DBS Equity Research: Wired Daily 16 Jan 2015

kiasutrader

Publish date: Fri, 16 Jan 2015, 11:03 AM

NOL upgrade to Buy (TP$ 1.10) on lower fuel prices and disposal gain if APL Logistics is sold

NOL could be in for better luck in FY15, with bunker fuel prices declining from US$600/ MT to less than US$300/MT in a little over six months. Given that NOL's liner business consumes about 3m MT of bunker fuel per year, this implies significant cost savings. We revise up our FY15 net profit expectations from US$46m to US$203m, taking into account the return of 19 chartered-in ships this year as well. Press reports have indicated that NOL has received offers from several interest parties for its APL Logistics arm. Assuming US$80m EBITDA for APL Logistics and a 10x EV/EBITDA multiple, NOL could register a one-off gain of around US$200-250m if the sale is completed. With the revision in earnings and higher US$ exchange rate, our TP is revised up to S$1.10, now based on 1x FY15 P/BV, pegged to mean valuation levels.

Dec'14 was expectedly another quiet month for property developers as they sold 230 units (430 units including executive condominiums). This represents a m-o-m drop of close to 46% but is a 22% increase from a year ago. The Singapore residential property market is expected to remain quiet in 2015 with prices seen correcting 15% over 2015/2016. With demand for new units remaining tepid due to ongoing government curbs, we expect buying demand to remain weak going forward in 2014 and forecast primary sales in the range of 8,000-9,000 units.

Temasek, in conjunction with the Singapore Tourism Board (STB), announced the rejuvenation of the Mandai region into an integrated wildlife and nature heritage precinct in Singapore. This will involve the relocation of the Jurong Bird Park from its existing site in Jurong to Mandai, as well as redevelopment of the former Mandai Orchid farm and abandoned village. These attractions will be integrated with the existing Singapore Zoo, Night Safari and River Safari. While the redevelopment of the Mandai/Zoo precinct is positive in the medium term, we remain optimistic on the outlook for the Singapore hospitality market in 2015 on the back of an expected recovery in Chinese tourist arrivals. Our top pick in the sector is CDL Hospitality (BUY, TP of S$1.86).

Swiss National Bank (SNB) unexpectedly gave up its minimum exchange rate of 1.20 per euro today, ending a 3-yr policy designed to shield the economy from the euro area's sovereign debt crisis. The latest move marks an attempt by the SNB to reinforce defences before government bond purchases by the ECB. Swiss Franc/SGD cross spiked as high as 1.83 from 1.31 before settling at 1.55 currently. None of the companies under our coverage has exposure to the Swiss Franc.

US stocks fell after banks and Best Buy Co. slid on disappointing earnings. Bank of America and Citigroup shares fell as both banks reported a drop in 4Q profit as revenue from fixed-income trading declined. Best Buy shares fell after saying 1H sales will range from flat to a low-single digit drop. Finally, Intel Corp shares fell in late trade after forecasting 1Q sales that may fall short of analysts' estimates, sparking concern that the PC industry is headed for a steeper decline.

Source: DBS

CDL HTrust (J85)

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