DBS Equity Research: Wired Daily 13 Nov 2014

kiasutrader

Publish date: Thu, 13 Nov 2014, 11:28 AM

SingTel's reports better-than-expected 2Q15 underlying profit, Maintain Buy

Accept $1.65/share offer for United Envirotech by Citic/KKR SingTel's 2Q15 underlying profit of S$979m (+10.8% y-o-y, +11.1% q-o-q) was 3% above our estimate of S$950m

Regional associates' post tax profit contribution grew to S$434m (up 22% y-o-y, 4% q-o-q) mainly led by Bharti's contribution (+183% y-o-y, +13% q-o-q). Group Enterprise registering EBITDA of S$553 (+7.6% y-o-y, +8.4% q-o-q) benefitting from strong growth in Singapore enterprise revenue and S$31m write back related to fiber rollout costs. Singapore maintained its guidance for low-single digit growth in core EBITDA, which leads us to believe that SingTel can secure 7% earnings growth this year and also offers ~5% yield on top of this. Maintain BUY, TP: S$4.28.

Citic/KKR consortium has made a pre-conditional voluntary offer for all United Envirotech (UENV) shares at S$1.65 each. UENV will remain listed post offer. Upon completion of the offer, UENV will issue between 30.3m and 90.9m new shares to the Offeror at S$1.65/sh to raise S$50-S$150m for MTN redemption and/or to expand business. 2H growth will be dependent on new contract wins. We have raised FY15F earnings by 68% to account for strong margins in H1. Offer is attractive at 27x upgraded FY15 EPS. We recommend investors to realize value now and accept offer. Revisit the stock after the offer or when earnings catch up with valuations.

SIIC Environment'sbottomline was boosted by substantially higher interest income but core profits of S$51m were a shade lower. EPC continues to outperform while Treatment has fallen short. 9M14 core profits accounted for 70% of our FY14F earnings. SIIC is poised to continue positive growth on the back of strong industry dynamics. However, we have dropped FY14/15 by one percent as we paced out revenue recognition of projects and raised interest income. Still a Buy with unchanged target price of S$0.22.

3Q14 net profit for Petra Food down 29% y-o-y; below expectations. Gross margins maintained, but EBITDA margins affected by higher selling & distribution expenses. We cut our forecasts by 17%/ 20%/ 15% for FY14F/15F/16F on the back of: (i) lower sales volume growth assumption; (ii) imputing a weaker IDR and regional currencies vs USD; and, (iii) higher distribution and general admin expenses. Downgrade to Fully Valued and target price revised down to S$3.02 (Prev S$ 3.62).

3Q14 adj. EBITDA for Genting Singaporedown 27% y-o-y on poor win rate. Near term headwinds for VIP and Mass market with uncertainty over timing of Japanese casino bill, but partially mitigated by opening of Jurong hotel in mid-2015, with potential upside from Jeju project. HOLD, target price S$1.08.

Ex FX losses, Bumitama's 3Q14 earnings of Rp299bn (+59% y-o-y) were below expectations. FY14F/15F/16F earnings cut by 12%/8%/2%; target price reduced to S$1.19 (Prev S$ 1.21). Dryness may shift some harvesting into 1Q15. BUY call maintained for 10% upside, 1% dividend yield. Bumitama is still on track to deliver FY13-16F earnings CAGR of 28%.

CSE Global's 9M14 net profit of S$25.0m (+4.5% y-o-y) was 5% above our estimates; 9M14 order win of S$288m exceeded our estimates but backlog was in line. Offshore projects in Gulf of Mexico (GoM) and higher sales in Australia buoyed profits. We raise FY14F/15F order win assumptions to S$400m/$440m from S$320m/S$350m earlier. Current order backlog of S$202m (-23% y-o-y) needs to be improved further to warrant a higher FY15F EPS growth. Maintain HOLD with a revised target price of S$0.74 (Prev S$ 0.70).

Golden Agri (GGR) booked 3Q14 core earnings of US$26m (-28% y-o-y, -47% y-o-y) - below expectations. China operations contributed further losses as Palm & Lauric segment EBITDA eased 32% q-o-q. We have cut FY14F/15F profit by 35%/8% after adjusting for 3Q14 results. Trimmed Fair Value to S$0.46 (Prev S$ 0.51); counter is NOT RATED.

Yongnam has secured new contracts in Singapore worth a combined S$93.1m. These include structural steelwork for Project Jewel, a mixed-use complex located on a 35,000 sq m plot in the heart of Changi Airport, a contract for the fabrication of steel components for jack-up structures in the offshore sector and contracts for the supply of kingposts for the Thomson-East Coast MRT Line.

In property news, rentals for private condos/apartments as well as HDB flats continued to come under presure in October, latest SRX flash estimates show. Flash estimates for October 2014 released on Wednesday show that since December last year, SRX's overall rental index for nonlanded private homes has eased 3.9%, a bigger drop compared with the 2.5% fall for the whole of last year. In the suburbs or Outside Central Region (OCR), the rent drop so far this year has been 5.5%, more than double the 2.5% decline last year. In the city fringe, or Rest of Central Region (RCR), SRX's October 2014 flash estimate was 2.8% lower than December 2013. Last year the subindex slipped 3.8%. For HDB rents, SRX's flash estimate for October was 1.7% below last December. Full year 2013, the index declined 2%.

The rally in US markets halted as gains among phone and consumer stocks offset losses in utilities and growing concern over slowing growth in Europe. Better-than estimated corporate earnings and economic data had recently lifted confidence the U.S. economy will be able to weather a global slowdown. Concerns about a slowdown in Europe still weigh on sentiment. ECB President Mario Draghi's move to quantitative easing has met resistance from German Chancellor Angela Merkel, who has advocated fiscal discipline across the euro area.

Source: DBS

Singtel (Z74)Delfi (P34)Genting Sing (G13)Bumitama Agri (P8Z)CSE Global (544)Golden Agri-Res (E5H)

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