DBS Equity Research: Wired Daily 19 Aug 2014

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Publish date: Tue, 19 Aug 2014, 11:17 AM

OCBC - Proposing 1 for 8 rights issue at issue price of S$7.65 per rights share

Nam Cheong - Secured sale contracts for four vessels worth a total of US$90m

OCBCis proposing a rights issue which entails raising gross proceeds of up to S$3.37bn, comprising of up to 440m shares at an issue price of S$7.65 per rights share on the basis of one (1) rights share for every eight (8) shares held by entitled shareholders as at 5pm on 27 Aug. This rights price is equivalent to a 25% discount to OCBC's last closing price of S$10.20 (15 Aug). The rights shares will not be entitled to the FY14 interim dividend/scrip dividend which was declared/announced during its 2Q14 results.

The Wing Hang Bank (WHB) acquisition will be fully funded by a combination of US$ subdebt (US$2bn), scrip dividend (S$486m) and the proposed rights issue (S$3.3bn). The privatisation of WHB will take another 2-3 months to complete. Combined, both OCBC and WHB will be able to leverage on each other's strengths which are complementary, in our view. The acquisition would be EPS/ROE accretive three years from now. The integration is underway but OCBC HK and OCBCWHB will operate as separate entities for now. Maintain BUY and target price S$12.40 (fully diluted: S$12.15)

Nam Cheong has secured sale contracts for four vessels with a total value worth approximately US$90m. Revenue from the contracts will be recognised over the relevant contractual period in accordance with the Group's revenue recognition policy. The contracts are expected to contribute positively to the earnings of the Group for FY Dec 14. With the contracts, Nam Cheong's order book stands at approximately RM2.0 bn.

Separately, Nam Cheong has entered into a Joint Venture agreement with SGX-listed company, Marco Polo Marine to form a JV company. The JV Co recently purchased a newly built Accommodation Work Vessel (AWV) constructed by the Nam Cheong Group. Following the acquisition of the AWV, the JV Co announced that it has secured a long-term firmed five-year bare-boat contract with an estimated value in excess of US$27m, excluding extension options.

OLAM International is selling a 25% stake in its packaged food business to Japanese noodle manufacturer Sanyo Foods for US$187.5m. Aimed at capitalising on growth opportunities in sub-Saharan Africa, the deal is expected to be completed by October-December this year, which is the second quarter of Olam's FY2015. As Olam will hold the majority stake of 75%, it will retain management control of the packaged foods business.

Global Logistic Properties has signed a new lease agreement for 6,500 sqm in Greater Tokyo with SENKO Co., a major third party logistics provider and one of GLP Japan's largest customers by leased area. With this newly signed agreement, GLP Atsugi is 100% leased. The customer will use the facility to cater to rising domestic consumption demand in Kanagawa sub-market, a major distribution center for the Greater Tokyo region.

SBI Offshore has secured a design and engineering contract amounting to US$24m. The contract was signed with a consortium of six Middle East-Chinese parties that have varied interests in oil and gas activities. The contract is in line with the Group's strategy to move up the value chain and focus on providing one-stop engineering solutions and drilling equipment for the oil and gas industry. Singapore's exports continued its slide in July for a third successive month, weighed down by contraction in both electronic and non-electronic exports. Singapore's non-oil domestic exports (NODX) contracted 3.3% y-o-y in July. The data came in below the consensus estimate of a 4% y-o-y contraction, and lower than the 4.6% and 6.6% decrease recorded in June and May, respectively. Electronic exports continued its 24th consecutive month of decline. As compared to last year, electronic NODX contracted by 7.9% in July, following a 17.4% decline in the previous month, largely due to shrinking sales of integrated circuits (IC) (-5.1%), parts of PCs (-14.5%) and disk media products (-18.5%). While the decline in electronics exports is hardly surprising, the performance of non-electronic shipments was a setback. The non-electronic NODX contracted by 1.1% in July, in contrast to the 1.3% expansion in June. On a month-on-month seasonally adjusted (m-o-m SA) basis, NODX rose by 2.5% in July, following the previous month's 1.5% increase.

U.S. stocks rose as tensions eased over global conflicts. Airlines led gains among industrial companies as oil price fell. Homebuilders gained as the National Association of Home Builders/Wells Fargo sentiment measure climbed to 55 from 53 in July, the highest level in 7 months. The FED releases minutes from its July meeting tomorrow. Fed Chair Janet Yellen has said officials will keep its benchmark interest rate low for a "considerable time" after the bond buying ends. The annual symposium at Jackson Hole, Wyoming begins Thursday. Leading economists and central bankers will discuss the outlook for the economy and monetary policy. Yellen and ECB President Mario Draghi are among the speakers at the conference, this year titled "Re-Evaluating Labor Market Dynamics."

Source: DBS

OCBC Bank (O39)Nam Cheong (N4E)MarcoPolo Marine (5LY)Olam Intl (O32)SBI Offshore (5PL)

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