Today’s Focus
SIIC - Initiating coverage with BUY call for 33% potential
return to S$0.25 target price
Genting Singapore - Forays into Korea to gain foothold
in North Asia. Reiterate BUY and S$1.75 target price
US markets rallied last Friday despite a weaker-than-expected
jobs figure. Non-farm payrolls rose 113k, below consensus
expectations of 180k. The unemployment rate declined to
6.6% from 6.7% the previous month. About 2/3 of S&P
500 companies have posted quarterly earnings this season,
with 76% beating profit estimates and 66% exceeding sales
projections, this according to Bloomberg.Meanwhile, U.S.
Treasury said U.S. borrowing authority may not last past Feb
27th and urged Congress to extend the debt ceiling as soon as
possible.
STI found a near-term trough last week when it fell to as low
as 2950, as 12-mth forward PE valuation sank below 13.12x
(-0.5SD) FY14F PE and came within a mere 50pts from its
12.33x (-1SD) 12-mth forward PE level at c.2900.
The index would have to go through a stabilizing process
following the recent sell-down as investors assess the impact
of QE tapering on emerging markets. The current rebound is
likely to find immediate resistance at 3030, not exceeding
3050. If external volatility such as a further short-term decline
in US equity indices continues to drive it lower, we see limited
downside below the 2950 level. Bargain hunters will be
eagerly waiting at 2900 or slightly above.
The MAS and SGX are seeking feedback on a proposed suite
of changes that include an end to uncollateralised contra
trading, minimum Mainboard share prices and an
independent listings committee. These include 1) minimum
5% collateral for customers’ open positions 2) reducing
settlement period to 2 days 3) minimum 180-day volumeweighted
average price of 10-20 cents for Mainboard
companies amongst others. To improve liquidity, SGX will cut
clearing fees by 0.75bps to 0.0325% from May 2. The
existing cap of $600 for contracts of $1.5mil or more will be
removed.
US Indices Last Close Pts Chg % Chg
Dow Jones 15,794.1 165.5 1.1
S&P 1,797.0 23.6 1.3
NASDAQ 4,125.9 68.7 1.7
Regional Indices
ST Index 3,013.1 24.9 0.8
ST Small Cap 523.3 2.1 0.4
Hang Seng 21,636.9 213.7 1.0
HSCEI 9,645.4 107.7 1.1
HSCCI 4,156.8 65.9 1.6
KLCI 1,808.6 10.7 0.6
SET 1,296.5 1.3 0.1
JCI 4,466.7 42.0 0.9
PCOMP 6,011.1 96.6 1.6
KOSPI 1,922.5 14.6 0.8
TWSE 8,387.4 76.3 0.9
Nikkei 14,462.4 307.3 2.2
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 552
Total Daily Vol (m shrs) 2,618
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
7 Feb
Target Price
(S$)
Hutchison Port Hldgs Trust (US$) Buy 0.660 0.80
Keppel Corp Buy 10.370 12.60
ST Engineering Buy 3.770 4.90
Yangzijiang Buy 1.125 1.32
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
7 Feb
Target Price
($)
Ezion Holdings Buy 2.280 3.36
China Merchants Buy 0.890 1.20
Pacific Radiance Buy 0.950 1.05
Nam Cheong Buy 0.320 0.43
Source: Bloomberg Finance L.P., DBS Bank
Singapore
Wired Daily
Page 2
We initiate coverage on SIIC Environment with Buy for 33%
potential return to S$0.25 target price. Our sum-of-parts
target price is based on 15x PE for Construction and 10-
Year DCF valuation methodology for Water Treatment,
using 8% WACC, zero terminal growth and flat tariff rates
throughout the concession period.SIIC is fast becoming one
of the largest players in China’s water treatment and supply
industry by design capacity. The company is an owner and
operator of water supply and wastewater treatment (WWT)
facilities. SIIC is 46.72% owned by Shanghai Industrial
Holdings Ltd (SIHL), a state owned enterprise (SOE) which
facilitates SIIC’s acquisitions and gives it access to capital at
preferential rates, thus enabling the firm to leapfrog rapidly
into China’s environmental industry. SIIC’s strong parent
support and positive industry fundamentals are expected to
drive 49% earnings CAGR from FY13-FY15.
Genting Singapore forays into Korea to gain foothold in
North Asia, hedging for potential gaming liberalisation. The
US$2.2bn Resorts World Jeju (RWJ) will be GENS’ first foray
into the North Asian gaming market. The development is a
50:50 JV with Landing International Development, the
largest property developer in Anhui province in China. The
IR, spanning over 568 acres, will be similar to RWS (casino,
luxury hotels, retail mall, themepark) but includes property
development (villas & apartments) which makes it selffinancing.
Reiterate BUY and S$1.75 target price. Potential
catalysts will be from strong earnings recovery and Japan’s
gaming liberalisation (GENS is seen as frontrunner).
CapitaMall Trust offers for subscription of up to S$200m in
aggregate principal amount of 7-year retail bonds to the
public in Singapore, and institutional and other investors
under CMT’s S$2.5 bn retail bond programme. The retail
bonds carry a fixed interest of 3.08% per annum, to be paid
half-yearly on 20 February1 and 20 August1 each year from
2014 to 2021, commencing on 20 August 2014. Up to
S$150m of the retail bonds will be offered to the public,
while up to S$50m will be offered to institutional and other
investors. The public offer period is from 9 a.m. 11 February
2014 to 12 noon 18 February 2014. Minimum investment
sum is S$2,000.
Vard Holdings has secured a contract with BOURBON, for
the design and construction of one arctic Anchor Handling
Tug Supply vessel (AHTS). The vessel is scheduled for
delivery in Norway in 1Q 2016. The contract value was not
disclosed, but based on similar order for arctic class AHTS
secured in 2012, we believe the contract could worth about
NOK700m. This will bring YTD-FY14 order wins to about
NOK2.7bn, making up almost 25% of our order win
assumption this year. We expect Vard to book NOK11/12bn
new wins in FY14/15. Contract momentum has been solid
so far in the last few weeks, with orders for 2 large ticket
Offshore Subsea Construction Vessels (OSCVs) worth
NOK1bn plus each secured in end-December and mid-
January. The OSCV market remains promising for Vard and
with the possibility of AHTS and PSV orders in the North Sea
picking up momentum later this year, order outlook for
Vard remains quite positive.
However, despite the order flow momentum, near term
earnings visibility is clouded to an extent by operational
issues at its Brazil yards. Thus, for now, we maintain our
HOLD call and target price of S$0.84 on Vard as we wait for
visible evidence of margin improvements and sustainable
order wins in the coming quarters, before we turn more
positive on the stock.
Pacific Radiance’s diverse fleet clinches US$59m worth of
contracts from repeat clients. The latest wins involve vessels
such as tugs and barges, AHT, AHTS, FSO and a specialised
saturation DSV bound for Asia. The vessels are being
chartered out to established oil and gas players. Pacific
Radiance’s integrated service approach backed by diverse
fleet enhances the Group’s edge in the high-growth
offshore sector.
Otto Marine has secured a charter contract for its 24,000
bhp AHTS vessel, Go Pegasus worth approximately US$40m
including options. Recently completed at Otto Marine’s
Batam yard, Go Pegasus will be mobilized to the North Sea
in March 2014.
Great Eastern Holding’s 4Q13 earnings were softer q-o-q
but within expecatations. Underlying business remained
strong. GEH declared 40 Scts final DPS plus 5 Scts special
DPS, bringing full year DPS of 55 Scts. OCBC will release
4Q13 results on 14 Feb. Insurance income should be inline.
We expect stronger non-interest income q-o-q.
Oxley Holdings said that net profit for its second quarter
ended Dec 31, 2013 more than doubled to $25.1m, from
the same period a year ago. This was mostly due to an
accounting requirement that caused the entirety of profit to
be recognised for a completed commercial and industrial
project, 131-unit The Commerze@Irving.
Epicentre Holdings is expected to report a loss for the half
year ended 31 December 2013, mainly due to the
deterioration of its profit margin
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