DBS Equity Research: Wired Daily 31 July 2015

kiasutrader

Publish date: Mon, 03 Aug 2015, 11:55 AM

NOL - Better-than-expected results. Upgrade to BUY with TP of S$1.08

SMRT - A disappointing start. Downgrade to Fully Valued with revised TP of S$1.27

Headline numbers for NOL were boosted by one-off APL Logistics divestment gains. Stripping out the contribution from discontinued logistics operations, the liner division would have posted a net loss of about US$11m in 2Q15, still better than our expectations and also an improvement over the US$36m net loss recorded in 1Q15. Liner losses reduced on better cost management in 2Q15. We now forecast minor profits for NOL in FY15/16 amidst better cost efficiencies and benign oil price environment. Upgrade to BUY with TP of S$1.08 (0.8x P/BV).

SMRT registered a disappointing set of 1Q16 results. We downgrade to Fully Valued with revised TP of S$1.27 (Prev S$1.59). 1Q16 results were below our expectations with net profit down by 10% y-o-y to S$20.1m despite revenue growing by 7.8% y-o-y to S$320.3m. Disappointment arose from higher staff and R&M costs which more than offset benefits from fare increase and lower energy costs. Recent train breakdown throws more uncertainty to earnings visibility. We cut forecasts by 20%/18% on revised cost assumptions. Upside risk to our recommendation is the transition to rail framework but timing is hard to pin down.

2Q15 results for SembCorp Marine below on lower rigbuilding revenue, associate/JV losses and fair value adjustment. 4 Scts interim DPS was declared, 1 Sct lower than last year, in line with c.40% payout ratio. We trimmed FY15/16F net profit by 15%/10%, largely to reflect the deferments of two Transocean drillships and potentially Petrobras projects. Maintain HOLD; TP lowered to S$2.55 (Prev S$2.89).

China Merchants Hldgs (Pacific) reported a good set of results in 2Q15, with earnings from its core toll road operations up 6% y-o-y to HK$194.5m, on toll revenue growth of 9% y-o-y to HK536.8m. As last year's figure's included a gain of HK$68.3m from the disposal of its property business, net earnings fell 22% y-o-y to HK$195.1m. At half time, the Group's net profit from core toll road operations was flat at HK$342.1m, in line with our expectations. A S3.5cts interim dividend was declared, the same as last year. The Group also announced a 1-for-2 rights issue of up to 633.8m new shares at an issue price of S$1 per share. The rights issue price of S$1 represents a 1.5% discount to yesterday's close of S$1.015, and the new shares are not entitled to the proposed interim dividend. This net equity fund raising of between S$583m to S$633m would be entirely for the purpose of partially funding its recently announced acquisition of three toll roads in Guangxi.

Terratech Group has been awarded a RMB240m contract for the supply and installation decoration works for a property development project in Beijing, China. This is the first major milestone achieved by the Group in its continuous effort to facilitate its current sales and marketing efforts for its marble products after acquiring Shaanxi Hengyu last year.

ES Group is expected to report a net loss for HY2015. This was mainly attributable to a drop in sales revenue due to slowing down of projects. TA Corporation and LH Group also expect to report a loss for 2Q15.

Auditor reporting standards in Singapore will be enhanced from 2017 onwards, allowing investors and other stakeholders to draw deeper insights from their reports of listed entities. The main change to auditor reporting standards for Singapore-listed companies will be in the introduction of a "key audit matters" (KAM) section in the company's audit report. Auditors are required to highlight issues such as the valuation of investments.

Source: DBS

Sembcorp Marine (S51)ES (5RC)TA (PA3)

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