Towards Financial Freedom
DBS Equity Research: Wired Daily 15 May 2015
Singapore Airlines - Better outlook ahead; maintain BUY, S$12.80 TP
NOL - Low fuel prices not helping much. Downgrade to HOLD with revised TP of S$1.07
Ezion - Proxy for oil price rebound. Reiterate BUY; TP lowered slightly to S$1.50
ST Engineering - Expect seasonal uplift in 2H15; maintain BUY with TP of S$3.80
Singapore Airlinesreported FY15 net profit of S$368m (+2% y-o-y), below expectations due to larger than expected drag from fuel hedging losses and associate' losses. Final DPS of 17Scts declared (full year: 22Scts), representing 70% payout. While FY16/17F earnings are cut by 23%/13%, SIA's recovery is still projected to be strong as fuel cost savings kick-in. Maintain BUY, S$12.80 TP (Prev S$ 12.90).
NOL's liner division continues to underperform in 1Q15. Spot freight rates at historical lows as liners pass on fuel cost benefits to customers in market share war. We no longer expect NOL to be profitable in FY15. Downgrade to HOLD with revised TP of S$1.07 (Prev S$ 1.10).
We have trimmed FY15/16 net profit for Ezion by 15%/2%, adjusting for rig downtime, delivery rescheduling, and weak offshore logistic business. No reduction in dayrates or cancellations thus far but increase in capex on customer requests for rig upgrades. Ezion is one of the most resilient O&G names and best proxies for oil price rebound. Reiterate BUY; TP lowered slightly to S$1.50 (Prev: S$1.55).
1Q15 revenues and net profit for ST Engineering were slightly below expectations but comparable to 1Q14 levels. Aerospace, Electronics stable but some issues to contend with in Land Systems and Marine divisions. Expect seasonal uplift in 2H15; STE remains on track to earnings recovery after a weak FY14 Maintain BUY with TP of S$3.80.
Thai Beverage's 1Q15 net profit grew 10%; within expectations. Beer turned in a better performance, while Non-Alcoholic Beverage posted a bigger loss, given launch of new products. We project growth to continue despite softer consumer sentiment, given its wide portfolio range. Maintain BUY, TP adjusted to S$0.81 (Prev S$ 0.80).
Singtel's 4Q15 underlying profit of S$950 (+6 y-o-y, -2% qo-q) in line; strong associate performance continued, offsetting weak Singapore performance. Net profit growth may be slow in FY16 due to Trustwave acquisition, not included in the official guidance. Maintain HOLD with unchanged TP of S$4.45.
Genting Singapore reported another weak quarter with 1Q15 net profit down 73% y-o-y to S$62.7m VIP segment continues to underperform with rolling chip volumes down c.50% y-o-y. Outlook for VIP market remains challenging; FY15-17F earnings cut by 8-13%. Maintain HOLD, TP lowered to S$0.96 (Prev S$ 1.00).
CWT's 1Q15 net profit of S$29.2m (-16% y-o-y) below expectations due to start-up costs and translation losses on a Euro-denominated intercompany loan. FY15/16F earnings cut by 8%/9%, taking into account the weak 1Q15 results. Long term growth prospects are underpinned by warehouse expansion plan. Maintain BUY with S$2.08 target price.
1Q15 earnings for Nam Cheong muted as only two vessel sales contracts were secured YTD in FY15. The Group's ambitions have toned down as part of the 2015 built-tostock shipbuilding programme is pushed back to 2016. We cut FY15/16 earnings estimates by about 30% each to reflect the deferred revenue recognition and potentially lower gross margins. Maintain HOLD with lower TP of S$0.34 (Prev S$ 0.36).
Dip in OSV fleet utilisation leads to a disappointing set of results in 1Q15 for Pacific Radiance; improvement will be slow. No boost expected from JV/associate contributions or gains on asset disposals in the near term either. We cut FY15/16 net profit estimates by 49% and 36% respectively to account for the above. We could be past the worst, but still far from normalised levels; maintain HOLD with TP of S$0.67 (Prev S$ 0.78).
Contracted sales for Yanlord Land Group came in faster than expected with YTD sales target hit rate better than peers at 25%. Yanlord targets to lock in Rmb10bn sales by end-May, as the recent loosening has unleashed upgrader demand in Tier 1/2 cities. Management has raised ASPs in recent launches in Shanghai and Nanjing with strong demand. Upgrade to BUY with new TP at S$1.49 (Prev S$0.99).
Midasposted 1Q results that were within expectations, with net profit down 5.3% y-o-y to RMB10.9m. We maintain our view that while we expect Midas to see substantially better gross profit in 2015F (+42% y-o-y), much of that growth is to be offset by higher operational and finance costs. Instead, we project 2016F to be a much better year for the Group with net profit growth of 150% y-o-y as it ramps up utilisation of its new plant. Maintain BUY, TP S$0.49 based on 0.9x P/B.
CapitaLand issues S$650m in principal amount of convertible bonds. The bonds are convertible at the option of the holder, at any time from 19 July 2015 to 29 May 2025, at initial Conversion Price of S$4.97 for each new Share.
Macquarie International Infrastructure Fund (MIIF) announced it has agreed to sell its 81% effective interest in Hua Nan
Expressway for a total cash consideration of S$110m, following which it will delist from Singapore Exchange (SGX) and wind up. MIIF intends to distribute the net proceeds and any residual cash following the settlement of its liabilities to shareholders by way of a redemption of ordinary shares in the capital of MIIF. The total proceeds to be distributed to shareholders following the proposed divestment are expected to be approximately 8.25 Singapore cents per share.
In US, the Dow jumped 191.75 (1.06%) to 18,252.24, while the Nasdaq gained 69.10 (1.39%) at 5,050.80, led by strong gains in Apple, Facebook and other technology stocks. The yield on the 10-year US Treasury fell to 2.24%, while the 30-year dropped to 3.06%.
Source: DBS
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
