Towards Financial Freedom
DBSV S'pore Wired Daily 3 September 2012
Today's Focus
Hi-P - 50% expansion shows confidence. Maintain BUY, TP raised to S$1.06.
SembCorp Marine - Earnings on recovery mode. Maintain BUY and TP S$5.85.
September should turn out to be a choppy month for equities as markets brace for several key events that include the ECB and FED policy meetings, Germany's ruling on the ESM legality and the troika's assessment of Greece reform efforts. FED chairman Ben Bernanke kept stimulus hopes alive at the Jackson Hole summit last Friday. For the STI, we peg a range from 2930 to 3100. Within this range, the immediate support and resistance levels are at 3000 and 3040 respectively.
Hi-P is proposing to invest S$300m in a new manufacturing plant in the Nantong Economic and Technological Development area. This plant will produce electro-mechanical components and modules assembly for both wireless and computing customers. It will be partly completed by 2Q 2013. The planned investment will :1) expand capacity by 50% for future business growth; and 2) allow for integration of processes to optimize cost and improve competitiveness as well as profitability. This plant is expected to contribute to earnings in 2H13. Total borrowings would increase, resulted in a 4% decline in earnings for FY13 from higher interest costs, which is immaterial to our conservative forecast. Maintain BUY, TP raised to S$1.06 (Prev S$0.91) on roll-over valuation peg to FY13.
August was a bumper month for SembCorp Marine, with S$6.1bn added to its orderbook. These have set new records for SMM, with FY12 YTD order wins of S$9.1bn exceeding pre-crisis peaks, and its S$12.6bn orderbook translating to a book-to-bill of 2.6x, extending earnings visibility. On the back of rising rig day rates and tightening rig capacity, the pipeline for potential orders remains robust. Our analyst has raised FY13 order wins assumption to S$5.0bn (prev S$4.0bn); no change to FY12 non-Petrobras order wins assumption of S$5bn. In the near term, we see SMM as a key contender for two harsh environment Cat J jackups for Statoil worth >US$1bn. We expect earnings to bottom in FY12, before recovering 17% y-o-y in FY13F, and 4% in FY14F. The recovery in earnings is expected to commence from 2H12, which forms 61% of our FY12F, buoyed by higher turnover and improved margins. Maintain BUY, TP S$5.85.
Keppel Corp said its unit Keppel Seghers Belgium NV is part of a consortium that has been awarded a waste-to-energy project in Poland worth US$100m. The Keppel unit will execute 49.6% of the project work scope by value and supply technology for the combined heat and power project in Bialystok, Poland. The remaining work will be undertaken by consortium partners Budimex, one of Poland's largest construction companies and another Spanish waste management company. Impact to earnings will be marginal, given the relatively small attributable contract value of c. S$62m to Keppel Corp and relatively long lead time commencing from 1Q 2013, with project completion scheduled for 2015.
Midas Holdings announced that its joint venture company, Nanjing SR Puzhen Rail Transport (NPRT), together with their consortium partners, has won an intercity rail project worth approximately RMB588m. NPRT's share of the contract is approximately 76%. Delivery for this contract is slated to take place from 2013 to 2014 and is expected to contribute positively to the Group's financial performance for the financial years ending 2013 to 2014.
The Development Charge (DC) rates for the period Sep 2012 to Feb 2013 for land for industrial/warehouse use and hotel/hospital use have been raised by a higher 14% and 11% respectively while rates for land for residential and commercial uses are lifted by a smaller 1% and 9% each. Charges for industrial purposes in the Ang Mo Kio/Yio Chu Kang area saw the highest uplift of 23%. In the commercial segment rates for the Farrer park/Syed Alwi/Balestier Rd/Lavender area were boosted by 20%. The residential segment saw the least movement with rates for the non-landed housing land rising only 1%. The latest news is not unexpected as the active industrial strata market had resulted in firm prices for these properties. The slowdown in the residential DC rates growth is also in tandem with the decelerating momentum in the residential prices. This news is likely to have an overall neutral impact on the market as developers have been largely tapping the GLS programme for residential sites while those that have not paid DC for commercial sites may see a slight uplift in development costs.
Bank lending expanded at a slower pace in July as business loan growth continued to slide amid weakening economic sentiments. Bank loans rose 1.3% m-o-m to S$458.3bn at the end of July, below June's 1.7% growth. Over the year, loans expanded by 20%, also down from June's 20.9% climb. Loans to businesses at end-July reached $265.7bn, up 1.2% m-o-m and 23.6% y-o-y. The rise was smaller seen against June's, when business loans increased by 2% from the previous month and 25.4% from the previous year. Contributing to the slowdown in July, loans to firms in the manufacturing, business services, and transport, storage and communications sectors shrank month on month. But lending to the building and construction sector - the biggest business-loan category ' rose 1.1% from the previous month to $72.9bn. Consumer loans displayed slightly more stability in growth. They reached $192.6bn at end-July, rising 1.3% m-o-m and 15.4% y-o-y. Housing and bridging loans - the biggest consumer-loan category - grew 1.2% m-o-m to $141.3bn.
Sentosa Island is ready to open yet another hotel to keep up with its steady of visitors. The Sentosa Development Corporation (SDC) is releasing a site that can accommodate up to 550 rooms, with a public tender to be called later this month. SDC said the new hotel will be part of a belt of colonial buildings which have been transformed into heritage hotels. Currently, the belt consists of Capella Singapore, Amara Sanctuary Resort and Movenpick Hotel.
China's official factory purchasing managers' index fell to 49.2 in August from 50.1 in July. It marked the lowest reading since November 2011. The market had expected August official PMI to slip to 50. A flash PMI published last week by HSBC plunged to a nine-month low of 47.8 in August, as new export orders slumped and inventories rose, a signal that a persistent slowdown in economic growth has extended deeper into the third quarter.
Source: DBSV
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