Today’s Focus
Ezion - Tan Sri Quek Leng Chan’s presence would aid
Ezion’s foray into Malaysia. Reiterate BUY; TP adjusted to
S$3.03
Keppel Corp - 1Q14 results in line. Reiterate BUY and
target price of S$12.60
STI touched and slightly exceeded the upper limit of our
anticipated near-term upside cap for it. No change in our view
for the 3250 level to be a near-term limit as valuation has
reached 13.9x (ave) 12-mth forward PE and it is still too early in
the 1Q results season to determine if the earnings downward
revision trend can end. The rally in US equities in the past 3
days following a brief sell-down is typical of the choppiness
seen during the initial part of the results season – some days,
results beat expectations while on others, they come below.
After the bell in US trade, IBM and Google reported results that
disappointed.
Expect a pullback in the STI for the current session, retreated
off the c.3250 level as the long-weekend approaches.
Tan Sri Quek Leng Chan is extending his O&G acquisition spree
to Singapore through the subscription of a 7.6% stake (100m
new shares @ S$1.94/share) in Ezion via Hong Leong
Company’s indirect subsidiaries. We view this development
positively as it underscores Ezion’s differentiating capabilities in
the niche liftboat market, while potentially benefitting from
Tan Sri Quek’s extensive network of resources and political
connection. This will accelerate Ezion’s market penetration in
Malaysia, which has strong potential to be the first in Asia to
endorse the use of liftboats.
Concerns on Ezion pouring money into E&P are unfounded.
Management has alleviated concerns over their recent move
into E&P. JK Tech will likely acquire small producing oilfield
assets and not greenfields from Ezion’s existing clientele. More
importantly, Ezion would not be required to fork out more
capital for JK Tech in the foreseeable future, eliminating our
concern of stretching its balance sheet into a non-core
business.
Post-placement, net gearing is expected to improve from 1.3x
to 1.0x. We estimate that the US$150m will enable Ezion to
US Indices Last Close Pts Chg % Chg
Dow Jones 16,424.9 162.3 1.0
S&P 1,862.3 19.3 1.0
NASDAQ 4,086.2 52.1 1.3
Regional Indices
ST Index 3,253.2 6.9 0.2
ST Small Cap 548.5 2.1 0.4
Hang Seng 22,696.0 24.8 0.1
HSCEI 10,036.0 7.2 0.1
HSCCI 4,240.3 (13.4) (0.3)
KLCI 1,845.4 (8.5) (0.5)
SET 1,401.8 12.7 0.9
JCI 4,873.0 2.8 0.1
PCOMP 6,671.2 49.5 0.7
KOSPI 1,992.2 (0.1) (0.0)
TWSE 8,923.8 7.1 0.1
Nikkei 14,417.7 420.9 3.0
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$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$)
16 Apr
Target Price
(S$)
ComfortDelgro Buy 2.020 2.19
Global Logistic Properties Buy 2.700 3.31
Keppel Corp Buy 11.190 12.60
Stock Picks – Small Cap
Rec’n Price (S$)
16 Apr
Target Price
(S$)
Goodpack Buy 2.290 2.60
China Merchants Buy 0.955 1.32
Pacific Radiance Ltd Buy 1.070 1.20
Nam Cheong Buy 0.355 0.46
Centurion Corporation Buy 0.765 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
take on 7-8 additional service rig projects and will eventually
be accretive to EPS. Meanwhile, we are factoring in the
enlarged share cap and lowering our target price to S$3.03
(Prev: S$3.26), out of prudence. Valuations are compelling
at 9x 12M rolling forward PE and 2.2x P/BV, despite a
promising 2-year EPS CAGR of 44% that is backed by firm
charter contracts of US$1.9bn (4x revenue coverage), and
an astounding ROE of 24%. Maintain BUY.
1Q14 results for Keppel Corp in line. Core net profit of
S$339m was flat y-o-y if we exclude exceptional items in
1Q13. It makes up c.22% of our and consensus’ full year
estimates. Operating margin of O&M held up at 14.2%. The
S$1.9b new order wins in the quarter is impressive and
account for 32% of our full year forecast of S$6b. Group
order book reached a new high of S$14.4b, providing
revenue visibility up to 2019. Reiterate BUY and target price
of S$12.60.
Cambridge Industrial Trust’s 1Q14 results in line. Recently
completed acquisitions are expected to contribute to
earnings from 2Q14, while its organic growth outlook
remains stable. Maintain HOLD, given limited upside to
target price of S$0.74.
1Q14 CPO output for First Resources (FR) grew 14% y-o-y (-
24% q-o-q) to 131,474 MT. Assuming 1Q14 ASP is
US$797/MT, earnings would be US$49m – US$52m for the
quarter. We expect output growth to decelerate in
subsequent quarters, following a severe drought in
February. Reiterate HOLD call and target price of S$ 2.22.
We are reviewing our CPO price forecasts for upside bias
but believe FR’s share price has more than priced this in.
CapitaLand is acquiring another 80% interest in CapitaLand
(Beijing) Kai Heng Holdings (CBKH) that it does not already
own from a group-managed China fund for RMB220.2m.
CBKH, which will become a fully owned subsidiary of
CapitaLand post-transaction, has 100% economic interest
in Beaufort, a residential development site in Chaoyang
District in Beijing.
Global Logistic Properties has leased 34,000 sqm (366,000
sq ft) to a leading smartphone manufacturer. The customer
signs six leases to meet strong increase in online
smartphone sales throughout China.
StarHub has become the first telco to bite the 4G bullet,
saying that it will start charging mobile subscribers $2.14
per month for using its 4G service in June this year.
Currently, all three telcos - StarHub, SingTel and M1 - offer
4G access as a free value-added service (VAS) to their
mobile subscribers. A higher "usual price" of $10.70 per
month also looms, as the monthly $2.14 fee is pegged as a
"promotional rate" on StarHub's website. SingTel and M1
also cite a monthly subscription of $10.70 as their usual
price.
Natural Cool Holdings has entered into an agreement for
the sale of the Group’s property located at 20 Benoi
Crescent for S$26.5m. The group is expected to book a net
gain of S$6.15m from the sale.
Singapore's non oil domestic exports fell 6.6% y-o-y in
March, after rising a revised 8.9% in February, because of a
decline in shipments of both electronics and non-electronics
goods. The figure is below market expectations for exports
to be unchanged. On a m-o-m basis, exports fell 8.9% in
seasonally adjusted terms after expanding 7.0% in February.
The market projected a 3.4% contraction. Shipments to
China, the biggest export destination, rose 16.1% y-o-y
compared with a 35.5% rise in February. Exports to the
European Union, however, fell 27.8% after rising 3.4% in
February and shipments to the US fell 1.8% after a 22.3%
increase. Electronics exports declined 16.1% compared with
a 3.7% decline in February while non-electronics shipments
fell 2.4% compared with a 15.0% rise. Pharmaceutical
exports fell 44.6% after growing 21.7% in February.
In property news, cooling measures hit Prince Charles
Crescent tender. Bids for the 99-year residential site were
much lower than those for its neighbour, sold two years
ago. Parcel B got a highest bid of $463.1m or $820.65 psf
ppr, a sharp drop from the $516.3m or $960.28 psf ppr
that its adjacent Parcel A site received two years ago. The
highest bidder for the Parcel B site was a partnership
between UOL Venture Investments and Kheng Leong, which
plans to develop a 24-storey project with about 750 units.
China’s economy grew 7.4% y-o-y in the first quarter, the
slowest pace of expansion since the third quarter of 2012.
Officials at the statistics bureau attributed the slower firstquarter
growth data to weak external demand - affected in
part by the severe US winter, a struggling real estate market
and structural changes.
U.S. stocks rose as earnings for Yahoo! Inc. topped
estimates and March industrial production gained more
than forecast (actual +0.7% m-o-m, consensus +0.5%).
Meanwhile, FED Chair Janet Yellen told investors to pay
attention to shortfalls in both inflation and the jobless rate
for signals on the FOMC’s decisions on the policy rate. She
added that the Fed has a “continuing commitment” to
support the economic recovery. Yahoo posted 1Q earnings
of 38cts/share, beating consensus by 1ct. Sales also beat
projections. Bank of America swung to a quarterly loss after
settling claims on mortgage bonds. After the bell, Google’s
Class C shares sank 5.7% reporting sales that fell short of
estimates as advertising prices declined. IBM shares lost
3.5% in after-hours trade after it reporting a decline in
Singapore
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