Shipyards: 1Q14 results preview - Keppel reported a
decent 1Q performance and we expect SMM to be on
track. Yangzijiang could beat market expectations while
Cosco struggles to keep its head above water
Suntec REIT - Delays in Suntec Mall refurbishment.
Downgrade to HOLD, target price cut to S$1.66
1Q14 results preview for Shipyards. Keppel Corp reported a
decent 1Q performance that saw its O&M profits growing 11%
y-o-y with a healthy operating margin of 14.2%.
For Keppel Corp, we are more bullish than the street and
believe that Yangzijiang could deliver a net profit growth of
9% y-o-y to Rmb780m in 1Q14, aided by a 10-ppt reduction in
tax rate following the accreditation of high-tech status for its
new yard in March. This represents 26%/33% of our/consensus
estimates for FY14. We think that peers may have
underestimated its shipbuilding margins. We expect
1Q net profit for Sembcorp Marine is expected to grow 10% yo-
y to S$130m, driven by higher orderbook recognition.
Operating margin is sustainable at around 11%, bolstered by
higher contribution from more profitable repair business and
own proprietary designs.
We have relatively low visibility on Cosco. The group is barely
breaking even with its net margin dipping to 0.5% in 4Q13.
The market is hopeful to see an earnings recovery for Cosco
this year after its massive provisions in FY13, hinging on an
improved shipping market. We project net profit to recover
from S$4.6m in 4Q13 to S$8m in 1Q14.
Our top picks are Keppel and Yangzijiang.
1Q14 results for Suntec REIT in line. DPU was flat at 2.2Scts.
The opening of Phase 2 of Suntec Mall is understood to be
delayed to 2H14 due to engineering issues. Phase 3 remains on
track to complete by 4Q14 and begin operations in 1Q15. As a
result of the updated construction schedules, we moderate our
FY14- 15F DPU by -2 to -3% and also updated our estimates to
account for a larger share base due to the recent placement.
Given limited upside to our revised target price of S$1.66 (Prev
S$ 1.7
, we downgrade our call to HOLD.
US Indices Last Close Pts Chg % Chg
Dow Jones 16,501.7 - -
S&P 1,878.6 3.2 0.2
NASDAQ 4,148.3 21.4 0.5
Regional Indices
ST Index 3,283.9 25.9 0.8
ST Small Cap 549.9 3.5 0.6
Hang Seng 22,562.8 53.2 0.2
HSCEI 9,940.6 35.0 0.4
HSCCI 4,164.9 3.0 0.1
KLCI 1,865.3 (2.1) (0.1)
SET 1,422.7 (0.7) (0.1)
JCI 4,891.1 (2.1) (0.0)
PCOMP 6,731.3 (38.2) (0.6)
KOSPI 1,998.3 (2.0) (0.1)
TWSE 8,945.5 (11.5) (0.1)
Nikkei 14,405.0 (141.3) (1.0)
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$bn) 605
Total Daily Vol (m shrs) 2,314
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
24 Apr
Target Price
(S$)
ComfortDelgro Buy 2.090 2.19
Global Logistic Properties Buy 2.790 3.31
Keppel Corp Buy 10.590 12.60
Stock Picks – Small Cap
Rec’n Price (S$)
24 Apr
Target Price
(S$)
Goodpack Buy 2.310 2.60
China Merchants Buy 0.960 1.32
Pacific Radiance Ltd Buy 1.060 1.20
Nam Cheong Buy 0.365 0.46
Centurion Corporation Buy 0.740 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
Ascendas India Trust (a-itrust) reported a 4Q14 DPU of 1.22
Scts (+11% y-o-y), bringing full year DPU to 4.52 Scts,
slightly ahead of expectations. Aviator and aVance’s third
building are the key drivers to earnings. a-itrust offers stable
organic growth outlook, while the low gearing level opens
up opportunities for acquisitions. Maintain HOLD, target
price raised to S$0.75 (Prev S$ 0.73). The expected
weakness of the INRSGD is likely to cap re-rating
opportunities in the near term, in our view.
Ascott Residence Trust’s 1Q14 results in line. Various
refurbishment plans initiated, which are expected to see
rates increase going forward. Acquisition growth is still a
main catalyst. BUY maintained, target price S$1.33. Ascott
REIT offers a stable growing earnings profile of c.2-3% over
FY13F-15, and its yields of 7.0-7.2% is attractive.
CapitaRetail China Trust (CRCT) reported impressive growth
in 1Q14. The strong 1Q growth was led by organic
expansion and new contributions. We expect earnings to be
even better in 2H with the reopening of Minzhong Leyuan
in May. Maintain BUY, target price raised to S$1.62 (Prev S$
1.56). CRCT offers FY14-15 DPU yields of 7.4-8.1%.
Frasers Commercial Trust’s 1Q14 DPU of 2.30 Scts in line.
Alexandra Technopark operations continue to strengthen,
more upside in store when master lease expires in Aug’14.
Maintain BUY, target price S$1.46. FY14-15F prospective
yields of 6.4%-7.0% remain attractive.
1Q14 earnings for Sheng Siong Group were slightly ahead
on better than expected revenue growth and margin
expansion. We expect growth from existing stores to be
backed by resilient same store sales growth (SSSG) and
improved cost efficiencies. FY14F/FY15F earnings raised by
+6%/+5%. Maintain BUY with higher TP of S$0.76 (Prev S$
0.72).
Metech International proposed placement of up to 160m
new shares at an issue price of S$0.0144 per share. The
placement price represents a discount of approximately
10% to the last weighted average price. The net proceeds
of about S$2.3m will be used to expand its business
operations in US and Asia and for working capital purposes.
Negotiations are under way for a potential sale of Equity
Plaza, a landmark quadrant-shaped office block beside
Republic Plaza in the Raffles Place financial district. Talk in
the market is that listed GSH Corporation and its chairman
and key shareholder, Sam Goi Seng Hui, are teaming up
with a view to acquire the 28-storey office tower. They may
be entering an exclusive due diligence period on the asset,
BT understands. The price is thought to be around $550-
560m, which would work out to $2,177-$2,217 psf based
on the building's net lettable area of about 252,600 sq ft.
Businesses may not face more months of sharp increases in
industrial prices and rents as a huge supply of completed
industrial space - about six million square metres - comes
onstream from now until 2016. While prices and rentals of
industrial space continued to rise in the first quarter, the
pace was significantly lower than the average annual
increase in the past four years, according to data released
by JTC Corporation. The first quarter saw transaction prices
of industrial space increase 3.8% quarter on quarter and
2.5% year on year, compared to an average annual growth
of about 20% in the last four years. Industrial rentals rose
0.4% quarter on quarter and 4.9% year on year, compared
to an average annual growth of about 10% in the last four
years. The quarter saw occupancy rates of Singapore's
industrial property market fall by 0.3 percentage points to
91.6% from the previous quarter as supply outstripped
demand.
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