Monday, May 26, 2014

DBSVickers Report 26 May 14

Today’s Focus
􀂃 Vard - Wins second newbuilding contract in a week,
robust order momentum continues
We peg STI’s year-end objective at 13.9x (average) FY15F PE
that is currently at 3400 but in the short-term, we remain
watchful of a correction to support at 3170, base 3100. STI’s
current resilience even as it stayed above average PE valuation
the recent dip in bond yields. A dovish FED and macro
uncertainties such as China slowdown concerns and
developments in Ukraine have led to an up tick in interest for
bonds.
While South-East Asian (SEA) equity indices have outperformed
this year, investors should stay watchful of the current
developments in this region. If the political situation in Thailand
and the territorial spat between Vietnam and China worsens,
the strong performance enjoyed by SEA equity indices YTD
could come to a pause.
Vard has secured another significant newbuild contract from
repeat Norwegian customer Island Offshore for the
construction of a high end Offshore Support Vessel worth more
than NOK1bn. This is the second newbuilding contract secured
in a week, following a PSV order from Carlotta Offshore
recently. The value of the contract comes as a surprise, as
typically high end AHTS and PSV vessels built by Vard are below
NOK500m. The vessel will be delivered from Vard Brevik yard in
Norway in 2Q-2016. The contract brings Vard's YTD-FY14
contract wins to above NOK7bn, which represents 50% of our
full-year assumption of NOK14bn. Order win momentum has
been strong this year, in line with recovery in OSV market as
well as continued strength in subsea construction vessels space.
We maintain our BUY call with target price of S$1.21.
Improving earnings execution on a sequential basis hereon will
be the key catalyst.
Vallianz Holdings will be boosting its fleet capabilities with the
addition of platform supply vessels of Ulstein P128 and PX128
designs (New PSVs). The New PSVs are the first of its kind in
the world and charts the start of the modernisation and
diversification for Vallianz’s current fleet of 28 vessels.
Q & M Dental has announced a strategic partnership with IMC
Group (IMC) by way of signing a call option with Heritas Helios
Investments (HHI), a healthcare private equity fund seeded by
IMC and managed by IMC’s wholly owned subsidiary, Heritas
Capital Management, granting HHI the right to call upon Q&M
to issue 63m new shares within a 2-year option period for a
minimum exercise price of S$0.48 per share. Q&M also
announced that QMH, together with Dr Kelvin Koh and Dr
Felicia Koh, sells shares collectively equivalent to 10% of Q&M
to HHI.
US Indices Last Close Pts Chg % Chg
Dow Jones 􀀘 16,606.3 63.2 0.4
S&P 􀀘 1,900.5 8.0 0.4
NASDAQ 􀀘 4,185.8 31.5 0.8
Regional Indices
ST Index 􀀘 3,278.0 12.4 0.4
ST Small Cap 􀀘 548.3 4.5 0.8
Hang Seng 􀀘 22,965.9 12.1 0.1
HSCEI 􀀘 10,121.1 11.5 0.1
HSCCI 􀀘 4,317.1 47.5 1.1
KLCI 􀀙 1,869.2 (5.9) (0.3)
SET 􀀙 1,396.8 (8.4) (0.6)
JCI 􀀘 4,973.1 3.2 0.1
PCOMP 􀀙 6,811.3 (19.3) (0.3)
KOSPI 􀀘 2,017.2 1.6 0.1
TWSE ?? 9,008.2 38.6 0.4
Nikkei 􀀘 14,462.2 124.4 0.9
STI Index Performance
Singapore
Total Market cap (US$bn) 611
Total Daily Vol (m shrs) 1,771
12m ST Index High 3,406
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
23 May
Target Price
(S$)
ComfortDelgro Buy 2.380 2.50
Global Logistic Properties Buy 2.810 3.31
Keppel Corp Buy 10.710 12.60
Mapletree Greater China
Commercial Trust
Buy 0.895 1.02
Stock Picks – Small Cap
Rec’n Price (S$)
23 May
Target Price
(S$)
Pacific Radiance Ltd Buy 1.180 1.20
Nam Cheong Buy 0.380 0.47
Centurion Corporation Buy 0.740 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 3
Sinjia Land announced its joint venture with Real Time
Engineering (RTE) to explore new business opportunities in
clean technologies. The joint venture will leverage RTE’s 10-
year test-bedding partnership agreement with JTC
Corporation under JTC’s CleanTech Park Living Lab
Programme for the installation and operation of a fuel cell
power plant that will generate clean electricity for JTC’s
CleanTech One development in CleanTech Park.
Inflation in Singapore grew at a faster clip in April - rising
from 1.2% y-o-y in March to 2.5% last month, slightly less
than the 2.6% growth that the market had expected. The
jump in April's consumer price index (CPI) was largely due to
a rise in car prices; private road transport costs climbed
5.7% in April, reversing four consecutive months of decline.
The increase reflected the rise in COE premiums -
exacerbated by the low base in April 2013 - and an edging
up of petrol pump prices. With the exception of
accommodation - which moderated further to 1.1% from
1.7% in March, mainly due to a smaller increase in imputed
rentals on owner-occupied accommodation - all other major
categories showed slightly stronger price increases in April.
Core inflation, which excludes accommodation and private
road transport costs, crept up to 2.3% in April from 2% in
March. Services inflation was higher at 2.7% compared to
2.4% in March, led by a pick-up in the cost of holiday travel
and public road transport. Food inflation, meanwhile, rose
to 3.1% from 2.9% a month ago, reflecting steeper price
increases of both non-cooked food and prepared meals.
MAS and MTI said that core inflation is expected to "stay
elevated" at 2-3% in 2014, while headline inflation is
projected to come in at 1.5-2.5%. Car prices are likely to
add "negligibly" to inflation, they said.
International ratings agency Standard & Poor's (S&P) has
affirmed Singapore's sovereign credit strength over the long
and short term with the vaunted top risk-free ratings. S&P
has assigned triple A long-term rating and A-1+ short-term
rating for Singapore's creditworthiness. Even so, the agency
warned that brisk credit growth relative in real terms and
vulnerabilities in a small and open economy present some
risks to Singapore's credit profile.
US markets rose as data showed purchases of new homes
climbed in April. The rise was on very weak volume though,
as about 4.6bil shares changed hands on U.S. exchanges,
the lowest figure for the year. Sales of new U.S. homes
increased 6.4% to a 433k (consensus 425k), the most since
October. Hewlett-Packard shares rose despite reporting an
11th straight quarter of declining sales. This after CEO said
profit will be propped up by cutting as many as 16,000
more employees, on top of 34,000 already announced.

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