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OSPL - MARKET PULSE: Olam, NOL, Sembcorp Marine (29 Nov 2012) | | | | | |
MARKET PULSE: Olam, NOL, Sembcorp Marine
29 Nov 2012
KEY IDEA
Olam Int’l: Value around S$1.23; maintain HOLD
Olam International Limited (Olam) has issued a comprehensive reply to refute Muddy Waters (MW) findings, dismissing MW’s allegations as “false and
misleading”. Olam also intends to issue another report soon to clarify other issues raised by MW. On the whole, we note that the issues raised by MW
are not exactly new, especially those about negative goodwill and fair value gains from biological assets. But the market could still adopt a pretty
cautious approach even after this, with investors putting in a greater scrutiny on Olam’s financial reports and corporate developments. We think
this may also lead to investors adopting a less “risk on” approach in terms of valuation for the company. As such, we are paring our valuation peg
from 12.5x to 10x FY13F EPS, which translates to a fair value of S$1.44 versus our original FV of S$1.80. While we may still see some near-term
volatility surrounding Olam’s share price as market weighs in on the allegations and rebuttals, value may start to emerge around S$1.23 (FY13F NTA).
Maintain HOLD. (Carey Wong)
MORE REPORTS
Neptune Orient Lines: Boost from collective rate hikes
While NOL’s boost from the positive Chinese PMI data proved to be short-lived, recent data and developments within the industry remain supportive
for the counter. According to the Shanghai Containerized Freight Index (SCFI), average rates are still up on a YoY basis despite continued weakness
in the China-Europe and China-USA routes. In addition, average 4QCY12 bunker fuel prices have also fallen ~3.1% QoQ so far, a positive for operating
margins. On the industry level, a few of the major container shipping lines have planned for rate increases, which could help alleviate the stress
on profitability. This collective effort yields the most encouraging sign for NOL and we remain optimistic that the tacit agreement amongst liners
follows through. Maintain BUY with an unchanged fair value estimate of S$1.38. (Lim Siyi)
Sembcorp Marine: Additional US$806.4m drillship order secured
Sembcorp Marine (SMM) announced that it has secured a drillship contract worth US$806.4m from Sete Brasil for the design and construction of a
drillship based on the former’s proprietary Jurong Espadon design. This is the seventh unit of a series of drillships that SMM has secured since Feb
this year (price is same as earlier drillships), and is scheduled for delivery no later than 3Q16. Given the relatively early delivery date, we
think this may be an order that was originally slated to be built by another Brazilian shipyard that had secured orders from Sete Brasil. Recall
that execution issues have resulted in construction delays at that particular yard, and we mentioned the possibility of SMM securing additional work
likely by the end of this year or early next year. Meanwhile, we expect more work to come. The group has secured new orders worth S$10b YTD,
exceeding our S$9.5b new order estimate. Maintain BUY with S$5.84 fair value estimate. (Low Pei Han)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
NEWS HEADLINES
- US stocks rose sharply on Wed, recovering from an early drop, after comments by President Obama and other top politicians gave investors hope that
a budget deal to avoid the fiscal cliff would be reached. The Dow, S&P 500 Index and Nasdaq all ended 0.8% higher, at 12,985.11, 1,409.93 and
2,991.78, respectively.
- Singapore Grade A office rents have continued to fall this quarter. The average monthly rental value for Grade A office space has fallen by 2-3%
compared to Q3, estimates from CBRE, Jones Lang LaSalle and Colliers International show. All three firms predict Grade A rents will remain flat next
year.
- Keong Hong Holdings' FY12 PATMI more than doubled to S$19.7m, from S$9.4m a year ago, despite a 12% drop in revenue to S$167m. Its gross profit
rose to S$29.4m, from S$13.8m a year ago, due to the completion of higher-margin projects.
- Craft Print International reported an FY12 net loss of S$2.0m, narrower than the S$7.0m loss a year ago, despite a 9.4% fall in revenue to S
$17.8m. Its bottom line was boosted by a S$1.6m gain from the sale of factory buildings.
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MARKET WATCH 29th Nov 2012
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