Local Brokerages Stock Call 6 August 2013

From OCBC:
United Envirotech: Decent 1QFY14 start
Summary: United Envirotech Ltd (UEL) reported 1QFY14 revenue of S$44.1m, +37.5% YoY (but -5.9% QoQ), meeting 14.2% of our FY14 forecast, while net profit slipped 2.6% YoY and 18.9% QoQ to S$5.7m, or about 12.5% of our full-year forecast. We deemed it to be a decent start as its fiscal first quarter tends to be seasonally softer. Going forward, management remains upbeat about its prospects in China, where the Chinese government has a planned investment on CNY4t in water resources by 2020; it adds that China is consistently tightening the effluent discharge standards. But we are tweaking our FY14 estimates slightly lower (revenue by 7.4%, earnings by 5.1%) to account for a likely smaller EPC pipeline. Our fair value also eases slightly from S$1.03 to S$0.975, still based on 13x FY14F EPS. Given the limited upside after the recent outperformance, we downgrade it to HOLD. 

Valuetronics Holdings: Discontinuing coverage 
Summary: Valuetronics Holdings Limited (VHL) will begin FY14 on a fresh page, as it will no longer incur losses on its Licensing business following its decision to terminate operations in 2QFY13. Any recovery in VHL’s earnings will likely translate into higher dividends for its shareholders, in our view, as VHL had a relatively stable dividend payout ratio of 37-42% from FY10-13. This is also supported by VHL’s strong net cash position. Looking ahead, we believe that VHL will focus its attention largely on its LED lighting OEM business, given the robust industry growth prospects and its largest customer’s market leadership position in this field. However, given the continued lack of trading liquidity in VHL’s stock and a reallocation of resources, we are CEASING COVERAGEon the stock. Our last rating was a ‘Hold’ with a fair value estimate of S$0.195.

City Developments Limited: 2Q13 PATMI up 48% YoY
Summary: CDL’s 2Q13 PATMI increased 48% YoY to S$203.8m, mostly due to disposal gains from several industrial property assets. 1H13 PATMI now cumulates to S$341.5m which makes up 49% of our full year forecast. We judge this to be mostly in line with our expectations. Residential sales performances remain firm, with 2013 launches D’Nest, Bartley Ridge and Jewel@Buangkok showing healthy sell-through rates to date. In 2H13, the group expects to launch a mixed use JV project at the junction of Upper Serangoon Rd and MacPherson Rd near Potong Pasir MRT. Hotel subsidiary Millennium and Copthorne Hotels’ (M&C) 2Q13 PATMI decreased 17.7% YoY as 181k net rooms were taken out of the supply due to enhancement works. 1H13 global REVPAR, however, was up 4.1% to GBP71.27; AOR and ARR increased by 0.7 ppt and 3.1%, respectively. The group also announced a special interim dividend of 8 S-cents per share. Maintain HOLDon CDL with our fair value estimate of S$12.04 (15% RNAV disc.) under review. 

From Maybank KE:
 Yongnam Holdings: Still In With A Chance; Maintain Buy, TP $0.465
 YNH SP | Mkt Cap USD305.0m | ADTV USD4.6m
 2Q13  results were mostly within expectations, including a one-off SGD5.1m
 provision. Excluding this item, net profit was up 13% yoy and 19% qoq.
 Profit  growth  was  driven  by  revenue  which grew 48% on recognition of
 projects.   We   expect   gross   margins  to  improve  going  forward  on
 better-priced  contracts  and  a higher revenue mix from civil engineering
 (strutting) which has higher margins.
 Both  the  Myanmar  airport  projects  have  yet to be officially awarded,
 despite  ongoing  speculation.  We  believe current share price represents
 good opportunity to accumulate. Maintain BUY.

 Sarin Technologies: More Potential Rewards Await; Maintain Buy TP $1.86
 SARIN SP | Mkt Cap USD414.0m | ADTV USD0.2m
 2Q13  results  were  ahead  of our expectations with net profit of SGD8.1m
 (+26%  YoY,  +3%  QoQ). 1H13 net profit makes up 53% of our previous FY13F
 forecast.  Sarin  also  declared  higher-than-expected dividends of 4.0 US
 cts/sh.  We see the possibility of even higher dividends in 2H13, implying
 FY13F yield of 6.5%
 Sales  of GalaxyTM were exceptionally high in 2Q13 due to pent-up purchase
 which  was  put  off  in  end  1Q13 by India customers. Sarin is generally
 upbeat  on  long-term  prospects,  but  cites  possible weaker 3Q13 due to
 macroeconomic  challenges  in China and India, as well as the narrowing of
 spread between rough and polished diamond prices.
 We  see  the  possibility of even higher dividends in 2H13, implying FY13F
 yield  of  6.5%.  We  roll  forward  our  valuations  to blended FY13F/14F
 earnings maintaining a 15x PER multiple. Consequently, our TP is raised to
 SGD1.86, implying a 21% share price upside 

From DBS:
Yongnam’s 2Q13 results were below expectations on weak
margins. Delay in Yangon Airport tender results weakens
stock catalyst. Weaker outlook as margins remain muted and
order book shrinks. We have cut FY13F/FY14F earnings by
44%/25%. Downgrade to FULLY VALUED, TP S$0.28 (Prev S$
0.41).

Sales for United Envirotech in line, but net profit fell short due
to lower Treatment margin. Capacity utilization is on track to
meet our full year expectation, but EPC wins are behind
target. We have cut FY14/15F earnings by 13%/15% to
reflect lower Treatment margin and EPC revenues. Maintain
HOLD rating, nudged down TP to S$0.90 (Prev S$ 0.97).

 

Local Brokerages Stock Call 5 August 2013

From OCBC:
Golden Agri-Resources: Downgrade to SELL; poor 2Q13 showing
Summary: Golden Agri-Resources (GAR) saw 2Q13 revenue jumped 25.4% YoY and 17.6% QoQ to US$1682.3m, but weaker margins on the back of softer CPO prices led to core earnings tumbling 52.3% YoY and 50.0% QoQ to an estimated US$55.1m. 1H13 revenue grew 8.8% to US$3112.4m, meeting 49.7% of our FY13 forecast, while net profit tumbled 41.5% to US$158.1m; core earnings slipped 40.9% to US$165.2m, or just 33.7% of our full-year forecast. In view of the worse-than-expected showing and likely more margin compression ahead, we opt to slash our FY13 core earnings forecast by 19%; this in turn drops our fair value from S$0.57 to S$0.465, now based on 11x blended FY13/FY14F EPS. We also downgrade our call from Hold to SELL.

Global Premium Hotels: 2Q13 in line
Summary: The 2Q13 results for Global Premium Hotels (GPH) were generally in line with our expectations. Revenue climbed 1.0% YoY to S$15.m and gross profit rose 1.1% to S$13.m. Administrative expense fell 19.4% to S$5.5m mainly due to one-off recognition of IPO expenses of S$1.4m in 2Q12. Interest expense was 9.8% higher at S$1.9m due to the restructuring exercise undertaken by GPH pursuant to the IPO in 2Q12. 2Q13 net profit climbed 36.2% to S$4.9m. 2Q13 hotel room revenue increased 1.3% YoY to S$15.1m. RevPAR was 2% higher at S$95.7, chiefly due to higher average occupancy rate of 93.1%, up 3.4 ppt. We expect 2H13 to be slightly better than 1H13 because we understand from industry sources that the sector as a whole has seen some stabilisation in Jul and Aug. Using a 10% discount to RNAV, we maintain our fair value of S$0.33 and BUY rating on GPH. 
 
Singapore Post: In Post we still trust
Summary: Singapore Post (SingPost) reported a 32.8% YoY rise in revenue to S$201.3m but saw a 2.0% decrease in net profit to S$37.3m in 1QFY14, such that the latter accounted for 25.3% of our full year estimates. Underlying net profit fell slightly by 0.9% to S$36.2m in the quarter, in line with our expectations. Margins continued to normalise as expected, while the group’s cashflow generation remained strong. In line with its usual practice, SingPost has proposed an interim quarterly dividend of 1.25 S cents/share. We look forward to the group’s transformation as it seeks more growth opportunities, but till then, we see limited upside potential unless earnings growth from its acquisitions proves better than expected. Still, we expect the share price to be supported by investors seeking yield (~4.8% FY14F). Maintain HOLD with S$1.32 fair value estimate. 
 
StarHub – Offers S$300 rebate for new BPL customers
Summary: StarHub Ltd has announced its “Surf & Watch” bundles specifically aimed at welcoming BPL fans home. Priced from S$47.37/month with a 24-month contract, subscribers (new and those without a contract) will get 25Mbps cable home broadband, its Deluxe HD Pack (82 channels) and a S$300 rebate; note that subscribers will have to pay SingTel S$59.90/month directly for the BPL content. According to StarHub, the rebate will be part of its Marketing & Promotions expense, and will not affect the Pay TV cost. However, as the bundle involves its older cable broadband, there could be limited appeal versus the newer NBN fibre network. We also see limited traction for existing SingTel subscribers who can continue to pay S$34.90/month for BPL. For now, we maintain SELLon StarHub with an unchanged S$3.82 fair value.

United Envirotech: Decent 1QFY14 start
Summary: United Envirotech Ltd (UEL) this morning reported 1QFY14 revenue of S$44.1m, +37.5% YoY (but -5.9% QoQ), meeting 14.2% of our FY14 forecast, while net profit climbed 3.5% YoY (down 13.8% QoQ) to S$6.1m, or 12.5% of our full-year forecast. According to management, the higher revenue came from a 23.3% YoY jump in Engineering revenue to S$31.2m, while recurring Water Treatment revenue surged 89.7% to S$12.9m. Note that its fiscal first quarter tends to be seasonally softer. Going forward, management intends to grow its recurring treatment income further and focus on securing more industrial wastewater treatment projects in China. We will speak more with management for further updates. For now, we place our Buy rating and S$1.03 fair value under review. 

From DBS:
Light trading activity is likely in this holiday shortened week
that could exaggerate price action even as the 2Q results
soldiers on. To date, slightly less than half of the stocks in our
portfolio have reported their quarterly earnings. 71% came in
within while 24% was below expectations. However, we
have cut FY13F and FY14F earnings by 1.2% and 0.6%
respectively. Results on tap next week include ARA on
Monday; City Dev, Genting, Wilmar, StarHub and SembCorp
Inds on Tuesday and Biosensors, Ezion, UOL and NOL on
Wednesday.

OCBC reported strong revenues ex-GEH. 2Q13 earnings were
in line with our expectations but below consensus. Loan
growth was strong at 7% q-o-q /15% y-o-y; this prompted
higher general provisions. Indonesian and Malaysian
operations improved q-o-q largely from strong loan growth.
However, guidance remains cautious. We have assumed a
conservative run rate of 1% loan growth per quarter (1H13
YTD: 10%), raising FY13F loan growth to 12% (FY14-15F at
9% per year). OCBC has declared 17 Scts DPS, no scrip
dividend applied. Upgrade to BUY, TP raised to S$12.40 (Prev
S$ 11.50), as we rolled valuation base to FY14.

1Q13 underlying profit for Singapore Post of S$36.2m (-0.9%
y-o-y, +13.8% q-o-q) was slightly below estimate due to
forex losses; declared S$1.25 Scts interim DPS, in line. We
have trimmed FY14F/15F earnings by 3%. SingPost is
transforming into a major E-commerce player in Asia, where
it can ride on last mile delivery network of postal peers in
various countries. Maintain BUY with a revised TP of S$1.50
(Prev S$ 1.56). SingPost has S$146m net cash for more
acquisitions.

Golden Agri (GGR) booked 2Q13 core earnings of US$45m (-
60% q-o-q, -58% y-o-y), significantly below our expected
range of US$110-126m. 2Q13 earnings thus brought 1H13
earnings to US$158m (-41% y-o-y), or 37% of our initial
FY13F earnings of US$423.8m. Compared to FY12 consensus
expectations of US$417mm the group's earnings were also
below on annualised basis. The poor results were dragged by
drop in CPO prices, drop in output and higher than expected
operating expenses. We lowered our FY13F/FY14F/FY15F
earnings by 20%/20%/16% to US$332.5m / US$388.6m /
US$485.4m, respectively. This consequently lowers our DCF
valuation on the stock to S$0.45/share, or 15% lower than
our previous estimate of S$0.53. Counter is NOT RATED.

From DMG:
Hi-P’s strong 2H performance seen. HIP’s 2QFY13 results were
 in line with our estimates as PATAMI swung from negative a year
 ago to SGD10.9m on the back of revenue of SGD285.0m 
(+13.2% y-o-y). As its existing clients are ramping up their new 
programs, Management is upbeat on its 2H performance. 
Management is now guiding for a better 2H performance (compared
 to 1H) in view of the new programs ramp-up by its existing customers.
 As we highlighted in our previous reports, we believe HIP will play 
an important role in the production chain of upcoming mid-end 
smartphones such as Apple’s new lower-priced iPhone. Management
 also said the group is now able to achieve decent yields from these
 projects despite the steep learning curve. In view of HIP’s strong 
operating cash flow and net cash pile of SGD85.2m, we see a 
possibility of the group buying back its own shares, similar to what
 it did a few days after it released its 1QFY13 results. In the last 
buyback, it bought a total of 7.5m shares amounting to SGD6.1m,
 with the highest price being SGD0.845/share. This will provide 
downside support to its share price. Reiterate BUY, with an
 unchanged SGD0.96 TP, based on a blended 13.5x FY13/FY14 P/E,
 -1 SD on the stock’s 3-year historical forward P/E.

Selldown Unwarranted As Share Sale Misconstrued. 
NeraTel’s CEO, Mr Samuel Ang recently sold off all shares under 
his name and the market reacted extremely negatively to the news.
 On the contrary, our checks show Mr Ang effectively increase stakes
 as the parent PE fund Northstar allowed him to hold more stakes 
of the company in order to incentivise and retain the CEO. Northstar, 
the current parent of NeraTel, is an Indonesian USD1.2bn private 
equity firm with a long solid track record, partnering with institutional
 giants such as GIC and TPG. Recent deals include the Indonesian
 national bank TPN’s exit, where sources confirmed that Northstar 
stood to gain a 7x return. Similarly, Northstar also set a target for 
NeraTel to achieve, doubling profits in three years’ time. As such,
we opine that NeraTel’s future is a bright one. Reiterate BUY with
a higher TP of SGD0.93 based on 11.4x blended FY13/14 PE 
(+1 S.D 5-year historical forward P/E).

From Maybank KE:
OCBC: MTM Losses A Drag in 2Q13; Maintain Hold TP $10.90
OCBC SP | Mkt Cap USD28.9b | ADTV USD34.5m
OCBC’s 2Q13 results were below our expectation at 44% of our
full-year forecast, but generally within consensus. The variance was
due primarily to MTM losses for the insurance division.
Expectations are for the yield curve to steepen further and
earnings volatility is likely to persist awhile longer for the group.
Our earnings are cut by about 11-12% for FY13-15.
Our TP is reduced to SGD10.90 from SGD11.30 on rolling
forward valuations to 2014 and on a lower P/BV of 1.4x (1.5x
previously) to factor in higher market volatility risk.
 
Cordlife Group: Rumoured relaxation of China’s one child policy; Buy TP
$1.29 CLGL SP | Mkt Cap USD192.3m | ADTV USD6.8m
According to a Chinese press report, there is a strong rumor
that China may relax its one child policy by the end of 2013 and fully
implement the policy in 2015. China’s baby stocks have reacted
positively on this.
If realized, this will be great news for Cordlife as it holds 10% stake in 
China Cord Blood Corp, the largest cord blood player in China with 
operations in 4 provinces which in aggregate account for 73% of China’s 
newborn population.
To sum up, Cordlife is in a good stead to reap the benefits
of the high potential China cord blood market. We maintain our positive
view on the stock and reiterate BUY with TP of SGD1.29 (23x FY14F PER).
 
Singapore Land: Slow and Steady, But Lacks Catalysts; Hold TP $9.75
SL SP | Mkt Cap USD3.0b | ADTV USD0.7m
SingLand’s 2Q13 core PATMI came in at SGD48.3m (-3% QoQ;
+14% YoY), taking 1H13 core PATMI to SGD97.7m (48% of our full-year
estimate) and in line with expectations.
Recurrent income remained largely stable, but we see little
immediate upside from office rental reversion and hotel operations.
Residential sales have also been weak at Mon Jervois.
SingLand still remains a potential privatisation candidate
(free float down to 11.5%), but it is currently trading close to our TP
of SGD9.75. Maintain HOLD.

Local Brokerages Stock Call 2 August 2013

From OCBC:
Sembcorp Marine: New yard opens at a time of record order book
Summary: Sembcorp Marine (SMM) reported a 7.6% YoY fall in revenue to S$1.12b and a 12.5% decrease in net profit to S$124.9m in 2Q13, such that 1H13 figures accounted for about 43% of our full year estimates, which we judge to be largely within our expectations. The last quarter saw fewer projects achieving initial recognition; more are expected in 3Q13. The new Tuas yard should also see revenue contribution in 2H13. Operating margin in 2Q13 was 13.0% vs 13.1% in 2Q12. After securing new orders worth about S$3.5b YTD, the group’s net order book stands at S$14.4b, a record high in SMM’s history. Meanwhile the stock price has appreciated by about 7.3% since our last report on 6 May 2013, and has outperformed the STI by about 11.1% over the same period. Maintain BUYwith S$5.64 fair value estimate.

UOB: Stronger 2Q and modest rise in NIM
Summary: UOB posted 2Q13 net earnings of S$783m, better than consensus estimate of S$699.9m. Net Interest Margin improved modestly from 1.70% in 1Q13 to 1.71% in 2Q13. For the Fee and Commission income, the key outperformers were its Investment-related and credit card operations which showed both YoY and QoQ improvements. Management has declared an unchanged 1H dividend of 20 cents. The group is continuing with its strategy of growing its regional franchise. For its Wealth Management business, AUM has grown from S$48b in 2010 to S$71b as of Jun 2013. We have adjusted our FY13 estimates, lowering impairment charges and increasing operating expenses. We are maintaining our HOLD rating and our fair value estimates of S$22.97, but will turn buyer at S$21.40 or lower.

Roxy-Pacific Holdings: $1.1b of revenues to drive earnings growth
Summary: 2Q13 PATMI is S$19.5m (EPS: 2.05 S- cents) which increased 10% YoY due to higher property development profits. 1H13 PATMI now cumulates to S$31.2m, forming 40% of our full year forecast. We judge this to be within expectations; earnings are likely to be backloaded in FY13, particularly with an anticipated one-time boost from Wis@Changi upon its TOP in 2H13. The group now sits on S$1.1b of yet unrecognized revenues from sold units – this is equivalent to 8 times FY12 property revenues and would underpin a rigorous earnings growth profile ahead in our view. Maintain BUY with an higher fair value estimate of S$0.81 (25% discount to RNAV) versus S$0.76 previously as we update for latest sales datapoints and a reduced RNAV discount. Key catalysts in 2H13 ahead include the launch of LIV on Wilkie and an earnings boost from Wis@Changi’s TOP. We also see a bonus share issue as a possibility in 2H13, which could help the counter’s uneven trading liquidity.

COSCO Corp (Singapore): Another weak quarter
Summary: COSCO Corp (Singapore)’s revenue for 2Q13 declined by 9% YoY to S$890m, while net profit fell by 56% to S$12.0m. For 1H13, the group’s net profit fell by 61% to S$21.8m, forming 45% and 29% of ours and the street’s FY13 estimates respectively. As its operating weakness is more severe than what the street had expected, we think that the street would likely lower its FY13F forecasts. The group’s balance sheet is debt-laden with net debt-to-equity ratio at 1.4x and S$1.3b of loans due within 12 months. Should the credit situation in China deteriorates further, the group may become vulnerable. Maintain SELL with unchanged FV of S$0.60.

Lippo Malls Indonesia Retail Trust: 2Q13 results as expected
Summary: LMIRT posted 2Q13 gross rental income of S$40.1m, up 30.2% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions of 15.5% for the existing malls. Distributable income increased by 19.5% YoY to S$20.5m and DPU climbed 17.7% YoY to 0.93 S cents. Results for the quarter were in line with our and consensus expectations. 1H13 DPU of 1.82 S cent forms 50.6% of our FY13 estimate. We maintain our HOLD rating on LMIRT but place our fair value of S$0.52 under review.

Sembcorp Industries: Investing in its second energy-from-waste plant in Singapore
Summary: Sembcorp Industries (SCI) announced that it will invest over S$250m to build, own and operate a facility capable of producing 140 tonnes/h of steam using industrial and commercial waste collected by its solid waste management operations. This will be SCI’s largest energy-from-waste plant in Singapore to date (also its second one here), and will be located on Jurong Island. The project will be funded by bank borrowings and internal resources, and will be completed in early 2016. SCI has a track record of managing such facilities, and its portfolio includes energy-from-waste, biomass and wind power facilities in the UK and China. Maintain BUY with S$6.48 fair value estimate on the stock. 

From DBS:
UOB’s 2Q13 earnings were slightly above expectations
from lower provisions; pre-provision profits were in line.
UOB is focusing on total customer returns and regional
growth. We raised loan growth to 13%, in line with
guidance of low-to-mid teens. A 20 Scts DPS was declared
but no scrip dividend applied. Our FY13-15F earnings
forecasts are raised by 1-3% after adjusting for higher
loan growth. TP is lifted to S$21.90 (Prev S$ 20.10) as we
roll over our valuation base to FY14. Upgrade to HOLD.

OCBC’s 2Q13 results were inline with ours but below
consensus. Ex- Great Eastern Holdings, non-interest
income was strong. 2Q13 net profit came in at S$597m (-
14%q-o-q; -8% y-o-y) mainly dragged down by GEH nonpar
fund losses (as a result of bond yield volatility in June).
NIM was stable at 1.64%. Provisions were higher mainly
from general provisions which increased with strong loan
growth. An interim dividend of 17 S cts was declared;
scrip dividends are not applicable. More updates after
briefing this morning.

2Q net earnings for SembCorp Marine down 12.5% y-oy,
marginally below. Operating margins declined to
11.8% from 13.7% (1Q13). New orders are on track,
strengthening order book to S$14.4b. We expect stronger
2H from higher order book drawdown and repair
revenue. Upside to earnings could come from the sale of
ARV3, which is now operating on a 5 year charter in
Brazil. We have trimmed FY13F net earnings by 3% as we
have assumed lower EBIT margin of 12% vs 12.4%
previously. Stock is fairly valued at PE of 17.5x (FY13),
maintain HOLD.

2Q13 results for Cosco Corp below due to forex loss. The
group is under pressure to fill yard capacity. We lowered
our below consensus FY13 forecast by a further 12% to
account for the forex loss. Maintain FULLY VALUED; TP
S$0.75
On contract wins, Cosco has secured a contract worth
over RMB590m from a Chinese company to build two
deep water platform supply vessels. Both of them are
scheduled for delivery in the second quarter of 2015. It
also announced contract valued over US$170m from a
European company to build one Jackupdrilling rig. The rig
is scheduled for delivery in the 3rd quarter of 2015. YTD,
contract wins form 60% of our order win assumption of
US$2bn.

Hi-P reported 2Q13 net profit of S$10.9m, in line; formed
39% of FY13F. Outlook is positive, driven by multiple new
product launches in 2H13. Maintain BUY, TP raised to
S$0.97 (Prev S$ 0.88) as valuation is rolled over to
blended FY13/14 EPS.

2Q DPU of 2.63 Scts for Parkway Life REIT was within
expectations. Hedges were in place to counter impact of
weaker JPY. The REIT is on track to meet FY13F earnings.
Maintain HOLD, TP adjusted to S$2.49 (Prev S$ 2.57) on
higher risk-free rate assumption.

Underlying earnings for HongKong Land were 17%
ahead of our estimate due to higher development
earnings and rental income. We expect encouraging
residential sales to add to growth momentum.
Maintain BUY with US$7.94 TP.

From Maybank KE:
DBS Group: 2Q13 In Line, Danamon Off; Maintain Buy TP $20.00
DBS SP | Mkt Cap USD33.1b | ADTV USD64.5m
Maintain  BUY  on  DBS  with  an unchanged Street-high TP of SGD20,
pegged  to  a  rolled  forward  2014  P/BV  1.3x  (1.4x  previously) on
factoring in higher market volatility risk.
DBS’  2Q13  results  were within our expectation and consensus. Our
forecasts are maintained. That the Danamon deal is off is a setback for
the group but it does clear a large overhang issue on the stock.
Near-term  prospects remain robust and the group is well-positioned
to ride steepening yields/rising interest rate trends.
 
Sembcorp Marine: Efficiency Is The Focus; Maintain Buy, TP $5.20
SMM SP | Mkt Cap USD7.5b | ADTV USD14.6m
2Q13 PATMI of SGD125m (-13% YoY, +5% QoQ) was lower than our preview
figure of SGD162m, but can be explained by the lower revenue recognised
which  is  entirely  a timing issue (we forecasted SGD1.4b in revenue).
More  importantly, op. margin of 13.0% was within our expected range of
12-13%.
The  key  focus  of  the  analyst  brief  was  on  SMM’s efficiency
enhancement  plans.  We came away more positive of its well thought-out
plans and believe that these could alleviate the risks in Brazil and be
an added support to sustain overall margins.
Orderbook  momentum remains on track to meet our full-year forecast
of  SGD5.2b  with  YTD  order  win  of  SGD3.5b. Net orderbook breached
another  record high at SGD14.4b. Maintain Buy, SOTP-based TP unchanged
at SGD5.20.
 
UOB: 2Q13 Results Within Expectations; Maintain Sell TP $20.50
UOB SP | Mkt Cap USD27.0b | ADTV USD40.5m
Maintain  contrarian  SELL with an unchanged TP of SGD20.50, rolled
forward  to FY14 on a lower P/BV of 1.2x (1.3x previously) to factor in
higher market volatility risk.
UOB’s 1H13 net profit of SGD1.5b was within our expectations (53% of
full-year) but above consensus (56%).
Results  were  fairly  lackluster  as  bottomline growth was driven
primarily by lower provisions and a one-off associate gain.
UOB’s  higher  exposure to the domestic property sector remains our
primary  concern,  and  for  which  we  believe  a discount to peers is
warranted at this stage.
 
Cosco: The Going Gets Tougher; Maintain Sell, TP $0.65
COS SP | Mkt Cap USD1.3b | ADTV USD1.3m
Cosco  reported 2Q13 PATMI of SGD12.0m (-56% YoY, +24% QoQ), weaker
than  our  below-consensus forecasts. 1H13 net profit makes up only 35%
of  our  previous  FY13F  forecast.  We cut FY13F-15F net profits by by
27-36%. Maintain Sell, with TP of SGD0.65, pegged to 1.1x P/B.
Operating  margins  continue  to  be under pressure, trending lower
sequentially to 4.1% (1Q13:5.7%). We believe that yard underutilisation
in the next few quarters would cap any meaningful margin upside.
We flag the rising debt level which has pushed net gearing higher to
0.86x  (1Q13:0.82x)  as  Cosco  took  on  more  borrowings  to fund its
shipyard operations.

Local Brokerages Stock Call 1 August 2013

From OCBC:
Fortune REIT: MOU for Kingswood Ginza property
FRT has entered into a non-binding MOU in connection with the acquisition of 100% of the issued share capital of a target company by FRT and assignment of the shareholder loans to FRT. The target company owns Kingswood Ginza Property, which comprises the entire Kingswood Ginza Mall as well as other retail, kindergarten, parking lots and ancillary spaces. The indicative purchase consideration is HK$5,849m. 142,962,000 new units, representing an increase of 8.4% of the total number of units currently in issue (excluding the new units), have been placed out at HK$6.82 each. The net proceeds of ~HK$947m will be used to partially fund the proposed acquisition. The remainder will be funded through new facilities. In our model, we assume that the acquisition will be completed by mid-September. While the acquisition is likely to be accretive, we note the continued increase in bond rates since late June, and hence lift our risk-free rate to 2.3% from 2.0%. Incorporating a higher expected market return of 13.5% as well (13.0% previously), we lower our FV to HK$6.95 from HK$7.51. On valuation grounds, we downgrade FRT to a HOLD. 

DBS Group: 2Q in line; ended Danamon bid
DBS Group Holdings posted 2Q net earnings of S$887m this morning, up 10% YoY and -7% QoQ. This is in line with consensus estimate of S$883m. Net Interest Margin (NIM) eased off from 1.72% in 2Q12 and 1.64% in 1Q13 to 1.62% in 2Q13. Loans grew a decent 5% from last quarter to S$234.8b by Jun 2013. In terms of fee income, the top performers were Investment Banking, up 82% in 1H to S$111m, followed by Wealth Management (+44% to S$214m) and Stockbroking (+29% to S$119m). An unchanged interim dividend of 28 cents has been declared. Stock will trade ex-dividend on 15 Aug and dividend will be paid on or about 7 Oct 2013. Meanwhile, DBS has also announced last evening that the long delayed acquisition of PT Bank Danamon Indonesia has lapsed. However, while this is a slight disappointment for its Indonesian strategy, it is not totally unexpected as this proposed acquisition has been long delayed with no clear outcome. We do not expect the market to have included any possible contribution from this proposed deal and as such do not expect this to impact earnings forecasts for the next two years. Meantime, do note that our pre-results rating was a BUY with fair value estimate of S$18.28. We will provide more details after the media and analysts’ briefings later in the day.

Yoma Strategic Holdings: Key catalyst ahead - the Landmark Project
Yoma reported 1QFY14 PATMI of S$0.4m, which decreased 80.6% YoY mostly due to higher staff costs as the group continues to build up a strong management team in anticipation of future activity. We judge 1QFY14 PATMI to be below view – forming only 3.7% of our full year forecast – due to a slower than anticipated pace of recognition at Star City and higher staff costs. The group announced that it has entered into an agreement with a third party investor for the sale of LDRs for five buildings (1043 units) in Zone B of Star City and would receive incentive fees if certain sales targets to end buyers are met. We continue to await the completion of the Landmark Project acquisition, which would likely be a key catalyst for the share price ahead. Maintain HOLD with an unchanged fair value estimate of S$0.87 (20% premium to RNAV).

Singapore Post: Expecting another steady quarter
Singapore Post (SingPost) will be announcing its 1QFY14 results after market close on 2 Aug 2013. We expect net profit to be around S$35m, which would represent about 24% of our full year estimate. Expenses are likely to remain elevated due to inflationary cost increases, growth in volume-related expenses and other administrative costs and continued investments. Looking ahead, we expect the group to continue to grow inorganically as it will be the fastest way to diversify from the mail business. As the group increases its exposure to faster-growing businesses such as the logistics and e-commerce segments, we increase our terminal growth assumption from 1.5% to 2.0%, thus bumping up our fair value estimate from S$1.23 to S$1.32. Maintain HOLD. 

Far East Hospitality Trust: Rendezvous acquisition – Issue price for new stapled securities
Far East Hospitality Trust (FEHT) has announced the issue price of new FEHT stapled securities to be issued to the The Straits Trading Company (as partial consideration for the proposed acquisition of Rendezvous Grand Hotel and Rendezvous Gallery), the Far East Organization (FEO) group of companies (pursuant to the equity placement to the FEO group), and the REIT manager (as payment for 80.0% of acquisition fee payable in relation to the acquisition). The issue price is at S$0.9302 per stapled security, based on the volume weighted price for FEHT trades done on the SGX for the period of 10 business days commencing from the day on which the existing stapled securities trade ex-distribution i.e. the period from 18 July 2013 to 31 July 2013. The trading of the 148,304,059 in aggregate of new stapled securities is expected to commence today, 1 Aug, at 2pm. Pending the 2Q13 results which will be released next week, we maintain our FV of S$1.01 and HOLD rating on FEHT.

By DMG
DBS issued a statement yesterday that the long-stop date for
the acquisition of Bank Danamon is 1 Aug 2013, and the conditional share
purchase agreement will lapse thereafter. While it is unclear whether official
written notification was received from Bank Indonesia, DBS appears to be taking
the middle ground by allowing the share purchase agreement to lapse, in our
view. We think the more positive outcome would have been BI approving DBS’
acquisition of a majority stake while acquisition of a 40% stake in Danamon could
have led to an overhang due to lingering uncertainties regarding the lack of
control as well as whether DBS would eventually be allowed to hold a majority
stake in Danamon. The latest development does raise some questions with
respect to DBS’ longer term strategy for Indonesia, although DBS said it remains
committed to Indonesia and will continue to invest and grow the franchise there.
DBS also said that it remains open to opportunities as they arise. We are Neutral
on the latest development and await further details from the conference call later
today, which will discuss the announcement and the 2Q13 results. We have a
BUY on the stock with a TP of SGD18.70.

Kreuz: Initiation - Poised, But Not Priced, For Growth (BUY, SGD0.76,
TP: SGD1.14)
Kreuz (KRZ) is a fast-growing subsea services provider with very
strong margins and highly visible medium-term growth as its capacity
is set to more than double by FY16F. Given its very low 6% net
gearing and strong cashflow, KRZ is attractively priced at 7.1x FY13F
EPS and 19% growth. We initiate coverage with a BUY and SGD1.14
TP, based on 10x blended FY13F/14F EPS, and backed by a SGD2.05
DCF value.

Broadway Industrial: Outlook Dims (NEUTRAL, SGD0.275, TP:
SGD0.30)
Broadway Industrial (BWAY)’s 2QFY13 results were below estimates,
with a core PATAMI loss of SGD1.1m on the back of a 8.5% y-o-y drop
in revenue to SGD158.6m. We expect the Group to face an uphill task
in rationalising its HDD operation while garnering new clients to take
up excess capacity. Maintain NEUTRAL, with a lower SGD0.30 TP,
based on 0.6x FY13 P/BV (-0.5SD from the stock’s 5-year historical
mean).

SMRT: Weak 1QFY14 Results (SELL, SGD1.43, TP: SGD1.25
SMRT reported weak 1QFY14 results, with PAT tumbling 55% y-o-y to
SGD16.3m, slightly below our expectation. Positive catalysts in the
form of a new rail financing framework and new bus operational
framework may not be implemented anytime soon. We think that its
share price will continue to be weighed down by its weak earnings
amid persistent cost pressures. Maintain SELL, with DCF-derived TP
of SGD1.25.

Hutchison Ports Holdings Trust: Lower Throughput Hits 1HFY13
Numbers (NEUTRAL, USD0.74, TP: USD0.79)
HPHT’s 1HFY13 earnings missed forecasts due to weaker volume and
higher costs resulting from a strike by its union. Even incorporating
2H’s peak season, trade volume in Hong Kong may at best come in
flat y-o-y while that in Yantian will rise 3%-4% this year. We cut our
earnings estimates on the lower volume, which trims our FV to
USD0.79. Maintain NEUTRAL, as the stock’s yield is an attractive
6.4%.

From UOB KH:
Golden Agri-Resources (GGR SP, E5H) –
Technical SELL with +11.7% potential return
Last price: S$0.525
Resistance: S$0.59
Support: S$0.47
SELL with a target price of S$0.47 with tight stops
placed above S$0.55. The stock is likely to continue to
trend lower as its mid Bollinger band could be acting as
resistance. A break below S$0.52 is likely to see the
stock test S$0.47. Its MACD indicator has hooked
down. Watch to see if its negative DI could continue to
slope downwards with its ADX looking poised to rise.
Our institutional research has a fundamental SELL with
a target price of S$0.55.

GuocoLand (GUOL SP, F17) –
Technical BUY with +10.4% potential return
Last price: S$2.10
Resistance: S$2.565
Support: S$1.915
BUY with a target price of S$2.32 with tight stops placed
below S$2.04. The stock may continue its rebound after
prices broke above its declining 50-day simple moving
average and was supported by its mid Bollinger band
earlier. Its MACD indicator has crossed above its
centreline and its positive DI has crossed above its
negative DI. Watch to see if prices could first break
above its 200-day simple moving average. Our
institutional research has a fundamental HOLD with a
target price of S$2.42.

Freight Links Express Holdings (FLE SP, F01) –
Technical BUY with +33.3% potential return
Last price: S$0.120
Resistance: S$0.160
Support: S$0.105
Maintain BUY with a higher target price of S$0.16 with
trailing/tight stops placed below S$0.11. The stock has
returned 21.2% on closing since 4 Jun 13 and currently
its 52-week high has exceeded our initial technical buy
target of S$0.12. The stock may trend higher as prices
could continue to trend above its 10-day and 50-day
moving averages and have taken out the high during
Nov 10. Its positive DI is sloping upwards with a rising
ADX, which suggests a strong uptrend. Watch to see if
the stock could close above S$0.132 for further upside.

Banking- Jun 13: Slight easing in loan growth.
DBS Group Holdings (BUY/S$16.70/Target: S$20.80)
Oversea-Chinese Banking Corp (BUY/S$10.56/Target: S$12.02)
A slight easing in pace of expansion. Loans grew at a moderated pace of
17.7% yoy and 0.7% mom. Loan growth has eased over the past two
months but the magnitude of easing is mild.
Maintain OVERWEIGHT. We expect loan growth of 10-15% for the
Singapore banks. Economic growth should strengthen gradually in 2H13
driven by externally oriented sectors, which should sustain growth in loans
for businesses. Our top pick is DBS due to strong execution capabilities
and attractive valuation. We also like OCBC for its ASEAN-centric
footprint.

Oil Service- Channel check: Improving OSV utilisation and charter
rates in Southeast
Asia; POSH Semco listing is likely to rekindle investor interest in the
sector.
POSH Semco’s listing in 4Q13 is likely to rekindle investor interest
Singapore oil-service stocks. Reuters has reported that Robert Kuok
group’s offshore support vessel (OSV) provider POSH Semco is seeking a
listing on the SGX. POSH Semco owns and operates a fleet of more than
100 OSVs. Scheduled to be launched in September/October, the company
is said to be looking to raise S$300m-500m, with its market capitalisation
estimated at US$1b. Based on its 2012 financial accounts (which we
secured from the Registrar of Companies), the company posted a net profit
of US$38.1m in 2012 (2011: US$27.9m). At a market capitalisation of
US$1b, this would imply a hefty 2012 PE of 26x. Singapore OSV-owner
segment is currently trading at 13.2x, 11.9x and 10.2x for 2012, 2013 and
2014 respectively, while Malaysian peers are trading at higher PEs of
25.6x, 16.3x and 14.8x.
Top stock picks. Ezion Holdings (EZI SP/Target: S$2.60), Kreuz (KRZ
SP/target: S$0.88, Nam Cheong (NCL SP/Target: S$0.34) and Triyards
(ETL SP/Target: S$1.11).

Wilmar International- 2Q13 Preview: Earnings likely to be lower qoq.
The least price volatility market should lead to more stable earnings
growth on volume expansion.
(WIL SP/BUY/S$3.15/Target: S$3.80)
FY13F PE (x): 11.9
FY14F PE (x): 10.1
Management has guided for a more challenging 2Q13 since 1Q13 results
briefing, ie the poorer results are unlikely to be a surprise to the market.
The main challenges are weaker outlook for soybean crushing, where
utilisation could be affected by the bird flu breakout in China early 2013.
Subsequently, the breakout of The Yellow Canopy Syndrome could affect
the sugar yield in Queensland, Australia. Sugar contribution should be
stronger in 2H vs 1H and to-date there is still no concrete information on
the potential yield impact. Maintain BUY with target price of S$3.80 based
on the sum-of-the parts (SOTP) method, implying a blended PE of 14.5x
2013F and 12.5x 2014F.

From Maybank KE:
StarHub: Catching A Break From 4G & EPL; Upgrade to Hold TP $4.22
STH SP | Mkt Cap USD5.9b | ADTV USD8.4mThe  share price has corrected significantly since our downgrade to
SELL in May to near our DCF-based fair value of SGD4.22. We upgrade the
stock  from  SELL  to  HOLD  with  TP  maintained at SGD4.22. Our telco
preference is M1 followed by StarHub and SingTel.
It is too early to confirm now but catalysts in 2H13 would include a
potential increase in FY14 dividend now that cashflow uncertainties viz
spectrum  auction have cleared up, and we anticipate drumbeats for this
to get louder toward end-FY13.
Recent  reprieves  – the government’s rejection of SingTel’s appeal
for   EPL   not  to  be  subjected  to  the  cross-carriage  rule,  and
lower-than-expected  4G spectrum auction cost – may cause StarHub to be
more receptive toward paying higher dividends, in our view.
  
The Hour Glass: Clockwork Ticking Down As Demand Slows
HG SP | Mkt Cap USD324.1m | ADTV USD0.1m
We recently met the management of The Hour Glass for an insight into
the company and the watch industry.
China’s  efforts  to weed out official corruption has resulted in a
drop  in Swiss watch export levels to Asia. Across the region, in fact,
the luxury sector is facing increasing challenges.
In  the  short  term,  Hour Glass has to contend with weak consumer
sentiment  in  Singapore. It recently cut its dividend payout, bringing
its  yield  of  3.1%  in line with peers. Valuation appears on the high
side at 7.8x hist. P/E vs. its mean of 6.3x.

From DBS:
Maiden numbers for Mapletree Greater China
Commercial Trust ahead of forecast by 8.3%, boosted by
strong reversions at Festival Walk and Gateway Plaza.
Looking ahead, we expect 2H to be better than 1H. There
is a remaining 25% of leases at Festival Walk to be recontracted
in FY14 and another 5% at Gateway Plaza
with an additional 18% and 10% of leases due in FY15.
Maintain Buy, TP S$1.09 (Prev S$ 1.22), after adjusting for
the latest risk free rates. We continue to like MAGIC for
its earnings resilience backed by robust performance at
Festival Walk as well as the growth aspects from organic
positive rental reversions.

Mark-to-market losses dragged Great Eastern Holdings’
2Q13 earnings, as expected. However, underlying
operations remain strong. OCBC will release 2Q13 results
on 2 Aug; earnings are expected to drop q-o-q on weaker
non-interest income. Maintain HOLD rating on OCBC and
S$11.50 TP.

Local Brokerages Stock Call 31 July 2013

From OCBC:
OSIM International: To uInfinity and beyond!
Despite challenging economic conditions in China, OSIM International Ltd (OSIM) managed to record a 15.9% YoY jump in its 2Q13 PATMI to S$26.1m on the back of a 7.0% increase in revenue to S$165.5m. The former was 4.4% ahead of our forecast while the latter was 2.4% below. An interim DPS of 2 S cents was declared, in line with expectations and brings YTD dividends to 3 S cents/share. As a continuation to its innovative product drive, OSIM launched its new high-end massage chair named uInfinity in Hong Kong. This will also be sold in its other key markets in the coming weeks. We raise our FY13 and FY14 PATMI estimates by 2.5% and 2.4%, respectively, largely to account for higher share of profits of associated companies (mainly from TWG-Tea). Rolling forward our valuation to 16.5x blended FY13/14F EPS, our fair value estimate is raised from S$2.21 to S$2.40. Maintain BUY.

SMRT Corporation: Disruptions continue
SMRT's 1Q14 results came in below our expectations as revenue growth slowed while higher staff and depreciation expenses caused operating and net profit to decline 49.4% YoY to S$22.2m and 55.2% YoY to S$16.3m respectively. In the coming quarters - and in the absence of fare adjustments - we expect this trend to persist as higher operating expenses continue to compress margins. In addition, recurring service disruptions suggest elevated repair and maintenance expenses. With the lack of any immediate catalysts (a switch to the new rail financing framework within FY14 is unlikely in our view), we lower our FY14 forecast figures yet again and our DDM-derived fair value estimate falls to S$1.30 (S$1.45 previously). Downgrade to SELL. 
 
Fortune REIT: MOU for Kingswood Ginza property
FRT has entered into a non-binding MOU in connection with the acquisition of 100% of the issued share capital of a target company by FRT and assignment of the shareholder loans to FRT. The target company owns Kingswood Ginza Property, which comprises the entire Kingswood Ginza Mall as well as other retail, kindergarten, parking lots and ancillary spaces. Kingswood Ginza Mall is the largest shopping center in HK’s Yuen Long district. The proposed acquisition, a connected party transaction, is expected to be yield accretive. The indicative purchase consideration is HK$5,849m. 142,962,000 new units, which is an increase of 8.4% of the total number of units currently in issue (excluding the new units), have been placed out at HK$6.82 each. The issue price represents a discount of 4.4% to the volume weighted average price of HK$7.1356 per unit for trades done on the SGX-ST and the SEHK for 29 July 2013. The net proceeds of ~HK$947m will be used to partially fund the proposed acquisition. We place our Buy rating and FV of HK$7.51 under review. 

From DBS:
2Q13 net profit for Hutchison Port Holdings Trust declined
26% y-o-y to HK$420.5m, which was within expectations
given the impact of the port workers’ strike in HK earlier in
April 2013. On a positive note, 1H13 DPU of 2.4UScts was
slightly ahead of expectations. We expect higher DPU in
2H13, in line with seasonal patterns. Maintain BUY with
unchanged TP of US$0.82. There could be potential earnings
upside from lower refinancing costs as the Trust has been
evaluating refinancing options for its US$3bn term loan.

Osim’s 2Q13 results in line, driven by sales of uAngel.
Sustainable growth ahead as new uInfinity chair will be rolled
out in 3Q13. DPS of 2 Scents was declared, exceeding our
estimate of 4 Scts for FY13F or 1 Sct per quarter. As such, we
raise our FY13F DPS to 5 Scts. Maintain BUY, TP raised to
S$2.50 (Prev S$ 2.21) as we roll over our 16x PE valuation to
FY14F earnings.

Yoma’s 1QFY14 profit tumbled 82% y-o-y to S$0.4m,
missing expectation. Sales were below forecast due to slow
construction and weaker sales at Star City. We expect
improvements in 2QFY14 and beyond. Given visible revenue
drivers, we are maintaining our sales assumptions but
trimmed FY14F/15F earnings on weaker margins and higher
expenses. Maintain BUY rating and S$1.02 TP.

2Q13 net profit of S$0.16m for Broadway Industrial Group
came in below forecast, partly due to higher marketing
expenses. FY13/FY14F earnings cut by 44-48%. More
restructuring is needed to optimise operations and lift
margins; recovery is pushed back to 4Q13. Maintain Hold and
TP of S$0.30 (~0.6x P/BV).

1QFY14 results for SMRT were below expectations, net
profit tumbled 55% y-o-y to S$16.3m. Soaring costs
remained the main culprit, and is expected to continue to
rise. Changes in operating model and fare review is key to
profitability, but timing of government move is uncertain.
Maintain Fully Valued and S$1.20 TP.

From UOB KH:
CapitaLand (CAPL)
Last price: S$3.25
Technically, CAPL may continue to trend up towards
S$3.40 should it be well supported by its mid Bollinger
band.
On 26 Jul 13, CAPL’s CEO Lim Ming Yan said the
company may alter the sizes of its apartments as it
seeks to improve affordability to combat government
measures aimed at curbing speculation and lowering
prices. In our institutional research report dated 26 Jul
13, we maintain our BUY recommendation with a target
price of S$4.35, based on a 15% discount to our RNAV
of S$5.11/share. We have adjusted our 2013-15 net
profit forecasts by -10.4% to +3.5%, mainly deferring
recognition of its residential projects. Despite recent
developments in China, CAPL continues to see buoyant
demand due to urbanisation and income growth in
China. CAPL China’s residential sales surged 43% yoy
to 3,157 units in 1H13 and new launches, such as The
Loft (Chengdu) and The Metropolis (Kunshan) continued
to be well received.

OKH Global (OKH)
Last price: S$0.515
Technically, OKH may test S$0.60 should it be well
supported at above S$0.48.
On 16 Jul 13, OKH signed a memorandum of
understanding for a joint venture with Pan Asia Logistics
Singapore (PAL). The JV company, Pan Asia Logistics
Investment Holdings Pte Ltd, will develop, own and
manage modern logistic buildings. OKH and PAL will
own 40% and 60% of the JV company respectively.
Upon formation of the JV company, it shall acquire Pan
Asia Logistics Investment Pte Ltd, a wholly-owned
subsidiary of PAL which holds three properties in
Singapore, Malaysia and Korea.

Keppel Corp (KEP)
Last price: S$10.37
Technically, KEP looks poised to trend lower to retest its
previous low near S$10.20.
Reported on 22 Jul 13, KEP, the world’s largest oil-rig
maker, will focus on building more offshore production
and support vessels in Brazil as competition from China
cuts prices for its main product. In our institutional
research report dated 19 Jul 13, we maintain our BUY
recommendation and raise our target price from S$13.10
to S$13.50 on a higher sum-of-the-parts valuation, which
still values KEP’s O&M business at 18x 2014F PE. We
raise our blended O&M operating margin assumption
from 13.0% to 13.5%. As a result, we raise our 2013-15
net profit forecasts by about 3%. Our earnings forecasts
have factored in contract wins of S$6b p.a. Ytd, KEP has
won contract wins worth S$3.7b.

Golden Agri (GGR)
Last price: S$0.545
Technically, GGR needs to be supported at above
S$0.52 and needs at least to break above S$0.60 to
negate its bearish outlook. The next support could be at
around S$0.47.
Reported on 24 Jul 13, the Industry Ministry of Indonesia
is keeping August palm oil export tax at 10.5%. In our
institutional research report dated 14 May 13, we
maintain our SELL recommendation with a target price of
S$0.55, based on 13x 2014F PE, a mid-cycle valuation
for an integrated player. When CPO prices trade
sideways, we expect plantation stocks to underperform
the market. We expect CPO production growth to slow
down to 5% yoy in 2013 amid weak CPO prices, and
China operations to remain challenging despite a
recovery in performance in 1Q13 and a stronger
management team.

From DMG-OSK:
Scoop of the Day: Osim’s 2Q13 net profit of SGD26m (+16% y-o-y, +4% q-o-q)
met expectations on margin gains and higher contribution from associates.
Management attributed the growth amidst a tough operating environment to
product innovation and competitive positioning. For instance, its attempt to
segmentise the affordable luxury market hit resonance with uAngel, priced at
SGD2,000 per chair. Favourable product mix and operating efficiency lifted
operating margin by 1.2ppt to 20.8%. Despite their low bases, we note that share
of profit from associates – namely from JV factory DT-OSIM and TWG Tea –
jumped 213% to SGD1.5m. Net cash ballooned to SGD94m and an interim
dividend of 2.0 cents was proposed. Its highly anticipated uInfinity massage
chair, priced at SGD6,988, will be launched in 3Q and is expected to give
earnings a boost in coming quarters. To capture the highly cash-generative
nature of Osim’s branded business and a SGD94m cash pile, we are switching to
a DCF-based valuation Maintain BUY, with a higher TP of SGD2.38.

Lian Beng Group: Expecting a Strong FY14 (BUY, SGD0.57, TP:
SGD0.70)
LBG recorded 4QFY13 PATMI of SGD9.3m (-19.3% y-o-y), on the back
of a 39.1% revenue growth. It expects to book profits from the sale of
its industrial development – M Space – in FY14, which should boost
its earnings growth. LBG’s orderbook of SGD1.3bn would keep it busy
till FY16. The Group’s outlook remains positive, as LBG is set to
secure more contracts on robust construction demand. Maintain BUY.

OKP: 2Q13 Results Hit By Lower Margins (NEUTRAL, SGD0.41, TP:
SGD0.35)
OKP recorded 2Q13 PATMI of SGD0.7m (-77.0% y-o-y), even as
revenue was 27.5% stronger y-o-y at SGD30.1m, due to higher costs
incurred on a project. Gross margins are expected to remain low until
the project is completed towards end-3Q13. With our margin
assumptions lowered, we adjust our estimates and arrive at a TP of
SGD0.35. OKP has strong balance sheet, with net cash of
SGD0.15/share.

From Maybank KE:

SMRT: Another Weak Set Of Numbers; Sell, TP $1.00
MRT SP | Mkt Cap USD1.7b | ADTV USD1.3m
Maintain Sell with TP of SGD1.00. With structurally higher leverage and
poor dividend yield support, we argue that SMRT should de-rate from its
historical  levels. The stock of SMRT currently trades at 25X FY14E P/E
and yields merely 1.7%.
SMRT  reported  a weak set of results with net income of SGD16.3m (-54%
YoY).  Profitability of the group remains poor with EBIT margin of only
7.8%  (1QFY13:  16.0%). Higher staff cost (+1% QoQ, +23% YoY), incurred
as  a  result of larger headcount and wage revision, was a key pressure
point.
SMRT  recorded  negative  FCF  of  more  than SGD400mn and finished the
 quarter with a net debt position of SGD505mn (net gearing: 0.64x).
 
OSIM International: Strong Foundations For Future Growth; Buy, TP $2.34
OSIM SP | Mkt Cap USD1.2b | ADTV USD1.9m
Maintain  BUY  with  reduced TP of SGD2.34 to account for dilution from
convertible  bond,  now that share price is firmly above exercise price
of  SGD1.90.  We  see  further  room  for better operating leverage and
expect TWG contribution to become more meaningful going forward.
2Q13  results  were  broadly  within  expectations.  Net profit for the
quarter   came   in  at  SGD26.1m  (up  16%  yoy)  versus  our  preview
expectations of SGD26.5m.
Revenue  grew  7% yoy, driven mostly outside North Asia. We believe the
new  uAngel  was also a major contributor. EBIT margin grew from 19% to
21%.

Local Brokerages Stock Call 30 July 2013

From OCBC:
Telco Sector: Minimal impact on SingTel
SingTel will have to offer its BPL content to rival StarHub customers after the Ministry for Communications and Information (MCI) rejected its appeal for a stay of the Media Development Authority (MDA) ruling for the cross-carriage of the closely followed football content. However, the subscription comes with a price – new subscribers will have to fork out S$59.90 (before GST) for the stand-alone package, while existing mioTV subscribers can continue with the existing pricing of S$34.90 (before GST). While we may see some migration of subscribers from mioTV to StarHub’s cable TV platform, we do not expect a huge number. We maintain our NEUTRALrating on the sector. While we also maintain our HOLD rating on SingTel, we downgrade StarHub to SELL.

StarHub Ltd: Downgrade to SELL; BPL likely non-event
StarHub Ltd will be able to cross carry the widely-followed BPL (Barclays Premier League) live matches for the upcoming 2013 to 2016 seasons. However, with a seemingly steep price point of S$59.90/month (before GST) for new subscribers (while existing mioTV subscribers continue to pay the current S$34.90 (before GST)), we suspect that any migration of subscribers from mioTV to StarHub’s cable TV platform would be quite muted. In light of the likely muted boost from the BPL cross carriage and recent strong run-up in share price (9.5% after our upgrade on 3 Jun), we feel that the stock may have run ahead of its fundamentals. As we are also keeping our DCF-based fair value unchanged at S$3.82 (already accounted for a higher risk-free rate), we foresee more downside risk from here. Hence, we downgrade our call back from Hold to SELL. 
 
First REIT: Contribution from new assets
First REIT’s (FREIT) 2Q13 results were within our expectations. Revenue and DPU (after stripping out a special distribution in 2Q12) rose 43.4% and 16.4% YoY to S$20.1m and 1.85 S cents, respectively. Only 0.86 S cents will be paid to unitholders (on 29 Aug 2013) as FREIT had already made an advance distribution of 0.99 S cents on 26 Jun 2013 (prior to the issuance of new units for part payment of its acquisitions). FREIT is in the process of refinancing ~S$92m of its floating-rate debt to a 4-year fixed-rate unsecured bank loan. Upon completion, its floating rate exposure will be reduced from 72% to 46% of its total borrowings, which we view as a positive development. We retain our forecasts, HOLD rating and DDM-derived fair value estimate of S$1.20 on FREIT.
 
Yoma Strategic Holdings: First take on Yoma 1QFY14 results
Yoma Strategic Holdings (Yoma) reported 1QFY14 PATMI of S$0.4m, which decreased 80.6% YoY mostly due to higher staff costs as the group continues to build up a strong management team in anticipation of future activity. We judge 1QFY14 PATMI to be below view – forming only 3.7% of our full year forecast – but expect the pace of recognition at development projects to be back-loaded in the year. 1QFY14 topline came in at S$15.2m, up 11.6% YoY due to higher contributions from recognition of residential sales. We highlight the slower pace of sales in Star City over 1QFY14, as the sales status for Buildings 3 and 4 only crept up by 22 units (from 491 units sold as at end Mar-13 to 513 units sold as at end Jun-13). However, we note the group also reported a potential conditional agreement with a third party investor for the sale of LDRs for five buildings (1043 units) in zone B of Star City, which could be a significant catalyst for Star City sales ahead. We would speak with management about this set of results and the outlook ahead and, in the meantime, maintain HOLD with our fair value estimate of S$0.87 under review.  
 
M1: Joins Pay TV fray
M1 Ltd has announced its own Internet TV service – MiBox, which offers video-on-demand entertainment and educational titles, games, e-books and apps. Priced at just S$8/month with a 2-year contract for M1 fibre customers (S$12/month for non-M1 subscribers), customers will have access to MiBox’s library of 18k video-on-demand titles, 116 TV channels, 1.2k e-books and 370 apps. In addition, there is also an extensive selection of chargeable premium video-on-demand, e-learning titles and apps. According to M1, the service offers a new TV experience for everyone, from students to working adults to homemakers to retirees. However, given M1’s small fibre customer base and its relatively new presence in a pretty saturated Pay TV market, we do not expect to see any major impact on earnings. Maintain HOLD with an unchanged fair value of S$3.10. 

From Maybank KE:
Offshore & Marine: KL Marketing - Key Takeaways; Overweight
The  robust  oil  and  gas  activities in Malaysia, led by Petronas
spending,  piqued  interest  in  Singapore  offshore players during our
recent marketing trip to KL. We remain positive on the sector as we see
structural  fundamentals  sustaining  a high level of spending over the
next few years. Key Buys are Keppel, SMM and Ezion.
There  was  a  fair  amount of concern on the impact of Chinese and
Korean competition on Singapore rigbuilders’ margins. Execution risk in
Brazil  was  also  a  key  discussion point. While we acknowledge these
risks, we argue that these concerns may be overblown.
There was still strong interest in Ezion and the key question was if
there  is further upside given the strong run up in share price. In our
view,  forward  valuations  of  7.5x  FY14F  PER still look attractive,
backed  by  strong  earnings  visibility from its liftboat contracts to
support a 40% CAGR in EPS over FY13-15F. 

From UOB KH:
Singapore Airlines (SIA SP)

Analyst Briefing Takeaways

SIA guided that it carried a higher proportion of bellyhold cargo, which

would have lowered its breakeven load. In addition, further impairment

charges on the remaining nine freighters are unlikely. Maintain HOLD and

lower target price to S$10.80.

Suggested entry price is S$9.60.

From DBS:
United Envirotech has signed an agreement to fully acquire
Memstar’s membrane operation for S$293.4m or
S$0.11/share. Of this, S$73m will be settled in cash and the
remaining S$220m by the issue of 200m new shares priced at
S$1.10 a share (~19x FY14 PE). Apart from ensuring
membrane supply, this acquisition enables UENV to be
vertically integrated and to ride on growth potential of
Memstar’s membrane operations. Although this acquisition
could boost FY14/FY15F net profit by 1% and 6%
respectively, new share issues would dilute FY14/FY15 EPS by
18%/14% respectively. We are maintaining our earnings
forecast for UENV pending completion of this acquisition. No
change to HOLD call and TP for now.

2Q13 results for OKP Holdings below; gross margin collapsed
16ppts on higher subcontracting costs and low margin work.
We expect gross margins to remain depressed for at least
another quarter. Project rollout by the government has been
slow in 1H13. Visibility for project wins weak; going forward,
we expect project wins to come from the low value, low
margin maintenance segment. Maintain Fully Valued call.