Towards Financial Freedom
DBSV S'pore Wired Daily 12 July 2013
Today's Focus
Vard - Lack of visibility clouds outlook; maintain HOLD with lower TP of S$0.88
Ezra - 3Q13 results significantly below expectations
US markets rallied in reaction to Ben Bernanke's comments that monetary policy will stay highly accommodative for the foreseeable future. Essentially, there is not much new that was said compared to the press conference post June FOMC meeting. Back in June, Ben Bernanke said that QE tapering is not automatic but dependent on GDP and unemployment numbers. He had added that any rate hike is still 'far into the future' and the FED might even aim to lower the 6.5% unemployment threshold before raising short-term rates. Back in June, equity markets reacted negatively. This time round though, it's a positive reaction.
For the STI, we do not expect much, if any, follow through gains in the current session in reaction to the overnight rally on Wall Street as it had already rallied in anticipation yesterday.
Vard Holdings reported weak results in 2Q, in line with profit warning, mainly due to cost overruns at both Brazil yards. Margins may not recover as early as we had expected earlier. FY13/14 earnings cut by another 39%/ 19%. Order wins in 2H13 should be within expectations but unlikely to outperform. Maintain HOLD with lower TP of S$0.88 (Prev S$ 1.16).
Ezra reported another disappointing set of results for 3QFY13. Reported net profit of US$7.2m includes about US$64.9m in exceptional gains (inclusive of divestment gains related to Ezion shares). Stripping that out, Ezra would have reported a core net loss of US$57.7m, significantly worse than our projections of US$15m profits. Our earnings estimates, target price and recommendation are put under review, with negative bias. A full report will be released, following discussions with management.
Separately, Ezra reported contract wins worth US$505m. These projects are for work in the North Sea, Africa, the Gulf of Mexico and the Asia-Pacific region, said the group, which provides services to the oil and gas industry.
Triyards' 3Q net profit tumbled 55% y-o-y to US$7.55m, on the back of reduced revenue recognised on a subsea construction vessel Lewek Constellation. For the nine months ended May 31, net profit was 33% lower y-o-y at US$21.1m. Revenue during the nine months was down 30% to US$198.4m.
We hosted SREITs from the industrial, hospitality and retail sectors. REITs remained generally upbeat about occupancies and rents, citing still-strong tenant performance and positive rental reversions as indicators of organic growth going forward. S-REITs generally expect Net property income (NPI) growth to drive or support valuations. In terms of picks, we like Cache Logistics Trust (BUY, TP S$1.47) for its locked-in earnings growth and acquisition opportunities, Fraser Commercial Trust(BUY, TP S$1.69) for its strong capital management and organic growth from Alexandra Technopark, and Mapletree Commercial Trust (BUY, TP S$1.53) for its strong reversionary growth profile, particularly from VivoCity.
OKP has won a S$13.6m drainage contract from PUB. The project is expected to commence on 15 July 2013 and scheduled for completion in 2015. Gross order book is now S$428.8m lasting till 2015. This project win is small in our view with no significant impact to earnings. It is within our project win expectation for FY13F of S$117m. Maintain Fully Valued call on the stock.
Courts has announced soft opening of its first Malaysia big-box in 8trium, Klang Valley. 8trium is located in a business-retail cum leisure concept development that serves a population of over 750,000. The Megastore is the largest store in Malaysia with 108,000 sq ft offering the largest range of electrical, IT and furniture products in Malaysia. This development has been factored into our forecasts and is within our store opening projection for FY14F. Maintain BUY and TP of S$1.13.
Ausgroup has signed a sale-and-leaseback deal with Boustead to sell the latter its Singapore fabrication facilities at 36 Tuas Road for $39.4m. The property, built in a secure area of over 30,000 square metres, consists of a large enclosed fabrication facility, machine shop and staging areas with waterfront access. Ausgroup estimates that it will have a net gain of $17.3m. It plans to use the net sale proceeds to reduce its bank borrowings, facilitate other corporate funding requirements and for general working capital.
Mencast Holdingshas secured two separate contracts for offshore services from Keppel Singmarine and Keppel Shipyard. Both contracts will extend to Dec 31, 2015, and include a one-year option to renew. The value of both contracts was not disclosed, due to the contracts' long term nature and that prices would depend on Keppel's requirements during the contract period.
ST Aerospace, the aerospace arm of ST Engineering, has landed contracts totalling some $430m in the second quarter for services ranging from component and engine maintenance to interior modifications.
Dyna-Mac Holdings has secured a new fabrication order for a provisional sum of S$135m. The order is from a regular client for the fabrication of topside module of various sizes, manifolds and flare towers for two FPSOs to be carried out in Singapore and Guangzhou, China yards. Production will commence in late 3Q2013.
Singapore's 2Q advance GDP estimate surges 15.2% q-oq, on the back of a rebound in the biomedical and electronics clusters. That beats a 9.7% rise predicted by consensus. On a y-o-y basis, GDP expanded 3.7% in 2Q vs 0.2% in 1Q and a prediction of 2.1% by the market. Manufacturing powered this improvement, expanding 37.6% q-o-q and 1.1% y-o-y. Services and construction pulled their weight too, growing 5% and 5.6% y-o-y respectively.
Source: DBSV
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