OCBC Report 24 Feb 14

KEY IDEA Sheng Siong Group: Slower growth ahead Summary: Sheng Siong Group’s (SSG) FY13 results came in within our expectations. Revenue increased 7.9% to $$687.4m and forms 99.9% of our FY13 forecasts. Core net profit increased 18.6% to S$38.9m, or about 99.2% of our FY13 forecasts. A final dividend of 1.4 S-cents per share is proposed, bringing the total dividend to 2.6 S-cents per share in FY13, or a yield of 4.3% based on Friday’s closing price. We expect stable margins but slower growth in FY14 as the 11 stores opened in FY11 and FY12 mature. We look favourably upon management’s prudence in opening of new stores and execution of e-commerce. We maintain our BUY with a new fair value of S$0.68 (previous: S$0.70) as we roll forward our model.  (Yap Kim Leng) MORE REPORTS Noble Group Ltd: Maintain HOLD for now Summary: Noble Group (Noble) reported its FY13 results, with revenue rising 4% to US$97.878b, or just 1% below ours and street’s forecast, while reported net profit tumbled 48% to S$243.5m. But if we exclude the non-cash charge of US$103m from its share of Yancoal's loss, Noble noted that its core earnings would have come in around US$349m, or about 15% above our forecast (8% above consensus). Noble declared a final cash dividend of US$0.0091/share, versus US$0.0181 last year; but still around 25% of its earnings. For now, we are largely keeping our FY14 estimates unchanged; although we expect better margin improvements in FY15. Our fair value remains at S$1.03, still based on 11x FY14F EPS. Maintain HOLD. (Carey Wong) SG Budget: Tribute for pioneers Summary: The Singapore government announced its Budget 2014, with the focus primarily on thanking and honouring the pioneers of Singapore. The unprecedented S$8b pioneer fund consists of health-care benefits for some 450k pioneers for the rest their lives. Also included were measures to help older workers and elderly Singaporeans as well as address the health-care cost concerns of tomorrow’s seniors. For the corporates, the government has extended the PIC (Productivity and Innovation Credit) scheme to 2018, which gives tax breaks for firms that improve their processes, among other measures. Overall, we think that the Budget would be most positive to the health-care sector; hence we maintain our OVERWEIGHT on the sector, with Raffles Medical (BUY, S$3.61 FV under review) as our top pick. Other businesses may experience slightly higher manpower cost with the 1% point increase in employer’s CPF contribution (which will go into Mediasave). We note that the levy for Basic Skilled/R2 Work Permit Holders will be increased from $600 to $700 in Jul-16, while levies for Higher Skilled/R1 Work Permit Holders will remain unchanged. Meanwhile, the unexpected hike of 25% on alcohol tax could impact F&B outlets that rely heavily on sale of alcoholic drinks.  (Carey Wong) Raffles Medical Group: FY13 results within expectations Summary: Raffles Medical Group (RMG) reported its FY13 results this morning that were within our expectations. Revenue rose 9.4% to S$341.0m and was 1.9% below our forecast. PATMI surged 49.3% to S$84.9m, but was partly boosted by fair value gains of investment properties (S$3.9m) and a disposal gain from its Thong Sia building divestment (S$20.4m). Excluding these items, we estimate that core PATMI rose 14.5% to S$60.6m, forming 99.8% of our core earnings projection. The improved performance was attributed to growth from both RMG’s Hospital Services and Healthcare Services divisions, which registered an increase in revenue of 12.4% and 6.2%, respectively. This was in turn driven by higher patient loads and increased depth of medical specialties offered. A final dividend of 4 S cents/share was declared, bringing full-year DPS to 5 S cents (FY12: 4.5 S cents/share). We will provide more updates after the analyst briefing. For now, maintain BUYon RMG, but our fair value estimate of S$3.61 is under review. (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks stepped lower Fri and finished mostly down for the week, as the S&P 500 snapped a two-week winning streak that has left it just below a record level. - Otto Marine sank to a net loss of US$9.7m for its 4Q13 after three quarters of gains, even though it managed to report a net profit for the full year. - QAF Ltd reported a 13% decline in net profit to S$30.19m for FY13 due mainly to its provision for unrealised foreign exchange loss. - ValueMax posted a 34.8% decline in FY13 net profit to S$9.36m on lower revenue. - Strong momentum and higher agent productivity drove AIA Singapore's growth in FY13, with its operating profit after tax rising 15% to US$396m. - Millennium & Copthorne's FY13 pretax profit jumped 54% due to accrued one-time revenue from condominium sales by its Singapore subsidiary. - Hiap Hoe and Heeton signalled caution over the Singapore property market amid weaker 4Q13 results, and have indicated more expansion opportunities overseas. - Swissco more than doubled its net profit to S$12.9m for its 4Q13 from S$6.4m a year ago.