Today's Focus

•  Nam Cheong - Expect net loss for 4Q15. Downgrade to FULLY VALUED, TP: S$0.07

Nam Cheong issued a profit warning, guiding for a net loss in 4Q15 but overall positive profits for FY15. This would be the first quarterly net loss seen since its listing in 2011. We think the loss in 4Q15 could be due to steeper than expected slowdowns in revenue recognition or possibility of order cancellations. Nam Cheong has not secured any order wins since 1Q15. The company's net orderbook has thus experienced a steady decline from RM1.3bn as at end-FY14 to RM880m as at end-3Q15. Eight vessels remain unsold under its 2015 built-to-stock programme, with another 18 unsold under the 2016 programme. Among these, 12 are PSVs, which remain one of the most oversupplied vessel types in the offshore service vessel market. This does not bode particularly well for Nam Cheong's vessel sales prospects in the near to medium term. In light of worsening industry fundamentals, we have slashed our net profit estimates for FY16 and FY17 by 64% and 49% to RM29m and RM42m respectively. Downgrade to FULLY VALUED, TP: S$0.07 (Prev S$0.09).

3Q16 earnings for SATS in line, led by better margins from the disposal of the low margin BRF business. Maintain HOLD, TP S$3.65. Upside is largely priced in at +1.5SD PE valuation. We also believe that downside to the stock is limited since it is supported by 4% dividend yield.

The Stratech Group announced that its flagship iFerretTM intelligent Airfield/Runway Surveillance and Foreign Object & Debris (FOD) Detection System has been selected for performance assessment of a cost effective surveillance system to track aircraft and ground vehicle movements in areas other than runways. These places include taxiway crossings, apron, terminal and cargo areas. The project is undertaken by the Federal Aviation Administration (FAA) Airport Safety Technology Research and Development Subteam and the University of Illinois Center of Excellence for Airport Technology (CEAT) as part of an on-going effort to improve overall airport safety. This opens new market segment for Stratech when adopted by airports in the US, and around the world.

AusGroup is expected to report a net loss for the half year ended Dec 15. This was mainly due to the continued delay in the commercialisation of the Port and Marine business, higher capital expenditure related to the exploration and production, and also impairment write-downs.

EMS Energy expects to report a net loss for FY2015 mainly attributable to:
(a) delay in recognition of revenue due to delay in project schedule;
(b) one-off professional fees and other expenses incurred for the acquisition of the Koastal Group; and
(c) lower share of profit from associated company.

SRX Property's flash rental index for private non-landed homes showed a 0.2% rise in January this year compared to a month ago - a second consecutive month of increase after a 0.4% rise in December. Rents in January were still some 14.6% lower than the peak in January 2013 and 5.5% below that of January 2015, based on the SRX's rental index. Consultants do not think this marks an inflexion from the 10 straight months of rental decline since February 2015.

Source: DBS