DBS Equity Research: Wired Daily 11 May 2016

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Publish date: Wed, 11 May 2016, 01:38 PM

F&N - Awaiting deployment of cash

2Q16 core net profits for F&N were within expectations. Dairies shine with higher margins, benefitting from lower commodity prices. Interim 1.5-Sct DPS was declared. The Group's earlier pursuit of SAB's Grolsch and Peroni beer brands were unsuccessful. We believe management is still very keen to deploy its cash, currently standing at S$700m, to supplement its current business and claw back profits lost from the divestment of its stake in MBL. In our view, acquisitions are likely to be substantial and the purchase consideration could range from S$1bn to S$2.5bn. Maintain HOLD, TP unchanged at S$2.20.

Wilmar's 1Q16 core earnings were slightly below our/consensus expectations. Operating margins met/exceeded expectations; but results were dragged down by provisions and lower associates/interest income. Earnings are under review in anticipation of weaker soybean crushing/Tropical Oils downstream margins in 2Q16. TP and BUY rating are also under review.

4QFY16 profits for SIA Engineering were in line; flat y-o-y. Cost savings help offset decline in associate/JV profits. Final dividend of 8cts per share was declared. Together with the 6cts per share interim dividend paid earlier, this amounts to a 14cts per share dividend for FY16 - representing an almost 90% payout ratio, similar to last year's payout ratio. The dividend is lower than expected as the sale of 10% stake in HAESL has yet to be finalised. Current BUY recommendation and target price under review.

1Q16 results for Overseas Education were below expectations, hit by higher expenses and deferred tax. We cut FY16-17F earnings by half after imputing higher expenses and deferred taxation. On the back of uncertain company outlook and weak earnings, we will be ceasing coverage of the stock; TP cut to S$0.40.

Malaysia's Apr-16 palm oil output expanded by 6.7% m-om to 1.301m MT (-23% y-o-y); in line with our forecast of 1,362m MT. But exports fell to 1.165m MT, which was 14% below forecast; on lower shipments to India and China. This was offset by a pick-up in domestic consumption and lower imports; which translated to 1.800m MT of stockpile, in line with expectations. Output recovery is losing momentum; CY16 estimate of 19.549m MT unchanged for now.

EMAS Offshore announced that since the start of Q3 FY2016, it has secured new awards and letter of intents for charters amounting to approximately US$32m, including options.

Ziwo Holdings is expected to report a net loss for 1Q2016. The net loss was mainly attributed to weak market conditions and continuous slide in demand for our products. Dyna-Mac Holdingsis also expected to report a net loss for 1Q2016.

EMS Energy has been awarded a contract worth approximately S$4.47m, for the design, construction, procurement and installation of equipment, commissioning and technology transfer of waste water treatment plant stage 4, with capacity of about 15,000 m3/day at Yen Phong I Industrial Zone, Bac Ninh Province, Vietnam. The contract is expected to be completed in 4Q2016.

Source: DBS

F & N (F99)Wilmar Intl (F34)SIA Engineering (S59)Overseas Edu (RQ1)Dyna-Mac (NO4)

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