Towards Financial Freedom
DBS Equity Research: Wired Daily 9 Feb 2015
Hutchison Port Holdings Trust - Expect lower DPU payouts in FY15/16. Downgrade to HOLD, TP cut to US$0.65
Singapore Airlines - Operating earnings in 3Q15 weaker than expected but expect fuel savings to boost earnings in future quarters. Maintain BUY and S$12.90 TP
We maintain our near-term range of 3380 to 3450 for the STI, capped at the 13.8x (ave) 12-mth forward PE level. Whether the STI is able to clear the 3450 level soon will depend on earnings revisions when the index heavyweight's banks and SingTel release their results this week. Otherwise, it could be closer to the end of 1Q before the STI ascends above 3450.
Bond yields have stayed suppressed, as low inflation helped by falling oil price and slow growth enabled central banks around the world to adopt easing policies. Low bond yields underpin yield stocks. Our yield picks are China Merchants Holdings, Venture Corp, M1, Yangzijiang and Sheng Siong. Among these, China Merchants offer the higest yield at 7.5% and the best upside to fundamental TP.
Hutchison Port Holdings Trust's full year DPU of 41HKcts for FY14 in line, but large goodwill impairment related to HK operations reveals negative outlook for HK port business. Going forward, the Trust is unlikely to continue to defer capex in order to boost DPUs. We expect lower DPU payouts of 34- 35HKcts in FY15/16 and are also cutting FY15/16F earnings by 5-9% to reflect poorer earnings from HK operations. Downgrade to HOLD, TP cut to US$0.65 (Prev US$ 0.78).
Operating earnings for Singapore Airlines in 3Q15 weaker than expected, but offset by exceptional gains.9M15 earnings of S$328m was flattish y-o-y, on track to meet our FY forecast of S$494m. We expect fuel savings to kick in and boost SIA's earnings performance in future quarters. The Group's balance sheet remains strong with over S$3.5bn net cash after consolidating Tigerair's numbers. We project SIA to pay out DPU of 50Scts for FYE Mar 16, given the improved profit outlook and its strong balance sheet position. This equates to c.60% payout and translates to a decent dividend yield of 4.1%. Maintain BUY and S$12.90 TP.
3Q15 DPU of 1.30 Scts for Ascendas Hospitality Trust in line. Results were underpinned by improved performance from Australian and Japanese hotels. However, we expect headwinds from weakening AUD to temper DPU growth. Maintain HOLD, TP revised to S$0.70. A-HTRUST offers a yield of 7.8-8.6%.
Cache Logistics Trust has entered into separate sale and purchase agreements to acquire three industrial properties in Australia for A$70m. The first property - located at Chester Hill, New South Wales - is a freestanding
warehouse facility with a net lettable area of about 25,830 sq m. The second property - located at Somerton, Victoria - is a distribution centre with a net lettable area of 21,279 sqm.
Rex International Holding plans to participate in drilling of about 10 wells in 2015 in the core areas of Norway, Oman and Trinidad. The Group's focus is on proving up more oil in own assets for further technology validation.
Otto Marine has secured contracts to charter two PSVs to Global Oil Major in Australia for 36 months including
options. Net order book is further strengthened by approximately US$64m based on firm contract value and including options. With the latest orders, the Group's net order book stood at approximately more than USD400m as at January 31, 2015.
COSCO Corporation has secured a contract from a European company to build a 152,000 DWT shuttle tanker.
The shuttle tanker is scheduled for delivery in the 1st quarter 2017. Separately, the contract awarded earlier to build one (1) 21,000 DWT module carrier for a European company has been rendered effective. The delivery of the module carrier is scheduled in the 1st quarter of 2017. Total contract value is about US$160m.
Soilbuild Construction Group has been awarded a S$25.9m contract for the design and build of an 8-storey single-user E-commerce Hub at Tampines North. The construction period is approximately 17 months.
IEV Holdings has obtained an exclusive 5-year master license for the Oxifree corrosion control technology for Indonesia from the USA-based licensor, Oxifree Global LLC. This is the fourth country in South East Asia for which the Group has acquired the exclusive rights to distribute, apply and maintain products utilising the Technology, after Vietnam, Malaysia and Brunei. Oxifree is a sprayable polymeric resin coating that protects a wide range of bolted metallic components.
Tritech Group has been awarded a S$4.92m contract for the Provision of Water Quality Profiling Services and
Comprehensive Maintenance of Existing Water Quality Stations and Equipment in Singapore Catchments and Reservoirs by the Public Utilities Board (PUB).
Genting Hong Kong reported that excluding the share of results of Norwegian Cruise Line Holdings Ltd. And Travellers International Hotel Group, the Group is expected to record a net profit of not less than US$235m for FY14, as compared with a net profit, excluding the share of results of NCLH and Travellers, of approximately US$483m for FY13.
Spackman Entertainment Group is expected to report a net loss for FY14, mainly due to weak ticket sales for the films produced and invested by the group as well as the significant one-off listing expenses incurred during the IPO exercise.
Hiap Hoe is expected to record a net loss for 4Q2014, but will still maintain a profitable position for the full year ended 31 December 2014. The expected loss was mainly attributable to:
1. Agent sales commissions on sold units for Marina Tower, a residential property at Melbourne which forms part of the mix-development project
2. Qualifying certificate extension charges for Treasure On Balmoral
3. Impairment loss for Treasure On Balmoral
4. Foreign exchange loss
5. Fair value loss on investment in Ley Choon Group Holdings
6. Property taxes
mDR Limited is expected to report a net loss for FY14. The expected net loss is mainly attributable to goodwill impairment of certain of its investments, and provision for restructuring costs, slow-moving inventory and doubtful
debts.
Technics Oil & Gas is expected to report an operating net loss for Q1 FY2015.
Source: DBS
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