ALTHOUGH THE SINGAPORE residential market has been dampened by several policy measures with the most recent announced on Jan 13, CLSA has upgraded City Developments to a buy in a 100-page property report dated Apr 7. According to property analyst Pang Chin Hong, despite 44% of its revalued Gross Asset Value (GAV) coming from Singapore residential properties, “a substantial portion is pre-sold,” he says. Another 25% and 12% of GAV come from the office space and hospitality sector respectively.
The strongest driver for City Developments is likely to come from the divestment of its commercial property portfolio, Pang says. Last year, the company divested several older commercial properties such as The Corporate Building, The Corporate Office and Chinatown Point. In 2005, the company had planned to sell 11 properties to Suntec REIT for $788 million but the deal fell through. “We believe that CDL will continue asset divestment this year as the group is shifting its focus toward a higher-quality portfolio as evidenced by the South Beach development, 9 Tampines Grande and 11 Tampines Concourse,” Pang writes.
What could City Developments sell? At this stage, it’s unlikely to be Republic Plaza which Pang has revalued at $2.2 billion. Instead, lower-grade properties such as City House, Fuji Xerox Towers, Central Mall, Katong Shopping Mall, some strata units in Tanglin Shopping Centre, The Arcade, Palais Renaissance, Delfi Orchard, units in GB Building, Fortune Centre, Sunshine Plaza and Plaza by the Park are possible candidates for divestment. Pang reckons these properties are worth a further $2.2 billion. Tanglin Shopping Centre, worth $105 million, has been put up for a collective sale but market observers note there are so far no takers. Sunshine Plaza is also believed to have been up for sale for a while.
Nonetheless, Pang is optimistic that City Developments can realise good gains if it manages to sell these assets. The developer does not revalue properties unlike other companies. Investment properties are carried at historical cost plus accumulated depreciation. Pang reasons that the carrying book values of these properties are likely to be much lower than their true value and City Developments could rake in a capital gain of $1 billion if it can find buyers for such a diverse portfolio.
“This presents a key catalyst for City Developments’ share price in 2011. With interest in commercial properties on the rise, we would not be surprised to hear of aggressive offers,” Pang writes. He has a target of $14.31 for the stock against his RNAV (Revised Net Asset Value) estimate of $16.84.
Back on the residential front, City Developments’ mass-market project, H2O Residences, which saw a takeup rate of 27% during the first weekend launch on March 5, is to have drawn mediocre response so far. Also, only 21 of the 56 units released in the 226-unit The Residences at W on Sentosa Cove have been sold. City Developments says it doesn’t plan to launch any more units in the near term. At a results briefing in Feb, chairman Kwek Leng Beng says he can afford to hang on to the units because he has holding power.
Thursday, April 21, 2011
Axiata BUY Target Price RM5.83 by OSK Research
OSK Research is maintaining its NEUTRAL recommendations for SINGTEL (FV: S$3.00) and STARHUB (FV: S$2.85) whilst keeping its BUY rating on M1 (FV: S$2.85), its'' top pick for the Singapore telecoms sector.
For the Malaysian mobile telcos, it is retaining its BUY recommendation on AXIATA (BUY, FV: RM5.83) and NEUTRAL call on MAXIS (FV: RM5.20).
'We are downgrading our recommendation on DIGI to NEUTRAL from BUY previously as its share price has rallied 15% since our upgrade in late January and has surpassed our DCF fair value of RM27.90,' it said.
For the Malaysian mobile telcos, it is retaining its BUY recommendation on AXIATA (BUY, FV: RM5.83) and NEUTRAL call on MAXIS (FV: RM5.20).
'We are downgrading our recommendation on DIGI to NEUTRAL from BUY previously as its share price has rallied 15% since our upgrade in late January and has surpassed our DCF fair value of RM27.90,' it said.
Wednesday, April 20, 2011
Cosco BUY Target Price $3.00 by Citigroup
Citi has raised its target price on Cosco Corporation (COSC.SI), a Singapore-listed Chinese shipbuilder, to $3.00 from $2.55 and maintained its buy rating.
Cosco said last month its subsidiary had signed a letter of intent to build two rigs worth US$1.05 billion ($1.32 billion) for Norway’s Sevan Group (SEVAN.OL). Sevan also has the option to order two more rigs at the same price.
Cosco is likely to make a full transition from a shipmaker to a rigbuilder in 2011, Citi said, adding that it sees accelerating wins in floating, production, storage and offloading (FPSO) vessels and rigs.
The brokerage said the shift in business mix will result in better margin resilience compared with shipbuilding, since offshore and marine wins should account for more than 80% of new orders in 2011, versus around 20% in 2007.
Cosco is also likely to benefit from order spill-overs and grow market share as Singapore and South Korean yards are getting more filled, Citi said, adding that the contract value may rise with the expansion from fabrication to full turnkey projects.
Cosco said last month its subsidiary had signed a letter of intent to build two rigs worth US$1.05 billion ($1.32 billion) for Norway’s Sevan Group (SEVAN.OL). Sevan also has the option to order two more rigs at the same price.
Cosco is likely to make a full transition from a shipmaker to a rigbuilder in 2011, Citi said, adding that it sees accelerating wins in floating, production, storage and offloading (FPSO) vessels and rigs.
The brokerage said the shift in business mix will result in better margin resilience compared with shipbuilding, since offshore and marine wins should account for more than 80% of new orders in 2011, versus around 20% in 2007.
Cosco is also likely to benefit from order spill-overs and grow market share as Singapore and South Korean yards are getting more filled, Citi said, adding that the contract value may rise with the expansion from fabrication to full turnkey projects.
Golden Agri BUY Target Price $0.88 by OCBC Research
OCBC Investment Research in a 13th April research report says: "Golden Agri-Resources (GAR) has provided more details on its Forest Conservation Policy (FCP). Meanwhile, in the nearer term, we note that CPO prices continue to hold up pretty well, no doubt buoyed by the rising crude oil prices, as well as lessened demand concerns following the Japan twin disaster in early March.
"And with the MENA (Middle East North Africa) region still looking slightly uncertain, we believe that it may continue to drive demand for alternative sources of fuel, especially bio-diesel. The world's second largest CPO producer Malaysia plans to implement the use of B5 bio-diesel this year; it has also allocated MYR200 million for the establishment of blending facilities. Fair value of 88 cents (17x FY11F core EPS). MAINTAIN BUY."
"And with the MENA (Middle East North Africa) region still looking slightly uncertain, we believe that it may continue to drive demand for alternative sources of fuel, especially bio-diesel. The world's second largest CPO producer Malaysia plans to implement the use of B5 bio-diesel this year; it has also allocated MYR200 million for the establishment of blending facilities. Fair value of 88 cents (17x FY11F core EPS). MAINTAIN BUY."
Keppel Land BUY Target Price $5.09 by OCBC Research
Singapore property developer Keppel Land said its first-quarter net profit rose 46% year-on-year to $92.1 million, lifted by higher contributions from property trading and its unit K-REIT Asia, as well as gains from selling its stake in Keppel Digihub.
OCBC said future earnings for Keppel Land are likely to be lumpier as the firm will have to comply with accounting standards and recognize profits on its overseas projects only on full completion.
The brokerage added that it expects slower Chinese sales this year, noting that prices remain at healthy levels of 60,000-80,000 yuan ($11,405-$15,206) per square metre for unsold units but foot traffic has dipped since the purchasing curbs.
However, OCBC said the pre-commitment levels at the firm’s Ocean Financial Center in Singapore’s office district have edged up to 82.3% from 80% in the fourth quarter, and is fairly confident of robust occupancy when it is completed.
OCBC said future earnings for Keppel Land are likely to be lumpier as the firm will have to comply with accounting standards and recognize profits on its overseas projects only on full completion.
The brokerage added that it expects slower Chinese sales this year, noting that prices remain at healthy levels of 60,000-80,000 yuan ($11,405-$15,206) per square metre for unsold units but foot traffic has dipped since the purchasing curbs.
However, OCBC said the pre-commitment levels at the firm’s Ocean Financial Center in Singapore’s office district have edged up to 82.3% from 80% in the fourth quarter, and is fairly confident of robust occupancy when it is completed.
Axiata BUY Target Price RM5.75 by RHB Research
Having achieved 8% revenue growth for FY10, we expect Celcom's revenue growth to moderate towards mid-single digits for FY11. Growth will come from data and expanding its range of device offerings. So far, we gather from management that competition has been rational. Despite YTL Communications' new product and pricing launches, we gather from management that the impact is not yet significant.
Similar to Celcom, XL's revenue growth for FY11 will moderate, and will likely be in line or above the industry (which management estimates at 8%), compared with the 27% increase achieved for FY10. Nonetheless, management is confident of at least 50% earnings before interest, tax, depreciation and amortisation (Ebitda) margin for FY11. Looking ahead, management believes competition in Indonesia would remain relatively stable, as mobile penetration is now relatively high at 86%. Hence, management believes a potential price war is unlikely.
We gather from management that Axiata does not rule out increasing its stake in Idea (currently 19%) at the appropriate price. Management opines that media reports of the Aditya Birla Group looking to sell its 47% stake in Idea are quite likely speculative, as the Aditya Birla Group has denied it was in talks to sell the stake.
We gather from management that Idea does not hold excess 2G spectrum. This should relieve regulatory risks in relation to the proposed excess spectrum fees.
Dialog completed a significant turnaround in FY10 on the back of 14% revenue growth which, however, will moderate to mid-single digitd in FY11. Management expects Ebitda margins to be sustainable while the competitive environment should remain stable.
The issue of spectrum renewal fee for Robi and the rest of the mobile operators continues to overhang. The exact fees have not yet been determined, though at present it could be about US$400 million (RM1.2 billion). Hence, management does not rule out a cash call from Robi. Nonetheless, management hopes to see a resolution in June, given that the licences expire in November.
We maintain our earnings forecasts with the following risks: (i) weaker-than-expected performance by Celcom as well as by regional telcos due to competition as well as macroeconomic factors (inflation and so on); and (ii) over-priced acquisitions.
We still like Axiata, which offers growth prospects albeit moderating this year. We see highest regulatory risks in Bangladesh, which could shave off 16 sen from our fair value. Nonetheless, we maintain our sum-of-parts fair value of RM5.75 for now, but upgrade to 'outperform' due to recent share price weakness. ' RHB Research.
Similar to Celcom, XL's revenue growth for FY11 will moderate, and will likely be in line or above the industry (which management estimates at 8%), compared with the 27% increase achieved for FY10. Nonetheless, management is confident of at least 50% earnings before interest, tax, depreciation and amortisation (Ebitda) margin for FY11. Looking ahead, management believes competition in Indonesia would remain relatively stable, as mobile penetration is now relatively high at 86%. Hence, management believes a potential price war is unlikely.
We gather from management that Axiata does not rule out increasing its stake in Idea (currently 19%) at the appropriate price. Management opines that media reports of the Aditya Birla Group looking to sell its 47% stake in Idea are quite likely speculative, as the Aditya Birla Group has denied it was in talks to sell the stake.
We gather from management that Idea does not hold excess 2G spectrum. This should relieve regulatory risks in relation to the proposed excess spectrum fees.
Dialog completed a significant turnaround in FY10 on the back of 14% revenue growth which, however, will moderate to mid-single digitd in FY11. Management expects Ebitda margins to be sustainable while the competitive environment should remain stable.
The issue of spectrum renewal fee for Robi and the rest of the mobile operators continues to overhang. The exact fees have not yet been determined, though at present it could be about US$400 million (RM1.2 billion). Hence, management does not rule out a cash call from Robi. Nonetheless, management hopes to see a resolution in June, given that the licences expire in November.
We maintain our earnings forecasts with the following risks: (i) weaker-than-expected performance by Celcom as well as by regional telcos due to competition as well as macroeconomic factors (inflation and so on); and (ii) over-priced acquisitions.
We still like Axiata, which offers growth prospects albeit moderating this year. We see highest regulatory risks in Bangladesh, which could shave off 16 sen from our fair value. Nonetheless, we maintain our sum-of-parts fair value of RM5.75 for now, but upgrade to 'outperform' due to recent share price weakness. ' RHB Research.
MAS SELL Target Price RM1.60 by OSK Research
Malaysian Airline System Bhd (MAS) was cut to “sell” from “neutral” at OSK Research Sdn Bhd, which said higher oil prices will hurt the Malaysia national carrier’s earnings.
The stock’s fair value was reduced to RM1.60 from RM1.76.
The stock’s fair value was reduced to RM1.60 from RM1.76.
Friday, April 8, 2011
YTL Power BUY Target Price RM2.57 by RHB Research
YTL Communications finally unveiled two new Yes devices early this month ' the Samsung Buzz mobile phone and the Zoom router. Our initial impressions of the Buzz are less than favourable mainly due to: 1) smaller than-average screen size; 2) lack of applications; 3) keypad being too small; and 4) a not-so-friendly user interface. We welcome the news that YTL Comms plans to launch Android smartphones in June, given their rising popularity.
The new Valuepacks offer competitive rates for heavy data users, as not only do they enjoy bigger savings, they also receive free voice calls and SMS to any mobile number.
However, for mobility, we believe the fact that a user must use the Samsung Buzz to enjoy the free voice minutes and SMS is a serious dampener. Otherwise, you need to login using a Yes ID to a non-handset device (such as a desktop or laptop) to utilise the freebies. However, this means a lack of convenience and/or mobility.
We are somewhat concerned with YTL Power's lower-than-expected second interim single tier dividend per share (DPS) of 1.875 sen (we had forecast 3.75 sen).
After further discussions with its management, we were still unable to get a clear sense of the level of future dividend payouts.
Preferring to remain conservative, we have cut our FY11 DPS forecast from 13.1 sen to 9.4 sen. Thus, we only expect YTL Power to subsequently declare a third interim and final dividend of only 1.875 sen/share each. We believe management is looking to conserve cash, as YTL Comms plans to spend more to boost coverage.
The risks include: 1) unfavourable forex movements, which will adversely affect the translation of foreign earnings; 2) potential change in competitive landscape under the National Energy Plan; and 3) execution risk and poor subscriber numbers for WiMAX.
We have left our earnings forecasts unchanged.
We have maintained our sum-of-parts-derived fair value on YLT Power at RM2.57. Without the management's assurance regarding future dividends, we believe YTL Power may lose a bit of shine since the key investment thesis for the stock has historically been high dividend yields. For FY11, we now expect YTL Power to only offer a relatively mediocre gross dividend yield of 5.5% (FY10: 7.6%).
The new Valuepacks offer competitive rates for heavy data users, as not only do they enjoy bigger savings, they also receive free voice calls and SMS to any mobile number.
However, for mobility, we believe the fact that a user must use the Samsung Buzz to enjoy the free voice minutes and SMS is a serious dampener. Otherwise, you need to login using a Yes ID to a non-handset device (such as a desktop or laptop) to utilise the freebies. However, this means a lack of convenience and/or mobility.
We are somewhat concerned with YTL Power's lower-than-expected second interim single tier dividend per share (DPS) of 1.875 sen (we had forecast 3.75 sen).
After further discussions with its management, we were still unable to get a clear sense of the level of future dividend payouts.
Preferring to remain conservative, we have cut our FY11 DPS forecast from 13.1 sen to 9.4 sen. Thus, we only expect YTL Power to subsequently declare a third interim and final dividend of only 1.875 sen/share each. We believe management is looking to conserve cash, as YTL Comms plans to spend more to boost coverage.
The risks include: 1) unfavourable forex movements, which will adversely affect the translation of foreign earnings; 2) potential change in competitive landscape under the National Energy Plan; and 3) execution risk and poor subscriber numbers for WiMAX.
We have left our earnings forecasts unchanged.
We have maintained our sum-of-parts-derived fair value on YLT Power at RM2.57. Without the management's assurance regarding future dividends, we believe YTL Power may lose a bit of shine since the key investment thesis for the stock has historically been high dividend yields. For FY11, we now expect YTL Power to only offer a relatively mediocre gross dividend yield of 5.5% (FY10: 7.6%).
Tenaga SELL Target Price RM5.73 by Maybank Investment Bank Research
Maybank Investment Bank Research had maintained Tenaga as a Sell due to the challenging business outlook stemming from high coal prices, a shortage of natural gas supply and remote possibility of a tariff hike.
'We now use the EV/EBITDA valuation metric (previously DCF) as we think it captures more accurately the true health of utility companies given their high gearing.
'Our new target price of RM5.73 is based on 5.8x FY12 EV/EBITDA ' consistent with its long-term average. This implies 12.0x FY12 earnings, which we think is fair for its multiple challenges,' it said.
'We now use the EV/EBITDA valuation metric (previously DCF) as we think it captures more accurately the true health of utility companies given their high gearing.
'Our new target price of RM5.73 is based on 5.8x FY12 EV/EBITDA ' consistent with its long-term average. This implies 12.0x FY12 earnings, which we think is fair for its multiple challenges,' it said.
Mudajaya BUY Target Price RM7.44 by OSK Research
Tenaga Nasional Bhd recently signed an engineering, procurement, construction and commissioning (EPCC) agreement with the Consortium of Alstom Power System SA for the expansion of the 1000MW Janamanjung coal-fired power plant. The portions of the contract are valued at US$810 million (RM2.5 billion), '180 million'' (RM771 million) and RM1.8 billion. The plant is expected to be fully commissioned by March 2015.
This recent award to the Alstom consortium is positive for Mudajaya. In our previous reports, we had highlighted that Mudajaya is likely to participate in the civil works for Janamanjung should the Alstom consortium win the EPCC job. We expect the consortium to subcontract the civil works to Mudajaya. Generally, the civil works for a coal-fired power plant make up 15% to 20% of the overall EPCC value.
Hence, based on the RM5 billion EPCC value for Janamanjung, the civil works portion would work out to RM750 million to RM1 billion. This should represent a healthy replenishment for Mudajaya's order book as one of its major projects, the KL-Kuala Selangor Expressway (RM958 million), is nearing completion. Management guides that the subcontract award could be out as soon as within a month.
Earlier this year, the Energy Commission had issued a request for proposal to Tanjung'' Bin and Jimah for another 1000MW expansion. Both parties have until mid-April to submit their proposals.
We understand that Mudajaya has been in talks with an EPCC contractor to participate in the civil works for this 1000MW expansion.
The actual award of the Janamanjung civil works to Mudajaya is expected to provide the upside to our earnings estimates, mainly from FY12 onwards, as we have only imputed a conservative RM200 million in annual order book replenishment.
For now, we are leaving our forecasts and RM7.44 fair value unchanged, which is based on a 20% discount to our sum-of-parts value based on 12 times FY11 earnings and a free cash flow to equity valuation of its Chhattisgarh IPP at 16% equity cost.
This recent award to the Alstom consortium is positive for Mudajaya. In our previous reports, we had highlighted that Mudajaya is likely to participate in the civil works for Janamanjung should the Alstom consortium win the EPCC job. We expect the consortium to subcontract the civil works to Mudajaya. Generally, the civil works for a coal-fired power plant make up 15% to 20% of the overall EPCC value.
Hence, based on the RM5 billion EPCC value for Janamanjung, the civil works portion would work out to RM750 million to RM1 billion. This should represent a healthy replenishment for Mudajaya's order book as one of its major projects, the KL-Kuala Selangor Expressway (RM958 million), is nearing completion. Management guides that the subcontract award could be out as soon as within a month.
Earlier this year, the Energy Commission had issued a request for proposal to Tanjung'' Bin and Jimah for another 1000MW expansion. Both parties have until mid-April to submit their proposals.
We understand that Mudajaya has been in talks with an EPCC contractor to participate in the civil works for this 1000MW expansion.
The actual award of the Janamanjung civil works to Mudajaya is expected to provide the upside to our earnings estimates, mainly from FY12 onwards, as we have only imputed a conservative RM200 million in annual order book replenishment.
For now, we are leaving our forecasts and RM7.44 fair value unchanged, which is based on a 20% discount to our sum-of-parts value based on 12 times FY11 earnings and a free cash flow to equity valuation of its Chhattisgarh IPP at 16% equity cost.
Genting Singapore BUY Target Price $2.30 by UBS
UBS upgrades Genting Singapore (G13.SG) to Buy from Neutral, noting the counter has underperformed the weighted performance of the 5 listed Macau operators by around 25% and the STI by around 7.0% YTD.
“We think Genting Singapore is turning into a bona-fide China (wealth creation) play, with strong growth in VIP from North Asia (especially China) expected to continue into 2011-2012E.”
It tips VIP volumes of US$18 billion ($22.8 billion)-US$20 billion per quarter at RWS in 2011 (putting RWS in the same league as the top-performing Macau properties). It expects HK/China to account for as much as 50% of RWS' total gross gaming revenue by 2012, when its VIP-targeted expansion will be rolled out.
Overall, the house says China VIP growth, capacity expansion in 2012, a net cash position and potential for new projects together make Genting an attractive stock at this valuation. It lowers its target to $2.30 from $2.39, based on 15X 2011E EV/EBITDA (vs 16X previously).
“We think Genting Singapore is turning into a bona-fide China (wealth creation) play, with strong growth in VIP from North Asia (especially China) expected to continue into 2011-2012E.”
It tips VIP volumes of US$18 billion ($22.8 billion)-US$20 billion per quarter at RWS in 2011 (putting RWS in the same league as the top-performing Macau properties). It expects HK/China to account for as much as 50% of RWS' total gross gaming revenue by 2012, when its VIP-targeted expansion will be rolled out.
Overall, the house says China VIP growth, capacity expansion in 2012, a net cash position and potential for new projects together make Genting an attractive stock at this valuation. It lowers its target to $2.30 from $2.39, based on 15X 2011E EV/EBITDA (vs 16X previously).
Biosensors BUY Target Price $1.36 by OCBC IR
OCBC Investment Research in a Mar 28 research report says: "Biosensors International Group (BIG) announced that it has obtained approval in-principle from SGX for the private placement of 216,325,800 new ordinary shares to Atlantis Investment Management Hong Kong Ltd and Ever Union Capital Ltd.
"The total placement represents approximately 19.55% of BIG's issued and paid-up share capital. The dilution factor works out to be 16.4%, which seems quite substantial, in our view. Nevertheless, we are confident that management would be able to efficiently utilise the proceeds to generate value for their shareholders.
"We adjust our DCF estimates to incorporate higher growth in its mid- to long-term profitability but also tweak our USD/SGD assumptions downwards due to persistent weakness in the U.S. dollar. Fair value revised to $1.32 (previously $1.36). MAINTAIN BUY."
"The total placement represents approximately 19.55% of BIG's issued and paid-up share capital. The dilution factor works out to be 16.4%, which seems quite substantial, in our view. Nevertheless, we are confident that management would be able to efficiently utilise the proceeds to generate value for their shareholders.
"We adjust our DCF estimates to incorporate higher growth in its mid- to long-term profitability but also tweak our USD/SGD assumptions downwards due to persistent weakness in the U.S. dollar. Fair value revised to $1.32 (previously $1.36). MAINTAIN BUY."
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