Today’s Focus
Thailand’s coup adds to market uncertainty
SATS earnings below expectations on weaker yen, outlook
challenging
From a non-coup to now, a coup, the Army chief on 22 May
has detained the leaders of the rival groups who attended the
crisis talks that failed to reach a conclusion. Thailand’s 1Q GDP
had fallen 2.1% q-o-q. The concern is that the situation will
further affect the economy and result in a recession should the
situation be allowed to drag on. The country’s credit rating
could also be affected.
Still, the coup is seen by some to provide short-term certainty
to markets after months of street protests and upheaval that
led to the removal on May 7 of caretaker Premier Yingluck
Shinawatra by the Constitutional Court. Our analysts in
Thailand look forward to seeing the new Cabinet soon,
particularly the Prime Minister and economic ministers, who
will determine the outlook for Thailand for at least the next one
year.
On the other hand, the political situation in Thailand and the
territorial spat between Vietnam and China could spell a pause
at least, to the strong performance enjoyed by South East Asian
equity indices YTD. For the STI, current valuation isn’t a plus
factor as the index trades at slightly above its 13.9x (average)
12-mth forward PE level even as the earnings downward
revision trend continues. It’s a watch and see situation.
SATS’s headline 4Q14 and FY14 earnings of S$43mil and
S$182mil respectively came in slightly below expectations. Food
Solutions revenue declined on the weaker Japanese Yen.
Dividend is also below expectations. No special dividend is
declared but a higher final DPS of 8 Scts is proposed (2H13: 6
Scts). The outlook remains challenging on mild aviation outlook
and higher staff costs. SATS currently trades at 18x FY15F
earnings at +1SD of its historical mean PE. Maintain HOLD and
reduce TP to S$2.95 as we trim our forecasts marginally by 7%.
JES International’s wholly-owned Jiangsu New East Marine
Engineering Co has won contracts to build and deliver 6
Ultramax bulk carriers plus 5 options to build a total of 30
similar carriers collectively worth US$974mil.
US Indices Last Close Pts Chg % Chg
Dow Jones 16,543.1 10.0 0.1
S&P 1,892.5 4.5 0.2
NASDAQ 4,154.3 22.8 0.6
Regional Indices
ST Index 3,265.7 3.9 0.1
ST Small Cap 543.8 1.5 0.3
Hang Seng 22,953.8 117.2 0.5
HSCEI 10,109.6 114.2 1.1
HSCCI 4,269.6 63.9 1.5
KLCI 1,875.1 (1.9) (0.1)
SET 1,405.2 2.3 0.2
JCI 4,969.9 59.6 1.2
PCOMP 6,830.6 68.2 1.0
KOSPI 2,015.6 7.3 0.4
TWSE 8,969.6 107.2 1.2
Nikkei 14,337.8 295.6 2.1
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 608
Total Daily Vol (m shrs) 1,600
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$)
22 May
Target Price
(S$)
ComfortDelgro Buy 2.250 2.50
Global Logistic Properties Buy 2.770 3.31
Keppel Corp Buy 10.670 12.60
Mapletree Greater China
Commercial Trust
Buy 0.890 1.02
Stock Picks – Small Cap
Rec’n Price (S$)
22 May
Target Price
(S$)
Pacific Radiance Ltd Buy 1.160 1.20
Nam Cheong Buy 0.375 0.47
Centurion Corporation Buy 0.730 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
OKP Holdings has won a S$50.6m PUB tender to build the
Stamford diversion canal and is due for completion by 17
December 2017. The contract is expected to contribute
positively to, but has no material impact on, the EPS and
NTA/share of the Company and its subsidiaries for the
current financial year ending 31 December 2014.
U.S. stocks rose as data showing strength in manufacturing
boosted confidence in the global economy. The Markit
Economics preliminary index of U.S. manufacturing
increased to 56.2 in May from 55.4 a month earlier
as output accelerated. An index of homebuilders rallied as
sales of previously owned U.S. homes rose in April. Hewlett-
Packard Co. shares fell after it reported second- quarter
sales that fell short of estimates and announced it is cutting
more jobs.
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