Towards Financial Freedom
DBS Equity Research: Wired Daily 30 Sep 2014
Hang Seng Index technical - Short-term oversold, look for rebound off 22800-23200 range
JK Tech - Value creating acquisitions to provide upside to fully diluted fair value of S$0.40
Sentiment across Asia was affected by the demonstrations in HK that is currently ongoing, The Hang Seng Index bore the brunt of the selling, tumbling 449pts (1.9%). While the situation remains fluid, we note that negative reactions to similar events in the past can present opportunities for investors willing to look beyond the near-term volatilities. One example closer to home was the demonstrations in Thailand. Furthermore, we note that after yesterday, the Hang Seng Index has fallen 2134pts (-8.4%) from its high of 25363 just earlier this month. The near-term technical oscillators are oversold. For example, the Hang Seng Index's14-day RSI is currently at 26.4 (oversold below 30) and the weekly stochastics read just 8.6 (oversold below 20). Technically, we expect the Hang Seng Index to find short-term support at 22800-23200. For the STI, there is no change in our index view.
JK Techis transforming from an IT solutions provider to an oil and gas (O&G) exploration and production (E&P) player with its acquisition of a 45% working interest in Mustang Field at attractive pricing. Strategic shareholder, Ezion Holdings holds a 14.4% stake in the company, and this opens doors for JK Tech to bargain hunt good quality O&G assets. While our current fair value of S$0.40 implies limited upside to current share price, partly as we impute the massive dilution though this may not take place in next 12-month, we see potential re-rating catalysts stemming from acquisitions of accretive O&G assets, production plan for 2P reserves, and potential farm-out of the 104 acres unexplored Mustang Field.
Nam Cheonghas sold eight vessels worth US$126m in September, and is on track to beat last year's record of vessel sales. The Group is also committed to invest c.US$30m for up to a 30% stake in Indonesia-listed growing OSV player PT BBR. We keep our full year estimates for Nam Cheong unchanged at this point, though we reckon there could be upside from better shipbuilding margins as well as growth in recurrent charter income from FY15, especially from the high margin cabotage market in Indonesia. Maintain BUY and S$0.52 target price.
Following completion of the share placement announced in January, OCBC Bank's aggregate equity stake in Bank of Ningbo has increased from 15.34% to 20.00% of the enlarged issued capital. Bank of Ningbo has accordingly become an associated company of OCBC Bank. Bank of Ningbo is listed on Shenzhen Stock Exchange with a market capitalisation of approximately RMB29.5bn as at 29 September 2014.
Global Logistic Properties has signed new lease agreements totaling 43,000 sqm with JD.com and a leading third-party logistics company in China. JD.com is one of GLP's largest customers in China by leased area. Domestic consumption and e-commerce fulfilment are driving significant demand for modern logistics facilities in China.
Libra Group has been awarded a sub-contract relating to the construction, supply, delivery and installation works for a proposed addition of one block of a four-storey ancillary office building to an existing shipyard at Benoi Road. The value under the Sub-Contract is S$12.1m and is expected to be for a duration of approximately nine months.
The Singapore Exchange (SGX) remains on track to shift from a T+3 settlement period to T+2 - possibly by 2016.
The industry could eventually see settlement decentralised to individual broking houses, with each responsible for its own technology systems. The exchange will pull back from being a service provider looking after the accounting and settlement processes for every broker in the country. The SGX, instead, will lay out guidelines for decentralisation. Eventually, every broker will be responsible for their own technology systems and would need to have people and processes in place in order to take care of the settlement of any transaction, a practice that is consistent with most other markets.
Business confidence in Singapore slipped to its lowest level in a year for the final quarter of this year, as reverberations from global uncertainties sparked by geopolitical risks cast a pall over local firms, a survey has found. The latest Singapore Commercial Credit Bureau (SCCB) quarterly study on business confidence found overall sentiment for the fourth quarter to have taken a relative beating, with the Business Optimism Index (BOI) falling for the second straight quarter to a year's low of +10.79 percentage points. This compares poorly to the previous score of +14.65 percentage points recorded in the third quarter, and 2013's final quarter reading of +33.98 percentage points.
Resale prices of completed private apartments and condos in Singapore stayed flat in August, based on flash estimates from the National University of Singapore's Singapore Residential Price Index (NUS SRPI). Both prices for the overall market as well as the central region were unchanged in August compared with July. Their price indices excluded small units of up to 506 sq ft. Bucking the trend slightly were prices in the non-central region as well as those of small apartments, both of which edged up a marginal 0.1% in August.
US stocks started the week softer as Hong Kong protests added to geopolitical concerns and a rebound in consumer spending fuelled speculation the FED may raise interest rates sooner than anticipated. Ford Motor Co. shares fell after saying pretax profit this year will miss its goal amid weaker results in South America and Europe.
Source: DBS
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