Towards Financial Freedom
DBS Equity Research: Wired Daily 12 May 2016
Remove SIA Engineering from Blue Chips & Dividend Model Portfolio
Wilmar - Near-term challenges. Rating cut to HOLD; TP trimmed to S$3.75
UMS Holdings - Bracing for weakness ahead. Downgrade to HOLD; TP lowered to $0.61
Pan United Corp - Less favourable risk reward profile; downgrade to FULLY VALUED with lower TP of S$0.49
Model Portfolio update - We are removing SIA Engineering from the Blue Chips and Dividend portfolio, in light of the stock rising to within just 1% of our $3.84 fundamental TP. The stock was first added into the Dividend portfolio on 10 Feb and returned 4.4% since, slightly underperforming the STI's 5.8% gain. We had also added SIA Engineering into the Blue Chips portfolio on 13 Apr. It returned a similar positive 4.4% since, outperforming STI's 5.4% decline since that time.
1Q16 core earnings for Wilmar slightly below our expectations. Operating margins met/exceeded expectations; but results were dragged down by provisions, lower associates/interest income. FY16F/17F earnings cut 6%/4% on lower expected crushing/Tropical Oils downstream margins in 2Q16. Rating cut to HOLD; TP trimmed to S$3.75 (Prev S$3.85).
1Q16 earnings for UMS Holdings disappointed, falling 55% y-o-y to S$3.4m, mostly on forex losses and weak demand. 2H16 outlook mixed; assembly business is expected to pick up, but it is still too early to tell for components manufacturing segment. Interim dividend of 1Sct was announced. Rating cut to HOLD, TP S$0.61 (Prev S$0.73).
Pan-United Corporation's 1Q16 earnings disappoints on lower ready-mixed concrete (RMC) price and shipping losses. We slash FY16-17F earnings by 15-16%. Our revision mainly takes into account a steeper than expected decline in RMC demand and pricing for FY16F. We anticipate that lower earnings from slower RMC demand will result in dividend cuts over the next few quarters. As such, we are taking a negative stance on less favourable risk-reward profile. Downgrade to FULLY VALUED with lower TP of S$0.49 (Prev S$0.57).
City Developments reported an 11% dip in revenues to S$723m and a 14.4% dip in net profit to S$105m, slightly below our expectations. The weaker performance was portfolio wide and mainly from its property development (S$223.23m, -25.2% y-o-y) and hotel segments (S$359.4m, -4.4% y-o-y). Operating profit margins remained steady at c.19.7%. Despite the recent rally in share price, we continue to see good value at 0.8x P/NAV. Operating income is improving, and the locked-in sales of its overseas projects in 2H16 should be a re-rating catalyst for the stock. A near term catalyst will be the potential reinclusion to the FTSE EPRA/NAREIT Global Developed Index. Our TP is reduced in S$9.60 (Prev S$10.26), pegged at a 20% discount to RNAV.
1Q16 DPU of 1.32 Scts for OUE Commercial REIT(+33% y-oy) was above expectations, mainly attributed to OUE Bayfront (+22% y-o-y uplift in revenues). We maintain our HOLD call with a revised TP of S$0.70 (Prev S$0.65). We believe investors will remain wary of OUE Commercial REIT although the REIT is trading at only 30% of its book value, given fears over falling office rents ahead of the impending 4.5m sqft of new office space over 2016-2017.
1Q16 net profit of S$ 5.5m (-20% y-o-y, -15% q-oq) for CSE Global was well below our expectations. Order wins of S$75m was also below our estimate. We have revised down our estimate of new order wins to S$ 320m in FY16F from S$380m earlier. As a result, we have reduced our FY16F earnings down by 16% to S$ 25.3m. Maintain HOLD on revised TP of S$0.40 (Prev S$0.46).
1Q16 earnings for Super Group in line, boosted by soluble coffee powder sales. Earnings are declining at a lower rate. We expect earnings to grow by 7% y-o-y in FY16F. Maintain HOLD, TP S$0.97.
Ezion's 1Q16 headline profit of US$15.5m (-59% y-o-y) looks largely in line, making up 17% of our full year estimate. We note that there was a significant forex loss of S$14.6m, which was the exchanges loss on notes payable arising from the strengthening SGD against USD. This was offset by the S$13.2m gain on disposal of a service rig. We will provide more update after results briefing this morning.
UOBhas launched and priced S$750m in aggregate principal amount of 4% non-cumulative non-convertible perpetual capital securities. The securities are perpetual securities but may be redeemed at the option of UOB on 18 May 2021 (First Call Date) or any distribution payment date thereafter.
Vard Holdings has secured a contract for the design and construction of 15 Module Carrier Vessels for Topaz Energy and Marine. Five of the vessels will be built at Vard Braila and four at Vard Tulcea in Romania, while the remaining six will be built at Vard Vung Tau in Vietnam. Delivery is scheduled between 3Q 2017 and 2Q 2018. The aggregate contract price is close to US$300m.
Ezra Holdings announced that the Group's subsidiaries, EMAS Offshore and EMAS Energy, have secured new contract awards and letters of intent amounting to approximately US$40m, including options, since the start of 3Q FY2016.
Delfi, formerly known as Petra Foods, and South Korea's Orion Corporation has signed a Joint Venture Agreement to form a JV company, Delfi-Orion, to develop, market and sell a range of joint branded confectionery products in the soft biscuits and cakes category, in Indonesia. Both partners will have equal stakes in the JV with a total initial capital commitment of US$3m.
The US Energy Information Administration (EIA) revised its WTI oil price forecast to be around $40.5pbl, up $6 from April estimates of only $34.73pbl for the average price of crude in 2016. Improving economic data, growing supply disruptions, falling U.S. crude oil production and rig counts contributed to the price increase, this according to the EIA its Short-Term Energy Outlook report. The forecast for Brent crude prices in 2017 were also revised upwards, from $40.58pbl to $50.65pbl.
Source: DBS
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