DBS Equity Research: Wired Daily 7 Aug 2014

kiasutrader

Publish date: Thu, 07 Aug 2014, 11:57 AM

Sembcorp Industries - 2Q results below expectations; interim DPS of 5 Scts a positive surprise. Maintain BUY, TP S$6.00

Yangzijiang - Reported a robust set of 2Q results. Rerating underway, maintain BUY with higher TP of S$1.60

2Q14 results for Sembcorp Industries below, 1H met 42% of original forecast. 2Q14 net profit of S$179m (+8% y-o-y, -3% q-o-q) was below our forecast (DBS: S$200m) due to weaker than expected earnings from Marine and Urban Development. Utilities in line. Interim DPS of 5 Scts is a positive surprise. We have trimmed FY14/15F earnings by 8%/5%. Target price revised to S$6.00 on reduced earnings and rollover to blended FY14/15F valuations. Maintain BUY on decent upside.

Yangzijiang reported a robust set of 2Q results with strong shipbuilding margins and tax write-back. 2Q14's headline net profit of Rmb1,236m (+52% y-o-y) beat our above consensus estimate. 1H14 net profit of Rmb2.0bn made up 61%/75% of our and consensus' estimate. We see sustainable order momentum in 2H with emphasis on mega containerships and VLGCs. The strategic shift from non-core to shipbuilding related businesses is also underway. Maintain BUY, target price S$1.60 (Prev S$ 1.55).

Biosensors' 1Q15 results in line; decline in earnings is a function of a drop in licensing revenue and lower ASP. We expect muted sales growth and lower margins ahead. Maintain HOLD and S$0.90 target price.

TEE International has secured a total of S$60m worth of contracts to carry out Mechanical and Electrical (M&E) works for the Venetian Cotai Limited's (a subsidiary of Sands China Ltd) property development in the Macao Special Administrative Region, named The Parisian Macao, located at the Cotai Strip Resorts Macao.

CNA Group has been served with a writ of summons filed by Pyramid Corporation. A dispute has arisen in relation to the percentage completion attributable to CNA. The amounts quantified under the claim are: (a) US$3.2m; and (b) further sums of JPY 49.8m, THB 27.6m and US$96,153.42 being certain contract payment amounts alleged to be due and owing from CNA.

Global passenger traffic expanded 4.7% y-o-y in June, down from the 6.2% growth registered in May, although growth is likely to be stable in the months ahead. Capacity in June was up 5%, resulting in a passenger load factor of 81.5%, said the International Air Transport Association (Iata) in its latest air passenger market analysis. For the first six months of the year, air traffic volumes rose 5.9%. In comparison, the figure for the whole of last year was 5.2%.

Asia-Pacific carriers recorded a 4.9% increase in passenger traffic (measured in revenue-passenger-kilometre) in June and growth of 6.1% for the first half of the year. However, capacity rose by a sharper 6.7% in June, pushing load factor down to 77.9%. Middle Eastern carriers registered the strongest increase in passenger traffic - 10.8% in June, with the region's carriers buoyed by the robust economies of the Middle East and healthy growth in the premium segment from business travel. Latin American carriers posted growth of 7.1% in June and 5.9% for the first half, down from the 8.1% growth for last year as a whole. Iata attributed the slowdown to a scaleback in capacity this year and to weakness in key regional economies such as Brazil. Meanwhile, European airlines recorded growth of 5.6% in June and 5.8% year-to-date as the eurozone continued with steady recovery.

In US, stocks inched slightly higher, shaking off early jitters caused by more trouble overseas, fueled largely by tensions with Russia. Time Warner (TWX) plunged over 13% after Rupert Murdoch's 21st Century Fox (FOX) announced it has given up on pursuing a takeover of the owner of TBS, HBO, CNN and CNNMoney. Time Warner shares remained under heavy pressure even after logging earnings that crushed expectations amid continued HBO strength. Fox reported good earnings after close. Grouponplummeted 13% after alarming investors with a wider quarterly loss than expected and a gloomy outlook for the rest of the summer. On a more positive note, AOL popped 7.5% as Wall Street cheered a 12% jump in second-quarter revenue that easily beat expectations.

Source: DBS

Sembcorp Ind (U96)YZJ Shipbldg SGD (BS6)TEE Intl (M1Z)

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