DBSV S'pore Wired Daily 25 February 2013

kiasutrader

Publish date: Mon, 25 Feb 2013, 03:54 PM

Today's Focus

NOL - Worst is over; current freight rates rebounded from 4Q12 lows, further rate hikes planned in March-April. Maintain BUY with S$1.45 TP

The government will announce the FY13 budget later today. This budget will focus more on longer-term challenges than short term risks to the economy. Specifically, to sustain longer-term growth given an aging population and the moderation in labour growth, productivity improvement and fostering inclusive growth will continue to take centre-stage in this budget. Concrete medium term measures to improve public infrastructure will also be introduced to ease some of the current bottlenecks. We expect many measures to help companies offset the transition costs from the ongoing restructuring and to boost productivity. For households, an outright cash handout or a generous special transfer package will be visibly lacking in this budget. The focus this time will be on preparing the baby boomers for retirement, catering to an aging population, as well as skills upgrading to mitigate against the side effects of the restructuring.

Losses in 4Q12 for NOL were higher than expected, but current freight rates have rebounded from 4Q12 lows. We think that the worst is over. After the slide in rates for much of 2H12, liners were able to push through spot rate increases on the mainlanes in late-2012/ early 2013, which means that liners started FY13 on a much better footing than in FY12. Spot Asia-Europe and Asia-US rates are currently about 30% and 20% higher compared to early December 2012. Liners are advocating further rate hikes in March-April. FY13F earnings are likely to benefit from lower cost base and better industry discipline. Maintain BUY with S$1.45 TP (1.2x FY13 P/BV).

4Q12 core earnings for Wilmar came in at US$401m - slightly below forecast. Stronger-than-expected Oilseeds & Grains and Plantations pretax contributions were offset by weaker-than-expected Palm & Lauric and Sugar. Final DPS of S$0.03 was declared, payable on 14 May13. HOLD call maintained. TP adjusted slightly higher to S$3.88 (Prev S$3.81).

Yangzijiang posted a 10% y-o-y decline in net profit to Rmb3.6bn in FY12 (its first y-o-y decline in history), in line with expectations. A final DPS of 5 Scents was declared. Earnings recovery beyond FY14 will hinge on the pace of recovery in the shipping market, rebound in newbuild orders and margins. Maintain HOLD for decent 3-5% yield and inexpensive valuation; TP revised to S$1.10 (Prev S$ 1.20).

EMS Energy is expected to report a loss for its FY12 results as a result of reduction in turnover and gross profit. This was mainly attributable to fewer new signification projects secured in FY2012 coupled with delays in several project schedules, and also provision for doubtful debts and goodwill written-off.

Sinwa is expected to record a loss in FY2012, mainly due to losses from the engineering and charter businesses which has been affected by the slowdown in the marine sector, and also impairment and currency losses.

Property consultants expect development charge (DC) rates - payable for enhancing the use of some sites or building bigger projects on them - to head upwards come March 1 for all major use groups. They cite an appreciation in land values over the past six months. In some cases, the hikes could be in double digits. The average DC rate for industrial use, which saw the biggest hike (among major use groups) of 14.3% in the last revision six months ago, could potentially rise 8-12% this round, according to Jones Lang LaSalle. Colliers International projects an increase of 5-10%, while Knight Frank is predicting the appreciation will be 3-5%.

Source: DBSV

Wilmar Intl (F34)YZJ Shipbldg SGD (BS6)

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