Thursday, February 20, 2014

DBS Vickers Report 21 Feb 14


Today’s Focus
 Ezion – Maintain BUY; TP revised to S$3.26. We
continue to like Ezion’s strong growth profile and
earnings visibility.
Ezion’s FY13 recurring net profit surged 115% y-o-y, in line
with expectations. Gross margin inched up to 48.7%; net
gearing manageable at 1.1x. We are expecting solid c.50% 2-
year EPS CAGR, supported by fleet expansion backed by
charter contracts.
In its post results briefing, the management of Ezion has
addressed concerns on Port Melville, gearing and margins.
Ezion may stick with its plan to divest Port Melville so as not
to dilute management’s focus on service rig business and
burden on balance sheet. Net gearing could reach 1.3x by 1Q
with the buyback of two service rigs. Gross margins should be
sustainable in the near future but should moderate in the
medium term as Ezion moves towards time charter model.
We have trimmed FY14 EPS by 2% to reflect the delivery
schedule adjustment of two of its vessels. Maintain BUY; TP
revised to S$3.26 (Prev S$3.36). We continue to like Ezion’s
strong growth profile and earnings visibility.
Neptune Orient Lines reported another quarter of higher than
expected losses. Core net loss of US$277m in FY13 is lower yo-
y despite lower average freight rates, due to cost savings.
We are not expecting freight rates to be significantly higher in
FY14; operational efficiencies will be key for NOL. High
gearing of 1.8x is a cause for concern. Maintain HOLD and
S$1.10 target price. Despite hopes of slow economic recovery
and a possible return to profitability driven by cost savings,
we do not think NOL will be able to achieve normalised
returns in FY14-15, given the unfavourable demand-supply
dynamics in the industry.
Ascott REIT announced the proposed acquisition of a 125-
unit serviced residence in Dalian for Rmb 571m (cS$118.6m)
from a third party. This acquisition is accretive to earnings,
and we expect more to come. Maintain BUY and S$1.33
target price. We believe yields of close to 7.3%-7.5% remain
attractive.
US Indices Last Close Pts Chg % Chg
Dow Jones  16,133.2 92.7 0.6
S&P  1,839.8 11.0 0.6
NASDAQ  4,267.5 29.6 0.7
Regional Indices
ST Index  3,086.6 (2.2) (0.1)
ST Small Cap  533.5 0.5 0.1
Hang Seng  22,394.1 (270.4) (1.2)
HSCEI  9,978.1 (79.5) (0.8)
HSCCI  4,219.1 (50.7) (1.2)
KLCI  1,827.8 (1.6) (0.1)
SET  1,304.0 (17.0) (1.3)
JCI  4,598.2 5.6 0.1
PCOMP  6,352.8 58.1 0.9
KOSPI  1,947.9 17.4 0.9
TWSE  8,524.6 (52.4) (0.6)
Nikkei  14,449.2 (317.4) (2.1)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 569
Total Daily Vol (m shrs) 1,994
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$)
20 Feb
Target Price
(S$)
Hutchison Port Hldgs Trust (US$) Buy 0.630 0.76
Keppel Corp Buy 10.450 12.60
ST Engineering Buy 3.760 4.90
Yangzijiang Buy 1.140 1.32
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
20 Feb
Target Price
($)
Ezion Holdings Buy 2.30 3.26
China Merchants Buy 0.89 1.20
Pacific Radiance Ltd Buy 0.945 1.05
Nam Cheong Buy 0.34 0.43
Source: Bloomberg Finance L.P., DBS Bank
Singapore
Wired Daily
Page 2
FY13 results for Sheng Siong slightly below expectations.
Final DPS of 1.4 Scents was declared, resulting in DPS of 2.6
Scents for FY13. Earnings growth for FY14F is adjusted
down to 1%, on moderate store opening expectations in
FY14F. Maintain BUY despite lower S$0.72 (Prev S$ 0.80)
target price as its valuations are still attractive.
Pan-United Corporation (PAN) has paid RMB437m at 1.3x
book for 90% stake in Changshu Changjiang International
Port (CCIP). The acquisition is funded by 50% debt and
50% internal cash. PAN plans to expand its existing CXP’s
port operations through CCIP’s additional capacity. Net debt
increased to 0.5x while earnings reduced by 8% on higher
interest cost. Downgrade to HOLD with lower S$1.03 target
price (Prev S$ 1.21).
4Q13 results for ARA Asset Management in line; final
dividend of 2.7 Scts was declared. ARA’s recurring earnings
base is expected to continue growing after a series of
opportunistic acquisitions in 2013 (Suntec, Prosperity,
Fortune and Cache). A key focus for ARA in 2014 will be
driving asset under management (AUM) growth from its
private funds. Maintain BUY, target price revised to S$2.00
(Prev S$ 2.08), after accounting for lower cash balances and
market prices of its REITs.
Results for Genting in line if not for poor VIP win rate. We
look forward to strong earnings recovery, more new
ventures abroad and Japan’s gaming liberalisation. Maintain
BUY and S$1.75 target price.
4Q13 core net profit for Wilmar came in at US$353m (-
12% y-o-y; -10% q-o-q) - in line with our and consensus
estimates. 4Q13 revenue was US$11,622m (flat y-o-y, -2%
q-o-q). The sequential drop in Sugar revenue was offset by
higher Oilseeds & Grains revenue and higher volumes in
most segments. Maintain BUY but target price of S$3.83
under review. More updates after briefing today.
Hyflux reported net losses of S$7m in 4Q13 as sales fell
another 57% y-o-y and 47% q-o-q to S$85m. Revenue
decline as Hyflux continues to work down its thinning
orderbook. Hyflux’s EPC orderbook continues to reduce to
S$732m, meaningful project execution, if any, would likely
be later part of the year. Balance sheet has deteriorated too
as net gearing shot to 1.15x from 0.6x previously. This is
due to higher borrowings taken up to fund the Singapore
desalination projects. Overall, we feel Hyflux remains stuck
in a rough patch for both earnings and contract wins.
Rex International Holding announced that its jointlycontrolled
entity, Lime Petroleum Norway has signed an
agreement with North Energy to acquire a 20% stake in a
new licence in Norway. Lime Norway’s portfolio has grown
at a good clip over the past year, from four initial licences to
the current 14, and at higher stakes.
Delong Holdings expects to report a net loss for 4Q2013,
and consequentially, for the full year ended 31 Dec 13, due
to (i) weaker steel prices; and (ii) lower volume of hot-rolled
coils and steel billets sold.
China Bearing is expected to report a net loss for FY2013.
The expected net loss for FY13 is mainly attributable to
amongst others:-
(i) Decrease in revenue;
(ii) Increase in administrative expenses;
(iii) Decrease in other operating income; and
(iv) Impairment on property, plant and equipment.
Dyna-Mac Holdings has secured three new fabrication
orders for a provisional sum of S$42m. The orders are
expected to be completed progressively by the first quarter
of year 2015.
Global Logistic Properties announced that GLP Brazil
Development Partners I (GLP BDPI) has raised additional
capital commitment of BRL 538mn (US$230m) for strategic,
value-added initiatives led by strong customer demand.
GLP’s assets under fund management now stand at
US$11.1 bn.
Growth forecasts for both total trade and non-oil domestic
exports this year are maintained at 1-3%, even though the
two put up a disappointing performance in 2013 NODX,
which barely grew in 2012, fell 6% last year against the
official forecast of a 4-5% decline. Total trade dipped 0.5%
to $980.2 bn in 2013, against a 1.1% rise the year before.
The decline fell short of the 1-2% growth that IE Singapore
had expected.-

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