DAILIES
Uploaded on 
22 Feb 12 Power Bites - Palm reading
Palm reading – Wilmar International released its FY11 results this morning and the numbers were broadly in line with our forecasts as well as consensus estimates. However, its share price has taken a beating (-$0.50, -8.5%) in the aftermath, possibly due to contracted margins reported in 4Q11 for its palm and laurics merchandising and processing segment. The decline was caused by a variety of factors: unfavourable market conditions in China and India, ongoing European financial crisis and the disadvantaged position of Malaysia given new Indonesian export duty structure. There was also a significant drop in the 4Q11 contribution from other income (-US$36m, -60% YoY), arising from a decrease in gains from investment securities, lower fertiliser profits and lower shipping profits. As for future prospects, Wilmar is exploring closer collaborations to meet the growing demand for agricultural products. Noble Group’s share price appears to have been dragged down the same way on high volume, perhaps due to the perception that it has some businesses similar to Wilmar’s. Nevertheless, it should be noted that the group does not have exposure to palm oil (though it has a 51% stake in an Indonesia-based palm plantation under development). Wilmar’s soybean crushing operations in China, where Noble is similarly exposed to, did stage a sharp turnaround to profitability against the same quarter last year, but profit was marginal and margins remained challenging.
22 Feb 12 Sunny Side Up - ARA Asset Management
What’s cooking ARA Asset Management (ARA SP, $1.41, Buy, TP $1.68) – ARA’s FY11 net profit was up 7% YoY to $68.2m, in line with expectations. A higher-than-expected final dividend per share (DPS) of 2.7 cents was declared. This brings full-year DPS to 5 cents and the higher minimum dividend guidance of 5 cents pa is a positive surprise. Near-term catalysts are the potential listing of a RMB-denominated REIT in 1H12 and the final closing of the Asia Dragon Fund II by 1H12. Reiterate Buy with a higher SOTP-based target price of $1.68 (previously $1.65), as we raise our FY12F-13F earnings estimates by 3-10%.
21 Feb 12 Power Bites - Tech stocks in the limelight
Tech stocks take turns to be in the limelight – On several occasions this year, various tech stocks have taken turns to be in the limelight, surprising the market with a strong surge in their share price. Last month, Meiban Group’s share price shot up after the company revealed that it was approached by a potential acquirer. The news also sent the share prices of several other small-cap tech stocks higher on speculation that they could be potential targets as well for consolidation in the sector. Last Thursday, Creative Technology’s share price surged by 71% in a single day after investors learned that it is jumping into the tablet computer market with its own product, HanZpad. The following day, Hi-P International was in the spotlight when its share price soared to a six-month high after a market research report claimed that it could have won a large order from Apple. The company refuted the claim in a subsequent clarification. This morning, it seems to be Broadway Industrial’s turn to be in the limelight. Despite the company reporting a full-year net loss yesterday, the stock was up on high volume today. To be fair, the net loss it incurred was mainly due to unrealised forex charges and one-off impairments. Looking ahead, perhaps the market is finally convinced that this is a short-term blip for the company and that the HDD sector recovery is surely underway. Armstrong Industrial is another tech-related stock that has traded higher in the morning and we do not rule out the possibility of positive surprises or market response when it reports its results next week.
21 Feb 12 Sunny Side Up - OCBC, CapitaMalls Asia
What’s cooking OCBC (OCBC SP, $8.85, Sell, TP $7.50) – While 2011 earnings were flat YoY, underlying trends were commendable, with healthy topline growth (investment income aside), cost containment and growing regional contributions (41% of group pretax with 29% of group pretax from OCBC Malaysia). However, valuations at this stage are not enticing with the stock trading at a prospective 2012 P/BV of 1.3x for a relatively low prospective 2012 ROE of 10.9%. Our target price of $7.50 tags on a P/BV of 1.1x to the stock. CapitaMalls Asia (CMA SP, $1.64, Buy, TP $1.95) – CMA has acquired the remaining 73.71% stakes in three malls from CapitaMalls Japan Fund, in which it has a 26.29% stake. The latest acquisitions demonstrate that management is not resting on its laurels and continues to seek a balance between growth and improving ROEs. 2012 is truly looking like the inflection point for CMA. Maintain Buy with the target price raised to $1.95, pegged at a 20% discount to RNAV.
20 Feb 12 Power Bites - Respite could be in sight
Respite could be in sight – Over the weekend, the People’s Bank of China announced that it will cut banks’ reserve requirement ratio (RRR) by 50bps, effective 24 February, in a bid to fuel lending and sustain economic growth as the housing market cools while the Eurozone debt crisis continues to weigh on exports. The ratio will decline to 20.5% after the cut for most large banks. Data released on the same day showed that China’s home prices in January continued to show signs of cooling, with none of the 70 cities monitored by the government showing any price increases. In fact, 47 cities posted gradual price declines. While Premier Wen Jiabao had earlier reiterated that Beijing will not waver on the real estate controls and its efforts to bring prices down to a reasonable level, the housing data as well as the RRR cut may provide some breathing space as the prospect of further property cooling measures looks unlikely. Nonetheless, as long as the property prices show a gradual and controlled rate of decline, outright lifting of the home purchase restrictions may not happen in the near term, at least not until the 18th Politburo Standing Committee takes office in November this year. Developer stocks in China, as represented by the Shanghai Property Index (SHPROP), have already fallen by some 51% since the last peak of July 2009 on fears of a China hard landing and a property market crash. Such dim prospects are now looking less likely and the SHPROP rose by 1.5% this morning. This should also help to re-rate Singapore-listed developers with China exposure, such as Yanlord Land Group, Ying Li International and even CapitaLand, which has 38% of its assets based in China.
20 Feb 12 Sunny Side Up - Singapore Land
What’s cooking Singapore Land (SL SP, $5.96, Sell, $4.86) – SingLand reported a 51% fall in its PATMI to $330.7m in FY11. Excluding revaluation gains, PATMI would have shown a 5% YoY increase instead to $214.8m, in line with our expectations. More notably, its investment properties marked a 2.5% downward revaluation from 1H11, making SingLand the first commercial landlord to report a decline in capital values. Maintain Sell as the office sector outlook remains challenging. We also trim our target price to $4.86, pegged at a 50% discount to its RNAV.
17 Feb 12 Power Bites - Creative tablet mania
Creative tablet mania – Long-forgotten sound card maker Creative Technology leaped back into the limelight yesterday with a spectacular 71% surge to close the day at S$4.15, its highest trading level since 2010. This came after traders hopped all over the news that it is jumping into the tablet computer market with its own reference design kit and development platform that includes its own Chinese operating system, called HanZpad. With its Chinese characteristics, Creative is initially targeting the China market, especially the education market, although it is not ruling out the possibility of partnering with companies outside China to market tablets based on its development platform. Some of the noteworthy features that stand out about Creative’s tablet design are the ultra light weight of 480g, extreme thinness of 7.95mm and claimed battery life of 22 hours compared to iPad 2’s 601g (Wifi model), 8.8mm thinness and 10-hour battery life. The current incarnation supports Wifi and Bluetooth but does not appear to have 3G connectivity. Prior to this announcement, Creative traded at about 0.8x book value of US$2.44 per share. It has traded at an average P/BV of 0.9x in the past five years. At S$4.61 at the time of writing, the stock is trading at 1.5x book value, more than two standard deviations above its mean.
17 Feb 12 Sunny Side Up - SingTel, Sembcorp Marine
What’s cooking SingTel (ST SP, $3.06, Hold, TP $2.95) – We expect SingTel’s EBITDA margin to remain under pressure for the next few quarters as the telco focuses on building its mobile customer base aggressively in Singapore. While it expects long-term benefits, the costs related to its build-up of mobile device content, as well as subscriber acquisition and retention, are expected to stay high, thus eating into margins. Downgrade to Hold. Sembcorp Marine (SMM SP, $5.28, Buy, TP $5.58) – Sembcorp Marine (SMM) has announced a new order worth US$213m. It is constructing a Pacific Class 400 jack-up rig for customer Safin Gulf. The rig is due for delivery in November, which is less than a year, whereas a jack-up built from scratch takes around two years. Previously, the same class of rig sold for US$192m. As it stands, the contract win itself is positive for SMM, and the news should propel its share price even higher. We maintain our Buy recommendation and target price of $5.58.
16 Feb 12 Power Bites - The black gold
The black gold – Oil prices continued to spike this week after Iran warned that it may suspend crude exports to six European Union countries amid escalating tensions over its nuclear programme. With the stubbornly high crude prices and huge run-up in share prices of big boys such as Keppel Corp and Sembcorp Marine, we believe investor interest may eventually trickle down to other smaller oil and gas (O&G) plays listed on the Singapore Exchange. We highlight two names that have seen active trading today. Ramba Energy announced yesterday that it has been awarded a tender from PT Chandra Asri Petrochemical TBK (CAP) to provide logistics services in Indonesia. The tender agreement will see RichLand, the group’s subsidiary, providing warehousing management and transport services to CAP from March this year. According to management, the initial contract is for a period of three years with the option to extend for another two years. Separately, Interra Resources entered into a sale and purchase agreement early this month with PT Mentari Abdi Nusa to acquire a 49% stake in PT Mentari Pambuang Internasional. The latter holds a 100% participating interest in a production sharing contract with Badan Pelaksana Kegiatan Usaha Hulu Minyak Dan Gas Bumi for the exploration and exploitation of the Kuala Pambuang Block. We understand that the agreement covers an area of 7,946 sq km and is located onshore Central Kalimantan, Indonesia.
16 Feb 12 Sunny Side Up - Ezion Holdings, Genting Singapore
What’s cooking Ezion Holdings (EZI SP, $0.915, Buy, TP $1.35) – Ezion has announced two developments that have validated the positive outlook for the company. First, it has secured another service jack-up contract, and second, it has effected the sale and leaseback of another liftboat to manage its capital for expansion. As a result, its share price has surged and we believe that its discounted ratings should be a thing of the past. We are raising our core earnings forecasts for FY13F and our target price is increased to $1.35. Reiterate Buy. Genting Singapore (GENS SP, $1.705, Buy, TP $2.10, BUY) – Genting Singapore will release its 4Q11 results on 22 February 2012. We expect it to record 4Q11 EBITDA of around $350m bringing 2011 EBITDA to $1.6b (+15% YoY), within expectations. We understand that the mass market segment compensated for slower VIP volume in 4Q11. Going forward, we are upbeat on 2012 post the opening of the Equarius Hotel & Beach Villas and potential expansion into Japan and Mongolia. Maintain Buy with the target price raised to $2.10.
12345678910...