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Tuesday, August 6, 2013

Local Brokerages Stock Call 6 August 2013

From OCBC:
United Envirotech: Decent 1QFY14 start
Summary: United Envirotech Ltd (UEL) reported 1QFY14 revenue of S$44.1m, +37.5% YoY (but -5.9% QoQ), meeting 14.2% of our FY14 forecast, while net profit slipped 2.6% YoY and 18.9% QoQ to S$5.7m, or about 12.5% of our full-year forecast. We deemed it to be a decent start as its fiscal first quarter tends to be seasonally softer. Going forward, management remains upbeat about its prospects in China, where the Chinese government has a planned investment on CNY4t in water resources by 2020; it adds that China is consistently tightening the effluent discharge standards. But we are tweaking our FY14 estimates slightly lower (revenue by 7.4%, earnings by 5.1%) to account for a likely smaller EPC pipeline. Our fair value also eases slightly from S$1.03 to S$0.975, still based on 13x FY14F EPS. Given the limited upside after the recent outperformance, we downgrade it to HOLD

Valuetronics Holdings: Discontinuing coverage 
Summary: Valuetronics Holdings Limited (VHL) will begin FY14 on a fresh page, as it will no longer incur losses on its Licensing business following its decision to terminate operations in 2QFY13. Any recovery in VHL’s earnings will likely translate into higher dividends for its shareholders, in our view, as VHL had a relatively stable dividend payout ratio of 37-42% from FY10-13. This is also supported by VHL’s strong net cash position. Looking ahead, we believe that VHL will focus its attention largely on its LED lighting OEM business, given the robust industry growth prospects and its largest customer’s market leadership position in this field. However, given the continued lack of trading liquidity in VHL’s stock and a reallocation of resources, we are CEASING COVERAGEon the stock. Our last rating was a ‘Hold’ with a fair value estimate of S$0.195.

City Developments Limited: 2Q13 PATMI up 48% YoY
Summary: CDL’s 2Q13 PATMI increased 48% YoY to S$203.8m, mostly due to disposal gains from several industrial property assets. 1H13 PATMI now cumulates to S$341.5m which makes up 49% of our full year forecast. We judge this to be mostly in line with our expectations. Residential sales performances remain firm, with 2013 launches D’Nest, Bartley Ridge and Jewel@Buangkok showing healthy sell-through rates to date. In 2H13, the group expects to launch a mixed use JV project at the junction of Upper Serangoon Rd and MacPherson Rd near Potong Pasir MRT. Hotel subsidiary Millennium and Copthorne Hotels’ (M&C) 2Q13 PATMI decreased 17.7% YoY as 181k net rooms were taken out of the supply due to enhancement works. 1H13 global REVPAR, however, was up 4.1% to GBP71.27; AOR and ARR increased by 0.7 ppt and 3.1%, respectively. The group also announced a special interim dividend of 8 S-cents per share. Maintain HOLDon CDL with our fair value estimate of S$12.04 (15% RNAV disc.) under review. 

From Maybank KE:
 Yongnam Holdings: Still In With A Chance; Maintain Buy, TP $0.465
 YNH SP | Mkt Cap USD305.0m | ADTV USD4.6m

 2Q13  results were mostly within expectations, including a one-off SGD5.1m
 provision. Excluding this item, net profit was up 13% yoy and 19% qoq.
 Profit  growth  was  driven  by  revenue  which grew 48% on recognition of
 projects.   We   expect   gross   margins  to  improve  going  forward  on
 better-priced  contracts  and  a higher revenue mix from civil engineering
 (strutting) which has higher margins.
 Both  the  Myanmar  airport  projects  have  yet to be officially awarded,
 despite  ongoing  speculation.  We  believe current share price represents
 good opportunity to accumulate. Maintain BUY.

 Sarin Technologies: More Potential Rewards Await; Maintain Buy TP $1.86
 SARIN SP | Mkt Cap USD414.0m | ADTV USD0.2m

 2Q13  results  were  ahead  of our expectations with net profit of SGD8.1m
 (+26%  YoY,  +3%  QoQ). 1H13 net profit makes up 53% of our previous FY13F
 forecast.  Sarin  also  declared  higher-than-expected dividends of 4.0 US
 cts/sh.  We see the possibility of even higher dividends in 2H13, implying
 FY13F yield of 6.5%

 Sales  of GalaxyTM were exceptionally high in 2Q13 due to pent-up purchase
 which  was  put  off  in  end  1Q13 by India customers. Sarin is generally
 upbeat  on  long-term  prospects,  but  cites  possible weaker 3Q13 due to
 macroeconomic  challenges  in China and India, as well as the narrowing of
 spread between rough and polished diamond prices.
 We  see  the  possibility of even higher dividends in 2H13, implying FY13F
 yield  of  6.5%.  We  roll  forward  our  valuations  to blended FY13F/14F
 earnings maintaining a 15x PER multiple. Consequently, our TP is raised to
 SGD1.86, implying a 21% share price upside 

From DBS:
Yongnam’s 2Q13 results were below expectations on weak
margins. Delay in Yangon Airport tender results weakens
stock catalyst. Weaker outlook as margins remain muted and
order book shrinks. We have cut FY13F/FY14F earnings by
44%/25%. Downgrade to FULLY VALUED, TP S$0.28 (Prev S$

Sales for United Envirotech in line, but net profit fell short due
to lower Treatment margin. Capacity utilization is on track to
meet our full year expectation, but EPC wins are behind
target. We have cut FY14/15F earnings by 13%/15% to
reflect lower Treatment margin and EPC revenues. Maintain
HOLD rating, nudged down TP to S$0.90 (Prev S$ 0.97).


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