Towards Financial Freedom
DBS Equity Research: Wired Daily 7 April 2015
Brent crude building up for a rise to USD70pbl - ETF
United States Oil Fund, Singapore listed O&G Ezion The price action of oil price since February has panned out much in line with our expectations. We had said back in mid-February to expect a pullback in Brent crude to USD55pbl from USD62.7pbl (refer to Wired Weekly dated 16 February 2015). Post pullback, to expect a subsequent rally to USD72pbl. Bent crude did pullback in recent weeks, looked to have stabilized around USD55pbl and firming up. Meanwhile, WTI has also recovered after making a marginal new low in mid-March. We keep our view for another positive upmove for Brent crude but tweaked the technical upside to USD70pbl. This still represents a 21% upside potential. SIP-qualified investors who wish to ride the anticipated rise can turn to the (Bloomberg quote USO US Equity) ETF whose underlying investment is the WTI oil price futures. For Singapore listed O&G names, our pick is Ezion.
Indonesia newspaper reported that the Indonesian government will impose export levies of US$50/MT for CPO and US$30/MT for refined products (unclear which ones) - starting this week, when the regulation is due to be signed. The funds collected would go towards the so-called "CPO Supporting Fund" (outside the government budget). The levies are to be collected regardless of price, but included in export taxes when CPO price is US$750 or above. The impact of this impending regulation is negative for Indonesian upstream planters and Malaysian planters with significant contribution from Indonesian subsidiaries, as the levies would reduce Indonesian domestic prices by the same amount. Subject to final details of the long-awaited government regulation, we are reviewing our forecasts and TPs with negative bias.
Our currency strategist expects the SGD NEER policy bands to be shifted lower when the central bank meets later this month. This would allow the SGD NEER to stay "neutral", reflecting the "low growth, no inflation, tight labor" economy. It would also allow the central bank to better manage the currency volatility likely to arise when US rates eventually go up.
Frasers Centrepoint Limited reportedly sold 313 out of 430 units (sell through rate of 72% of units launched, 34% of total units in the development) launched at Northpoint residences over the weekend at an average pricing of close to S$1,300psf. This marks one of the most successful property launches in recent times. It is noted that 88% of the buyers are Singaporeans. The strong draw of this property is in its proximity to MRT station and it sits atop a shopping mall (Northpoint City) and bus interchange, giving residents convenience and access (MRT/Buses) to other parts of Singapore. We continue to like FCL for its value (0.7x P/Bk NAV, 0.57x P/RNAV) compared to peers.
TRIYARDS Holdings has secured new orders worth approximately US$100m comprising of a liftboat, a high speed aluminium craft project including integrated logistics support work and a fabrication project. These contracts come at the back of two ice-class Multi-Purpose Support Vessels (MPSVs) contracts and a turret fabrication project valued at more than US$100m (announced on 9 March 2015). Scheduled for completion in 4QFY2016, the order will bring TRIYARDS' current newbuild pipeline to 11 vessels. New substantial shareholder has emerged at Ellipsiz, after its chief executive Chan Wai Leong sold 100 million of his shares for S$15m to David Lum Kok Seng, the managing director of Lum Chang Holdings. With that, Mr Lum raised his stake through the married trade from 2.35% to 20.44% on April 5. Mr Chan's stake was pared from 19.79% to 1.7%.
KTL Global has unveiled key corporate changes following a review of its businesses. These include streamlining its internal and operating efficiencies that will involve a significant relocation of operations from Singapore to Johor, Malaysia. These are expected to translate into significant operational cost efficiencies from FY2016.
US stocks rose with energy shares rallying led by a rebound in oil price on speculation the Federal Reserve will hold interest rates lower for longer. New York Fed President said the pace of rate increases is likely to be "shallow" once the Fed starts to tighten. Investors now believe the FED is likely to start raising rates in September rather than June. The USD managed to recover from an intraday decline to end marginally higher. It now trades at 1.356 against the SGD.
Source: DBS
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