OCBC Report 25 Feb 14

KEY IDEA Sembcorp Marine: Better-than-expected FY13 showing Summary: Sembcorp Marine (SMM) reported better-than-expected FY13 results. Revenue of 5525.9m (+25%) was about 8% above our forecast (6% above consensus). Reported net profit came in at S$555.7m, +3%, while core earnings rose 11% to S$553m, which was 7% above our estimate (5% above consensus). SMM declared a final dividend of S$0.06/share and a special S$0.02 dividend, bringing the total payout to S$0.13 (unchanged from last year). Overall, management maintains a pretty upbeat outlook, backed by a net order book of S$12.3b with visibility stretching out to 2019. While we are largely keeping our FY14 estimates unchanged, our SOTP-based fair value slips from S$5.68 to S$5.26. Maintain BUY. (Carey Wong) MORE REPORTS Raffles Medical Group: FY13 results within expectations Summary: Raffles Medical Group’s (RMG) FY13 revenue and core PATMI growth of 9.4% and 14.5% to S$341.0m and S$60.6m, respectively, were both within our expectations. A final dividend of 4 S cents/share was declared, bringing full-year DPS to 5 S cents (FY12: 4.5 S cents/share). Once RMG’s local expansion plans are completed in 2016, we believe it will enhance its position as a leading healthcare services provider. We trim our FY14 EPS forecast marginally by 1.5% due to an enlarged share base. Given that management has implemented a concrete plan to deploy its cash in a more efficient manner which is expected to enhance shareholders’ return in the longer-term, coupled with RMG’s continued solid execution track record, we assign a slightly higher PER target peg of 30x (previously 29x) to our FY14F EPS. This raises our fair value estimate from S$3.61 to S$3.68. Maintain BUY. (Wong Teck Ching Andy) COSCO Corp: Margin pressure likely to continue Summary: COSCO Corp (Singapore) reported FY13 revenue of S$3,508.1m, representing a decline of 6.1% and formed 97.4% of our FY13 estimate. PATMI fared much worse, plunging 71.0% to S$30.6m and came in 17.0% below our full-year forecast (31.0% below Bloomberg consensus). The miss was partly due to a S$51.0m allowance made for expected losses recognised on construction contracts and a S$7.5m allowance for inventory write-down in 4Q13. We believe this reflects the execution risks still faced by COSCO. A first and final DPS of S$0.01 was declared, half that of FY12. Looking ahead, management highlighted that it is targeting to win US$2.2b of new orders in FY14, which we believe will be dominated by offshore marine orders, especially in the accommodation units segment. However, operating conditions are expected to remain challenging in 2014, since construction will commence for some of its shipbuilding contracts which were secured at low prices, coupled with continued learning curve for its offshore marine business. Hence we expect margin pressure to remain as a key concern. Maintain SELL and S$0.61 fair value estimate on COSCO. (Low Pei Han and Andy Wong)

Vard Holdings: FY13 results within expectations Summary: Vard Holdings Limited (VARD) reported its FY13 results this morning which was in-line with our expectations. Revenue was flat (+0.2%) at NOK11,155m and was 3.7% above our full-year forecast. PATMI slumped 55.6% to NOK357m, or 1.0% below our FY13 estimate. During 4Q13, VARD delivered five vessels and clinched contracts for three new buildings, bringing its end 2013 order book to NOK19,356m (end FY12: NOK15,096m). However, VARD highlighted that its Niteroi shipyard in Brazil continued to face further delays and cost overruns, although operations were stable at its shipyards in Europe and Vietnam. A negative surprise came from VARD’s decision to not declare any dividends in FY13, which we believe would disappoint the market. We were expecting a S$0.02 first and final DPS. Management attributed this to an extraordinarily high dividend payout in FY12, record high investments in 2013 and a sharp fall in profitability. We will review our Hold rating and S$0.84 fair value estimate pending an analyst briefing later. (Wong Teck Ching Andy) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks climbed on Mon, boosted by M&A activity, an upbeat German confidence report and bets that the S&P 500’s foray into new high ground could spur further buying. - Inflation may have dropped to a near four-year low in Jan - dipping to 1.4% from 1.5% in Dec - but economists say the benign headline rate masks underlying price pressures. - United Industrial Corporation said that it was taking its 80.36% subsidiary, Singapore Land, private at S$761.67m. - Impairment charges totalling US$20.8m sent Rickmers Maritime's earnings into the red, with net losses of US$8.04m for 4Q13, compared with net profit of US$2.24m a year earlier. - Super Group, whose stock is now trading at S$3.90, has proposed a one-for-one bonus share issue to boost trading liquidity. - China XLX Fertilizer has posted a net profit attributable to owners of 264.05m yuan (S$54.8m) for FY13, a 15.1% decline from the previous year's 311.12m yuan. - Wheelock Properties sank deeper into the red with a loss of S$91.3m for 4Q13, versus a loss of S$30.8m in the corresponding period a year earlier. - Q&M Dental Group has signed a binding master agreement for a full stake in specialised dental materials manufacturer Qinhuangdao Aidite High Technical Ceramic Co for 80m yuan (S$16.7m).