DBS Equity Research: Wired Daily 16 Dec 2014

kiasutrader

Publish date: Tue, 16 Dec 2014, 01:02 PM

First Sponsor Group - Initiate coverage with BUY call and TP S$1.43

Japfa - Cut earnings and TP after adjusting ASP and FX rates

We initiate coverage on First Sponsor Group with a BUY call and target price of S$1.43. With growing property development business in Chengdu and Dongguan to serve mass market residential property demand, First Sponsor Group is currently developing and selling its second mixed-use project in Chengdu - the Millennium Waterfront in Wenjiang District. The development includes residential units as well as a commercial component for sale, which will strengthen cash flows. A similar strategy will be applied to the mixed-use site in Dongguan. We expect a stable contracted sales in 2014 and double digit growth in contracted sales in 2015, driven by the Millennium Waterfront. We believe the company is a low risk play given it is in net cash and has strong parent support from the Hong Leong Group of companies and Tai Tak Estates Sendirian Berhad; both are well recognised in Asia with extensive business experience and networks in China.

Our analyst has cut Japfa's FY14F-16F earnings by 9-18% and lowered target price to S$0.80 (Prev S$ 1.00). Day Old Chick (DOC) prices in Indonesia have not recovered as fast as expected, although broiler prices have. Recent strength in USD has also had an adverse impact on profitability via USD denominated debts and raw material costs. However, we believe the recent sell-down is excessive, with Japfa's price currently trading below book value. BUY call maintained.

City Developments(CDL) has partnered with Blackstone's Tactical Opportunities Fund and CIMB Bank Berhad, Labuan Offshore Branch to create a unique investment platform that will invest in the cashflows of CDL's properties in Sentosa Cove, called the Quayside Collection. Through this transaction, a total of S$1.5 billion will be raised. The Quayside Collection, an upscale integrated development on the resort island of Sentosa, comprises three adjacent properties developed by CDL: 1) Hotel - The 5-star hotel W Singapore - Sentosa Cove;

2) Retail - Quayside Isle, a waterfront F&B and retail property and 3) Residential - Apartments of The Residences at W Singapore - Sentosa Cove. CDL said the Profit Participating Security (PPS), as the investment instrument is called, will see the investors receive a fixed payout based on 5% interest per annum for a period of five years, in addition to a participation in the cashflows over the period that they hold the PPS. The total aggregated value of PPS is S$750m.

The Asian Development Bank (ADB) has approved a loan of up to US$100m to Yoma Strategic Holdings to improve infrastructure connectivity needed for sustainable economic growth in Myanmar. The ADB loan will meet the gap for long-term commercial debt for infrastructure designed to enhance connectivity. It will be disbursed in two tranches, with Yoma Strategic engaging partner companies to work with it on individual infrastructure subprojects. The first tranche will be used to build telecommunication towers, develop cold storage logistics, and modernize vehicle fleet leasing; the second will fund subprojects in transportation, distribution, logistics and other sectors.

Libra Group has been awarded contracts worth S$5.28m for works in relation to air-conditioning and mechanical ventilation system for a auto workshop at Sin Ming Road and also Ngee Ann Polytechnic campus.

Ryobi Kiso Holdings has secured additional new contracts worth S$56.3m, bringing the total new contracts secured since 1 January 2014 to S$235.5m.

Yongnam has secured two contracts worth S$22.8m. One is a specialist civil engineering contract in Hong Kong and the other a mechanical engineering contract for the Trisonic Wind Tunnel in Singapore.

Sysma Holdings announces its fifth contract in three months with new S$13.5m contract win. The new contract at Ridout Road is for a Detached Dwelling House with basement.

Kori Holdings has been awarded two contracts amounting to an aggregate of S$52.9m. These two contracts are part of the Thomson Line MRT.

In property news, with developers' sales of private condominiums falling 48% in November from a month ago

to 412 units and December being typically a slow month, it is almost a foregone conclusion that new private condo sales for the full year will be about half the level of last year. Executive condominiums (ECs), however, registered brisk sales. Including the 855 EC units sold in November, up from 90 units in October, total developer sales tallied up to 1,267 units in November - a 45% jump from October. In the first 11 months, a total of 7,137 new private condos and 1,410 new ECs were sold by developers. Property consultants are projecting full-year sales of private condos (excluding ECs) by developers to be around 7,500-7,700 units, down from 14,948 new private condos sold last year. Another 3,588 new EC units were sold in 2013.

Retail sales in Singapore increased 8.1% y-o-y in October, boosted by motor vehicle sales. Excluding motor vehicles, retail sales rose a mere 1.9% during the month. Sales of motor vehicles surged 44.1% y-o-y but declined 7.7% from September 2014. Compared to September, retail sales (seasonally adjusted) decreased 1.3% in October. Excluding motor vehicles, it rose 0.3%. Retail sales of telecommunications apparatus & computers recorded an increase of 19.6% y-o-y in October 2014. Similarly, retail sales of medical goods & toiletries, food & beverages, department stores, supermarkets, optical goods & books, watches & jewellery and mini-marts & convenience stores rose between 1.5% and 6.6%. In contrast, retail sales of furniture & household equipment, recreational goods and petrol service stations declined between 3.6% and 6.6%. Retailers of wearing apparel & footwear also saw sales falling 0.6% in October over the same month last year.

U.S. stocks gave up early session gains to end lower following the continuing selloff in oil that overshadowed a surge in industrial production and corporate deals. November industrial production (actual +1.3% m-o-m, consensus +0.7%) and capacity utilization (actual 80.1%, consensus 79.4%) had came in better-than-expected. Shares of Boeing Corpafter saying it would boost its share buyback program and increase its dividend.

Source: DBS

First Sponsor (ADN)Japfa (UD2)CityDev (C09)Yoma Strategic (Z59)Libra (5TR)Sysma (5UO)Kori (5VC)

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