Tuesday, October 1, 2013

DBSVickers Report 2 Oct 13

Hi-P – Uncertainty rising, downgrade to HOLD, TP cut
to S$0.65
 Yangzijiang – Secured massive orders worth
US$871m; reiterate BUY, TP S$1.32
We see uncertainty rising for Hi-P. Customer demand is
falling short on weaker than expected reception to 5C
iPhones and rising stockpiles. We expect 3Q to be on
track but momentum is likely to fizzle out, thus
weakening the outlook for 4Q and even FY14.
Downgrade to HOLD, TP cut to S$0.65 (Prev S$ 0.97).
Yangzijiang has secured massive orders worth US$871m
of contracts comprising: i) New orders for four 208k dwt
bulk carriers (with options for two identical vessels) and ii)
Exercise of 13 options including five 82k dwt bulk carriers,
three 64k dwt bulk carriers and five 10k TEU
containerships (Seaspan). The 208k dwt bulk carrier orders
are the first capesize contracts for Yangzijiang, reinforcing
company’s strategy to move up the value chain to build
more sophisticated vessels. Prior to this, the largest bulk
carrier Yangzijiang undertook was 95k dwt panamax. The
contract prices seem in line with Clarkson’s average
newbuilding prices for respective vessels. We understand
the payment term varies but collection prior to delivery is
at least 30%.
These new orders have lifted Yangzijiang’s YTD wins from
US$1.22bn to US$2.10bn, outpaced our expectations of
US$2bn this year. We raise FY13 order win assumption to
US$2.5bn in anticipation of more options exercising in the
coming months. Yangzijiang has remaining 28 options
worth US$1.36bn consist of 11 containerships worth
US$0.85bn and 17 multi-purpose bulk carriers worth
US$0.51bn. Our FY13-15F forecast are largely intact as
the additional order wins are expected to contribute more
to FY16 earnings. These latest 17 orders are scheduled for
delivery in 2015-2016. Reiterate BUY with unchanged
target price of S$1.32.
Keppel Corp has secured contracts from repeat customer
Clearwater to build two jackup rigs worth US$440m in
total. The contract price of US$220m each is 7% higher
than the last order clinched in Aug, as it includes owner
US Indices Last Close Pts Chg % Chg
Dow Jones  15,191.7 62.0 0.4
S&P  1,695.0 13.5 0.8
NASDAQ  3,818.0 46.5 1.2
Regional Indices
ST Index  3,181.5 13.6 0.4
ST Small Cap  570.9 (0.8) (0.1)
Hang Seng  22,859.9 (347.2) (1.5)
HSCEI  10,316.1 (178.2) (1.7)
HSCCI  4,380.2 (43.0) (1.0)
KLCI  1,769.0 0.4 0.0
SET  1,408.2 25.0 1.8
JCI  4,345.9 29.7 0.7
PCOMP  6,197.8 6.0 0.1
KOSPI  2,011.8 12.9 0.6
TWSE  8,187.0 13.2 0.2
Nikkei  14,484.7 28.9 0.2
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013
100-Day MA
Index
STI
Total Market cap (US$bn) 584
Total Daily Vol (m shrs) 3,806
12m ST Index High 3,454
12m ST Index Low 2,946
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price ($)
1 Oct
Target Price
($)
ST Engineering Buy 4.260 4.80
ComfortDelgro Buy 1.975 2.19
OCBC Bank Buy 10.300 12.40
Singapore Airlines Buy 10.180 11.40
Frasers Centrepoint Trust Buy 1.840 2.07
Stock Picks – Small /Mid Cap
Rec’n Price ($)
1 Oct
Target Price
($)
Ezion Holdings Buy 2.290 3.10
Goodpack Buy 1.710 2.00
CSE Global Buy 0.900 1.07
Mapletree Commercial Trust Buy 1.230 1.35
CDL Hospitality Trust Buy 1.630 1.80
Source: Bloomberg Finance L.P., DBS Vickers
Singapore
Wired Daily
Page 2
furnished equipment and project management fees. The rigs
are scheduled to be completed in 4Q 2015 and 1Q 2016.
YTD order win is now S$5bn, making up 83% of our full year
assumption of S$6bn. We like Keppel's market leadership,
global network of yards and proven track record. Maintain
BUY and TP of S$12.90.
Yoma Strategic has together with SPA and First Myanmar
Investment (FMI), signed a non-binding memorandum of
understanding (MOU) with Mitsubishi Corporation and
Mitsubishi Estate to invest in the prestigious Landmark
project (excluding the Peninsula Yangon) in Yangon,
Myanmar’s capital. This latest development follows an earlier
agreement which established Yoma, SPA and FMI as the
preferred business partners of Mitsubishi Corporation as it
invests further in Myanmar.
Rail operators SMRT and SBS Transit (SBST) will be fined a
total of $1.11m for five rail incidents. The Land Transport
Authority (LTA) yesterday said it intends to impose total
financial penalties of $860,000 on SMRT for four separate
incidents on the North-South and East-West Lines, the Circle
Line and the Bukit Panjang LRT. At the same time, a financial
penalty of $250,000 will be imposed on SBST for a service
disruption on the North East Line. The money collected will
be used to help needy families with transport fares.
The Total Debt Servicing Ratio (TDSR) framework has made
its presence felt, crimping prices and volumes in pocket
segments of the private and public residential markets. Prices
of Singapore's private homes rose a marginal 0.4% in Q3,
compared with the one per cent gain seen in the previous
quarter. Both the Core Central Region (CCR) and Rest of
Central Region (RCR) posted price declines simultaneously.
Specifically, prices of non-landed homes in the CCR slipped
0.5% in Q3, compared with a 0.2% dip the previous quarter.
In a similar vein, prices of city-fringe homes dropped 1.1%,
reversing a 0.2% rise in Q2. This is the first decrease since the
first quarter of last year.
HDB resale prices slip in Q3. Flash data from HDB shows a
0.7% fall in index to 205.1, the first decline in over four
years. Consultants were not surprised by the drop, and
expect further decline, as a combination of cooling measures,
and new or tweaked government regulations over the year
took their toll. On the supply side, the pipeline remains
ample, with HDB on track to launch 25,000 Build-to-Order
(BTO) flats this year. Next month, it will offer close to 8,000
units under BTO and Sale of Balance Flats exercises.
China’s official purchasing managers index (PMI) came in at a
lower than expected 51.1, the second set of disappointing
data in less than a week. While the index hit a 17-month
high, it was only fractionally higher than August's and stood
below a Bloomberg poll of analysts that forecast a figure of
51.6. There had been hopes for a stronger rebound amid
recent signs that the economy was on the road to recovery.
On Monday, the PMI published by investment bank HSBC
came in at 50.2, a whole point lower than the flash version.
A breakdown of figures of both sets of data - official and
HSBC PMI, shows that while exports are picking up on the
back of stronger economies in the United States and Europe,
demand at home and business activity of small enterprises
still lag.
US markets rose despite the first government shutdown in 17
years as investors bet that work stoppage will end in time for
lawmakers to tackle the need to raise the debt ceiling.
According to Bloomberg, CEOs say that a prolong shutdown
of the US government has the potential to hurt the already
fragile economic rebound. The USD Index dipped and against
the SGD, the cross rate retreated to 1.2518. Yields on the US
treasury edged 0.04% higher to 2.65%.

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