Monday, May 5, 2014

DBSVickers Report 5 May 14

Today’s Focus
 Sembcorp Marine - 1Q14 net profit slightly below
expectations; expect sequential improvement in earnings.
Maintain BUY and S$4.80 target price.
We expect May-June to be a consolidation period for blue chips
following the c.300pt run-up from 2960 since beginning
February. The reasons are various: 1) STI’s valuation is currently
at 13.9x (average) 12-mth forward PE level of c.3255. 2) Recent
rally partly fuelled by buying ahead of year-end dividend
payout. But stocks are going ex-dividend this period. That’s one
incentive off the table. 3) Lull period in the month leading to
the FIFA World Cup that starts June 12.
Still we view the anticipated consolidation as a healthy one that
should be contained at 3170, above the 13.12x PE (-0.5SD)
blended FY14/15 PE level. While it is still 2 more weeks before
the current results season ends, there are signs that the
earnings downward revision trend is finally drawing to an end.
The risk of a decline all the way to 13.12x (-0.5SD) 12-mth
forward PE currently at 3120 is now lower.
We see the consolidation ending by end-June and the STI
heading to 3370 by end-Sept and 3450 or higher by year-end,
peg to current 13.9x (ave) 12-mth forward PE forecast.
Sembcorp Marine’s 1Q14 net profit slightly below expectations
on slower orderbook drawdown; EBIT margin held up at
11.1% q-o-q. Brazil yard on track; south quay to be ready to
take on integration work for first drillship in July. We expect
sequential improvement in earnings. Maintain BUY and S$4.80
target price. SMM is a pure play in the offshore & marine sector
with strong EPS CAGR of 15% in FY13-15F.
Tiger Airways Holdings is sinking deeper into the red. Core net
loss of c.S$45m, plus impairments and provisions totaling
c.S$51m in 4QFY14. Poor load factors (- 9ppt y-o-y to 74%)
coupled with weak yields (-16% y-o-y) and higher unit costs
(+2.2% y-o-y) resulted in a very disappointing quarter overall.
In addition, associates in Australia and Indonesia continued to
be loss-making. Decline in both load factors and yields amid
industry overcapacity deals double whammy; desperate
measures to manage capacity growth are in place now. Further
US Indices Last Close Pts Chg % Chg
Dow Jones  16,512.9 (46.0) (0.3)
S&P  1,881.1 (2.5) (0.1)
NASDAQ  4,123.9 (3.6) (0.1)
Regional Indices
ST Index  3,252.6 (12.2) (0.4)
ST Small Cap  542.8 (0.9) (0.2)
Hang Seng  22,260.7 126.7 0.6
HSCEI  9,802.5 22.7 0.2
HSCCI  4,163.6 (4.3) (0.1)
KLCI  1,869.1 (2.4) (0.1)
SET  1,421.5 6.5 0.5
JCI  4,838.8 (1.4) (0.0)
PCOMP  6,743.0 35.1 0.5
KOSPI  1,959.4 (2.3) (0.1)
TWSE  8,867.3 75.9 0.9
Nikkei  14,457.5 (27.6) (0.2)

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$bn) 608
Total Daily Vol (m shrs) 1,534
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
2 May
Target Price
(S$)
ComfortDelgro Buy 2.070 2.19
Global Logistic Properties Buy 2.810 3.31
Keppel Corp Buy 10.600 12.60
Stock Picks – Small Cap
Rec’n Price (S$)
2 May
Target Price
(S$)
Goodpack Buy 2.390 2.60
China Merchants Buy 0.970 1.32
Pacific Radiance Ltd Buy 1.055 1.20
Nam Cheong Buy 0.355 0.46
Centurion Corporation Buy 0.705 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
losses loom in FY2015 with no significant turnaround in
sight. We expect the Singapore operations to remain in the
red in the near term unless yields jump significantly, which
seems unlikely given slowing passenger traffic growth at
Singapore Changi Airport. Maintain FULLY VALUED with
lower target price of S$0.35 (Prev S$ 0.44).
Geo Energy Resources expects to report a lower profit in
1Q14 as compared to the corresponding period in 2013.
The Group continued to experience weak coal demand and
a downward trend in global coal prices.
ST Engineering announced that its land systems arm, ST
Kinetics, has secured a new contract worth S$100m from
SMRT Buses for the supply of 40 MAN A24 articulated
buses and 332 MAN A22 12-metre buses. Delivery of the
buses is expected to begin in second half of 2014 and to be
completed by end of 2016. ST Kinetics has to date delivered
402 MAN A22 12-metre buses to SMRT Buses since 2011.
Sim Lian Group has been awarded a contract of $88m by
Housing and Development Board for proposed building
works at Jurong West. The contract comprises the
construction of 5 blocks of residential building with 528
dwelling units, 1 multi-storey carpark and other communal
facilities. The contract period is 36 months.
Loyz Energy has successfully completed its purchase of
stakes in three onshore petroleum concessions in Thailand.
Its 20% stake in 3 Thailand onshore concessions will see
immediate returns and positive cashflows, effective April
2014. Gross production rate rose from 1,200 bopd in
February 2014 to 3,000 bopd in early April 2014, and is
expected to surge to 4,000 bopd by May 2014. Growing
recurrent income from these producing fields will enable the
Group to invest in other strategic concessions.
Growth in China's services sector quickened slightly in April
as the purchasing manufacturing index (PMI) for the
industry edged up to 54.8 last month as compared with a
reading of 54.5 in March. The mild improvement in the
services sector mirrors a separate PMI survey out on last
Thursday that showed growth in China's factories picking
up slightly last month. But the PMI poll of Chinese factories
was marred by a sharp fall in export orders, clouding the
outlook for a stumbling economy.
US April non-farm payrolls registered a 288k gain
(consensus 218k), the biggest upside surprise since February
2012. At the same time, the unemployment rate dropped to
6.3%, the lowest level since September 2008. This bolstered
optimism that the US economy is gaining back its
momentum following the cold winter. Still, US markets gave
up early session gains to end lower on concerns about
escalating tensions in Ukraine.

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