Wednesday, June 11, 2014

DBSVickers Report 11 Jun 14

Today’s Focus
 SingTel acquires Adconion and Kontera
SingTel’s mobile advertising subsidiary Amobee, has signed
agreements to acquire Adconion Direct North America and
Adconion Australia (together, Adconion) as well as Kontera
Technologies, Inc. Adconion will be acquired at a valuation of
US$235 million. The consideration payable is approximately
US$209 million, excluding debt. The valuation and
consideration payable for Kontera is approximately US$150
million. Adconion is a cross channel digital advertising company
while Kontera is a digital content intelligence and marketing
technology company.
Mobile advertising is one of the three key areas – the other two
being mobile video and big data analytics, where SingTel plans
to spend S$2bn over the next 3 years. Group Digital business
(mostly mobile advertising) had S$169m turnover in FY14F,
resulting in negative EBITDA of S$170m and negative EBIT of
S$217m. SingTel has guided for 50% rise in turnover at Group
Digital with negative EBITDA to decrease by 20% in FY15F.
Negative EBIT may not decrease due to rising amortization
expenses in our view. One should not expect to see a
turnaround in the business for next 2-3 years as (i) margins and
razor thin due to competition from likes of Googles and Apples
(ii) the business needs bigger scale which further attracts more
customers.
YTD spot CPO prices have averaged 5% below our target for
the year. Our plantation analyst maintains CY14 CPO price
forecast of RM2,790/MT for now, as we believe lower
inventory in 2H14 is price supportive. For Singapore plantation
stocks, our pick is Bumitama Agri with a $1.25 TP.
China’s May CPI picked up to hit a 4-month high of 2.5%,
better than consensus expectation of 2.4%. May PPI fell 1.4%
y-o-y, versus a 2% decline in April and market forecasts for a
1.5% decline. The rebound in the CPI is well under the official
target of 5% for the year. However, the central bank has said
that monetary easing is not an option. The Chinese
government is keen to wean out overcapacity and is worried
about non-performing loans on banks' balance sheets. It has
repeatedly said that it would not introduce aggressive stimulus
measures.
US Indices Last Close Pts Chg % Chg
Dow Jones  16,945.9 2.8 0.0
S&P  1,950.8 (0.5) (0.0)
NASDAQ  4,338.0 1.8 0.0
Regional Indices
ST Index  3,293.8 (11.4) (0.3)
ST Small Cap  559.8 (2.2) (0.4)
Hang Seng  23,315.7 198.3 0.9
HSCEI  10,518.8 112.0 1.1
HSCCI  4,327.4 51.5 1.2
KLCI  1,876.6 12.9 0.7
SET  1,469.2 11.9 0.8
JCI  4,946.1 61.0 1.2
PCOMP  6,778.0 (24.8) (0.4)
KOSPI  2,011.8 21.8 1.1
TWSE  9,222.4 59.6 0.7
Nikkei  14,994.8 (129.2) (0.9)

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$bn) 619
Total Daily Vol (m shrs) 3,100
12m ST Index High 3,305
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
10 Jun
Target Price
(S$)
Global Logistic Properties Buy 2.760 3.42
Mapletree Greater China
Commercial Trust
Buy 0.870 1.02
Thai Beverage Public Buy 0.635 0.68
Stock Picks – Small Cap
Rec’n Price (S$)
10 Jun
Target Price
(S$)
Vard Holdings Buy 1.155 1.34
Nam Cheong Buy 0.380 0.47
Centurion Corporation Buy 0.700 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
US indices halted a 4-day winning streak as valuation
concerns crept back. The S&P500 Index trades at 16.5x
projected earnings, up from a multiple of 14.8x at the
beginning of February. Bloomberg consensus expects profit
for the 500 companies to climb 7.4% in 2014. This is down
from a January projection for growth of 9.7%. On the data
front, U.S. wholesale inventories rose 1.1% in April, better
than consensus estimates for a 0.6% gain. EBay Inc. shares
fell after saying David Marcus will step down as the head of
its PayPal unit to join Facebook Inc. Facebook shares rose as
a result. Meanwhile, RadioShack Corp. shares tumbled after
reporting a wider quarterly loss.

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