OCBC Report 3 Feb 14

KEY IDEA Anticipating earnings spikes Summary: For its 1QFY14 (ending Sep-13), Oxley Holdings announced a net income of S$250.8m, up a whopping 37 times YoY. This comprised mainly cash earnings, not valuation gains, and was boosted by Oxley BixHub attaining TOP, which had its profits booked wholly under the completion of contract (COC) method. We note that the full visibility of COC profits can be price catalysts for mid-small cap companies, particularly if they are not well-covered; Oxley’s share price subsequently appreciated as much as 40% after its results. In our piece, we highlight two companies likely to see COC earnings boosts ahead. First, Roxy-Pacific is likely to see an earnings boost ahead from Wiz@Changi attaining TOP in its upcoming 4Q13 earnings. Similarly, we expect Lian Beng’s upcoming 3QFY14 earnings to be boosted by the TOP of M-Space, in which it has a 55% stake. Both Roxy and Lian Beng are rated BUY with fair value estimates of S$0.65 and S$0.58, respectively.(Eli Lee)

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NEWS HEADLINES - US stocks ended the week and the month with deep losses following a selloff on Fri, which was prompted by disappointing earnings, renewed fears over deflation in the euro zone and a continuing rout in emerging markets. - Bank lending in Singapore grew at a slower pace in Dec 2013 compared with the previous month, dragged by softer growth in both consumer and business loan segments. - United Fiber System's proposed acquisition of a 67% stake in Indonesia's Golden Energy Mines Tbk has been plunged into doubt because of a failure to meet certain conditions relating to the deal. - GRP Ltd is placing 27.8m new shares to real estate veteran and Hong How Group chairman Daniel Teo at 10 S cents per share, to raise S$2.78m for new market expansion, business development plans and projects. - Sino Construction Ltd has bought a 60% stake in privately owned Malaysian construction company Elite Bay Sdn Bhd for RM300,000 (S$114,390). - The Armada Group has extended its 3QFY14 losses to HK$13.35m, from HK$8.18m a year earlier.