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DBS Equity Research: Wired Daily 4 Nov 2014

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Publish date: Tue, 04 Nov 2014, 10:59 AM


Pacific Radiance - Expect weaker 2H14 earnings but no significant change to topline driven growth trajectory in FY15. Maintain BUY, TP S$1.34

Pacific Radiance announced a long term contract for one of its newly delivered DP2 offshore support vessels. The 5-year contract with a repeat customer in SE Asia is worth more than US$70m, including options. The Group will be taking delivery of more than 15 vessels over the next 2 years and management remains fairly confident of deploying these vessels profitably. The Group will be releasing 3Q14 results on 13th November. We expect 2H14 earnings to be weaker than 1H14 as margins normalise and subsea vessel utilisation eases. As a result, we lower FY14F earnings for Pacific Radiance by 6% and FY15 earnings by 2%. However, there is no significant change to topline driven growth trajectory in FY15. Maintain BUY with adjusted TP of S$1.34 (Prev S$ 1.36).

3Q14 results for Cosco Corp below; gross margin dipped further to <5%. We have cut FY14-15F earnings forecasts by 10-23% as we lowered margins across segments. Heightened cancellation risks, lingering concern over drillship and cylindrical rig sagas are the key risks. Maintain FULLY VALUED; potential downside risks to our target price of S$0.62.

Japfa's subsidiary Japfa Comfeed Indonesia's core 3Q14 earnings plunged 90% y-o-y to Rp50bn This is not an isolated case. Weaker-than-expected demand amid flat unit cost were the main causes Japfa Comfeed is estimated to contribute c.44-49% of Japfa Limited's FY14F and FY15F earnings. Our forecasts, TP and rating of Japfa Limited are under review. Results for Japfa will be released on 11 Nov14.

OUE Hospitality Trust reported 3Q14 net property income (NPI) of S$25.4m, in line with expectations, although 1.6% higher than prospectus forecasts. 9M14 NPI stood at S$76.2m which represents 73% of our FY14F. The 3Q14 results were driven by a seasonal boost in RevPAR to S$252 (2Q14: S$248). Moving into 4Q14, we expect a seasonal boost as well as the benefit of an additional 160 rooms that were recently refurbished. In addition, OUEHT may also gain from a potential recovery in tourist arrivals which have been weak over the last 12 months. Maintain BUY call and target price of S$0.95.

Elektromotive Group announced that its United Kingdom subsidiary, namely Elektromotive Limited (United Kingdom), (EUK) is intending to seek a listing on the AIM Market of the London Stock Exchange (AIM). EUK is currently one of UK's leading providers of electric vehicle recharging stations. EUK's main product is the Elektrobay, an AC duel head recharging station for public on-street or general car park use. To date, EUK has an installed base of more than 4,500 charging outlets across the United Kingdom and globally.

Koon Holdings announced that its wholly-owned subsidiary, Koon Construction & Transport, has entered into a 20:80 joint venture (JV) with Penta-Ocean Construction Company. The JV has been awarded a S$1.108 bn Land Preparation Works for Airport Development project from the Ministry of Transport. The works include site clearance, ground treatment including the strengthening of the ground for airport facilities and operations, and earthworks. Revenue from the New Project will be recognized progressively over the contract duration.

Chip Eng Seng Corporation has secured a $232.8m contract from the Housing & Development Board (HDB) for construction works at Woodlands Neighbourhood. Expected to take approximately 42 months to build, the newly awarded contract would encompass the construction of 9 blocks of residential buildings and is expected to be completed in mid-2018. As at 30 June 2014, the Group's order book stood at $548m.

Sysma Holdings has secured a new contract to erect a two storey Detached Dwelling House at Mount Echo Park. The contract is valued at S$10.2m, and construction is scheduled to take place over a period of 16 months starting from November 2014. This contract boosts current order book to approximately S$88m.

PSL Holdings is expected to report a loss for the 3Q2014 period due to reduction in the Group's revenue as a result of stiffer competition, higher expense incurred in the proposed investment in Longmen and stock impairment.

Luzhou Bio-Chem Technology is also expected to report a net loss for 3QFY14.

US stocks dipped modestly led by energy companies as oil price fell after Saudi Arabia cut the cost of crude sent to American customers. Meanwhile, data showed the October ISM manufacturing index increased to 59, much better than the 56.6 consensus. In contrast, The China's October PMI was 50.8, below consensus expectations for 51.2. West Texas Intermediate oil dropped to the lowest level in more than 2 years to USD78.78pbl after Saudi Arabia reduced the cost of its crude to U.S. customers in the face of soaring North American output. However, Brent crude held at USD84.78pbl, above its recent low of USD82.6pbl.

Source: DBS
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