DBS Equity Research: Wired Daily 14 Aug 2014

kiasutrader

Publish date: Thu, 14 Aug 2014, 02:28 PM

ST Engineering - 2Q14 results below, downgrade to HOLD with lower target price of S$4.00

Courts Asia - 1Q15 results below, downgrade to FULLY VALUED with lower S$0.45 target price

2Q14 results for ST Engineering were below expectations as profitability affected across segments. We have cut FY14/15 earnings by 6-7%, near term growth hits a roadblock due to margin concerns. Interim dividend of 4Scts (1H13: 3Scts) was the only key positive, underpinned by solid balance sheet. Downgrade to HOLD with lower target price of S$4.00 (Prev S$ 4.30).

1Q15 earnings for Courts Asia were below expectations on weak sales and much higher marketing expenses. Outlook is unexciting with weak demand drivers and margin pressure. We have cut FY15F/FY16F earnings by 23%/17%. Downgrade to FULLY VALUED with lower S$0.45 target price (Prev S$ 0.70).

SingTel reported 1Q15 results this morning. Underlying profit of S$881m (-1.8% y-o-y) was 3-4% below our estimates due to weaker Group Enterprise (mainly from Singapore) and weak AUD (-5% y-o-y) and IDR (-19% y-o-y). In constant currency terms underlying profit would have been up 4.9% y-o-y. Group Enterprise faced increased price competition due to National Broadband Network in Singapore resulting in Enterprise EBITDA declining to S$510 (-7.1% y-o-y) dragging the group EBITDA to S$1254m (-3.2% y-o-y). Most importantly, SingTel has maintained its FY15F guidance to increase group EBITDA by low-single digit despite 3% decline this quarter.

Pacific Radiance reported another stellar set of numbers for 2Q14. Core chartering net profit (ex-gains on vessel disposals) up 14% y-o-y and 17% q-o-q to US$14.3m in 2Q14, better than our expectations of about US$12m. For the 1H14, core net profit of US$26.6m forms 52% of our existing full year forecasts.The out-performance was driven by better gross margin of 44%, compared to our forecast of about 40%. Further upside in earnings expected in 2H14, with the addition of newbuild vessels into the fleet. More details to follow after briefing today.

United Envirotech reported strong headline profits of S$22.5m (+292% y-o-y) mainly due to a S$14.2m divestment gain from the sale of Memstar shares. Excluding this, core operating profits would be S$8.4m (+53% y-o-y) which is below our forecast of S$13m. Revenue grew 50% y-o-y to S$66.3m as both EPC (+23% y-o-y to S$38m) and Treatment (+59% y-o-y to S$20.5m) improved. Despite lacklustre operating results, reported bottomline now accounted for 38% of FY15F. As the outperformance is not driven by operating metrics, we prefer to maintain our forecast for now. No change to BUY call. Regardless of results, we believe interest on this stock is bolstered by ongoing M&A development.

ComfortDelgro's 2Q14 in line; 1H forms 49.5% of our FY14F estimates, DPS of 3.75 Scts declared. We expect stable growth to continue, aided by recent fare increases, ridership and acquisitions. Share price is trading at 1.5 std deviation above historical average. Maintain HOLD, target price revised marginally to S$2.71 (Prev S$ 2.70).

Mermaid Maritime's subsea division rebounds on sequential basis, but earnings fall slightly short on temporary factors like upgrading works. Stock has lagged other offshore services players, and remains cheap at 9x PE and 0.8x P/BV, despite healthy balance sheet to drive growth in FY16 and beyond. Catalysts from new contracts/contract extensions and sequentially better earnings should be in the offing. Maintain BUY with adjusted target price of S$0.57 (Prev S$ 0.58).

Bumitama Agri's 2Q14 core earnings of Rp378.8bn (123% y-o-y) were better than expected. Y-o-y jump in earnings was driven by higher average selling price (ASP). Forecasts and target price unchanged, as we expect lower ASP in subsequent quarters. HOLD call maintained, TP: S$ 1.23. 2Q14 core earnings of US$29.7m for First Resources were below, due to weaker-than-expected CPO ASP. S$0.0125 DPS declared. Plantation EBITDA fell 18% y-o-y to US$92.9m, but was partly offset by a six-fold jump in Refining & Processing EBITDA to US$15.5m on strong biodiesel margin. FY14F/15F/16F earnings cut by 5%/5%/8%; target price lowered to S$2.14 (Prev S$ 2.43); as we cut CPO ASP, and adjust Plantation feedstock costs. HOLD call maintained.

Ascendas Hospitality Trust's 1Q15 net property income (NPI) up 11% y-o-y. Australian hotels reported high occupancy levels with better yields at its Chinese properties. DPU of 1.24 Scts declared. Maintain HOLD and S$0.77 target price.

UOL Group has completed a sale-and-purchase agreement to acquire two UK-incorporated companies and a Jersey unit trust at £97m (S$202 million). Through the purchase, UOL gains the legal and beneficial interests in a 3,200-sqm prime freehold plot of land in the central financial district of London. Under the current consented planning scheme, the land may be developed into a 43-storey tower with an estimated total gross floor area of 52,255 sq m. This comprises 109 residential units for sale, a 190-room hotel and a retail component.

Source: DBS

ST Engineering (S63)Singtel (Z74)Pacific Radiance (T8V)ComfortDelGro (C52)Mermaid Maritime (DU4)Bumitama Agri (P8Z)UOL (U14)

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