OCBC Report 7 Jan 14

KEY IDEA ST Engineering: Reducing peg to 19x FY14F EPS Singapore Technologies Engineering (STE) had a good run from 31 Dec 2012 to 7 Nov 2013. Its share price rose 9.9%, outstripping the STI’s 1.1% increase over the same period. However, STE’s 3Q13 results, announced on 7 Nov, missed ours and the street's expectations and since then, STE’s share price has fallen 7.6% from S$4.20 to S$3.88 (versus a 2.4% decline for the STI). While the miss was in large part due to one-off items, we believe that investors have begun to apply lower valuations to STE to bring its multiples closer in line with its peers after the outperformance and with gradually less interest in yield plays such as STE due to the progressive tapering by the US Fed. Having re-examined STE’s peer group’s multiples, we lower our peg from 21x to 19x (applied to FY14F EPS of 20.6 S cents). We thus reduce our FV on STE from S$4.32 to S$3.91, and maintain a HOLDrating on STE on valuation grounds. FY14F dividend yield is 4.7%.(Sarah Ong) MORE REPORTS Midas Holdings: JV NPRT secures CNY1.1b train contracts Midas Holdings (Midas) has made a positive start to the year, announcing that its 32.5%-owned JV Nanjing SR Puzhen Rail Transport (NPRT) has clinched two train contracts with an aggregate value of CNY1.1b. This is the first NPRT contract win announced since the mid of last year. The first order is for the supply of 17 train sets (or 85 train cars) for the Suzhou Rail Transit Line 2 Extension and worth CNY520m. The second contract amounts to CNY590m and entails the supply of 13 additional train sets (or 78 train cars) for the Nanjing Metro Line 1. However, delivery for these orders is scheduled only from 2015 to 2016. As Midas is also a key supplier of aluminium extrusion profiles for NPRT, we believe this may also lead to future contract wins for Midas, likely to be in 2H14. Maintain BUYon Midas, with an unchanged fair value estimate of S$0.67, pegged to 1.3x FY14F P/B. (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks closed lower on Mon, with the S&P 500 index falling for a third consecutive session after weaker-than-expected services-sector data. - Singapore's manufacturing sector shrank in Dec 2013, as a key barometer of industrial activity pointed to contraction for the first time in 10 months. - Price growth for strata-titled retail property will likely moderate this year as the introduction of the total debt servicing ratio curbed investors' ability to finance purchases, property consultants say. - OCBC Bank has entered into exclusive talks to take over Hong Kong's Wing Hang Bank, in a deal estimated to be worth around S$5.8b. - Second Chance Properties posted a 15% YoY increase in net profit to S$3.85m for the first quarter ended 30 Nov 2013. - Healthway Corporation has secured a RM190m (S$73.3m) financing facility with Malaysia's Public Bank.