Local Brokerages Stock Call 29 August 2013

From OCBC:
Oil and Gas: Looking beyond the volatility
YTD, the FTSE Oil and Gas index has generally tracked the broader market, though there have been instances of a divergence in performance. Besides the exploration and production segment garnering more investor interest, we are increasingly positive on the OSV segment, while prospects of the rig market remain bright, underpinned by the sustained high oil price environment. Still, the relatively high-beta O&G sector is very much sensitive to macroeconomic events. The possibility of increasing capital flows from Asia to the US remains, and investors may want to look beyond the short term volatility and focus on the positive longer-term growth prospects of the sector. Maintain Overweight with a one-year horizon, with Ezion Holdings [BUY, FV: S$2.90], Keppel Corp [BUY,FV: S$12.53] and Sembcorp Marine [BUY, FV: S$5.64] as our preferred picks. For investors seeking less volatility in terms of earnings but with O&G exposure, Sembcorp Industries [BUY, FV: S$6.48] is a worthy candidate. 

Local Retail REITs: Outlook remains sanguine
Local retail landlords ended 2Q13 on a positive note, with results mostly in line with our expectations. Aggregate leverage for the quarter has also improved sequentially across the board. Notably, a significant portion of the REITs’ existing borrowings are either based on fixed rates or hedged. This will likely limit the impact of rising interest rates on the REITs’ DPUs and yields. Looking ahead, we are maintaining our positive view on the local retail REITs due to AEI activities and better rental rates for the leases due for renewal. In addition, the local retail landscape has remained largely stable. According to Jones Lang LaSalle (JLL) 2Q13 Singapore property market review report, the growth in rents island-wide is likely to range between 0% and 0.2%, while capital values grow by 2.7%-3.8% in 2013. We are keeping our OVERWEIGHT rating on the local retail REIT subsector. Starhill Global REIT remains as our preferred pick, due to its apparent growth drivers, higher-than-average yield of 6.8% and compelling valuation (0.88x P/B).  

From UOB KH:
KSH Holdings (KSHH SP, ER0)
Technical BUY with +10.2% potential return
Last price: S$0.49
Resistance: S$0.54
Support: S$0.46
BUY with a target price of S$0.54 with tight stops placed
below S$0.465. The stock may have a short-term
rebound as a potential bullish hammer pattern has
formed near to its rising 200-day SMA. Its Stochastics
Indicator as formed a bullish crossover and could turn
up. Watch to see if the stock could break above its
middle Bollinger band. Our retail research has a
fundamental BUY with a target price of S$0.71.

Tiong Woon (TWC SP, T06) –
Technical SELL with +6.2% potential return
Last price: S$0.34
Resistance: S$0.375
Support: S$0.30
SELL with a target price of S$0.30 with tight stops
placed above S$0.360. The stock could continue to
trend down after being resisted near S$0.375 which was
a support now turned resistance level. A dead cross
could be formed on its 50- and 200-day SMAs. Its
Stochastics Indicator has formed a bearish crossover
and could continue to turn down. Watch to see if prices
could break below S$0.34.

Sinarmas Land (AFP SP, A26) –
Take profit from previous technical SELL
Last price: S$0.505
Resistance: S$0.60
Support: S$0.475
The stock was featured as a technical SELL when it
opened at S$0.60 on 20 Aug 13. The stock has since
returned 15.8% on closing prices, and its intraday low of
S$0.485 has exceeded our initial SELL target of
S$0.505. Some profits could be taken off the table as
the stock could be supported at around S$0.475 which
is also near to its rising 200-day SMA.

StarHub- Maintaining leadership in pay-TV.
(STH SP/BUY/S$4.12/Target: S$4.60)
FY13F PE (x): 20.4
FY14F PE (x): 18.6
Maintaining leadership in pay-TV. StarHub intends to differentiate and
maintain its lead in pay-TV through producing local content, such as
Academy Fantasia (a reality singing competition) and Lady First Singapore
(a variety show). Viewership for Lady First Singapore is said to be five
times higher than the original Taiwanese version. The programme is very
popular because fashion advice and beauty tips given are tailored for
Singapore’s women. StarHub is also looking into the production of
localised content for variety shows. It defrays costs of production through
advertising and sponsorship deals.
Maintain BUY. Our target price is S$4.60, based on DCF (required rate of
return: 6.7%, terminal growth: 1%).

From DBS:
United Envirotech announced a RMB90m (~S$19m) EPC
contract to upgrade a 100,000m3/day industrial
wastewater treatment plant in Nantong City, Jiangsu
Province, China. This wastewater treatment plant serves
industries located in the Nantong Economic Development
Zone and about 70% of the wastewater is from textile
industry. Upgrading of the plant is required to meet the
more stringent Grade 1A discharge standard imposed by
the local government. This project will commence
construction immediately and is expected to be completed
by the end of Dec 2013. Together with a RMB100m
contract announced last week, United Envirotech has met
~50% of our FY14 new win assumption of RMB400m. No
change to our forecast, S$0.90 TP and Hold call.

Local Brokerages Stock Call 28 August 2013

From OCBC:
Goodpack Limited: Decent FY13 results
Goodpack’s FY13 results were in-line with expectations. Revenue grew by a smaller 7.7% YoY to US$190.9m while PATMI improved 13.4% YoY to US$51.3m as its cost saving initiatives helped to offset higher depreciation and financing costs from a larger fleet and increased borrowings respectively. Similar to last year (FY12), management declared a final dividend of 2 S cents and a special dividend of 3 S cents. Although we lower our revenue forecasts for FY14, we still expect growth improvement following the commencement of key clients’ synthetic rubber (SR) operations in Singapore and a new SR contract in Russia. In terms of margins, we only expect a small drop-off as continued cost saving initiatives should keep a lid on logistic and handling expenses. In light of its unchanged fundamentals and recent share price correction, we maintain BUY on Goodpack with a slightly lower fair value of S$1.69 (S$1.80 previously). 

From Maybank KE:
Sino Grandness: Ready, Willing And Able; Buy, $1.05 - TP $1.89
SFGI SP | Mkt Cap USD240.2m | ADTV USD1.4m
Reiterate BUY and SGD1.89 TP. In light of the recent short seller’s
attack  on  China  Minzhong,  Sino  Grandness’ management has been very
responsive  and  open  in  dealing with investors’ concerns and readily
agreed to hold a conference call with our clients yesterday despite the
extremely short notice given to them.
In  all, the conference call was organised within 90 minutes and 20
clients participated. We think the information shared by management was
helpful  and  informative, and should go a long way to calming investor
concerns.
In our view, the share price drop in the past two days was purely
due to fallout from the Minzhong short selling incident. Fundamentals
are still firm and the biggest catalyst, the Garden Fresh IPO, still
lies ahead. We believe Sino looks more attractive today compared to
last week.
  
Wing Tai: Sturdy as a Tembusu Tree; Buy, $2.04 - TP $2.78
WINGT SP | Mkt Cap USD1.2b | ADTV USD1.2m
We  reiterate  our  BUY  recommendation  on Wing Tai, with a slightly
higher  TP  of  SGD2.78,  pegged  to  a 30% discount to RNAV. A bumper
dividend  of  12  cts/share  has  been  proposed,  translating  to  an
attractive FYJun13 yield of 5.9%.
Its  FYJun13  core  PATMI  of  SGD294m was in line with expectations.
Having achieved SGD885m worth of property sales in FY13, Wing Tai went
on  to  launch  The Tembusu in mid-August. 220 units have been booked,
with an ASP of ~SGD1,500 psf.
The  Group  will  remain  selective in land acquisitions. Malaysia is
deemed   its   most   attractive  market  in  the  near-term  for  new
investments,  but  the Group will continue to explore opportunities in
Singapore, HK and China. 

From DBS:
FY13 results for Goodpack slightly above. The key variants
were the US$1.4m disposal gain of PPE and US$0.9m
forex gain in 4Q13. Goodpack is on track to achieve
volume growth of 250k boxes in FY14, underpinned by
the firm ramp up of new SR markets in Singapore and
Russia. It is also gaining traction in the autoparts market.
Maintain BUY with higher TP of S$2.00. The finalisation of
autopart contracts serve as an imminent catalyst.

2Q13 results for IHH Healthcare within expectations.
EBITDA margins improved with positive contribution
from new hospitals. Novena hospital turned in RM2m
EBITDA profit, on track for positive contribution in FY13.
Maintain HOLD, TP adjusted to S$1.50 (Prev S$ 1.55),
accounting for recent currency effects. While we believe
the long term prospects for healthcare remains positive
and IHH commands a premium due to its scarcity and
geographical spread, the stock is already trading at
43x/36x on FY13F/14F earnings.

Local Brokerages Stock Call 27 August 2013

From OCBC:
Technology Sector: Slightly improved sentiment
Under our tech sector coverage, Venture Corp (VMS) reported earnings which were in-line with our expectations for the recently concluded 2QCY13 results season. However, core PATMI for ECS Holdings missed due to weaker-than-estimated gross margin. Encouragingly, a number of companies which we spoke to highlighted an improvement in sentiment amongst their key customers, which is in-line with the expected uptick in the global economy. However, we maintain NEUTRAL on the tech sector, as we believe that the economic recovery remains fragile. ECS [BUY; FV: S$0.56] is still our preferred pick within the sector given its cheap valuations (FY14F PER of 5.0x and P/NTA of 0.5x).

Suntec REIT: New city taking shape
Suntec REIT announced on 15 Aug that it has established a US$1.5b Euro Medium Term Note programme. We believe Suntec REIT may use this to address part of its refinancing needs due in 2014. If so, this will lock in part of its debts into fixed rates, enhance its debt maturity profile and improve its unencumbered asset ratio. Looking ahead, we remain positive on Suntec REIT’s performance. While its 2Q13 NPI and distributable income were down 38.5% and 18.7% YoY respectively due to the concurrent execution of Phases 1 and 2 of the remaking of Suntec City, we believe that the worst is likely over given that Phase 1 enhancement works were completed in Jun and the retail space there has since become operational. At current price, Suntec REIT trades at one of the lowest P/B in the S-REITs sector at 0.73x, while offering a compelling FY14F yield of 6.9%. We are revising our fair value from S$1.85 to S$1.80 due to higher risk-free rate. As valuations remain attractive and outlook is positive, we maintain BUY on Suntec REIT.

From UOB KH:
Kori Holdings (KHLL SP, 5VC) –
Technical BUY with +10.9% potential return
Last price: S$0.46
Resistance: S$0.51
Support: S$0.405
BUY with a target price of S$0.51 with tight stops placed
below S$0.435. The stock could continue to trend up
after making a higher low, and has closed above its mid
Bolllinger band. Its Stochastics indicator has also
formed a bullish crossover. Watch to see if prices could
break above its all-time high of S$0.475. Our retail
research has a fundamental BUY with a target price of
S$0.525.

Courts Asia (COURTS SP, RE2) –
Technical BUY with +12.8% potential return
Last price: S$0.78
Resistance: S$0.88
Support: S$0.76
BUY with a target price of S$0.88 with tight stops placed
below S$0.755. The stock may continue its rebound
after prices rebounded from its lower Bollinger band,
and may move towards its middle Bollinger band. Its
RSI indicator has also rebounded from a reading of 20,
with its MACD histogram turning up. Watch to see if
prices could break above S$0.80. Our retail research
has a fundamental BUY with a target price of S$1.14.

Ezion Holdings- Channel check: Key takeaways from company visit.(EZI SP/BUY/S$2.37/Target: S$2.85)
FY13F PE (x): 11.3
FY14F PE (x): 8.7
Competition is still not in sight. Ezion continues to be the only player in the
liftboat market in Asia. Its fleet of liftboats and service rigs has increased to
27 units from 17 a year ago. Ytd, Ezion has won seven new charter
contracts. Given the high ROE of these projects, it is a surprise that thus
far, competition to Ezion has still not emerged. Management gave its
rationale: Liftboats operating in Asia are niche assets as their designs have
been modified from the original American designs. For competition to
emerge, Ezion’s competitors would need to offer designs that are suitable
for Asian waters. For asset investors who are non-oil & gas specialists,
they may not have adequate knowledge of Asian offshore oil & gas market
- and hence the confidence - to invest in these niche assets.
Maintain BUY. Our target price of S$2.85 is pegged at 11x 2014F
fullydiluted EPS (adjusted for dividends on perpetual securities and
preference shares). This is 15% above the long-term 1-year forward PE
mean of 9.5x for the offshore support vessel-owner segment of the
offshore & marine sector.

From DBS:
Silverlake Axis reported FY13 (Jun YE) profit of RM196m,
2% ahead of our estimate due to slightly better gross
margins coming in at 63.7%. Revenue of RM399m, flat yo-
y, was inline. Gross margins improved significantly due
to lower hardware sales and rise in software licensing and
maintenance revenue. Better than expected dividends
with payout ratio of ~80%. Proposed final dividend of
Singapore 1.1 Scts, resulting in total FY13 DPS of 3.1 Scts,
up 63% y-o-y, exceeded our 2.6S Scts forecast. The stock
is trading at FY13 dividend of 4.1% now. We will provide
more updates post discussion with management.

Local Brokerages Stock Call 26 August 2013

From OCBC:
CPO Stocks : Outlook still fairly muted
Summary: Most CPO (crude palm oil) companies reported fairly disappointing 1H13 results recently, no doubt hurt by weaker CPO prices in 2Q13 (CPO prices fell 25% YoY and another 5% QoQ). But going forward, the outlook for CPO prices remains largely muted, given the sluggish economy, as well as the expected rise in production of vegetable oils. While most of the plantation stocks have corrected quite a bit of late, making valuations less demanding, we note that there could still be earnings disappointments for upstream players should CPO prices fall further. We have a SELL on GAR and are reviewing our Hold rating on GPR. While we have a HOLD on WIL, its downstream business may be vulnerable to further economic contraction in China.  


From UOB:
Highlights
We remain selective given limited earnings visibility as we approach
2014.
M1 is our preferred pick among telcos due to its attractive valuation
and sustainable dividend policy
We prefer Keppel Corp (Keppel) over SembCorp Marine (SMM) on
firm offshore & marine (O&M) margins.
Suntec REIT (Suntec) will benefit from an office sector turnaround
and its asset enhancement will boost rentals and property income

M1 (M1 SP, B2F) –
Attractive dividend; potential for special dividend
(BUY/Target: S$3.58)
M1’s management guided a moderate growth in earnings for 2013.
It continues to evolve into a triple-play telco and will invest to further
modernise its 3G network. It recently launched its new internet TV
service, and also expects the adoption of fibre broadband to
accelerate in 2013, which should improve its margins. The company
has a dividend policy of paying out 80% of net profit. The remaining
20% could be paid as special dividends if there is no urgent need
for additional capex. Assuming M1 pays out the 20%, total dividend
for 2013 could reach 18 S cents, and this improves the dividend
yield to 5.6%. M1 remains our preferred pick for the telco sector due
to its attractive valuation and sustainable dividend policy. We have
a BUY and DCF-based target price of S$3.58.
Technically, the stock could be forming another top should it be well
supported near S$3.10. The stock may top at S$3.55. The next
support is at S$2.90.

Keppel Corp (KEP SP, BN4) –
O&M margins appear to be bottoming
(BUY/Target: S$13.50)
We prefer Keppel between the two shipyards after they delivered
differing performances. In terms of margins, Keppel’s O&M margins
appear to be bottoming out at 14% while SMM’s is still at a low
10.5%. We have adjusted our earnings projections on this improved
operating margin outlook for Keppel. In terms of contract wins,
Keppel has won S$4b worth of contracts ytd, on track to meet our
full-year forecast of S$6b. SMM has a ytd contract win of S$3.5b.
We prefer Keppel with a SOTP target price of S$13.50.
Technically, the stock could have a technical rebound with
immediate support at S$10.14 and needs to break above S$10.75
for further upside.

Suntec Reit (SUN SP, T82U) –
Office sector turnaround; successful AEI
(BUY/Target: S$1.95)
In the property space, the main disappointments came from
developers while REITs were generally in line. Most office REITs
reported positive rental reversion, which reaffirms our positive view
on the office sector. On this note, we re-iterate our BUY call for
Suntec. We expect Grade-A office rentals to rise 8% in 2014 and
office demand to rebound, which should bode well for Suntec.
Furthermore, phase 1 of its renovations has progressively opened
since June with rents higher than management’s projections and
existing mall rentals. We have seen good foot traffic despite
minimal marketing efforts. As for phase 2, 70% has been precommitted
with majority of the large anchor spaces taken up. Our
target price of S$1.95 is based on a dividend discount model.
Technically, the stock looks poised for a technical rebound from
S$1.49/1.42 and is likely to be resisted near S$1.62.

Sabana Shari’ah Compliant REIT - Proposed acquisition of AMD
factory for S$68m.
(SSREIT SP/HOLD/S$1.135/Target: S$1.29)
FY13F DPU (S$ cent): 9.6
FY14F DPU (S$ cent): 9.3
Proposed Acquisition Of AMD Factory For S$68m. Sabana is proposing to
acquire AMD’s factory building for S$68m. Although AMD has only
committed to take up 50% of the facility, we anticipate that the well-located
facility will gradually see higher occupancies. We remain cautious in the
near term due to the expiry of the master-leases and potential equity-fund
raising as gearing approaches 40%.
We maintain HOLD with a higher target price of S$1.29 (from S$1.27),
based on DDM (required rate of return: 8.1%, terminal growth:1.8%). Entry
price is S$1.12. We raise our 2014-15 DPU estimates by 3-5% to factor in
the impact of the acquisition and also higher future occupancies for the
acquisition. Key near term risks remain the expiry of the master-leases in
Nov 13 and also potential equity fund raising to fund further acquisitions.

From Maybank KE:
China Minzhong: Earnings Preview; Buy TP $1.36
MINZ SP | Mkt Cap USD520m | ADTV USD2.4m
China  Minzhong  will  publish  its  4QFY6/13 results this Thursday
before  market.  We are looking at revenue of RMB685m and net profit of
RMB164m. Possible YoY and QoQ decline are due to seasonality reason.
In  our  view,  there are two short term catalysts for Minzhong: 1)
supply contracts from Indofood and 2) first dividends payout since IPO,
which could help to argue for a re-rating case for the stock.
Recent developments of the company include the first-time credit
rating (Ba3) given by Moody’s and the issuance of USD150m syndication
loan underwritten by Citibank and Standard Chartered. In our view, this
could help to rebuild investors’ confidence. Maintain BUY and TP
SGD1.36, pegged to historical average of 5x FY6/14 PER.

Economics
Singapore CPI, July 2013 - Up Slightly, To Stay Moderate This Year
Inflation  rate  in  July  2013 increased slightly to +1.9% YoY (June
2013: +1.8% YoY) on higher transport and food costs.
However, core-inflation rate (CPI excluding accommodation and private
road  transport)  moved  in  the  opposite  direction  as it moderated
slightly  to  +1.6%  YoY  (June  2013:  +1.7%  YoY) amid moderation in
accommodation costs.
With inflation rate in the first seven month of 2013 at +2.7% YoY, we
have  adjusted  our  full-year forecast to +2.5% from +2.3% previously
(2012: +4.6%).  Official forecast is 2%-3%.

From DBS:
Asia’s emerging markets sold off last week as the derisking
trend continues. DBS Research says while shortterm
pressure may still persist, a repeat of the 1997 Asian
financial crisis (AFC) is unlikely. The accelerated currency,
bonds and equity market slides accentuated the downside
risks to growth as sentiments weakened. But the bigger
and longer lasting reason behind capital inflows into Asia
has always been structural and it will soon return. In the
context of ASEAN, Singapore looks resilient. But a slow
growth and a tightening environment is unlikely to drive
the index.

For the Singapore market, the reversal in fund flows out
of Asia and emerging markets back to developed
economies, triggered by the anticipation of QE tapering,
rising US 10-year treasury yields and a rebound in the
USD, Euro and GBP had exposed the structural
vulnerabilities of emerging market economies with high
current account deficits. While the Singapore market has
outperformed regional bourses, we expect a rocky ride for
Singapore equities, held hostage by the still developing
emerging markets uncertainties.

STI has fallen 10% to 3088 since May 22 when FED
Chairman first hinted of QE tapering. We are close to the
support level of 3050, at 13.1x PE (-0.5SD). Consensus
has been expecting the FED to start to taper in Sept, a
positive signal that the US is on a firmer footing for
recovery, which could provide some stability to the
market. Recovery names should outperform in this
situation while yield sensitive sectors such as SREITs will
remain under pressure. If tapering of QE is pushed back,
volatility continues, and could push STI to test 2900 (12.9x
PE or -1 SD) if the selldown in emerging economies
continues. 

Growing optimism about the improving US recovery and
Europe’s economy moving past the recession trough
should see a return in interest among recovery names and
companies with significant revenue exposure in both
regions. Technology stocks are early recovery plays – CSE
and Venture have significant exposure to US/Europe and
offer attractive yields of 4.7% and 6.7% respectively.
Selected industrials – Ezion and Goodpack will leverage
on their niche positions in the global arena. Stocks with
earnings visibility supported by yield are likely to remain in
favour - our picks are SingPost, Comfort Delgro, ST
Engineering and Hutchison Port. Avoid stocks with
exposure to emerging markets which are likely to
Underperform - Petra, Acott REIT, Religare, AIT and
SingTel. 

4Q13 core earnings for Amtek Engineering were below
but sequential improvement suggests worst is over for
now. New programmes and continuous cost
management are expected to drive core earnings growth.
Upgrade to HOLD, upped TP to S$0.48 on earnings
rollover to FY14F.