OCBC Report 14 Feb 14

KEY IDEA ComfortDelGro: Another record year ComfortDelGro’s (CDG) FY13 results met our expectations, with both revenue and PATMI growing by 5.7% to S$3,747.7m and S$263.2m, respectively. This was a new record high for the group. A final DPS of S$0.04 was declared, bringing total FY13 dividends to S$0.07/share and translates into a yield of 3.6%. CDG’s domestic operations was dragged down by start-up losses at its DTL operations, but this was offset by overall growth in operating profits for its overseas operations, especially in the UK. We rework our assumptions following a change in analyst coverage, and bump up our DDM-derived fair value estimate on CDG from S$2.20 to S$2.30. We are positive on the fact that management has been able to mitigate domestic challenges by making astute accretive overseas acquisitions. Maintain BUY. (Wong Teck Ching Andy) MORE REPORTS CapitaMalls Asia: Steady data from Chinese malls CapitaMalls Asia (CMA) reported 4Q13 PATMI of S$216.4m, which increased 17.1% YoY mainly due to contributions from Star Vista, four new malls in Japan and progressive recognition from Bedok Residences. Adjusting for one-time items and fair value gains, FY13 core PATMI cumulates to S$240.1m, forming 104% of our FY13 forecast and we judge this to be mostly in line. The group announced a final dividend of 1.75 S-cents per share. Overall occupancy rate for CMA’s Chinese malls increased QOQ marginally to 97.3% from 97.2%. FY13 tenant sales increased 10.1% (excluding Tier 1 cities: 11.0%) while shopper traffic increased 2.2%. Maintain BUY. Our fair value estimate falls marginally to S$2.40 from S$2.55 previously due to weaker valuations of listed holdings. (Eli Lee) Keppel Corp: Wins US$650m of rig orders Summary: Keppel Corp (KepCorp) announced that it has won a contract worth US$650m to build three high-spec KFELS B Class jack-up rigs from a new customer Fecon International. According to KepCorp, Fecon (backed by experienced industrial entrepreneur A.P. Dobrov) is a new player to the offshore offshore oil and gas industry, and is targeting the growing offshore drilling markets of Africa, Middle East, and Southeast Asia. As the rigs are scheduled to be delivered progressively within 2H16, the contract is not expected to have any impact on FY14 earnings. Nevertheless, we estimate that the latest win will bump up its order book to US$14.9b with visibility extending out to 2019. We have a BUY on KepCorp with a SOTP fair value of S$12.25. (Carey Wong) Olam International: 1HFY14 earnings mostly in line Olam International Limited (Olam) posted 2QFY14 revenue of S$4506.7m, down 8% YoY, affected by both lower commodity prices and lower sales volumes. Nevertheless, EBITDA grew 12.3% to S$279.3m, reflecting margin expansion from upstream and midstream initiatives. Although reported net profit fell 13% to S$134.9m, underlying earnings (excluding exceptional items) improved 31% to S$143.4m. For 1HFY14, revenue also fell 8% to S$8827.8m, meeting 38% of our full-year forecast, while net profit eased 9% to S$180.5m; underlying net profit of S$152.3m met around 44% of our FY14 estimate. We will be attending the analyst briefing later and will have more. For now, we maintain our HOLD rating but place our S$1.45 fair value (based on 10x FY14F EPS) under review. (Carey Wong) United Envirotech: 9MFY14 earnings below forecast United Envirotech Ltd (UEL) posted 3QFY14 revenue of S$64.3m, up 23% YoY and 24% QoQ, driven mainly by the increase in water treatment revenue of S$10.9m (+117% YoY, +30% QoQ); this also led to an increase of gross margin to 47.0% versus 46.2% in 2QFY14 and 42.4% in 3QFY12. However, due to higher depreciation and interest charges, net profit eased 1% YoY (+17.8% QoQ) to S$8.4m. 9MFY14 revenue grew 16% to S$160.3m, meeting 82% of our full-year forecast, while net profit slipped 5.3% to S$21.3m, or just 62% of our FY14 estimate. We will be speaking to management shortly to get more colour on its order book as well as the integration of the recently-acquired membrane business from Memstar. In the meantime, we are putting our Hold rating and S$1.00 fair value (based on 15x FY15F EPS) under review. (Carey Wong) Roxy-Pacific Holdings: A strong finish to the year Roxy announced 4Q13 PATMI of S$44.8m, up 92% YoY mostly due to profit contributions from WIS@Changi, which achieved TOP over the quarter, and progressive recognition at seven other property development projects. Full year FY13 PATMI cumulates to S$92.2m which increased 58% and is 18% above forecast. We judge this to be above expectations, as a result of faster-than-anticipated progress recognition over 4Q13. In terms of the topline, Roxy reported 4Q13 revenues of S$169.7m, up 202% YoY again mainly due to WIS@Changi, and is within expectations. A final cash dividend of 1.297 S-cents per share is proposed.  We note the group now sits on significant cash and equivalents of S$354.2m, which will provide dry powder for its planned expansion into the region. Already, over FY13, we have seen Roxy acquire assets in Malaysia and Hong Kong, and understand that management is looking into opportunities in Sydney, Melbourne, London and Phuket as well. We will speak with management regarding this set of results and, in the meantime, put our Buy rating and fair value estimate of S$0.65 under review. (Eli Lee) Tat Hong Holdings: Continued weakness in 3QFY14 results Both Tat Hong’s 3QFY14 revenue and PATMI came in below our expectations. 3QFY14 revenue fell 19% YoY to S$167.4m while PATMI declined 32% to S$12.1m. Revenue declined YoY across all divisions other than Tower Crane Rental, which we view as a continuing trend from previous quarters’ results. Similar to the preceding quarter, the decline in PATMI is primarily due to lower profit contribution from Australia and Indonesia. GP margin also dropped across all divisions other than General Equipment Rental on a YoY basis. In particular, we note that Tower Crane Rental’s GP margin also dropped by 4.2ppt, which is a surprise given management’s previous guidance of cost management in that segment. We keep our HOLD call but put our fair value estimate of S$0.90 under review pending a change in analyst and a call with the company later. (Research Team) Lippo Malls Indonesia Retail Trust: 4Q13 results a big miss LMIRT’s 4Q13 results were significantly below ours and the street’s expectations. FY14 DPU of 3.25 S cents formed only ~93% of ours and the street’s prior estimate. LMIRT reported 4Q13 gross rental income of S$33.9m, down 4.0% YoY. While rental income in IDR-terms increased, the depreciation of the IDR versus the SGD was the more important factor. Distributable income fell by 14.6% YoY to S$13.8m and 4Q13 DPU contracted 24.3% YoY to 0.56 S cents (down 36% QoQ). LMIRT’s NAV has fallen from S$0.4528 at end-Sep 2013 to S$0.4115 at end-Dec 2013. We place our fair value of S$0.45 and Hold rating UNDER REVIEW. We will be speaking with management shortly. (Sarah Ong)

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NEWS HEADLINES - US stocks closed higher, with the Nasdaq rising for a sixth straight day, as investors looked past disappointing data on consumer spending, chalking the weakness up to weather instead. - Parkson Retail Asia has recorded a 2.8% rise in 2QFY14 net profit despite a fall in revenue and other income, as a decline in expenses helped to prop up the bottom line. - LionGold slipped into the red in 3QFY14, as a plunge in other income affected its bottom line. - The Hour Glass saw a 5% drop in 3QFY14 net profit to S$13.8m as total revenue and other income jumped 13% to S$180m, due to an expanded retail network and increased marketing activities. - Raffles Education Corporation said its 2QFY14 net profit rose 20% YoY to S$5.84m despite a 5% slip in revenue to S$31.63m.