and the potential of excess net cash return
SIA’s share price has recently broken below -1SD (0.92x
P/BV) in August to its current level of 0.87x P/BV, or -
1.3SD. This is a level seen previously only in crises such as
9/11, SARS, and the GFC. At this current price, the rest of
SIA I valued at less than S$3 per share if we were to strip
to out its net cash and stake in SIA Engineering. There is
potential to return excess net cash to shareholders that
has reach c.S$4.20 per share. We upgrade SIA to BUY, TP
S$11.40 (prev. $11.5) based on 1x FY14 P/BV, which
translates to -0.5SD, reflecting the still muted outlook for
Singapore’s premier carrier. Nonetheless, we see the
stock’s current valuation at 0.88x P/BV as an attractive
level for entry.
Cosco Corp has secured a series of contracts totalling
USD566m, comprising 4 platform supply vessels (PSVs), 2
salvage lifting vessels, 2 module carriers (21k dwt), 4 bulk
carriers (64k dwt) and 1 semi-submersible accommodation
rig (exercise of option). In additions, options for 8 PSVs, 2
module carriers and 2 bulk carriers were also signed.
These new contracts bring Cosco's YTD wins to
US$1.78bn, forming 89% of our expectation of US$2bn.
With Cosco's non-offshore orderbook running low with
only c.1x revenue coverage, it is under pressure to fill its
shipbuilding capacity through merchant ships and some of
the offshore support vessels. While strong order flow is
encouraging, we would prefer to monitor its execution
and earnings performance further.
US stocks dipped modestly amid lingering concerns over Syria
and ahead of an anticipated reduction in QE at next week’s
FOMC meeting. US Secretary of State John Kerry told top
Syrian opposition members that the option for a US military
strike remains on the table. This even as he heads for talks on
a proposal for Syria to surrender chemical weapons.
Meanwhile, investors continue to weigh on the possibility of a
USD10bil/mth reduction in QE at next week’s FOMC meeting.
US Indices Last Close Pts Chg % Chg
Dow Jones �� 15,300.6 (26.0) (0.2)
S&P �� 1,683.4 (5.7) (0.3)
NASDAQ �� 3,716.0 (9.0) (0.2)
Regional Indices
ST Index �� 3,121.1 12.9 0.4
ST Small Cap �� 552.7 3.1 0.6
Hang Seng �� 22,953.7 16.6 0.1
HSCEI �� 10,637.5 0.8 0.0
HSCCI �� 4,418.3 (12.2) (0.3)
KLCI �� 1,772.4 3.9 0.2
SET �� 1,397.9 (13.3) (0.9)
JCI �� 4,356.6 7.2 0.2
PCOMP �� 6,195.6 (19.3) (0.3)
KOSPI �� 2,004.1 0.2 0.0
TWSE �� 8,225.4 16.4 0.2
Nikkei �� 14,387.3 (37.
(0.3)
STI
Total Market cap (US$bn) 578
Total Daily Vol (m shrs) 9,797
12m ST Index High 3,454
12m ST Index Low 2,946
Source: Bloomberg Finance L.P
Stock Picks – Large Cap
Rec’n Price ($)
12 Sep
Target Price
($)
ST Engineering Buy 4.030 4.80
ComfortDelgro Buy 1.885 2.19
OCBC Bank Buy 10.120 12.40
Stock Picks – Small /Mid Cap
Rec’n Price ($)
12 Sep
Target Price
($)
Ezion Holdings Buy 2.320 3.20
Goodpack Buy 1.650 2.00
Nam Cheong Buy 0.275 0.36
CSE Global Buy 0.920 1.07
Venture Corporation Buy 7.670 8.40
Source: Bloomberg Finance L.P, DBS Vickers
Singapore
Wired Daily
Page 2
US 10-yr bond yields rebound slightly to 2.92%, still below
the 3% mark. FED chairmen Ben Bernanke has given financial
markets a more than ample 4 months time to prepare for QE
tapering. From a technical perspective, we believe it will be
cap at around the 3% level in the short-term with the
likelihood of a pullback to 2.7% or even 2.5% in coming
weeks/month. S-REITs should rebound if bond yields take a
dip. Our picks are AREIT, CDL HT, MCT & Suntec Reit.
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