Singapore Stock Market News

Straits Times Index - Breakout caution required

noreply@blogger.com (StockFanatic) — Wed, 01 Feb 2012 02:40:00 +0000

The Straits Times Index has moved above the upper edge of the rounding top pattern. This is a strong rebound from the support area near 2700. It’s a rebound behavior that is seen in other markets and it signals the potential for a solid rally. It is too early to know if this is the beginning of a significant trend change. The fast rallies continue to provide great opportunities for fast traders.

We continue to treat this as a whipsaw market with fast rallies and fast retreats. It is most suited to derivative trading where returns can be leveraged over a short period. This is not a market suitable for trend trading.

The intraday market volatility is high. We take a cautious approach for case study purposes at this time. This means tight stop loss conditions.

The key conclusions:
1) Up trends become very unreliable
2) Trend breakouts collapse quickly when they fail
3) Volume backed rallies fail quickly
4) Average profit targets are small, around 10% to 15%
5) Momentum is king

Source : Daryl Guppy

Baltic Shipping Index - a barometer of economic activity

noreply@blogger.com (StockFanatic) — Tue, 31 Jan 2012 05:50:00 +0000

Chart 1

As you can see (chart 1) when you look at the 90 day correlation between the Baltic Index and the MSCI Global stock market index it is not unusual for it to negative.

The theory is that the Baltic shipping index is a barometer of economic activity and therefore a guide to growth and therefore should be reflected in stock markets which rise when growth does.

As chart 1 pointed out the Baltic has fallen sharply recently while stocks have been rising. So does this drop foreshadow a decline in stock markets?

The simple answer is yes, it probably does. As you can see the correlation with the world’s stock markets is negative and has room to move lower but is getting to a level where the downside is limited.

Chart 2

You can see from chart 2 that there are lags between MSCI Global stock market moves and the Baltic with the Baltic tending to lead the markets. This makes perfect sense if you think about it for a moment.

So beware, the background technicals on many of these markets still point to the downside on a longer term basis. This latest dive in the Baltic can only underscore that view.

Source : Reuters Market Technical Analysis

Tiong Woon lifts in Myanmar and South East Asia

noreply@blogger.com (StockFanatic) — Tue, 31 Jan 2012 03:29:00 +0000

Tiong Woon in Singapore has signed two contracts in South East Asia. Under the first contract, it will supply heavy equipment and marine transportation for oil and gas projects in Burma, (Officially Myanmar), and under the second it will supply lifting and transport in Malaysia.

Listed in 1999, parent company Tiong Woon Corporation Holding is a new player in this market, so it is planning a representative office to prospect new business there.

Tiong Woon's wholly-owned subsidiary, Tiong Woon Crane and Transport provides integrated services for the oil, gas and petrochemicals market and specializes in installation and lifting of heavy process equipment.

The contract in Burma/Myanmar partners Tiong Woon Crane Pte with an engineering and project management conglomerate based in India.

The firms will collaborate projects for energy and infrastructure.

Assisting with one of these projects, a pipeline-laying project in Burma, Tiong Woon will provide cranes and marine transport.

The other, Malaysian project contracts Tiong Woon Crane and Transport to work with Malaysia Marine and Heavy Engineering, providing services for heavy equipment and marine transport operations for an offshore fabricator in Pasir Gudang in Malaysia.

Ang Kah Hong (left), chairman and managing director of Tiong Woon commented on the new projects, which will allow the group to purse its five-pronged business strategies to sustain revenue growth.

He said, "We are delighted and thrilled by these business opportunities before us. We will be capitalising on our strengths in heavy lift and haulage. As for Myanmar, it is a new frontier for us, and we are excited to start prospecting for possibilities there.

Ang continued, "Despite the current global economic sentiment, we are still attending to lots of enquiries and are participating in a number of tenders, here and overseas."

The projects begin at the end of 2011 and will remain active until at least the end of 2012.

Read also

CHANGE IN CAPITAL :: RIGHTS ISSUE :: RECEIPT OF IN-PRINCIPLE APPROVAL FROM THE SGX-ST

Trades for the day - Technology stocks; time for a sanity check

noreply@blogger.com (StockFanatic) — Mon, 30 Jan 2012 04:08:00 +0000

Technology sector technical picks - Spurred by positive news flow and Meiban’s potential M&A announcement, interest has returned to small cap tech stocks. We highlight three stocks trading below book that our chartist feels has upside potential on a technical basis.

• Below book + M&A = trading interest. Trading interest has once again returned to tech stocks given the spate of good news from tech companies globally and Meiban’s announcement of a possible M&A transaction. As far as we can recall, the last M&A deal in the tech sector was Beyonics which was bought out at a historical P/BV of 0.53x.

• Top three technical picks. Although we can use Bloomberg data to come up with tech stocks trading below historical P/BV of 0.53x, we have not been able to buy a crystal ball that tells us which of these stocks will eventually see an M&A deal. However, our chartist is able to give us his top three technical buys for these stocks and they are highlighted in the following sections.

1) Miyoshi – Technical BUY

Weekly Chart

• Prices are still in a downtrend but prices have tested the downtrend channel support for the past couple of months. The bulls appear to be able to repel the selling pressure, suggesting that there is a good chance that a rebound could take place here.

• Its weekly MACD is improving while its weekly RSI sports a bullish divergence. We believe that a rebound is likely on the cards as its intra-day indicators also sport bullish divergence signals.

• Only aggressive traders should attempt to buy this stock. The rebound is likely to take prices back up towards S$0.10 and possibly to try to test the upper channel resistance at S$0.12.

2) JLJ – Technical BUY

Weekly Chart

• We see a lot of positives at current levels. Prices appear to have found a bottom after flattening out since September last year.

• The technical landscape is beginning to look appealing with both its weekly MACD and RSI sporting bullish divergences.

• Aggressive buyers should get in to buy now with a stop below S$0.075. We expect prices to rally towards its moving averages around the S$0.109 levels followed by retesting the next resistance at S$0.14.

3) Spindex – Technical BUY


Weekly Chart

• The stock continued to stay below its key moving averages, suggesting the trend is still down. However, we see a slowdown in the selling momentum.

• Looking at its momentum indicators, we see bullish divergence signals on both its weekly MACD Histogram and RSI. Hence, there is a chance that the selling may be coming to an end soon.

• Again, buying on weakness may be a good strategy to adopt here. A stop loss below the recent low of S$0.19 is required though. If the low has been formed, then prices are likely to rebound towards S$0.27 next. The 200-day SMA at S$0.29-0.30 could be the following target.

Year of the black water dragon

noreply@blogger.com (StockFanatic) — Sun, 22 Jan 2012 14:59:00 +0000

CHINESE NEW YEAR has come a little early this year and soothsayers, economists, fortune tellers and strategists are all coming together to give their take on what 2012 will look like.

There are several other views floating about too though. CLSA has just put out its annual Feng Shui Index, which attempts to predict the monthly rise and fall of the Hang Seng Index (HSI) using feng shui principles. The dragon is regarded as a major game-changer, but is also an unpredictable beast. CSLA therefore sees a gradual slide in the HSI till August, when we should see a strong rebound that will begin to taper off in December.

Based on a reading of the five elements – metal, water, wood, fire and earth – CLSA also forecasts that several sectors will have a better year than others. Those with a fairly good prognosis are transport, gaming, cement, property and tourism. Cement, in particular, is likely to fare exceptionally well. Those that might see some trouble are oil and gas, telecoms and Internet, technology and utilities.

If you were born in the year of the rat, 2012 will be a fab year for you, CLSA says. To boost your wealth, put a red object in the south of your home or office. To boost your health, put a music box in the west. “This year promises sterling returns for the quick and the debt-free,” the report says. Also set to have good years: the tiger, rabbit, monkey and rooster. Cows and dogs may need to take a little extra care.

P.S. Wishing all readers a happy and prosperous lunar new year ahead.

Source : Theedge Singapore

In the mood for M&A?

noreply@blogger.com (StockFanatic) — Fri, 20 Jan 2012 03:09:00 +0000

Offshore Marine sector - Following a possible stake sale in STX OSV by its parent and Meiban’s announcement of a potential share transaction that may or may not lead to a takeover, we believe traders will revisit the M&A theme in the offshore marine sector. Companies that the market has in the past “touted” as M&A candidates include Jaya Holdings, CH Offshore, ASL Marine, Technics Oil & Gas and Swissco Holdings. (See price quote below)

• Who else? We used Bloomberg to conduct a simple exercise in which we identified stocks trading below historical book value per share and in a net cash position. From this pool, we then ranked them by their net cash to market cap multiple. A lot of S-Chips showed up in the list which is probably not surprisingly. What’s interesting though is that Hong Leong Finance (market cap of US$762m) and Hong Leong Asia (market cap of US$492m) are both trading below book value. (Read Consolidated list)

Source : CIMB Research

Noble Group - Keep the faith; sugar to lead earnings recovery

noreply@blogger.com (StockFanatic) — Thu, 19 Jan 2012 02:49:00 +0000

Noble Group - stock idea of 2012: In spite of concerns about (i) volatile macro environment and (ii) certain banks looking to scale back / restrict commodities hedging financing (e.g. French banks), we remain positive on Noble Group’s likely stock performance in 2012 on the back of (i) steady recovery of earnings, in our view (from one-time losses seen in 3Q11), (ii) upcoming catalysts of value unlocking (likely approval of Gloucester - Yancoal transaction) and (iii) compelling valuations.

Earnings recovery likely over the next 2-3 quarters; sugar assets to provide the kicker in 2012E? Sugar is likely to be a key driver of its earnings growth with 21% of incremental operating income in FY12E driven by sugar segment alone. We estimate that (a) every incremental US$10 / ton margin and (b) every incremental one million tons of cane crushed (utilization at ~65% in 2012 with 5 million cane crushing capacity available) would potentially add ~1.4%/2% to FY12 income.

Not too heavy, not too light - “asset-medium” the way to go: We see likely approval of GCL-Yancoal merger (US$200 mn gain) as a key catalyst for the stock in next 3-4 months. Moreover, whenever this event comes through, we see it moving towards the “ideal business mix” where Noble (a) does not get too asset-heavy (as this would make it vulnerable to commodity prices), (b) enjoys certain control on asset (including marketing rights), and (c) enables it to maximize RoEs.

Leading supply chain business at nearly 1x P/BV: Noble Group’s stock price was down ~50% in 2011 driven by macro concerns and a surprise 3Q11 net loss. With Noble currently trading at one standard deviation below its historical trading average (only during the GFC did it go below these valuation levels), and with its steady earnings performance and strong liquidity position, we see this as an ideal opportunity to accumulate the stock. Key risks to our PT and rating remain execution risk, a sharp slowdown in China, and a steep decline in the prices of commodities it trades in. (Read full report)

Source : JP Morgan Research

Tanker Shipping - Submerged underwater

noreply@blogger.com (StockFanatic) — Thu, 19 Jan 2012 01:59:00 +0000

The tanker segment seems to be in the worst predicament among the three shipping sectors as almost all the tanker companies are mired in huge losses. There is no relief in sight as we do not expect any major improvements in the tanker market over the next few years.

We continue to rate the tanker sector an Underweight as fundamentals are weak and could deteriorate further. MISC remains an Underperform as the higher losses from the tanker division partly offset the reduced liner losses.

Demand-supply gap to widen
We expect overall tanker rates to continue declining before recovering slightly in 2014. Until then, tanker operators will be in a tight spot. Demand growth for oil is expected to remain weak, at around 1.2% due to the fragile global economy. Given this and the Middle East tension that could choke off oil supply, tanker demand could fall significantly. Not helping matters is the newbuildings that are still entering the fleet. Since the tanker fleet is still relatively young and most single-hull tankers have been scrapped, we can expect fewer demolitions.

High bunker costs sapping profits
Tanker losses are likely to escalate in 2012, not only because of lower rates but also because of higher bunker cost. Despite tanker rates hovering at one of the lowest points in 10 years, bunker is close to the 2008 peak due to high demand from the growing shipping fleet and sustained high oil prices. Should bunker fuel remain elevated, many tanker companies would be under financial stress.

Will US crude oil imports collapse?
Experts are predicting a 66% collapse of crude oil imports by the US over the next 10 years due to declining domestic demand and increases in oil production from shale, Canadian oil sands and offshore sources. This may be the game changer that could put tanker rates in a prolonged slump as the US is the largest single importer of crude oil. (Read full report)

Source : CIMB Research

UMS Holdings Limited - Smartphone has benefited many

noreply@blogger.com (StockFanatic) — Thu, 19 Jan 2012 01:19:00 +0000

• UMS (UMSH SP; S$0.575 - BUY) - Despite an anticipated slowdown in the semiconductor industry, our recent contact with UMS indicates that business is still strong. Catalyst - UMS maintains last year’s 4Q10 DPS of 3cts when it announces 4Q11 results. Maintain BUY, TP S$0.77.

• No slowdown yet. We caught up with UMS CFO recently. Concerns over a slowdown in activities in the semiconductor industry were noted. However, business remains brisk and 1H12 appears alright. This is being driven by strong sales performance for Samsung “Galaxy” series of products which has benefited UMS major customer. Note that Samsung has announced record capex of US$41.4b recently.

• Quarter-on-quarter growth. Earnings momentum remains healthy and we expect 4Q11 (excluding once-off gains) to be better than 3Q11 given rush orders from its major customer. We believe such momentum could continue into 1Q12. Year-on-year though, would not be that strong as FY11 was a good year for earnings at UMS.

• Will UMS beat its record? FY10 was a record for dividends with UMS paying 5cts for the full year. If UMS matches 4Q10 DPS of 3cts (2cts ordinary, 1ct special). FY11 DPS would be a new record of 6cts or 14.1% dividend yield (If you only bought the stock yesterday, the dividend yield would be 7.1%).

• Earnings buffer with recently announced acquisition. Annualised net profit of recent acquisitions amount to S$6.7m. Assuming status quo, UMS could recognise about S$5.6m in profit from these acquisitions which would buffer earnings. There is no customer diversification benefit though as the new acquisitions (detailed below) still serve the same customer. Goodwill from the acquisition will be recognised on the balance sheet and impairment tests will be carried out annually.

• Share price could rally if UMS does announce 3cts DPS for 4Q11 results. Maintain BUY. TP S$0.77.(Read full report)

Source : CIMB Research

SET Index: negative divergence, sell at resistance

noreply@blogger.com (StockFanatic) — Thu, 19 Jan 2012 00:52:00 +0000

Market trends : Last trade, SET Index closed at 1056.54 pts increasing 19.53 pts with 24,031 million baht turnover. The market last trade show recovery sign form buying in energy and banking stock. After pull back to test importance support of uptrend channel at 1038-1040 pts.

Daily: Last trade the SET Index show recovery sign after pull back to test importance support of uptrend channel at 1038-1040 pts. But we see technical indicator show negative divergence. Which the SET Index has chance move down from profit taking has next resistance at 1065-1070 pts. We recommend

sell at resistance has support at 1040 pts.

STRATEGY: The SET Index appear recovery sign with in increasing turnover has resistance at 1065-1070 pts. But technical indicator show negative divergence. We recommend sell at resistance and has support at 1040 pts.

Source : CIMB Research

Goodpack Ltd - Earnings growth remains at risk

noreply@blogger.com (StockFanatic) — Wed, 18 Jan 2012 02:20:00 +0000

Goodpack (GPACK), a logistics player operating the world’s largest fleet of reusable bulk containers, has seen its share price decline by 12% since our downgrade to SELL in August 2011. We expect the underperformance to continue in 2012 as well, as:

1) it remains dependent on a single product (rubber accounts for 87% of sales);

2) in an uncertain macroeconomic environment, a decline in global auto sales will result in lower demand for rubber, which will hurt earnings; and

3) EBITDA margin will remain flat over FY12-14, as logistics cost (40% of sales) remains exposed to rising oil prices. After the recent share price drop, we upgrade GPACK to REDUCE from SELL, but maintain our cautious view on earnings growth. Our unchanged TP of S$1.42 is based on 12x FY12ii EPS.

Decline in rubber demand - the biggest earnings risk: GPACK’s 14% EPS growth over FY11-14 will be driven largely by: 1) 3-5% volume growth in global rubber trade; 2) 2-4% increase in market share in the natural and synthetic rubber market; and 3) 7.5% increase in rubber contract prices over the next three years. Given the weak macroeconomic environment, any decline in global auto sales and subsequent drop in global rubber production/exports, as witnessed during the global financial crisis, present the biggest downside risk to our earnings estimates.

Margins to remain flat: Cost-saving benefits from RFID tagging of IBCs and likely appointment of a global logistics supplier for movement of its IBCs will be visible only after 2-3 years. Despite a 7.5% increase in IBC renewal contract prices over the next three years and the ability to partially pass-through higher fuel costs to customers, significantly large exposure of logistics costs to likely higher oil prices over FY12-14 will keep the EBITDA margin flat at 45%.

Upgrade to REDUCE; TP unchanged: As valuations have eased after the drop in share price, we upgrade GPACK to REDUCE from SELL. Our unchanged valuation basis of 12x FY12 P/E is at a 26% discount to the historical forward P/E of 16.2x and 90% above the 2008-09 low P/E of 6.3x. (Read full report)

Source : IIFL Institutional Equity Research

Yangzijiang Shipbuilding - Bullish break suggests more upside ahead

noreply@blogger.com (StockFanatic) — Wed, 18 Jan 2012 01:33:00 +0000

Closing Price:	Last Market Volume:	52 Week Range:
$1.025	36.9m shares	$0.77 - $2.07

Vital resistances broken. Yangzijiang is likely to see further recovery after overcoming the upper boundary of its 1-year downtrend channel and 100-DMA recently; this was followed by another strong bullish break of the $1 key support-turned-resistance on heavy volume yesterday.

Indicators are bullish. As both the RSI and MACD are still trending higher steadily at the moment, these suggest that the upside momentum is building up now.

Initial resistance at $1.23. We expect the counter to head towards the $1.23 immediate resistance (key support-turned-resistance) in the weeks ahead, with the subsequent obstacle pegged at $1.48 (key supportturned- resistance).

Immediate support at $1. Meanwhile, $1 is now the newly established key resistance-turned-support, with the subsequent base marked at $0.76 (key trough in Oct ‘11).

Note: We currently have a fundamental BUY rating on Yangzijiang with S$1.60 fair value.

Source : OCBC Research

China property - Strength to rise above policy

noreply@blogger.com (StockFanatic) — Tue, 17 Jan 2012 04:43:00 +0000

Given top-down uncertainty, we take a bottom-up view to find the strongest developers

Action: Forget the policy; look at developers’ execution and quality
Investors are looking for property easing, but unfortunately we do not have a crystal ball. Rather than guessing the timetable of policy easing, we are more focused on developers’ execution capabilities and product quality, which are the factors to succeed in the changing competitive landscape. We identify eight criteria to analyse the 12 developers under our coverage in terms of operation, financial, profitability and management execution and we conclude our top picks as COLI and CRL among large caps; Longfor and Country Garden in mid caps; and COGO in small caps.

Catalysts: 5-10% home price correction to trigger easing in 2H12F

While most developers continue to struggle with cash squeezes, local governments also suffer from declining land sales revenue. With increasing financial pressure, we believe local governments will gradually fine-tune their existing policies. We believe a 5-10% correction in home prices would open a window for national property easing.

For 2012, we expect home prices to drop 5% and volume to drop 10%
We forecast 2012 property sales (by value) to decline 15% y-y, with home prices correcting 5% and volume retreating 10% y-y; this takes into consideration the central government's stance on building a ‘harmonious society’, especially prior to the reshuffle of government leadership. For 2012, we expect the mass market to continue to dominate the property market and weigh on ASPs.

Trading opportunity in 1H12F and fundamental buy in 2H12F
In our view, the sector valuation (trading at an average NAV discount of 57% and 6.7x/5.7 2011/12F PE) has been attractive for quite a long time. However, the effects of policy tightening and property-related noises on share price performance continue to outpace fundamentals, weighing on the sector. While property policies are unlikely to be eased before 2H12, we expect 1H12 to see trading being driven by news flow. In our view, 2H12 will offer opportunities for value investors to buy on fundamental strength, and a good possibility of policy easing. (Read full report)

Source : Nomura Research

United Overseas Bank - Bullish break suggests further recover

noreply@blogger.com (StockFanatic) — Tue, 17 Jan 2012 03:42:00 +0000

Closing Price:	Last Market Volume:	52 Week Range:
$16.18	2.6m shares	$14.42 - $21.00

Key resistances broken. UOB is likely to see more upside ahead after overcoming the upper boundary of its 7-month downtrend channel and 50-DMA recently; this was followed by a strong bullish break of the $16 key support-turned-resistance two sessions ago.

Indicators turning bullish. With both the RSI and MACD still trending higher steadily at the moment; these suggest that the upside momentum is building up now.

Initial resistance at $17.71. We expect the counter recover further towards the $17.71 immediate resistance (key support-turned-resistance) in the weeks ahead, with the subsequent obstacle pegged at $19 (support-turned-resistance).

Immediate support at $16. Meanwhile, $16 is now the newly established key resistance-turned-support, with the subsequent base marked at $14.76 (key troughs in Nov ‘11).

Note: We currently have a fundamental BUY rating on UOB with S$18 fair value.

Source : OCBC research

CDREIT likely to deliver the strongest set of numbers; office REITs’ concerns likely priced

noreply@blogger.com (StockFanatic) — Mon, 16 Jan 2012 04:44:00 +0000

S-REITs: 4QCY11 results preview

Latest data from JLL and STB suggest rental weakness across different asset classes in 4Q11, with the exception of hotels where RevPAR in October and November appears to have reached a record high of S$225. We expect CDREIT to deliver the strongest set of numbers amongst the REITs under our coverage in the upcoming results season. While office REITs’ results are likely to show slower lease renewals and higher vacancy, we believe these concerns are well anticipated by the market and hence already priced.

Next week: results, December pre-sales, GLS tender closes

Besides the results, investors are likely to focus on December pre-sales data to be released on Jan 16 as well as the close of two GLS tenders on Jan 17 and 18. Following the Dec 7 cooling measures, we expect last month’s pre-sales volume to show a significant m-m drop. On the other hand, property consultants expect the Sengkang commercial site and the Kovan condo site to draw top bids of S$800 psfppr and S$550-560 psfppr, respectively.

Key news

Some return units to developers, fearing price dip
CDL picks up a third site in China for CNY540mn
Luxury home market faces oversupply
Suburban retail rents expected to drop
HDB offers 3,923 new flats in year's first BTO launch (Read full report)

Source : Nomura Research

Gold Sector Update - Lose the battle, win the war

noreply@blogger.com (StockFanatic) — Sun, 15 Jan 2012 14:42:00 +0000

Buy into weakness. Gold, weighed down by the strong US dollar and easing inflation, came down 15% from its high in September. Yet gold remains one of the best asset classes to own, having advanced 28% YoY in 2011. Recent gold price weakness offers a good buying opportunity as the overall trend is favorable given the lingering sovereign debt crisis, central bank gold purchases and the low interest rate environment. Our top picks within the sector remain Zijin (2899 HK, Outperform) and Zhaojin (1818 HK, Outperform).

Positive industry developments:

• Central banks big buyers of gold. The central banks made a record net gold purchase of 148.0 tonnes in 3Q11. In November Korea purportedly made a purchase of 15.0 tonnes and Turkey 41.3 tonnes.

• Resilient investment demand. As at 11 January 2012, holdings in bullion-backed ETFs amounted to 2,358 tonnes, down only 1.5% from their all-time high on 13 December 2011.

• Rupee recovery to boost gold imports. The Indian government’s plan to boost foreign investment in the retail sector should restore the rupee’s exchange rate, reviving gold imports.

• The Chinese love gold. China’s gold imports from Hong Kong, a proxy for China’s gold imports, surged 20% from October to 103 tonnes in November, breaking the monthly import record for the fifth consecutive time.

Zijin has a compelling re-rating story, on the back of improved reserve accuracy, the settlement of several environmental lawsuits and gold-focused M&A. Investors appear to be undervaluing Zijin’s gold assets. With an implied long-term gold price of US$1,450/oz, it is trading at 7.3x 2012F P/E, comparable to 6.8x for Jiangxi Copper (358 HK, Not Rated), a pure copper play. Our target price of HK$4.90 equals 11.4x 2012F P/E and 2.9x 2012F P/B.

Zhaojin is a pure gold play with strong leverage to a gold price upswing. A 1.0% increase in gold price would support a 1.9% increase in Zhaojin’s 2012F earnings, versus 0.9% for Zijin and 1.5% for China Gold International (2099 HK, Outperform). It offers attractive 2012F ROE of 30% and ROA of 20%. Zhaojin’s target price of HK$16.60 implies 15.6x P/E and 4.7x P/B, based on our 2012 forecasts.

China Gold International is one of the few gold plays trading below book value. Our target price of HK$28.50 places the counter at 14.0x P/E and 1.1x P/B, based on our 2012 forecasts. (Read full report)

Source : CCB International Research

CSE Global - Look out for Australian LNG project win

noreply@blogger.com (StockFanatic) — Fri, 13 Jan 2012 02:34:00 +0000

- Long-term investor increased stake
- 5.3% dividend yield attractive
- Potential catalyst from Australia

Long term investor increases stake

CSE Global’s shares fell by as much as 14% (from end Nov 11) to $0.67 (a 30-month low) in Dec 11, but subsequently rallied to S$0.75 by the end of 2011. Since the start of the year, its share price has also rallied by another 17% to S$0.88. The Dec sell-off was likely due to France-based institutional investor Amundi Group selling down its stake to below 5% (from 5.2%). Almost immediately after, long-term value investor Chartered Asset Management increased its stake to 13.5% from 12.8%. We spoke to CSE Global’s management and understood that there are no changes to its fundamentals. With a greater proportion of its shares held by long-term investors, we believe there is lower downside risk to its share price.

5.3% dividend yield attractive

For a growth stock like CSE Global, we feel that a 5.3% dividend yield is attractive. Our projected dividends are based on the following assumptions: (i) FY12F revenue of S$551m (backed by an order-book of $487m as of Sep 11), (ii) net margins of about 11%, and (iii) a payout ratio of 40%. With the group’s consistent track record in execution and healthy industry dynamics, we see little downside risk to our assumptions.

Potential catalyst from Australia

We think that a potential catalyst could come from the Australia, where LNG projects appear to be finally gaining momentum. CSE Global has been strengthening its position in the country over the past few years and it has a good chance of winning a major LNG contract. Separately, we note that long-term value investor Chartered Asset Management has increased its stake to 13.5% from 12.8% in Dec 11. With a greater proportion of its shares held by long-term investors, we believe there is lower downside risk to its share price. We also find the current 5.4% dividend yield attractive. Maintain BUY with unchanged fair value estimate of S$1.06. (Read full report)

Source : OCBC Research

Singapore Land Transport - Smooth ride or not, it's a captive market after all

noreply@blogger.com (StockFanatic) — Fri, 13 Jan 2012 01:43:00 +0000

 Vehicle population growth set to slow: The Singapore government has plans to curb vehicle growth on the back of limited space for new roads, and intends to reduce the current 1.5% annual growth rate in the upcoming review for the next 3-year phase. This may have the effect of pushing up the already high COEs and further decreasing affordability of car ownership, pushing more commuters to use public transportation.

 Recent taxi fare hike leaves little alternatives: Taxi operators announced fare increases in Dec-2011 following the lead of c.60% market leader ComfortDelgro. With the latest round of fare hikes seeing a meaningful number of taxi users now being caught under “peak hour” (vs. “non-peak” previously) and having to pay significantly more (up to 60% more in some instances), affected users may reduce their taxi usage and either (1) upgrade to car ownership or (2) shift to public modes of MRT and buses (which we believe is more likely).

 Buses not the best answer, for now: The 2008 Land Transport Masterplan has emphasized a hub-and-spoke model in transport planning. Bus services running parallel to MRT lines were to be eliminated, as LTA eventually takes over the role of central bus network planner. Even if this policy intention is now reversed, having new bus services running parallel to MRT lines may not be enough to absorb an increasing ridership load given increased congestion on Singapore roads.

 Captive market for MRT: We think the recent departure of SMRT’s CEO following earlier train service disruptions should help to restore public confidence in the system in terms of accountability. We believe public

transport commuters are a captive market after all, and that MRT ridership will actually increase driven by (1) decreased car ownership affordability, (2) higher taxi fares, (3) inability of buses to further absorb ridership load.

 Prefer SMRT over ComfortDelgro: Notwithstanding potential fines by LTA, we believe SMRT should still see an earnings boost from (1) stronger MRT ridership growth, (2) ramp-up of Circle Line, (3) stabilization of the NSEW lines post investigation/repair from FY13E. We raise our FY13E/FY14E ridership growth assumption to 8%/10% for SMRT, and factor in a worst case fine of S$2 million and higher repair & maintenance expenses, upgrading earnings by 2%/3%. Strong operating cashflow should keep dividend payout on a stable to rising trend. We also think SMRT’s chances of winning either the Thomson Line (2018) or Eastern Region Line (2020) are unlikely to be compromised as we expect SMRT and SBS Transit to be awarded one line each to maintain the competitive landscape. (Read full report)

Read related article
SMRT - Taxi Fare Revision

Source : JP Morgan Research

SATS - Management meeting takeaways

noreply@blogger.com (StockFanatic) — Thu, 12 Jan 2012 02:53:00 +0000

We met with the management of SATS recently to get an update on the business and industry. Key takeaways:

 To the best of management’s knowledge, ASIG, the third (and most recent) entrant at Changi airport, seems to be still on the lookout for its first operating contract.

 The new Marina South ICT might not change SATS’ earnings profile dramatically, and should account for ~5-10% of earnings, on our estimates, from FY13F onwards, but is positive in terms of new revenue opportunities it opens up.

 SATS doesn’t rule out the possibility of special dividend from Daniels disposal proceeds, or it might choose to deploy capital in other ventures.

 Cargo business might only see low single digit y-y growth in 3QFY12F.

 SATS is looking at opportunities in the Middle East (specifically Dubai) and Heathrow.

 TFK performance to moderate slightly in 3QFY12F given 2QFY12 was the peak aviation related quarter in Japan.

Please see details from the meeting below:

The new entrant ASIG has not yet impacted SATS’s market share in the Changi ground-handling business

SATS believes that ASIG, the winner of the third ground handling license at Changi, is yet to secure its first operating contract – SATS has not seen them operating at Changi so far. We note that incumbents such as

SATS and dnata, due to the full suite of services they provide (food services + ground handling, vs ASIG which is only ground handling) enjoy a long-standing relationship with their customers. We believe it is unlikely that a customer will change a service provider just on the basis of price – these customer relationships create strong barriers to entry in the sector.

Marina South ICT opens up new revenue streams which are essential for SATS’s growth

As per management, although earnings contribution from the cruise terminal might not be very material in the near term (not more than 5- 10% of our earnings estimates), it opens up a new non-airline revenue stream for the company.

While operating the ICT, SATS would have multiple revenue channels. For instance, it can derive revenues out of handling cruise liners, as well as ancillary revenues through renting out retail space, advertising space, operating duty free shops, car parking fees etc. SATS, through its subsidiary SFI, also has a prior experience in ship chandling (dealing in special supplies or equipment for ships). SATS might later also look at providing other services like auxiliary police, and possibly laundry. (Read full report)

Read related article

SATS - Turning around?

Source : Nomura Research

City Developments Ltd : SELL - Outlook remains murky; Risks still leaning to the downside

noreply@blogger.com (StockFanatic) — Thu, 12 Jan 2012 02:37:00 +0000

On the backdrop of slower economic growth, lower immigration level and large supply in both public and private housing market, we expect buyers to remain cautious as large completions come into the market. With the recent hard-hitting additional buyer’s stamp duties (ABSD) and new GLS supply, we expect 10-15% correction in residential prices in 2012-2013. All these breed a challenging year ahead for City Developments (CDL), as it has significant domestic exposure, with 34% GAV on Singapore residential and ~5,600 unsold/pipeline units according to our estimates. Maintain SELL with TP of S$8.15 (following Chonqing site win), set at 25% discount to our FY12ii RNAV of S$10.86.

Office Dampeners:

• With the exception of the still-under-construction South Beach development, and two-year old Tampines Grande and Tampines Concourse, ageing office assets constiture the rest of CDL’s office portfolio (26% of GAV).

• We expect CDL’s older properties to suffer a 10-15% rental decline and fall in capital values, as office vacancies rise by 2013-14.

• For the South Beach project, we are forecasting breakeven cost of S$2,341 psf (on net leasable area basis) for office space and S$1,628 psf for residential.

Slower sales expected; Possible wait-and-see stance:

• We expect sales to moderate for CDL’s existing launches (The Palette (525 unsold units), The Rainforest EC (recently launched with 466 units), Hedges Park condominium (166 unsold units), H20 Residences(148 unsold units) etc.)

• We think management may lean also towards a wait-and-see attitude for anticipated launches of the Jean Nouvel and Lucky Tower redevelopment given the recent cooling measures. We also see a more cautious approach to land-banking moving forward, on the back of the more stringent requirement of selling all the units within five years, in order to qualify for ABSD remission for developers.

Little catalyst ahead - Maintain SELL with TP of S$8.15:

• The stock is unlikely to perform as market starts to factor in oversupply concerns, in our view. Maintain CDL as our top SELL with TP of S$8.15 (prev S$8.11),set at a 25% discount to our FY12ii RNAV of S$10.86. (Read full report)

Read also
CIMB Research : City Developments - Adding China risk
Nomura Research : Averaging down

Source : IIFL Instituitional Equity Research

Interra Resources - Another Myanmar play shooting to fame soon?

noreply@blogger.com (StockFanatic) — Thu, 12 Jan 2012 00:45:00 +0000

After recent "hot stock" Yoma Strategic (read related article) revealed its business potential in Myanmar and hence attracted big players attention; its share price has shot up astronomically from 8 cents to 29 cents. (A whopping 260% return in 1.5 months!!) Which other SGX listed stocks also has business dealing in Myanmar?

Looking through the list

Interra Resources Limited - listed on the SGX Catalist, is a Singapore-incorporated company engaged in the business of petroleum exploration and production (“E&P”). The company's E&P activities include petroleum production, field development and exploration.

Since the company inception, it have grown both organically by developing its existing assets and through disciplined acquisitions by seeking attractive acquisition targets across Southeast Asia and Australia.

Today, Interra Resources have established oil and gas interests and operations in various parts of Southeast Asia and Australia. The company portfolio of production, development and exploration assets comprises five contract areas in Australia, Indonesia and Myanmar. The company is also listed in ASX on 2008 Jun 19. (Read announcement)

The company recent SGX announcement

1) 09/01/2012 - MYANMAR DRILLING UPDATE: DRILLING COMMENCEMENT OF CHAUK DEVELOPMENT WELL CHK 1163 (Read report)

2) 05/01/2012 - MYANMAR DRILLING UPDATE: YENANGYAUNG DEVELOPMENT WELL YNG 3242 COMPLETED AS AN OIL PRODUCER (Read report)

3) 03/01/2012 - ANNOUNCEMENT OF APPOINTMENT OF VICE PRESIDENT, OPERATIONS *
(Read report)

Read also - Interra Resources research report

Technical Analysis

1) A very illiquid stock with very low trading activity, stock broke out of its trading range on higher volume 2 days ago (Tuesday 10/01/2012).

2) Recent uptrend - Potential SMA 20 crossover SMA 50 (Bullish short-term signal)

3) Positive Technical Indicators

MACD steady uptrend, histogram bars have returned to the black while RSI is also rising. With the candles also trading above all its key moving averages, thus generating buying interest; stock could still push on higher from here.

4) Facing immediate Resistance

Stock facing confluence of resistance (0.152 to 0.16 region)

1) Stock retreated after touching its 38.2% retracement resistance at 0.154 (see chart left).

2) Resistance at recent high of 0.152 and 0.16.

Summary

Looking at its volume, this stock is very illiquid with very little trading activities. But the recent news on Yoma Strategic could generate some interest in this stock as shown in the surge in vol. for the past 2 days. Nevertheless trade with care - Stockfanatic.

Cosco Corp (S) Ltd : SELL - Payment risks emerge as deliveries approach

noreply@blogger.com (StockFanatic) — Wed, 11 Jan 2012 08:52:00 +0000

The share price of Cosco Corp (S) Ltd (COS), a Chinese ship builder / repairer and offshore engineering player, has halved since our initiation in June 2011, owing to bleak new orders and poor execution. The company faces a similar situation in 2012 - its offshore and marine business faces high uncertainty and increased payment risk, outlook for the dry bulk ship-building segment remains weak, and the ship repair/conversion segment faces stiff competition due to low entry barriers. New order intake of US$2.0bn in 2011 met 95% of our forecast (US$2.1bn); we maintain our new order forecast of US$2.2bn for 2012 and US$2.3bn for 2013. We retain SELL with a target price of S$0.65 based on 11x FY12ii earnings.

Offshore segment faces high uncertainty: COS’s offshore segment is affected by: 1) poor track record (only 2 completions out of 5 major projects since 2006); 2) lack of synergy along with major project delays, as each project is new and different; 3) under-estimation of the complexity of rig-building contracts; 4) rising raw-material and labour costs resulting in offshore segment margin falling to 7-9% vs. management’s forecast of double digit margins.

Risks emerge as order payments are back-loaded: Payments for O&M orders are back-loaded with 20% received as down-payment and the balance 80% received upon delivery. Owners have to arrange for the balance 80% payment upon taking delivery, which requires them to charter the vessel to end-users in order to secure a loan. COS is scheduled for two major deliveries in 2012 (the second Sevan 650 in 1Q12 and a drillship in 3Q12). Sevan 650 has been chartered out by Seven Drilling to Petrobras and thus the final payment looks more assured. However, the drillship owner, DVB Bank Ag, is still looking for chartering opportunities for the vessel; both delivery and chartering currently remain question marks for COS.

Traditional ship repair/conversion/building faces stiff competition: New dry-bulk orders would likely remain weak for the next 2-3 years due to a supply glut. Orders received, post the recent global financial crisis, will have lower margins, as prices were c30% lower than those taken before 2008. The ship repair/conversion segment has low entry barriers and its GP margin has dropped from over 30% three years ago to about 15% currently; this is unlikely to improve in the near term. (Read full report)

Source : IIFL Instituitional Equity Research

Singapore Rig Builders, 2012 Outlook - Overweight

noreply@blogger.com (StockFanatic) — Wed, 11 Jan 2012 08:23:00 +0000

Stay Overweight on robust rig demand; PBR new-builds finally coming through in 1H12?

Sticking with our OW view on Singapore Rig Builders in spite of an uncertain macro environment: With (a) US$100+ oil prices and resilient E&P capex outlook (stocks historically have had a 0.8-0.9 correlation with oil), (b) steadily rising rig day rates, utilization alongside positive outlook by US drillers, and (c) the impending PBR award, we are retaining our OW view on Singapore rig builders. We have a slight preference for KEP over SMM on the back of: (i) KEP being more resilient (defensive) in an uncertain macro environment, (ii) better risk/return profile for Petrobras bid, (iii) higher revenue visibility (18 months for KEP vs. 12 months for SMM), and (iv) cheaper O&M valuations.

Deepwater rigs, production jobs the next focal point; Petrobras orders to finally flow through in 1H12? While we expect to see sizeable deepwater rig wins (40-45% of new orders), we believe we could see a near doubling of our 2012 new order estimates driven primarily by potential Petrobras orders (worth S$5-6 billion which are currently not in our estimates). With Sete Brasil finally placing a semisub order with Keppel's BrasFels at US$809 million (25-35% premium to new-builds) in Dec-11, we see most of PBR–related rigs being ordered in 1H12. Every incremental S$1 billion new order (assumed over 10- year period) adds 7% and 12% to our Dec-12 SOTP based PTs for KEP and SMM, respectively.

“Yet to be contracted” new-builds, Drillship preference and macro uncertainty remain key risks: With 70% of “under-construction” rigs yet to be contracted, we see this potentially slowing order momentum. Drill ships are also being increasingly preferred over semisubs. However, given that: (i) semi-subs and (ii) HS/HE JUs (mainly used in North Sea) are a small share of “global rigs under-construction” and are 65-70% of JPM’s new order estimate, we see limited risk in this regard. Macro uncertainty, however, does remain (which may affect financing although no such fears by drillers till date).

Price target, valuation, key risks: At our Dec-12 SOTP-based PTs, KEP/SMM would be trading at 13.7x/17.7x FY12E P/E and 2.7x/4.1x FY12E P/B. Key risks to our PT remain a steep fall in oil prices and

lower-than-expected order wins. (Read full report)

Source : JP Morgan Research

Tiger Airways - Early sign of recovery?

noreply@blogger.com (StockFanatic) — Wed, 11 Jan 2012 02:37:00 +0000

- Dec 2011 load factor recovered to 83%

- Is it a real recovery or just seasonality?

- Persistently high jet fuel prices

Dec 2011 passenger load factor recovered to 83%

Tiger Airways (TGR) last night reported that its number of passengers flown in Dec 2011 fell 13% YoY to 481k while seat capacity was only 5% lower YoY at 580k. On a positive note, TGR’s passenger load factor (PLF) recovered to 83%. TGR still has to prove the early sign of recovery in Dec 2011 was not entirely due to seasonal effect and it is truly on a recovery path. It is probably too early to buy into TGR, with jet fuel prices stubbornly refusing to return to a more manageable level and without TGR showing a sustained recovery. Thus, we maintain our HOLD rating on TGR, with a fair value estimate of S$0.65/share.

But is the recovery real or skewed by seasonality?
TGR’s Dec 2011 PLF of 83% is impressive, especially when compared to the high 70s it has recorded in recent months. But in 2009 and 2010, TGR recorded 90% or higher PLFs in the usually busier month of Dec. TGR still has to prove Dec 2011 was not a flash in the pan and it is truly on a recovery path. As reference, TGR’s CEO last month told The Straits Times that Tiger Airways Australia is expected to, by the middle of this year, recover back to its pre-suspension activity level of operating 10 aircraft.

Persistently high jet fuel prices mean more losses expected
In 3QFY12, jet fuel prices (JETKSIFC Index) adjusted to SGD averaged 4% higher than in 2QFY12, when TGR recorded a net loss of S$50m. With fuel costs contributing to 40-45% of total expenses, persistently high jet fuel prices are likely to continue depressing TGR’s profit margin. Coupled with its less than optimal PLFs, TGR will most probably remain loss-making in 3QFY12.

Maintain HOLD and fair value of S$0.65
It is encouraging to see TGR showing an early sign of recovering from the grounding of its Australian operations. However, it is probably too early to buy into TGR, with jet fuel prices stubbornly refusing to return to a more manageable level and without TGR showing a sustained recovery. We maintain our HOLD rating on TGR, with a fair value estimate of S$0.65/share, which represents a near all-time low P/B multiple of 1.9x. (Read full report)

Source : OCBC Research

Ezion Holdings (EZI SP; S$0.715) – Broke out on strong volume yesterday

noreply@blogger.com (StockFanatic) — Wed, 11 Jan 2012 01:33:00 +0000

FY11P/E: 8.4x, P/BV: 1.5x

• Ezion Holdings broke out of its bullish flag pattern on strong volume yesterday. This indicates that buying interest has emerged. If we are right, the next upswing is going to lift prices towards S$0.76 and S$0.81 next.

Ezion daily chart

• Technical landscape remains positive. MACD histogram bars have returned to the black while RSI is also rising. With the candles also trading above all its key moving averages, we think the stock could still push on higher from here.

• Risk takers may start to nibble now but be quick to cut loss if the S$0.685 support is breached. Once this level is violated, the stock will likely dwindle towards its moving averages again. A break below the S$0.63 low would suggest that the uptrend from its Oct11 low is likely over.

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Source : Trend spotter / CIMB Research