Thursday, May 22, 2014

OCBC Report 22 May 14

KEY IDEA

Yoma Strategic Holdings: 4QFY14 boosted by fair value gains

Yoma reported 4FYQ14 PATMI of S$6.4m, which dipped 44.9% YoY mostly due to the absence of gains from a bargain purchase recognized in 4QFY13, partially offset by a S$5.2m fair value gain in 4QFY14. Excluding fair value gains, we estimate core FY14 PATMI at S$11.2m, which forms 95% of our full year estimates; this is judged to be in line with our expectations but below consensus. We note there is as yet limited color for the Landmark site acquisition, which is five weeks away from its 30 June 2014 deadline. While management remains confident of obtaining the lease top-up from the Railway Ministry, on which the acquisition is conditional, we see yet another extension of the deadline to be a possibility if more time is needed. Given limited visibility for Landmark’s completion schedule at this juncture, we introduce a 25% discount to the project’s contribution to our RNAV calculation. As a result, our fair value estimate dips to S$0.87 from S$1.00 previously; maintain BUY. (Eli Lee)


MORE REPORTS


Land Transport Sector: Another step towards sustainability

LTA announced last evening that it will restructure the public bus industry to a “Government contracting model” beginning from 2H14 (but implementation to take place only in 2H16 after the expiration of the current Bus Service Operating Licenses on 31 Aug 2016). This is aimed at improving service quality and injecting more competition into the industry. The key implication of this is that revenue risk will now fall under the Government instead of the public transport operators (PTOs). Under this model, bus operators will bid for the right to operate bus services via a competitive tendering process. The Government will own all bus infrastructure and operating assets. Three out of 12 bus packages (~20% of existing buses) will be tendered out starting from 2H14, and the contract length will be five years (can be extended by another two years on good performance). The remaining 80% of buses will continue to be operated by the incumbent operators, and these will also come under the new contracting model when their licenses expire on 31 Aug 2016. Overall, we believe this will enable the PTOs’ bus operations to return to profitability. We expect ComfortDelgro to be a bigger beneficiary than SMRT as the former operates the largest bus fleet in Singapore via its 75%-owned subsidiary SBS Transit (~75% market share) and also has experience operating a gross cost contracting model for its UK and Australia bus businesses. We will be reviewing our recommendations on ComfortDelgro [BUY; FV: S$2.30] and SMRT [HOLD; FV: S$1.25]. (Wong Teck Ching Andy)


SATS Ltd: 4QFY14 results below expectations

SATS’s 4QFY14 results came in below our expectations. Revenue declined 3.2% YoY to S$434.6m, which is 7.9% below our forecast. Correspondingly, PATMI dropped 7.8% YoY to S$42.6m, which is 5.8% below our estimate. Share of after-tax profits from overseas associates/joint venture for 4QFY14 was S$9.9m, 46.5% lower YoY. This was mainly due to the poorer performance of some of the Gateway associates/joint venture arising from lower cargo volumes and higher staff costs. On a full-year basis, FY14 revenue dropped by 1.8% to S$1,786.7m. The 5.2% revenue decline in Food Solutions to S$1,103.6m (mainly due to the translation loss resulting from the weakening of JPY), was partially mitigated by a 4.5% revenue increase in Gateway Services to S$678.1m. FY14 PATMI came in 2.4% lower YoY at S$180.4m, where the underlying net profit from continuing operations was 9.4% lower at S$183.0m. We maintainHOLD but keep our fair value estimate of S$3.35 under review pending a change in analyst. (Yap Kim Leng)

For more information on the above, visit
www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- US stocks rebounded on Wed from the previous day’s losses and ended the session with solid gains, led by advances in the consumer discretionary and energy sectors.


- Singapore has reclaimed the No 1 spot in Asia for overall competitiveness, inching past former titleholder Hong Kong after three years, according to the 2014 IMD World Competitiveness Yearbook.


- Against a backdrop of Chinese developers turning to Singapore to raise funds through bonds, Moody's has revised its outlook for China's property industry to "negative" from "stable".

- Manhattan Resources has entered into an agreement to acquire the entire issued share capital of mining group Singxin Resources Pte Ltd at a price of S$1.0b.


- Thai Beverage expects to continue the momentum of its 1Q14 growth despite current political events in Thailand, its CEO said.

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