Local Brokerages Stock Call 16 May 2013

From OCBC:
SingTel: Upside fairly limited; downgrade to HOLD

Summary: SingTel saw its 4QFY13 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. 4Q core earnings slipped 2% YoY and rose 15% QoQ to S$1.0b. Core FY13 earnings eased 1.8% to S$3.61b, or 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). Going forward, SingTel expects group consolidated revenue to remain stable, and EBITDA to see low single-digit growth. It has guided for S$2.5b capex spending and a FCF of S$2b; it also raised its dividend payout ratio to 60-75% (from 55-70% previously). While we raise our SOTP fair value from S$3.68 to S$3.83 (after updating the value of its listed associates), further upside from here looks limited after the recent sharp run-up. Hence we downgrade our call from Buy to HOLD.

Petra Foods – 1Q13 results below expectations
Summary: Petra Foods’ 1Q13 results fell short of expectations as growth slowed relative to the previous quarters. Revenue grew 7.7% YoY to US$127.4m while margin improvement boosted gross and operating profit. Excluding losses from its to-be-divested Cocoa Ingredients business, which resulted in an overall net loss for Petra, core PATMI came in at US$14.1m (+20.0% YoY but -4.3% QoQ). Based on the results, we reduce our FY13 projections to reflect more achievable revenue growth targets and to account for a net loss in 2Q13 from sustained losses in the Cocoa Ingredients business. In terms of valuations, Petra is currently trading at more than 36x FY13F / 32x FY14F PE. In our view, this premium is too expensive at this juncture, and we expect some profit-taking on the likelihood of overall losses for 1H13. Maintain HOLD with an unchanged fair value of S$3.88.

Olam Int’l: HOLD – recalibration still needs time
Summary: Olam International Limited (Olam) saw 3QFY13 revenue climb 12% YoY (but decline 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. Meanwhile, net gearing remains high at 2.2x as at end-Mar, unchanged from end-Dec; this after it further increased borrowings to S$9.3b from S$8.8b. But Olam intends to reduce its gearing boundary condition from < 2.5x to < 2.0x. Still, we could continue to see some overhang from its high net gearing. We also opt to keep our FY13 estimates unchanged. But our fair value improves from S$1.50 to S$1.73 as we push our valuations out from blended FY13/14F EPS to FY14F EPS. Maintain HOLD.

Midas Holdings: Adverse near-term conditions
Summary: Midas Holdings’ 1Q13 net loss attributable to shareholders of CNY4.9m (1Q12: PATMI of CNY15.3m) was larger than our forecast for a net loss of CNY3.2m. This was attributed largely to a wider-than-estimated share of loss of CNY4.0m from its associated company, NPRT. Looking ahead, we believe that strength of Midas’ recovery will depend heavily on the resumption of new high-speed railway (HSR) tenders. As the timeline of this is still uncertain, we believe that a more significant recovery in Midas’ financial performance would likely come in FY14, versus our previous FY13 expectations. Paring our FY13 revenue and PATMI estimates by 9.7% and 59.1%, respectively, and lowering our valuation peg from 1.2x to 1.1x FY13F P/B, we derive a fair value estimate of S$0.54 (previously S$0.595). But we maintain our BUY rating as we expect the eventual HSR tenders resumption and subsequent contract wins by Midas to provide a re-rating catalyst for the stock. 

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 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 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. Increasing our P/E peg from 17.1x to 20.0x and using an EPS forecast of 25.0 S cents for FY14F, we increase our fair value from S$4.38 to S$5.00 and maintain our HOLD rating on SIAEC.

CSE Global: Focus on margin stability
Summary: CSE Global reported 1Q13 results that were in-line with ours and the street’s estimates. 1Q revenue fell 10.9% YoY to S$120m on lower contribution from the Americas and EMEA (Europe, Middle East & Africa), while PATMI was flat at S$12.7m. After encountering issues in the Middle East in 2011 (cost overrun at two large telco projects) and the Americas in 2012 (lower-than-expected margins for onshore work), CSE Global now appears to be more keen on the higher margin brownfield projects, while carefully re-evaluating the lower-margin greenfield jobs. We now expect a slight contraction or modest growth in the top-line across FY13-14F and gross margins to stabilize around 30%. We have tweaked our model slightly and our FV declines to S$0.96 (previously S$0.99) on 10x FY13F PER. Maintain BUY. 

Ezion Holdings: Bond issue to fund new contract
Summary: Ezion Holdings (Ezion) announced that it has received a letter of intent with a contract value of about US$80.3m over a four-year period to provide a service rig for an Asian-based national oil company. The unit is expected to be deployed and working in SE Asian waters by end-2013 after refurbishment and conversion. Unlike previous projects, this project will be funded through a bond issue; the total project cost is US$60m (US$40m asset cost, US$20m refurbishment, conversion). Indeed, we understand that Ezion has launched S$110m of six-year bonds at 4.70%. We maintain our BUY rating on the stock but put our fair value estimate of S$2.50 under review. 

KS Energy: Recovery will take time
Summary: KS Energy (KSE) reported a 27.6% YoY rise in revenue to S$153.4m and a net profit of S$1.1m in 1Q13, vs a net loss of S$315k in 1Q12. However, the group’s operating profit went into the red again, after four previous quarters in the black. Though revenue and net profit accounted for about 24% and 26% of our full year estimates, respectively, we note that results were bumped up by gains arising from the sale of a jointly owned asset. Gross profit margin was lower at 23.3%, compared to 28.2% in 1Q12. Revenue from the distribution business grew 40.6% YoY to S$120.4m, mainly due to strong project related sales in SSH Corp and Aqua Terra. The drilling business, on the other hand, saw a 9.6% growth in revenue. Pending further details from management, we put our HOLD rating and fair value estimate of S$0.70 under review.

From UOB KH:

Ying Li International Real Estate- Results within
expectations; new strategy to be unveiled soon (YINGLI
SP/BUY/S$0.495/Target: S$0.64)
Maintain BUY but with a reduced target price of S$0.64, pegged
at a 23.5% discount to our RNAV of S$0.83/share. This is in
line with the average discount for Chinese developers under our
coverage.

Global Logistic Properties (GLP SP, MC0) -
Technical BUY with +11.1% potential return
Last price: S$2.88
Resistance: S$3.20
Support: S$2.67
Maintain BUY with a revised target price of S$3.20 with tight
stops placed below S$2.78. The stock is currently trending
above its rising 30-day moving average and could continue
its bullish momentum. Its MACD did not form a bearish
crossover in the last trading session and the RSI indicator has
turned up above a reading of 60. Watch to see if the stock
could continue to make new 52-week highs.

Neptune Orient Lines (NOL SP, N03) -
Technical BUY with +12.7% potential return
Last price: S$1.10
Resistance: S$1.24
Support: S$1.05
BUY with a target price of S$1.10 with tight stops placed
below S$1.075/1.05. The stock is trading near a potential
triple bottom created on 25 Jul 12, 25 Sep 12 and 21 Nov 12
and prices have moved away from its lower Bollinger band
with comparatively higher trading volume. Its MACD has
formed a bullish crossover earlier and is trending up, while its
Stochastics appears to be forming another bullish crossover.
Watch to see if the stock could break above its declining 200-
day moving average.

Cordlife Group (CLGL SP, P8A) -
Take profit from previous technical BUY
Last price: S$0.88
Resistance: S$0.92
Support: S$0.77
The stock was featured as a technical BUY when it opened at
S$0.555 on 17 Jan 13. Prices did not fall below the stop-loss
level of S$0.535 and have since returned 58.5% on closing
prices, with an intraday high of S$0.89 in the last trading
session which exceeded the initial target of S$0.64. Some
profits could be taken off the table should the stock fail to
move above S$0.92. Its 21-day Stochastics is suggesting
that the stock is overbought.
Our institutional research has a fundamental HOLD with a
target price of S$0.65.

Olam International- 3QFY13: Results are within expectation. 4QFY13 numbers likely to be weaker on lower sales volume and net contribution/mt.
(OLAM SP/BUY/S$1.81/Target: S$2.00)
FY13F PE(x): 16.7
FY14F PE(x): 12.9
Within expectation. Olam reported a net profit of S$113.5m (+15% yoy, -26% qoq) for 3QFY13 and S$311m (+19% yoy) in 9MFY13. Profit was lower on a qoq basis due mainly to non-operating items. At EBITDA level, 3QFY13 was relatively flat as lower
qoq sales volume was compensated by better net contribution/mt. 9MFY13 strong profit growth was partly due to the gain from sales of US almond orchard, gain on bond buyback, losses from termination of sugar projects and net of tax pertaining to the sale
of almond orchard land.
Maintain BUY with a new target price of S$2.00 (previous: S$1.98) pegging FY14F EPS to 30% discount to Olam’s long-term forward PE of 16.1x (or equivalent to 1SD below long-term mean PE).

SATS- 4QFY13: Admirable 13.8% rise in core net profit.
(SATS SP/HOLD/S$3.22/Target: S$3.40)
FY14F PE(x): 17.5
FY15F PE(x): 16.8
Lower depreciation costs, a recovery from TFK and higher associate income lift core profit 32.4%. Headline 4QFY13 net profits declined 7.8% yoy due to a S$16.8m impairment charge relating to a deferred consideration arising from the sale of Daniels
Group two years ago. However, the 13.8% core net profit growth was admirable. Final dividend of 10 S cents (4 S cents special) amounted to a total payout of 90%.
Maintain HOLD but we raise target price from S$3.20 to S$3.40. We continue to value SATS based on a dividend discount model (required return: 7.1%, terminal growth 1.5%). At our fair value, the stock will offer a dividend yield of 4.7%.

SIA Engineering- 4QFY13: Two consecutive quarters of top-line decline. No immediate catalyst. Downgrade to HOLD.
(SIE SP/HOLD/S$5.06/Target: S$5.20)
FY13F PE(x): 19.9
FY14F PE(x): 18.9
Results slightly weaker than expected. Net profit came in 2.5% below consensus and 3.6% below ours. Revenue declined yoy but a slight improvement in operating margin and better associate income led to flat net profit. There was no change in its final dividend of 15 cents. Payout ratio increased from 86% to 90%. Operating cash flow was flat yoy but free cash flow (FCF) rose 5% yoy.
Downgrade to HOLD. We lower our target price by 7.2% to S$5.20 after lowering our FY14 and FY15 earnings estimates. We continue to value SIAEC on a DDM basis (COE 6.2%, terminal growth 1%). At our target price, the stock offers a dividend yield of 4.4%. Entry price is S$4.70.

S’pore Telecommunications- 4QFY13: Earnings decline on a yoy basis. Maintain SELL.  (ST SP/SELL/S$3.99/Target: S$3.54)
FY14F PE(x): 17.9
FY15F PE(x): 16.5
Singapore Telecommunications (SingTel) reported a net profit of S$868m (-32.6% yoy) for 4QFY13, below our expectation of S$913m. It completed the divestment of its 30% stake in Warid Pakistan, resulting in an exceptional loss of S$225m. Underlying net profit would have declined 2.2% yoy if we exclude all exceptional items.
Maintain SELL. Our valuation for SingTel is S$3.54 based on sum-of the- parts (SOTP) methodology. We have fine-tuned our SOTP valuation to utilise our target prices of Bt272 for AIS and Rp13,050 for Telkom, which are under our coverage.

Swiber Holdings- 1Q13: Trading at a deep discount to our RNAV.
(SWIB SP/BUY/S$0.69/Target: S$0.86)
FY13F PE(x): 5.8
FY14F PE(x): 4.8
Ahead of expectations. Swiber reported a net profit of US$20.1m (+132% yoy) for 1Q13. This was 36% of our 2013 forecast of US$56m. We attribute the higher-than-expected earnings to: a) faster-thanexpected orderbook recognition (1Q13 turnover was 27% of our 2013 forecast of US$1,137b), b) strong associates' earnings contributions, and c) lower-than-expected tax and minority interests.
Maintain BUY and target price of S$0.86, based on 6.2x 2014F fully diluted EPS. We peg Swiber’s valuation at a 35% discount to the long term PE mean of 9.6x (since 2004) of the offshore support vessel (OSV) owner segment of the offshore & marine sector.
We believe as Swiber ramps up its earnings, it will gain investor confidence as a good play on rising regional offshore exploration and production spending.

From DBS:

Ezion has signed a LOI to provide time charter for a service
rig, worth US$80.3m over 4 years. The rig is expected to
be delivered to a national oil company in SEA by end of
2013. Capex will be funded solely by a 6-year bond
issuance at c.5%. FY14F earnings were lifted by 4%.
Maintain BUY with higher TP of S$2.52 (Prev S$ 2.47).

China Merchant Holdings announced that its deal to
acquire Jiurui Expressway in exchange for its New Zealand
property business as well as cash and new shares has
been called off, mainly due to the failure to obtain
approvals from the New Zealand authorities to transfer its
property business to the sellers of Jiurui Expressway. As
such, our fully diluted EPS forecasts for FY13 and FY14 are
lifted (as Jiurui E'way was not initially expected to be very
profitable and dilution now does not take place) by
10.4% and 12.5% respectively to S 9.2cts and S 10.5cts
but our TP is reduced (reflecting the long term value that
Jiurui E'way would have brought) to S$1.07 from S$1.12.
Maintain BUY.

SingTel’s 4Q13 underlying profit of S$1001m (-2% y-o-y)
was in line with consensus but slightly below ours. We
were surprised with higher payout ratio of 60-75% (from
55-70%). At 75% payout ratio, dividend yield would be
4.5% in FY14F. Guidance from management is for stable
FY14F EBIT (excluding associates), 5% below market
forecasts. Maintain HOLD with revised TP of S$3.80 (Prev
S$ 3.40), after revising our valuation for Telkomsel and
Globe in line with higher market prices. SingTel is trading
at +2 S.D. above historical mean of 13.3x.

FY13 results for SATS were within expectations. A final
and special DPS of 10 Scts was declared. This will bring
FY13 DPS to 15 Scts, equating to a payout of 90% and
dividend yield of 4.7%. Maintain HOLD with higher TP of
S$3.29 (Prev S$ 2.80). SATS has performed well and is
now trading at 17.2x on FY14F PE, +1 std dev above
historical mean, and presents limited upside to our TP.

Banyan Tree Holdings reported a strong set of 1Q13
results, with earnings rising 19% to S$14m. Outlook for
hotels and property sales continue on an upward
momentum. Forward bookings for hotels improving while
new property launches in Phuket are selling like hot
cakes. Given its asset heavy balance sheet, we believe that
setting up a REIT (probably from its Thailand properties,
coupled with properties from its Indochina and China
Funds) can result in the group crystalizing significant value
in its balance sheet. Maintain BUY and TP S$0.83.

3Q-FY13 core earnings for Jaya Holdings were below. The
usually weak season (monsoons in SE Asia) was
exacerbated by changes in cabotage laws in Indonesia,
which limited the ability of the group’s fleet to participate
in Indonesian tenders. Utilisation has since recovered and
outlook for charter rates for the group’s OSV fleet
remains generally upbeat. However, FY13/14F earnings
cut by 5/8% on weaker 3Q and some revenue deferment
due to delays in vessel completions. The recovery story for
Jaya is intact; maintain BUY with S$0.85 TP.

1Q13 earnings for Yongnam were slightly below but on
track to meet our full year expectations. We expect back
end loaded earnings as Thomson Line commences
construction in 2H13. Maintain HOLD, TP S$0.33 (Prev S$
0.25). Yongnam is bidding for two airport projects in
Myanmar (Yangon International Airport and the
Hanthawaddy International Airport).

From Maybank KE:
Yongnam Holdings: Positioning Ahead of Contract Wins; Buy TP $0.43
YNH SP | Mkt Cap USD334.9m | ADTV USD2.9m
Reiterate  BUY  ahead  of  2H13. Our TP of SGD0.43 is pegged to 10x
FY13F.
1Q13 results were largely within expectation. Revenue grew 22% yoy.
Profit  was flat yoy, but this was in comparison to exceptional margins
in the same quarter last year.
We  expect  margins  to pick up on execution of strutting orderbook
which  has  higher  margins  and the commencement of new contract wins.
Management  is  gunning  for  several  contracts  in  2H13  which  will
replenish orderbook substantially.
 
 Sino Grandness: Watch Out For The Next Step; Buy TP $1.60
 SFGI SP | Mkt Cap USD337.1m | ADTV USD2.3m
Maintain BUY and TP of SGD1.60. Sino Grandness’s 1QFY13 results were
within  market  expectation  but  we  expect  2Q  and  3Q results to be
stronger. BUY maintained.
Garden Fresh continued to drive the growth with revenue up 50% yoy.
It seems RMB250m net profit target for Garden Fresh is on track.
We  maintain  our  BUY call and target price for the time being but
watch  out  for  the  further  step towards the Garden Fresh IPO, which
could significantly re-rate the stock.
 
Swiber Holdings: Strong Start to the Year; Buy TP $0.84
SWIB SP | Mkt Cap USD338.1m | ADTV USD1.1m
Maintain  BUY with TP of SGD0.84. A very strong set of 1Q13 results
following a record year in FY12, supports our upbeat view on Swiber.
Ø  1Q13 PATMI of USD20.1m was above expectations and make up 43% of our
previous  FY13F  forecast.  Contract  win is our main concern now given
that its last announced contract win was in Feb-13.
Swiber  is tendering for close to USD2b of contracts. Contract wins
plus  execution  is critical for Swiber in order to benefit from better
utilisation of its vessels. This would support a positive re-rating for
the stock and relieve balance sheet concerns.
 
SingTel: The Heavy Lifting Begins; Sell TP $3.38
ST SP | Mkt Cap USD51.0b | ADTV USD59.6m
SingTel is a SELL with a target price of SGD3.38 as the easy “hype”
phase  is  over  now that the stock has gained 30% in a year. M1 is our
top pick among Singapore telcos.
Even as it prepares to pour in more billions into loss-making, very
long-term  investments  with  no  hope for positive short-term returns,
capex  is expected to rise 25% and free cashflow is expected to drop by
a  third,  it  is on the eve of having to spend even more money that is
beyond  its  current  guidance  - if it wins one of two Myanmar telecom
licences (deadline 27 June 2013).
FY13  underlying  net  profit  of SGD3,611m was within expectations
mainly  because  of  strong contributions from Telkomsel and Globe that
offset continued poor results from Bharti Airtel.
  
Olam International: Work In Progress; Sell $1.55
OLAM SP | Mkt Cap USD3.5b | ADTV USD11.0m
Maintain  SELL  with  TP of SGD1.55, pegged to 13x FY13F. with 3Q13
results  were  within  expectations,  though  higher  than  ours,  with
recurring net profit coming in at SGD121.5m.
This  is  healthy  yoy  growth,  but it is worth noting that it was
driven  mainly by the Food Staples & Packaged Foods segment, where Olam
was able to profit from exceptional margins for rice in Nigeria.
We  think  time  will  be  needed for any restoration of its equity
premium.  Progress  will have to be made in the coming quarters for its
recent strategic review plans.
 
United Engineers: Hit by start-up expenses; Buy TP $4.05
UEM SP | Mkt Cap USD725.5m | ADTV USD0.9m
Maintain BUY with TP of SGD4.05/share, 25% discount to RNAV.
1Q13  results  were  slightly below our expectations, but largely a
misnomer  given UE’s ongoing plans to takeover WBL. With the recent WBL
saga  between  Straits  Trading  and UE drawing to a close, we think UE
will  experience  short  term  share price weakness via paying over 12%
higher than their original price for WBL
1Q  was  hit  by  higher staff and operating costs arising from the
commencement  of  UE Bizhub East and Park Avenue Changi. Revenue was at
SGD136.6m  (17%  YoY,  -25%  QoQ), and net profit at SGD7.4m (-24% YoY,
  -82% QoQ).
 
Midas Holdings: On The Way To Recovery; Buy TP $0.75
MIDAS SP | Mkt Cap USD464.3m | ADTV USD3.3m
Maintain  BUY and TP of SGD0.75. Midas reported a net loss of RMB5m
for  1QFY13.  But our investment theme for Midas remains to be a bet on
improving order flow in 2013 and a turnaround in earnings in 2014.
Management’s contract outlook implies further RMB500-600m order win
for  the  rest of the year on the top of current RMB650m order book. We
are  also  optimistic  on  the likelihood of potential high speed train
tender this year.
We  recommend the investors to be patient for the new order wins as
the current 1x PB provides a floor for the share price.