DBS Equity Research: Wired Daily 17 Nov 2014

kiasutrader

Publish date: Mon, 17 Nov 2014, 12:14 PM

Maintain STI 3400 by year-end led by banks/SingTel, broad market gains likely narrow

POSH - Downgrade to HOLD TP$0.73 amid lacklustre outlook

We maintain our view for STI to head for 3350 and than 3400 by year-end based on 13.76x (average) 12-mth forward PE given the upward earnings revision this 3Q results season. Index heavyweights SingTel and banks should continue to underpin the STI. The strength is unlikely to spill over to the broad market as the year-end holiday lull period has just about started and the positive 3Q14 earnings revision is mostly due to banks while most of the sectors suffered cuts.

POSH reported net profit of US$14.6m in 3Q14, down 30% yo-y. Stripping out the US$11.6m gain on sale of vessels, core net profit stood at only US$3m. Results were affected by higher than expected losses of US$5.7m from JVs, including US$5m loss from Mexico. We believe that losses of its Mexican operations could drag on further into FY15 as the redeployment of the vessels in Mexico is taking longer than anticipated. We are also more conservative on the start dates of the contracts for the two SSAVs in FY15. As a result, we cut our FY14/15F net profit by 9% and 19%, respectively. In view of the lacklustre earnings delivery outlook and lack of significant positive catalysts in the near term, we cut our recommendation to HOLD with a lower TP of S$0.73, pegged to 9x FY15F earnings, -0.5 SD below mean.

Centurion reported a 47% growth in 3Q14 net profit to S$7.9m, in-line with expectations driven largely by contribution from Toh Guan Phase 2 and RMIT Village in Melbourne. Going forward, earnings should be supported by growing contributions from its student dormitory business as well as its Malaysian dormitories, which we understand have hit occupancy levels of >90%, and are seeing robust rental growth. At current price, Centurion is trading at 14x FY14F PE and 11x FY15F PE, which is attractive in our view. Maintain Buy and our DCF-backed TP of S$0.91.

Olam's1Q15 core PATMI (excluding bio. gains and exceptionals) rose 14% y-o-y to S$48.1m, which was in line with expectations. The main driver for the better performance was a 10% y-o-y decline in interest expenses. We project a 24% earnings CAGR over the next three years as these assets reach their full potential. We have a DCFbased target price of S$3.05 for Olam. Our TP implies a forward PE of 18.4x which is in line with its average forward PE of 18.3x since the end of the GFC/start of 2009.

Core earnings of S$9m for Tat Hong were within our expectations. Revenue fell 18% y-o-y to S$153m due to weaker sales. Headline earnings of S$11.5m (+39% y-o-y) were boosted by S$2.5m of one-off items. Revenue from Australia remains weak (S$74m), registering a 4% decline both y-o-y and q-o-q. We therefore expect a slow recovery outlook for Australia. Meanwhile the listing of China business remains preliminary. The tower crane business contributed 13% of group revenue (S$90m) and segment profit (S$11m) for FY14. We estimate that the market cap of the listed entity would be <S$110m (vs Tat Hong's current market cap of S$480m) at a valuation of <10x PE. We continue to value TAT at S$0.83 as we expect muted recovery of its Australian operations and earnings growth going forward. Our TP is based on blended 1x P/BV and 12x FY16F earnings. Maintain HOLD.

3Q14 headline net profit for Thai Beveragedropped by 9% y-o-y to THB3.7bn, while revenues inched up by 0.7% to THB35.3bn. The results are within expectations and the drop in headline profit is largely due to lower associates' contribution. We are factoring in lower contribution from associates (namely FNN) largely due to the exceptional items recognised in the quarter ending Sep'14. As such, we lowered our FY14F earnings marginally by 2%. We are projecting 11%/9% growth in FY15F/16F at this juncture, lower than c.18-20% for FY13 and FY14F. That said, there could be upside from higher contribution from the Beer segment and/or faster turnaround at NAB. Our target price is S$0.80 based on sum-of-parts valuation.

Source: DBS

Centurion (OU8)Olam Intl (O32)ThaiBev (Y92)

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