Towards Financial Freedom
DBS Equity Research: Wired Daily 6 Nov 2014
SembCorp Marine - Brace for tougher times ahead, downgrade to HOLD with lower target price of S$3.80
SIA Engineering - 2QFY15 earnings disappoint, down 41% y-o-y. Downgrade to FULLY VALUED with lower target price of S$3.80
SembCorp Marine reported 3Q14 results below our estimates; EBIT margin was compressed to 10.0%. We have trimmed FY14-15F profit forecasts by 4-5% after revising down repair revenue and newbuild margins. We expect more headwinds ahead. The Rigbuilding sector faces a triple-whammy of near term supply glut, keener competition, and declining oil prices. Downgrade the stock to HOLD with lower target price of S$3.80 (Prev S$ 4.00), given the limited upside and potential headwinds ahead. We would turn positive on the counter again if order flow picks up strongly, margin recovers, repair revenue rises and Brazil operations progress well.
2QFY15 earnings for SIA Engineering disappoint; net profit of S$42.1m was down 41% y-o-y and 21% q-o-q. Revenue was down by 3%, dragged down by lower heavy maintenance revenue. The weaker capacity utilisation resulted in poor operating margin of 5.6% (vs. 7.0% in 1QFY15 and an average of 9.8% achieved in FY14). The Group was affected by deferments/ cancellations of heavy aircraft checks and escalation of engine check intervals. We have cut FY15/16 earnings forecasts by 23%/11% respectively to factor in lower workload and margins. We lower FY15 dividend expectation to 16Scts (vs. 25Scts in FY14), including the 6Scts interim dividend already announced. Downgrade to FULLY VALUED with lower target price of S$3.80 (Prev S$ 4.50).
Starhub's 3Q14 net profit of S$ 97.7m (+2.5% y-o-y, +4% qo-q) was 3% below our expectations. Service revenue growth was weak on lower broadband and prepaid revenue. 5Scts interim dividend declared, in line with expectations. Maintain HOLD with unchanged TP of S$4.30.
Hyflux turned profitable operationally in 3Q14 but still below forecast. EPC orderbook is estimated to shrink to c.S$600m, comprising mainly of Dahej. Hyflux cautioned slower 4Q14 in view of continued weak growth in global municipal water projects. We will review our forecast for FY14F and FY15F and target price post conference call today.
3Q14 net profit for Kim Heng Offshore & Marine was down 62% y-o-y to S$1.15m, on the back of a 23% drop in revenue to S$13.8m, due to the decrease in revenue from the Offshore Rig Services and Supply Chain Management segment. Gross profit margin dropped from 43.3% for 3Q2013 to 36.1% for 3Q14. The decrease in gross profit margin was mainly due to a higher proportion of lower margin business which comprise sale of materials and accordingly, a lower proportion of high margin business such as marine offshore support services.
Standard & Poor's Ratings Services (S&P) has revised the rating outlook on Indonesia-based poultry feed and commercial farming company PT Japfa Comfeed Indonesia Tbk to negative from stable. Japfa Comfeed is a listed Indonesian subsidiary of Japfa Ltd. The latter was listed on Singapore Exchange in August this year.Several real estate investment trusts (Reits) have banded together to form an association - the Reit Association of Singapore (Reitas) - to promote the growth of Singapore's Reit sector. It will be headed by a nine-member executive committee, comprising representatives from some of the major Reits and sponsors such as Mapletree, CapitaLand, Frasers and Keppel. Reitas has its first task cut out already - amassing feedback from Reits on the latest Monetary Authority of Singapore (MAS) consultation paper.
U.S. stocks rallied after Republicans won their first Senate majority in 8 years and the release of a better-than-expected October ADP employment number (actual 230k, consensus 220k) ahead of tomorrow's official employment figures. Coal producers gained on expectations that Republicans will oppose restrictions on the fuel. TripAdvisor Inc. shares plunged after an earnings report that fell short of analyst estimates. Time Warner Inc. shares gained after beating consensus profit estimates last quarter upon collecting higher fees for its TV channels.
Source: DBS
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