Sunday, June 15, 2014

OCBC Report 16 Jun 14

KEY IDEA

Consumer Sector: Run-up in valuation levels reminiscent of 2H13

We believe regional consumption growth ahead in China and selected ASEAN (Singapore, Malaysia, Indonesia, Philippines and Thailand) economies will be supported by: 1) forecasted 2014 GDP growths in excess of 5% for four of the six countries, 2) retail sales growth outpacing GDP growth as seen in 1Q14, and 3) consumer optimism for four of the six countries. However, the sector indices are currently trading at forward PERs of more than 1 s.d. above their 2-year historical averages, bringing back memories of the sector run-up in 2H13. Hence, we maintain UNDERWEIGHT on the sector and favour consumer staple over consumer discretionary as the former is less vulnerable to excessive sell downs. We continue to like Thai Beverage PLC [BUY; S$0.74], Sheng Siong Group [BUY; S$0.68] and Petra Foods [BUY; S$4.06] but not BreadTalk Group [SELL; S$1.12]. (Yap Kim Leng)


MORE REPORTS



Yoma Strategic Holdings: Adjustments to the Landmark deal

Yoma announced that, instead of acquiring 80% of the Landmark site after the SPA group has extended the master lease to 50+10+10 years (as originally planned), it will initially acquire the site (comprising 2 subplots with remaining leases of 24 and 26 years respectively) with its existing leases with a first payment of US$43.2m. The remaining payment of up to US$38.08m will be paid to the SPA Group if and when the master lease extension to 50+10+10 years is secured in future. SPA is also expected to procure approval, by end Dec-15, from the Myanmar Investment Commission (“MIC”) for the transfer of the site to Yoma, and Yoma’s pro rata development cost for Landmark will be capped at US$40m over this period, in addition to the S$7m already incurred. Should the SPA Group fail the obtain MIC’s approval for the transfer by end Dec-15, it will refund Yoma US$43.2m and all monies disbursed for the Landmark project. To fund this acquisition, Yoma has proposed a 1-for-8 rights issue at 38 S-cents and Serge Pun, the controlling shareholder, has indicated his intention to support the entire rights issue. We will speak with management about the transaction later today and, in the meantime, maintain BUY with our fair value estimate of S$0.87 under review. (Eli Lee)

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


NEWS HEADLINES


- The US stock market finished last week with the biggest losses in two months, snapping the longest weekly rally this year.

- Singapore's unemployment rate inched up from 1.8% in Dec 2013 to a revised 2% in Mar 2014, said the Ministry of Manpower.


- The Monetary Authority of Singapore said it will provide up to 5b yuan (S$1b) in overnight funds to support the growing offshore renminbi market here.


- QT Vascular reported a net loss of US$9.2m for its first quarter ended 31 Mar 2014, compared with a US$4.1m loss the same period a year ago.

- Transcorp Holdings reported a S$10.6m net profit for the half-year ended 30 Apr, a turnaround from a S$931,000 net loss a year ago.

- Oceanus' fiscal first-quarter net loss from continuing operations shrank to 19.1m yuan (S$3.8m) from a year-ago 46.4m yuan deficit.

- A subsidiary of developer Sim Lian has been awarded an S$87.8m contract by the HDB for a project in Sengkang Neighbourhood 3.

- Hengxin Technology has received in-principle approval from the SGX to convert its listing from a primary to a secondary one.

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