Tuesday, June 3, 2014

DBSVickers Report 3 Jun 14

Today’s Focus
United Envirotech - Solid execution to sustain re-rating.
Maintain HOLD on limited upside to target price of S$1.37
Vard - Signs LOIs for two PSVs. Maintain BUY call with
target price of S$1.21
FY14 earnings for United Envirotech fall short of our
expectations. UENV reported FY net profits of S$21m against
our forecast of S$28m. The company sank into the red with a
S$1.2m loss in 4Q14, weighed down by higher staff and
interest expenses which compressed operating margins. We lift
FY15F earnings by 11% to incorporate Memstar, offset by
lower Treatment, target price raised to S$1.37 (Prev S$ 1.31).
FY15 earnings rebound hinge on effective execution and cost
management. Maintain HOLD on limited upside to target price.
Positive industry newsflow could buoy share price but direct
catalysts or strong results would better sustain re-rating.
Vard has signed letter of intent (LOIs) with Nordic American
Offshore for the design and construction of two Platform
Supply Vessels (PSVs), and an option for a third vessel. This
marks Vard’s third and fourth contract wins since the start of
the 2Q, and its eleventh and twelfth newbuilds since the
beginning of 2014. Delivery is scheduled from Vard Aukra in
Norway in 2Q and 3Q 2015. Upon effective of the LOIs by end
of 2Q, we estimate these could add over NOK1bn to Vard's
orderbook. Order win momentum has been strong this year.
Excluding these LOIs, Vard has secured over NOK7bn new
orders YTD-FY14. 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.
SembCorp Marine has secured a long-term Favoured Customer
Contract (FCC) from GasLog LNG Services to provide shiprepair,
refurbishment, upgrading and related marine services
for its managed fleet of 20 LNG carriers. GasLog LNG Services
is a wholly-owned subsidiary of GasLog, an international
owner, operator and manager of LNG carriers. With the
signing of this long-term contract, Sembawang Shipyard can
anticipate the refit of 3 to 5 GasLog's LNG carriers each year.
US Indices Last Close Pts Chg % Chg
Dow Jones  16,743.6 26.5 0.2
S&P  1,925.0 1.4 0.1
NASDAQ  4,237.2 (5.4) (0.1)
Regional Indices
ST Index  3,302.2 6.4 0.2
ST Small Cap  558.5 0.1 0.0
Hang Seng  23,081.7 71.5 0.3
HSCEI  10,249.7 64.5 0.6
HSCCI  4,265.1 (7.7) (0.2)
KLCI  1,864.3 (9.1) (0.5)
SET  1,440.9 25.2 1.8
JCI  4,912.1 18.2 0.4
PCOMP  6,710.4 62.8 0.9
KOSPI  2,002.0 7.0 0.4
TWSE  9,075.9 (33.1) (0.4)
Nikkei  14,935.9 303.5 2.1

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$bn) 616
Total Daily Vol (m shrs) 1,464
12m ST Index High 3,302
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
2 Jun
Target Price
(S$)
ComfortDelgro Buy 2.330 2.50
Global Logistic Properties Buy 2.770 3.42
Mapletree Greater China
Commercial Trust
Buy 0.895 1.02
Thai Beverage Public Buy 0.640 0.68
Stock Picks – Small Cap
Rec’n Price (S$)
2 Jun
Target Price
(S$)
Vard Holdings Buy 1.120 1.21
Nam Cheong Buy 0.390 0.47
Centurion Corporation Buy 0.725 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
Sembcorp Industries strengthens its presence in China’s
Jiangsu province with the signing of a joint venture
agreement to acquire and upgrade an existing wastewater
treatment plant in Lianyungang Lingang Chemical Industrial
Park (LCIP). Plans are in place by the Jiangsu Environment
Protection Department to replicate Sembcorp’s model in
other industrial parks in Jiangsu. The upgrading is targeted
to be completed by end 2015 and the enhanced industrial
wastewater treatment plant will have a capacity of 20,000
cubic metres per day. The total project cost of RMB130m
(approximately S$26.1m) will be funded through a mix of
equity and borrowings.
Longcheer Holdings wishes to inform shareholders that the
Company has been approached by interested persons in
relation to the potential acquisition of certain subsidiaries
within the Group. Discussions are on-going and there is no
certainty whatsoever that these discussions will result in any
transaction.
DeClout is looking to acquire the entire issued and paid-up
share capital of Netipay for a purchase consideration of
approximately $4.72m. Netipay will eventually evolve into a
mobile cloud platform and proprietary payment processing
service provider comprising Indonesia-based PT Max
Interactive Technologies (Maxitech) and Matrix Treasure.
Chip Eng Seng has secured a $165m contract from the
Housing & Development Board (HDB) for construction works
at Sembawang Neighbourhood 1 Contract 10. As at 31
March 2014, the Group’s order book stood at $453m.
Factoring in this latest contract win, the Group’s order book
rises above the half a billion mark once again to hit $618m.
W Corporation announced that it has obtained the
Approval-in-principle (AIP) from SGX for its proposed
S$490.9m acquisition of YuuZoo Corporation. YuuZoo is
one of the world’s leading targeted e-commerce social
networking platform. The proposed acquisition would be
satisfied with the issuance and allotment of approximately
490.9m W Corp shares to existing YuuZoo shareholders,
resulting in a reverse takeover of W Corp (RTO). As part of
the proposed RTO exercise, W Corp will also be undertaking
a proposed share consolidation exercise pursuant to which
10 existing W Corp shares will be consolidated into 1 new
W Corp share.
The International Air Transport Association (Iata) has
trimmed its industry forecast for the second time this year,
projecting a combined net profit of US$18 bn for global
carriers, owing to slowing trade and weaker business
confidence linked to China's economy. This is on the back
of revenues of US$746 bn, which translates to a thin profit
margin of 2.4%. Iata last cut its forecast by US$1 bn to
US$18.7 bn in March, citing higher fuel costs, from an
earlier estimate of US$19.7 bn. However, profitability has
been on an upward trend overall, gaining momentum from
US$6.1 bn in 2012 to US$10.6 bn in 2013 - no small feat
for an industry which has clocked profits in only half the
years since 1945.
US markets finished higher with May ISM manufacturing
showing continued expansion (actual 55.4, consensus 55.5,
previous 54.9). Broadcom Corp. shares rose after saying it
will explore options for its cellular base band business.
General Electric Co. expects about US$10bil of orders from
Latin America this year driven by infrastructure spending
from electricity and clean water to transportation. Attention
is on Europe later this week on expectations that the ECB
will unleash an array of measures to jump start the economy
and ignite prices to confront deflation threat. These include
negative interest rates and conditional liquidity for banks.

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