Towards Financial Freedom
DBS Equity Research: Wired Daily 23 Feb 2016
Innovalues - Initiate coverage with BUY and TP of S$1.01
Regional Plantation Companies - CY16F-18F palm oil prices raised by 12-16%; plantation counters' TPs raised up to 38%
We initiate coverage on Innovalues with BUY and TP of S$1.01, which offers potential 21% upside to current price. Innovalues is a beneficiary of raising awareness and stricter regulatory standards on safety and emissions, as it is a key supplier to Sensata, a leading global producer of automotive sensors. As Innovalues taps into the underpenetrated Chinese automotive sensor market alongside Sensata, we project earnings to grow by 30% from S$23m in FY15 to S$30m in FY17F on 30% revenue growth (from S$114m in FY15 to S$148m in FY17) and modest improvement in margins. Beyond the automotive segment, the long-term multi-sector application potential of sensors also bodes well for Innovalues.
CY15 El Nino is expected to wipe out 2.2m MT of potential palm oil output this year; tilting the balance to deficit. CY14 dry weather and skip in fertiliser may compound the impact. Our plantation analyst raised CY16F-18F palm oil prices by 12-16%; and accordingly, plantation counters' TPs raised up to 38%. He now expects CPO price (RM/MT FOB P.Gudang) of 2,600 for 16F and 2,810 for 17F. Top picks for SGX-listed stocks: Wilmar (TP raised to S$3.85; Prev:S$3.70), Bumitama (upgrade to BUY, TP raised to S$0.95; Prev:S$0.86), Indofood Agri Resources (upgrade to BUY, TP raised to S$0.54; Prev:S$0.52).
Ezion issued a profit warning for its upcoming 4Q15 results due on 29 Feb. It is expected to report a net loss in 4Q15 and significant decline for full year results. In view of the challenging market conditions anticipated for the next 12 months, it has carried out an assessment on the impairments of its assets based on their intended redeployment into non O&G activities. Potential rate reduction for existing contracts is another concern to watch out for in the upcoming results.
Separately, Ezion announced that it has entered into a joint venture agreement with a Chinese state-owned enterprise (SOE), which is an integrated logistics, shipping and shipbuilding company. The SOE will be responsible for the integration of domestic requirements for the operations of Service Rigs in the offshore wind farm market in China while Ezion will be taking care of the technical, operational management and commercial aspects of the Service Rigs that will be chartered by the JV. This JV will be complementary to the strategic cooperation agreement with the Chinese SOE in power industry.
Noble Group is expected to report a net loss for 4Q15 and FY15, partly due to the fall in crude oil prices.
PACC Offshore Services Holdings reported a large headline net loss of US$150m in 4Q15, largely stemming from goodwill and asset impairments amidst challenging industry conditions. A final dividend of 0.5Sct was declared. Uncertainty remains on contracts for the 2 SSAVs. Balance sheet is relatively strong· Maintain HOLD, TP: S$0.28.
CapitaLand today plans of its upcoming integrated development at Cairnhill Road, which is set to become the next landmark in the Orchard Road district, when it is completed in end 2016. Comprising Cairnhill Nine, a 30- storey residential tower offering 268 luxurious units and Ascott Orchard Singapore 1, a 20-storey premium serviced residence with 220 units, the integrated development is located a few minutes' walk from Orchard as well as Somerset Mass Rapid Transit stations, shopping malls and premium medical facilities.
US stocks rallied, following the rise in oil price amid speculation that a production freeze by some OPEC members and Russia could eventually help to abate the surplus. According to Bloomberg, Russia said talks on an output freeze will be done by March 1, while Nigeria said some countries should have production capped at higher levels. WTI crude futures soared 6.2% while Brent crude rebounded to USD34.7pbl. Meanwhile, the International Energy Agency (IEA) said a global surplus will persist into next year and limit any chance of a short-term price rebound. While supply and demand will be aligned next year, large accumulated stockpiles will slow the pace of recovery in prices, the IEA said in its medium-term report.
Source: DBS
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