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DBSV S'pore Wired Daily 24 June 2013

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Publish date: Mon, 24 Jun 2013, 01:44 PM
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Cosco Corp - Secures contracts for accommodation units

While STI fell below 3100 briefly last Friday, we believe further volatility should only result in a decline that is moderately below 3100 (13.1x or -0.5SD12-mth forward PE) and comfortably above 2915 (12.3x or -1SD 12-mth forward PE).

The root cause behind the current correction comes from the rise in bond yields due to QE3 withdrawal if the US economic sustains recovery. S-REITs and high gearing sectors (e.g. property) are likely to underperform the market given the upward pressure on the risk-free rate. During this transitional period when focus shifts away from yield to growth but broad based growth is still lacking, we are selective in our growth/recovery picks. One group is the O&M stocks within the SMC space given their low single digit forward PE valuation and double digit growth rate in the low to mid teens. Our picks are Nam Cheong, Ezion, Kreuz and Vard. The large cap O&M pick is Keppel Corp. 

Cosco has secured contracts from a Singapore customer for the conversion of two semi-completed accommodation units valued at over US$170m each. The contract for the first unit is effective while the second one shall turn effective within 6 months. The units are scheduled for delivery 24 months upon effectiveness of contracts. Taking into account the first unit that has been effective, Cosco's YTD wins is lifted to US$528m. Management has guided US$2bn order win this year with 90% coming from offshore projects. YTD wins seem lagging, forming only 26% of company's target new order (as well as our assumption). Maintain Fully Valued, TP: S$0.75. 

Property developer Oxley Holdings has expanded its overseas presence again, this time embarking on a joint venture to develop a 12-hectare freehold plot of land in Penang for residential use. It will be entitled to all income generated from the project, including 70% of the total sales of the built-up saleable area of the land.


United SM Holdings intends to make a voluntary unconditional cash offer of 88 cents per share for Guthrie GTS in a move to take the company private. United SM Holdings has a deemed interest representing about 69.15% of the total number of issued shares in Guthrie. The offer price is at a 21.4% premium over the last closing price. According to the offerer, delisting Guthrie would provide United SM Holdings and the company with greater control and management flexibility in utilising and deploying its available resources.

Source: DBSV
COSCO SHP SG (F83)Nam Cheong (N4E)Ezion (5ME)Keppel Corp (BN4)
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