Towards Financial Freedom
DBSV S'pore Wired Daily 21 August 2013
Today's Focus
STI - Range trading 3095 to 3150 near term
Eyes will be on the emerging market equity indices of Jakarta, Thailand and India again. The Jakarta Composite Index fell as low as 4062, c.110pts away from our stated short-term technical support level, before ending yesterday at 4175 while Thailand finished the session down almost 2%, also off session lows. For the STI, we see the support at 3095-3100 holding intact in the short-term but near-term resistance is at 3150. Choppy movement is expected in the days/week ahead.
In PM Lee Hsien Loong's NDR speech, he outlined new strategic plans to assist Singaporeans to cope with global changes, an ageing society and rising inequality. Policy changes focusing on infrastructure, healthcare, housing and education addresses social needs as well as chart the long term plans to maintain Singapore's leading aviation hub status.
Plans to upgrade and expand Changi Airport with the revamp of T1 new terminals T4 and T5, and an additional runway will double the airport's total capacity to 132m passengers by 2023. Clear winners are MRO players - SIA Engg, ST Engineering, while SATS may face more competition from new entrants. Construction of these mega projects costing >S$1.5bn will raise construction demand, benefiting specialist contractor like Yongnam and building material supplier Pan United.
The relocation of Paya Lebar airbase and revamp of Southern corridor to meet long term population needs will benefit industrial REITS with assets in Paya Lebar - Sabana (49%), Mapletree Industrial Trust (29%) and Cambridge REIT (19%) while beneficiaries of the redevelopment plans for Southern Corridor are Mapletree Commercial and Keppel Land.
The Rupiah weakness is net positive to the Indonesian plantation companies. The CPO price is USD-linked, because the benchmark is CIF Rotterdam. For every 1% weakness in Rupiah the revenue will also increase by 1%; whereas the cost will increase by 0.4%-0.7%, mainly from the fertiliser cost. The CRB index (palm oil price included) has been lifted by buoyant crude oil price, affected by concerns over Suez canal closure due to Egypt unrest. For every 1% weakness in Rupiah, the impact breakdown on FY14F income statement for Bumitama is +1.7% and Indo Agri Resources +3.4%.
Keppel Corp has secured a contract worth US$280m from Floatel, to build its fifth accommodation semisubmersible for delivery in 4Q 2015. The continuous support from repeat customer is a testimonial to Keppel's product quality and project execution. The pricing is about 8% higher than the previous KFEL proprietary accommodation semisubmersible awarded by Floatel in 2011, partly due to the higher specs. We understand the contract has a back-end loaded payment term. The latest win brings Keppel's YTD new orders to US$4.3bn, forming 72% of our full year assumption of US$6bn. Maintain BUY and TP of S$12.90.
Sembcorp Marine (SMM) has signed a MOU with two partners: 1) national oil company - Saudi Aramco; and 2) National Shipping Company of Saudi Arabia (Bahri), to explore the feasibility of building a maritime yard in Saudi Arabia. The yard will provide engineering, manufacturing & repair services for a comprehensive product range encompassing offshore drilling rigs, platforms, service vessels and commercial vessels. It is too preliminary to judge the impact of this development as it is still at exploration stage and feasibility study will take 15 months to conclude based on Bahri's announcement to Saudi stock exchange. Nonetheless, it is a good sign that SMM is exploring expansion into new market that has plenty of opportunities. Maintain HOLD call and TP of S$4.70. We are wary of near term headwinds from execution of Brazilian projects and yard construction progress.
United Envirotech was awarded a 25-year Build-OperateTransfer (BOT) contract from the local government of Yantai City for a municipal wastewater treatment project in Shandong Province, China. The capacity of the treatment plant is 30,000 m3/day for Phase 1 and it will reach 80,000 m3/day upon completion of Phase 2. The total investment for Phase 1 is approximately RMB 100m. The project will commence immediately and Phase 1 is expected to be completed by third quarter of 2014.
Oakwell Engineering is proposing to dispose its business of the distribution of (i) electrical and mechanical parts and accessories and (ii) security and access control solutions for S$70m. The Distribution Business may require significant capital injection to grow. The proposed disposal will enable the Company to realise its investment in the Distribution Business and to unlock the value thereof for its shareholders. The proceeds may be used to fund future acquisitions and its working capital, consider reducing its bank borrowing and provide a dividend distribution.
GKE Corporation is proposing to acquire Uniplas (Shanghai) for RMB72.2m. Uniplas is the owner of the land use right over an industrial land situated at Waigaoqiao Free Trade Zone, Pu Dong New District, Shanghai, PRC with a gross land area measuring approximately 28,057m2. A warehouse with a gross floor area measuring approximately 10,004m2 is situated on the land. The land use right over the Land has been granted up to 31 December 2049. The proposed acquisition of Uniplas will enable the Group to utilise the existing Warehouse facilities and expand its warehousing capacity for its logistic business in Shanghai.
Kori Holdings is issuing convertible bond with a principal amount of S$5m at an interest rate of 5% per annum. The proceeds will be used for acquisitions and future expansion.
Joyas International is placing up to 32m new shares at S$0.032 per share. The placement price is at a discount of approximately 8.6% to the last volume weighted average price. The net proceeds of about S$983,000 is intended to be for working capital purposes.
Broadway Industrial has entered into an option to dispose its property located at #15-96 The Central, 8 Eu Tong Sen Street for S$26m.
US stocks rebounded led by retailers as companies' results surpassed estimates. The FED will publish the minutes from FOMC end July meeting tonight and investors will study the discussions for hints about when QE will start tapering. Officials meet at Jackson Hole this week to discuss monetary policy. Consensus expects the FED to start QE tapering come September, reducing purchases by USD10bil to USD75bil/mth. The 10-yr treasury yield eased 7bps to 2.81%.
Source: DBSV
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
