Towards Financial Freedom
DBS Equity Research: Wired Daily 18 June 2015
ASEAN Small Mid Caps Radar - SGX-listed stocks: Vallianz Holdings and Trek 2000 International
Ezion - AMS withdrawn suit; key overhang removed
We highlight two SGX-listed stocks - Vallianz Holdings and Trek 2000 International in our monthly ASEAN Small Mid Caps Radar. Vallianz is the second largest OSV supplier to Saudi Aramco. The Group is growing fast and has a young fleet - it owns and operates 39 OSVs with an average age of three years. Approximately 60% of Vallianz's fleet is on 5-year long term charters with Aramco, providing high earnings visibility and a cushion to ride out the oil price volatility. Valuation is undemanding at 0.7x NTA and 7x annualised 1Q15 earnings against decent ROE of c.10%.
Trek provides customised solutions to the digital industry, with customers and partners such as Toshiba, Panasonic, Olympus and Pentax. Trek's innovations have wide ranging applications in products such as cameras, wearable technologies and medical products. Trek's earnings more than doubled in 2014 (from a low base) and is likely to see strong growth momentum ahead, based on the contracts and collaborations won in 2014. The Group's "Cloudstringers" Internet portal - an ecosystem of storing, sharing and exchanging of digital content could be a game changer.
Ezion announced that Atlantic Marine Services (AMS) has withdrawn the court proceedings against the Group. Ezion reiterates that the claims by AMS in the suit are frivolous and hold no water. Post a change in management, AMS has expressed intention to carry on the partnership with Ezion in the North Sea while Ezion commented that it will continue to engage with the new management of AMS. This is a winwin situation. Ezion has corrected >10% since the surface of the suit. We expect share price to regain ground following the elimination of a key overhang. Ezion remains one of our top pick in O&G sector in view of its resiliency and undemanding valuation. Maintain BUY with TP of S$1.50 based on 8x FY15 PE.
Frasers Centerpoint Limited (FCL) announced the acquisition of Malmaison Hotel du Vin group (MHDV) of boutique lifestyle hotels for GBP363.4m (c. S$760m). The transacted price is based on a market value of GBP355.1m (S$742.2m) from Savills, with the difference of GBP8.4m due to working capital adjustments. The purchase price implies a valuation per key of GBP170k/room. MHDV owns two upscale boutique lifestyle brands - Malmaison and Hotel du Vin and has a portfolio of 29 boutique lifestyle hotels and 2,082 keys across 25 cities in the UK. Through this acquisition, Frasers Hospitality will almost double their offering in Europe to about 4,000 keys and will propel the group as one of the leading players in the UK. The acquisition is expected to be accretive to earnings with the contribution from the FCL's hospitality division to increase to c.13% of assets vs 9% currently. On a proforma basis, the acquisition is expected to increase the group's EBITDA by 63% and further increase the group's recurring cashflows. Funding for the deal is likely to be through internal resources and from recent proceeds of FCL's bond and perpetual issues.
SingPost has acquired a 30% stake in Australian e-commerce firm Hubbed Holdings for about A$4.3m (S$4.45m). SingPost said that if certain agreed performance benchmarks were met, SingPost (via indirect wholly owned Quantium Solutions (Australia)), would pay an additional A$1m to Hubbed. Otherwise, Quantium would subscribe for another 5% shareholding interest in Hubbed. Hubbed, a one-stop ecommerce service aggregator, has built a network of some 680 newsagents to provide a parcel delivery service in every major city across Australia. Its net asset value as at April 30 was approximately AS$0.94m.
United Engineers (UE) said it has found a series of irregular transactions in relation to its subsidiaries. These transactions appear to have taken place between 2010 and 2015 and the value of the contracts amount to approximately S$11m, based on available information and pending further inquiries. In the irregular transactions that were uncovered, UE said that quotations for proposed contracts were found to have been forged by certain employees. "This was carried out with the view of preferring certain third-party contractors, which would then be awarded the relevant contracts."
Logistics Holdings has secured a S$13.8m contract from JTC Corporation for addition and alteration works on conserved buildings at Seletar Aerospace Park. The latest contract win boosted the Group's order book to S$278.9m, with projects expected to last until the financial year ending 30 June 2019 (FY2019).
Geo Energy Resources announced that the Company's subsidiary, PT Sungai Danau Jaya (SDJ), had on 17 June 2015 entered into a memorandum of understanding for cooperation of coal mining services with PT Bukit Makmur Mandiri Utama (BUMA). SDJ holds production operations mining business licenses for an aggregate area of 235.5 hectares located in the Sub-District of Angsana and Sungai Loban, District Tanah Bumbu, Province of South Kalimantan. BUMA is a company engaged in the provision of coal mining services. BUMA shall provide mining services for the entire life of the mine or until all of the coal reserves have been fully produced and/or extracted from the mining area.
Non-oil domestic export (NODX) performance in May dipped 0.2% y-o-y, worse than market's expectation of a 2.3% increase. Last month's decline came after a 2.2% rise in April and a 18.5% surge in March. Trade promotion agency International Enterprise (IE) Singapore blamed the electronic NODX for the NODX's poor performance in May, with the non-electronic NODX providing insufficient support. Thus while the 2.5% y-o-y drop in the electronic NODX last month was less sharp than the 4.0% fall in April, it still outweighed the increase in the non-electronic NODX. The non-electronic NODX rose just 0.8% in May, against a 4.7% increase in April. Weak external demand continued to weigh heavily on Singapore's exports. Except for exports to the US, South Korea, Thailand and Hong Kong, shipments to all of Singapore's major markets declined. Indonesia, the EU and China were the biggest contributors to the NODX's drop in May.
U.S. stocks rose and the USD fell after the FED signaled the pace of monetary-policy tightening will be gradual even as the central bank prepares to raise interest rates this year. The Fed maintained its forecast for the FED funds rate to rise to 0.625% this year, while lowering its projection for 2016. FED Chair Janet Yellen said the committee wants to see more decisive evidence on growth and that she anticipates only gradual increases in borrowing costs will be warranted, even as officials bolstered their assessment of the US labour market and economy. Meanwhile, data showed that US refineries unexpectedly reduced operating rates while stockpiles of crude at the nation's largest hub rose last week. WTI crude dipped 0.1% to USD59.93pbl.
Source: DBS
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