Towards Financial Freedom
DBS Equity Research: Wired Daily 3 Sep 2014
Singapore Post - First rate hike in 8 years to mitigate cost increase; maintain BUY with higher target price of S$2.12
Singapore Post has received approval for 12-30% rate hike across domestic and international mail from 1st Oct 14. This is the first hike in 8 years to mitigate cost increase. Since 2008, according to SPOST, labor, and fuel costs have gone up ~30% each, inflation has risen 26% while terminal dues for international mail have risen 43% and will further rise 37% by 2017. Annual revenue is expected to improve S$12m-16m, this should translate into 3%/5% higher FY15F/16F EPS conservatively. Maintain BUY with revised target price of S$2.12 (Prev S$ 2.00).
Sunningdale Tech announced today the proposed 100% acquisition of Anchorage Singapore Holdings (ASH), the ultimate holding company of First Engineering (FEL). The proposed acquisition will create one of the largest precision plastics engineering companies with combined revenue of S$636m and manufacturing operations and sales offices spanning across nine countries. The acquisition of FEL is strategic to the Group, and will expand its customer base and widen the Group's product mix offering. The proposed acquisition will also further strengthen the Group's existing footprint, while providing it immediate access to the attractive Indian market. Whilst Sunningdale Tech and FEL have complementary businesses in the three major business segments, there is minimal overlap at the component level, providing further strategic benefits. The proposed acquisition will be funded by Sunningdale Tech through a combination of existing cash and new borrowings.
JB Foods is proposing to acquire 80% stake in PT JeBe Koko, a cocoa bean processing facility in Gresik, Indonesia. The proposed acquisition for US$18.4m (S$23.0m) will be funded through the issuance of 38m new shares at S$0.30 per share, and cash amount of S$11.6m. This represents an attractive 42.3% discount to the proportionate fair value of the proposed acquisition of US$31.9m (S$39.9m), conducted by an independent valuer.
Concurrently, JB Foods is also proposing a 1-for-2 rights issue of up to 240m new shares at S$0.12 per share. The issue price represents a 40% discount to JB Foods last closing price. Proceeds raised will be used to fund the cash payment of S$11.6m of the proposed acquisition, and the balance will be used for general working capital and capital expenditure.
Rotary Engineering has recently won several contracts worth a total value of about S$80m. Rotary achieved a breakthrough into the LNG space with its first contract win in Thailand and further strengthened its presence in Fujairah with new contract win.
Manufacturing Integration Technology has launched a new generation of vision inspection equipment under its Smart Flex series. Together with other die sorter and laser marker sales, the Company has secured a total of $8.2m new orders. Total order book as at 1 Sept 2014 stands at $34.2m.
Rex International Holding has acquired Rex Technology Management (RTM) at a nominal value of U$1 and a loan repayment of US$8.5m. The acquisition addresses investors' major concern that the listed entity did not own the Rex Technologies. RTM has signed contracts with an estimated annual value of US$10m and will start contributing recurring income to the Group immediately.
Singapore eDevelopment has sold 140 lots or 35% of its land development project in Houston, Texas, in the United States for US$20.7m. The Group expects to complete construction and development of the necessary infrastructure and deliver the lots in phases, hence recognising the revenue over the FY2015, FY2016 and FY2017 financial years (ending 31 December).
Avi-Tech Electronics has been added to the watch-list of Singapore Exchange (SGX) after it posted losses for the past three consecutive years.
Dropping below the key 50-point mark for the first time this year, Singapore's Purchasing Managers' Index (PMI) fell 1.8 points to 49.7 in August, dragged down by lower levels in new orders, inventory, and stockholdings of finished goods. This is below market consensus of 51, and down from 51.5 in July. After seven consecutive months of expansion, August's swing to contraction mode marked the largest retreat since March 2011 and the lowest reading since last December. The readings recorded a first-time contraction in new export orders (down 1.9 points to 49.8) and production output (down 2.6 points to 49.6. Overall imports and employment reverted to contraction (49.2 and 48.6 respectively), while input prices (49.7) continued to contract for the third consecutive month.
While the electronics PMI also fell in August, it continued to expand for the 19th consecutive month, dropping 1.7 points to 50.7. The easing was due to slower growth in new orders from both domestic and overseas markets (which were down 2.1 points and 2.2 points to 51.4 and 50.5 respectively), and a drop in electronics production output (down 2.7 points to 50.9).
Developers' profit margins for new condominium launches have halved from a year ago, a focused study by Knight Frank suggests. Looking at condominium launches on 99-year leasehold sites acquired through the government land sales (GLS) programme, the global consultancy estimated that new launches this year could have seen margins dive to 5-10.3%. This came on the back of a slew of government cooling measures that have subdued an otherwise hot market last year when record prices allowed developers to churn margins of 15.6-22.5% for new launches. The average take-up rate in condominium launches has also fallen to 32.3% this year, down from 67.2% in 2013 and 96.9% in 2012, based on the study.
U.S. stocks fell led by energy producers that reacted to the decline in crude oil price. The price of Brent crude fell to USD100.3pbl, the lowest since June 13. On the data front, the ISM manufacturing index unexpectedly climbed to 59 (consensus 57), the highest level since March 201, from July's 57.1. Elsewhere, manufacturing data was less positive as U.K. factory growth slowed more than forecast last month and Italian manufacturing shrank. Airline stocks rose led by Delta Air Lines Inc. and Southwest Airlines Co. Home Depot Inc. shares fell after saying it was investigating a possible data breach.
Source: DBS
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