DBS Equity Research: Wired Daily 2 Mar 2016

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Publish date: Mon, 07 Mar 2016, 10:23 AM

Japfa - FY16F/17F earnings raised by 36%/19%. Maintain BUY, TP S$0.90

Ezion - FY16F/17F earnings trimmed by 30-33%, after adjusting for delivery schedules and temporary rate reduction. Maintain BUY, TP S$0.85

Japfa's 4Q15 earnings were ahead of expectations on strong contribution from Japfa Comfeed. Dairy 4Q15 EBITDA was also ahead on higher yield, offsetting weak raw milk prices in China. FY16F/17F earnings were raised by 36%/19%, after imputing higher DOC/broiler ASP, stronger Rupiah, offset by higher local corn prices in Indonesia and reduced DOC sales volume. TP unchanged at S$0.90 on lower cash forecast; maintain BUY.

Ezion's 4Q15 swung into losses with US$93m impairment charges and share of Ausgroup's losses. We trimmed FY16/17 earnings by 30-33%, after adjusting for delivery schedules and temporary rate reduction. Ezion's windfarm venture is taking off, diversifying from the bleak O&G sector. Maintain BUY on Ezion with a TP of S$0.85, based on 0.7x FY16 P/BV. We remain optimistic on Ezion's ability to survive through this downturn with its solid management team, network and assets.

Midas reported full-year profit of RMB57m, in line with expectations. Final dividend of 0.25 Scts, the same as last year, was declared. We expect earnings to improve from steady organic growth and with contribution from new businesses. Maintain BUY, TP of S$0.41 (Prev S$0.49) based on 0.8x P/BV.

Otto Marinesecures OSV chartering contract to a renowned international E&P company. The chartering period is confirmed for 5 years from May 2017 with the option for another 5 years. The confirmed contract value is AUD47.4m for the initial 5 years and AUD94.8m including the option.

KS Energyhas secured a new contract with Belayim Petroleum Company for the "KS Medstar-1", a 300-feet cantilever jack-up drilling rig to continue drilling in Egypt. Work is expected to commence in March 2016 and continue for approximately 4 months. The total value of the new contract is expected to be approximately US$6m.

Fitch Ratings gave Mapletree Industrial Trust's (MIT) new S$60m 3.79% fixed-rate unsecured and unsubordinated notes due in March 2026 a rating of BBB+. The agency also affirmed MIT's BBB+ long-term ratings on the outstanding S$245m unsecured unsubordinated medium-term notes.

China's Purchasing Managers' Index (PMI) fell to its lowest point in four years in February, adding further pressure on the government to loosen monetary policies and support growth. The official PMI dropped to 49.0 last month, its seventh monthly decline. Meanwhile, the private reading published by Caixin hit 48 and has been contracting for one year now.

US stocks rallied, led by banks and technology companies following the stronger-than-expected February ISM manufacturing figure (actual 49.5, consensus 48.5). Sentiment was also underpinned by accommodative monetary policies by central banks. The ECB is expected to bring the deposit rates further into negative territory at the March 10 meeting while the FED is seen holding rates steady come March 16. Bond yields rose, oil price gained while gold price fell as investors took on more risk. For the STI we continue to see upside bias to an initial resistance at 2750 in the near-term.

Source: DBS

Japfa (UD2)Ezion (5ME)Midas (5EN)KS Energy (578)Mapletree Ind Tr (ME8U)

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