Towards Financial Freedom
DBS Equity Research: Wired Daily 1 Mar 2016
Yangzijiang - Valuations undemanding, decent yield. Reiterate BUY, TP S$1.25
UOL - Deep value large cap play; maintain BUY, TP: S$7.39
Japfa - 4Q15 earnings significantly ahead of expectations
Yangzijiang reported headline profit of only Rmb42m (-93% y-o-y) in 4Q15, due to massive impairments of Rmb824m. Excluding provisions, core profits were actually commendable, with shipbuilding business registering an impressive 20% gross margin. While the outlook for shipping and shipbuilding remain uninspiring, Yangzijiang is poised to emerge stronger in this downturn. Valuation is undemanding at 0.7x PB and 6x FY16F PE. Our TP is lowered to S$1.25 (Prev S$1.55), following earnings revisions. This translates to a fair 1x P/Bv and 9x PE, against 10-11% ROE and 4.5% yield. In addition, Yangzijiang sits on net cash of 44 Scts, representing 36% of NTA and 47% of market capitalisation. Reiterate BUY.
UOL's FY15 results below our and consensus estimates, mainly due to impairment losses, lower fair value gains of investment properties and sale of land in FY14. Trading at an attractive 0.6x P/NAV, which is close to its -2 SD historical average, we believe that negatives from a weakening operational outlook has been priced in. Maintain BUY, TP: S$7.39 (Prev S$8.47).
Japfa's 4Q15 earnings were significantly ahead of expectations on strong contribution from Japfa Comfeed. Strong Animal Protein contribution was driven by higher DOC/broiler ASP - partly offset by lower DOC volume. Dairy 4Q15 EBITDA was also ahead of expectations on higher yield, which mitigated weak raw milk prices in China. Forecasts and TP of S$0.90 unchanged for now, BUY call reiterated.
Ezion swung into net loss of US$63.5m in 4Q15 due to asset impairments amounted to US$81m. Gross margin was weaker than expected, contracted 26.8ppt y-o-y and 5.1ppt q-o-q to 23.8%. Full year net profit fell 80% to US$36.8m. More update after briefing today. Separately, Ezion proposed 1-for-5 bonus warrants issue exercisable within four years from issuance date at an exercise price of S$0.50 (last closing price). This could enlarge the share cap by up to 20%. If fully exercised, Ezion would receive gross proceeds of c.S$162m, which would be utilised for investment, debt repayment and working capital purposes.
Olam's4Q15 core profit of S$66.9m (-41% y-o-y) was below expectations. FY16-17F core earnings were raised by 5-6% after incorporating recent BUA Group acquisition. We maintain our HOLD call but lowered our TP to S$1.58 from S$2.01. We believe investors will remain on the sidelines until Olam delivers on its positive free cash flow targets by 2016 and successfully integrates its recent US$1.2bn acquisition of ADM Cocoa.
Indofood Agri Resources reported 4Q15 underlying pretax ahead of expectations on higher volumes. DPS of 0.52 S cents proposed. We expect a drop in FFB yields this year, offset by higher ASP and volumes from maturing estates. FY16F/17F forecasts tweaked by -4%/+1%, TP S$0.52; BUY rating reiterated.
Golden Agri Resources reported 4QFY15 net loss of US$88.4m that brought FY net loss to US$16.7m, against US$186.9m consensus expectations. A 26% y-o-y drop in Plantations EBITDA dragged performance; as CPO prices declined 25% and FFB output grew by only 3% on dry weather. But Palm & lauric EBITDA jumped 89% due to capacity expansion and improved downstream margins. Forecasts & TP of S$0.40 under review.
Starburst reported net loss of S$1.7m in FY15, below expectations. The weak performance was because for FY15, the existing projects were in completion stage while the new contracts are still at the beginning of fabrication work phase, thus project revenue recognition is at a lower level, as compared to the higher value-added fabrication work phase in FY14. It is a beneficiary of the higher defence spending in Southeast Asia and the Middle East. We continue to expect growth in the Middle East, despite decline in oil prices. The global trend of rising terrorism threats bodes well for the group. Starburst expects to secure more contracts for firearm shooting ranges and tactical training mock-ups to add to its orderbook in FY16. Maintain BUY, TP S$0.37.
4Q15 earnings for Mermaid Maritimedragged down by significant asset impairments as guided earlier.Subsea fleet utilisation will be a challenge going forward, as orderbook dwindles. Maintain FULLY VALUED with TP of S$0.09.
4Q15 net loss of NOK83m for Vard Holdingswas largely in line. Dearth of order wins, orderbook has fallen 43%. Vard plans to diversify into new markets to counter the offshore slump, but unlikely to turnaround soon. Maintain FULLY VALUED with TP of S$0.13.
Yoma Strategic Holdings has signed an importer agreement with Volkswagen Aktiengesellschaft (AG). Under the agreement, Yoma will serve as the official importer and distributor of a range of passenger cars and SUVs manufactured by Volkswagen AG, within Myanmar. This arrangement expands upon the Group's existing Volkswagen after-sales, service and Volkswagen genuine spare parts distribution business which commenced following the signing a service partner agreement in October 2013.
Bank lending in Singapore extended its malaise into 2016, as weakness across both business and consumer lending translated into flat growth in loans in January from the previous month. Loans through the domestic banking unit stood at S$600 billion in January. Business loans in January stood at S$357 billion, largely unchanged from a month ago. Consumer lending in January was also broadly unchanged, at S$243 billion.
The government has trimmed development charge rates for most of the major use groups for the Mar 1 to Aug 31 period this year. On average, DC rates have been trimmed for industrial use by 3%, followed by cuts of 2% each for commercial and hotel/hospital uses. For non-landed residential use, the average DC rate has been shaved by one per cent. However, the rates for landed residential use were left untouched as were the rates for place of worship/civic and community institution, and other use groups.
US indices gave up early session gains to end lower. This is despite the PBOC's move to lower the required reserve ratio for banks, which lifted emerging markets and oil price. For Singapore stocks, we see the STI's rebound moving higher in March ahead of central banks' policy meetings this month and as oil price stabilizes in the short term. Still, we are watchful of a pullback off the near-term resistance at 2750-2770 that coincides with 11.32x (-1.5SD) FY16/FY17 PE. Pullback support is around 2600, a 'higher low' compared to 2530. Rotational interest in small caps should see an uptick in the short-term as the benchmark index stabilizes.
Source: DBS
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
