DBSV S'pore Wired Daily 10 July 2013

kiasutrader

Publish date: Wed, 10 Jul 2013, 02:21 PM

Today's Focus

Tat Hong - Australia presents earnings risks; maintain BUY with lower TP of S$1.43

Our analyst sees potential earnings downside for Tat Hong in 1Q14F from weaker AUD and slower mining and infrastructure spending in Australia. 2H13 revenues from Australia fell 12% y-o-y, affected by a slowdown in mining and infrastructure spending. These could result in slower equipment sales/rental and translation losses for 1Q14F. The outlook for mining in Australia will likely remain weak with infrastructure spending expected to slow down over the next two quarters. Australia will potentially drag earnings growth, thus FY14F/FY15F earnings cut by 20%/21%. Maintain BUY with lower TP of S$1.43 (Prev S$ 1.80). The stock has corrected from S$1.54 since May. In the near term, the stock looks technically oversold and the support is at S$1.12.

Cosco Corp announced that it has secured contracts worth US$216m in total, comprising: i) Four 111k dwt tankers, ii) One 22k dwt tanker and iii) One stinger barge. This brings Cosco's YTD wins to US$744m, forming 37.2% of our order win assumption of US$2bn. Maintain FULLY VALUED; TP: S$0.75.

Yancoal Australia, of which Singapore-listed Noble Group owns 13%, has received a privatisation proposal from its holding company Yanzhou Coal Mining Company (YZ). In an indicative and non-binding offer, Yanzhou would buy the 22% stake that it does not own through a share swap, and eventually delist Yancoal. While we believe Noble will consider the proposal in view of its asset light strategy, we see two potential roadblocks: 1) Further negotiation of offer price / share exchange term. The indicative offer price of AUD 0.91 from YZ is based on its 60 days volume weighted average price of HKD7.09. However, YZ last closing price was HKD5.19, a 27% discount from the average price. Based on YZ's last closing price and same conversion term of 0.91, the implied offer price is only AUD 0.67 which is an 8% discount to Yancoal last closing price. 2) The approval from relevant regulatory on Yancoal's privatisation. Recall that the listing of Yancoal was one of the conditions for YZ's acquisition of Felix.

Silverlake Axis has secured a contract from Bank Rakyat, the biggest Islamic cooperative bank in Malaysia, to implement a new internet banking system. The contract is expected to contribute positively to the results of Silverlake Axis for the current and next financial years.

Rotary Engineering has won approximately S$60m worth of contracts in Singapore from April to June this year. YTD, the group has won a steady stream of contract wins with more than S$400m. It continues to win jobs from oil majors and specialty chemical companies in Singapore and is currently working on two major oil terminals - US$250m Fujairah project and S$300m Pulau Busing project.

Europtronic Group has entered into a non-binding memorandum of understanding (MOU) to sell a Singapore unit to Catalist-listed We Holdings. We Holdings will make the payment via a new share issuance. Europtronic plans to use proceeds for general working capital and to reduce bank loans.

In China, the producer price index (PPI), a supply-side inflation gauge, has contracted 2.7% y-o-y but improved from a 2.9% fall in the previous month, This marks the 16th straight month fall. According to the market, China's factory-gate prices will remain weak for the rest of the year as the new leadership pursues its reform programme that saw a serious credit crunch last month and industries continue with their destocking cycle.

Source: DBSV

COSCO SHP SG (F83)Silverlake Axis (5CP)

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