Thursday, October 17, 2013

DBSVickers Report 18 Oct 13

Keppel Corp – 3Q13 results in line; O&M margins
stronger than expected. Maintain BUY with
unchanged TP of S$12.90
3Q13 bottomline for Keppel Corp was largely in line. The
key highlight was the stronger than expected O&M
operating margin that expanded 2.3ppts q-o-q to 16.5%,
attributable to more deliveries of KFELS B class jack ups
and higher repair margins for certain projects. However,
this was offset by lower O&M revenue recognition
resulting from slower orderbook drawdown. Property
income rose 70% q-o-q to S$201m, driven by home sales
in Singapore and China. 9M13 net profit amounted to
S$1.08bn, forming 71% of our full year estimate. Order
flows are gaining momentum; YTD order wins stood at
S$5.3bn, and looks set to exceed our full year expectation
of S$6bn.Maintain BUY with unchanged TP of S$12.90.
1Q14 earnings for Singapore Exchange were lifted by
lower expenses; total revenues were in line with
expectations. Annualised expenses were below target; we
expect pick up in technology expenses and depreciation
ahead. Base DPS of 4 Scts was declared as expected.
Maintain HOLD and S$7.15 TP.
Dalian Deepwater Development initiated termination of its
drillship order with Cosco on the grounds of delay in
delivery and is seeking refund of payment totalling
US$110m. The actual financial impact is still unknown at
this juncture. Taking cue from previous similar cases, we
believe Cosco will likely have to reverse any profits it has
recognised on the project before a new buyer is found.
The drillship is >80% completed implying revenue
recognition of >US$400m. Given the project overrun,
reversal of profit should be small, if there is any. Cosco is
currently talking to potential buyers.
Separately, Cosco announced contract wins totaling over
US$400m comprising:
1) newbuild contract for a jack up drilling rig from
Asian shipowner worth US$180m. To be built in
Dalian yard and delivered by 3Q15
2) conversion of a semi-completed hull to high end
floating accommodation unit valued at over US$
170m; delivering in 24 months from Nantong
yard; and
US Indices Last Close Pts Chg % Chg
Dow Jones  15,371.7 (2.2) (0.0)
S&P  1,733.2 11.6 0.7
NASDAQ  3,863.1 23.7 0.6
Regional Indices
ST Index  3,186.6 12.6 0.4
ST Small Cap  536.1 2.8 0.5
Hang Seng  23,094.9 (133.5) (0.6)
HSCEI  10,568.7 (61.1) (0.6)
HSCCI  4,525.3 (20.8) (0.5)
KLCI  1,797.4 6.1 0.3
SET  1,469.1 4.7 0.3
JCI  4,518.9 26.7 0.6
PCOMP  6,560.9 77.3 1.2
KOSPI  2,040.6 6.0 0.3
TWSE  8,374.7 42.5 0.5
Nikkei  14,586.5 119.4 0.8

Index
STI
Total Market cap (US$bn) 592
Total Daily Vol (m shrs) 2,704
12m ST Index High 3,454
12m ST Index Low 2,946
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price ($)
17 Oct
Target Price
($)
ST Engineering Buy 4.21 4.80
ComfortDelgro Buy 1.905 2.19
OCBC Bank Buy 10.40 12.40
Singapore Airlines Buy 10.26 11.40
Stock Picks – Small /Mid Cap
Rec’n Price ($)
17 Oct
Target Price
($)
Ezion Holdings Buy 2.23 3.10
Goodpack Buy 1.755 2.00
CSE Global Buy 0.895 1.07
Mapletree Commercial Trust Buy 1.225 1.35
Frasers Centrepoint Trust Buy 1.845 2.14
Source: Bloomberg Finance L.P., DBS Vickers
Singapore
Wired Daily
Page 2
3) newbuild contract for a 30k dwt cargo and
training ship from a chinese shipowner worth
RMB325m (US$53m); To be delivered from Dalian
yard by 3Q15.
The latest wins lift Cosco's YTD new orders to US$2.2bn,
surpassing our expectations of US$2bn. Maintain HOLD and
TP of S$0.83.
Cordlife is partnering with Golden Meditech to expand its
product presence in China. It has signed a non-binding
Memorandum of Understanding (MOU) with Golden
Meditech, a leading integrated healthcare enterprise in
China. This is to further capitalise on the fast-rising Chinese
middle class, whose population is estimated to grow from
290 million in 2011 to a projected 590 million by 2025. This
strategy is in line with Cordlife’s growth plans to improve
economies of scope via offering of complementary products
and services that cater to the mother and child segment,
through partnerships and collaborations.
Sysma Holdings proposes to place 19.5m new shares at the
price of S$0.312 per share. The issue price represents a
discount of 9.9% to the last volume weighted average price.
Gross proceeds of approximately S$6.08m will be utilized to
fund the Group’s business expansion and for general working
capital purposes.
ISDN Holdings may consider separate public listings for its
coal-related ventures in Myanmar as an added
measure to raise funds for the project development. ISDN has
previously announced a joint venture agreement with its
Myanmar joint venture partner Tun Thwin Mining to invest,
develop, construct, operate and manage a 540 megawatt
(MW) coal-fired power plant in Kalewa, North West
Myanmar.
Far East Group is proposing to undertake a renounceable
non-underwritten rights issue of up to 36.2m new shares at
an issue price of S$0.15 for each Rights Share, on the basis of
one (1) Rights Share for every two (2) existing shares held.
The Issue Price represents a discount of approximately 26.8%
to the last weighted average price. Net proceeds of
approximately S$5.2m will be used for acquisitions and
working capital purposes.
Blumont Group has secured US$200m of funding from
Platinum Partners Value Arbitrage Fund LP, a New Yorkbased
global investment fund. Under a binding term sheet
entered into yesterday, Blumont will issue redeemable
convertible bonds to Platinum Partners, in four equal tranches
of US$50 million - each at a coupon rate of 8% per annum,
payable on a semi-annual basis.
Non-oil domestic exports (NODX) fell year-on-year for an
eighth consecutive month in September, though the
contraction was narrower than market forecasts, as higher
non-electronic exports such as ships and petrochemicals
helped offset weaker electronics ones.
NODX eased from a 6.8% y-o-y decline in August to a 1.2%
dip last month. Expectations were for a 2.8% drop.
Shipments to the United States and China, two of
Singapore's largest markets, have recovered strongly. The top
three contributors to the export contraction were the
European Union, South Korea and Japan. Electronic NODX
fell year-on-year for the 14th straight month in September,
even though the decline eased to 5.5% in September from
9.2% the previous month. Non-electronic shipments swung
to a 0.9% increase, from a 5.6% decline.
S&P 500 hit a new record high but Dow ended the day flat as
weakness in IBM, Goldman Sachs and UnitedHealth was
balanced by strength in American Express and Verizon. Both
Dow heavy weights – IBM and Goldman Sachs reported
weaker than expected results. About 70,000 federal workers
filed for unemployment benefits during the first week of
October. The 16-day shutdown comes with a $24bn price
tag, according to Standard & Poor's.

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