OCBC Report 12 Feb 14

KEY IDEA Hutchison Port Holdings Trust: 4Q13 one-off items hit P&L Summary: HPHT reported 4Q13 earnings results that were lower than ours and the street’s expectations due to one-off items: (1) concession to shipping lines after previous industrial action at HIT, (2) write-off of an upfront fee after the US$3.6b bank loan refinancing, and (3) exchange loss from the conversion of USD to HKD for repayment of bank loan for the ACT acquisition. Revenue for 4Q13 fell 0.8% YoY to HK$3.12b. Total operating expenses for the quarter increased by 10.9% to HK$2.17b. PATMI fell 47% to HK$335m. Management is guiding mid-single digit growth in volume for its HK and Shenzhen ports, with 1-2% increase in ASP. Due to the expiry of tax holidays for some phases of Yantian, for FY14, management is guiding an effective tax rate of 19-20%, a significant increase over FY13’s 12%. Lowering our DPU forecasts, we reduce our FV on HPHT from US$0.74 to US$0.63. We maintain a HOLD rating on HPHT. HPHT is trading at a FY14F dividend yield of 8.0%. (Sarah Ong) MORE REPORTS SATS Ltd: Sluggish 3Q results and 4Q outlook Summary: SATS Ltd posted a pretty lethargic set of 3QFY14 results. Revenue was flat at S$465.5m, or just shy of the street’s S$472.5m forecast (based on Bloomberg consensus), but earnings slipped 8.7% to S$42.9m, or about 18% below consensus’ S$52.2m estimate. For 9MFY14, revenue fell 1.3% to S$1352.1m, meeting 76% of our FY14 forecast (72% of consensus), while reported net profit edged 0.6% lower to S$137.8m. Excluding one-off items, core earnings would have been S$139.5m (+0.4%), or about 73% of our full-year estimate (67% of consensus).  Given the still-muted outlook, as well as the below-forecast earnings, there is likely to be a negative knee-jerk reaction in SATS’ share price, especially after the 3.2% rebound from the recent S$3.08 low. Due to a change in analyst coverage, we put our Hold rating and S$3.35 fair value under review. (Carey Wong) KSH Holdings: Another steady quarter of growth Summary:  KSH Holdings reported 3QFY14 PATMI of S$9.9m, up 22% YoY, mostly due to increased contributions from the construction and property development segments. 9MFY14 PATMI cumulates to S$33.5m, up 50.3%, and makes up 69% of our full year forecast. We judge this to be mostly within expectations, and anticipate a back-loaded year in terms of revenue recognition from construction and development projects. In addition, we note that 3QFY14 earnings were also impacted by up-front marketing costs for key projects launches, KAP, NeWest and Floraville. 3QFY14 topline increased 78.4% YoY to S$93.2m as construction project and development revenues rose 67.9% and 344.8%, respectively. We will speak further with management regarding these results and, in the meantime, maintain BUY with an unchanged fair value estimate of S$0.73. (Eli Lee) Far East Hospitality Trust: 4Q13 results in line Summary: Far East Hospitality Trust (FEHT) has announced 4Q13 results which are in line with our expectations and the street’s. FY13 distribution per stapled security of 5.64 S cents forms 101% of our forecast and 99% of the street’s median forecast. 4Q13 gross revenue was S$33.6m or 3.0% lower than management’s forecast. RevPAR for the hotels, excluding the Rendezvous property (which was acquired on 1 Aug 2013), was S$164.8, down 5.3% YoY, which was expected given challenging industry conditions. Net property income was 2.4% below forecast at S$30.5m. Income available for distribution was S$25.1m or 2.2% below forecast. 4Q13 distribution per stapled security was 1.42 S cents or 2.1% lower than forecast. We maintain our HOLD rating on FEHT but place our FV of S$0.92 under review. We will be speaking with management later today. (Sarah Ong) Vard Holdings: Secures contract for one PSV Summary: Vard Holdings Limited (VARD) announced that it has won a contract for the design and construction of a Platform Supply Vessel (PSV) for Carlotta Offshore, a repeat customer. This vessel is a multifunctional PSV of VARD’s internal design, is ~4,000 DWT and will be used for standby, rescue, fire-fighting and oil recovery operations. Delivery of this vessel is scheduled for 2Q15 from VARD’s Vietnam yard. Although the value of the contract was not disclosed, we believe it is worth NOK300m. This is the second announced contract win by VARD within a week, and brings its YTD order wins to ~NOK2.4b (22% of our FY14 estimate), based on our estimates. We maintain our HOLDrating and S$0.84 fair value estimate on the stock (pegged to 8x FY14F EPS). (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks extended their four-day winning streak, ending Tue with solid gains as Fed Chairwoman Janet Yellen pledged to keep interest rates low. - Singapore banks could be in for a rough ride this year due to sluggish economic growth and skittish financial markets, according to a new report by Standard & Poor's. - Fraser and Neave posted a modest 3.2% increase in its 1QFY14 net profit from continuing operations and before exceptionals, as weaker printing profits took a bite out of stronger food and beverage earnings. - Vicom’s FY13 net profit rose 7.7% to S$28.4m, as revenue climbed 8.1% to S$105m. - Sim Lian Group's net profit for 2QFY14 rose 38% YoY to S$65.8m, even as revenue was almost flat at S$207.3m. - Valuetronics Holdings Limited posted a net profit of HK$35.53m (S$5.81m) for 3QFY14 last year vs. HK$24.51m a year ago. - Earnings for Pacific Andes Resources Development fell 48% for 1QFY14, despite revenue contribution from newly acquired Copeinca. - Ausgroup's net profit for 2QFY14 slid 16.7% YoY to A$2.3m (S$2.6m). - Cordlife posted a net profit of S$4.2m for its 2QFY14, 25% down YoY due to margin pressure and rising costs. - Soilbuild Construction Group's SB Procurement has been awarded a S$56.6m contract by XMH Holdings to construct a new seven-storey industrial building at Tuas Crescent. - Gallant Venture and Indonesian flag carrier Garuda will develop an aviation and tourism hub in Bintan.