Local Brokerages Stock Call 20 May 2013

From OCBC:
Tiger Airways: Roaring success in FY14?
Tiger Airways (TGR) reported a decent set of 4Q13 results to close out the year with a second consecutive quarter of core operating profit. This helped overturn 1H13 losses and TGR recorded a FY13 overall core operating profit of S$7.3m (FY12: -S$83.4m) and its net loss narrowed to S$45.4m from S$104.3m a year ago. In the coming quarters, we expect TGR SG to continue exhibiting strong growth prospects and carry the group forward. Passenger demand has remained healthy for the group and the planned capacity increases for FY14 will allow it to capitalise on this demand. Despite the risk of a drag from its associates, we remain hopeful for a positive core net profit performance for FY14. Maintain BUYrating on TGR with an unchanged fair value estimate of S$0.79. 

CWT Ltd: Growing the trading wing
CWT Ltd’s 1Q13 revenue jumped 39% YoY to S$1.5b, while net profit was flat at S$27m. 1Q results were in-line with ours and the street’s expectations. The surge in 1Q revenue was mainly driven by its newly established trading business (Commodity SCM) which resulted in higher volume, and the inception of a new product line. At the same time, the group incurred higher administrative expenses relating to the costs of establishing new operations. The group’s logistics operations were largely business-as-usual. Looking ahead, we expect operating leverage to kick in for the Commodity SCM business and the group to expand its logistics capacity with the developments of three large warehouses in Singapore. Maintain BUY with unchanged FV of S$2.08. 

From UOB KH:
Cordlife Group- Pushed To A Record High On Positive
Newsflow (CLGL SP/BUY/S$0.915/Target: S$0.87)
Maintain HOLD; raised target price to S$0.87. We raised our
earnings estimates by 30% to reflect the impact of the latest
acquisitions and updated our outlooks on the cord blood and
tissue banking businesses. 

Oil services - Bottom-up strategy for outperformance.
We continue to advocate a bottom-up strategy that favours
companies in an aggressive business expansion phase leading
to EPS improvement. These companies focus on
regional/global expansion to capitalise on rising oil & gas
spending or are expanding their footprints to increase market
shares. They are actively pursuing business growth for greater
earnings, instead of waiting for a global recovery in offshore
support vessel (OSV) charter rates. Corporate growth
strategies in this cycle (2009 onwards) differ from those in the
last cycle (2003-08), which was driven by OSV charter-rate
increases. Our top picks include Kreuz, Nam Cheong and
Swiber. 

Kreuz Holdings (KRZ SP, 5RK) –
New capacity to bridge 2014 growth gap
Last price: S$0.74
Target Price: S$0.68
Kreuz reported 1Q13 numbers, which were in line with our
expectation. Margins continued to improve, while the group also
reported its seventh consecutive quarter of positive operating
cash flow. Kreuz’s orderbook currently stands at US$200m,
which will be recognised over 12-18 months. Even just based on
this, we estimate that the group will be able to achieve 70-75%
of our full-year revenue forecast. Management plans to charter
in one additional third-party vessel on a 1+1 year contract,
which will add capacity and allow the group to bid for additional
contracts. Kreuz has an option with a Chinese shipyard for a
second deepwater subsea construction vessel, which will
probably be exercised in light of buoyant subsea activity. We
maintain BUY with an unchanged target price of S$0.68, pegged
to a 2014F PE of 6.5x. We see the potential to raise our target
price now that the share price has exceeded it.
Technically, the stock has been supported near S$0.57 and a
break above S$0.75 may see it test S$0.85.

Nam Cheong (NCL SP, N4E) –
Strong earnings visibility from a record net orderbook
Last price: S$0.275
Target Price: S$0.34
Nam Cheong’s reported 1Q13 profit was in line with our
forecast. A key positive was the sale of five vessels, bringing
net orderbook to a record RM1.3b. This provides strong
earnings visibility for the next three years. According to
management, there have also been more enquiries on built-toorder
vessels, which is a sign of an industry-wide uplift in
activity. Management disclosed more details about the
shipbuilding programme for 2014, which we view as a wellbalanced
mix of different vessel types. We maintain BUY and
target price of S$0.34, based on 9.7x 2014F PE.
Technically, the stock has been supported near S$0.24 and may
continue to rise towards S$0.32.

Swiber Holdings (SWIB SP, AK3) –
Trading at a deep discount to our RNAV
Last price: S$0.695
Target Price: S$0.86
Swiber’s 1Q13 results were above expectations due to higherthan-
expected turnover and associates’ contributions. Gross
margin fell due to a different revenue mix. Swiber has won only
about US$150m worth of contracts ytd. Management said
project tenders are taking longer to conclude because of their
large size but they are eyeing three with an estimated value of
US$300m each. These projects are likely to be awarded in
2013. Swiber’s extensive regional footprints yield economies of
scale. While its high gearing is a still concern, it should start
tapering off from 2014 onwards as Swiber’s capex programme
is at a tail-end. The share price of 58%-owned Kreuz has
appreciated more than 80% ytd and this has enhanced Swiber’s
value. We estimate Swiber now trades at a more than 30%
discount to our estimated RNAV. We maintain BUY and target
price of S$0.86, based on a 2014F PE of 6.2x.
Technically on the weekly chart, the stock has been supported
near S$0.59 and a break above S$0.75 may see it test S$0.90. 

Singapore Airlines- 4QFY13: Market has not factored in key positives.
(SIA SP/BUY/S$10.93/Target: S$13.30)
FY14F PE(x): 22.1
FY15F PE(x): 14.2
The 4.3% yield decline was mainly due to forex impact. Some 79% of the 4.3% decline in the yields was due to lower S$-yields, ie SIA was impacted by the yen and the euro which had declined 7% during the period. About 10-12% of the parent airline's
revenue came from Japan and 22% from Europe. This suggests that competitive pressures were less of an issue. Despite the adverse forex moves in 1Q13, pax yields actually improved mom in March. If the forex impact was excluded, yields would have
improved qoq.
No reason to be pessimistic on results. We are surprised by the market’s reaction to the results. The decline in yields was mainly due to unprecedented currency volatility, especially in the yen. The market should be focusing on the impact of inbound travels to
Japan and that SIA would now have hedged its yen exposure at better rates.
Maintain BUY with a lower target price of S$13.30 (from S$13.50), mainly factoring in a 7.3% change in SIAEC’s target price. At current level, SIA is being valued at 70% ex-SIAEC after adjusting for a 10% discount to fair value. We continue to value SIA on an SOTP basis and value the airline business at 0.9x FY14F book value. 

From DBS:
CSE Global’s 1Q13 net profit of S$12.7m (flat y-o-y) was
in line but new order win of S$95m (up 11% y-o-y) was
below our S$110m estimate. CSE has guided for core
profit to improve in FY13F. The revival of higher margin
offshore projects in North America is expected to drive
growth despite lower revenue. Our revised TP of S$0.97
implies potential returns of 22%. CSE has a resilient
business model supporting a 40% payout ratio (4.9% to
5.5% yield).

Sheng Siong Group expects more earnings upside from
better operating costs and efficiencies. We have raised
earnings by 5.0%/3.5%. The recent price weakness
presents opportunities to accumulate. Upgrade to BUY
with higher TP of S$0.76 (Prev S$ 0.72).
We expect a maiden distribution of 8% annualised payout
(DPU of 3.56 Scts) in FY13 results announcement for
Religare Health Trust (RHT) on 21 May. Share price
appreciation is panning out as expected, and still has
8.3% yield and upside to revised TP. The recent drop in
Indian bond yields and stable INR is positive for RHT.
Maintain BUY, TP raised to S$1.06 (Prev S$ 0.97).

Operating profit of S$12.7m for Tiger Airways was above
estimates but associate losses dragged net earnings. The
upcoming divestment of stake in Tiger Australia stake and
recent round of fund raising bolsters balance sheet to
support growth trajectory. Tiger Singapore/ Mandala
should benefit from expansion of Singapore-Indonesia
bilateral. Maintain BUY with TP adjusted to S$0.79 (Prev
S$ 0.95) as we lower FY14/15F earnings by 38%/ 28% to
factor in a slower ramp up in associates’ profitability as
well as possibility of losses continuing at Tiger Australia,
albeit narrower.

Core earnings for Singapore Airlines were below
expectations due to an operating loss of S$44m in 4Q.
Net profit of S$379m was 13% higher than last year.
Passenger yields are likely to remain fairly tepid with a bias
towards modest improvements. However, jet fuel has
been trending lower and should help a modest recovery
for earnings. A S17cts final dividend was declared;
maintain HOLD, TP S$11.50 (Prev S$ 11.20).