Sheng Siong: Proxy to local consumption demand (OCBC)

Synonymous with value. Sheng Siong Group Ltd (SSG), with its highly recognizable brand name, is one of the top three supermarket chains in Singapore in terms of revenue, and has a current size of 23 supermarket stores with three wet market stalls.

Fresh produce - a lucrative segment. Fresh produce contributes about 30% to its revenue, with strong gross profit margins ranging from 21% to as high as 30%. Naturally, management hopes to achieve higher contribution from this segment going forward. Coupled with their expertise in handling fresh produce and the new distribution centre where it can handle larger quantities of fresh produce, we expect to see increased revenue contribution (>50%) from this segment within the next few years.

Store expansion to drive future growth. An expansion of its store network is essential to drive future growth and we believe that the local market is able to support additional stores without over-saturation. There are several highly populated areas in Singapore (approximately 45% of the total number of Singapore residents) where SSG lacks a formal store presence, and management has identified Sengkang, Hougang and Toa Payoh as key growth areas in the interim. Although NTUC Fairprice has between four to five stores in these locations, most of these are located in the central areas, which frees up the hinterlands for SSG to enter.

Temporary revenue dip in FY11. Due to the closures of two key outlets, lower revenues are forecasted (-10% YoY) in FY11 although we expect profitability margins to at least maintain at its current adjusted FY10 levels. However, the fall in revenue is expected to be temporary as the two new outlets opened in FY11- in areas with comparable residency levels as the two closed stores - will contribute fully in FY12. We estimate FY12 revenue growth to pick up by at least 12% YoY.

Initiate with HOLD after spectacular share price run-up. Its shares have appreciated almost 33% since its listing. We like SSG for its strong fundamentals and healthy balance sheet, but are also mindful of the temporary revenue decline expected in FY11. Overall, given the dismal economic outlook, SSG still represents a defensive play into domestic consumption demand. We initiate coverage on SSG with a HOLD rating and a fair value estimate of S$0.43 based on a discounted free cash-flowto-equity model (cost of equity: 7.6%; terminal growth rate: 2%), and this translates to a dividend yield of 4.5% based on FY11F earnings. We will turn buyers of SSG at S$0.40 or lower.

Ascendas REIT: A-Grade REIT, but limited upside at current price level (OCBC)

Diversified portfolio. Ascendas REIT (A-REIT) is one of the more defensive names in the industrial REITs space. As a market leader, the group holds a diversified portfolio of 93 properties in Singapore, and houses a tenant base of ~990 customers. YTD, A-REIT has continued to make a number of acquisitions, developments and asset enhancement initiatives. We expect these investments, together with other potential opportunities, to continue to drive rental and hence DPU growth when they are completed.

No immediate refinancing needs. Based on last reported total borrowings of S$1.56b, we estimate A-REIT has ~S$1b of additional debt headroom before it reaches an aggregate leverage of 40%. This provides the group more than enough ammunition for further acquisitions. Moreover, it is in the process of finalizing the rolling over a S$200m committed revolving credit facility due in Nov to 2016. With that, A-REIT would have no major refinancing needs until 2013.

Market outlook still positive. In its 1QFY12 results, A-REIT anticipated the global growth to moderate in 2H11, with forward-looking indicators such as Purchasing Managers' Indices pointing to slower pace of economic activity. We voiced our concern in our recent discussion with management that this may have a negative impact on its operating performance. However, A-REIT shared with us that it was still business as usual for most of its accounts, and there have been no significant signs of downsizing or scaleback in expansion. In fact, management revealed that the majority of its leases have passing rents that are below the existing market rents. As the group has 10% of its revenue due for renewal, it could potentially achieve positive rental rate reversions for majority of these leases for the rest of 2011 and even 2012, should the economy do not deteriorate drastically.

Maintain HOLD rating. We now value A-REIT using a Dividend Discount Model, in line with the current industry practice. We derive a fair value of S$2.17, implying a P/B of 1.21. This is in line with its 5-year historical median of 1.25. At current price level, however, A-REIT is trading at a premium to the average S-REIT P/B of 0.9. While we think this is justified given its market leadership in the industrial REITs segment, we note that its FY12-13F DPU yields of 5.9-6.2% are not particularly attractive, which also pale in comparison to the sector average of over 7%. In view of these factors and limited upside to our fair value, we maintain our HOLD rating.

China Fishery Group (KimEng)

Background: China Fishery Group is a global integrated industrial fishing company. A subsidiary of mainboard-listed Pacific Andes Resources, it has access to fishing grounds worldwide. The company uses supertrawlers equipped with sonar fish-finding technology and navigation systems to optimise fish yields and minimise wastage.

Recent development: Revenue grew by 19.7% YoY to US$159.4m with net profit rising by 5% YoY to US$37.4m. This is attributed to higher total allowable catch volume for fishing season in 2011, higher contribution from trawling, which accounted for 78.4% of total revenue, as well as higher prices achieved on fishmeal and fish oil.

Our view

Higher operating expenses and one-off costs. In 3Q11, gross margins declined from 38.5% to 37.1% due to vessel operating expenses reflecting higher fuel costs as well as higher vessel repair and maintenance costs. Other operating expenses surged by 393.9% from US$1.3m to US$6.2m due to costs incurred from the proposed secondary listing in Oslo, which was withdrawn in 2010, and a one-off cost of US$2.7m on the closure of a fishmeal plant in Peru. Net margins fell from 23% to 21%.

Dual listing in Hong Kong delayed. China Fishery was to join its parent company, Pacific Andes, to dual-list on the Hong Kong Stock Exchange in December last year. But it had to postpone the plan until further notice owing to difficult market conditions.

Highly leveraged. The company is geared at 58.6% due to the four-year club loan facility agreement of US$425m signed in the previous year. Currently, 83.4% of its total borrowing comes from long-term debt.

Looking ahead. China Fishery sees potential in Africa and China, which currently generate over 75% of its revenue. It expects strong demand for fishmeal in China and higher fishmeal inventory levels carried forward to aid sales in the next quarter. The firm has been achieving a six-year CAGR of 43%. The stock currently trades at 7.3x PER and 1.2x P/B.

Key ratios…

Price-to-earnings: 7.3x

Price-to-NTA: 1.4x

Dividend per share / yield: S$0.05 / 4.1%

Net cash/(debt) per share: (US$0.14)

Share price S$1.215

Issued shares (m) 1,022.3

Market cap (S$m) 1,242.1

Free float (%) 29.4

Recent fundraising activities Jun10 – private placement to Carlyle Group; 113.5m new shares at $1.85/share, 26.7m warrants at S$1/share (S$190m)

Financial YE September

Major shareholders Super Investment – 69.8%, Carlyle Group – 11.1%

YTD change -46.4%

52-wk price range S$1.055-2.360

GuocoLeisure (KimEng)

Background: GuocoLeisure is an investment holding company with interests in hotels (the UK, Malaysia), gaming (the UK), oil and gas (Australia) and real estate (Hawaii, Fiji). It is 66.4%-owned by Hong Kong-listed Guoco Group and ultimately owned by Malaysian businessman Quek Leng Chan’s KLSE-listed conglomerate, Hong Leong Group.

Recent developments: As at 16 September 2011, substantial shareholder Quek Leng Chan, through his holding company Guoco Group, has purchased 2m GuocoLeisure shares at $0.61 per share on average in the latest quarter, pushing his already hefty stake to 66.4%. Institutional shareholder Marathon Asset has also over the past 12 months raised its stake by 1% to 8%.

Key ratios…

Price-to-earnings: 9.9x

Price-to-NTA: 0.7x

Dividend per share / yield: $0.02 / 3.3%

Share price S$0.60

Issued shares (m) 1,368.1

Market cap (S$m) 820.8

Free float (%) 25.6

Recent fundraising Nil

Financial YE June 30

Major shareholders Quek Leng Chan (deemed) - 66.4%, Marathon Asset Mgt - 8.0%

YTD change -17.2%

52-wk price range S$0.56-0.79

Our view Major shareholder Quek Leng Chan bullish on stocks. Mr Quek was quoted in Guoco Group’s 2010 financial report as saying that “we take market corrections as buying opportunities for the accumulation of quality counters. We hold a positive outlook for the Asian economies and build significant positions in strategic long-term investments”. He might have been referring to GuocoLeisure as he has been steadily raising his interest this year, buying 2m shares in September alone at an average cost of $0.61 per share. This brought his already hefty deemed stake to 66.4% (from 65.5% a year ago).

More corporate actions to come? GuocoLeisure is also streamlining its overseas listings, having delisted its London-traded shares in January this year. Currently, its primary listing is in Singapore with a secondary listing in New Zealand. In addition, the company has expressed its intention to exit its property businesses in Hawaii and Fiji. The carrying value of the assets is estimated to be US$178m (US$0.13 per share) as at June 2011.

Still significantly below replacement value. With the general market decline, the stock is trading at 0.7x NTA of US$0.688 per share and is at the lower end of its 52-week trading range. Among its prized assets are the Thistle and Guoman Hotels in the UK, as well as the value of its UK casino licences and a 55.1% interest in the Bass Strait Oil Trust. In addition, it owns real estate on two islands in Hawaii and Fiji.

SATS Ltd (KimEng)

Event

While there are headwinds from global economic concerns and cost pressures, SATS is still well-positioned to maintain its revenue base and expand on recent acquisitions. At 1.6x P/B, the stock is trading below its mean P/B of 1.8x. We do not see any immediate catalysts for an upward re-rating, but the company’s steady dividend payout should keep investors happy while it waits for more growth opportunities. Maintain HOLD with the target price at $2.43.

Our View

For its aviation-related business, Singapore visitor arrivals continue to hover around the 1.1m visitors per month. While a significant part of the growth is being driven by low cost carriers, which typically require less of SATS’ service offerings, the company still has a 75% market share for gateway services and 86% for food solutions.

With regard to higher operating costs, SATS still has good leeway to pass on higher food costs to its aviation-related customers. Its clientele is mainly full-service carriers, which are more dependent on SATS for its in-flight solutions as opposed to the low cost carriers. For non-aviation customers, the passing on of higher input prices is also justifiable. In the meantime, SATS is striving to further improve its own efficiency.

The results for the bid to operate the $500m Singapore International Cruise Centre (ICT) should be known by next month. There are three parties vying for the deal, with the incumbents Singapore Cruise Centre and SATS (in partnership with a Spanish operator) recently joined by Jurong Port. As it is, SATS feels reasonably confident of securing the bid and should be able to hit the ground running as it currently operates a Cruise-Fly handling service with Royal Caribbean Cruises.

Action & Recommendation

We expect earnings to hold steady in FY Mar12, with a 15% growth in FY Mar13 to be driven by a recovery at TFK in Japan. We maintain our HOLD call. SATS’ dividend yield of 5-6% is supported by strong free cash flow.

Trek 2000: First non-camera-maker deal for FluCard (DMG)

The news: Trek announced that it has inked a contract with PLUS Corporation to provide

customised FluCard® to the second largest electronic Copy/White board producer in the world.

Upon adopting Trek’s patented technology, the traditional white board can now store the

scanned contents into the FluCard® and shared them wirelessly with different host devices such as PC, Notebook and Smartphone. The contract will be effective from October 2011 onwards and Trek will deliver approximately 50K units of FluCard® to Plus in FY2012.

Our thoughts: In the past, SD cards were only used as storage media for cameras. But

following Trek’s groundbreaking innovation, the wireless flash memory card can now be adopted by a wide spectrum of consumer electronics. This is because it is costly for the consumer electronics manufacturers to make all their products wireless enabled, as the license fee is US$300,000 per model. FluCard® provides the same wireless feature at a much lower cost while bringing in the storage functionality, which is deemed essential for most devices. We believe this is a positive sign as the group enables the already matured SD card technology to reach another fast growing stage. We expect the contract to contribute positively from FY2011 onwards, getting one step closer to our one million units FluCard® sales target. Maintain BUY with a TP of S$0.45.

Ezra Holdings: Speculating on dual listing in London (DMG)

(BUY, S$0.925, TP S$1.44)

Talk of dual listing is premature at this stage. According to press reports, Ezra’s Managing

Director Lionel Lee was quoted as saying that London is an attractive place to do a dual listing but no decision has been made given current market conditions. We do not rule out a possible dual listing but believe such a move is premature at this stage given that its subsea earnings have yet to show the desired results. A move to do a second primary listing on depressed earnings may not be viewed positively. On a more positive event, the recent takeover of Global Industries by Technip has set a pricing benchmark for the sector: the deal is valued at 20x FY12F P/E and 1.33x FY11F P/B on consensus estimates. At similar valuations, we estimate that Ezra will be valued at S$1.70-2.50/share. Maintain BUY with an unchanged TP of S$1.44 on 12x FD FY12F EPS.

Still looking for raise new funds? Earlier this month, Ezra announced its intention to raise

fresh capital via perpetual capital securities but we think the exercise has been set aside given choppy market conditions. We believe the company is looking for 6-7% yield on the perpetual capital securities, which is slightly above the yield on its three-year unsecured guarantee debt of 4.78% (due in 2013). Volatile market conditions may also impact the sale of the non-core units as potential bidders may take a wait-and-see approach before making new acquisitions. Assuming no disposals in the next 6-9 months, we estimate net gearing to hit a peak of 1.3x in mid FY12F. We expect management to scale back on huge capex plans (aside from Constellation) until net gearing falls below 1.0x.

Takeover of Global Industries sets a pricing benchmark for the sector. The recent takeover

of Global Industries, a US-based offshore construction and subsea specialist, by Technip for

US$1.1b was valued at 20x FY12F P/E and 1.33x FY11 P/B on consensus estimates. We note

that Global Industries reported US$61m losses in 1H11 with US$201m backlog orders as at end

Jun 2011 vs. Ezra’s 9M11 net profit of US$28m and >US$600m backlog for its subsea unit. At

similar valuations, Ezra’s share price is valued at S$1.70-2.50.

Ezion Holdings: Strong growth on track despite volatile market (DMG)

(BUY, S$0.56, TP S$1.02)

Maintain positive view on the stock. We recently met with management and re-iterate our

BUY rating on the stock: (1) Share price has fallen 20% since end Jul 2011, tracking the fall in FTSE SG Small Cap Index. We see no change in fundamentals as FY11-13F earnings are

backed by long term contracts from its liftboats and steady contribution from the logistics

division. We expect +28% EPS CAGR over FY11-13F; (2) Management continues to deliver

strong growth as more liftboats are deployed. We estimate 3Q11 core net profit to improve to

~US$13.5m (+10% QoQ, +60% YoY) with the addition of one new liftboat in end-Jun 2011. We

revised our TP to S$1.02 based on 12x FD FY11/12F EPS. Key catalysts are new contract

awards and continued delivery of strong quarterly earnings. Maintain BUY.

Positive feedbacks from Asia-Pacific clients on liftboat. In the past three months, Ezion has deployed its Liftboat 4 to Vietnam, Indonesia and Malaysia for paid trials to gauge interest in the asset. Feedbacks are positive and management plans to use the liftboat in Asia-Pacific on long term time charter. While Ezion currently enjoys strong demand for its liftboats in Africa and Middle East, we see significant market potential in Asia Pacific given the high number of ageing platforms in the region.

Update on existing businesses; minor changes to FY11-12F EPS: (1) Liftboat Five and Six

are scheduled to be ready in Mar 2012 and May 2012 respectively. The deliveries are delayed

by one month due to late delivery of critical items. (2) The refurbishment of a service rig to be used in the North Sea is one month ahead of schedule and could be deployed by early Dec 2011. We have revised our FY11-12F earnings by +2% and -4% respectively.

New competition for Northern Territory marine supply base. Upstream reported that a

consortium led by Aberdeen-based Asco has won a bid to develop a marine supply base in

Australia’s Northern Territory. The new site will compete against Ezion’s Melville Island supply base. We believe it is too early to ascertain the amount of competition in that area as the various projects remain at the planning stage. We have not factored in any contribution from the marine supply base projects.

Mermaid Maritime PCL - Chop & change makes for a rudderless ship (CIMB)

NEUTRAL Downgraded

S$0.29 Target: S$0.31

Mkt.Cap: S$224m/US$177m

Offshore & Marine

Impending departure of CEO

Mermaid yesterday announced that its CEO, Mr Denis Welch, will be leaving the company at the end of this month. We view the constant changes in its senior management negatively. Although no radical impact on its business operations is expected, a perceived lack of direction is damaging, in our view. In addition, while valuations are only 0.4x P/BV, we believe Mermaid would at best perform in line with the market amid negative sentiment and as such, downgrade it to NEUTRAL from OUTPERFORM. We keep our earnings estimates but lower our target price to S$0.31, now based on 0.5x CY11 P/BV, the bottom end of its trading range (previously S$0.49, 0.8x CY11 P/BV). We would revisit the stock when there is better clarity on its strategic direction, better-than-expected quarterly performances or favourable contracts for its newbuild jack-ups.

The news

CEO leaving. Mermaid yesterday announced that its CEO Mr Denis Welch will be leaving at the end of this month. Mr Welch was appointed CEO only in February this year. Mermaid did not indicating whom his replacement might be.

Our comments. We do not expect the recent spate of senior-management changes to have a major detrimental impact on its business operations. We still expect a turnaround in its subsea business, strengthened by recent significant appointments to its subsea team. However, constant changes in management should be unsettling for employees and investors, giving rise to a perceived lack of direction.

Valuation and recommendation

Downgrade to Neutral from Outperform. While valuations are only 0.4x P/BV, we believe Mermaid would at best perform in line with the market amid negative sentiment and as such, downgrade it to NEUTRAL. We keep our earnings estimates while cutting our target price to S$0.31, now based on 0.5x CY11 P/BV, the bottom end of its trading range (previously S$0.49, 0.8x CY11 P/BV). We would revisit the stock when there is better clarity on its strategic direction, better-than-expected quarterly performances or favourable contracts for its newbuild jack-ups.

Marco Polo Marine Ltd - Downgrading on valuation grounds (OCBC)

Downgrade to HOLD

Previous Rating: BUY

Current Price: S$0.40

Fair Value: S$0.43

Progress in the Offshore division on track. Marco Polo Marine's (MPM) offshore division was established at the end of last year, and the group has expanded its fleet to five offshore support vessels (OSVs) currently - two 5,000BHP AHTS vessels are under bareboat charters in Australia, one utility vessel is in the Gulf of Thailand, while two additional newbuilds were delivered recently and are currently undergoing a reflagging exercise. The newbuilds are 8,080BHP AHTS vessels bound for Indonesia.

Capitalising on healthy market demand. According to talks with industry players, demand for 5,000BHP and 8,000BHP AHTS vessels remain strong in SE Asia, such as Malaysia and Indonesia. MPM's vessels are currently of that size to cater to market demand, and with an expected increase in the exploration and development of oil and gas fields in Australia, Malaysia and Indonesia, the outlook for the group's offshore division looks bright. In Malaysia, the government's intention to boost oil production domestically has increased interest from both foreign oil companies and associated services companies. National oil company Petronas also announced that it is scaling back international exploration campaigns to develop its domestic oil and gas resources. Indonesia's Energy and Mineral Resources Ministry is also preparing a new regulation to boost exploration activities in the country, and it may contain clauses on incentives for contractors who successfully fulfilled their exploration commitments, as well as disincentives for those failing to meet their commitments, according to The Jakarta Post.

Shipbuilding orders mainly relate to tugs and barges. MPM announced about S$18m worth of new contracts since Jul this year, compared to around S$17.2m in the Jul to Oct period last year. However, the orders still mainly relate to tugs and barges, rather than OSVs such as AHTS vessels.

Downgrade to HOLD. Though MPM's revenue is expected to increase with its fleet expansion and greater ship repair activity, we prefer to be conservative in our estimates due to continued vessel reflagging activity (which affects fleet utilisation), and a more competitive ship repair environment. Furthermore, MPM's stock price has risen 20% in the last nine trading days such that the current price now has less than 10% upside compared to our fair value estimate of S$0.43 (based on 9x FY12F earnings). As such, we downgrade the stock to HOLD on valuation grounds.

SMRT Corporation Ltd - May benefit from lower expectations (OCBC)

Maintain BUY

Previous Rating: BUY

Current Price : S$1.785

Fair Value : S$2.04

CCL 4 & 5 to commence operations on 8 Oct. SMRT organized a preview of the stages four and five of the Circle Line (CCL) yesterday, which are slated to commence operations on 8 Oct. The addition of both stages will complete CCL (without CCL extension - target completion 1Q2012) and bring to fruition almost 10 years of patient anticipation since the awarding of the operating license to SMRT. Twelve new stations - stretching from HabourFront to Caldecott - will be available to commuters on the CCL, and will bring the total number of accessible stations to 28. Current average daily riderships are expected to increase from the 1QFY12's 180K/day and should hopefully hit close to LTA's estimated 400-500K/day within six to nine months. In terms of the number of trains in use, SMRT expects to utilize around 29-32 trains during peak hours (20 trains off-peak) with an average of 3.5 and 7 minutes headway respectively.

Increase in rental space & advertising opportunities. CCL will have available retail space of 3,150 sqm or 80 shops. Both stages four & five contribute a total of 868 sqm via three stations: Holland Village (596 sqm; 19 shops), one-north (248 sqm; 4 shops) and Botanic Gardens (24 sqm; one shop). With current occupancy levels at 90%, SMRT expects full take-up of the new retail space. In addition, anticipated high passenger traffic at stations like Buona Vista, Holland Village and HabourFront should enhance their advertising revenue as well.

Higher operating expenses still remain for FY12. Whilst news of full CCL operations provides temporary reprieve from otherwise negative publicity, SMRT is still expected to experience sustained cost pressures from higher operating (staff and energy) expenses in FY12 with anticipated profitability below FY11. Furthermore, with the six to nine month lead-time required to ramp-up and stabilize ridership levels, we continue to view CCL's operating profit contribution to be negative for FY12.

But SMRT may benefit from lower expectations. Wholesale electricity prices have somewhat stabilized over the past three months and could even move downwards given the poor macro-economic outlook. As SMRT has not entered into any fixed rate contracts, it could potentially benefit when wholesale electricity prices turn favourable. That said, most of the negative news and expectations have already been priced in by the market and the counter has lost 12.1% YTD. With a decent dividend yield (4.3% FY12F vs. 3.7% FY12F for STI), SMRT could surprise on the upside on any positive developments. As such, we maintain our BUY rating on valuation grounds, with an unchanged fair value estimate of S$2.04.

STX OSV Holdings - Down but not out (DBSVickers)

BUY S$1.21 STI : 2,791.79

Price Target : 12-Month S$ 1.54 (Prev S$ 1.90)

Reason for Report : Reduction in earnings forecasts, TP

Potential Catalyst: Order wins

DBSV vs Consensus: Below on lower order win assumptions

• Fundamentals intact despite recent sell-down; STX OSV is well positioned to leverage on the newbuild cycle

• Order flow momentum hit by macro uncertainties and protracted contracting process

• FY11-13 order wins lowered by 17-19% on slow YTD order flow YTD; FY12/13F earnings cut by 4-10%

• BUY, TP lowered to S$1.54

Longer term fundamentals intact; STX OSV well positioned. Despite the recent sell down, STX OSV remains well positioned to benefit from a recovery in the newbuild cycle. In our view, the drivers supporting a recovery in demand for newbuild OSVs remain intact, with our latest background checks indicating that enquiry levels remain healthy, with a stable pipeline of potential orders.

Order momentum hit by macro uncertainties. However, in the near term, the ongoing economic uncertainty and skittish capital markets continue to cloud visibility on the timing of orders. Our industry checks reveal a generally more protracted process in finalizing an order. With ~3 months of 2011 left and only NOK5bn of orders in the bag, our view for a stronger 2H 2011 for order wins seem increasingly unlikely.

FY11-13 order wins assumptions trimmed. As such, we have trimmed our FY11-13 order wins assumptions by 17-19% on possible order deferments, leading to a 4%/10% cut in our FY12/13F. We highlight that 48% of our revised FY11 order wins assumption is backed by secured orders, rising to 80% once the Transpetro and Island Offshore orders are made effective.

TP trimmed to S$1.54; maintain BUY. Our TP for STX OSV is adjusted to S$1.54 (prev S$1.90) on a reduced FY12F and lower target PE of 9x (prev 11x) on FY12F. At 5.7x/7.0x FY11/12 PE, valuations are undemanding, supported by strong quarterly results expected over the near term and sustained solid project execution. Maintain BUY on STX OSV for its market dominance in complex and highly customized AHTS and PSVs, solid execution and track record.

STX OSV (KimEng)

Background: STX OSV’s (SOH) core business is in building complex customised offshore vessels including platform supply vessels (PSV), anchor handling tug supply vessels (AHTS) and advanced offshore subsea construction vessels (OSCV). It is part of South Korea’s global STX Group.

Recent development: SOH’s relative outperformance vis-à-vis its offshore peers seem to be over, with the stock correcting by 22% over the past two months. Concerns abound that tightening credit could slow down its order flow. Nevertheless, STX OSV is trading at extremely low valuations of some 5.8x forward PER, based on consensus estimates, with target prices ranging from $1.60 to $2.20.

Key ratios…

Price-to-earnings: na

Price-to-NTA: 2.2x

Dividend per share / yield: S0.029 cts / 2.4%

Net cash/(debt) per share: $0.60

Net debt as % of market cap: 50%

Share price S$1.22

Issued shares (m) 1,180

Market cap (S$m) 1,392.4

Free float (%) 31.0

Recent fundraising IPO – $131.6m

Financial YE 31 December

Major shareholders STX Corp – 69.0%

YTD change +7.0%

52-wk price range na

Our view

Announces new NOK750m contract. SOH recently announced a contract win for NOK750m (about US$132m) for the construction of three advanced stern trawlers for Aker Seafoods ASA. This brings its orderbook up to an estimated NOK16b (around US$2.8b) with some NOK4.2b secured this year alone.

But key offshore orders have stagnated. However, this latest contract is for fishing vessels. STX OSV’s offshore order flows have abated since June, when it secured a NOK1.2b for two anchor handlers. This is even earlier than the cessation of new offshore orders seen at Keppel Corp and Sembcorp Marine (SMM). But it is not surprising as equipment owners get skittish about new orders in times of economic uncertainty and when oil prices are volatile.

Decent backlog to tide it through. In analysing SOH’s outstanding orderbook and therefore its ability to ride out the lull, our comparison versus other offshore yards shows its orderbook over its FY10 sales at a healthy 1.3x, which is comparable to SMM but behind Keppel’s 1.7x. On balance, we do not believe SOH’s discount to these peers is justified, but broader negative sentiment towards the sector will continue to depress its share price.

Lian Beng Group (KimEng)

We reinitiate coverage on Lian Beng Group with a BUY rating and target price of $0.62. Its orderbook remains robust at $839m; its earnings are reinvested in its construction business to ensure sustainability of income in the event of a downturn; and its engineering and concrete subsidiaries are ready to be spun off for listing in Taiwan. The group is also building a workers’ dormitory on a freehold industrial land acquired in January this year and rental yield is expected to exceed 13%. Dividend yield, too, is an attractive 4.6%. Therefore, we see no reason for Lian Beng to trade at an undemanding PER of 3.9x, a sharp discount to its peers at 6.3x.

Our View

Lian Beng’s orderbook of $839m will help the group maintain its current profitability for the next three years. There is no shortage of jobs as the group has the highest market share of construction contracts from GLS sites sold since 2009 that are gradually coming on-stream.

Lian Beng has $150m in cash and a stable construction business that generates free cash flow of $70m every year. It has announced plans to list its engineering and concrete subsidiaries (17% of FY May11 earnings) in Taiwan. This will further solidify its cash position while allowing these businesses to be self-funding and to grow independently.

The freehold industrial land at Mandai Estate will strengthen Lian Beng’s sustainable income base. Part of the land will house a 3,500-bed workers’ dormitory with gross yield estimated to exceed 13% and net margins approaching 50%. The remaining land could be developed and sold for over $40m in pre-tax profits, more than 20% of Lian Beng’s market cap.

Of the three main contractors with sizeable orderbooks (over $800m), Lian Beng is the most undervalued, trading at 3.9x PER, below Lum Chang and Tiong Seng at 6.3x and the sector’s average of 5.0x. Lian Beng has proposed a dividend of 1.6 cents, implying an attractive yield of 4.6%.

Action & Recommendation

We reinitiate coverage on Lian Beng Group with a BUY recommendation and target price of $0.62, based on 6x FY May12 PER.

Lian Beng Group: Spinning off cement and engineering businesses (DMG)

(BUY, S$0.345, TP S$0.71)

Lian Beng Group (LBG) announced that it would be listing two of its subsidiaries on the Taiwan Stock Exchange. If shareholders’ approval is obtained during the EGM, we estimate the listing to take place six to nine months from now. With S$149.9m cash on hand (excluding the potential IPO proceeds), LBG is well positioned to accumulate land bank for property development. Trading at a mere 3.4x prospective P/E, we believe it has the capacity to trade up to the sector average of 7x for a TP of S$0.71. Maintain BUY.

IPO of concrete and engineering businesses. Lian Beng is spinning off two of its subsidiaries - the concrete and engineering businesses, to list on Taiwan Stock Exchange. Pre-clearance had been obtained from SGX, and an EGM would be held subsequently to obtain shareholders’ approval.

Rationale for listing. The proposed listing will provide greater clarity for credit profiling for financial institutions which wish to lend against the credit of the engineering and concrete business. In addition, it will enable its engineering and concrete business to fund its own growth. We estimate the listing process may take six to nine months. Taiwan’s concrete peers are trading at an average of 12.9x current year earnings, while the engineering/construction peers are trading at an average of 7.8x. This implies a blended 10.4x prospective earnings, which implies IPO proceeds of ~S$28m based on FY11 earnings of ~S$9m for its two subsidiaries in FY11.

Attractively valued at 3.4x FY12 P/E. On the back of strong order books of S$839m (as at May 11) and a good track record of project wins, we estimate LBG’s FY12 earnings to come in at S$53.5m, which suggests a prospective P/E of 3.4x. Maintain BUY.

CHINA MINZHONG (Lim&Tan)

S$1.045-CMIN.SI

􀁺 The company’s founder and CEO Lin GR made his maiden open market purchase in the company, buying 200,000 shares at $1.03 yesterday, raising his stake to 6.32% of the company.

􀁺 While the 200,000 shares only represented 5.7% of yesterday’s trading volume and a mere 0.6% of his holdings, it likely helped the stock recover from yesterday’s intra-day and all time post listing low of $1.

􀁺 The stock’s selling pressure has accelerated recently when it broke its all time post listing low of $1.09.

􀁺 Since hitting its all time high of $1.90 in Mar ’11, the stock has been under tremendous selling pressure likely due to continued share overhang concerns, corporate governance concerns given global frauds for Chinese companies as well as selling pressures of their peers in Hong Kong.

􀁺 While these may linger for a while longer, we understand that fundamentals of the company continue to remain intact, underpinned by continued demand for higher quality vegetables both in China as well as overseas and the company’s expansion and growth plans remain on track.

􀁺 More sustained buying by insiders could help stabilize the stock.

􀁺 Further weakness would be a buying opportunity.

􀁺 Maintain BUY.

Global Palm Resources - Holdings Ltd (OCBC)

Maintain HOLD

Current Price: S$0.21

Fair Value: S$0.21

FC leaves after two months. Global Palm Resources (GPR) has recently announced that its group financial controller (FC) Zhang Xiaoyu has left the company to "pursue other career opportunities"; this after being appointed to the position on 5 Jul 2011, or just slightly over two months on the job. Its previous FC Chua Cheng Hian was with the company for just under two years. But unlike the previous FC's leaving, GPR did not immediately announce a replacement, suggesting that Zhang's departure was quite sudden. However, GPR does not expect to experience much of a disruption, saying that its CFO (currently based in Indonesia) can handle the work. Nevertheless, we note that the latest staff movement does not inspire confidence, especially in the current volatile market.

Expansion again very modest in 2Q11. Meanwhile, we continue to remain concerned about the slow pace of its expansion. As a recap, GPR added another 239 ha of new planting in 2Q11, adding to the 205 ha of new planting in 1Q11, and this brings its total planted area to 12,673 ha. But given management's plan to plant 1.6-1.7k ha this year out of its existing 3850 ha land bank, we note that 1H11's new plantings of 445 ha only made up 27% of its target, suggesting that GPR is at risk of not being able to meet its target.

Slow expansion will affect long-term growth. Given the still-resilient CPO (crude palm oil) prices thus far, we believe that GPR is still on track to meet our FY11 and even FY12 estimates. However, the slow pace of expansion could potentially curb its longer-term growth prospects, especially since 81% of its plantations are already in the prime segment (7-year to 18-year) with an average age of nearly 15 years old; and yield typically drops off after 18 years and these palms would need to be replaced. Meanwhile, GPR is still in talks to potentially acquire some small brown-field plantations owned by foreigners in Sumatra. But we understand that GRP seems to be more interested in acquiring their land as these plantations are typically not well-run with mostly young trees.

Maintain HOLD with S$0.21 fair value. As we only expect the FC's resignation to have a modest negative short-term impact on GPR; hence we maintain our HOLD rating and S$0.21 fair value. But the longer-term issue remains its ability to aggressively expand its plantation as set out in its IPO prospectus.

LIAN BENG GROUP - Spinning off cement and engineering businesses (DMG)

BUY

Price S$0.345

Previous S$0.71

Target S$0.71

Lian Beng Group (LBG) announced that it would be listing two of its subsidiaries on the Taiwan Stock Exchange. If shareholders’ approval is obtained during the EGM, we estimate the listing to take place six to nine months from now. With S$149.9m cash on hand (excluding the potential IPO proceeds), LBG is well positioned to accumulate land bank for property development. Trading at a mere 3.4x prospective P/E, we believe it has the capacity to trade up to the sector average of 7x for a TP of S$0.71. Maintain BUY.

IPO of concrete and engineering businesses. Lian Beng is spinning off two of its subsidiaries - the concrete and engineering businesses, to list on Taiwan Stock Exchange. Pre-clearance had been obtained from SGX, and an EGM would be held subsequently to obtain shareholders’ approval.

Rationale for listing. The proposed listing will provide greater clarity for credit profiling for financial institutions which wish to lend against the credit of the engineering and concrete business. In addition, it will enable its engineering and concrete business to fund its own growth. We estimate the listing process may take six to nine months. Taiwan’s concrete peers are trading at an average of 12.9x current year earnings, while the engineering/construction peers are trading at an average of 7.8x. This implies a blended 10.4x prospective earnings, which implies IPO proceeds of ~S$28m based on FY11 earnings of ~S$9m for its two subsidiaries in FY11.

Attractively valued at 3.4x FY12 P/E. On the back of strong order books of S$839m (as at May 11) and a good track record of project wins, we estimate LBG’s FY12 earnings to come in at S$53.5m, which suggests a prospective P/E of 3.4x. Maintain BUY.

STX OSV: Lower new order expectations; cut EPS and TP (DMG)

(BUY, S$1.15, TP S$1.56)

Customers could hold back orders due to volatile market conditions. STX OSV’s share price has declined 25% since end-Jul on rising concerns that volatile capital market conditions could delay customers’ newbuild programs. While we view the latest NOK750m contract win positively, we have reduced our new order wins for FY11-12F by 20-25% as we believe our previous estimates were too aggressive in view of the current environment. As a result, we cut our FY12-13F EPS by 8% and TP to S$1.56 (old: S$2.00). Our new TP is based on a lower FY12F P/E of 7.7x (old: 9.1x), 30% discount to big-cap rig builders. We continue to like STX OSV for its exposure to the deepwater space. Maintain BUY with 36% upside from its last closing price.

First new order announcement in 3Q11. STX OSV announced that they have secured new contracts for the design and construction of three advanced stern trawlers for Aker Seafoods for around NOK750m. The vessels are expected to be delivered in 2Q13 and 1Q14. The vessels will be built based on STX OSV’s own FV 01 design. With the latest win, we estimate that YTD 2011 order win has reached NOK5.4b and outstanding order book is estimated at NOK16.5b.

Cut order win forecasts by 20-25%; lower FY12-13F EPS by 8%. STX OSV recorded NOK3.1b new orders in 2Q11 but only managed to secure NOK1.1b in the current quarter (include one vessel from Island Offshore). In view of the current market conditions, we think customers could delay some of their newbuild programs. Hence, we reduce our FY11-12F new order forecasts by 20-25% to NOK9b and NOK12b respectively. We maintain FY11F EPS but lower FY12-13F by 8% due to the changes in new order assumptions. We expect the NOK3b Transpetro orders for eight LPG carriers to be made effective by end of the year.

M1 Limited - Cutting the line with Vodafone (CIMB)

NEUTRAL Maintained

S$2.52 Target: S$2.63

Mkt.Cap: S$2,287m/US$1,843m

Telecommunications - Mobile

Roaming and corporate lines to cease

We view negatively M1’s decision to end its partnership with Vodafone from 31 Dec 11 as this may shave M1’s core net profit by 5-10%, based on our estimates. M1 has a roaming partnership with Vodafone whereby users of Vodafone or Vodafone partners roam on M1’s network in Singapore. We also gather from the industry that Vodafone provides mobile telephony for multinational companies through M1. We maintain our NEUTRAL rating on M1 although there are risks to our forecasts and DCF-based target price of S$2.63 (WACC 8.5%) as a result of the cessation of the partnership. M1’s share price should be supported by its fairly attractive dividends. SingTel is our top Singapore telco pick.

The news

M1 announced it is ending its 7-year partnership with Vodafone from 31 Dec 11. M1 has a roaming partnership with Vodafone whereby users of Vodafone or Vodafone partners roam on M1’s network in Singapore. M1 still has roaming partnerships via the Axiata group and Asian Mobility Initiative, a regional grouping of networks which includes Celcom (Malaysia), DTAC (Thailand), Idea (India), Smartone (Hong Kong and Macau), Sun Cellular (Philippines), and XL Axiata (Indonesia).

Comments

Negative development. We are negative on this news as we believe roaming revenue from Vodafone and its partners forms a substantial part of M1’s inbound roaming revenue which contributes an estimated 8-10% to its total revenue. Assuming the Vodafone partnership contributes 20-30% to M1’s inbound roaming revenue, ending it could shave about 2-3% and 5-10% off M1’s revenue and core net profit respectively.

Vodafone also supplies business products (such as Blackberry devices and dongles) at lower prices, and provides M1 users preferential roaming arrangements on Vodafone and Vodafone-partner networks.

We also gather from the industry that Vodafone provides mobile telephony for multinational companies (MNCs) through M1. We believe MNCs will gradually shift to Vodafone’s new partner network when their contracts expire.

We believe Vodafone will soon ink a new partnership with SingTel or StarHub for roaming and mobile telephony services in Singapore.

Valuation and recommendation

We remain NEUTRAL on M1 thanks to its fairly attractive dividend yield 6-7%. This is despite downside risks to our earnings forecasts and DCF-based target price of S$2.63 as a result of the cessation of the partnership. SingTel is our top Singapore telco pick.

PEC Ltd - Secured contract from ExxonMobil (OCBC)

Maintain BUY

Previous Rating: BUY

Current Price: S$0.805

Fair Value: S$1.12

5-year maintenance contract. PEC announced recently that it has secured a tankage maintenance and repair services contract in Singapore. The contract is effective for five years beginning Sep 2011 and involves ExxonMobil's Jurong Refinery, Pulau Ayer Chawan Refinery and Singapore Chemical Plant. Although the unit rates for the different type of maintenance work have been agreed upon, the actual timing, amount and scope of the work to be carried out will depend on ExxonMobil's schedule which is not disclosed. For FY12, we estimate low single-digit increments to its maintenance revenue (over FY11). In terms of margin pressure, we see no signs of easing. We believe that the stiff competition within Singapore's Jurong Island will persist and may even intensify. Recall that PEC's gross margin for maintenance declined to 17.8% in FY11 from 23.4% a year ago. Looking ahead, we estimate gross margins of around 17.0% for the maintenance segment.

Expansion outside oil & gas sector. The company also announced plans to provide engineering, procurement and construction (EPC) services to infrastructure, township, industrial, energy and power-related facilities, through its newly incorporated subsidiary Enerz Engineering Ltd (Enerz). Enerz will have an initial paid up capital of S$360k funded from PEC (97%) and minority shareholders Lim Tow Hong and Chong Pang Soon (3%). PEC's investment in Enerz (S$350k) will be funded from internal sources. We welcome the move by PEC to deploy its huge capital, which we believed to be underutilized. However, we also note that Enerz is not within the group's area of expertise (oil & gas sector) and it may need to scale the learning curve before it can make meaningful contribution to the group's top- and bottom-line. In any case, the Enerz is only at the initial stage of its development and it remains too early to tell if the subsidiary's business will take off.

Idle cash? As at end-FY11, the group had S$158m of net cash against S$210m of equity (end-FY10: S$160m net cash vs. S$194m equity). Investors may be concerned about the group's acquisition strategy as the group has been holding on to large amount of cash over the past two years. Given its balance sheet strength, we believe that PEC can well afford acquisition with size north of S$100m. This may provide a catalyst to the group's share price. Meanwhile, we raised our FY12 maintenance revenue by 5% for the recent contract win, but our FY12 EPS remains unchanged after rounding. As such, we keep our BUY rating and fair value estimate of S$1.12.

Roxy Pacific Hldgs Ltd - Upgrade to BUY on compelling value (OCBC)

Upgrade to BUY

Previous Rating: HOLD

Current Price: S$0.39

Fair Value: S$0.48

Compelling value at current prices. At the current market cap of S$248m, Roxy Pacific Holdings is trading less than the independent valuation of its hotel asset alone (Grand Mercure Roxy Hotel "GMRH"), which is S$329m or S$590K per room - a fair valuation in the current hospitality market, in our view. Excluding GMRH, there is still an additional net equity of S$115m on its balance sheet. Moreover, we see little chance of a liquidity crisis, even in a bear scenario, as ~56% of its debt is secured on sold-out projects and the remaining on land sites.

Management buying shares. From end 2Q11 to date, we observe that ROXY management has cumulatively bought ~1.5m shares from the open market at an average price of S$0.46 per share. We believe this reflects management's belief that the share price currently reflects value. In addition, given ample cash on the balance sheet, we think management could further examine capital management options, such as a share buy-back program.

Expect three more launches in 4Q11. Despite recent macro uncertainties, we expect ROXY to launch three more projects in 4Q11. Everitt Building at 116 Changi Rd is expected to launch soon, with New Changi Hotel (80 Changi Rd) and Singapura Theatre (55 Changi Rd) to follow in Dec 11. All three projects are slated for strata-titled sales, and we expect launch performances to drive share price performance over 4Q11-1Q12. With the office sector facing inflection points ahead, we believe there were likely few, if any, concrete offers for Marina House (70 Shenton Way) which was put up for sale. As such, management is likely to go ahead with the project launch in 1Q12.

Likely cautious acquisition stance ahead. As of end-2Q11, ROXY had S$65m in available cash and fixed deposits, and management indicates additional debt headroom of S$150m. Despite ample ammunition currently, management would likely remain cautious in terms of acquisitions given heightened macro risks. Hence we expect acquisitions to stay bite-sized (

Upgrade to BUY on compelling value. Given the macro uncertainties ahead, residential prices and sales volume would likely weaken in 2H11 but prices are unlikely to collapse significantly due to continued low interest rates and healthy liquidity. At the current ROXY share prices, we believe there is compelling value and a significant margin of safety. Upgrade to BUY with a fair value estimate of S$0.48 (30% discount to RNAV).

Technics Oil & Gas Ltd (KimEng)

Background: Technics Oil & Gas is a full-service integrator of compression systems and process modules for the global offshore oil and gas sector. Specifically, it makes modules that are integrated into equipment used in offshore production. The company operates two yards, one each in Singapore and Batam.

Recent development: Technics announced last week that it has secured an EPCC contract worth an estimated $32m from Vietsovpetro for the provisioning of the topside equipments for wellhead satellite platforms in offshore Vietnam. According to management, project planning will commence this month and the platforms are targeted for completion next June.

Key ratios…

Price-to-earnings: 9.0x

Price-to-NTA: 3.4x

Dividend per share / yield: S$0.12 / 13.1%

Net cash/(debt) per share: (S$0.074)

Net gearing ratio: 30.0%

Share price S$0.915

Issued shares (m) 221.773

Market cap (S$m) 202.92

Free float (%) 55.8

Recent fundraising activities Dec 2010: Issuance of 13m new shares @ $1.02 for TDR listing

Financial YE 30 September

Major shareholders Robin Ting (33.2%), David Tay (8.7%)

YTD change +8.4%

52-wk price range S$0.73-1.05

Our view

Repeat orders affirm strong working ties. Including this latest contract win, Technics has been awarded a total of 15 wellhead satellite platform orders by Vietsovpetro. It has completed and delivered 13 projects to date, including the delivery of RC-6 and RC-7 earlier in June.

Strong order momentum. Notably, the latest order came on the heels of another two contract wins worth $8.5m in total. The latter involved a contract engineering job to fabricate a structural module for a Malaysian customer and the construction of a power generation module for FPSO “Petrojarl Cidade Itajal”.

Contract delivery on track. As at 3 August 2011, Technics has an outstanding orderbook of about $103.0m, which should last until end-March next year. More importantly, the company’s customers are oil and gas majors, as well as leading FPSO operators and end-users, which usually have a longer-term perspective on their operational requirements and are not affected by oil price fluctuations. In view of this, the company expects lower risk of order deferment and/or cancellation by its customers.

Fair valuation with attractive yield. Technics recently declared an interim dividend of 3 cents per share for its 3QFY Sep11 results, bringing total DPS to 12 cents for FY Sep11 (no dividend expected in 4Q). This translates to an annualised yield of 13%. The stock currently trades at 9.0x FY Sep11 and 8.1x FY Sep12 PER.

Olam International (KimEng)

Event

Olam this month announced positive newsflow in the form of an important milestone for its Gabon fertiliser project, as well as the acquisition of sugar milling facilities in India for US$63.8m. With the stock up 8% in the past two weeks alone (vs FSSTI 1%), we believe its valuations are no longer compelling in the light of the current global economic uncertainties. Downgrade to HOLD.

Our View

Olam acquired a 3,500-tonne-per-day sugar milling facility and related assets in India for a total consideration of US$73.8m and intends to invest a further US$6.6m (total US$80.4m) to expand capacity to 5,000 tonnes per day. Book value of the assets is approximately US$70m. We expect this to be the first in a series of sugar mill acquisitions, with management having articulated its interest in this space at the company’s latest results briefing.

The successful completion of the gas due diligence for the Gabon Fertiliser project is a major milestone, given that its feasibility largely hinges on whether the Republic of Gabon can provide this low-cost feedstock to the plant over the 25-year period. When fully operational, this project will probably account for some 15% of its US$1b net profit target for FY Jun16.

Nonetheless, we believe these developments are already largely within the market’s expectations. The stock currently trades at 13.5x FY Jun12F, which is lower than its historical average of 24x. However, as we said previously, we expect the stock to de-rate to levels closer to its peers, given more earnings contributions from its upstream/midstream assets.

Action & Recommendation

Our target price of $2.79 remains pegged to 15x FY Jun12F. The stock traded to a trough of 7x during the 2008-09 global financial crisis. We are mindful of the current global economic uncertainties and believe the recent share price run-up represents a good opportunity for investors to take profits off the table. Downgrade to HOLD.

Golden Agri: Nestle resumes CPO purchases (OCBC)

Nestle resumes CPO purchases. Golden Agri-Resources (GAR) recently announced that Nestle has placed an order to resume palm oil purchases from its subsidiary PT SMART. This after the food giant1 noted that SMART has managed to make continuous progress towards meeting Nestle's responsible sourcing guidelines, including full traceability across the supply chain as audited by international NGO, The Forest Trust (TFT). Recall in Mar 2010, Nestle ceased CPO purchases from SMART due to alleged draining of peat lands and violations of environmental laws. Further allegations by Greenpeace also led other consumer food giants such as Unilever and Burger King to suspend their palm oil purchases from the group.

Further orders depend on continuous progress. Going forward, Nestle adds that further business will depend on the group delivering continuous progress towards meeting the responsible sourcing guidelines and RSPO (Roundtable on Sustainable Palm Oil) certification. Nevertheless, the group says it views this order as an acknowledgement of its ongoing sustainability commitments and efforts to find solutions to continuously produce palm oil in a sustainable, environmentally and socially responsible manner. We also view the move positively as it means that the group's effort (undertaken in late 2010) to improve the sustainability of its CPO plantations has borne fruit and this news is a strong endorsement of its "green" progress.

Still looking to do more. And the group is not stopping there - GAR says it has also been working with TFT on the implementation of a Forest Conservation Policy, which aims to ensure that GAR has no deforestation footprint (including no development on high conservation value forest areas) and also seeks to achieve long-term sustainable growth for both GAR and the CPO industry. In addition to FCP, GAR is developing a Yield Improvement Policy to improve its productivity. After gaining entry into RSPO in Apr this year, GAR intends to secure RSPO certification for all its existing units (as of 30 Jun 2010) by end 2015; SMART has just gotten its certification on 16 Sep 2011 covering nearly 15k ha and one mill.

Maintain BUY with S$0.80 fair value. Meanwhile, we are maintaining our estimates for now, as we understand that Nestle probably contributed less than 0.5% of its FY09 sales. But further catalysts could come from the resumption of CPO purchases by other food giants such as Unilever. For now, we maintain our BUY rating and S$0.80 fair value. As before, key risks to our thesis include further weakening of the USD, a collapse of crude oil prices, and severe contraction in CPO demand from both China and India.

CHINA ENERGY (Lim&Tan)

S$0.056-CENG.SI

􀁺 Management warned that the company expects to report a net loss for financial year ending Dec ’11.

􀁺 Due to the high raw material costs (Rmb2,500/ton for methanol and Rmb1,500/ton for anthracite coal), coupled with other costs associated with the conversion of anthracite into methanol, it is not cost effective to produce methanol from anthracite coal which resulted in the very low utilization rate of their methanol plants.

􀁺 Management is of the view that the cost of anthracite coal is unlikely to fall significantly for the remaining period of 2011 and as such the utilization rate of the company’s methanol plants will remain low and continue to drag the overall group performance into the red.

􀁺 Since 4Q 2008, the company’s quarterly performance has been in the red, reducing its shareholders funds from Rmb1.73bln to Rmb1.39bln currently. With continued losses expected, shareholders funds will continue to be eroded.

􀁺 Besides its weak fundamental performance, the continued de-rating of China companies listed overseas due to numerous high profile scandals over the years has also impacted the company, with the stock currently trading at (5.6 cents) or a fraction of its 2007 all time post listing high of $1.87 as well as Dec ’06 IPO price of 83 cents.

Singapore Post Ltd - Eyeing the Chinese e-commerce market (OCBC)

Maintain HOLD

Previous Rating: HOLD

Current Price : S$1.045

Fair Value : S$1.14

Another step in regional expansion. Singapore Post (SingPost) recently announced that together with 4PX Worldwide Express, it will set up a joint venture called vPOST Hong Kong (vPOST HK) which will provide internet shopping, shipping, and logistics services. SingPost will invest HK$1.5m and take up a 50% stake in the JV. Recall that Quantium Solutions, a subsidiary of SingPost, had earlier invested S$11.5m for a 20% stake in Shenzhen 4PX Express which provides international express delivery services (excluding postal services), international freight forwarding, import/export of goods and technology. This is in line with SingPost's strategy to expand its inbound and outbound logistics and ecommerce market.

China's e-commerce market has huge growth potential. These investments give SingPost a platform for entry into the logistics and high-growth e-commerce market in countries such as China and Hong Kong. The growth potential of China is especially eye-catching (Exhibit 1); as its economy grows, more of its consumers and businesses are able to purchase goods as well as sell to other markets. According to AT Kearney, China's e-commerce market has grown at a compound annual growth rate of 90% over the past five years to more than US$32b in 2009 and is estimated to be worth US$175b in 20141 . Factors that will drive this trend include an increase in purchasing power among residents which would drive the growth of online shoppers, and the development of greater online security.

Asia Pacific market also holds promise. The outlook for the Asia Pacific market is also bright (Exhibit 2), driven by both businesses and consumers. According to the EMS unit at the Universal Postal Union2 , manufacturers are looking for the best-priced parts and companies are increasingly ordering such products to be shipped from Asia-Pacific. Moreover, as parts get smaller and lighter, shipping products becomes an increasingly attractive option due to lower costs.

But still just a small step. SingPost is taking the right direction but the group is still in the early stages of gaining a strong foothold in the Chinese market. Pending more details on its expansion strategy, we retain our DCF-based fair value estimate of S$1.14 and maintain our HOLD rating. Meanwhile, we like the stock for its decent dividend yield of 6.0% which is backed by stable operating cash flows and a strong financial position (net gearing stands at 0.5x and EBITDA/interest coverage of 18.1x as at 30 Jun 2011); investors may want to rotate into defensive stocks such as SingPost from a tactical asset allocation point of view, amidst the market uncertainty.

Hutchison Port Holdings Trust - Look forward to better data (DBSVickers)

BUY US$0.66 STI : 2,789.04

Price Target : 12-Month US$ 0.95 (Prev US$ 1.05)

Reason for Report : New operating data

Potential Catalyst: Volume growth, macro data

DBSV vs Consensus: Our DPU forecasts for FY12/13 are 5% lower than consensus owing to more conservative volume and tariff assumptions

• Yantian numbers in August make for poor reading; subsequent months should be better

• Trade contraction is unlikely in 2012; hence current valuations look oversold

• Maintain BUY with lower TP of US$0.95, as we lowered our FY11/12 DPU estimates by 4.5%/6.5%

Yantian numbers disappoint. Yantian Port’s throughput volumes fell 6.9% y-o-y in August 2011. While the drop was expected, the quantum surprised us. YTD in 2011, Yantian Port’s

throughput was up just 0.5% y-o-y, well below initial expectations. In view of the weaker peak season, and ongoing economic uncertainties, we thus cut our volume growth assumptions at Yantian to 2% and 4% for FY11 and FY12. We also lower our growth assumptions at HIT by 1ppt, and flatten our tariff growth assumptions, resulting in 4.5%/6.5% decline in FY11/12 DPU projections, to 5.7UScts (annualised) and 6.0UScts respectively.

But we continue to expect only sub-par growth and not negative growth in GDP/trade. Given Yantian Port’s exposure to export volumes to US and EU economies, growth are expected to remain anaemic in the near to medium term, but we are decidedly not looking at the kind of recession that HPH Trust’s current valuations seem to imply. Our economist believes that in terms of numbers, the US could grow at 2.3-2.4% (QoQ, saar) rate in 3Q11 and 4Q11, which is below average (3.0%) but a far cry from recession. Real consumption growth in the US is on track at 2.4% (QoQ, saar) in 3Q11 and retail inventory to sales ratios remain at alltime

lows.

Maintain BUY, TP cut to US$0.95. Even with our lower DPU projections, the Trust is still trading at attractive 8.5-9.0% yields. We think this offers a very good entry point with limited downside even in the case of a deep recession and contraction in trade. We reckon

current share price is pricing in a DPU (and by extension, EBITDA) decline of close to 22% in FY12. Compare this to 2009 – when global container trade contracted by an exceptional 9% – and EBITDA had declined by only 17%.

STX OSV - Quality order book to withstand downturn (CIMB)

OUTPERFORM Maintained

S$1.23 Target: S$1.85

Mkt.Cap: S$1,451m/US$1,170m

Offshore & Marine

Trading close to trough

Reiterate Outperform. STX OSV’s share price has fallen sharply on concerns that tightening credit could slow down its order intake. We were the first to downgrade the O&M sector based on the same fears. We now reduce our earnings estimates for STX OSV for FY12-13 by 2-10% as we scale back order expectations by 20-23%. Our target price dips accordingly to S$1.85 (from S$1.89), still based on 11x CY12 P/E (5-year mean for small-mid-cap industrials). Notwithstanding this, we maintain our OUTPERFORM rating, believing in minimal cancellation risks for its quality order book and buffer to withstand a downturn. We continue to anticipate catalysts from strong quarterly results, 8% dividend yields (for FY11) and continued good project execution.

Still positive for now

Order intake concerns. As sentiment turns more negative, project negotiations have become lengthier. Some customers are adopting a "wait-and-see" attitude. However, underpinned by an uptick in the North Sea over this summer and heightened project inquiries, STX OSV stands by its belief in a stronger order momentum for 2H11. Further, orders are lumpy and are expected to be backend-loaded.

We remain confident that it can meet our FY11 order target. Including effective NOK3bn Transpetro contracts and a NOK375m PSV order from Island Offshore, STX OSV has met 60% of our order target of NOK13bn for FY11.

Cutting order expectations for FY12-13 by 20-23%. Nonetheless, a full-blown liquidity crunch is a worry. Tampering our bullishness further out, we cut our FY12 order expectation to NOK10bn (from NOK13bn); and FY13 expectation to NOK12bn (from NOK15bn).

Such expectations are realistic, in our view. Our FY12 NOK10bn target is in line with average orders secured over a boom-bust period (FY07-10). In addition, a 20% higher order intake for FY13 takes into account its new Brazilian yard, which is expected to increase its production capacity by 25%.

As a result of the drop in order expectations, our earnings estimates for FY12-13 have been reduced by 2-10%.

Quality order book should withstand downturn

Minimal order cancellations. Given STX OSV’s quality clientele and track record of no order cancellations, we believe there should be minimal cancellation risks for its order book. STX OSV’s customers are established Norwegian OSV operators such as DOF, Farstad and Island Offshore, with whom it enjoys close relationships. In addition, its backend-loaded payment structure does not stress customers during the construction phase and should help to reduce cancellation risks, in our view.

Sufficient order-book buffer. We estimate 1H11 order book at NOK15.3bn, to underpin 70% of our FY12 revenue projection. Such a buffer should be sufficient, in our view. An over-extended order book could actually erode STX OSV’s competitiveness - STX OSV’s edge lies in its ability to introduce new vessel solutions to its customers. If yard slots are booked too far ahead, it is unable to stay abreast of the industry’s changing needs.

Moreover, a bulging order book does not guarantee future performances. In FY07-08, the company secured over two years of forward revenue but still lost money. Part of the problem was capacity constraints at its own yards and an overheated supplier market which delayed the delivery of equipment.

We deem an order-book cycle time of 1.5 years as being optimal for STX OSV. This gives STX OSV the flexibility to meet customers’ needs and ensures it has enough resources to concentrate on project execution. Such has helped in its FY11 exceptional performance.

Valuation and recommendation

Trading close to trough. STX OSV is trading at 7x CY12 P/E, just above small-midcaps’ trough valuations. On average, Singapore’s small-mid-cap offshore stocks are trading at 6x CY12 P/E while Singapore rigbuilders are trading at 10x. The stock is trading roughly 18% above small-mid-cap offshore stocks but at a 30% discount to Singapore rigbuilders. Backed by its better capabilities and a quality order book, we believe STX OSV should trade closer to rigbuilders (although rigs are considered higher-spec than OSVs).

In addition, we deem the risk-reward trade-off favourable. Should the stock be derated to trough valuations, we see 18% downside. On the other hand, we see 51% upside should the stock be re-rated to mean valuations.

Reiterate Outperform with slightly lower target price of S$1.85 (from S$1.89), still based on 11x CY12 P/E (5-year mean for small-mid-cap industrials). Its recent correction provides an entry opportunity, in our view. We continue to anticipate catalysts from strong quarterly results, 8% dividend yields (for FY11) and continued good project execution.

租户失踪，房东怎么办？

上周，我们提到遇上租户死赖不走的情况。

现在让我们谈谈房东的另一桩一样让人烦恼的房东“心事”，但情况却恰恰相反，而是更严重的租户人间蒸发，留下一间空屋，却又大门深锁。

门又闯不得，屋又拿不回，租金当然更是收不到，身为专业经纪，我们经常都会收到房东的求助，怎么办？

若是房东强闯入屋，可能事后会被租户起诉，若再继续等下去，或许要高歌 “何日君回来？”损失一天一天的加重。

租户失踪了，或者拖欠租金逃之夭夭，房东最好通过律师向法庭申请索回产业的庭令，甚至拍卖租户留下的家具或物品。

保留索赔权力

但若发现房屋被当作非法用途，或被严重破坏，或有任何危险状态，则必须即刻报警，由警方陪同开锁入屋检查。

屋子拿回了，房东还是有权力起诉索回一切的损失。

笔者建议，若签署合约的另一方是国际公司、上市企业或还正在运营的公司，抑或是名人或富商，房东就应该跟他们奋战到底，誓必以合法的程序拿回损失。

但是，若租户是一位夕阳西下的失意者，房东则更需要尽速索回产业的拥有与控制权利，这或许是不幸中的大幸，也可能因此找到一位更好的租户，尽管如此，房东仍然应该保留索赔的权力。

“完美”租约保障权益

无论如何，房东若要真正的避免以上问题，确保在事件发生时能获取应得的赔偿，还是要靠一份“完美”的租约订制。

签约前先了解背景

一般房东都忽略了“索屋”的条例；房东应该在租约上清楚地列明，违反合同条例或拖欠租金超过三个月，房东有权力即刻索回屋子的使用与拥有权，若合约上没有注明此条例，房东只能采取法律途径。

当然最基本的“防范”方法，还是能在签约之前绝对的了解租户的背景，确保租户付租的经济能力。

若租户是以公司名义签署，且注册资本为2令吉：或少过租期内租金的总数 （例： 3000令吉租金、两年租约，则要求注册资本必须至少7万2000令吉），否则必须由至少一位董事担任担保人，则可确保将来事发时更方便采取追讨行动。

万一租户逝世

万一厄运临头，单身租户不幸逝世，一般房东都会手足失措，无从下手，但事情总要解决。

之前，我们劝告房东在租赁申请书或租约，要求租户在表格上填写紧急事故联络人，房东可在第一时间联络租户的亲友，以便处理后事。

当然，如果无法联络上任何人，这应该寻找警方或公共服务局的协助。

房东切记不可搬走该租户留下的任何物件，法律上，其继承人有权处理及拥有有关财产。

当然，房东在这个紧急关头是有权破门而入，但必须懂得保护自己，避免麻烦。

至于有关租户拖欠的租金和相关费用等，房东可通过法律程序向死者家属或财产继承人索取。

驱逐租户须律师处理

一般的驱逐行动都必须通过律师来处理，律师将向法庭申请庭令以便封屋，租户不被允许擅自取出任何物件，租户可在期限内解决租金及相关付款等等事宜。

倘若无法如期办妥，房东可拍卖屋内的物件，充作欠租赔偿，如果拍卖所得无法抵销欠款，房东可继续索赔。

无论如何，房东通过这个方式，可以索回房子，再度转租。

一些房东擅自开门入屋，或加锁来威迫租户就范，这不但无法索讨赔偿，可能还会惹上官司。

http://www.nanyang.com/node/383621?tid=691