Daily Review - InvestingNote

LIM & TAN SECURITIES
20 CECIL STREET #09-00 EQUITY PLAZA SINGAPORE 049705
TEL: 65330595
www.limtan.com.sg
RCB REG NO. 197301030W
DAILY REVIEW | 30 OCTOBER 2014
FINANCIAL MARKETS
MAJOR MARKET INDICES
CLOSE
FSSTI
1D
(%)
MTD
(%)
YTD
(%)
3224.0
0.4
-1.6
1.8
16974.3
-0.2
-0.4
2.4
S&P 500
1982.3
-0.1
0.5
7.2
NASDAQ
4549.2
-0.3
1.2
8.9
FTSE (UK)
6453.9
0.8
-2.5
-4.4
Nikkei
15553.9
1.5
-3.8
-4.5
Hang Seng
23819.9
1.3
3.9
2.2
2373.0
1.5
0.4
12.1
15.2
5.3
-7.1
10.4
Dow Jones
Shanghai Composite
VIX
US stocks fell a marginal 0.2% as the Federal Reserve announced the
end of their US$15bln monthly bond purchase program and modified
their earlier language that referred to “significant under-utilization of
labour resources” to “under-utilization of labour resources is gradually
diminishing”. Fortunately, the Fed kept their pledge to keep interest
rates low for a “considerable time”. The committee said that while
inflation in the near term will likely be held down by lower energy prices,
it reiterated that “the likelihood of inflation running persistently below
2% has diminished somewhat”, allaying fears of dis-inflation. Gold
prices fell 1% as the end of QE3 will reduce demand for the metal as a
hedge against inflationary pressures.
IDEA OF THE DAY
SG MARKET SUMMARY
Daily Market Value (S$ 'm)
1019.6
Daily Market Volume (mln)
1342.6
52-week STI High
3387.8
52-week STI Low
2953.0
KEY INTEREST RATES
CLOSE
1D
(%)
MTD
(%)
YTD
(%)
3 Mth SGD SIBOR
0.4
0.0
1.0
3.4
3 Mth Swap Offer Rate
0.2
-0.6
-0.9
10.9
SG 10 YR Bond Yield
2.3
0.6
-7.9
-10.9
US 10 YR Bond Yield
2.3
0.9
-6.9
-23.5
US FUTURES
As at 8.00am SG time
CLOSE
Dow Jones
1D
(%)
MTD
(%)
YTD
(%)
16921.0
0.0
-0.3
3.9
S&P 500
1972.6
0.0
0.4
8.3
NASDAQ
4073.8
0.0
0.7
14.6
COMMODITIES
Gold
CLOSE
1D
(%)
MTD
(%)
YTD
(%)
1212.4
0.0
0.3
0.6
Crude Oil
82.2
1.0
-9.8
-16.5
Baltic Dry
1428.0
2.4
34.3
-37.3
Crude Palm Oil
8770.0
2.1
-2.0
-11.5
FSSTI INDEX
3600
3500
52-week price chart
OCBC ($9.69, down 3 cents) 3Q’14 net profit rose 62% yoy to $1.23bln,
coming in above expectations of $840mln, largely on the back of a onetime gain of $391mln (arising as a result of their increase in Bank of
Ningbo Co’s stake to 20% on 30 Sept’14 as the group’s initial available
for sales 15.3% investment was deemed disposed of in accordance with
accounting standards and its related fair value reserve was recognized in
the P&L statement as a one-off gain).
Excluding this one-off gain, 3Q’14 core earnings of $841mln (+11% yoy
but down 9% qoq) was largely in line with consensus estimates. 3Q’14
performance benefitted from the inclusion of OCBC Wing Hang’s net
profit contribution of $38mln after merger-related adjustments primarily in
depreciation and provisions. The sequential decline of 9% reflects lower
trading and insurance income, higher expenses from the consolidation
of OCBC Wing Hang (such as increase in net allowances for loans and
other assets).
Net interest income rose 27% yoy and 11% qoq to $1.246bln, underpinned
by strong asset growth and higher net interest margin (up from 1.63% to
1.68%). Improved loan spreads and higher returns from money market
activities helped net interest margin.
Customer loans grew 27% to S$205bln as a result of S$24.9bln additional
contributions from OCBC Wing Hang as well as higher demand for
general commercial loans, housing loans and loans to professionals and
individuals.
Fee and commission income rose 16% to a new high of $406mln,
underpinned by strong growth in wealth management, loan and
trade fees. Great Eastern’s earnings however fell 27% to $174mln as
unrealized mark to market investment gains in its non-participating fund
were lower yoy.
Operating expenses rose 28% yoy to $870mln, reflecting the consolidation
of OCBC Wing Hang. Excluding this, operating expenses still rose
16% due to higher staff costs and also additional headcount to support
business expansion.
Common Equity Tier 1 capital adequacy ratio (CAR) was 13.2% and Tier 1
CAR and total CAR were 13.2% and 15.5%, comfortably above regulatory
requirements of 5.5%, 7% and 10% respectively. Non-performing loan
(NPL) ratio was 0.7%, an improvement from last year’s 0.8% and was
unchanged qoq.
3400
3300
3200
3100
3000
2900
2800
10/13 11/13 12/13 01/14 02/14 03/14 04/14 05/14 06/14 07/14 08/14 09/14
Source: Bloomberg
Samuel Tsien said that “the integration of OCBC Wing Hang is progressing
well and the management and staff of OCBC Wing Hang and OCBC
Group are working very closely together”. In addition, “the integration has
been effective and smooth at both the customer-facing and operational
levels”.
At $9.69, OCBC is trading at 1.3x book, 12x forward and 10x prospective
PE compared to DBS’s 1.3x, 12x, 10x and UOB’s 1.3x, 12x, 11x. OCBC
is currently providing the highest dividend yield of 3.5% compared to
DBS and UOB’s 3.2%. We thus switch our banking sector preference to
OCBC, DBS then UOB.
Singapore Research Team
Tel: 6533 0595
Email: [email protected]
Please see research disclaimer on last page
Page
1
OTHER HIGHLIGHTS
Eu Yan Sang ($0.775, up 1.5 cents) reported 1Q FY15 net
profit of $0.7 mln (-48% yoy) as sales growth failed to catch
up with operating expenses (+9% yoy due to cost pressures
in salary and rental as well as some start-up expenses in new
markets). Revenue only grew 4% yoy to $83.0 mln given the
protracted unrest in Hong Kong and the slower economic
growth in China though partially offset by higher turnover
generated from Australia, Hong Kong and Singapore. While
wholesale revenue contribution has increased, this has not
impacted the group’s GPM, which has improved 30 basis
points to 51.5% for 1Q FY15.
On a positive note, we note that sales in Australia have
continued to grow consecutively with quarterly sales for 1Q
FY15 reaching A$10.6 mln. Given the challenging external
environment, management is taking the necessary steps to
manage rising operating costs by rationalizing its retail network,
expanding wholesale and even exploring E-commerce as an
alternative distribution channel. Currently, the total number of
retail outlets stood at 283 (comprising 252 company-operated
outlets and 31 franchise outlets) as at end-Sept 2014.
Notwithstanding, it remains optimistic that its business will
remain profitable and cash flow positive.
Baker Technology ($0.265, up 0.5 cent) has posted net profit
of S$4.3 mln (+20% yoy) on revenue of S$21.1 mln (+2%
yoy) for the 3Q FY14. The stronger bottomline growth was
primarily due to a foreign exchange gain of S$1.5 mln from
the strengthening USD against the SGD, pared by higher
administration expenses of S$0.9 mln. Its net order book
currently stood at US$50 mln as at end-Sept 2014 and are
expected to be completed within the next 12 to 18 months.
Looking ahead, management remains cautiously optimistic of
the long term fundamentals of the O&G industry despite the
recent drop in oil prices and the softening of charter rates. We
understand that the construction of Baker Engineering’s liftboat
remains on course for completion in time. Given its strong
balance sheet with net cash of S$148.7 mln and zero gearing,
Baker is also keen to look at potential M&A opportunities
(including strategic alliances) to provide additional avenues of
growth.
Trek 2000 ($0.395, down 0.5 cents) announced that it had
entered into a 70:30 JV with a subsidiary of Taiwan-listed UMC
to produce solid-state drives for portable consumer electronics
with a paid-up capital of US$5mln. The move is expected to
impact FY15 financials.
Yongnam Holdings ($0.20, up 1.2 cent) updated that the
consortium comprising Yongnam, Changi Airport Planners
and Engineers and JGC Corporation has successfully
been selected as the successful Tenderer by Myanmar’s
Department of Civil Aviation, for the design, construction,
operation and maintenance of Hanthawaddy International
Airport (HIA) and its facilities on the basis of a public-private
partnership agreement for a 30-year concession period.
Following the selection process, the consortium will now enter
into advanced discussion and negotiation with the DCA to
finalise details and terms of the HIA project.
InnoTek Ltd ($0.265, unchanged) said that it would form a
49:51 JV with China’s fourth-largest TV manufacturer, Konka
Group, to design and produce high-end precision metal
components needed for larger, high definition flat screens.
The JV company will have a registered capital of RMB20mln
and management believes that the move is in line with its
strategy to diversify its customer mix and improve InnoTek’s
overall utilization of resources.
SP Corp ($0.097, unchanged) saw 3Q14 revenue inch up 3%
to S$34.9mln while net profit dropped 58% to S$0.3mln due to
lower tyre distribution activities and lower gross margin from
commodities trading. As with 3Q13, no interim dividends were
declared.
For 9M14, turnover dropped 17% to S$99.4mln as net earnings
declined 39% to S$1.3mln. Going forward, the company
expects the market environment for both commodities trading
and tyre distribution to remain challenging. At $0.097, market
cap is $34mln, trailing P/E is 14.1x, P/B is 0.7x and price-tosales is 0.2x.
Creative Technology ($2.08, up 3 cents) saw 1Q15 revenue
decrease 20% to US$24.3mln as losses deepened to
US$9.9mln from US$5.5mln mainly due to the US$3.6mln
other losses line item. As with 1Q14, no interim dividends were
declared. Balance sheet of the company remains strong as it
is in a net cash position of US$112.7mln, representing 92%
of market cap. Going forward, the company expects no major
improvement in the difficult and uncertain market conditions,
and the overall market for its products remains challenging. At
$2.08, market cap is $156.5mln, P/B is 0.9x, dividend yield is
2.4% and FY14 price-to-sales is 1.1x.
FSSTI STOCK SELECTION
HIGHEST CONSENSUS FY14E DIV YIELD (%)
LOWEST TRAILING P/B (X)
1 HUTCHISON PORT-U
7.90
1 GOLDEN AGRI
0.59
2 ASCENDAS REIT
6.77
2 HONGKONG LAND
0.59
3 CAPITAMALL
5.78
3 HUTCHISON PORT-U
0.72
4 SPH
5.14
4 CAPITALAND
0.86
5 STARHUB
4.98
5 SIA
0.86
LOWEST CONSENSUS FY14 P/E (X)
LOWEST TRAILING EV/EBITDA (X)
1 SIA
4.32
2 SEMBCORP INDUSTRIES
10.23
2 JARDINE C&C
7.47
3 OCBC
10.40
3 COMFORTDELGRO
7.71
4 KEPPEL CORP
10.43
4 SEMBCORP INDUSTRIES
7.99
5 DBS
10.75
5 SEMBCORP MARINE
8.98
1 NOBLE GROUP
9.84
Source: Bloomberg Estimates (FSSTI Universe)
Please see research disclaimer on last page
Page
2
23 - 28 OCTOBER
SHARE TRANSACTIONS
Company
Buy
Sell
Transacted
Price* ($)
Market
Price ($)
New
Balance
Stake
(%)
32,926,000
200,000
300,000
200,000
250,000
95,000
-
0.024
1.46
0.96
1.465
1.19
0.48
-
36,626,000
3,009,000
3,480,000
3,119,000
4,116,800
237,396,560
9.16
0.14
0.12
0.18
0.16
40.42
-
18,430,000
818,800
176,000
0.029
ND
3.782
1.88
-
55,687,000
704,235,500
36,545,000
10.89
8.61
5.98
Party
ACQUISITIONS
Huan Hsin
Mapletree Commercial
Mapletree Greater China
Mapletree Industrial Trust
Mapletree Logistics Trust
Sino Grandness Food
Unionmet (Singapore) Ltd
Hiew Yoon Khong
Hiew Yoon Khong
Hiew Yoon Khong
Hiew Yoon Khong
Huang Yupeng
DISPOSALS
Cacola Furniture
IHH Healthcare
Petra Foods
Liu Kit Nam
EPF
Aberdeen International Fund
* ND: Not Disclosed
SHARE BUYBACK
Company
GP Industries
Lian Beng
Pacific Century
SATS
Please see research disclaimer on last page
No. of shares
Price
($)
Cumulative
Purchases
Of Maximum
(%)
266,000
300,000
941,000
24,000
0.555
0.67
0.26
3.05
2,908,000
11,797,000
127,723,000
3,987,000
5.9
22.3
41.9
3.6
Page
3
DIVIDENDS (LIST IS NOT EXHAUSTIVE)
Company
Amount
Frasers Centrepoint Trust
Mapletree Commercial Trust
Mapletree Greater China
PCI
Raffles Education
Isoteam
Spindex Industries
800 Super Holdings
Cheung Woh Technologies
K1 Ventures
Micro-Mechanics
Parkson Retail Asia
CH Offshore
Chuan Hup Holdings
Olam
Lantrovision
LCD Global Investments
Singapura Finance
Tai Sin Electric
Wing Tai
Silverlake Axis
PEC Ltd
Chosen Holdings
Ascendas India Trust
SPH
Second Chance Properties
2.785¢ (Period 01 July To 30 September 2014)
1.97¢ (Period 01 July To 30 September 2014)
3.162¢ (Period 01 April To 30 September 2014)
3¢ final / 7¢ special
1¢ final
1¢ final
2.2¢ final
1¢ final
0.5¢ interim
2.5¢ interim
2¢ final
2.5¢ final
2¢ final / 2¢ special
1¢ final
5¢ final / 2.5¢ special
3¢ final
1¢ final
5¢ final
1.5¢ final
3¢ final / 3¢ special
1.2¢ final / 0.6¢ special
2¢ final
6.72¢ final
2.4¢ (Period 01 April To 30 September 2014)
8¢ final / 6¢ special
1.5¢ final
Please see research disclaimer on last page
Last Day
First Day
Cum-Dividend Ex-Dividend
29 Oct
29 Oct
29 Oct
29 Oct
29 Oct
30 Oct
30 Oct
31 Oct
31 Oct
31 Oct
31 Oct
31 Oct
03 Nov
03 Nov
03 Nov
04 Nov
05 Nov
05 Nov
05 Nov
05 Nov
06 Nov
07 Nov
10 Nov
19 Nov
05 Dec
07 Jan 2015
30 Oct
30 Oct
30 Oct
30 Oct
30 Oct
31 Oct
31 Oct
03 Nov
03 Nov
03 Nov
03 Nov
03 Nov
04 Nov
04 Nov
04 Nov
05 Nov
06 Nov
06 Nov
06 Nov
06 Nov
07 Nov
10 Nov
11 Nov
20 Nov
08 Dec
08 Jan 2015
Date
Payable
28 Nov
04 Dec
24 Nov
13 Nov
12 Nov
14 Nov
19 Nov
14 Nov
18 Nov
14 Nov
19 Nov
13 Nov
19 Nov
18 Nov
13 Nov
17 Nov
20 Nov
19 Nov
18 Nov
24 Nov
27 Nov
26 Nov
21 Nov
10 Dec
23 Dec
21 Jan 2015
Page
4
WHAT’S AHEAD
OCTOBER 2014
Sun
Mon
Tue
Wed
Thu
Fri
Sat
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Please see research disclaimer on last page
1Q Ended Sept ‘14
Yamada Green
1Q Ended Sept ‘14
Fragrance Group
2Q Ended Sept ‘14
AIMS AMP Capital
2Q Ended Sept ‘14
SMRT
3Q Ended Sept ‘14
First Ship Lease
Indofood Agri
ParkwayLife Reit
Tuan Sing
UOB
3Q Ended Sept ‘14
DBS
Forterra Real Estate
Global Premium
Hotel
OUE Commercial Reit
UIC
Page
5
WHAT’S AHEAD
NOVEMBER 2014
Sun
Mon
Tue
Wed
Thu
Fri
Sat
1
2
3
3Q Ended Sept ‘14
CitySpring Infra
Cosco Corp
Elec and Eltek
Global Investments
OUE Hospitality Trust
9
4
2Q Ended Sept ‘14
Global Logistic
SIA Engineering
3Q Ended Sept ‘14
Maxi-Cash
SembCorp Marine
Starhub
3Q Ended Sept ‘14
Hi-P International
Perennial China Retail
Rickmers Maritime
Roxy-Pacific
10
3Q Ended Sept ‘14
ARA Asset Mgmt
Hotel Royal
Super Group
Vard Holdings
5
11
3Q Ended Sept ‘14
CSE Global
Genting Singapore
Petra Foods
UOL group
Vard Holdings
Vicom
Wilmar International
World Precision
6
7
2Q Ended Sept ‘14
Ascendas Hospitality
SIA
3Q Ended Sept ‘14
CapitaLand
FEO Hospitality
IFS Capital
Noble group
Singapore Reinsurance
ST Engineering
3Q Ended Sept ‘14
Ascott Residence Trust
Asian Pay TV Trust
Challenger Tech
China Aviation Oil
Ezion Holdings
SembCorp Ind
12
3Q Ended Sept ‘14
Amara Holdings
China Sunsine
City Developments
Croesus Retail Trust
SBS Transit
13
1Q Ended Sept ‘14
Amtek Engineering
2Q Ended Sept ‘14
SATS
Singapore Telecoms
8
14
15
3Q Ended Sept ‘14
Mewah Intl
Straco Corporation
3Q Ended Sept ‘14
ComfortDelgro
Ho Bee Land
HTL Intl
4Q Ended Sept ‘14
Frasers Centrepoint
16
17
18
19
20
21
22
23
24
25
26
27
28
29
Please see research disclaimer on last page
Page
6
RESEARCH DISCLAIMER
This report is intended for clients of Lim & Tan Securities Pte Ltd [herein after termed as LTS] only and no part of
this document may be –
i.
Copied, photocopied, duplicated, stored or reproduced in any form by any means or
ii. Re-distributed or disseminated, directly or indirectly, to any other person in whole or in part, for any purpose
without the prior consent of LTS.
This research report is prepared for general circulation. It does not have regard to the specific investment objectives,
financial situation and particular needs of any specific recipient of this research report. You should independently
evaluate particular investments and consult your independent financial adviser before making any investments or
entering into any transaction in relation to any securities or investment instruments mentioned in this report.
The information, tools and material presented herein this report are not directed at, or intended for distribution to
or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution,
publication, availability or use would be contrary to applicable law or regulation or which would subject LTS to any
registration or licensing requirement within such jurisdiction.
The information and opinions presented in this research report have been obtained or derived from sources believed
by LTS to be reliable. Their accuracy, completeness or correctness is, however, not guaranteed. Opinions and
views expressed in this report are subject to change without notice, and no part of this publication is to be construed
as an offer, or solicitation of an offer to buy or sell securities, futures, options or other financial instruments or
to provide investment advice or services. Therefore, LTS accepts no liability for loss arising from the use of the
material presented in this report where permitted by law and/or regulation. LTS may have issued other reports that
are inconsistent with the assumptions, views and analytical methods of the analysts who prepared them.
LTS, its directors, its connected persons and employees may, from time to time, own or have positions in any of the
securities mentioned or referred to in this report or any securities related thereto and may from time to time add to or
dispose of or may be materially interested in any such securities. LTS’s research analysts are primarily responsible
for the content of this report, in part or in whole, and certifies that the views about the companies expressed in
this report accurately reflect his personal views. LTS prohibits the research analysts who prepares this report
from receiving any compensation (excluding salary and bonuses) or other incentives and benefits receivable in
respect of this report or for providing specific recommendation for, or in view of a particular company or companies
mentioned in this report.
LTS-SPECIFIC / REGULATORY DISCLOSURE
1. LTS does not have a proprietary position in the company / companies as recommended in this report as at the
close of 29/10/14.
2. The research analysts do have interest in OCBC as recommended in this report as at the close of 29/10/14.
*
Includes direct or indirect ownership of securities or Futures Contracts (excluding the amount of securities or Futures
Contracts owned), directorships or trustee positions.
Page
7

Download Report