Courts Asia

Phillip Securities Research, May 30

COURTS' Q4 2013 earnings of S$12.6 million was marginally above our expectations on lower expenses. Sales registered in Singapore were weaker than expected, while expenses were well managed. Underlying service charges from the in-house credit facilities grew strongly at 25.3 per cent y-o-y to S$32.5 million.

Total earned service charge was, however, lower y-o-y because of movements related to the accounting recognition of service charges. Proposed dividend of 1.01 cents, representing a 30 per cent payout ratio of H2 2013 net profit, was also announced.

While Q4 2013's sales were below expectations, we continue to expect stronger sales growth in FY2014. This is expected to be driven both by higher sales of goods, and earned service charges.

The opening of new stores in Singapore (two stores), and Malaysia (six stores + one megastore) in FY2014 is expected to drive this increase. Overall credit quality in Singapore and Malaysia remains benign, while credit sales are expected to remain strong.

We adjust our forecast to include Q4 2013's results. Based on our DCF (discounted cash flow) valuation, assuming WACC (weighted average cost of capital) of 7.1 per cent, and terminal growth (g) of 3.0 per cent, we maintain our target price of S$1.14.

We continue to view the expansion into Indonesia positively, while the higher expected sales growth and good cost management is expected to drive net profits. We therefore maintain our "buy" rating.

BUY

Biosensors International

Maybank Kim Eng Research, May 30

FY13 results were within our expectations with revenue of US$336 million (up 15 per cent y-o-y) and net profit of U$114 million (down 68 per cent y-o-y and up 14 per cent y-o-y excluding exceptionals).

Revenue and net profit make up 100 per cent and 101 per cent of our FY13 forecasts, respectively. Biosensors also declared maiden dividends of 2.0 US cents per share which translates to a forward yield of 2.1 per cent.

Product sales registered a 32 per cent y-o-y growth in FY13 due to consolidation of JWMS as well as increased sales of BioMatrix DES family products. Product gross margin improved to 81 per cent (FY12: 76 per cent) as a result of improved economy of scale and better product and geographical mix. However, the DES market is plagued by negative price pressures from government intervention, competition and natural price decline which could see erosion in margins going forward. In Japan, despite efforts to step up marketing of Nobori stents, Biosensors guided for flat licensing revenue growth, which implies that Terumo is unlikely to regain its initial market share.

New product lines such BioMatrix NeoFlex and contributions from recent acquisition of Spectrum Dynamics could sustain a decent growth rate but we think that a stronger catalyst is needed for positive re-rating, which hopefully could come from value accretive acquisitions. We cut FY14-15 forecast by 6-8 per cent on lower revenue and margin forecasts. Maintain "hold", SOTP-based (sum of the parts) TP reduced to S$1.25.

HOLD

King Wan Corp

DMG & Partners Research, May 30

KWAN's (King Wan) Q4 FY13 revenue was 2.7x that of the preceding quarter, but conservative revenue recognition led to lower margins. We expect a positive reversal in later quarters. Interest income of S$1.3 million from associates also contributed to the outperformance.

Strong order book provides high visibility for core dividends. KWAN's S$166.6 million outstanding order book will provide mechanical and electrical work for at least two years. For FY14 and FY15, we also expect contributions from the property developments (Starlight Suites and Dairy Farm Road). Taken together, the 1.5 cent core dividend prospect looks very stable.

KWAN stated that Kaset Thai Industry Sugar (KTIS) IPO is expected to go live in July 2013. This will translate the sale of its Thai Associates into cash (as well as a S$28.7 million income boost) which will allow KWAN to pay a 1.5 cent special dividend in Q2 FY14 forecast. We see this dividend being sustainable over 10 years as the S$50 million value of the Thai Associates is distributed to shareholders as special dividends of S$5 million per year.

Raise TP to S$0.43 based on 7 per cent yield. With the core dividend outlook very stable and the special dividend looking more certain each day, we believe that KWAN should experience further yield compression.

We value the sustainable three cents dividend at a 7 per cent yield (down from 7.5 per cent), translating into a TP of S$0.43. The 9.1 per cent current yield compares favourably with business trusts averaging 6.5 per cent and Reits averaging 5.2 per cent.

United Envirotech

OCBC on 30 May 2013

United Envirotech Ltd (UEL) reported its FY13 results, with revenue jumping 117% to S$185.0m, or just 2% above our forecast, while net profit surged 182% to S$29.5m, and was about 1.6% ahead of our estimate. UEL also declared a final dividend of S$0.005/share. Going forward, management intends to further expand its recurring water treatment revenue by acquiring or investing in more water treatment plants. We believe UEL has the financial means to achieve its goal after its recent fund raising exercises. We are also positive on the company’s long-term prospects. Maintain BUY with a higher S$1.03 fair value (versus S$0.90 previously), still based on 13x FY14F EPS.

FY13 results almost spot-on
United Envirotech Ltd (UEL) reported its FY13 results, with revenue jumping 117% to S$185.0m, or just 2% above our forecast, aided by higher engineering business (+132%) and also a 77% jump in the water treatment business. Net profit surged 182% to S$29.5m, and was about 1.6% ahead of our estimate. UEL also declared a final dividend of S$0.005/share. 

Still looking to expand portfolio
Going forward, management continues to see growing demand for membrane-based water and waste-water treatment services, especially in China; this mainly driven by stricter discharge limits imposed by the Chinese government and the shortage of water supply in various parts of the mainland. On its part, it will actively seek out suitable engineering and investment projects. And as a long-term strategy, UEL intends to continue expanding its stable and recurring treatment income. 

Financial means to achieve goal
Recognizing that the water treatment business is pretty capital intensive, UEL has already moved to raise funds over the past year or so. From its convertible bond issue and share placement to KKR, the company still has about S$88m of utilized proceeds. Based on its usual 40% equity/60% debt policy, we estimate that UEL can comfortably finance up to S$220m worth of projects. We understand that it is considering issuing bonds as another source of funds.

Upping FV to S$1.03
We raise our FY14 revenue forecast by 4% and core earnings by 20%, as we expect to see more high-margin recurring income flowing through as more upgraded treatment plants start contributing in the coming quarters. This in turn raises our fair value from S$0.90 to S$1.03, still based on a 13x FY14F EPS. Although near-term profit-taking may occur following the stock’s stellar performance prior to the results announcement, we remain upbeat about its long-term prospects. Maintain BUY.

Biosensors International

OCBC on 30 May 2013

Biosensors International Group’s (BIG) 4QFY13 revenue growth of 0.7% YoY to US$88.8m closely matched our US$88.5m forecast. PATMI excluding exceptional items came in at US$29.8m, a 4.1% increase YoY and exceeded our projection by 6.5%, thanks to an income tax benefit of US$5.9m due largely to a tax refund received. For FY13, revenue and core PATMI jumped 15.1% and 10.5% to US$336.2m and US$111.6m, respectively. Surprisingly, BIG declared its first ever dividend since listing. Declared DPS of US$0.02 translates into a yield of ~2.1%. Looking ahead, we expect BIG to maintain its technological superiority with its new product launches. Management has guided for revenue growth of ~15% for FY14, in line with our expectations. We leave our estimates unchanged, and maintain our fair value estimate of S$1.60. Reiterate BUY as BIG’s recent share price weakness represents a good entry point, in our view.

4QFY13 core PATMI above expectations
Biosensors International Group (BIG) reported a mild 4QFY13 revenue increase of 0.7% YoY to US$88.8m, as strong product sales growth (+16.9%) was offset by a sharp 45.7% dip in licensing and royalties revenue. This closely matched our US$88.5m forecast. PATMI excluding exceptional items came in at US$29.8m, a 4.1% increase YoY and exceeded our forecast by 6.5%, thanks to an income tax benefit of US$5.9m due largely to a tax refund received. For FY13, revenue and core PATMI jumped 15.1% and 10.5% to US$336.2m and US$111.6m, respectively. The former came in at the low end of management’s 15-20% revenue growth guidance for FY13.

Positive dividend surprise, first ever declared since listing
Surprisingly, BIG declared its first ever dividend since its IPO in May 2005. We believe this decision was supported by its huge net cash hoard of US$336.9m (as at end FY13). Declared DPS of US$0.02 translates into a payout ratio of 29.9% and yield of ~2.1%. 

Stepping up the technological ladder
Following its recent CE Mark approval for its next-generation BioFreedom™ drug-coated stent (full commercial launch expected in 2014), BIG announced last week (20 May) that it has also obtained the CE Mark approval for its BioMatrix NeoFlex™, the latest addition to its BioMatrix family of drug-eluting stents. We believe this demonstrates BIG’s ability to maintain its technological superiority, as the BioMatrix NeoFlex™ features a new advanced stent delivery system supported by positive clinical data. This product will be sold immediately in its key markets.

Revenue growth guidance of ~15% for FY14; reiterate BUY
BIG has guided for revenue growth of ~15% for FY14, which is within our expectations as our prior forecast implies topline growth of 14.1%. We leave our estimates unchanged, and maintain our fair value estimate of S$1.60. In our opinion, BIG’s recent share price weakness represents a good entry point, with the stock trading at an attractive 13.5x FY14F PER, coupled with management’s decision to reward shareholders with their first-ever dividends. Reiterate BUY.

Tuan Sing Holdings

NRA Capital Research, May 29

TUAN Sing (TS) is primarily a property developer, deriving 85 per cent of its group earnings in FY12 from the property segment.

Despite the latest property cooling measures, sales of Sennett Residence, which is near the Potong Pasir MRT station, sold well with a take-up rate of 79 per cent since the project's launch in March 2013.

The remaining projects launched with unsold units are Seletar Park Residence (95 per cent sold) and Phase III of Lakeside Ville in Shanghai (86 per cent sold).

Based on confirmed sales, unrecognised profits (as at last Dec 31) from sold units in these projects are expected to enhance RNAV per share by about 12 Singapore cents.

Tuan Sing plans to launch Cluny Park Residence, a 52-unit freehold premier residential project in July.

Management guided a launch price of $2,600 per square foot (psf), which is a tad aggressive in our opinion.

However, this small-scale project in a choice location by a quality developer could appeal to a certain pool of buyers.

A full take-up rate of this project alone will enhance RNAV per share by 2.5 cents.

There are currently no plans to launch two projects, located in Fujian and Shandong provinces, in China.

The proposed redevelopment of Robinson Towers, its annex and the International Factors Building into a single commercial development comprising an office tower and a retail podium will commence in Q4 FY13, once existing tenants vacate the premise, at the latest, by the end of this month.

Upon completion expected in 2016, the redevelopment will enhance the lettable floor area of the redeveloped buildings and investment property portfolio by 65 per cent to 261,000 square feet and 37 per cent to 320,000 square feet respectively.

Tuan Sing will enjoy a sharp uplift in recurring rental income from about $11 million in FY12 to an estimated $28 million in FY17, assuming full occupancy in the new commercial building and a conservative average rental of $8.20 psf and $12.50 psf for office and retail spaces respectively.

Going forward, Tuan Sing plans to participate in land acquisition in Singapore through the government land sale programme.

It is also looking to pursue opportunities to acquire commercial buildings as part of the group's strategy to build up recurring income.

Its balance sheet strength and low gearing of 0.47x as at March 31 bode well for the group, providing it with the financial resources to pursue investment plans.

Adopting a conservative stance and valuing only the property development and investment division, we value TS at RNAV per share of 78 cents per share and a target price of 47 cents, taking a 40 per cent discount to valuation to account for TS' small market capitalisation, illiquidity and, particularly, policy risk.

Taking our conservative stance further to account only for completed sales of existing development projects Seletar Park Residence and Sennett Residence, our fair value and target price of 74 cents and 44 cents still offer upside of about 24 per cent.

This also does not account for the other businesses, including hotel ownership in Australia, growth prospects of the printed circuit board manufacturing operation at Gul Technologies and commodity trading at SP Corporation.

Downside risk to share price is also supported by low P/B of 0.57x, compared to P/B of 1.0x of small-cap property peers. Tuan Sing is relatively undervalued.

OVERWEIGHT

Tat Hong Holdings Ltd

DBS Group Research, May 29

TAT Hong Holdings reported FY13 revenue of S$837 million and earnings of S$70 million, which were in line with our forecasts.

Revenue grew 16 per cent, driven by stronger tower and mobile crane rental segments, which rose 27 per cent and 37 per cent respectively through better utilisation and rental rates.

Tat Hong declared final dividend per share (DPS) of 2.5 cents, bringing full-year DPS to four cents. This was a surprise as we had expected a total DPS of 2.5 cents, similar to last year's.

Infrastructure developments regionally continue to be robust.

In Singapore, the construction of the Thomson MRT Line will commence in H2 2013; there are other rail projects in Asean, such as in Malaysia and Thailand. We expect Tat Hong to be actively supplying its cranes for these projects.

We expect both rental rates and utilisation rates to remain strong, given buoyant demand for cranes in regional infrastructure projects.

We are leaving our earnings estimates and TP intact. Valuations remain compelling, with the stock trading at an attractive 10x FY14 forecasted earnings currently.

Our S$1.80 TP is based on 12x FY14F earnings. Maintain "Buy" for 19 per cent upside.

BUY

Tat Hong

OCBC on 29 May 2013

Tat Hong reported revenue and net profit to shareholders of S$837m (+16%) and S$70m (+67%) respectively for FY13. The results were in line with ours and the street’s estimates. Gross profit margin improved to 37.6% for FY13 (FY12: 36.5%) due to greater contribution from the higher-margin Crane Rental and Tower Crane businesses. Although the outlook for its key markets remains positive, management believes it is time to slow down its fleet expansion, after a 79% surge in fleet tonnage in the past 5 years. It will now focus on raising its crane productivity, and reducing operating costs through the use of its new yard in Iskandar. Although this may mean more a modest PATMI growth rate of about 10%, the improving cashflow would also bring its gearing level to a more sustainable level. Maintain BUY with unchanged S$1.75 fair value estimate.

FY13 within expectations
Tat Hong reported revenue and net profit to shareholders of S$837m (+16%) and S$70m (+67%) respectively for FY13. The results were in line with ours and the street’s estimates. Gross profit margin improved to 37.6% for FY13 (FY12: 36.5%) due to greater contribution from the higher-margin Crane Rental and Tower Crane businesses. The group also recorded a disposal gain of S$9.3m and wrote off inventory and trade receivables worth S$6.0m in the last financial year. It proposed a final dividend of 2.5 S cts, bringing its total dividend to 4.0 S cts for FY13 (FY12: 2.5 S cts). 

Healthy level of infrastructure activities
Revenue for the Crane Rental segment jumped 37% to S$307m in FY13, driven by strong crane demand in its key markets (Singapore, Malaysia, Hong Kong, etc). The China Tower Crane Rental posted a 27% increase in revenue to S$75m due to improved utilization on a larger fleet. Revenue growth for Distribution was more modest at 7% (to S$362m), attributable mainly to higher sales in Singapore, Thailand and Indonesia; but partially offset by weakness in Australia. The only laggard was the General Equipment division, which suffered a 4% contraction resulting from more subdued activities in Australia. 

Digesting its fleet expansion
The outlook for its key markets remains positive, underpinned by a number of infrastructure projects. However, management believes it is time to slow down its fleet expansion, after a 79% surge in fleet tonnage in the past 5 years. It will now focus on raising its crane productivity, and reducing operating costs through the use of its new yard in Iskandar. Although this may mean more a modest PATMI growth rate of about 10%, the improving cashflow would also bring its gearing level to a more sustainable level. Maintain BUY with unchanged S$1.75 fair value estimate.

Yoma Strategic Holdings

UOBKayhian on 29 May 2013

Valuation

·          The stock is currently trading at 87.0x FY14F PE.

Financial Highlights

·          The group reported a net profit of S$14.4m in FY13 compared with S$6.0m in FY12. The boost in net profit is partly due to buoyant sales in the housing segment and land development rights as well as non-cash negative goodwill of S$9.1m of its retail mall in Dalian, China. Stripping this and the non-cash share-based payments to CEO and Employee Share Option Scheme, net profit would have doubled to S$12.3m.

·          The real estate division remains the core revenue driver, contributing more than 90% of FY13 revenue. The company has sold more apartments in the Pun Hlaing Golf Estate and Star City during the financial year, and as at 31 Mar 13, the company has S$55.9m of property sales yet to be recognised. Gross margin also improved from 29.8% to 43.3% in FY13 due to higher selling prices for its land development rights and properties.

Business updates

·          Yoma is currently embarking on one of the most iconic development projects in downtown Yangon, named as the Landmark Development Project. Although the company is still waiting for the final approval from the Myanmese government, this is a 2m sf GFA mixed-use development that comprises a 5-star hotel and condominium, 4-star hotel and serviced apartment and two Grade-A office towers and a retail mall.

·          Accordingly, Yoma has entered into a non-legally binding agreement with The Hong Kong and Shanghai Hotels, Limited, owner, developer and manager of The Peninsula Hotels, to jointly develop the 5-star hotel in the project.

·          On the retail business segment, PMIC (a three-party JV between Yoma, Parkson Myanmar and FMI) will hold a soft launch its 57,000sf departmental store in this month, and brands such as D&G, DKNY etc. will be brought to Myanmar for the first time.

·          Recently, Yoma and First Myanmar Investment (FMI) entered into luxury tourism where they will acquire hot air balloons operator Balloons over Bagan (BOB) for US$10.7m. They will also acquire a 20-acre prime site in Bagan to develop a high-end boutique hotel.

Our view

·         Myanmar’s economy seems to be opening up faster than expected with many multi-national companies eyeing a pie on its rich natural resources. On 11 April, Myanmar’s government opened an auction of 30 blocks of offshore oil and gas and we believe many international oil companies will be keen to tender.

·         We also expect the tourism industry in Myanmarto register strong growth due to its natural beauty and wealth of Buddhist monuments. However, as tourist numbers have risen to about 1m a year, the lack of hotels have caused hotel prices to rocket. In our view, Yoma will continue to remain in a sweet spot within the hospitality sector, developing apartments, hotels and commercial properties, catering to the needs of tourists and business expatriates.

Sembcorp Marine

DBS Vickers Research on 28 May 2013

SEMBCORP Marine (SMM)'s subsidiary, Jurong Shipyard, has secured a US$596 million contract for a newbuild ultra-high specification jack-up rig for deployment in the United Kingdom sector of the North Sea from Noble Corp. It comes with an option for an additional unit.The latest order brings SMM's YTD wins to S$2.43 billion, forming 49 per cent of our full-year expectation of S$5 billion.

Hence, we are leaving our forecasts intact. While this sizeable contract win is encouraging, we would like to see a faster ramp-up of new orders that will boost earnings visibility in 2014, strong pick up in repair sales in H2 2013, and continued improvement in margins before revisiting our "hold" recommendation and TP of S$4.70.

HOLD

Sarin Technologies

Maybank Kim Eng Research on 28 May 2013

DEBEERS has once again increased rough diamond prices by about 4 per cent in its May sight. According to Rappaport, rough prices have increased by about 10 per cent this year, while polished prices for one-carat diamonds rose by a mere 0.3 per cent (although prices for 0.30-carat stones rose by 9 per cent). Trading of rough in the secondary market is weak as sightholders would lose money after accounting for broker fees and other costs if they sell. Without the needed rise in polished prices, manufacturers would face a squeeze on their margins.

Consequently, Indian manufacturers are expected to maintain cautious manufacturing levels. Furthermore, it is usually a quiet period in the second quarter during this May summer-vacation period. We believe that this may lead to more subdued demand for traditional capital equipment sales in Q2 2013. Fortunately for Sarin, we believe that this could be compensated by stronger Galaxy sales that were being held back last quarter.

The market is looking at the Las Vegas jewellery show next week for indications of demand and prices in the polished diamond market. US retailers have experienced steady sales in Q1 2013 and the hope is for improved sentiments to compensate for slower demand in the Far East. A positive movement in polished diamond prices would provide a relief to the market.

Although the current situation may constrain liquidity for manufacturers in the short term, we believe that the repeated margin pressures faced by the manufacturers would stimulate an increased motivation to seek higher efficiencies through long-term investments in technologies.

We highlight that the investment case for Sarin is in the structural changes it would bring forth with its game-changing technologies. Other than the increasing penetration of the Galaxy in the rough diamond industry, its entry into the polished diamond markets should see more rapid developments over the next few years. Maintain "buy" and TP of S$1.66.

BUY

Valuetronics Holdings

OCBC on 28 May 2013

Valuetronics Holdings Limited’s (VHL) FY13 results were within our expectations. Revenue from continuing operations fell 3.4% to HK$2,210.2m, or just 0.6% shy of our forecast. Net profit from continuing operations fell 26.1% to HK$118.4m, while net losses from its now discontinued Licensing division widened by 32.7% to HK$39.8m, resulting in overall PATMI decline of 39.6% to HK$78.7m. Excluding exceptional items, we estimate that core PATMI for FY13 fell 14.7% to HK$103.7m (1.1% above our estimate). VHL also slashed its FY13 DPS from HK$0.17 to HK$0.08. This was below our HK$0.11/share forecast but still translates into a decent yield of ~6.0%. We foresee an improvement in VHL’s bottomline and DPS in FY14 as it does not expect to incur any further expenses for its Licensing business. We maintain our HOLD rating but raise our fair value estimate slightly from S$0.19 to S$0.195 due to a marginal 2.7% increase in our FY14 core PATMI forecast.

FY13 results in-line with our expectations
Valuetronics Holdings Limited (VHL) reported FY13 results which were within our expectations. Revenue from continuing operations fell 3.4% to HK$2,210.2m, or just 0.6% shy of our forecast. The decline was attributed to a 6.1% fall in sales from its Consumer Electronics segment, but partially offset by a 4.0% rise in revenue from its Industrial and Commercial Electronics (ICE) customers. Net profit from continuing operations fell 26.1% to HK$118.4m, while net losses from its now discontinued Licensing division widened by 32.7% to HK$39.8m, resulting in overall PATMI decline of 39.6% to HK$78.7m. Excluding the one-off termination expenditure and impairment of PPE from its Licensing division and other exceptional items, we estimate that core PATMI for FY13 fell 14.7% to HK$103.7m. This was 1.1% above our estimate.

Dividends cut but still translates into a yield of ~6.0%
Given the sharp decline in VHL’s reported PATMI, its DPS for FY13 was consequently slashed from HK$0.17/share (this includes a HK$0.01 special dividend) to HK$0.08/share. This represents a payout ratio of ~36.5% and was below our HK$0.11 DPS forecast. However, this still translates into a decent yield of ~6.0%.

No further losses from Licensing business; maintain HOLD
Following management’s decision to cease its Licensing division, VHL does not expect any further expenses to be incurred for this business in FY14. Hence we foresee an improvement in its bottomline in FY14 due to the hefty losses incurred in FY13. This would likely result in an improvement in its FY14 DPS (OIR forecast: HK$0.11/share). We lower our FY14 revenue forecast by 3.6% but raise our core PATMI estimate by 2.7% as we expect VHL to place stronger focus on its higher margin ICE business. Our FY15 projections are also introduced. We derive a slightly higher fair value estimate of S$0.195 (previously S$0.19), still pegged to 4x FY14F EPS. Although VHL trades at 4.3x and 0.73x FY14F PER and PBR, respectively, we maintain our HOLD rating on the stock given the still challenging outlook and lack of near-term catalysts.

Yoma Strategic Holdings

OCBC on 28 May 2013

Yoma reported 4QFY13 PATMI of S$11.5m, up 452% YoY mostly due to a S$9.1m one-time gain. FY13 PATMI cumulates to S$14.4m and, excluding one-time gains, is judged to be generally in line with our forecast. We see the completion of the Landmark Project acquisition as a key catalyst for the share price ahead but note that management has raised the possibility of another deadline extension. That said, the signing of a Heads of Agreement with the Hong Kong and Shanghai Hotels Group and other preparations by Yoma for site development points to a good level of confidence that they would acquire the site eventually, in our view. Sales at launched projects remain firm, with 491 out of total 528 units sold in buildings 3 and 4 at Star City. In addition, management showed a strong deal-making record in FY13 and is in the midst of acquiring more land sites and establishing businesses in tourism, retail, agriculture and automobiles. Upgrade to HOLD with an increased fair value estimate of S$0.87 (20% premium to RNAV), versus S$0.71 previously, as we incorporate firmer valuations for the Landmark Project and Yoma’s existing land bank into our model.

4Q PATMI up 452% YoY due to one-time gain
Yoma reported 4QFY13 PATMI of S$11.5m, up 452% YoY mostly due to a S$9.1m one-time gain (negative goodwill recognized from the consolidation of a subsidiary in Dalian, China). FY13 PATMI cumulates to S$14.4m and, excluding one-time gains, is judged to be generally in line with our forecast. Full year top-line is S$60.5m, which increased 54% and is again within expectations, but we note much of the gross profit uplift was offset by administrative costs rising S$13.9m, mostly due to employee share compensation schemes. Management proposed a final dividend of 0.5 S-cent.

All eyes on the Landmark Project acquisition
We believe the completion of the Landmark Project acquisition in downtown Yangon is a key catalyst for the share price ahead but note that management has raised the possibility of another extension for the deadline. That said, the signing of a Heads of Agreement with the Hong Kong and Shanghai Hotels Group and other preparations by Yoma for site development points to a good level of confidence that they would acquire the site eventually, in our view. Management has also reported that they have received verbal assurance from relevant authorities that a new lease would be granted.

Strong deal-making record 
Sales at launched projects remain firm, with 491 out of total 528 units sold in buildings 3 and 4 at Star City. In addition, management showed a strong deal-making record in FY13 and is in the midst of acquiring more land sites and establishing businesses in tourism, retail, agriculture and automobiles. One significant potential kicker for shareholders is Yoma’s participation (with Digicel and Quantum Strategic Partners) in tendering for one of the two telco licenses awarded by the Myanmar authorities in Jun-13. Upgrade to HOLD with an increased fair value estimate of S$0.87 (20% premium to RNAV), versus S$0.71 previously, as we incorporate firmer valuations for the Landmark Project and Yoma’s existing land bank into our model.

KSH Holdings

OCBC on 28 May 2013

KSH reported 4QFY13 PATMI of S$14.0m, up 85% YoY mostly due to an increase in profit contributions from development projects held by its associates and JVs. On a full year basis, FY13 PATMI is S$36.3m which increased a strong 98%. We judge this to be somewhat above our expectations (our FY13 PATMI forecast is S$30.7m) as the pace of revenue recognition at JV development projects came in faster than anticipated. Management proposed a final dividend of 1.15 S-cents per share. Likely catalysts ahead includes major pipeline launches at Hong Leong Garden (NeWest), King Albert Park and Seletar Garden which would all likely take place this year. In China, KSH’s 45% Beijing condo project could also begin sales this year. We view a potential firm performance at this project to be significant for KSH’s earnings profile which could sustain earnings growth into FY15 by contributing an estimated S$23m net earnings upon TOP. Maintain BUY with an unchanged fair value estimate of S$0.73.

A strong year of earnings
KSH reported 4QFY13 PATMI of S$14.0m, up 85% YoY mostly due to an increase in profit contributions from development projects held by its associates and JVs. On a full year basis, FY13 PATMI is S$36.3m which increased a strong 98%. We judge this to be somewhat above our expectations (our FY13 PATMI forecast is S$30.7m) as the pace of revenue recognition at JV development projects came in faster than anticipated. Topline for the year increased 42% to S$206.1m mostly due to strong contributions from the construction segment, which rose S$60.9m to S$206.3m. Management proposed a final dividend of 1.15 S-cents per share – in line with our expectations – which brings the total dividend payout for FY13 to 2.5 S-cents per share.

Still looking to strengthen order book
The order book currently stands at S$446.0m which we view to be healthy and we understand management is actively in the midst of seeking more contracts. In 2013 to date, order book replenishment now cumulates to S$233m – already exceeding the S$163m total last year. Construction contracts won include Q Bay Residences, a JTC district cooling system building and its 45%-owned condominium development project in Beijing, Liang Jing Ming Ju Phase 4 (LJMJ).

Maintain BUY at unchanged S$0.73
Likely catalysts for the share price includes major pipeline launches at Hong Leong Garden (NeWest), King Albert Park and Seletar Garden which would all likely take place this year. In China, KSH’s 45% Beijing condo project could also begin sales this year. We view a potential firm performance at this project to be significant for KSH’s earnings profile which could sustain earnings growth into FY15 by contributing an estimated S$23m net earnings upon TOP. Maintain BUY with an unchanged fair value estimate of S$0.73. Our model already accounts for accretion from LJMJ into the property segment’s RNAV and use a 5x PE multiple to value the construction segment, in line with peers trading at 5-7 times.

Global Logistic Properties

Phillip Securities Research on 27 May 2013

GLP announced FY13 Patmi (profit after tax and minority interests) excluding revaluation of US$350 million, up 11.4 per cent y-o-y. Total revenue reported was US$642 million, up 13.5 per cent y-o-y mainly on strong rental growth in China from newly completed properties.

The company met its FY13 whole-year target of 2.0 million square metres GFA (gross floor area) development start, and targets another 2.5 million sq m development start in FY14. This further consolidates their market leadership, while enhancing network effect and economies of scale.

The company also targets 0.4 million sq m and 0.31 million sq m GFA development starts respectively in Japan and Brazil, with an estimated gross project cost of US$960 million. Following the earlier monetisation of 33 properties to J-Reit, GLP has US$1.96 billion cash on hand and a low net debt-to-asset ratio of 8.2 per cent.

Management indicated monetisation of the remaining Japan stabilised properties could be considered before borrowing further debt to finance development projects.

The company has strong business fundamentals. The strong cash position and potential capital recycling through Japan property monetisation would ensure rich liquidity for future development.

Some developments previously scheduled for completion in FY13 were delayed to FY14.

We, therefore, expect strong project completions in the following few quarters and hence significant fair-value gain on project completion in FY14. Leasing activities in China remain upbeat, driven by 3PL and e-commerce, despite the nation's retail growth moderating slightly in the first four months of 2013. Potential further weakening of the yen could weigh on GLP's Japan rental income and exert downward pressure on the property valuation through currency translation. There is currently no concrete evidence that the Japanese government's aggressive monetary loosening has stirred up the nation's real economy.

We revise our FY14 target price upwards from S$2.77 to S$2.90. This is equivalent to a capital gain of 1.4 per cent in addition to a 1.4 per cent return on dividends, calculated based on the closing price of S$2.86 as at May 23.

Despite our liking GLP's strong business fundamentals, it could have been more or less fully reflected by the current share price. Therefore, we maintain our "neutral" rating but reserve the possibility of raising it to "accumulate" should the following events occur:

1) Exchange rate of JPY against SGD exhibiting mean reversion;

2) The economic recovery of China regaining momentum, therefore, improving market sentiment;

3) The aggressive monetary loosening by Japanese government successfully reviving Japan's economic outlook or compressing cap rate;

4) A detailed examination on GLP's key development pipeline information anchoring a better-than-expected projection. This may be disclosed in GLP's upcoming FY2013 Annual Report.

Midas Holdings

Maybank Kim Eng Research on 27 May 2013

THE newly formed China Railway Corporation (spun off from the former Ministry of Railways) made its capital market debut with the sale of 20 billion yuan bonds last Thursday.

The proceeds from the sales will go towards rail construction, the purchase of rolling stocks and working capital. In our view, it is a necessary move to get China's ambitious railway plans back in gear and could potentially result in more intensive investments in the second half of the year.

We continue to like Midas as a major beneficiary of the investments in China railway sector, and maintain our "buy" rating and target price of S$0.75.

China Railway Corp inherited all the liabilities of the former Ministry of Railways and the heavy debt burden affects its cash-generation ability. The funding source is thus crucial to the development of China railway system.

People had some concern that the high gearing and the restructuring of the China Ministry of Railways could cause some slowdown in this sector. Now it seems that the funding has returned to normal.

The RMB20 billion bonds are just the first batch of the RMB 150 billion bonds that China Railway is expected to issue this year.

Total investment in the China rail sector YTD also lags behind the full-year investment target of RMB650 billion, because of the restructuring of the Ministry of Railways. That implies more aggressive fund raisings and investments in H2 2013. We are looking at RMB500-600 million order wins in the metro sector in H2 2013. But the key point to watch remains the potential resumption of high speed train tenders in H2 2013, which can significantly boost Midas' profitability if they materialise.

We are still positive on the likelihood of the tender in H2 2013.

We suggest investors to remain patient. Although earnings will still suffer in 2013, we expect YTD order to win momentum to continue on the back of more aggressive investments by China Railway Corp, which will result in an earnings turnaround in 2014. Maintain "buy" and target price of S$0.75.

BUY

Dyna-Mac Holdings

OCBC on 27 May 2013

Dyna-Mac Holdings reported 1Q13 results that were slightly below our expectations. 1Q13 revenue fell by 19% QoQ to S$60.1m, while net profit fell 24% QoQ to S$6.7m. The group’s order-book continued to fall to S$113m (27 Feb-13: $134m), providing cover for under two quarters. To be fair, delays in the award of contracts is quite common in the industry and Dyna-Mac is currently tendering for a number of large projects. Nonetheless, the low order-book still makes Dyna-Mac vulnerable to potential yard under-utilization should contracts be further delayed. After adjusting our model to incorporate the 1Q13 results, our fair value estimate declined to S$0.44 (previously S$0.50). Maintain HOLD.

1Q13 results below expectations
Dyna-Mac Holdings reported 1Q13 results that were slightly below our expectations. 1Q13 revenue fell by 19% QoQ to S$60.1m, while net profit fell 24% QoQ to S$6.7m; as there is little or no seasonality involved in Dyna-Mac’s business, we believe a QoQ comparison better illustrates the changes in the group’s performance. Gross margin was 24.4% in 1Q13 (4Q12: 23.1%), within the typical range of 20-30%. The group also suffered a fair value loss on financial instruments of S$1.2m in 1Q13 due to unfavourable movements on the contracted USD forward rates against spot rates.

Declining order-book
As we mentioned in our previous report, the group’s low order-book makes it vulnerable to any delays in the awards of new contracts, and could potentially result in yard under-utilization. As of 14 May-13, its order-book fell to S$113m (27 Feb-13: S$134m), providing cover for under two quarters. To be fair, delays in the award of contracts are quite common in the industry for a number of reasons, including re-tendering and changes in design specifications or project schedules. We also understand that Dyna-Mac is tendering for a number of large projects and expects to rebuild its order-book significantly in 2H13. 

Maintain HOLD with lower S$0.44 FV
While we are positive over Dyna-Mac’s medium- to long-term outlook given the large backlog of floater orders across the industry, we are also mindful that its low order-book may pose a risk to near-term earnings. In addition, the group’s expansion into Malaysia and Guangzhou remains a work-in-progress, and bottom-line earnings growth may only be evident in FY14-15F. After adjusting our model to incorporate the 1Q13 results, our fair value estimate declined to S$0.44 (previously S$0.50). Maintain HOLD.

OKP Holdings

OCBC on 23 May 2013

For the first quarter of the year, PATMI came down 22.2% YoY to S$2.4m – below our expectations and consensus estimates – mostly due to margin pressures from increased subcontracting and labour costs. Looking ahead, we see softer gross margins in the vicinity of 15%-20% for OKP as it continues to face significant cost-side pressures from more restrictive labour regulations from authorities and increased competition to hire and retain engineers. That said, OKP continues to have a fairly healthy order book at S$393.5m as at 30 Apr 2013, as the group benefits from significant experience in public-sector construction and maintenance projects with a good reputation for on-time delivery. We last rated OKP a HOLD with a fair value estimate of S$0.46, based on a P/E multiple of 11x applied to FY13F EPS. Due to a re-allocation of internal resources, we are ceasing coverage on this counter.

Margin pressure from higher labor costs
1Q13 revenue was 28.4% higher YoY but we saw a steeper than expected dip in gross margins from 21.0% to 15.1% over the quarter. As a result, 1Q13 PATMI came down 22.2% YoY to S$2.4m, which was below our expectations and consensus estimates. Management indicates at margin pressures from increased subcontracting and labour costs due to more restrictive labour regulations from authorities and increased competition to hire and retain engineers. Looking ahead, we see softer gross margins in the vicinity of 15%-20% for OKP as it continues to face significant cost-side pressures now ubiquitous for major players across the construction sector.

Order book fairly healthy
That said, OKP continues to have a fairly healthy order book at S$393.5m as at 30 Apr 2013, as the group benefits from significant experience in public-sector construction and maintenance projects with a good reputation for on-time delivery. In 2013 to date, it won two contracts from the PUB: first, a S$6.7m contract for the dredging of Sungei Api Api and second, a S$10.2m contract for the improvement of roadside drains, mainly involving the construction of box drains/entrance culverts in the Joo Chiat District.

MRT contracts a source for new contracts
In addition, OKP intends to compete for contracts related to the new MRT lines ahead which management views to be a strong source for construction demand. For this purpose, the group indicates that it has found an established foreign partner with which it intends to jointly tender for contracts.

Ceasing coverage
We last rated OKP a HOLD with a fair value estimate of S$0.46, based on a P/E multiple of 11x applied to FY13F EPS. Due to a re-allocation of internal resources, we are ceasing coverage on this counter.