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DBS Equity Research: Wired Daily 31 Mar 2016

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Publish date: Fri, 01 Apr 2016, 12:42 PM


Nam Cheong - Perdana terminates contract. Lowering earnings estimates; maintain FULLY VALUED

Nam Cheongissued notice of termination for one of the two Accommodation Work Barges (AWBs) for client Perdana Petroleum. We lower FY16 earnings from ~RM13m to RM4.7m to account for the termination of the first AWB contract. We have not assumed further writedowns/provisions in the model yet as these are hard to predict at this point in time. We maintain our FULLY VALUED call with TP of S$0.07.

Mermaid Maritimehas been awarded a subsea remotely operated vehicle (ROV) services contract in the Gulf of Thailand with a major upstream oil & gas company. The contract is awarded for a two-year term, starting from March 2016 to March 2018, with an option for one-year extension. The value of the contract for the initial term is estimated to be about US$10m.

The Stratech Groupis expected to report a net loss for FY Mar16. The loss is mainly attributed to:
(1) Lower revenue due to late award of several projects which the Group had expected to commence earlier. As a result, a greater portion of revenue from these projects is expected to be recognised in FY2017;
(2) Increase in costs, including staff costs to build up the operations team and the rental of facilities to deliver secured projects and targeted contracts.

The Group has about S$55m worth of orders, including options. Up to about one-third of these contracts are expected to be delivered in FY17.

According to credit rating agency Fitch, the credit profiles of Singapore's retail and office real estate investment trusts (Reits) are expected to be largely unaffected, despite a challenging year ahead with rising supply and weak demand. Vacancy rates in Singapore's retail space are expected to rise from 8% at the end of last year to about
10% this year, as retail space expands by about 4% amid poor demand.

The national customer satisfaction level in Singapore was lower in 2015, weighed down by poorer performances in the finance & insurance and healthcare sectors in the fourth quarter. The Customer Satisfaction Index of Singapore (CSISG) released by the Institute of Service Excellence (ISES) showed that the national score last year was 70.2 points, down by 0.93 points. This came after the national score peaked in 2014 at 71.1 points.

Source: DBS 
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