The Edge - Brokers' Digest (July 2 - July 8, 2007)
CapitaCommerical Trust (June 28: $2.94) TP: $2.62
MAINTAIN HOLD. CCT's 30% Malaysian associate Quill Capita Trust (QCT)
has announced its intention to acquire two properties in Kuala Lumpur
for RM215 million ($95.3 million). In light of the development and the
expected rapid growth of QCT, we are including QCT's market
capitalization into CCT's valuation. The present effect is small at four
cents/CCT unit. But depending on how the REIT sector pans out in
Malaysia, QCT's valuation to CCT could be meaningful. More significantly
is the expected asset size growth for CCT and management has guided on
$5 billion to $6 billion by 2009. Our valuation has an asset target size
of $5.5 billion. With the inclusion of QCT, our fair value estimate is
revised up from $2.58 to $2.62. - OCBC Investment Research (June 28 )
Ezra Holdings (June 28: $5.80) TP: $8.60
OVERWEIGHT. Ezra recently announced the acquisition of its second
pipe-layer and two 30,000bhp multi-purpose anchor handling tug supply
(AHTS) vessels, which should contribute $50 million to $60 million to
net earnings on delivery in FY2009-10. The recent listing of its
offshore construction division has strengthened Ezra's position in
capturing fast-growing demand for production-related services and rigs.
We increase our FY2007 net earnings estimate by $5 million to $93
million to account the selling of exclusive use rights of a vessel. We
raise our sum-of-the-parts-based (SOTP) June 2008 price target to $8.60
after factoring in contributions from the two new AHTS vessels (sale and
leaseback) and the pipe-layer (100% ownership) - JP Morgan (June 28 )
Neptune Orient Lines (June 28: $5.20) TP: $4.80
DOWNGRADE TO REDUCE 2. Our price target and earnings esitmates remain
unchanged. In a report dated Jun 20, we discussed the possibility of
OOIL bidding for NOL. We would not expect any potential offer price to
significantly exceed current price levels. We estimate 55% of revenue is
from trans-Pacific trade. New trans-Pacific contracts were only
effective May 1, so the 1H2007 results will bear the burden of lower
2006 contracts. NOL now trades on 1.8 times 2008EP/BV and 1.3 times, if
our valuation of port assets is excluded. We belive this is high, as we
forecast just 4% net profit margins for this year and have a neutral
view. Our 12-month share price target of $4.80 remains unchanged. - UBS
Investment Research (June 27)
CDL Hospitality Trusts (June 28: $2.53) TP: $2.81
MAINTAIN BUY. CDLHT is to issue up to 130 million shares for an equity
fund raising exercise in two tranches - three for 20 basis, and private
placement to institutional and other investors. Including their recent
purchases in Novotel Clarke Quay, they have five Singaporean hotels and
a New Zealand hotel. The REIT has become a key hotel landlord in
Singapore, benefiting from tourism boom and increase in business
travelers. We assume the price for the new tranche will be at $2.20,
translating to an estimated value of $286 million for the new shares.
This will help lower the gearing ratio from 43% to 26%. We've also
increased our y-o-y rental rate increase to 18% for the Singapore
portfolio, working out to a new target price of $2.81. - DBS Vickers
Securities (June 28 )
Hongguo Int'l Holdings (June 28: $1.30) TP: $1.56
MAINTAIN BUY. Together with US-based Brown Shoe Co Inc, Hongguo will
incorporate a JV company to market the Naturalizer and Via Spiga brands
of lady shoes in China. Hongguo will take up 49% stake in this JV. We
raised our estimates for the number of point of sale in FY2008F to take
into account new stores opening for the Naturalizer and Via Spiga brands
through Mayflower Enterprise Ltd, a subsidiary of Hongguo. We maintain
our price multiple at 22 times FY2008F EPS (derived from our blended
SOTP valuation metric), which is in line with the comparables average
forward PER of 20-25 times. Our target price is raised to $1.56 as we
increase our FY2008 estimates. - Westcomb Securities (June 26)
OCBC Bank (June 28: $9.25) TP: $10.20
MAINTAIN BUY. Sustainable earnings growth and ROE focus on regional
expansion in China and Indonesia. We expect net interest margins to
remain strong, backed by non-interest income. Capital management would
mainly be focused on share buyback rather than special dividends. We see
promising growth from the construction sector at 38% y-o-y in 1Q2007.
OCBC provides dividend yields of approximately 3%. We assume a dividend payout of 50%, projecting our net dividend per share (DPS) for FY2007 to be 28 cents. We revise our target price to $10.20 (from $9.75) based on the Gordon Growth Model. This yields an implied two times FY2008 adjusted book value based on peak valuations - DBS Vickers
Securities(June 25)
MAINTAIN HOLD. The HDD segment remains Cheung Woh's mainstay business
(60% top line contribution) while the automotive segment (22% top line)
will see strong growth in FY2008. We anticipate top-line automotive
growth of 46% to $20.4 million in FY2008 to be underpinned by repeat
orders from Cherry and Wubing for seat recliners and seat track, and new
products for Geely and Toyota as China's automotive industry heats up.
Although we are revising our FY2008 net profit after tax upwards by 10%
to $7.7 million, we maintain a "hold" for Cheung Woh. We believe that
the upside is limited as it is trading at 10 times FY2008 PER vs HDD
peers' of 11 times. We see fai value at 32 cents based on 11 times
FY2008 PER. - Kelive Research (June 26)
Hsu Fu Chi Int'l (June 28: $1.12) TP: $1.41
BUY (initiating coverage). HFC is a manufacturer and distributor of
confectionery products. The group is a leading player in China's candy
industry. According to Euromonitor, it had a sugar confectionery market
share of about 4.1% in 2005. It also manages its own network of 68 sales
offices with over 5,000 sales personnel throughout China. We project a
bottom line growth of about 15% to 16% for FY2008/09F, driven by growing
consumer affluence in China and underpinned by its sales/distribution
netowrk and capacity expansion. The target price is set at $1.41, based
on 18 time FY2008/09F blended earnings. - DBS Vickers Securities (June 27)
BUY. Penguin Boat acquired a second AHTS, currently being built in China
and due for delivery in 4Q2007, to ride on buoyant charter rates. it is
in talks to acquire their third AHTS by next year and possibly building
new units of AHTS. There is a proposed spin-off of Penguin Shipyard
Int'l (PSI) through a dividend-in-specie and separate listing on Sesdaq.
Penguin shareholders could receive "free" PSI shares through dividend
accounting up to $2.3 million from the utilization of section 44A tax
credits. The 42 cents target price based on 29.4 times 2007/08 blended
PER, derived from 0.47 time PEG. From the current price, the stock
provides a potential 18% upside. - Goldman Sachs (June 19)
Delong Holdings (June 28: $3.78 ) TP: $4.56
BUY. We recently visited Delong Holdings (DLNG) and witnessed its second
line in full swing, producing thinner (1.8mm) and higher grade hot
rolled coils (HRC). We think DLNG's growth is now underpinned by its
aggressive M&A strategy and stable average selling price (ASP) for its
HRCs. We forecast DLNG's FY2007 and FY2008 net profits to be $193.2
million and $347.8 million, respectively. With its aggressive growth
plan and cost leading operations, we peg DLNG at nine times FY2007/08
PER, which is still below the average 12.2 times estimate of its peers.
Our new fair value of $4.56 represents a potential 25% upside from its
current price level. - OCBC Investment Research (June 27)
Keppel Corp (June 28: $12.20) TP: $14.80
MAINTAIN BUY. KepCorp has clinched two new orders worth US$534 million
($820 million). Year-to-date order flows now amount to $3.3 billion with
an order book of $11.6 billion. The contracts are from repeat customers
Skie Drilling and Sea Drill for the construction of a
drilling-cum-production jack-up rig (US$400 million) and a
semi-submersible drilling tender (US$134 million), respectively.
Visibility for the O&M division extend out to 2010. KepCorp continues to
be an attractive blue-chip proxy to play the offshore oil and gas up
cycle, high-end property boom and infrastructure development in
Singapore and the region. Maintain "buy" with a raised target price of
$14.80, backed by revised NAV. - DBS Vickers Securities (June 26)
SC Global Devts (June 28: $6.40) TP: $7.55
MAINTAIN BUY. Wheelock Properties announced it has acquired 18.682
million ordinary shares in SC Global, a 10% interest in the company. The
shares were transacted at $6 per share, which works out to a total
consideration of $112.1 million. Wheelock's acquisition is intended to
be for long-term investment in a well-managed and respected Singapore
property company. SC Global has one of the highest historical PERs among
the Singapore-listed developers, which is around 71.2 times (FY2006).
Based on our estimations, FY2007,FY2008 and FY2009 forward PERs are 8.2
times, two times and 2.3 times, respectively. Our fair value remains
unchanged at $7.55 per share based on parity to its revised NAV. -
Phillip Securities Research (June 25)
Epure Int'l (June 28: $2.17) TP: $2.39
MAINTAIN BUY. Epure announced a new 58 million renminbi ($11.7 million)
engineering, procurement and construction contract from Anyang Mingbo
Water Co Ltd (AMW). This project is to build a wastewater treatment
plant of a 100,000 tonne capacity in Anyang city to be completed by
2Q2008. Epure's 15% owned AMW is the joint venture (JV) vehicle for its
first build-operate-transfer project in China. We have kept our earnings
esitmates unchanged for the moment, with 62% of our revenue forecast in
FY2007 backed by secured orders. But we hve raised our fair value for
Epure to $2.39, based on an upward-adjusted FY2008 PER of 23 times. -
DBS Vickers Securities (June 28 )
Lion Asiapac (June 28: 31 cents) TP: 36 cents
UPGRADE TO BUY. LAP has almost completed the disposal of its motorcycle
businesses in China. The company found a new focus in the production of
a quickline. Using SOTP valuation, we have included inter alia
market-to-market value of $132 million for its 6.16% stake in Anhui
Jianghuai Auotmobile Co; share of proceeds from sale of Zhejiang Victor
Motorcycle; and the group's strong net cash position of $39 million. We
also ascribed a conservative five time PER to our earnings forecasts for
LAP's limestone, electronics and trading businesses. After taking into
account the dilutive effects of LAP's outstanding warrants, we derive a
fair value of 36 cents. - Kelive Research (June 28 )
SembCorp Marine(June 28: $4.94) TP: $6.10
MAINTAIN BUY. SembCorp Marine (SMM) has clinched new contracts worth
$4.8 billion year-to-date, surpassing last year's full-year total of
$3.5 billion. 2Q2007 saw a surge in contract wins with contracts
clinched amounting to $3 billion compared with $1.8 billion in both
1Q2007 and 1Q2006. We are now forecasting $6 billion worth of new
contracts this year, compared with our previous forecast of $4 billion.
We have raised SMM's net profit forecast for FY2007, FY2008 and FY2009
by 7%, 12% and 10% to $333 million, $447 million and $548.5 million,
respectively. We have also raised our target price by 36% from $4.50 to
$6.10, based on SOTP valuation of $6.12 per share. - UOB KayHian (June 22)
Sincere Watch (June 28: $1.44) TP: $1.60
MAINTAIN BUY. Sincere Watch reported a net profit of $25.4 million for
FY2007 due to record-high revenue of $359.2 million. However, this is a
steep decline from the $35.1 million in FY2006 as the group recorded a
one-off exceptional gain of $10.6 million from the dilution of interest
in the group's subsidiary SWHK last year. The group declared a final
dividend of once cent per share, less tax together with Special Dividend
I of 0.2 cent per share less tax and Special Dividend II of 1.25 cents
per share (tax exempt one tier). Revenue growth estimated to be at 10%
for FY21008 to FY2012, as compared with compound annual growth rate
(CAGR) of 13% from FY2002 to FY2007. The target price is upgraded to
$1.60 based on DCF valuation, which translates to 11.1 times EPS of 14.4
cents in FY2009. - Phillips Securities Research (June 2
United Test & Assembly Centre (June 28: $1.17) TP: $1.32
MAINTAIN OUTPERFORM. Affinity Equity and TPG Capital has offered to
acquire Utac for $1.20 per share in a cash deal valued at $2.2 billion.
The offer price of $1.20 per share values Utac at 1.63 times CY2007 P/BV
and 4.6 times CY2007 EV/Ebitda. The offer is at an 11% discount to
Temasek's offer for STATs ChipPAC on CY2007 P/BV basis and 16% discount
on CY2007 EV/Ebitda basis. We believe Utac deserves a similar takeover
valuation for STATs ChipPAC, given Utac's fragmented shareholder base, a superior ROE and stronger earnings growth prospects. We raise our target price to $1.32 based on 1.8 times CY2007 P/BV. - CIMB-GK (June 27)
Wilmar Int'l (June 28: $3.18 ) TP: $4.32
MAINTAIN BUY. Merger completion (targeted by end-June) could improve
investor visibility of the post-merger entity's strong fundamentals and
Wilmar's enlarged market cap (estimated US$13 billion, top 10 stock in
Singapore) could also enhance its profile. We have raised our 2008E net
profit estimate by 11% and our estimate is now 10% ahead of Bloomberg's
consensus, but we see further upside risks from higher crude palm oil
prices and refining/processing margins. Our new $4.32 12-month price
target (prior $3.30, 20 times 2008E PER) is based on a SOTP valuation,
which adopts a DCF approach to valuing the company's strong long-term
growth potential. This implies 24 times 2008E PER, compared with
historical eight to 23 times trading range (since listing). - Goldman
Sachs (June 25)
HOLD. Revenue grew 16.9% y-o-y to $297.6 million but net profit fell
25.54% to $11.62 million due to higher raw material costs, financing
costs and higher tax expenses. The group's higher turnover was driven by
continual growth in sales of its propriety brands - Sumo Firenza and SSW
wheels - as well as the increase in product lines of its major brands
Falken, Dunlop and Continental. Margins were squeezed with gross margins
falling from 29% to 24.3% y-o-y and net margins from 6.1% to 3.9%. Fair
value is pegged at 56 cents, which is supported by our residual income
model. At the current price of 53 cents, the counter offers limited
upside potential. - Net Research-Asia (June 26)
The Ascott Group (June 28: $1.83) TP: $2.30
BUY 1. We believe Ascott is on track to manage around 30,000 units by
2010 against 19,000 currently, based on its targets for key markets in
China, Europe, Vietnam, Singapore, India, and the Middle East. We raise
our EPS estimates from 0.054 cents to 0.094 cents for this year, from
0.064 cents to 0.07 cents for next year, and from 0.077 cents to 0.084
cents for 2009. Ascott continues to realized divestment gains as part of
recurring income. We expect Ascott to pay out around six cents per share
in dividends this year. We raise our price target to $2.30 from $2.05,
based on our DCF and blended enterprise value (EV)/Ebitda valuations.
Our price target implies 2008E PER of 32 times, which we believe is
reasonable, given our estimate of a 20% Ebitda CAGR for 2007-10 - UBS
Investment Research(June 25)
United Overseas Land (June 28: $5.80) TP: $7.14
MAINTAIN OUTPERFORM. In the last six months, UOL has made four additions
to its prime land bank. The latest acquisition as the freehold Oakswood
Heights, to be jointly developed with Spottiswoode Apartments into a
high-rise residential project. Assuming an average selling rpice of
$1,600 psf, we estimate attributable gains of $98 million. Ouur
FY2008-09 EPS estimates have been raised by 7% to 20% to incorporate
profit contributions from the Spottiswoode project, higher office
rentals, higher residential selling prices and potential contributions
from the Jalan Conlay project. Our end-CY2008 revised NAV estimate has
also been lifted to $7.14 from $6.67. Our target price has been lifted
to $7.14 from $6. - CIMB-GK (June 25)
