Tuesday, May 27, 2014

DBSVickers Report 27 May 14

Today’s Focus
 PACC Offshore Services Holdings – Initiate coverage with a
BUY recommendation and target price of S$1.36.
We initiate coverage on PACC Offshore Services Holdings
(POSH) with a BUY recommendation and target price of
S$1.36. Being the largest Asia-based provider of offshore
support vessels and the youngest midwater/deepwater fleet of
AHTS/PSV globally gives POSH the competitive edge. POSH’s
strategy is to be market leader in several niches, and with
minimal exposure to competitive shallow water spaces. With
the delivery of two semisubmersible accommodation vessels by
end-2014, FY15 will be a game changer for POSH, whereby
Group’s earnings base is expected to double from that in FY14.
Key near-term catalysts will be: i) Significant charter contract
wins, including a contract for its second SSAV, which should
provide very strong visibility for FY15 earnings; ii) Resolution of
certain near-term issues at its Mexico JV, and iii) Better-thanexpected
earnings delivery.
Cosco has secured contracts worth US$120m to build four
platform supply vessels (PSVs) for a Singapore-based customer.
In addition, the contracts also come with two options for
similar vessels. The vessels are scheduled for delivery
progressively from 2Q16 to 1Q17. Unit price of US$30m per
PSV is similar to the last two PSV orders contracted with this
customer in Feb14. The latest wins lifted Cosco's YTD orders to
US$521m, but still lagging behind peers and our expectations
as it only forms 21% of our full year assumption. While Cosco
is one of the leading offshore yard in China, near term earnings
remain vulnerable to cost overrun issues. Maintain FULLY
VALUED and target price of S$0.69.
Mapletree logistics Trust (MLT) acquires its ninth property in
Korea for a total consideration of KRW 25.5bn (S$31.2m). The
3-storey, 25,600 NLA property is a newly completed warehouse
located in a prime logistics hub in Korea. At an initial yield of
8.3%, the property is expected to be accretive to earnings. We
expect MLT to fund this acquisition fully by debt – thus gearing
is expected to increase marginally to 33.8% vs 33.3%
previously. Our earnings estimates are maintained given that
we have previously priced in S$100m worth of acquisitions in
our estimates. Maintain BUY, target price S$1.20.
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  3,282.9 4.9 0.1
ST Small Cap  551.7 3.4 0.6
Hang Seng  22,963.2 (2.7) (0.0)
HSCEI  10,126.5 5.4 0.1
HSCCI  4,308.0 (9.1) (0.2)
KLCI  1,862.8 (6.4) (0.3)
SET  1,388.3 (8.5) (0.6)
JCI  4,963.9 (9.1) (0.2)
PCOMP  6,790.4 (20.9) (0.3)
KOSPI  2,010.4 (6.8) (0.3)
TWSE  9,036.1 27.9 0.3
Nikkei  14,602.5 140.4 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$bn) 611
Total Daily Vol (m shrs) 1,816
12m ST Index High 3,406
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
26 May
Target Price
(S$)
ComfortDelgro Buy 2.310 2.50
Global Logistic Properties Buy 2.810 3.42
Mapletree Greater China
Commercial Trust
Buy 0.905 1.02
Thai Beverage Public Buy 0.605 0.68
Stock Picks – Small Cap
Rec’n Price (S$)
26 May
Target Price
(S$)
Vard Holdings Buy 1.075 1.21
Nam Cheong Buy 0.385 0.47
Centurion Corporation Buy 0.740 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
Thakral Corporation has signed agreements with a private
Australian developer, as capital partner for a mixed
development property project in Brisbane, Australia. The
project is branded FV (the “Project”). It is located in
Fortitude Valley, Brisbane, which over several stages, will
comprise up to 950 apartments and 5,500 sqm of retail plus
car parking. The Group has agreed to invest up to A$46.2m
for the Project.
China Essence Group expects to register a net loss for FY14,
mainly due to low potato yield as well as the starch yield,
and also high finance and operating expenses.
A surprise production cutback by a semiconductor player
here has ended two consecutive months of double-digit
expansion in Singapore's factory output. Industrial
production slowed in April to grow 4.6% y-o-y, but still
slightly better than market consensus of 4.3% growth.
Electronics production fell 8.8% y-o-y, mainly due to an
11% contraction in the key semiconductors segment, which
accounts for one-fifth of all manufacturing output.
Excluding the volatile biomedical sector - which, with an
expansion of 23.8%, was the main driver of growth -
output would have fallen 0.7% y-o-y. Apart from the
electronics sector, all other manufacturing clusters -
biomedical, chemicals, precision engineering, transport
engineering and general manufacturing industries - posted
year-on-year increases in output. On a month-on-month
basis, industrial production decreased 4.7% in April.
Excluding biomedical manufacturing, output would have
fallen by a larger 7.3%.
The Housing & Development Board (HDB) is set to launch
more projects in Tampines North, Punggol Matilda, and
Bidadari regions - the three new towns that were identified
for further development under the Draft Master Plan 2013.
In the second half of this year, housing projects will be
launched in Tampines North and Punggol Matilda, followed
by Bidadari in the second half of 2015. These follow two
housing projects in Punggol Matilda - Matilda Edge and The
Verandah@Matilda - which were launched in a build-toorder
(BTO) exercise last September. Work on the
developments for the three housing areas has started on the
ground. When fully developed, they are expected to provide
about 40,000 new homes for Singaporeans, HDB said.

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