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SIN : MARKET PULSE: Retail REITs, ASL Marine, ComfortDelgro, CSE Global, ECS, Goodpack, Golden-Agri, Genting, SingTel, Swiber (14 Nov 2012) : OIR Inbox  | | | |
MARKET PULSE: Retail REITs, ASL Marine, ComfortDelgro, CSE Global, ECS, Goodpack, Golden-Agri, Genting, SingTel, Swiber
14 Nov 2012
KEY IDEA
RETAIL REITS - Upgrade to OVERWEIGHT
We are upgrading retail REITs from Neutral to OVERWEIGHT. We believe that operational performance for the retail REITs will remain resilient, given
the stable or positive retail property outlooks for Singapore, China, HK and Indonesia. The P/B of 1.07x that the retail REITs (local and overseas)
are trading at is the same as that for the overall REITs sector. We think that a premium relative to the sector average would not be unreasonable
given that retail REITs' distribution yields are expected to show the best improvement between the current year and forward year among all the three
major REIT subsectors, climbing from 5.5% to 5.9%. Our top picks among retail REITs are FRT [BUY, FV: HK$6.63] and SGREIT [BUY, FV: S$0.84]. (S-REIT
Team)
MORE REPORTS
ASL Marine: Good operational performance in 1QFY13
ASL Marine (ASL) reported a 7.1% YoY rise in revenue to S$89.0m and a 15.7% increase in net profit to S$9.8m in 1QFY13, such that net profit
accounted for 23.2% of our full year estimates, in line with our expectations. The group saw a significant increase in gross profit margin in 1QFY13
(24.8%) compared to1QFY12 (11.5%) and 4QFY12 (15.3%), driven by better performance across all three business segments. Meanwhile, ASL also announced
that its subsidiary will acquire all the shares of Vosta LMG International B.V. for 5.1m euros (S$8.0m). Vosta is well-known in the dredging
industry, being an established company with more than 140 years of history. ASL’s shipbuilding order book from external customers stood at S$573m as
at 30 Sep 2012 with deliveries up to 2Q14. Business operations remain healthy, and the group is well positioned to secure orders in a recovering
offshore support vessel market. Maintain BUY with S$0.82 fair value estimate. (Low Pei Han)
ComfortDelgro: Potholes not an issue
ComfortDelgro Corporation Limited’s (CD) 3Q12 results exceeded consensus estimates (revenue -2.8%; PATMI +13.9%). Revenue grew 2.7% YoY to S$900.8m
while a smaller than expected increase in operating expenses saw operating profit improve by 2.8% YoY to S$116.8m. As a result, PATMI rose 5.4% YoY
to S$72.8m. While pressures on operating expenses are expected to remain on increasing staff costs and higher repair and maintenance work, we deem
these pressures to be manageable in light of the fuel hedges in place for FY13. Similarly, although the Group will face operating challenges in
certain key markets i.e. Australia, China, we remain confident in management's ability to navigate these bumps along the road. Raising our FY13
forecasts accordingly, our valuation increases from S$1.53 to S$1.60. Maintain HOLD. (Lim Siyi)
CSE Global: Turnaround story intact
CSE Global’s 3Q12 net profit to shareholders decreased by 15% YoY to S$10.8m due to (i) lower margin onshore greenfield work in the USA and (ii)
lower software licensing fees in the weak UK market. Despite the setbacks, we feel that CSE’s turnaround story remains intact. The onshore
greenfield projects are unlikely to hurt further as only a small portion remained in its order-book. Activity in the offshore segment is now gaining
momentum and this should translate into more higher-margin jobs over the medium term horizon. The previously troubled CSE Transtel is doing well
with improved earnings of S$1.8m in 3Q12 (2Q12: S$0.7). Its balance sheet is also stronger now than compared to a year ago. Meanwhile, we updated
our model for 3Q12 results and revised our FY12F-13F earnings by about 10% downwards. As a result, our fair value estimate eased to S$0.99
(previously S$1.09). Maintain BUY. (Chia Jiunyang)
ECS Holdings: Core PATMI beats expectations
ECS Holdings (ECS) reported a 8.6% YoY decline in its 3Q12 PATMI to S$8.3m on the back of a 9.5% fall in revenue to S$897.3m. Adjusting for
exceptional items, we estimate that its core earnings rose instead by 8.3% YoY to S$8.7m, which beat our expectations. We see positives from major
new vendor product launches in 4Q12, but the combination of the lacklustre macro economy, competitive pressures and supply constraints could limit
the growth opportunities for ECS. Looking ahead, ECS would place stronger emphasis on its higher margin Enterprise Systems segment. We raise our
FY12F core earnings forecast by 3.5% but retain our FY13F projection. Rolling forward our valuations on ECS to 5.8x FY13F EPS, we derive a higher
fair value estimate of S$0.56 (previously S$0.52). Maintain BUY on cheap valuations, with the stock trading at FY13F P/NTA of 0.48x. (Wong Teck
Ching Andy)
Goodpack Limited: Synthetic push
Goodpack's 1Q13 results came within our expectations: revenue rose 10.9% YoY to US$48.4m while operating profit gained 13.4% YoY to US$17.2m after
overcoming a slight increase in operating expenses. Although financing costs for the quarter almost doubled to US$2.4m following an increase in
borrowings, PATMI still came in 9.7% YoY higher to US$13m. Goodpack's good start to FY13 came on the back of a continued strong showing within the
synthetic rubber segment, and we believe that this segment will persist on its growth trajectory with support from the automotive space and from key
customers such as Lanxess. Our fair value estimate remains unchanged at S$1.85 and we maintain our HOLD rating. However, given the counter's 9.3%
appreciation since our last report, we urge profit-taking for investors, and re-enter closer to S$1.80. (Lim Siyi)
Genting Singapore: Downgrade to HOLD with S$1.33 FV
Genting Singapore (GS) saw lower revenue and earnings in 3Q12, affected by lower casino business and also start-up costs for its new West Zone
attractions. 9M12 revenue fell 11% to S$2159.4m, or 62% of our full-year forecast, while reported net profit fell 32% to S$515.5m; estimated core
earnings slipped to S$598.6m, meeting 62% of FY12 forecast. To account for continued near-term pressure on margins, we are scaling back our
forecasts. We also scale back our DCF-based fair value from S$1.66 to S$1.33. Downgrade to HOLD and would be buyers closer to S$1.15. (Carey Wong)
Golden Agri-Resources Ltd: Weak 3Q12 results; cut to HOLD
Golden Agri-Resources (GAR) reported a weak set of 3Q12 results. Although revenue rose 7% YoY and 25% QoQ to US$1672.5m, aided by a strong
production increase, reported net profit fell 22% YoY and 21% QoQ to US$85.9m; this was also weighed by its China operations turning in a net loss
of US$26m in the quarter. For 9M12, revenue fell 2% to US$4533.2m, meeting 82% of our original FY12 forecast, while net profit slipped 32% to US
$356.0m, or just 65% of full-year estimate. As such, we are paring FY12 net profit by 17%. We believe that the street will similarly be looking to
pare estimates to reflect the weaker-than-expected margins. In addition, we are easing our valuation peg from 12.5x to 10.5x even as we push out to
FY13F EPS from blended FY12/13 previously, and this drops our fair value from S$0.76 to S$0.65. We also downgrade the stock to HOLD and would be
buyers below S$0.60 as before. (Carey Wong)
SingTel: 2Q13 results mostly in line
SingTel reported its 2QFY13 results this morning, with revenue easing 0.8% YoY (but +0.9% QoQ) to S$4572.0m, underpinned by strong operating
performance from Singapore and its regional mobile associates despite the impact of weaker regional currencies. Reported net profit fell 1.6% YoY
and 8.2% QoQ to S$867.7m, while underlying net profit rose 0.1% YoY and 4.2% QoQ to S$886.0m. Revenue fell 1.2% to S$9105.0m in 1H13, meeting 48% of
our FY13 forecast, while core earnings eased 1.3% to S$1736.0m, or 45% of estimate. SingTel has also declared an interim dividend of S$0.068/share,
or a payout of 62% of underlying earnings. We will be dialing into the analyst teleconference later. We will review our Buy rating and S$3.61 fair
value after the call. (Carey Wong)
Swiber Holdings: Proposes interim dividend of S$0.01/share
Swiber Holdings (Swiber) reported a 92.6% YoY rise in revenue to US$265.3m but saw a 45.8% fall in net profit to US$7.3m in 3Q12, such that 9M12 net
profit accounted for about 80% of our full year estimates, thus still within expectations. The strong growth in revenue was driven by progressive
recognition of offshore construction contracts in South Asia, SE Asia and Latin America. Gross profit margin declined from 16.6% in 3Q11 to 14.1% in
3Q12, but was similar to 2Q12’s 14.2%. Meanwhile, net debt to equity rose from 0.89x in Jun 2012 to 1.00x in Sep 2012. As of Nov 2012, the group has
an order book of about US$1.4b. Swiber has also proposed an interim dividend of S$0.01/share, payable by 18 Jan 2013. Pending an analyst briefing
later, we maintain our HOLDrating but put our fair value estimate of S$0.66 under review. (Low Pei Han)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
NEWS HEADLINES
- US stocks ended lower on Tuesday as investors continued to fret about the looming fiscal cliff. The Dow slid 0.5% to 12,756.18, while the S&P 500
Index fell 0.4% to 1,374.53 and the Nasdaq finished 0.7% lower at 2,883.89.
- Business sentiment here has worsened as more firms suffered a contraction in sales and new orders in 3Q12, the BT-UniSIM Business Climate survey
showed. Fewer firms' profits fell in 3Q12, but more suffered larger profit declines. Small firms were the most pessimistic in their outlook.
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