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DBS Equity Research: Wired Daily 8 May 2015

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Publish date: Fri, 08 May 2015, 06:18 PM


Sembcorp Industries - 1Q15 results below, downgrade to HOLD; TP lowered to S$4.30

STI has fallen to the 3430 support level and around its 65-day exponential moving average. Technical oscillators such
as the 14-day RSI is approaching oversold at 36. The McClellan Oscillator, which registered an overbought level of 37 in mid-April, is also approaching an oversold level of -28 (levels below -30 considered oversold, below -50 extreme oversold).

A rebound is seen in the current session following the correction this week, in line with the gains on Wall Street. Upside in coming sessions though should be capped at 3460 because 1) Investors will be assessing Greece's ability to repay the IMF €750mil on May 12th; the sum is much larger than the USD222mil that it managed to do so this week. 2) Janet Yellen's comments on US equity market valuation may turn investors' attention towards the elevated valuation of other equity markets that have performed well in recent months. 3) STI's forward PE level is tweaked about 30pts lower thus for in this 1Q results season. The 13.4x (-0.25SD) 12-mth forward PE is now at 3420 (3450 previously).

Get pass Greece loan repayment next week on a good note and the STI can head back to 3500. If that doesn't go well and global markets react negatively, a further dip towards 3370 (200-day EMA, closer to 13x or -0.5SD fwd PE) is possible before the correction ends. For now, we give Greece the benefit of the doubt.

Sembcorp Industries'1Q15 results below expectations. 1Q15 net profit of S$142m (-23% y-o-y, -41% q-o-q) fell short of our S$180m forecast, due to weaker than expected earnings across the board. Utilities was the key underperformer. We have trimmed FY15/16F core PATMI by 11%/10%. Singapore power's performance could get worse before it gets better. Key mitigating factor- India power plants to contribute more meaningfully from 2016 onwards. While we are positive on the long term prospects of SCI, near term growth seems muted and upside catalysts are lacking. Downgrade to HOLD; TP lowered to S$4.30 (Prev S$4.80).

1Q15 core net profit for Wilmar came in at US$263m (+22% y-o-y; -36% q-o-q) - ahead of our forecast but slightly below mean consensus on annualised basis. Including nonoperating items, reported 1Q15 earnings came in US$241m (+49% y-o-y; -40% q-o-q). The better-than-expected 1Q15 results were attributable to: more than 10-fold increase in Oilseeds & Grains pretax profit, jump in associates contribution and drop in FX losses. More updates post briefing today.

M1 has surprised us by taking a minority share in a telecom player in Oman. We are not excited by its investment in a new mobile reseller in a saturated market with 4 mobile players and multiple mobile resellers. Maintain HOLD with lower TP of S$3.65 (Prev S$ 4.05) as we assume 80% probability of entry of 4th mobile player in Singapore.

1Q15 results for Petra Food below expectations on weak consumer sentiment and weaker IDR. We expect a challenging 2015 but 2Q15 sales should pick up, supported by Lebaran festive spending. Cut FY15F/FY16F earnings by 12%/17%, as we have also lowered our gross margin assumptions in view of relatively higher input costs. Maintain FULLY VALUED, TP lowered to S$3.01 (Prev S$ 3.29).

CosmoSteel Holdings expects to record a lower profit for 2Q2015 and HY2015 as compared to the previous corresponding financial periods, mainly due to a decrease in revenue from customers in the Energy Sector on the back of flagging oil prices.

Hu An Cable Holdings expects to report a loss for 1Q15 mainly attributed to: 1) A decrease in gross profit as a result of lower sales volume of all products and lower selling prices; 2) Impairment loss on doubtful trade receivables due to slow debt collection.

Ziwo Holdings is expected to report a net loss for 1Q2015, mainly attributed to a share award expense amounting to
approximately RMB 2.4m.

With reference to yesterday's news on TEE Land, the sentence should read as "TEE Land has awarded a contract of RM266.75m" instead of "TEE Land has been awarded a contract of RM266.75m".

In property news, SRX Property's April flash estimate showed that overall resale prices of Housing & Development Board flats have eased 6% y-o-y, with prices in mature estates faring relatively better, with a 4% drop. Prices in non-mature estates have eased more, to the tune of 7.4%, over the same period. On a month-on-month basis, SRX Property's overall price index for HDB resale flats rose 0.2% in April - contrasting with a 0.8% m-o-m drop for March.

Source: DBS
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