Local Brokerages Stock Call 5 April 2013

From CIMB:

Tiger Airways

Business first, airline second

UNDERPERFORM - Maintained | S$0.66 - Tgt. S$0.63

We made a house call on Tiger last week. We like Group CEO Koay Peng Yen’s focus on long-term shareholder value. Expect a gradual breakaway from a dogmatic low-cost approach to a more return-focussed model. We think that Tiger is in good hands. Having said that, we maintain our Underperform call in light of continued near-term cash burn from associate losses. Our SOP-based target price of S$0.63, pegged to 13.5x CY14 P/E or the LCC industry's 5-year historical forward average, also includes proceeds from its planned Tiger Australia stake sale.

From UOB KH:
Oil Service - Best performing sector in 1Q13. What’s next?
Ezion Holdings (EZI SP/BUY/S$2.15/Target: S$2.40)
Kreuz Holdings (KRZ SP/BUY/S$0.515/Target: S$0.68)
Nam Cheong (NCL SP/BUY/S$0.26/Target: S$0.34)
Triyards (ETL SP/BUY/S$0.78/Target: S$1.11)
 
Bottom-up strategy for outperformance. The oil-service sector was the best performing sector in 1Q13 with a market cap weighted return of 12.1%, outperforming the FSSTI (+4.5%) by 7.6%. Major outperformers were Ezion (+28.4%) and Kreuz
(+19.8%). Both were our top oil-service stock picks in our 2013 strategy report. 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), whichwas driven by OSV charter-rate increase. Our top stock picks are Ezion, Kreuz, Nam Cheong and Triyards.

Ezion Holdings (EZI SP/BUY/Target: S$2.40). Booming demand as liftboats and service rigs gain NOC acceptance. Ytd, Ezion has secured three new liftboat/service-rig charter contracts (2012: 22 new charters) and the green light for its new marine supply
base business in Australia. Potential demand is huge given the small liftboat and service rig fleets in Asia Pacific. In Southeast Asia, the Middle East and West Africa, there are only 54 liftboats vs a large fixed platform fleet of 3,266 units (or 14 platforms per
liftboat). In comparison, North America has a larger liftboat fleet of 240 units vs a fixed platform fleet of 3,257 (or 60 platforms per liftboat).

Kreuz Holdings (KRZ SP/BUY/Target: S$0.68). Kreuz recently inked a deal to build a game-changing deepwater subsea vessel, which will lift the group’s capability to match that of leading global subsea players. Ytd, Kreuz has clinched contracts worth
US$40.5m, on track to meet our full year forecast of US$200m. The group has also continued to grow third-party contributions, reducing its dependence on its parent Swiber. 86% of the contracts secured ytd are from third-party customers.

Nam Cheong (NCL SP/BUY/Target: S$0.34). A key beneficiary of a recent pick-up in Malaysian offshore activity, being the largest Malaysian OSV shipyard with a 50-75% domestic market share. OSV tendering activity is expected to pick up on the back
of Petronas’ requirement of 34 vessels in 2013, coupled with additional vessels required for the Pan Malaysian Hook-Up and  Commissioning project.

Triyards (ETL SP/BUY/Target: S$1.11). Triyards is a proxy to the growing global acceptance of liftboats, being one of the few yards outside of the US capable of building such vessels. Triyards will embark on further growth by: a) developing proprietary
third-generation liftboat designs, b) expanding ship-repair capacity, c) diversifying into new products such as high-speed aluminum commercial and patrol vessels, and d) growing its equipment business and branding. 

SGX (SGX SP, S68) –
Technical SELL with +5.0% potential return
Last price: S$7.58
Resistance: S$7.85
Support: S$7.20
SELL with a target price of S$7.20 with stops placed above
S$4.35. Potentially, prices may swing lower should it break
below its 50-day moving average. Currently prices have
fallen below its immediate rising trendline. Its Stochastics
indicator has formed a bearish crossover and has turned
down. Watch to see if its mid Bollinger band could now act as
a resistance rather than a support.
Our institutional research has a fundamental BUY with a
target price of S$7.70. 

Singapore Telecommunications Ltd (ST SP, Z74) –
Technical BUY with +7.7% potential return
Last price: S$3.62
Resistance: S$3.90
Support: S$3.40
BUY with a target price of S$3.90 with stops placed below
S$3.53. The stock has trended above its mid Bollinger band
as well as its 50-day moving average and rising trendline. Its
MACD and Stochastics indicators have each formed a bullish
crossover. Watch to see if the stock could close above S$3.64
for further upside.
Our institutional research has a fundamental SELL with a
target price of S$3.41. 

Memstar Technology (MSL SP, 5MS) –
Technical BUY with +27.5% potential return
Last price: S$0.098
Resistance: S$0.105/0.125
Support: S$0.085
BUY with a target price of S$0.125 with stops placed below
S$0.092. Prices appear to be supported by its mid Bollinger
band and the stock is also trending above its 50-day moving
average. Its MACD and Stochastics indicators have each
formed a bullish crossover. Watch to see if the stock could
close above S$0.105 for further upside. 

From Maybank KE:
SMRT Corp: Ending the Year with a Whimper; Maintain Sell TP SGD1.19
MRT SP | Mkt Cap USD1.9b | ADTV USD2.1m

The  previously  unimaginable  has  happened. SMRT is expecting its
first  ever  quarterly  loss  in  its  history  for 4QFY3/13. This loss
guidance  validates  our sustained SELL call, and we are reiterating it
with a reduced, street-low target price of SGD1.19.
SMRT  has  been  a  dividend  darling  in the past, with stable and
growing  earnings  providing  shareholders  with  a  steady  stream  of
dividends  to  look  forward  to.  However  those days of stability and
certainty  look  to be coming to an end, as our final dividend forecast
for FY3/13 is correspondingly cut by 30% to SG 3.5 cts /share.
In  light  of  such  firm guidance on the challenges ahead for land
transport  operators  like SMRT, we are slashing our earnings forecasts
by  25%  for FY3/13 and ~10% for FY3/14-15. Our target price is reduced
to  SGD1.19, as we maintain our valuation peg to 15x FY3/14 PER, a full
standard deviation below mean. SELL SMRT. 

From OCBC:
Conviction Idea: Pair trade - Long SPH / Short STH
We recommend a long SPH/short STH pair trade. Investors would pick up a 63 bps dividend yield spread (to offset transactions costs) and gain significant upside exposure to the scenario that SPH lists its REIT. Two bases for our trade: first, we believe SPH’s 63 bps spread over STH is attractive. Newspapers are generally perceived to have weaker prospects than telcos but SPH has a virtual monopoly in its market while STH perennially competes against the much larger SingTel and has been losing market share in both its mobile and Pay TV segments. Second, from our calculations, we believe a SPH REIT listing scenario is realistic given the current yield/valuation dynamics of its assets and the size of its portfolio. Assuming SPH retains a 51% stake in the REIT, we see potential divestment gains of S$625m to S$744m or 39 to 46 S-cents per share. This could consequently lead to a special dividend and/or distribution in specie of REIT units for SPH shareholders.

CapitaMall Trust: Deep value at current price
CapitaMall Trust (CMT) has been a clear laggard within the S-REITs space, staying flat YTD versus an average of 11.0% increase in unit prices for its local retail peers. We believe this is unjustified given its portfolio of 15 quality retail malls and its relentless efforts in optimizing its yield via asset enhancement initiatives. The operating landscape in the retail space also appears sanguine thus far. According to CBRE, the average rents in prime Orchard Road rose for the first time in 1Q13 after staying flat since 3Q11. While the suburban retail will see a substantial amount of space coming online in 2013, CBRE notes that retailers are still upbeat about the suburban market. This is consistent with our view that both the Orchard Road and suburban rents may possibly remain firm in 2013. We are keeping our S$2.32 fair value unchanged and maintaining BUY on CMT as we expect the valuation gap to narrow between CMT and its peers.

Yoma Strategic Holdings: Forming consortium to bid for mobile license
Yoma announced that it has formed a consortium with FMI, its affiliate in Myanmar, and Digicel Group and Quantum Strategic Partners to bid for one of the two mobile licenses expected to be awarded by the Myanmar Government later this year. The consortium has submitted its pre-qualification bid in Nay Pyi Taw yesterday as the first part of the mobile license process. We understand that Yoma and FMI has joined the consortium through a newly created 80:20 joint venture YSH Finance Ltd, but Yoma’s eventual effective stake in the consortium is yet unclear. Also, we expect fierce competition for the mobile licenses from a host of contenders, including a Vodafone-China Mobile tie-up and other major telco players such as SingTel, Telekomunikasi Indonesia, Malaysia's Axiata Group Bhd, Norway's Telenor ASA and India's Bharti Airtel Ltd. Since we have downgraded Yoma to a SELL on 1 Feb 2013 with a fair value estimate of S$0.71, the share price has corrected 17.2% from S$0.90 to S$0.745. We now put our rating and fair value estimate UNDER REVIEW.

ST Engineering: ST Electronics won S$151m of contracts in 1Q13
ST Engineering (STE) announced that its electronics arm, ST Electronics, has secured about S$151m of contracts. This is in line with our expectations. The contracts include S$65m in the rail electronics market with projects for mass rapid transit (MRT) projects in Malaysia, Taiwan and North America. S$78m in contracts was secured under the satcom and sensor business segment and S$8m was under smart utilities solutions. We maintain our fair value estimate of S$4.12 and HOLDrating on STE.  

Local Brokerages Stock Call 3 and 4 April 2013

From UOB KH:
World Precision Machinery
Recovery Has Started
World Precision has benefitted from the pick-up in the automobile sector
and has made announcements on sizeable orders from Chongqing Baosteel
Meiwei Wheel and a supplier to Dongfeng Yueda Kia Motor. Its orderbook
has increased from Rmb118m at end-Feb 13 to about Rmb180m at end-
Mar 13. Expect full quarter impact of recovery in 2Q13. Maintain BUY with
target price at S$0.54.

Banking – Regional
Assessing Room For Growth
A comparison of LDRs shows that banks in Indonesia, such as Bank Negara
Indonesia, Bank Jabar Banten and Bank Mandiri, have significant room for
growth. Investors should adopt a selective stock picking approach after the
huge rallies in Thailand and Indonesia. We see value in Bank Negara Indonesia,
Bangkok Bank, Public Bank and OCBC due to their lower-than-peers’ LDRs and
attractive fundamentals. Maintain OVERWEIGHT on ASEAN banks.

Neo Group - Food for thought - Singapore’s largest
caterer (NGL SP/NOT RATED/S$0.345)
Valuation
• Neo Group (NGL) is trading at 15x FY13 PE and 2.6x P/B.
Financial Highlights:
• Although NGL reported an 8.7% yoy rise in revenue for
FY13, net profit dropped 43.9% yoy due to a one-off IPO
expense of S$0.9m and a 32.7% increase in employee
benefits. Excluding the non-recurrent items, net profit
would have declined 27.2% yoy.
• The increase in employee benefits is in line with the
company’s plans to increase its sales force to grow the
corporate and government catering businesses.

ST Engineering (STE SP, S63) –
Technical SELL with +4.4% potential return
Last price: S$4.27
Resistance: S$4.35
Support: S$4.08
SELL with a target price of S$4.08 with stops placed above
S$4.35. Potentially, prices may swing lower should it fail to
close above S$4.35. Its Stochastics has formed a bearish
crossover in the overbought region while its RSI has turned
lower. Watch to see if a bearish crossover could be formed at
its MACD indicator.
Our institutional research has a fundamental HOLD with a
target price of S$4.12.

Breadtalk Group Ltd (BREAD SP, 5DA) –
Technical SELL with +14.2% potential return
Last price: S$1.165
Resistance: S$1.20
Support: S$1.00
SELL with a target price of S$1.00 with stops placed above
S$1.20. Previously on 11 Mar 13, prices fell as the RSI
indicator had briefly crossed above a reading of 80 before
retreating. Prices have also formed a long upper shadow. Its
Stochastics indicator looks poised to form a bearish
crossover. Watch to see if its MACD indicator could form a
bearish crossover as well.

Uni-Asia Finance Corp (UNIAF SP, C3T) –
Technical BUY with +23.8% potential return
Last price: S$0.21
Resistance: S$0.26
Support: S$0.19
BUY with a target price of S$0.26 with stops placed below
S$0.19. Prices have now formed a higher low and a break
above S$0.215 is likely to see the stock trending higher. Its
20-day moving average looks poised to form a golden cross
with its 50-day moving average. Its RSI indicator has turned
up. Watch to see if its MACD indicator, which has hooked up,
could trend higher to cross above its centreline.

From OCBC:

Sembcorp Marine: More prudent on margins
Sembcorp Marine (SMM) is currently building a 82.5ha yard in Brazil to undertake drillship construction, amongst others. Should inflation in Brazil continue to be unrelenting, SMM may face further margin pressures from labour costs, especially since there is already a shortage of skilled labour in the country. Over the longer term, however, we believe that SMM’s foray into the drillship business puts it in good stead to secure more drillship orders, diversifying its product range. In the shorter term, however, we prefer to be more prudent on the group’s operating margin assumptions, and lower these to 12.1% and 12.3% for FY13F and FY14, respectively (2012: 12.5%). As such, our SOTP-based fair value estimate slips from S$5.84 to S$5.64. Maintain BUY.

Frasers Centrepoint Trust: Downgrade to HOLD - fair value hit
Frasers Centrepoint Trust (FCT) has enjoyed a good run-up in its unit price, clocking a 7.0% return YTD and 40.8% return YoY. This compares significantly to the 5.7% YTD and 31.4% YoY increase seen by the FTSE ST REIT Index. Now trading near its historical high and our fair value, FCT is the most expensive (P/B of 1.40x) when compared to its local retail peers (1.18x) and the S-REITs sector average (1.17x). As such, we believe that most of the good news has been priced in. While the asset injection of Changi City Point into FCT’s portfolio may possibly be a catalyst to its unit price and DPU growth, the timeline is uncertain as the regulatory procedures for the strata division into its retail, business park and hospitality components is a lengthy process. In view of the limited upside potential in the near term, we now downgrade FCT from Buy to HOLDon valuation grounds. We recommend switching FCT to CapitaMall Trust [BUY, S$2.32 FV] as a cheaper alternative to blue-chip local retail play with exposure to equally resilient suburban portfolio assets.  

KSH Holdings: Awarded S$60m JTC construction contract
KSH announced yesterday that it was awarded a S$60m construction contract by Jurong Town Corporation (“JTC”) for a district cooling system plant at Ayer Rajah Ave. We understand management wanted to diversify their condominium-heavy construction book with a public project, and gross margins continue to exceed a 10% hurdle rate. In 2013 to date, order book replenishment now cumulates to S$202m – tracking somewhat above forecast and exceeding the S$161m total last year. The order book now stands at S$489m. Given its momentum, we are reviewing our valuation of KSH’s construction segment – currently pegged at 4 times FY13E earnings versus 5-7 times seen at peers. We also see upcoming launches at key property projects (Hong Leong Gardens, Seletar Gardens and King Albert Park) to be potential catalysts ahead. We will speak further with management later today and, in the meantime, reiterate BUY while our fair value of S$0.62 is under review.

TEE International: Joint bid for Myanmar airport project
TEE International, Yongnam Holdings and Samwoh Corp have joined forces to participate in a consortium with JGC Corp and a unit of Changi Airport International to tender for the construction and operation of Myanmar’s new international airport. TEE and Samwoh will each take a 25% stake in a special purpose vehicle (SPV) that will in turn supply up to 60% of the project consortium’s equity. Yongnam will own 50% of the SPV and represent it in all negotiations involving the project. We are neutral on the announcement, pending further updates, and we maintain our fair value estimate of S$0.30 and HOLD rating for TEE.   

First REIT: Enhancing its portfolio value
First REIT (FREIT) recently announced its proposal to acquire two Indonesian hospitals from its sponsor Lippo Karawaci (Lippo) for a total purchase consideration of S$190.4m. This would be funded largely by debt and the issuance of new units to a smaller extent to Lippo. We are positive on the acquisitions as it offers DPU accretion of 6-13% for FY13-14F, according to our estimates, while also providing stability and visibility to unitholders. We now adopt a DDM model (cost of equity: 7.7%; terminal growth rate: 1.0%) as our new valuation matrix (previously RNAV). Coupled with our higher DPU forecasts, we bump up our fair value estimate from S$1.00 to S$1.31. But we maintain our HOLD rating as we believe that the market has largely priced in the positives from these acquisitions and FREIT’s continued transition to a sizeable healthcare REIT in the region.

Golden Agri-Resources Ltd: Near-term outlook remains weak
Golden Agri-Resources (GAR), after reporting a disappointing set of FY12 results at end Feb, has languished below S$0.60 in recent weeks; and may continue to do so in lieu of the still-weak near-term outlook. The main reason for the expected near-term underperformance comes from the uninspiring CPO (crude price oil) prices, which has again fallen below MYR2,400/ton. The other reason is probably the still-high stockpiles seen at several planters in both Malaysia and Indonesia. Despite the near-term headwinds, management remains relatively upbeat about its prospects, as it still sees robust demand growth for CPO as an edible oil from emerging and development countries. For now, we intend to maintain our HOLDrating and S$0.63 fair value (based on 12.5x FY13F EPS); and we see value emerging at S$0.55 or better. 

Lian Beng Group – Awarded two contracts worth $201m
Lian Beng announced that it has secured two construction projects which would boost its order book to a record S$1.085b. The first contract is worth S$112m and is awarded by Oxley Holdings to design and construct a multiple-user light industrial development at Sunview Road, Jalan Buroh and Pioneer Rd. It will commence in Apr-13 and take 24 months to complete. The second contract, also awarded by Oxley Holdings, is worth S$89m and involves the design and construction of a three-storey and seven-storey building forming a multiple-user industrial development at Tampines Industrial Crescent, Tampines Ave 10 and Tampines Expressway. It will also commence in Apr-13 and take 24 months for completion. We are keeping our rating on Lian Beng UNDER REVIEW pending a change in analyst. 

oma Strategic Holdings: JV with Dragages Singapore
Yoma announced that its wholly-owned subsidiary SPA Project Management Pte. Ltd. has formed a JV with Dragages Singapore Pte Ltd to construct 1,043 apartment units at Thanlyin Star City in Myanmar. The development would cost ~US$94m and construction would commence in Apr-13 and last for 33 months. The JV would be 60% owned by Dragages Singapore and the remaining by SPA Project Management Pte Ltd. While we are positive on the company entering into a JV with an established name in the sector and giving added visibility on the construction timeline for Star City, there is limited impact on our RNAV estimate at this juncture. Maintain a SELL based on a 12-month fair value estimate of S$0.71 (20% premium to RNAV).   

From DBS:
Kreuz – Secured second new contract for the year worth
US$25m. Maintain BUY, TP: S$0.58
Kreuz has secured a subsea installation contract worth
approximately US$25m. The project will be executed in
Southeast Asia and is scheduled for immediate
commencement with estimated completion by 4Q13. This is a
second new contract for the year, bringing YTD win to
US$40.5m. This represents 23% of our full year assumption of
US$174m. Maintain BUY, TP: S$0.58.

From Maybank KE:
Ascendas REIT: Nearing End of Sweet Run; Cut to Hold, TP SGD2.70
AREIT SP | Mkt Cap USD5.2b | ADTV USD14.2m
The  industrial REIT run looks over and we downgrade A-REIT to HOLD
on  valuations.  It was our last BUY among Industrial-REITS. A-REIT has
been  our  conviction BUY since we initiated in June 2012 and the stock
is up 30%.
We  expect  the current QE-inflated growth to run out of steam once
the  artificially  compressed  interest  rates  in  the  US,  and hence
Singapore,  start  normalising  sometime  next  year  or in early 2015.
Industrial  property  prices in the physical market have almost doubled
since  2009 whereas rentals are up only 44%. Further government cooling
measures  will  put  a lid on asset prices, while we are sceptical that
rentals can scale up in the near term.
We  remain  cautious on the mismatch between industrial rentals and
physical prices and see no further catalysts for the sector.

Local Brokerages Stock Call 2 April 2013

From CIMB:

Sheng Siong Group

Dominating the budget segment

OUTPERFORM - Upgrade | S$0.65 - Tgt. S$0.75 Shop n Save’s 57 stores will be re-branded into Giant stores from today. Dairy Farm’s retreat from the budget segment highlights Sheng Siong’s competitive positioning in this space. We upgrade to Outperform (from Neutral) on evidence of Sheng Siong’s dominance in the budget segment. Our estimates are maintained. We raise our target price, which is based on a higher applied multiple of 23x CY14 P/E (previously 18x) on a 5% discount to Dairy Farm (previously 20%). We see catalysts as earnings delivery from new stores and continued store expansion. From OCBC: SMRT Corporation: More impairments? We view the recent goodwill impairment announcement as a way for SMRT’s new management to turn the page on its past overseas ventures although the timing did take us by surprise. While the Shenzhen ZONA venture failed to yield the desired results, its performance only turned negative over the past two quarters. Nonetheless, we feel that management review of existing operations is still ongoing, and we could see further impairments – particularly on the SG bus business – down the line. In the interim, we expect to see a net loss in excess of S$4.3m for 4QCY13, and a possible halving of FY12’s final dividend. As we roll our valuations forward to include FY15, our fair value declines to S$1.51 from S$1.62 previously with higher operating expenses and a lack of growth opportunities to blame. We maintain HOLD on SMRT and reiterate our view that an inflection point is unlikely anytime soon.   United Envirotech: Inks another project in Jiangsu United Envirotech Ltd (UEL) has recently inked an agreement worth RMB200m (S$40m) with the local government of Siyang County, Jiangsu Province, China for TOT (Transfer-Operate-Transfer) and BOT (Built-Operate-Transfer) projects in an industrial park for the textile industry. Management intends to finance its latest investment using proceeds from the previous convertible bond issue to KRR and bank financing. Based on its usual 40% equity/60% debt financing model, UEL would need around S$5.6m for Phase 1 of the TOT project, which should not be an issue as it is currently sitting on ~S$63.2m of cash (as at 31 Dec 2012). In light of the latest investment, we bump up our FY14 estimates for revenue by 1.5% and earnings by 4.9%; this in turn raises our fair value from S$0.88 to S$0.90, still based on 13x FY14F EPS. Maintain BUY.  Singapore Press Holdings: Acquires vehicle online classifieds site SPH announced that it has entered into a sale and purchase agreement to purchase SGCM Pte. Ltd. which owns and operates vehicle online classified sites (including the popular sgcarmart.com), a car auction platform, and performs online marketing. In addition, it is also a service provider for car loans, insurance and settlement services. The maximum aggregate consideration payable is S$60m and would be made in cash. We see this acqusition to be a logical one and part of SPH’s continued expansion into online media advertising. We would speak further with management regarding this acquisition and, in the meantime, maintain BUY with an unchanged fair value estimate of S$4.94   From UOB KH: Lum Chang Holdings - Inexpensive contractor with strong financials (LCH SP/NOT RATED/S$0.33) With a strong construction orderbook of S$600m and its new executive condominium project at Woodlands to be launched in Apr 13, LCH’s construction arm is likely to be kept busy   STX OSV Holdings (SOH SP, MS7) – Technical BUY with +8.9% potential return Last price: S$1.23 Resistance: S$1.34 Support: S$1.20 The stock is now known as VARD. BUY with a target price of S$1.34 with tight stops placed below S$1.19. Prices appear to be forming an interim bottom near S$1.20 and its RSI indicator is still hovering above a reading of 40. Its Stochastics indicator has formed a bullish crossover in the oversold region. A break above S$1.26 is likely to increase its odds for further upside. Blumont Group Ltd (ADRT SP, A33) – Technical SELL with +17.6% potential return Last price: S$0.635 Resistance: S$0.665 Support: S$0.54 SELL with a target price of S$0.54 with tight stops placed above S$0.665. Prices have now formed a potential tweezer top and its RSI indicator, which has broken above a reading of 80, looks poised to turn lower. Its Stochastics indicator has formed a bearish crossover in the overbought region. Watch to see if its MACD indicator could form a bearish crossover as well and if the stock could still be supported by its 25-day moving average. From DBS: Cambridge REIT - Unlocking hidden value in its portfolio. BUY, TP raised to S$0.93  The coming few years could be transformational for Cambridge REIT (CREIT). With a number of its the master leases rolling off, we believe it is an opportune time for CREIT to relook at potential re-development or asset enhancement plans within its portfolio, which based on estimates, can reap a further 2.6m sqft GFA. This is a potential 35% expansion in rentable space, which could raise rental income by up to c44%. The potential collective sale of Lam Soon Industrial Buidling (LSB) if completed is likely to unlock substantial gains for CREIT, which currently own a 69.2% stake in the property. Our base case scenario of a collective sale, assumes a fair value of S$277m for LSB, implying an attributable profit of S$82.3m (S$0.07 / unit) for CREIT. Maintain BUY, TP raised to S$0.93 (Prev S$ 0.75).  From Maybank KE: STX OSV: A Bargain Hunt; Initiate with BUY; TP SGD1.66  SOH SP | Mkt Cap USD1.2b | ADTV USD7.7m  We  initiate coverage on STX OSV (VARD) with a BUY rating and TP of  SGD1.66,  pegged  to  9x  PER  on  average  FY13-15F  earnings.  With a  potential capital upside of 35% and FY13F dividend yield of 4.9% (which   can rise to 7.3% in FY15F), the stock is a steal.   Share  price  has  been  de-rated and suppressed due to the lowball   offer  (SGD1.22/sh)  by  Fincantieri for STX Group’s 50.75% stake. With   the  sale  concluded,  the overhang on share price has been removed and   VARD should re-rate positively to at least peer valuation levels.   We  believe that weakened ordering activity from 2H12 is short-term   in  nature and foresee a pickup towards 2H13. We believe the market has   been  overly  cautious  and  underestimated the potential strength of a   recovery.  The cautious mood sets the stage for positive surprises when   ordering activities pick up faster and stronger than expected. From RHB DMG: SPH: Paying a maximum of SGD60m in cash for online car portal sgCarMart (SGCM) (NEUTRAL, S$4.48, TP: S$4.30) Our thoughts: This acquisition does not come as a surprise – SPH has been involved in a number of acquisitions in recent times which includes Australia’s ACP Magazines for SGD58m in 2011, Eastern Holdings’ exhibition business for SGD43.5m in 2010, ShareInvestor for SGD12m in 2008, HardwareZone for SGD7.1m in 2006 and Blue Inc for SGD33m in 2004. We think that this acquisition will bode well and is accretive for SPH given that its overall portfolio of online businesses are currently loss making. We are NEUTRAL on SPH with a TP of SGD4.30. SMRT: Cutting Target Price On Profit Warning (SELL, S$1.54, TP: S$1.37) SMRT has announced that it is expecting to report a net loss for 4QFY13 due to deteriorating profitability as well as a SGD17m impairment of goodwill in its associate Shenzhen ZONA Transportation Group. We are lowering our FY13 and FY14 earnings by 21.1% and 7.2% respectively. Maintain SELL with lower TP of SGD1.37 (from SGD1.43 previously) based on DCF. This implies a FY14 P/E of 19.9x. Baker Tech: Charting New Growth Path ( S$0.44, UNRATED) We met up with the management team of Baker Tech (BTL) and came away with a positive view on BTL’s strategic plans. In the mid-term, BTL’s expansion into rig ownership through Discovery Offshore (DISC) will drive EPS growth in FY13-14F. DISC could be eyeing more rigs and BTL might continue to raise its stake in DISC. BTL trades at FY12 excash core P/E of 11.5x and could compress to 6.2x in FY14F. Unrated. Valuation: Trades at 11.5x FY12 ex-cash core P/E. Sea Deep can deliver a steady annual net profit of SGD14.6m. Adding that to our estimate of SGD12m net profit from DISC in FY14, this will raise BTL’s FY14F net profit to SGD26m, translating into FY14F ex-cash P/E of 6.2x. Sheng Siong Group We recently hosted Sheng Siong for a roadshow and came away more confident that management would be able to raise its gross floor area by 10% annually for FY13/14 as 17 new possible locations have been identified. Given the higher future growth rate, we raise our valuation multiple from 22x to 24x to derive a higher TP of S$0.69. At last close at S$0.65, valuations appear rich. Downgrade to Neutral.

Local Brokerages Stock Call 1 April 2013

From CIMB: Noble Group

A great bargain

OUTPERFORM - Maintained | S$1.22 - Tgt. S$1.47 Slower economic activity, heightened risk aversion and earnings disappointments have pinned Noble’s share price near to all-time lows. The IMF now projects an acceleration of global growth in 2013-2014, suggesting that Noble’s fortunes could be turning. Against a backdrop of low expectations and low ownership, any positives from earnings surprises and a return of risk appetites could spark Noble’s rerating. We maintain our Outperform rating, EPS estimates and target price (10.1x CY14 P/E, 0.5SD below the 5-year mean). SMRT Corporation Wheeling out its first-ever net loss UNDERPERFORM - Maintained | S$1.58 - Tgt. S$1.53 SMRT surprised us with its profit warning. The group will slip into its first-ever net loss in 4QFY3/13 as a result of high operating costs and S$17m goodwill impairment for its associate Shenzhen ZONA. But it will remain profitable for the full year. We slash our FY13-15 EPS by 4-22% to reflect structurally higher opex and the one-off goodwill write-down. Our target price (DCF, WACC 6.5%) falls to S$1.53. SMRT remains an Underperform, with earnings and dividend disappointments being de-rating catalysts. From UOB KH: SMRT Corporation Shock Profit Warning Due to Impairment Loss and Wage Hike SMRT announced that the group is expected to report a net loss for 4QFY13 due to a S$10m charge from the recently announced wage revisions, together with a S$17m non-cash goodwill impairment for SMRT’s China associate, Shenzhen ZONA Transportation Group. We slash our full-year dividend forecast to 6.1 S cents, implying an uninspiring yield of 3.8%. Maintain SELL with an unchanged target price of S$1.30.  From Maybank KE: Ying Li International: Little Affected By Cooling Measures; Buy TP $0.61 YINGLI SP | Mkt Cap USD818.6m | ADTV USD3.7m We believe that Ying Li will be less affected by the recent property cooling measures. Reiterate BUY with target price of SGD0.61, pegged to  25% discount to RNAV.  The  new  CEO  may  open  up  new  opportunities for Ying Li. It is  possible  for  Ying  Li  to  explore  other business models such as the  integrated township projects.  We  are projecting strong EPS growth in the next three years on the  back  of  strong  pipeline  of  assets.  We  like Ying Li’s prime asset  quality  and  its  exposure  to  high-end commercial property sector in  Chongqing.   From RHB DMG: SMRT Corporation SMRT announced that it is expecting to report a net loss for 4QFY13 (financial year end Mar), due to deteriorating profitability with increasing operating costs, coupled with a lack of corresponding fare adjustments. SMRT will also report a SGD17m impairment of goodwill in its associate Shenzhen ZONA Transportation Group, but will however still be profitable for FY13. SMRT had in Jan 13 indicated that profitability for 4QFY13 and the next twelve months will deteriorate due to higher operating costs, in particular for the fare-related businesses. In early Mar 13, SMRT had announced a progressive revision of its non-executive wage scale, excluding its Bus Captains which led us to downgrade our call on the counter to a SELL (from NEUTRAL). We are maintaining our SELL recommendation though we are looking to revise our FY13 estimates. Our current TP is S$1.43. Keppel Corp: SGD1bn New Contract Within Expectations (NEUTRAL, S$11.22, TP: S$11.21) Keppel announced orders for four KFELS B Class jackup rigs from Mexico-based drilling company, Grupo R, for USD820m (SGD1bn). YTD order win of SGD1.59bn is still within our forecast of SGD5bn. We maintain FY13-14F EPS estimates and TP is unchanged at SGD11.21. Maintain Neutral on Keppel. Stock is now valued at 14.3x FY13F P/E. From OCBC:  KSH Holding  ACQUIRING STAKE IN 160 CHANGI RD - Buys 30% stake in 160 Changi Rd - Expedient redeployment of capital - Fair value raised to S$0.62 KSH would acquire a 30% stake in 160 Changi Rd, located at the corner of Changi Rd and Lorong 105 Changi, for S$20.4m. Assuming a 50:50 retail and office breakdown and selling prices of S$2.8k and S$1.8k for retail and office, respectively, we estimate a 1.5 S-cents accretion to KSH’s RNAV. We like that KSH has re-deployed capital expediently into new projects after raising S$13.9m in mid-Mar 2013, and believe this points to a well thought-out plan for capital management and growth. Maintain BUY with an increased fair value estimate of S$0.62 versus S$0.61 previously. Our SOTP methodology conservatively values KSH’s construction segment at 4x FY13E earnings and its property segment at a 40% RNAV discount. This being so, its fair value estimate could re-rate signficantly if construction order book replenishment continues unabated and/or upcoming launches perform well.  Nam Cheong US$72M CONTRACT FOR SIX VESSELS -        Two AHTS to Icon Offshore Berhad -        Four ERRVs for deployment in the North Sea -        Buoyant industry outlook Nam Cheong Ltd announced that it has sold six vessels worth a total of US$72.1m to two of its existing customers. Two 5,150 bhps Anchor Handing Towing Supply (AHTS) vessels were sold to Icon Offshore Berhad, one of Malaysia’s largest OSV group, while four Emergency Response and Rescue Vessels (ERRVs) were sold to a Singapore-based company that provides ship management and chartering services. The six vessels will be built in one of its sub-contracted yards in China with expected deliveries between 2Q13 and 4Q14. We continue to like Nam Cheong for its exposure to the buoyant offshore market in Malaysia and its close ties with Petronas-licensed companies. Its build-to-stock shipbuilding programme enables it to capture the strong domestic vessel demand, while its build-to-order business model helps lower its overall risk profile. Maintain BUY with unchanged fair value estimate of S$0.30. From Phillips: Overseas Union Enterprise Ltd – Update Recommendation: Accumulate Previous close: S$3.07 Fair value: S$3.24  Revival of hospitality REIT plan a positive note Move could strategically unlock asset value while remaining as a substantial shareholder and asset manager Net proceeds give rise to potential of special dividend payout Maintain Accumulate with higher fair value of $3.24. SMRT Corporation – Update Recommendation: Sell Previous close: S$1.58 Fair value: S$1.20  Profit warning of a loss for 4QFY13E Impairment charge on goodwill of S$17mn. Other cost items could also be higher than usual. Maintain Sell with a lower target price of S$1.20.

Local Brokerages Stock Call 28 March 2013

From OCBC:

Oil and Gas sector: Takeaways from IHS Petrodata’s seminar
We recently attended IHS Petrodata’s seminar on the offshore oil and gas sector, and came away feeling positive on prospects of selected sub-segments of the industry. For the deepwater drilling market, day rates have recovered to 2008 levels, especially the ultra-deepwater segment. Rates for harsh-environment rigs have also been climbing. 2013 is also expected to see the development of more global oil and gas field projects, while sentiment on the OSV market has generally improved. In particular, average earned day rates in Asia Pacific are showing signs of an upturn, especially for AHTS vessels smaller than 6,000BHP in Indonesia and Malaysia. Maintain Overweight on the broader oil and gas sector, with Ezion Holdings [BUY, FV: S$2.33], Keppel Corporation [BUY, FV: S$12.68], Sembcorp Marine [BUY, FV: S$5.84], and Nam Cheong [BUY, FV: S$0.30] as our preferred picks. (Low Pei Han, Chia Jiunyang)

Yoma Strategic Holdings: Moving into luxury tourism
Yoma Strategic Holdings (Yoma) reported that it would take a 70% stake in Chindwin Holdings which would acquire several connected tourism assets. First, Chindwin would acquire 75% of a balloon tour company “Balloons over Bagan (BOB)” for US$10.7m. BOB is the only hot air balloon operator in Myanmar and has had a profitable track record since it began operations 13 years ago. We understand that this acquisition price translates to a forward PE multiple of 6 to 8 times. In addition, Chindwin would acquire a 75% stake in 21.2 acres of land in Bagan for US$3.75m. This acquisition is conditional on the present owner converting the existing land-rights to allow for the construction and operation of a hotel business. Overall we see these acquisitions to be positive and allows Yoma to capitalize on the burgeoning demand for luxury tourism in Myanmar. While we believe the company holds meaningful franchise value as a leading developer in Myanmar, most positives are likely priced in at current prices. Maintain SELL with a 12-month fair value estimate of S$0.71 (20% premium to RNAV).  (Eli Lee)

Keppel Corporation: Good demand from Mexico; secures four more jack-ups
Keppel Corporation (KEP) announced that it has secured contracts to build four jackup rigs worth US$820m for Mexican drilling company, Grupo R. The rigs will be built to KEP’s proprietary KFELS B Class design and are scheduled for delivery progressively from 2Q15 to 4Q15. Recall that KEP also secured contracts to build two similar rigs for PEMEX in Dec last year for US$420m. As mentioned in our earlier notes, the strong demand coming from Mexico is within our expectations, as PEMEX plans annual capital expenditures of ~US$30b till 2019 to stem the country’s declining oil production. We see KEP as one of the beneficiaries of these developments. The group has secured new O&M orders worth about S$1.6b YTD, accounting for ~32% of our full year estimate. Maintain BUY with S$12.68 fair value estimate on KEP. (Low Pei Han)
 
Nam Cheong Ltd: US$72m contract for six vessels
Nam Cheong Ltd announced that it has sold six vessels worth a total of US$72m to two of its existing customers. Two 5,150 bhp Anchor Handling Towing Supply (AHTS) vessels are sold to Icon Offshore Berhad – one of Malaysia’s largest OSV group, while four Emergency Response and Rescue Vessels (ERRVs) will be sold to a Singapore-based company for deployment to the North Sea. The vessels are scheduled for delivery between 2Q13 and 4Q14. We currently have a BUY rating and S$0.30 fair value estimate for the counter. (Chia Jiunyang)

From CIMB:

Parkway Life REIT

Defensive without losing sight of growth

NEUTRAL - Maintained | S$2.48 - Tgt. S$2.40

We recently brought Plife to see investors in Europe. Management articulated moves it undertook to strengthen its portfolio to ensure a sustainable DPU and further strategies to maintain DPU growth. We sense increased optimism about acquisitions this year. Factoring in higher retained earnings partially offset by higher acquisition accretion, we lower DPUs. Our DDM-based target price (discount rate: 6.7%) is, however, raised after rolling forward valuations. Maintain Neutral for premium valuations with catalysts from higher-than-expected accretion from acquisitions.  

From UOB KH:

Kreuz Holdings

Kreuz has recently inked a deal to build a game-changing deepwater
subsea vessel, which will lift the group’s capability to match that of leading
global subsea players. We expect the vessel to contribute a net profit of
US$6m-11m per year, lifting earnings by 13-23%. Maintain BUY with higher
target price of S$0.68 (previously S$0.53), given attractive 2014F PE of 4.5x
and a respectable 4-year EPS CAGR of 15% (2011-15).

Mapletree Industrial Trust

MIT is developing a S$108m (S$281psf) built-to-suit data centre for Nasdaqlisted
Equinix, with an option to upsize the investment to S$217m. Yield-oncost
is attractive at 7.5-8.0% when completed in 2H14, while income stability
is secure with a 20-year lease agreement. Maintain BUY with a higher target
price of S$1.66 (from S$1.62), factoring in a 1% dip in DPU in FY14-15
during construction and a 3% accretion in FY16.

GuocoLeisure - Portfolio Of Undervalued Assets In A
Global City (GLL SP/BUY/S$0.885/Target: S$1.19)
GLL’s sustained profitability and huge margin of safety from its
undervalued asset portfolio make it an attractive buy for value
investors 

From DBS:

Mapletree Industrial Trust has signed an agreement to develop
a ‘built-to-suit’ facility for Equinix Singapore, a 7 storey, high
specification property located in One-North. We like this deal
as (i) the long lease provides good income visibility for this
proposed investment, with annual step ups providing longer
term organic growth (ii) high returns of cost of 7.75% (on
estimated rent of S$2.0 psf pm) for this property, which will be
accretive to distributions and (iii) quality earnings backed by a
blue chip tenant - Equinix Singapore is a subsidiary of
NASDAQ-listed Equinix Inc. a global interconnection and data
centre company. Target price is adjusted slightly higher to
S$1.46 (Prev S$ 1.43) after this latest deal has been factored
in. Maintain HOLD call, as upside to TP is limited. 

Keppel Corp has secured contracts to build four jackup rigs
worth US$820m in total from Mexican drilling company,
Grupo R. The jackup rigs are scheduled for delivery
progressively from 2Q 2015 to 4Q 2015. We expect more
orders to come from the Mexican market as PEMEX, the
Mexican national oil company has announced investment
plans of US$25.3bn for 2013, of which US$20bn will be
targeted at upstream activities. It plans to add between eight
and 12 offshore platforms to its fleet. These latest contracts
bring Keppel's YTD order win to S$1,590m, making up 26.5%
of our full year assumption of S$6bn. Maintain BUY, TP:
S$13.00.

Nam Cheong announced the first round of contract wins in
2013, securing US$72m worth of contracts for 2 AHTS and 4
ERRV (Emergency Response and Rescue) vessels. The two AHTS
vessels are part of Nam Cheong's build-to-stock series and we
estimate 15 of the 19 vessels scheduled to be completed in
FY13 have now been sold already. The order for the 4 ERRVs,
which will be built on a build-to-order basis, could add further
upside to our FY14 numbers. Orderbook now stands at about
RM1.3bn. This underpins robust earnings trajectory for the
Group in FY13/14. Maintain BUY with TP of S$0.30. 

From Maybank KE:

Noble Group : Leaner Is Better; Buy, TP $1.53
 NOBL SP | Mkt Cap USD6.3b | ADTV USD20.8m
    Ø   We  are  positive  on  Noble’s  new strategic direction to become a
    leaner  version  of  its former self. We believe some of its key drives
    over the next 12-24 months will bear immediate and tangible fruits.
    Ø   The  pricing  and  takeup  on Noble’s recent 5-year MTN issuance is
    evidence  that  the  company’s  healthier  balance  sheet and will have
    immediate positive impact on bottomline.
    Ø  Reiterate BUY with a Street-high TP of SGD1.53, pegged to 13x FY13F.
    Potential  catalysts  include  divestment gains and announcement of JVs
    with strong partners.  
Maintain BUY. We see company-specific reasons to be positive on
earnings outlook. Noble’s lower gearing should also find favor with
investors. We adjust FY13-FY15F earnings up by 1-2%, with TP of
SGD1.53 remaining pegged to 13x FY13F. Potential catalysts include
divestment gains and announcement of JVs with strong partners. 

From RHB-DMG:

Second Chance (BUY/TP: SGD0.53) recorded a 42.4% YoY
decline in 2QFY13 PATMI to SGD3.0m. This was despite a 9.6% growth in
revenue. The PATMI decline was largely due to higher operating expenses and
significantly lower property revaluation gains. Going forward, its apparel
business is expected to continue to do well, supported by its new stores in
Malaysia, but this is likely to be somewhat offset by lower rental income (it had
disposed a few investment properties in FY12) and possibly lower profits from
its gold business as gold prices remain softer. Management has guided that it
will distribute dividends of SGD0.034 / share for FY13. At the current price, this
would translate into an attractive yield of 8.2%. (Lynette Tan)

Nam Cheong: Closing 1QFY13 With Massive Win (BUY, S$0.26, TP:
S$0.35)
TP lifted to SGD0.35, maintain BUY. Following the order win, we raise our
FY13-14F EPS by 1%-2%. Nam Cheong remains one of our top picks in the
small-cap oil & gas space, and our 10x P/E valuation is at a large 33% discount
to rig builders Keppel and SMM. Maintain BUY.  

  

Local Brokerages Stock Call 27 March 2013

From OCBC:

Neptune Orient Lines: Turnaround still intact
The Shanghai Containerised Freight Index has exhibited relative stability since the start of the year, and this should provide a good base for upcoming generate rate increases such as those enacted under the TSA for Apr. Although there is a possibility of a supply outpacing demand, several liners have expressed confidence in the resilience of rates this year and continue to push through GRIs beyond Apr. Nonetheless, the major liners acknowledge potential threats to profitability and have reiterated the need for the industry to strike a balance between competition and sustainability. Although some liners have taken heed – such as the G6 and CKYH alliances who have cancelled their planned Asia-Europe service launches this year – there remains some routes that are particularly susceptible to rate fluctuations, and we adjusted our estimates downwards for NOL accordingly. Regardless of this adjustment, our view on NOL’s turnaround in FY13 remains intact and we maintain our BUY rating with a fair value of S$1.38. (Lim Siyi)

OKP Holdings: Revenue visibility but margin compression
To recap, 4Q12/FY12 results were generally in line with our expectations. While FY12 net income of S$104.5m (-5% YoY) was 5% lower than our estimate, PATMI of S$12.4m (-53% YoY) was 6% higher than what we expected. The lacklustre results were due to a weak economy, price competition and climbing labour costs. OKP declared a first and final dividend of 1.5 S cents/share, lower than the 2 S cents that we and the street had expected. FY12 dividend translates into a yield of 2.9%. We believe that management is conserving cash to increase its flexibility to tender for government projects. Following a change in analyst, we have adjusted our forecasts for OKP’s FY13 and FY14 performance. Applying a P/E multiple of 11x to FY13F EPS, we derive a FV of S$0.48/share, slightly higher than our previous FV of S$0.46/share. We maintain our HOLDrating on OKP. (Sarah Ong)

From UOB

Halcyon Agri Corp - Solid Midstream Rubber Player With
Potential For Upstream Expansion
(HACL SP/NOT RATED/S$0.475)
We see the potential for M&As in the upstream segment, which
would enhance Halcyon’s position in natural rubber

From Maybank KE

ST Engineering: Defence’s Turn In The Limelight; Buy, TP $4.4
STE SP | Mkt Cap USD10.5b | ADTV USD5.8m
Ø We reiterate our BUY call on ST Engineering (STE), as a positive defence business outlook lends support to the thesis that it should trade at a premium to its historical average.
Ø Two of STE’s largest contracts announced to-date have been derived from its defence business, and both from its Marine arm. We continue to see healthy defence expenditure trends both in terms of Singapore (CAGR 4%) as well as from STE’s overseas customers (CAGR 4-5%).
Ø We believe STE’s 1Q13 orderbook will set yet another record (~SGD13b), providing the earnings visibility that would catalyse its share price appreciation. Our target price of SGD4.40 is pegged at 21.6x FY2013 PER, 1 SD above its historical average. Investors who own the stock before Ex-Div on 26 Apr will stand to enjoy SG 13.8 cts / share of dividends (translating to ~3.3% yield).

BreadTalk Group: Have a MINT, Have a BreadTalk; Not Rated
BREAD SP | Mkt Cap USD194.5m | ADTV USD0.44m

Ø Primacy Investment, a wholly-owned subsidiary of Minor International (MINT) in Thailand, surfaced as a shareholder in January and purchased an additional 2.58% last week at an average of SGD0.83 a share, reaffirming our suspicions that Minor may just be getting started. With BreadTalk’s premium reputation as a bread operator, and entrenched position in Asia, this could be the prized jewel which Minor has been waiting for.
Ø BreadTalk offers MINT an excellent portal to extend its cross-selling channels, as well as an opportunity to strengthen and add prominent brands to its growing overseas portfolio. It is a leading bakery chain, which has restaurants and cafes also figuring in its portfolio.
Ø Current valuations of BreadTalk are below peers with a forward consensus P/E of 15.6x against 16.5x. We believe BreadTalk deserves a premium valuation for its multi-country success in growing its bakery chain.