Wednesday, March 12, 2014

DBS Vickers Report 13 Mar 14

Today’s Focus
 Pacific Radiance - On track to deliver strong earnings
growth in FY14/15. Maintain BUY, target price revised
up to S$1.20
STI’s pullback off 3145 on Wednesday with a ‘gap down’ (@
3115-3125) day yesterday underpins our view that near-term
upside through March should be capped at 3145 with
pullback support at 3000-3050. We keep our view for the STI
to move pass 3150 only beyond 1QCY14, with potential to
reach c.3250-3300 by the end of 2Q14. For the current
session, any rebound should be capped at 3115-3125.
Attention turns to retail sales data releases for the rest of this
week. China February retail sales (consensus 13.5% YTD y-oy)
and industrial production (9.5% YTD y-o-y) will be released
this afternoon. US February advanced retail sales (consensus
0.2% m-o-m) will be released tonight while Singapore’s
January retail sales (-3.6% y-o-y) will be released tomorrow.
Pacific Radiance is on track to deliver strong earnings growth
in FY14/15, driven by existing newbuild orders. Its Indonesian
associate PT Logindo continues to shine with 86% growth in
FY13 net profit. Further investments are likely to be
announced in due course for fleet growth beyond FY15.
Factoring in slightly higher margins for its own fleet and
better profit growth at associate PT Logindo, we raise our
FY14/15 net profit forecast by 2-4% and revise up our target
price to S$1.20 (Prev S$ 1.05), now pegged to 11x FY14 PE,
in line with Asian peer average. Maintain BUY.
Vard Holdings announces a second set of newbuild contracts
in two days. It has secured contracts with an undisclosed
customer for the construction of two offshore support
vessels. The total value of the contracts amounts to close to
NOK 600m. Delivery is scheduled in 3Q 2015 and 4Q 2015.
This brings YTD contract wins to NOK4.6bn for 6 vessels. At
42% of our full year order win forecast within the first
3months of FY14, Vard looks set to beat our current
expectations on order wins.
US Indices Last Close Pts Chg % Chg
Dow Jones  16,340.1 (11.2) (0.1)
S&P  1,868.2 0.6 0.0
NASDAQ  4,323.3 16.1 0.4
Regional Indices
ST Index  3,097.4 (32.0) (1.0)
ST Small Cap  534.8 (1.5) (0.3)
Hang Seng  21,902.0 (367.7) (1.7)
HSCEI  9,364.5 (155.7) (1.6)
HSCCI  4,066.9 (51.9) (1.3)
KLCI  1,818.6 (10.0) (0.5)
SET  1,356.4 (7.9) (0.6)
JCI  4,684.4 (19.8) (0.4)
PCOMP  6,462.5 (67.1) (1.0)
KOSPI  1,932.5 (31.3) (1.6)
TWSE  8,684.7 (17.6) (0.2)
Nikkei  14,830.4 (393.7) (2.6)
Dow Jones  16,340.1 (11.2) (0.1)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn)
Total Daily Vol (m shrs)
12m ST Index High
12m ST Index Low
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
12 Mar
Target Price
(S$)
ComfortDelgro Buy 1.950 2.19
Global Logistic Properties Buy 2.820 3.31
Keppel Corp Buy 10.630 12.60
Yangzijiang Buy 1.065 1.45
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
12 Mar
Target Price
($)
Ezion Holdings Buy 2.140 3.26
Goodpack Buy 2.010 2.25
China Merchants Buy 0.955 1.32
Pacific Radiance Ltd Buy 0.965 1.05
Nam Cheong Buy 0.330 0.43
Source: Bloomberg Finance L.P., DBS Bank
Singapore
Wired Daily
Page 2
SingTel has secured exclusive rights to air football world
cup 2014 which will be cross-carried to StarHub as per
Singapore regulations. The bid price is speculated to be
S$25-30m up 30-50% than the previous world cup price.
One-time subscription price is raised to S$105 versus S$66
last time when SingTel and StarHub had made a joint bid.
However, subscribers can watch all the matches free if they
renew or sign up SingTel mio TV packs for 24 months.
Meanwhile, StarHub has declined to offer rebates on the
matches like it does on English Premier League matches
also cross carried from SingTel. StarHub faces challenges in
the near term although long-term plan is in place. We
expect some near term weakness in StarHub but downside
should be limited by its guidance of 5 Scts DPS each
quarter. M1 is our top pick in the sector as (i) M1 stands to
gain market share in the fixed broadband versus decline at
StarHub and SingTel (ii) M1 has much higher exposure
than its peers to a growing mobile sector from tiered-data
pricing. M1 will go ex-dividend (14 Scts DPS) on 11 April
2014.
Mapletree Industrial Trust (MINT) is proposing the
acquisition of an industrial property – 2A Changi North
Street 2, for a total consideration of S$14.1m (including
land premium). The property has a total GFA of 67,800
sqft and sits on a long remaining lease tenure of 30 years
with an option of a 30 year extension. The vendor,
Stamping Industries, will lease the property back for a
period of 5 years with annual rental escalations of 2% p.a.
and has an option to renew for an additional 3 years. The
implied acquisition yield is estimated to be c7.5%, which is
higher than the portfolio’s implied yield of 6.5%, thus this
deal is likely to be accretive and yield enhancing to the
portfolio. Given the fairly small deal size, MINT will fully
fund this acquisition using debt, gearing is estimated to
increase marginally to 36.7% ( vs 36.5% previously). DPU
impact is fairly marginal at <1%, our target price of S$1.44
and BUY call is maintained.
Otto Marine has secured a charter contract amounting to
US$24.9m for three offshore support vessels. Two of the
vessels will be deployed to Mexico on long term charter
and the third to be engaged for towage project from
Singapore to West Africa.
Libra Group has been awarded a sub-contract for the
supply, delivery, installation, testing, commissioning and
maintenance of air conditioning and mechanical ventilation
for a proposed development of an eight (8) storeys
teaching facilities building at Temasek Polytechnic worth
S$13.8m. The sub-contract is scheduled to be completed in
January 2015.
Polaris had obtained a distributorship for Huawei mobile
devices. Going forward, the revenue of Polaris is expected
increase with the addition of a comprehensive range of
Huawei mobile devices. According to recent research,
Huawei ranked third in global smartphone shipments in
2013.
Metax Engineering has been awarded a total of
approximately S$33m worth of palm oil bio-refining and
bio-energy engineering projects in Malaysia and Thailand.
The addition of these projects brings the Group’s current
order book to S$60m to date, which is expected to be
realised in the next 24 months.
Singapore Exchange (SGX) has raised the red flag on recent
trading activities in the shares of two companies, namely
integrated contract manufacturer Giken Sakata and raw
materials supplier Ziwo Holdings, after the strong surge in
their share price.
The International Air Transport Association (Iata) has cut its
global profit forecast by US$1bn to US$18.7bn for the
airline industry in 2014, no thanks to higher fuel bills
caused by the Ukrainian crisis. Owing to higher oil prices,
fuel bills which make up 30% of an airline's average cost
would rise by US$3bn to US$213bn than what Iata had
expected in December. This spike would be partially offset
by a stronger showing in the cargo space which could see
revenues clicking higher by US$2bn to US$63bn.
U.S. indices pared earlier session losses as investors
watched developments in Ukraine and weighed prospects
for global economic growth. Ukraine warned Russia is
amassing troops near its border. US President Obama
called Russia’s incursion into Crimea a violation of
international law and said the US stands with Ukraine to
protect its sovereignty and territory

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