Towards Financial Freedom
DBS Equity Research: Wired Daily 13 Jan 2016
Ezion - Partner with SOE to jointly market liftboats for offshore windfarm market
Ezion announced that it has secured an agreement to jointly market two liftboats being built by a Chinese State Owned Enterprise (SOE) to support the offshore windfarm, oil and gas activities in the energy sector. Ezion will also provide the technical expertise for the operations and deployment of the two rigs and has been granted options to purchase the rigs. While we do not expect financial impact from the two units in the near term as the newbuilds will take 2-years to deliver, this reinforces Ezion's strategic shift to diversify into the windfarm market in a big way. No change to our BUY call on Ezion and TP S$1.00 (0.8x FY15 PB).
1Q16 core earnings for SPH in line. Revenue declined by 3.5% to S$296m. We believe earnings and DPS will continue to be challenged by the sluggish GDP growth. We continue to see downside to the stock for now and therefore maintain our FULLY VALUED recommendation and S$3.51 TP.
Malaysia's Dec-15 palm oil output came in below forecast at 1.399m MT. Year-end stockpile of 2.632m MT was in line, as lower output was offset by lower net export. Palm oil prices in the futures market have notably traded higher. We expect palm oil spot prices to close its gap vis-à-vis futures in the near term (i.e. spot prices to improve). Although current CPO price of US$510/RM2,169 remains below our CY16F average of US$538/RM2,350, we believe the upside risks (i.e. lower yields, higher biodiesel consumption, weaker
Ringgit) are greater than the downside risks. We continue to prefer Wilmaras our pick for the plantation sector.
Olam has acquired Amber Foods Limited which owns the wheat milling and manufacturing assets of the BUA Group in Nigeria for an EV of US$275m (c.S$397m). We expect a potential 3-16% uplift to FY16-18F core earnings. The acquisition is expected to strengthen Olam's position as the second largest wheat miller by sales volume and make it a leading pasta player in Nigeria. Maintain HOLD call and TP of S$2.01.
It was reported in the Business Times and Straits Times that there is a large increase in data centre supply in Singapore this year, which saw a 47% increase in data centre supply, potentially putting short-term pressure on rents. Keppel DC REIT's two properties in Singapore contribute only 41% of the REIT's group revenues. Given the increase in supply, there is risks of tenants migrating from ageing facilities or moving to better quality data centres. In our view, these risks are mitigated by its quality portfolio in Singapore. We continue to like KDCREIT's exposure to the rising global usage of data and demand for data centres, as well as the defensive elements in its earnings. Maintain BUY call with TP of S$1.14.
US stocks held onto early gains despite oil prices dipped below US$30 a barrel for the first time since 2003. Stabilization in China's markets, including a firming of the yuan, helped Dow to register a 118pt gain to close at 16,516.
Source: DBS
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