Singapore Stock Market ,Singapore Stock Market news
CHINA ENVIRONMENT, uob initial coverage BUY with target price $0.76
-China Environment Ltd, known as Gates Electronics Ltd prior to a reverse
takeover, is a provider of waste gas treatment solutions in the PRC. Based
in Longyan City, Fujian Province, China Environment specialises in the
design and production of air pollution control and waste gas treatment
systems. The Group has been able to establish a firm foothold in the PRC’s
environmental protection industry with its solid sales and marketing
network, research and development efforts, strong track record and
experienced management team.
-The Environmental Protection Industry a major beneficiary of central
government’s policies. The central government is giving more and more
attention to environmental protection as a result of expanding
industrialisation and urbanisation in China. In recent years, the central
government’s policies, such as the 11th Five- Year Plan and the Rmb4t
stimulus package have major emphasis on environmental protection and
pollution control. Other related policies include more energy-saving
projects, investment on pollution treatment and control facilities,
emission reduction of pollutants and ecological construction, all of which
provide growth opportunities for the environmental protection industry in
China.
-China Environment a solid company with proven track record. In 2008, China
Environment undertook the construction of over 150 dust collectors for
contractors or its customers, many of which are large companies in various
industries such as cement, chemical, power and steel industries. To expand
its business and enlarge its customer base, China Environment is in the
process of launching its desulphurisation and De-NOx business.
-Expect strong earnings growth in 2009-11. With China Environment’s
desulphurisation and De-NOx business ready to kickoff, we estimate it will
deliver a net profit of Rmb97.4m in 2009, followed by 64% jump to Rmb160.2m
in 2010 and 29% increase to Rmb206.2m in 2011.
-Initiate coverage with BUY recommendation and target price of S$0.76,
representing 14.8x 2010F PE.
CHINA MERCHANT HOLDING, dbs maintain BUY with target price $0.81($0.60)
-Toll income of Gui Liu Expressway surged 57% y-o-y in 3Q09, due to the
adoption of toll-by-weight scheme from 1 July 2009. Gui Huang Highway
achieved 20% growth in toll income as well, as a result of improved road
conditions after the main upgrading work completed in early July. Yu Yao
Highway’s toll income continued to decline, falling 24% in 3Q09 due to the
traffic diversion caused by change of road network.
-The Group’s top line consists mainly of property sales in NZ, which edged
up 4% y-o-y. The property business’ pretax loss narrowed by 95% to only
HK$0.5m, due to lower opex and interest expenses. However, management is
still cautious on this segment given the uncertain and challenging
prospects of the NZ property market. The Group’s profit sharing ratio in
Gui Liu Expressway will be cut from the current 90% to 40% from Jan 2010,
according to the JV agreement, which will cause a drop in the earnings
contribution from Gui Liu Expressway in FY10.
-Reiterate BUY, TP raised to S$0.81, based on fully diluted forward 12M
target yield of 5%. We are expecting S3.5cts of FY09 final dividend and
FY10 interim dividend of S2.5cts (Payout ratio FY09-56%, FY10-59%), based
on the current share capital. Full conversion of RCPS would increase share
capital by 48%. We remain positive on PRC’s traffic growth and see
earnings-accretive road acquisitions as a further catalyst.
DBS, cimb maintain NEUTRAL with target price $14.97
- Maintain Neutral rating, results above expectations. We are maintaining
our Neutral rating on DBS and our $14.97 (1.34x P/BV) target price, pending
postresults briefing. DBS’s 3Q net profit (S$563m, +2% qoq) was above our
expectations ($450m) and consensus (S$469m) by 25% and 20% respectively,
solely due to lower-than-expected loan loss provisioning. Hong Kong turned
around (3Q profits S$143m, +44% qoq) on lower credit costs. The results do
signal that the credit cycle has peaked for DBS’s Asia consumer and SME
business, but there are still some red flags over DBS’s problematic OECD
loans.
-Core banking revenues in-line, trading lost some gloss. NII was up 2.5%
qoq on flat loans (+0.3% qoq) and 2bp margin improvement. Mortgage loans
was up 3.8% qoq but was surprisingly not the sole driver; manufacturing
loans was also up 4.2%. Fee income was flat qoq. Strong IB fees, wealth
management fees compensated for lower loan fees. Core banking revenue
streams were in-line with our expectations. Trading (3Q S$83m, 2Q $234m)
came in lower-than-expected but this is not an issue to fret about. 2Q
levels were inflated anyway. Cost overheads were flat qoq (+0.6%). Cost
ratio went up to 40% (2Q 35%) as trading gains faded. PPOP was below
expectations because of weaker trading income.
- Credit cycle is a positive, but be watchful on Rest of World NPLs.
Reduced provisioning was the main reason for the beat. Total provisions
(S$265m) slipped 43% lower qoq. As new NPL flow has slowed, SPs came off to
70bp (2Q 83bp) and GPs dwindled to almost nothing (-92% qoq). Overall NPL
ratio did gravitate lower (2Q 2.8%, 3Q 2.6%) but some trends still
warranted caution. Singapore bad debt trend was flat. Improved China, Hong
Kong and SE Asia NPL trends drove down overall NPL. Unfortunately, Rest of
World NPLs were still deteriorating (2Q8.8%, 3Q9.4%); these were Middle
East and shipping loans that posed problems in 2Q. Allowance coverage stays
at 90%. Coverage on unsecured NPL was 128%.
- 16% possible upgrade in FY09 EPS, but target price unlikely to change
much. 3Q ROE was still only at 9.1% (2Q7.9%) after the big drop in
provisions, albeit one has to recognise that this quarter, trading did not
weigh in. We are likely to raise our FY09 earnings later, but this might
not affect our post-cycle normalised earnings and ROE much. Hence, our
target price (based on FY11 ROE) is likely to stay.
DBS by ssb
-Provisions near halve, NPLs fall 3Q09 profit S$563m (vs. Citi 3QE S$508m,
2Q S$552m). 9M09 S$1.55bn is 85% of Bloomberg consensus 2009E S$1.81bn
(Citi 2009E S$2bn). Net interest income +2.5%QoQ, margins 2.03%, fee income
was stable. Revenues S$1.58bn hurt by sharply lower dealing income,
pre-provision profit S$942m down 19%QoQ, stable costs. NPLs fell 7%qoq to
S$3.4bn (NPL ratio 2.6% from 2.8% in 2Q), provisions fell 43%QoQ to S$265m
(83bps of loans). HK 3Q profit S$143m (+44%qoq), lower provisions. Tier-1
ratio 12.5%. 3Q EPS S$0.95, BPS S$10.76 (2Q S$10.45). At S$12.98, DBS is at
13.7x trailing PER and 1.2x trailing P/B vs 9.3% 3Q09 ROE. S$0.14 quarterly
DPS maintained.
-3Q09 profit S$563bn (2Q S$552m), +27%qoq 3Q09 NII S$1,140m +2.5%qoq Loans
+0.4%qoq, NIM 203bps (2Q 201bps). Loan-to-deposit spread 2.56% (2Q 2.53%),
LDR 73%. Non-II S$437m down 36%QoQ, fees S$361m (+0.8%QoQ), other income
S$76m down 76%QoQ, lower dealing profit, investment gains. Total revenue
S$1,577m -12%QoQ. Costs S$635m +0.6%QoQ; cost-inc ratio 40%. Preprov profit
S$941m, -19%qoq. Provisions S$265m (2Q S$466m), 83bps of loans. NPLs
S$3.4bn, NPAs S$3.8bn, NPL ratio 2.6%. Tier-1 ratio 12.5%, CAR 16.1%.
-NPLs down 7.4%QoQ, NPL ratio 2.6%, provision charges fall 43%QoQ NPLs fell
to S$3.4bn (2Q S$3.7bn) on lower Singapore, Hong Kong NPLs, while “rest of
world” problem loans remained high. NPAs S$3.8bn (2Q S$4bn), of which 34%
(2Q 38%) were still current. 3Q09 Provisions S$265m (annualized 83bps of
avg. net loans, 2Q S$466m). S$229m specific loan allowances (-16%QoQ),
other S$ 22m, general allowance S$14m (2Q S$183m). Loan provisions cover
75% of NPLs, total provisions cover 90% of NPAs. DBS has 90% coverage of
its S$152m ABS CDOs and 37% coverage of its S$707m corporate CDO
investments, plus another S$91m CDOs in its trading book for a total of
S$950m (2Q S$1,171m).
ELEC & ELTEK by ocbc
-3Q09 profitability improved significantly. Amid signs of recovery in
global economy, Elec & Eltek (E&E) posted a significantly better set of
3Q09 results. While revenue of US$119.8m was down 15.2% YoY, PATMI grew
15.7% YoY to US$14.2m due to lower operating expenses, reduced material
costs and better usage optimization. This improved performance is more
evident sequentially, where revenue and PATMI jumped 14.9% and 38.5%,
respectively, on increased shipments. Net margin over the quarter also
improved from 8.7% in 3Q08 to 11.8% (2Q09 9.8%). For 9M09, however, revenue
of US$307.4m and PATMI of US$27.9m still represent decline of 26.9% and
25.4% respectively, due largely to comparison with pre-crisis level.
-Segmental breakdown. Proportion of sales from 2-to-6 layered PCBs
increased 2.3ppt YoY to 67.4% in 3Q09, while that from 8-and-above
accounted for 32.6%. In terms of sector, sales from Computer/Peripheral and
Communication/networking segments increased 1.3ppt and 4.7ppt YoY to 53.4%
and 19.5% respectively, whereas the rest (Consumer Electronics, Automotive
and others) collectively slipped 6ppt to 27.1%.
-Visit to HDI plant in Kaiping. Starting from September, management
observed an increased demand due to seasonal factors. To maintain its
competitive edge and cope with anticipated business from a few high
valueadded telecommunication customers, E&E is stepping up its investment
on High Density Interconnect (HDI) capacity. In fact, we recently
participated in the grand opening ceremony of its new HDI plant in Kaiping,
China. This facility, we note, is already running at ~60% utilization rate
on production capacity of 250k sqf/month, and is projected to breakeven by
1Q10. According to management, the plant is currently serving some domestic
handset players. However, upon qualification by international players
(expected to take some time), it will also accommodate these big boys.
-Plans to expand Thailand operations. In parallel to the HDI investment,
E&E is also expanding its capacity on conventional PCBs. During the analyst
briefing yesterday, the group revealed its plans to expand its Thailand
operations due to some potential attractive tax incentive. Approximately
US$120m is expected to be utilized over three years for this expansion. As
for FY10, we estimate group capex to come around US$50-60m.
-Trading below book value. At current price, E&E is trading at 6.9x FY08
EPS and 0.9x FY08 NTA. While the group had skipped its interim dividend
amid privatization talks with its parent Kingboard Chemical, it is expected
to resume dividend payment in 4Q09. We note that its dividend payout ratio
(including special dividend) averaged 95.8% over the last two years. We do
not have a rating on E&E.
GENTING SP, cimb maintain TRADING BUY with target price $1.27
-Maintain Trading Buy. Quoting Genting Group’s chairman Tan Sri Lim Kok
Thay, Bloomberg reported that Resorts World at Sentosa (RWS) is on track to
open in early Jan 2010. While not entirely a surprise, the early opening
will be a positive, in our view, as 1) it falls within the earlier part of
its 1Q2010 guidance; and 2) RWS can fully capture holiday-makers during
next year’s Chinese New Year festivities. Also, RWS’s debut is very likely
to be ahead of its rival’s, Marina Bay Sands (MBS). We continue to
anticipate growing excitement over RWS as we approach its opening date. We
retain our FY09-11 earnings estimates and end-CY10 sum-of-the-parts target
price of S$1.27. Reiterate TRADING BUY with share-price catalysts likely to
come from 1) this concrete opening date; 2) more aggressive marketing
efforts; 3) the award of its casino licence; and 4) a potentially
longer-than-expected monopoly period if MBS opens later.
-Positive development. The early Jan 2010 opening date is not entirely a
surprise. GS has always guided for a RWS debut in 1Q2010. The timing
excites us more as 1) it falls within the earlier part of its 1Q2010
guidance; and 2) RWS would be able to capture the Chinese New Year crowd,
as the Lunar New Year falls on 14 Feb next year. More importantly, an early
Jan 2010 debut is very likely to be ahead of MBS’s expected Jan or Feb 2010
opening date. We note that RWS’s first event would be a ChildAid Concert,
to take place on Dec 19-21 at its Festive Grand Theatre. Although RWS
clarified earlier on that the theatre would be the only property accessible
then, we do not discount the possibility of a soft opening of the resort to
selected guests in conjunction with the concert.
-Expecting more news flow. Besides this opening date, we expect RWS to step
up its marketing efforts in the coming weeks as it seeks to build up
excitement ahead of its opening. Another key event to watch for is the
award of its casino licence, expected before year-end.
-Still positive on RWS’s prospects. We remain optimistic on RWS’s
prospects, especially with a more concrete opening date. Furthermore, RWS’s
competitor appears still quite a distance form the finishing line. A
potentially longer-than-expected monopoly period would be positive for RWS
and could boost its numbers beyond our earlier estimates, especially with
growing anticipation for the debut of Singapore’s two integrated resorts.
GENTING SP, csfb maintain UNDERPERFORM with target price $0.9
- We believe there is downside risk to Singapore’s first year casino
revenues. Our projection of US$2.6 bn of casino revenues for Singapore
implies that its casino market will be 40% of the Las Vegas strip. Market
expectations are even more bullish, ranging from US$3 bn (equivalent to 50%
of Vegas) to a blue sky target of US$6 bn (close to 100% of Vegas).
- In 2008, the Vegas strip’s US$6.1 bn casino revenues were generated by 37
casinos while Macau’s US$13.5 bn of revenues were generated by 31 casinos.
In contrast, the market expects revenues from the two upcoming casinos in
Singapore to be at least half that of the Vegas strip and one-fitth of
Macau’s. Visitor arrivals to Las Vegas and Macau totalled 37.5 mn and 30
mn, respectively, in 2008 compared with 10.1 mn for Singapore.
- We reiterate our UNDERPERFORM rating on Genting Singapore, one of the
most expensive casino stocks in the world. In a worst case scenario, if it
were to trade in line with the Singapore market, this suggests the stock
could halve from current levels.
MEIBAN, cimb maintain OUTPERFORM with target price $0.45
- 3Q09 core results above; maintain Outperform. Excluding a forex loss of
S$1.2m, 3Q09 core net profit of S$5.5m (+27% yoy) was 17% above our
estimate due to higher-than-expected sales and lower-than-expected opex.
9M09 reported net profit forms 71% and 70% of consensus and our full-year
forecasts, respectively. We have reduced our FY09 estimate by 7% to factor
in the slightly weaker-than-expected 3Q09 reported numbers, but have kept
our FY10-11 numbers intact. We continue to rate Meiban an Outperform as we
like its strong free cash flow business, decent yields, and proactive
management. Our target price remains S$0.445, conservatively based on 0.9x
CY10 P/BV.
-Sales contracted 8% yoy, but improved 11% qoq to S$116m, slightly ahead of
our expectation of S$112m. No surprises, given the strength in its HP
printer and Dyson vacuum cleaner businesses.
- EBITDA margins improved 30bp yoy and 10bp qoq as lower gross margins were
offset by lower opex. Unfortunately, the group was hit by a sudden drop in
the US$ at end-3Q09, resulting in a forex loss of S$1.2m. Excluding a
one-off revaluation gain of S$3.1m in 3Q08 and the forex swing, net profit
of S$5.5m was still better than the same period last year, reflecting
successful efforts to lower its cost structure.
- Still generating free cash flow. Meiban generated about S$5m of positive
free cash flow during the quarter, lifting its net cash position to S$30m
from S$26m at end-June. Cash cycle days extended by 12 days qoq as a result
of the higher sales.
-Effects of changes in HP’s supply chain to surface from 4Q09. Our
discussions with management indicate that Meiban will start to feel the
pinch of changes in HP’s printer supply chain from 4Q09. Its Wuxi plant,
supporting mainly Jabil, will be affected as Jabil had been completely
taken out of HP’s inkjet printer programmes at end-Sep 09. Nevertheless,
Meiban is seeking new business from its non-HP customers. It may also
benefit from Dyson’s continuous efforts to roll out interesting new
products, the latest being a no-blade fan.
NOL, ms upgrade to EQUAL WEIGHT from UNDER WEIGHT with target price $1.50
EPS for FY09/10 raised by 15% and 14%
-Upgrade to EW The recent stock price correction on the back of weaker than
expected 3Q09 results and management guidance for significant losses at
least through 1H2010, has been factored into most of the downside for NOL
stock, in our view. We believe that container shipping market fundamentals
remain extremely dire and shipping companies, including NOL, are unlikely
to be profitable over the next 12 months. Conversely, with the magnitude of
losses over the last 12 months being of unprecedented severity and the
balance sheets of all shipping companies deteriorating sharply, we think
that shipping companies are now more likely to be united in raising freight
rates towards covering cash costs. We believe that NOL’s effective cost
mitigation strategies in place since late 2008 well position NOL for
longer-term competitiveness and a return to profitability in 2011.
-Where we differ Our loss estimates for NOL in 2009- 10 are higher than
consensus as we expect freight rates to be capped at below profitable
levels due to the significant order book and latent containership supply.
We expect consensus earnings downgrades on the back of the weaker than
expected 3Q09 results and management’s cautious guidance for 2010.
-What’s next We view the catalyst to own NOL stock is
stronger-than-expected consumer demand over the holiday retail season,
because with inventory at low levels, restocking could result in stronger
1H 2010 volumes and in turn, buoyant sentiment could result in successful
rate hikes in mid 2010.
OLAM, cl maintain BUY with target price $2.979$2.91)
-Improving demand for Olam’s weak sectors such as confectionary and fibre
makes us sanguine of a good 1Q10 result which will set the tone for a
strong FY10. Separately, we estimate Olam’s purchase of almond assets in
Australia will add 3-12% to FY10-12 earnings. With a S$2bn war-chest we
expect M&A momentum to pick up as Olam executes their strategy to double
net margins. We raise our DCF and peer based target price from S$2.91 to
S$2.97. With 21% upside, we reiterate our Conviction BUY.
-Demand outlook positive for FY10. Improving demand profiles amongst Olam’s
weakest segments makes us sanguine of a good 1Q10 result. More importantly
this will set the tone from a strong FY10. The Group’s confectionary
volumes contracted 17% YoY in 4Q09, but with European cocoa grindings up
18% QoQ since, we expect a turnaround. Similarly, our checks with
Management point to improvement in cotton demand from both the US and
China, while Chinese dairy consumption is starting to see signs of recovery
after the earlier Melamine scares. In coffee, the Group’s intra-country
business continues to strengthen, especially in Latin America where Olam is
gaining market share.
-Recent acquisitions are earnings accretive… Once Olam’s acquisition of
Timbercorp’s Australian almond business is complete in 2Q10, we expect this
to add 3-12% to FY10-12CL earnings as the almond plantations progress to
maturity. Similarly, the Group’s SK Foods purchase in the US will be
consolidated in 1Q10 earnings. Management claims one-third of the current
season’s harvest is already pre-sold, which will result in further upside
to 2Q and 3Q10 earnings.
-…more deals to come. Olam has clearly articulated a strategy that will see
them drive growth inorganically. The Group’s past acquisitions generated a
ROI of 6.4% in FY09; a tough year and delivered a net contribution per
tonne that is double of its legacy businesses. Execution risks
notwithstanding, we believe these new acquisitions will drive net margins
from 2% to 4% by FY15.
-Raising target price to S$2.97. BUY. Incorporating Olam’s almond assets
sees us upgrading FY10-12 earnings by 3-12%. This raises our DCF and peer
valuations based target price from S$2.91 to S$2.97 incorporating a
weighted average of a high growth scenario and a organic only scenario.
With 21% upside, BUY
