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LIM & TAN SECURITIES
20 CECIL STREET #09-00 EQUITY PLAZA SINGAPORE 049705
TEL: 65330595
www.limtan.com.sg
RCB REG NO. 197301030W
DAILY REVIEW | 27 OCTOBER 2014
FINANCIAL MARKETS
MAJOR MARKET INDICES
FSSTI
CLOSE
1D
(%)
MTD
(%)
YTD
(%)
3222.6
-0.4
-1.7
1.7
16805.4
0.8
-1.4
1.4
S&P 500
1964.6
0.7
-0.4
6.3
NASDAQ
4483.7
0.7
-0.2
7.4
FTSE (UK)
6388.7
-0.5
-3.5
-5.3
Dow Jones
Nikkei
15291.6
1.0
-5.5
-6.1
Hang Seng
23302.2
-0.1
1.6
0.0
2302.3
0.0
-2.6
8.8
16.1
-2.5
-1.2
17.4
Shanghai Composite
VIX
US stocks rose another 0.7% on Friday, underpinned by better than
expected earnings as well as speculation that the Federal Reserve
may not end their bond buying program after St Louis Fed Reserve
Bank President James Bullard said that policy makers should consider
delaying the end of bond purchases. Investors will find out this week
if that will indeed be true after the Federal Reserve meeting later this
week.
IDEA OF THE DAY
We believe there is “speculative appeal” for United Engineers ($2.85,
up 3 cents) shares given:
·
Similar to Wing Hang Bank’s grant of an “exclusive” due diligence
period to OCBC, OCBC and Great Eastern’s (GE) grant of an
“exclusive” due diligence period (6 weeks from 26 Aug’14) likely
suggests that TCC Top Enterprise Limited (TCC) under Charoen
would have already made a minimum bid for UE.
·
Given the “exclusive nature” granted to TCC, we believe that
TCC’s bid would have met the minimum expectations of OCBC
and GE.
·
We also believe that TCC remains in discussion with OCBC and
GE as the exclusive period ends 6 weeks after TCC starts due
diligence and not 6 weeks from the date the exclusive agreement
was signed (ie on 26 Aug’14). In any case, UE would have to
make a formal announcement (under SIC takeover rules) if the
takeover talks are officially over with TCC.
·
Given the recent disposal of UE’s 68.2% stake in UE E&C at
$1.25 per share to Southern Capital Group, its 67.6% owned
WBL Corp’s disposal of its automotive division to StarChase
Motorsports for $455mln and WBL Corp’s 77.2% owned MFS’s
flexible printed circuit board business to Novo Tellus Capital
Partners, UE ’s remaining assets which consists of office assets
(UE Square, UE Bizhub Tower, 450 Alexandra Road), Retail
assets (UE Square, Rochester Mall, Seletar Mall) Serviced Suites
(Park Avenue Clemenceau, Park Avenue Rochester and Park
Avenue Robertson), provides strategic fit to Charoen’s (TCC’s
owner) Frasers Commercial Trust, Frasers Centrepoint Trust and
recently-listed Frasers Hospitality Trust.
·
To make an “educated” guess on a “fair” price for UE, we use
WBL’s Independent Financial Adviser (IFA) methodology as a
benchmark (during last year’s takeover battle between Straits
Trading and UE) to define what is fair in OCBC’s point of view
given that UE currently owns 67.6% of WBL and OCBC and its
related parties the rest.
·
According to the IFA report (refer to note 7.7 of the IFA letter in
WBL Corp), “the intrinsic value of WBL Corp was arrived using a
range of lower and upper RNAV estimates with no conglomerate
discount applied”.
·
If we applied this to UE using the current consensus estimates, it
would range from a low of $3.30 (ChurchillCapital done in Aug’14)
to $3.55 (done by CIMB in Oct’14).
·
While this RNAV range would translate to 1.17x to 1.27x price to
historical book, we note that historically when OCBC group and
even UE sells their assets, the deals were typically done at prices
that were comfortably above their book values. We also note that
since 2010 till current, the average and median price to book range
(for property related deals) is between 1.2-1.3x.
·
Finally, the combined 30% stake of OCBC, GE and the Lee family
in UE means that even if TCC were to successfully buy over the
stake (necessitating a general offer), it would not prevent potential
new offers from say OUE (which press reports had reported were
previously interested in UE) or even Straits Trading (previously
involved in a takeover battle with UE for WBL Corp and recently
raised $455mln from selling their flagship Straits Trading Building).
SG MARKET SUMMARY
Daily Market Value (S$ 'm)
915.7
Daily Market Volume (mln)
1402.1
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
0.9
3.2
3 Mth Swap Offer Rate
0.2
0.0
-1.7
9.9
SG 10 YR Bond Yield
2.2
-0.3
-9.2
-12.2
US 10 YR Bond Yield
2.3
-0.1
-8.9
-25.1
As at 8.00am SG time
CLOSE
1D
(%)
MTD
(%)
YTD
(%)
Dow Jones
US FUTURES
16750.0
0.1
-1.3
2.8
S&P 500
1960.8
0.0
-0.2
7.6
NASDAQ
4038.5
0.1
-0.2
13.6
CLOSE
1D
(%)
MTD
(%)
YTD
(%)
1227.9
-0.2
1.6
1.8
Crude Oil
81.3
-1.3
-10.9
-17.4
Baltic Dry
1192.0
3.2
12.1
-47.7
Crude Palm Oil
8615.0
0.8
-3.7
-13.1
COMMODITIES
Gold
FSSTI INDEX
3600
3500
52-week price chart
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
Singapore Research Team
Tel: 6533 0595
Email: research@limtan.com.sg
Please see research disclaimer on last page
Page
1
OTHER HIGHLIGHTS
Ezra Holdings ($0.835, down 0.5 cent) reported 4Q14 net profit of
US$11 mln (+10% yoy), which was below market expectations.
Unsurprisingly, the topline growth of 6% to US$26.8 mln was driven
by its Subsea Services division (which now accounted for 70%
of FY14 revenue) though partially offset by decrease in turnover
from Marine Services segment (13%) as well as Offshore Support
Services business (17%). Gross profit margin however, narrowed
from 18% to 14% in 4Q14, attributed to lower margin contribution
from the Offshore Support Division as a result of weakness in the
AHT and PSV segment. In addition, GPM for Subsea Services
Division was also weaker, arising from higher project close out and
variation orders recognised in 4Q13 compared to 4Q14.
The decrease in share of profit of associated companies for 4Q14
was mainly due to absence of disposal gain by EMAS Offshore
(formerly known as EOC Ltd). Excluding these one-off, adjusted
full year earnings rebounded from a loss of US$26.6 mln in FY13
to a profit of US$41.2 mln in FY14, mainly helped by operational
turnaround by EMAS AMC. Separately, it also announced that
EMAS AMC has won multiple new awards from various energy
companies valued at over US$70 mln. The scope of work includes
subsea installation of umbilicals, flowlines and jumpers, as well
as provision of services to support rigs. Work has commenced for
several projects, with the others slated for offshore execution from
4Q14 to 2Q15. Going forward, Ezra will focus in executing its current
backlog of US$2.4 bln, with the majority of its existing contracts to be
executed over the next 12 to 18 months.
While its relatively high net gearing ratio of 1.16x remains a concern,
management expects its gearing and free cash flow to improve
with Lewek Constellation’s delivery. Ezra did not declared any cash
dividend in FY14 (compared to 0.5 cent a year ago) though it is
proposing a bonus issue of 1 for every 25 existing shares to reward
shareholders. As valuation does not appear particularly compelling
at 9x FY15 P/E, we see no reason to change our Hold call.
HTL International ($0.29, up 0.5 cents) warned that it is expected to
report a net loss for 3Q FY14. Based on a preliminary review of the
group’s performance, the expected loss is attributed to an increase
in operating overheads resulting from a one-off expense incurred
in connection with the cessation of an agency. Notwithstanding the
expected loss in 3Q FY14, HTL is still likely to remain profitable for
the full financial year. It will announce its financial results for 3Q
FY14 on 13 Nov 2014.
Blumont Group ($0.025, down 0.1 cent) issued a profit warning
and that it expects to report a net loss for 3Q14 and 9M14. These
are due to fair value readjustments of the company’s investments
in transferable securities, attributable to the recent volatility in the
financial markets and global economy.
Xpress Hldgs ($0.008, down 0.1 cent) disclosed it had received no
objection from the SGX for an extension of time for a period of 2
months to release its FY14 results from the current deadline of 29Sep-14. Additionally, the company’s AGM is also to be postponed
to a later date.
Micro-Mechanics ($0.57, unchanged) saw its highest quarterly
revenue and net earnings ever with 1Q15 revenue increasing
17.7% to S$13.0mln as net profit increased 29.6% to S$2.8mln
due to higher sales in the semiconductor tooling division while
higher gross margins also helped. The company generated free
cash flows of S$2.3mln while its balance sheet remains robust
with net cash position of S$13.3mln equating to 16.8% of market
cap. As with 1Q14, no dividends were declared. Going forward, the
company cautioned that business forecasting and planning remains
difficult on a short-term basis while it plans to continue to deploy
resources towards the development of automated processes. At
$0.57, market cap is $79.2mln, P/E is trailing 11.6x, P/B is 2.1x,
dividend yield is high at 5.3% and price-to-sales is 1.8x.
Pavillon Hldgs ($0.104, unchanged) issued a profit warning and that
it expects to announce a net loss for 1H15. This is due to decrease
in sales in restaurants, increase in personnel costs, lower interest
income earned and fixed assets written off upon closure of an outlet
in Shanghai.
FSSTI STOCK SELECTION
HIGHEST CONSENSUS FY14E DIV YIELD (%)
LOWEST TRAILING P/B (X)
1 HUTCHISON PORT-U
7.65
1 GOLDEN AGRI
0.55
2 ASCENDAS REIT
6.62
2 HONGKONG LAND
0.59
3 CAPITAMALL
5.77
3 HUTCHISON PORT-U
0.73
4 SPH
5.18
4 CAPITALAND
0.83
5 STARHUB
4.98
5 SIA
0.84
LOWEST CONSENSUS FY14 P/E (X)
LOWEST TRAILING EV/EBITDA (X)
1 SEMBCORP INDUSTRIES
10.31
1 SIA
4.26
2 NOBLE GROUP
10.50
2 JARDINE C&C
7.49
3 OCBC
10.51
3 COMFORTDELGRO
7.55
4 DBS
10.68
4 SEMBCORP INDUSTRIES
7.99
5 KEPPEL CORP
10.70
5 SEMBCORP MARINE
9.12
Source: Bloomberg Estimates (FSSTI Universe)
Please see research disclaimer on last page
Page
2
14 - 23 OCTOBER
SHARE TRANSACTIONS
Company
Buy
Sell
Transacted
Price* ($)
Market
Price ($)
New
Balance
Stake
(%)
500,000
189,000
1,105,000
3,730,000
94,000
767,000
565,000
33,000
766,000
1,793,595
-
0.852
1.662
0.041
1.835
0.456
1.039
0.52
2.932
0.285
0.148
-
66,216,000
48,985,728
222,064,500
705,032,400
298,938,862
479,158,744
76,293,000
27,742,750
124,548,000
366,408,748
6.02
5.00
13.03
8.62
58.28
66.02
6.04
8.00
9.46
36.48
Party
ACQUISITIONS
Accordia Golf Trust
CDL Hospitality Trusts
Global Yellow Pages
IHH Healthcare
KS Energy
Pacific Radiance
Rex International
Sarine Technologies
Sino Construction
TT International
Daiwa Securities
Aberdeen Asset Management
Pang Yoke Min
EPF
Kris Taenar Wiluan
Pang Yoke Min
FIL Ltd
FIL Ltd
Zhang Yanmin
Julia Tong
SHARE BUYBACK
Company
Courts Asia
GP Industries
Keppel Land
Koh Brothers
Lian Beng
Pacific Century
Ryobi Kiso
SATS
Soup Restaurant
T T J Holdings
Please see research disclaimer on last page
No. of shares
Price
($)
Cumulative
Purchases
Of Maximum
(%)
60,000
56,000
223,000
100,000
262,000
1,551,000
1,150,000
470,000
232,000
300,000
0.46
0.55
3.28
0.305
0.645
0.26
0.113
3.05
0.222
0.36
2,433,000
2,066,000
373,000
10,095,000
10,859,000
122,119,000
5,249,000
3,412,000
904,000
500,000
4.4
4.2
0.2
22.9
20.5
40.1
7.0
3.0
3.2
1.4
Page
3
DIVIDENDS (LIST IS NOT EXHAUSTIVE)
Company
Amount
Frasers Commercial Trust
Mapletree Logistics Trust
GuocoLeisure
Mapletree Industrial Trust
SGX
Soilbuild Business Space Reit
Suntec Reit
Viva Industrial Trust
Cambridge Industrial Trust
Hai Leck
PCI
Raffles Education
Parkson Retail Asia
Spindex Industries
Micro-Mechanics
CH Offshore
Chuan Hup Holdings
Olam
Lantrovision
LCD Global Investments
Singapura Finance
Tai Sin Electric
Wing Tai
Silverlake Axis
PEC Ltd
Chosen Holdings
SPH
2.2145¢ (Period 01 July To 30 September 2014)
1.88¢ (Period 01 July To 30 September 2014)
2¢ final
2.6¢ (Period 01 July To 30 September 2014)
4¢ interim
1.546¢ (Period 01 July To 30 September 2014)
2.328¢ (Period 01 July To 30 September 2014)
1.687¢ (Period 01 July To 30 September 2014)
1.25¢ (Period 01 July To 30 September 2014)
1¢ final / 2¢ special
3¢ final / 7¢ special
1¢ final
2.5¢ final
2.2¢ final
2¢ 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
8¢ final / 6¢ special
Please see research disclaimer on last page
Last Day
First Day
Cum-Dividend Ex-Dividend
24 Oct
24 Oct
27 Oct
27 Oct
27 Oct
27 Oct
27 Oct
27 Oct
28 Oct
28 Oct
29 Oct
29 Oct
31 Oct
30 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
05 Dec
27 Oct
27 Oct
28 Oct
28 Oct
28 Oct
28 Oct
28 Oct
28 Oct
29 Oct
29 Oct
30 Oct
30 Oct
03 Nov
31 Oct
03 Nov
04 Nov
04 Nov
04 Nov
05 Nov
06 Nov
06 Nov
06 Nov
06 Nov
07 Nov
10 Nov
11 Nov
08 Dec
Date
Payable
28 Nov
28 Nov
17 Nov
04 Dec
06 Nov
20 Nov
21 Nov
21 Nov
12 Dec
14 Nov
13 Nov
12 Nov
13 Nov
19 Nov
19 Nov
19 Nov
18 Nov
13 Nov
17 Nov
20 Nov
19 Nov
18 Nov
24 Nov
27 Nov
26 Nov
21 Nov
23 Dec
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
2Q Ended Sept ‘14
Ascendas India Trt
3Q Ended Sept ‘14
Hutchison Port
OKP Holdings
Raffles Medical Grp
3Q Ended Sept ‘14
Osim International
CDL Hospitality Trust
4Q Ended Aug ‘14
Second Chance
Please see research disclaimer on last page
3Q Ended Sept ‘14
Great Eastern
STATS ChipPAC
Yoma Strategic
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
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
OUE Hospitality Trust
9
4
2Q Ended Sept ‘14
Global Logistic
3Q Ended Sept ‘14
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
Petra Foods
Wilmar International
World Precision
6
2Q Ended Sept ‘14
SIA
3Q Ended Sept ‘14
Ascott Residence Trust
Asian Pay TV Trust
China Aviation Oil
Ezion Holdings
SembCorp Ind
12
1Q Ended Sept ‘14
Amara Holdings
City Developments
Croesus Retail Trust
13
1Q Ended Sept ‘14
Amtek Engineering
7
8
3Q Ended Sept ‘14
FEO Hospitality
IFS Capital
ST Engineering
14
15
3Q Ended Sept ‘14
Mewah Intl
3Q Ended Sept ‘14
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
30
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 24/10/14.
2. The research analysts do have interest in OCBC as recommended in this report as at the close of 24/10/14.
*
Includes direct or indirect ownership of securities or Futures Contracts (excluding the amount of securities or Futures
Contracts owned), directorships or trustee positions.
Page
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