Towards Financial Freedom
DBSV S'pore Wired Daily 26 June 2013
Today's Focus
Yongnam - Secured S$27m contract in HK; slight negative impact from exposure to insolvent contractor Alpine
US stocks rose after data showed May's durable goods orders (actual 3.6%, consensus 3%), new home sales (actual 476k, consensus 460k) and June's consumer confidence (actual 81.4, consensus 75.1) was strongerthan-expected. Comments by a PBOC official that China will keep money-market rates at a reasonable level and seasonal forces that drove it higher will fade also calmed nerves as the overnight repurchase rate fell.
Yongnam has won two new civil engineering subcontracts worth HK$166m (S$27m) in Hong Kong. The two projects are namely the Hong Kong Express Link Central-Wan Chai Bypass Tunnel to be completed by April 2014 and the Shatin to Central Link MTR project due for completion by December 2013. The project value is small in our view and within our project win expectations for the year. No change to our earnings forecast on this event for now.
With regards to Yongnam's exposure to insolvent Downtown Line 2 (DTL2) contractor Alpine Bau GmbH, we estimate this could lower our current TP of S$0.41 by 5% if Yongnam provides for losses. Yongnam has reported that its exposure will be about S$5m (10% of FY13 earnings). Main contractor Alpine Bau GmbH has filed for insolvency and Yongnam is exposed to package C918 of DTL2. The project value is S$25m, started in March 2011 and due to end in 2Q13 to 3Q13. As this project is very near completion, we estimate that writeoffs could amount to about c.S$5m if management chooses to do so. Otherwise, we remain positive as Yongnam is a strong contender for Yangon Airport project. Results of Yangon Airport's expansion project bid are expected to be announced around July. We believe Yongnam's consortium is a strong contender and is one of the front runners. If it wins the contract, the Yangon Airport project could add another S$0.12 to the stock price based on our assessment. Maintain BUY.
Other stocks in our coverage list with exposure to Alpine include Pan United. We assess Pan United's exposure to be <S$3m (<5% of PBT). If we factor in potential losses, impact on target price will be -3.5% from S$1.16 to S$1.12. Tat Hong has no exposure to Alpine while OKP has no exposure to MRT projects.
Baker Technology has divested its entire 20.29% stake in Discovery Offshore SA. It has sold its 13.288m shares to Hercules Offshore Inc for S$41.7m. The divestment follows Hercules's purchase of an additional 27.4% stake in Discovery, bringing its total shareholding in Discovery to 59.5%. The acquisition of additional shares by Hercules triggers an obligation to make a mandatory offer for all the outstanding shares. The net sale proceeds of $40.9m will be used for general working capital, future investments and other purposes.
WE Holdings, together with prominent Myanmar businessman, H.E. Nay Win Tun, has established a joint venture company to assess petroleum, oil and gas, and related resources business opportunities in Myanmar. The Non-binding Memorandum of Understanding signed is to carry out petroleum exploration activities in five target oilfields in Myanmar.
AusGroup has issued a Writ of Summons against Karara Mining (KML). AusGroup's Writ is in respect of KML's failure to process, certify and make progress payments amounting in aggregate to approximately AU$43.5m and for a failure by KML to recognise additional corporate overhead and profit of AU$11.2m which was a performance incentive to achieve certain milestone dates for structural, mechanical and piping installation works carried out by AusGroup, at KML's Karara Iron Ore Project in Western Australia.
Water treatment company Moya Asia has inked a 25-year agreement to build and operate a water treatment plant in the Indonesian city of Tangerang, in Java. The International Financing Corporation (IFC) has arranged $85m of financing for this project.
Leader Environmental Technologies is placing 31.7m new shares at an issue price of SGD0.063 for each placement share. The issue price represents approximately 3.1% discount to the last volume weighted average price. The proceeds will be used for investment opportunity and general working capital purposes.
Swissco Holdings has secured contracts for its crew boats worth an aggregate of S$8.24m. The Group took delivery of a new crew boat on 16 April 2013, the 'Swissco Cheetah'. With the addition of Cheetah, the Group owns / manages a total of 7 crew boats.
Sunpower Group has secured a RMB130m Engineering, Procurement and Construction (EPC) contract with China's top 500 enterprise Lu'an Group for the first time. The contract is to supply flare systems for oil‐chemical‐power‐heat integrated project of highsulphur coal clean utilisation. This is the largest contract secured for the Group's Energy Saving and Environmental Protection Systems segment.
In property news, the Ministry of National Development (MND) has released a list of state land sites for the second half. It has trimmed supply in the confirmed list but made up for this in the reserve list, thus maintaining the overall supply of land for private homes and executive condominiums (ECs) for the second-half Government Land Sales (GLS) Programme at 14,155 units - close to the 14,035-unit supply for the first half. For H2 2013, MND will release land for 5,960 private homes and ECs under the confirmed list - a 14% reduction from the 6,935 units for H1 2013. This is the lowest confirmed-list supply since the H1 2010 figure of 2,925 units. Excluding ECs, the supply of private homes in the H2 2013 slate is 3,175 units, down 17% from the 3,825 units in H1 this year.
Tenders for a pair of adjacent private housing sites in Upper Serangoon View on the confirmed list will close at the same time in September. Likewise in December, tenders for a pair of side-by-side executive condominium (EC) housing sites in Choa Chu Kang Grove will close at the same time. The Ministry of National Development (MND), which revealed this in its second-half Government Land Sales (GLS) Programme, said that this would "encourage more prudent bidding by developers". One of the Choa Chu Kang Grove EC sites can generate about 575 units and the neighbouring plot, 580 units. As for the Upper Serangoon View pair, one site, beside the existing Rio Vista condo, is estimated to yield 510 private homes. The next-door plot can produce some 410 units. Market watchers predict that the top bid for each site could be around $800 psf ppr.
Source: DBSV
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