DBS Equity Research: Wired Daily 8 Dec 2014

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DBS Equity Research: Wired Daily 8 Dec 2014

kiasutrader

Publish date: Mon, 08 Dec 2014, 10:46 AM

Olam's TP raised to $3.10 post acquisition of peanut sheller McCleskey Mills Inc

GLP co-invests with GIC to acquire US logistics real estate portfolios

Yangzijiang added into Large Cap conviction picks

STI's pullback last week is not unexpected given the 200pt rise since mid-October. We continue to see the near-term support level at 3280-3300 holding up and keep our view for 3400 by year-end based on 13.76x (average) FY15 PE.

The SSEC blasted to our raised mid-term technical objective of 2927 within a week. Needless to say, technical oscillators are more overbought compared to last week and the risk of a nearterm pullback increases. The current 'bull rampage' will turn choppier in the near-term. Still, the underlying tone should stay firm. We see pullback support for the SSEC at c.2780 and that for the FTSE China A50 at c.9000. The positive undertone for the China market should continue into early 2015 at least.

We add Yangzijiang into our Large Cap conviction picks. Its peers in the China A-share market China CSSC(600150 CH) and China Shipbuilding Industry have performed very well in recent months. While Yangzijiang has a lower market capitalization compared to its China peers, valuation parameters such as forward PE, P/B and yield are much more attractive. Our current fundamental TP is $1.62 based on SOTP. Technically, a close above $1.24 points to $1.45.

GLP is co-investing with GIC to acquire IndCor Properties, with one of the largest logistics real estate portfolios in the US for US$8.1bil. The transaction is expected to be completed in the first quarter of 2015 and GLP will initially hold a 55% stake in GLP US Income Partners I and GIC the remaining 45%. GLP intends to reduce its stake to 10% by August 2015 and has already received strong interest from capital partners looking to invest in the US logistics market.

Olam announced the acquisition of McCleskey Mills Inc (MMI), the third largest peanut sheller at an enterprise value of US$176m (S$231m). Our analyst believes the acquisition of MMI is a positive strategic move for the group. Post-acquisition, we estimate 1-4% uplifts to our FY15-17F earnings, with positive accretion to cash flow and returns (40 to 50-bps boost to FY15-16F ROEs). We likewise raise our DCF-based TP to S$3.10 from S$3.05. We continue to like Olam for its strong earnings outlook (3-year earnings CAGR of 25%) and improving return/cashflow profile. Maintain BUY.

Halcyon Agri announced revenues of US$113.7mil for Q3 2014, with EBITDA before non-recurring items of US$4.0mil and a net loss before non-recurring items of US$3.6mil. Average selling prices and margins for the quarter continued to be under pressure, reflecting the decline in the market price for natural rubber over the period.

US markets rose following a strong employment number as November non-farm payrolls registered 321k, the highest since June 2013 while the unemployment rate held at 5.8%. A separate report indicated fewer Americans filed applications for unemployment benefits last week, while a Federal Reserve survey said "employment gains were widespread across districts" as the economy continued to expand. European stocks also rallied after 2 ECB officials familiar with deliberations said policy makers will consider a proposal to buy sovereign debt at its next meeting. Meanwhile, China's November trade balance, inflation and money supply figures will be released this week.

Source: DBS

Olam Intl (O32)YZJ Shipbldg SGD (BS6)Halcyon Agri (5VJ)

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