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DBS Equity Research: Wired Daily 12 Nov 2014

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Publish date: Wed, 12 Nov 2014, 10:44 AM


Nam Cheong - 3Q14 results significantly above expectations on better margin delivery. Maintain BUY with higher TP of S$0.60

Wilmar - Results slightly ahead; TP raised to S$3.45, HOLD rating unchanged

STI's pullback yesterday is within our expectation for a slowdown in its recent strong rebound momentum in the nearterm. We had also said earlier that market trading activity is unlikely to pick up with the approach of the year-end holiday lull period typically from mid-Nov till mid-Dec. We maintain that the underlying trend remains firm given valuation and a net upward revision to 3Q quarterly earnings led by banks. We tweak near-term support to 3260-3770 and upward bias to 3350-3400 by year-end.

Nam Cheong's 3Q14 results were significantly above expectations on better margin delivery. Nam Cheong remains largely unaffected by near-term oil price weakness owing to its shallow water focus and fuel-efficient vessel designs. We have revised up FY14/15 EPS estimates by 27%/23%. Maintain BUY with higher target price of S$0.60 (Prev S$ 0.52), pegged to 10x FY15 earnings.

3Q14 core earnings of US$430m for Wilmar were slightly ahead. Recovery in Oilseeds and Consumer pretax margins were offset by weaker than expected Sugar and Palm & Lauric segments. We expect steady Oilseeds/Palm & Lauric contribution in 4Q14, offset by lower Consumer on price cuts. Earnings were revised by -2% to +5%; target price raised to S$3.45 (Prev S$ 3.30). HOLD rating unchanged.

Silverlake Axisreported 1Q15 net profit of RM59.7m (+17% yo-y, -20% q-oq), which was c.5% above expectations due to higher licensing revenue from Islamic banking. Order backlog of ~RM270m was slightly up q-o-q, enough to support 15 months of licensing and project services. We have raised FY15F/16F EPS by 2%/6%. Interim dividend of 0.8 Scts in line; maintain HOLD with revised target price of S$1.25 (Prev S$ 1.05).

3Q14 earnings for Super Group were below expectations on lower sales and margins. We see Super undergoing a period of transition. It is currently innovating new products, while strengthening its existing business across its key markets. We believe results will take time to yield. We have cut FY14F-FY16F earnings by 16-17%. Maintain HOLD with lower S$1.15 (Prev S$ 1.52) target price.

Vard Holdings reported losses in 3Q14, as expected. Negative EBITDA margins were due to steep losses at new Vard Promar yard in Brazil. European operations also run into rough weather with some one-off learning curve issues. We expect order win momentum to be muted in the near term as well, owing to oil price weakness. Thus, lack of positive catalysts overall, maintain FULLY VALUED call withan adjusted TP of S$0.63 (Prev S$ 0.65).

Pan-United Corporation reported 3Q14 results below expectations on higher staff costs and lower margins. Outlook for new projects expected to remain stable, but expect higher cost structure and lower margins. We have cut FY15-16F earnings by 17-20% on softer margin outlook. Maintain HOLD, target price lower at S$0.90 (Prev
S$ 1.08).

United Envirotech reported unexpectedly strong net profits of S$16.7m (+133.8% y-o-y) for 2Q15 mainly because gross margins of 46.1%, was significantly higher than our 38% forecast for the full year. This gross margin is comparable to 2Q14 but weaker than 49.6% in 1Q15. At half time, UENV's 1H15 net profits met 96% of our subdued FY15F. This includes S$14.2m divestment gain from the sale of Memstar shares. Excluding this, core operating profits would be S$24.5m (+53% y-o-y) compared to our core profits forecast of S$26.5m for the full year. We will review our numbers and target price post results briefing today.

Swissco Holdings has secured a charter contract for up to a seven-year period to support an oil company in Asia Pacific. The value of this contract is worth up to US$115m. The Group has also secured another 12-month charter contract for a multipurpose vessel in the Middle East. The total value of the contract is worth approximately up to US$3.87m.

ARA asset Management announced that Hui Xian REIT, which the group has a 30% stake in the manager, has proposed the acquisition of an integrated commercial property development located in Jiefangbei Central. Total consideration expected to be about RMB3.9bn. Impact on earnings is c.3%, but this is expected to boost recurring earnings for the group, when completed. Maintain BUY, TP S$1.98. 

Soilbuild Construction Group has been awarded a S$61.2m contract by related companies of Tong Eng Brothers, to construct a new 16-storey commercial development comprising a 12-storey office tower and a 4-storey podium of retail, carpark and sky terrace at Jalan Besar / Lavender Street. Order book of S$727.2m to-date, expected to be substantially completed in the next 24 months.

Source: DBS
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