DBS Equity Research: Wired Daily 13 Apr 2015

kiasutrader

Publish date: Mon, 13 Apr 2015, 05:39 PM

STI - Reduce exposure towards 3500, bargain hunt near 3400

Shell kickstarts mega M&A in Oil & Gas sector. Among Singapore names, we believe Ezion, Ezra and Dyna-Mac are attractive targets

Our STI range for the month remains unchanged at 3430 to 3520. Any undershoot below 3430 should be limited at 3400. Reduce exposure as the STI heads towards 3500 in coming week(s) while a decline towards 3400 is an opportunity to bargain hunt.

Attention this week turns to the MAS monetary policy review tomorrow. Our currency strategist expects the SGD NEER policy bands to be shifted lower as the MAS eases policy.

Technical indicators for Frasers Centrepoint Limited signalled positive alerts, with base support at $1.76. Our fundamental TP for the stock is $2.02 with a Buy recommendation.

We believe the Hang Seng Index has hit resistance last week at about 28,000 and a period of volatility or short-term choppiness at least has set in. The pullback 23.6% downward retracement level is at 26,900 while the 38.2% at downward retracement level is at 26,300. Near-term resistance is at 27,300. Investors who are long on Hong

Kong ETFsshould look to take profit from a short-term tactical perspective at Hang Seng Index 27,300 and look to re-enter at either 26,300 or 25,800.

For the Shanghai Composite, the risk of a pullback is also high given the strong run-up in recent months. We prefer to re-look at China related ETFs only upon a pullback in the Shanghai Composite to 3550. Below that, the next support level is at 3350.

Shell swooped in to buy UK-based BG Group for Eur47bn (US$70bn) in the industry's first mega-deal since the oil price collapse. The deal will be funded by cash and new shares in Shell, and is expected to conclude by early 2016. The Shell-BG deal could spell the beginning of a new wave of megamergers in the sector. Exxon-Mobil is probably the only other supermajor that has the flexibility to do big-ticket deals, while BP could find itself the target of a takeover. Among Singapore names, we believe Ezion'sstrong niche, Ezra's advanced fleet at distressed valuation and Dyna-Mac's track record in topside modules make them attractive targets.

Malaysia's end-Mar15 palm oil stockpile was 21% above estimates on 33% m-o-m jump in output. Areas previously affected by floods have fully recovered, while exports fell short of expectations. Apr15 output may remain flat, but exports could expand 10%; lowering stockpile by 6% m-om. With conditions that were slightly drier than normal, we are looking at lowering Malaysia's FFB yield forecasts by 2- 3%.

Sarine Technologies' profitability for the quarter was affected by current industry conditions and also higher operating expenditures. Revenues for the quarter were impaired by around 50% as compared to the same quarter 2014. Issues of rough vs. polished prices, inventory overhang and working capital liquidity had resulted in an overall negative sentiment in the midstream of the diamond industry during the first quarter of 2015, and manufacturers had reduced output by some 20 - 30% accordingly. Coupled with an anticipated expanded operating expenditures in 2015 primarily for Research and Development and Sales and Marketing, Sarine expects to more or less break even (EBITDA and cash flow should be positive).

Tigerair operating statistics for March 2015. For the month of March 2015, the airline operations in Singapore recorded a 12.1% y-o-y decline in traffic to 772 million revenue passenger-kilometres (RPK), while capacity decreased by 12.4% to 972 million available seat-kilometres (ASK). Consequently, y-o-y passenger load factor increased by 0.2 percentage point to 79.4%. The number of passengers carried fell by 14.5% y-o-y to about 412,000. For the 12 months to March 2015, traffic increased by 4.0% y-o-y to 9.7 billion RPK, while capacity decreased by 1.1% to 11.8 billion ASK. Consequently, passenger load factor was 4.0 percentage points higher at 82.1%. The number of passengers carried grew by 1.4% to 5.1 million.

Yoma Strategic Holdings said that US investment firm Eaton Vance Corp has been a substantial shareholder of the company since October. Eaton has a 5.02 per cent stake in the company, according to Yoma.

KrisEnergy has been awarded the front-end engineering and design contract for the Lengo gas development offshore East Java in Indonesia, and has commenced geophysical and geotechnical surveys at the platform site as well as along the proposed platform-to-shore pipeline route and onshore receiving terminal location.

Source: DBS

STI ETF (ES3)Ezion (5ME)Sarine Tech (U77)Yoma Strategic (Z59)KrisEnergy (SK3)

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