Monday, April 21, 2014

DBD Vickers Report 21 Apr 14

Today’s Focus
 StarHub - Big boost from 4G price hike; upgrade to BUY
with higher target price of S$4.50
The 1Q reporting season has only just started. There is currently
a marginal 5pt dip in forward PE numbers but it’s still early in
the results season to draw any conclusion. Our view is that
earnings forecasters tend not move the needle early in the year
that means the overall 1Q earnings revision will more likely be
flattish.
The STI is due for a pullback now that the month-long rally has
lifted it to the 13.9x (average) 12-mth forward PE level nearterm
resistance currently at c.3250. The 2 downward
retracement level are at 3210 (23.6% retracement) and 3180
(38.2% retracement).
We avoid STI component stocks that have performed well over
the past month and are currently trading near our fundamental
TP. Both UOB and CityDev fit into this screen. Other index
component stocks that are trading within 5% of fundamental
TP are SingTel and SGX.
StarHub will start charging S$2.14 for its 4G service from June
2014 onwards versus its current promotional free offer. The
company may further raise the extra charge for 4G to S$10.70
at a later unspecified date. Meanwhile, M1 offers free 4G
services till Dec 2014 with regular price for 4G advertised as
S$10.70. Elsewhere, SingTel has yet to indicate any intent of
following suit. The premium price for 4G service is expected to
benefit Starhub’s FY14F/15F earnings by 2%/6%. If 4G prices
were to rise to S$10.70, FY15F earnings could increase by
30%. StarHub is also expected to benefit most from subsidies
for SMEs. Its corporate fixed line growth is likely to offset
weaker broadband & prepaid mobile. Upgrade to BUY with
revised target price of S$4.50 (Prev S$ 4.30), implying potential
returns of 16%. StarHub is committed to a fixed 5-Sct DPS
each quarter, with dividend yield of about 5%.
1Q14 results for CapitaCommercial Trust (CCT) in line.
Operational outlook improves further. Looking ahead, we
expect firmer revenues in FY14-15F given expiring rents at Six
Battery Road (S$11.00-11.30psf) and OGS (S$8.30-9.30psf) are
US Indices Last Close Pts Chg % Chg
Dow Jones  16,408.5 (16.3) (0.1)
S&P  1,864.9 2.5 0.1
NASDAQ  4,095.5 9.3 0.2
Regional Indices
ST Index  3,253.8 0.6 0.0
ST Small Cap  547.8 (0.7) (0.1)
Hang Seng  22,760.2 64.2 0.3
HSCEI  10,080.2 44.3 0.4
HSCCI  4,249.3 9.0 0.2
KLCI  1,852.7 2.2 0.1
SET  1,409.2 0.4 0.0
JCI  4,897.1 24.0 0.5
PCOMP  6,671.2 49.5 0.7
KOSPI  2,003.6 (0.7) (0.0)
TWSE  8,966.7 22.5 0.3
Nikkei  14,516.3 98.7 0.7

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$bn) 605
Total Daily Vol (m shrs) 2,024
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
17 Apr
Target Price
(S$)
ComfortDelgro Buy 2.050 2.19
Global Logistic Properties Buy 2.760 3.31
Keppel Corp Buy 10.990 12.60
Stock Picks – Small Cap
Rec’n Price (S$)
17 Apr
Target Price
(S$)
Goodpack Buy 2.310 2.60
China Merchants Buy 0.950 1.32
Pacific Radiance Ltd Buy 1.085 1.20
Nam Cheong Buy 0.355 0.46
Centurion Corporation Buy 0.755 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
at/below committed rents of S$9.50-S$13.00 in 2Q14.
CapitaGreen is expected to see progressively higher rents.
Maintain HOLD, target price raised to S$1.67 (Prev S$ 1.52).
CCT remains a beneficiary of improved fundamentals in
Singapore’s office sector but the recent price rally has priced
in most positives.
We feature TT International (TTI) in the Singapore sector of
our ASEAN Small Mid Caps Radar for this month. TTI is a
potential turnaround play if its big box hypermarket retail
concept takes off when operation begins by December
2014. By selling products at competitive prices through bulk
sourcing, management is confident of achieving S$200m
annual revenue within five years with a potential net margin
of >4%. With the business turned around, TTL could also
repay S$240m scheme debts if potential bank refinancing is
successful. Meanwhile, FY15 Mar YE would be boosted by a
potential revaluation of its 51% owned Big Box property
(1m sq ft) which could also reverse its balance sheet’s
negative equity of S$117m.
Transcu Group has signed a Sale and Purchase agreement
for potential reverse take-over of Straits Construction
Group. The purchase consideration will be between
S$325m - S$338m. The consideration will be satisfied by
the issue of new Transcu shares of S$0.50 per share, postconsolidation.
The proposed Reverse Take-Over (RTO) will
give Transcu a new lease of life. Completion of proposed
acquisition is expected by 31 December 2014.
Sarine Technologies announced the launch of its new laser
diamond sawing and shaping system – the QuazerTM 3.
The original QuazerTM and second generation QuazerTM II,
introduced in 2005 and 2010 respectively, based on
proprietary technology and state-of-the-art green laser
technology, introduced multiple breakthroughs in the
sawing, cutting and shaping of rough diamonds and
became the de-facto high-end market-leading solutions.
Sarine is now introducing its next generation system- the
QuazerTM 3. The QuazerTM 3 offers a completely new
control system with unique advantages, amongst which is a
fully automated pie cutting feature, facilitating accurate
sawing of highly advanced sawing profiles.
China’s economy grew an annual 7.4% in the first quarter,
its slowest pace in 18 months, but just ahead of forecasts
for 7.3% growth. March trade figures earlier this month
showed exports unexpectedly fell for a second successive
month and imports dropped sharply.

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