Local Brokerages Stock Call 15 May 2013

From OCBC:
Neptune Orient Lines – Looking at the positives
Summary: Neptune Orient Lines's (NOL) 1Q13 results disappointed with a larger-than-expected core operating loss. Nonetheless, the figures marked a vast improvement over the same period a year ago. Revenue stayed relatively flat at US$2.37b (-0.3% YoY) and core operating losses narrowed to -US$85.2m from -US$233m a year ago following the success of the cost cutting initiatives implemented last year. Entering 2Q13, NOL could experience further downward pressure on freight rates although we remain hopeful that a combination of positive macro-data, collective industry action and lower bunker fuel costs will push NOL towards a more positive showing by 3Q13. We maintain our view for a modest recovery in FY13 for the liner and keep our BUYrating with an unchanged fair value estimate of S$1.38. 

SingTel: FY13 results just about in line

Summary: SingTel posted its 4QFY13 results this morning, with revenue slipping 6% YoY and 3% QoQ to S$4.48b, weighed down by the weaker A$. Full-year revenue fell 3% to S$18.18b, and was 3% shy of our forecast. Reported net profit for 4Q came in at S$868.2m, down 33% YoY but up 5% QoQ; core earnings slipped 2% YoY and rose 15% QoQ to S$1.0b. Core FY13 earnings eased 1.8% to S$3.61b, and was about 4% below our forecast. SingTel has declared a final dividend of S$0.10/share, bringing the full-year payout to S$0.168 (74% of underlying net profit). For FY14, SingTel expects to consolidated revenue to remain stable, while EBITDA should continue to see low single-digit growth. It also expects to spend some S$2.5b in capex, with free cashflow coming in at around S$2b. Last but not least, it has revised up its dividend payout ratio from 55-70% to 60-75%. We will have more after the analyst teleconference later. Meanwhile, we place our Buy rating and S$3.68 fair value under review. 

 

Olam Int’l: Decent 3QFY13 results
Summary: Olam International Limited (Olam) saw 3QFY13 revenue climb 12% YoY (but down 4% QoQ) to S$4.72b, such that its 9MFY13 revenue of S$14.31b (+20%) met 72% of our FY13 forecast. Reported net profit gained 10% YoY (but fell 30% QoQ) to S$108.5m, while core earnings (excluding bio-asset revaluation gains etc) rose 13% YoY (down 22% QoQ) to S$92.8m. Core 9MFY13 earnings of S$240.3m met about 79% of full-year forecast. We will have more after the analyst briefing later. Until then, our Hold rating and S$1.50 fair value is under review.

Noble Group Ltd: Weak FY13 start but recovery expected
Summary: Noble Group (Noble) reported a 1.1% YoY QoQ decline in revenue to US$22.6b, meeting 22.5% of our full-year forecast, but reported net profit tumbled 62.5% to US$41.3m, or about only 10.2% of our original FY13 forecast, weighed by losses at its Agriculture segment. Its Metals, Minerals and Ores (MMO) also did not fare too well. The only bright spark came from its Energy segment, with operating income up 6% at US$368.0m, although tonnage (Excluding gas and power volume) was flat. Noble intends to continue with its asset light strategy and also intends to focus on improving its efficiency and lowering cost amid a still-challenging environment. Still, we are cutting our FY13F earnings by 10% (FY14F by 13%), which in turn eases our fair value from S$1.19 to S$1.09. Maintain HOLD. 

ComfortDelGro - Decent start to the year
Summary: ComfortDelGro’s 1Q13 results saw revenue increasing slightly by 1.8% YoY to S$870.8m on the back of broad–based growth across its segments while operating profit improved 2.8% to S$95.9m as higher staff and repairs and maintenance expenses were offset by a reduction in fuel and electricity expenditure. As a result, PATMI rose 7.9% to S$57.7m. In the coming quarters, we expect a fare increase to be implemented by the government in FY13, and the group should to continue benefiting from lower fuel costs due to the favourable fuel outlook and proactive hedges in place, which should offset sustained weakness in the SG bus business. While we continue to prefer ComfortDelgro over SMRT, we maintain our HOLD rating with an unchanged fair value estimate of S$1.95 in light of its recent ~8% appreciation. 

Midas Holdings: 1Q13 net loss wider than expected
Summary: In line with its profit guidance issued on 10 May, Midas Holdings reported a net loss attributable to shareholders of CNY4.9m in 1Q13, versus PATMI of CNY15.3m in 1Q12. Revenue fell 12.1% YoY to CNY202.4m. While we had expected Midas to report a loss-making quarter, the magnitude was larger than our forecast for a net loss of CNY3.2m. However, revenue was within our CNY199.8m estimate. The below-expectations bottomline performance was due partially to weaker-than-estimated gross margin and largely attributed to a wider share of loss of CNY4.0m from its associated company, Nanjing SR Puzhen Rail Transport (OIR forecast: share of loss of CNY0.8m). On an operational basis, Midas was actually profitable, although profit from operations dipped 50.4% YoY to CNY18.9m. We will provide more updates after the analyst conference call. For now we have a BUY rating on Midas. However, our forecasts, 1.2x P/B target peg and S$0.595 fair value estimate are likely to be lowered given the ongoing uncertainty over the timeline of resumption of new high-speed train car orders. 

 
SATS Ltd – FY13 results in-line
Summary: SATS’s FY13 results were in line with our expectations, coming in within 2% of our projections. Revenue grew 7.9% YoY to S$1,819m on the back of increases from the gateway and food businesses while operating profit increased correspondingly by 13.8% YoY to S$192.3m. Despite cost pressures related to higher staff expenses and raw material costs, SATS was able to register an improvement of 0.6ppt in operating margin to 10.6% from a year ago. FY13 PATMI was S$184.8m (+2.1% YoY). Management declared a final and special cash dividend of 6 S cents and 4 S cents, respectively, to bring the total dividends declared in FY13 to 15 S cents (FY12 total: 26 S cents), representing a payout ratio of 90.3% of PATMI. As SATS’s share price has continued to appreciate in the previous weeks, we feel that many of the positives have already been priced in. Nonetheless, pending the analyst briefing later this morning, we place our HOLD rating and fair value under review. 

 
SIA Engineering: FY13 within expectations
Summary: SIA Engineering Company's (SIAEC) FY13 results were in line with ours and the street's expectations. Revenue decreased by 2.0% to S$1.15b, chiefly due to lower fleet management and project revenue. Operating profit fell 1.2% to S$128m. Share of profits from associated and JV companies increased by 1.5% to S$159m, representing a contribution of 52.0% of the group's pre-tax profits. PATMI was up 0.4% to S$270m. Basic EPS of 24.51 S cents formed 98% of ours and the street's FY13 estimates. The board is recommending a final ordinary dividend of 15.0 S cents, which will bring total FY13 dividends to 22.0 S cents per share. Pending a briefing with management, we are maintaining our HOLD rating but place our fair value estimate of S$4.38 under review.

Swiber Holdings: Good 1Q13 results
Summary: Swiber Holdings (Swiber) reported a 59.3% YoY rise in revenue to US$309.7m and a significant rise in net profit from US$8.6m in 1Q12 to US$20.1m in 1Q13. Both revenue and pre-tax profit formed 27% of our full-year estimates, in line with our expectations, but the lower-than-expected tax rate meant that net profit accounted for 38% of our full-year forecast. Gross profit margin was lower at 16.1% in 1Q13 vs 19.8% in 1Q12. Swiber’s order book stands at about US$1.1b as at May. Net gearing increased slightly from 0.95x in 4Q12 to 1.0x in 1Q13. Pending an analysts’ briefing later in the afternoon, we put our hold rating and fair value estimate of S$0.70 under review. 

CSE Global: 1Q13 net profit within expectations
Summary: CSE Global’s 1Q13 net profit was flat at S$12.7m, forming about 24% of our full-year estimates and 23% of the street’s. Revenue declined 11% to S$120m due to lower contribution from the Americas and the EMEA region. However, net margin improved to 10.5% (1Q12: 9.4%) as it undertook higher margin work in the Americas and the loss-making projects are nearing completion. CSE’s order-book declined to S$361.1m as at end-1Q13 (end-4Q12: 384.5m). Pending an analyst briefing later, we keep our BUYrating (FV: S$0.99) unchanged.

CWT Ltd: Commodity SCM expansion underway
Summary: CWT’s 1Q13 revenue increased by 39% YoY to S$1.5b, largely due to growth from its newly established Commodity SCM business. However, net profit was flat at S$27m as the start-up costs offset any incremental earnings for the new business segment. Nonetheless, the results were within our expectations. CWT’s balance sheet also appeared to be stable with net gearing of 0.48x as at end-Mar 2013. We currently have a BUYrating on CWT with a FV estimate of S$2.08, and will provide further updates after our call with management.

Dyna-Mac Holdings: Stay cautious
Summary: Dyna-Mac Holdings reported revenue of S$60m (+155% YoY) and net profit of S$6.7m (+101% YoY) for 1Q13. However, gross profit margin declined to 24.4% from 28.8% in the year-ago period due to fewer variation orders during the quarter. Its order-book fell to S$113m (as at 14 May 2013) from S$134m (as at 27 Feb 2013), providing cover for only two quarters. This makes it vulnerable to any delays in the award of new contracts. We keep our HOLD rating for now and will review our S$0.50 fair value after our discussions with management. 

 
UE E&C: Construction pace expected to pick up
Summary: UE E&C reported a 43% YoY increase in revenue to S$87.6m and a 14% YoY increase in net profit of S$4.8m in 1Q13. The improvements were mainly due to larger contribution from existing projects. However, 1Q gross profit margin fell to 10.8% from 15.4% in the year-ago quarter as some of the projects were still in preparatory stages. We expect the construction pace to pick up in 2H13. Pending our discussions with management, we keep our BUY rating and S$0.82 fair value unchanged. 

VARD Holdings: Earnings recovery in FY14
Summary: VARD Holdings’ 1Q revenue and net profit declined by 2% and 30% YoY to NOK2.7b and NOK188m respectively, largely due to (i) the completion of several high-margin jobs last year, and (ii) operational challenges in the Niteroi yard in Brazil. Although 1Q results were slightly lower than ours and consensus estimates, we now see positive developments that we believe would herald an earnings recovery in FY14F. Firstly, management is now more positive on Brazil and expects operations to stabilize by year-end. Secondly, order-book is at a very healthy level and management is optimistic on securing new contracts. Thirdly, management is now able to commit to longer-term investment with Fincantieri coming onboard as a controlling shareholder. Maintain BUY with unchanged S$1.52 fair value estimate. 

From UOB KH:

Hafary Holdings Limited- Triple Boosters For This
Undervalued Gem (HAFA SP/BU/S$0.25/ Target:
S$0.33)
Triple boosters. Since early April, Hafary Holdings (Hafary)
has enjoyed three strong catalysts including: a) a second
interim dividend of 1.5 S cents/share (post-split), b) a transfer
to SGX Mainboard from Catalist, and c) 2-for-1 share split.

ComfortDelGro Corporation- 1Q13: Stellar results highlight earnings resilience; upgrade to BUY.
(CD SP/BUY/S$2.06/Target: S$2.32)
FY13F PE(x): 16.9
FY14F PE(x): 16.0
Stellar results. ComfortDelGro Corporation (CD) reported a net profit of S$57.7m (+7.9 % yoy) for 1Q13, accounting for 23% of our full-year profit forecast. In 2012, 1Q profits contributed 21% of full-year earnings.
Upgrade to BUY with DCF-derived (cost of equity: 6.5% terminal growth: 2%) target price of S$2.32 (previously S$1.92). We have raised our target price based on our higher earnings estimate, and lowered our capex forecast to S$500m per year from
S$520m-550m previously.

First Resources- 1Q13: Net profit of US$62.6m (+29.9% yoy, +34.4% qoq), above
expectation. The most remarkable set of results among peers.
(FR SP/BUY/S$1.87/Target: S$2.35)
FY13F PE(x): 13.6
FY14F PE(x): 10.9
Results above expectation. First Resources (FR) reported an impressive set of results with net profit for 1Q13 up 29.9% yoy and 34.4% qoq to US$63.6m.
Maintain BUY and target price of S$2.35, based on 14x 2014F PE, at mid-cycle valuation. We like FR for its hands-on management team, young age profile and efficiency.

Neptune Orient Lines- 1Q13: Gain from sale of building leads to an expected turnaround.
(NOL SP/BUY/S$1.09/Target: S$1.40)
FY13F PE(x): 8.3
FY14F PE(x): 9.1
Neptune Orient Lines (NOL) reported revenue of US$2,371m (+4% yoy) in 1Q13. It turned around from a 1Q12 loss with a net
profit of US$76m, thanks to a US$203m gain from the disposal of NOL Building. The core losses were quite close to CSCL’s and in
line with our expectation.
Maintain BUY but cut our target price to S$1.40, based on 1.2x 2013F P/B. As a premium TP carrier with more than 95% exposure
to TP contractual cargo, NOL is a major beneficiary of the potential TP contractual rate hike. In addition, rates and valuations have
bottomed out simultaneously, creating buying opportunities.

Noble Group- 1Q13: Continued weak agriculture margins led to a 62% yoy fall in net profit to S$41m. We see
consensus earnings downgrades as a catalyst.
(NOBL SP/SELL/S$1.115/Target: S$0.92)
FY13F PE(x): 15.8
FY14F PE(x): 13.0
Disappointing 1Q13. Noble Group’s (Noble) 1Q13 net profit of US$41.3m was substantially below our and consensus forecasts.
Although group tonnage for the various segments was flat at 52.7m tonnes (-0.6% yoy), operating income from supply chain was dragged by a US$66.6m loss in its agriculture division. On a more positive note, the group executed well on its plans to manage
finance and sales, administration and operating expenses (SAO) by cutting these two costs by 13% yoy and 19% yoy respectively.
SELL; consensus downgrades coming. Maintain SELL with a lower target price of S$0.92 (previously S$1.17), based on a 30% discount to its long-term mean PE of 15.3x. 

From DBS:

Core loss of US$121m for Neptune Orient Lines exceeds
expectations. Rate increases is hard to push through as
liners fail to maintain capacity discipline. Recovery
timeframe is pushed back; normalized returns look
unlikely for NOL before FY15. We cut our earnings
estimates for FY13/14 by 107%/70%, in line with more
bearish volume and freight rate expectations hereon.
Downgrade to HOLD with lower TP of S$1.19 (Prev S$
1.45).

1Q13 results for Noble Group below as agriculture
segment swung into the red. This division was hammered
by idled Argentina soybean plants, logistic congestion in
Brazil and weak sugar prices. We expect sequential
improvement in the absence of one-off negatives but the
sugar business may continue to face challenges from low
sugar prices. We have cut our FY13/14F earnings by
12%/9%. Downgrade to HOLD with TP cut to S$1.00
(Prev S$ 1.45). We believe Noble’s share price will come
under pressure post the disappointing results, earnings
downgrades and slow macro recovery.

SingTel’s 4Q13 underlying profit of S$1,001m (-2.2%
yoy) was 5% below ours and consensus estimate of
S$1,050m due to weak Singapore and regional
associates. Singapore’s underlying profit declined 5% yoy
to S$282m due to S$41m loss from new digital business
(versus S$13m loss in 3Q13). Associate’s underlying
profit contribution of S$387m was up 5% yoy but below
our expectations of S$420m due to currency translation
losses as Indian Rupee and Indonesia Rupiah declined
11% and 9% yoy respectively. Telkomosel, AIS and Globe
offset Bharti’s weakness. Management guided for stable
group revenue with low-single digit growth in EBITDA led
by cost cutting. However, it guided for stable EBIT
(excluding associates) due to higher depreciation and
amortisation. We will be reviewing our estimates and TP
but are likely to maintain HOLD call.

1Q13 results for ComfortDelgro within expectations. Net
profit up 7.9% y-o-y; EBIT margins expand on lower
fuel/energy costs. We expect re-rating to continue given
its stable profile, predictable earnings stream, diversified
geographical exposure and strong balance sheet.
Maintain BUY, TP raised to S$2.19 (Prev S$ 2.05) as we
roll our valuations to FY14, from a blended FY13F/14F.

First Resources’ 1Q13 earnings of US$63.6m (+30%y-o-y;
-13% q-o-q) were ahead of expectations. Key difference:
implied CPO ASP booked was 35% higher than average
spot prices (net of export taxes). FY13F/14F/15F earnings
were tweaked by +4%/-4%/-3% on changes in CPO ASP,
FFB yields, and olein volume assumptions. BUY call
reiterated for 15% upside to S$2.14 (Prev S$ 2.16) TP.

Midas reported a small loss in 1Q of Rmb 4.9m vs. profit
of Rmb 15.2m last year due to lack of contract wins in the
last 18 months. We expect a turnaround in 2H13 as the
group’s order book has now grown to c. Rmb800m from
just Rmb400m in January. The magnitude of turnaround

for Midas would depend on the timing of the high speed
rail contracts. Maintain BUY with S$0.60 TP based on
1.2x P/BV.

FY13 results for SIA Engineering were slightly below
estimates on lower revenues from fleet management and
lack of special projects. We are scaling back FY14/15F
earnings by 2/3% to account for the slower growth
trajectory. Final DPS of 15Scts was declared, in line with
our estimates, and implies total payout of 22Scts for FY13
(FY12: 21Scts). There is little room for further
outperformance, maintain HOLD with a TP of S$4.80.

Thai Beverage’s 1Q13’s net profit fall was within
expectations. The net profit drop was impacted by net
loss from F&N’s operating results. Spirits volume is
recovering from higher inventory carried by trade; we
expect sequential improvement. Maintain BUY, TP:
S$0.80.

1Q13 core earnings for Vard saw a 25% sequential
improvement but EBITDA margins still at low levels – in
line. Outlook for subsea remains robust and there are also
signs of improvement seen for AHTS market. The
operating issues in Brazil should be largely resolved by
end-FY13; we expect EBITDA margins to improve next
year. Maintain BUY; TP revised down to S$1.46 (Prev S$
1.57) as we trim FY13/14F earnings by 4/6%.

1Q13 net profit of S$12.7m for CSE Global, up 4% yoy,
was inline and account for 23.1% of our full year
estimates. Revenue declined 11% yoy due to lower
onshore activity in North America and lower zero-margin
revenue in Middle East and project delays. However gross
margin improved to 31.5% versus 27.9% in 1Q12 due to
higher margin offshore projects and lower zero-margin
revenue. New order wins stood at S$95m, up 11% yoy,
below expectations and only account for 17.2% of our
full year estimate. We have a HOLD rating with TP of
S$0.85. More updates after discussion with the
management.

From Maybank KE:
Noble Group: Agri Problems Persist; Cut to Hold, TP $1.17
NOBL SP | Mkt Cap USD5.9b | ADTV USD18.3m
1Q13 results were significantly below market expectations, as problems
in  its  agricultural  segment  persist. Recurring net profit was down 55%
yoy, hurt by a maiden loss in its agri segment.
We had earlier been positive on its new asset-lighter strategy and the
 benefits  of that in terms of lower overhead cost and strong balance sheet
 remains  evident.  However,  poor  earnings level and visibility will be a
 near-term drag on stock price.
We  cut our earnings by 18-26%, and our new TP of SGD1.17 is pegged
to  13x  FY13F.  We  would recommend entry around SGD1.00, where 1x P/B
provides strong support.
  
First Resources: Boosted By High CPO ASP, Sales Volume; Buy, TP $2.06
FR SP | Mkt Cap USD2.3b | ADTV USD3.2m
FR’s  1Q13 core net profit of USD64m (+34% QoQ, +30% YoY) was ahead of
expectations, at 36% of our forecast and 31% of consensus. 1Q results were
lifted  by higher CPO ASP achieved on forward sales locked-in in 2012, and
the drawdown of inventories to boost sales volume.
1Q  is  a  disproportionate  36%  of our full year forecast but we are
 maintaining  our full year forecast as 1Q was boosted by factors that will
 not be repeated.
 Still,  we  like  FR  for  its  long-term value proposition, strong
 management,  and  low  production cost. Maintain BUY with TP of SGD2.06
 (+11% upside) on 13x FY14 PER.
 
Vard Holdings: Looking More Attractive; Buy, TP $1.65
VARD SP | Mkt Cap USD1.0b | ADTV USD7.1m
Recent   sell-down   is   unwarranted   and   we   believe   that
stronger-than-expected  order  intake  this  year  would drive positive
re-rating. Reiterate Buy, TP SGD1.65.
1Q13  net  profit  of  NOK188m  (-30% YoY, +52% QoQ) was within our
expectations  but  below  consensus.  We  point  out  that current year
earnings  is  a  repercussion  of  past  event  which  should have been
anticipated.
We  think that order win this year could surprise on the upside and
high  cost  issues  in  Brazil  yard should be resolved by end-2013. At
7.2x/5.6x FY13F/14F PER, valuation is undeservingly low.
 
Biosensors International: More Acquisitions On The Way; Hold, TP $1.28
BIG SP | Mkt Cap USD1.7b | ADTV USD3.1m
Biosensors  is acquiring the assets of Spectrum Dynamics (SD) for cash
consideration  of  USD51.13m  (7x  P/B).  This  marks  the  first  of more
acquisitions to come as Biosensors seeks to expand its product offerings.
Given  that  there  would not be any near-term contributions from this
acquisition,  we believe that the market reaction would be neutral. Growth
expectations  need  to  be  tempered  with  execution risks in the initial
stages.
We  have  not  accounted  for  any  potential  contributions in our
forecasts and valuations. Maintain Hold and SOTP-based TP of SGD1.28.
  
CWT: Growth Story Intact; Buy, TP $2.20
CWT SP | Mkt Cap USD872.8m | ADTV USD1.1m
1Q13 net profit was within expectation. Our expectation of a 30% profit
growth  for  the  full-year  remains  intact  and  we  continue  to  see a
multi-year structural growth story from here.
We estimate that volume in its commodity trading business grew by more
 than  20%,  which  is  encouraging.  We  expect  to see operating leverage
 kicking in as the year goes on.
We  keep estimates unchanged and adjust our SOTP TP to SGD2.20. The
acquisition  of  a  new  land  at  Pandan  Ave  will likely add between
SGD0.15-SGD0.20 to value per share.