DBS Equity Research: Wired Daily 2 Feb 2016

kiasutrader

Publish date: Wed, 03 Feb 2016, 11:34 AM

SIA Engineering - Possibility of sequential earnings recovery, special dividends, and potential M&A activity. Upgrade to BUY, TP S$3.84

3Q-FY16 net profit for SIA Engineering came in slightly above estimates at S$49.4m, boosted by one-off gains from the JV/associate line. Worst could be over for earnings. Two things stood out in the latest 3Q16 results - core operating margins continued on a recovery trend to 10.5% and engine MRO centres registered sizeable rebound in profitability after some relatively weak quarters. Limited growth in FY16/17, but there is potential for special dividends. Given the possibility of sequential earnings recovery, special dividends, and potential M&A activity, we upgrade our call to BUY, TP of S$3.84. The stock is down around 15% since its recent peak last November and provides a better entry point.

Vard Holdingshas secured a new contract for the design of one Antarctic icebreaking vessel for the Chilean Navy. The contract value is approximately 4m Euros. Delivery of the vessel is scheduled in 2021.

IPS Securexhas entered into a new reseller agreement with UnderSea Sensor Systems, Inc. (USSI) for the distribution of USSI's Hyperspike range of acoustic hailing devices, for a period of five years. The agreement now covers the geographical regions of Australia, Brunei, Cambodia, China, Hong Kong, Indonesia, Macau, Malaysia, Myanmar, Japan, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, and Vietnam on an exclusive business, with India on a nonexclusive basis. China is a new addition to the list and is on an exclusive basis, whereas Hong Kong and Macau, which was previously on a non-exclusive basis under the existing reseller agreement, is now on an exclusive basis under the agreement.

Cordlife Grouphas extended its strategic alliance with CellResearch Corporation (CRC) via an S$8.4m investment which will be funded by internal resources. The funds will be used to further clinical development of advance wound healing technology with umbilical cord lining.

Developers' sentiment weakened further in the fourth quarter of last year, a survey by the National University of Singapore (NUS) and the Real Estate Developers' Association of Singapore (Redas) has found. The Current Sentiment Index, which tracks changes in sentiment in the preceding six months, fell from 3.7 in Q3 to 3.6 in Q4. The Future Sentiment Index, which tracks sentiment in the next six months, also took a dip - from 3.7 in Q3 to 3.4 in Q4.

The purchasing manufacturers' index (PMI) started the year on a weak note in China, with both the official and Caixin index still in negative territory last month, as the manufacturing sector continued to restructure amid a sluggish global environment. The official PMI published by the National Bureau of Statistics fell for the sixth consecutive month to 49.4, slightly below expectations on the back of weak external and domestic demand. Meanwhile, the PMI published by Caixin, which is more representative of small firms than the official figure, picked up slightly last month. It rose to 48.4 from 48.2 in December.

US stocks pared earlier session losses to end just marginally down after a FED Vice Chairman said the impact of recent market turbulence on US growth could factor into decisionmaking. Energy stocks fell as oil price pulled back from recent gains. This further downplays the probability of a March rate hike. Signs that central banks in Europe and Japan stand ready to do what is needed to spur growth underpinned equity markets in recent days.

Source: DBS

SIA Engineering (S59)IPS Securex (42N)Cordlife (P8A)

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