Towards Financial Freedom
DBS Equity Research: Wired Daily 5 Nov 2015
Yangzijiang Shipbuilding - 3Q15 dragged by non-cash items. Reiterate BUY with S$1.55 TP
Yangzijiang Shipbuilding's 3Q15 net profit of Rmb681m (-16% y-o-y) brings 9M15 net profit to Rmb2.4bn (-15% y-oy), making up only 67% of our full-year forecast. Key variance came from: 1) unexpected losses on disposals of Ashare investments and property subsidiary; and 2) unrealised forex losses. Overall shipping and shipbuilding outlook remains challenging as the impact of China slowdown filters through. Deferment is likely especially for bulk carriers while cancellation risk is less of a concern given the high 20-40% collection prior to delivery. Dual-listing and M&A plans are still on the cards. Reiterate BUY with S$1.55 TP (Prev S$1.62) plus 4-5% dividend yield.
PACC Offshore Services Holdings reported 3Q15 net profit of US$12.6m, more than doubled q-o-q as gross margins for OSV division recover to 14%. Visibility on contract coverage is low; however it is hard to say if these margin levels can be sustained. No updates as yet on contract renewal for the 1st SSAV and contract or delivery date for 2nd SSAV. Maintain HOLD with TP of S$0.35 given these uncertainties.
Frasers Centrepoint Limited (FCL) continues to offer strong earnings visibility by having locked-in almost c.S$3.5bn sales across its various major markets of Singapore, China and Australia. The group has executed well which enables it to substantially de-risk its exposures in the slowing residential market in Singapore, while its development projects in Australia are mainly in the mass- to mid-end segments which continue to deliver consistent sales. We have a BUY recommendation on FCL, with a target price of S$2.36 based on a 30% discount to RNAV.
Kencana Agriexpects to report a consolidated net loss for 3Q2015 mainly due to foreign exchange losses resulting from the depreciation of the IDR against the USD and lower average selling prices of CPO.
Tiong Woon Corporation expects to report a loss for the 1st quarter ended 30 September 2015, largely due to foreign exchange loss and provision for doubtful debts.
Rickmers Maritime said it has suspended distributions to unitholders for the time being to conserve cash flow until charter conditions improve. The business trust made this decision as cash from operating activities for the three months ended Sept 30 tumbled 24% y-o-y to US$16.9m. Until this suspension, Rickmers has been paying out distribution per unit of 0.6 US cent every quarter since 4Q2010.
Hyfluxhas signed an agreement to acquire a 30% stake in consumer water technology company, Kaqun Europe, for US$8m. Kaqun Europe was launched in 2002 and pioneered a water with beneficial properties that promote overall wellbeing.
In property news, negotiations are off "for now" between BlackRock and a consortium that includes CapitaLand and Norges Bank Investment Management (NBIM) on the sale of Asia Square Tower 1 in what could be the biggest office transaction in Singapore. Word in the market is that BlackRock has been talking to another party that was shortlisted following the close of an expression of interest exercise for the sale of the tower in August. The potential buyer is believed to be a consortium being stitched together by ARA Asset Management that includes South Korean SWF Korea Investment Corporation (KIC) and the California Public Employees' Retirement System (Calpers). BlackRock may also pursue discussions with other bidders that have expressed interest in the asset - including Singapore's Keppel Land; a tie-up between Abu Dhabi Investment Authority and Lend Lease; and China's Ping An Insurance (Group).
October Nikkei Singapore Purchasing Managers' Index (PMI) stood at 50.2, its slowest pace in six months. It was also a sharp drop from September's 51.4. A drop in new business orders pulled down the headline PMI figure. The volume of new orders received by private sector companies declined for the first time in three months, and at the fastest rate since May. Falling employment was another dampener.
US stocks fell moderately after Janet Yellen lifted bets that the FED is closer to raising interest rates and October ADP employment change for the private sector came in a little better than expected at 182k (consensus 180k). Yellen's commented that December remains a "live possibility" for a rate hike. Speaking before the House Financial Services Committee, she said an improving economy has set the stage for a December interest-rate increase if economic reports continue to assure policy makers that inflation will accelerate over time. The USD climbed and oil price fell more than 3% after US government data showed inventories climbed.
Source: DBS
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