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19 February, 2009
SINGAPORE
Daybreak
3950
3750
FSSTI Index
What’s on the table
3550
3350 OCBC Limited (S$4.89)– 4Q08 Results-Rising provisions
3150
2950
2750
OCBC's 4Q08 core net profit of S$250m was below our expectations (S$385m)
2550
2350 and below consensus (S$381m). Key variance was a spike in provisions and
2150
1950
1750
treasury-related losses. Higher provisions came predominantly from higher loan-
1550
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
related SPs. NPLs rose across geographies but notably, in the manufacturing sub-
sector. The key positive was a jump in margins, on higher lending spreads, lower
Source: Bloomberg
deposit costs and favorable money-market activities. We reduce our FY10 EPS
estimate by 5% on lower fee-growth assumptions. Our target price has been
trimmed to S$5.15 from S$5.50 (still based on 1.05x P/BV) on the back of a lower
book value. Our Underperform rating is maintained as credit-cycle concerns
outweigh any emerging positives, for now.
Quick Takes
• Hyflux Ltd (S$1.65) -4Q08 Results- Open the flood gate
• Meiban Group (S$0.15) - Healthy financials to help ride out tough time
Please read carefully the important disclosures at the end of this publication.
Quick Takes
Hyflux Ltd (S$1.65) -4Q08 Results- Open the flood gate
Core profit above expectation. FY08 core net profit of S$59.8m came in within
consensus and was 16% above our full-year forecasts. The results were largely
underpinned by MENA region, which accounted for 40% of total revenue, driven by the
with progressive EPC recognition of Tlemcen and award of Magtaa.
Record revenue of S$554.2m (+226% yoy) anchored by Municipal segment. Though
no figures were given, we estimated that the top-line include about S$10m related to the
three water treatment plants divested into Hyflux Water Trust (HWT) in 4Q08. Revenue
from municipal sector continued to shine as it increased more than five times from to
S$476.8m (86% of total revenue), attributable to the good progress made both in China
and Algeria. However, this was offset by industrial sector, which disappointed with
turnover of only $76.4m (-25% yoy), as a result of the economic slow down in China.
Margins will trend lower going forward. Spike in cost resulted in gross margin slipping
to 36% in FY08 (vs. 37.6% in FY07) as a result of higher raw material and consumables
(+262% yoy). The group plans to increase headcounts in FY09 as it forged its presence in
activities it engages in, this would add further pressure to margins. Going forward, the
continued shift of sales composition from Industrial to Municipal activities will result in
gradual compression of gross and net margin.
Developments. Hyflux disclosed that its EPC order book sits pretty at S$335m, even
though this figure excludes its three desalination projects. Divestment of the Yangkou
Rudong Wastewater treatment plant into HWT is likely to happen only in 2H09.
Construction of the Magtaa plant in western Algeria is scheduled to be completed in 28
months’ time once the project financing is completed.
EPS forecasts adjusted; target price reduced from S$3.38 to S$2.66, still
based on sum-of-the-parts valuation. Our FY09 forecast is reduced by 3.8%
due to lower margin assumptions, but we lifted our FY10 estimates by 7.5%
higher on revenue recognition. We also introduce FY11 estimates. Hyflux well
position to weather the economic turmoil largely due to the natural of its
municipal activities, pump-primed by governments’ effort in reviving economic
growth through infrastructure projects. Maintain Outperform.
Y Y Y
Meiban Group (S$0.15) - Healthy financials to help ride out tough time
Above expectations. Meiban’s 4Q net profit of S$6.9m (-8% yoy) came in 246% and
108% above consensus and our forecast respectively due to a combination of higher-
than-expected sales, better-than-expected gross margin and opex ratio, forex gains
(S$397k) and tax write-back (S$761k). However, this was partially offset by about $1m
provisions for doubtful debt and stock obsolescence. For the full year, net profit was 32%
and 20% above consensus and our forecast, respectively.
Sales slipped 17% yoy to S$122m in 4Q08, as both contract manufacturing (CM) and
plastic injection molding businesses were hit by lower order from Dyson and Hewlett
Packard, respectively. Qoq, however, the decline was much more muted at only 2% as
we suspect Meiban gained some market share.
EBITDA margin slipped 80bps yoy in 4Q08, but improved 60bps qoq, as the
management has been proactive in curbing expenses in anticipation of the difficult time
ahead. Opex ratio contracted by almost 1% pt qoq despite a slight decline in revenue. As
a result, net profit only slipped 8% yoy, much better than the 49% yoy contraction in
3Q08.
Exited the Dec quarter with S$17m net cash, fairly unchanged from end-Sep. This
represents about 36% of its current market cap. As expected, it declared a 1 cts final and
1 cts special dividend, similar to FY07, translating into a yield of close to 14%.
Operating environment to remain tough in 2009, but this should not come as a
surprise as we had earlier assumed both its CM and plastic injection businesses to
contract 15-20% yoy in 2009. However, we remain optimistic that Meiban, with its healthy
balance sheet, proactive management, and strong free cash flow, will be able to ride out
the tough time ahead.
Forecast and target price unchanged; maintain Outperform. Although 4Q08
numbers came in above our expectations, we are keeping our FY09-10 forecast intact in
view of the limited earnings visibility, especially in 1H09. We have introduced FY11
forecast, and have kept our target price unchanged at 30.5cts, based on 0.7x CY09
P/BV. The stock remains attractive at 3x CY10P/E and less than 0.4x P/BV. Although we
have conservatively assumed no special dividend payment in FY09, projected yield is
still attractive at 7%. Maintain Outperform.
Y Y Y
Market confidence in dollar at stake . The international credibility of the US dollar could
be severely damaged, possibly provoking a global currency crisis, if President Barrack
Obama's economic team fails to demonstrate that it is capable of controlling US
borrowing, Toyoo Gyohten, a former vice-minister for international affairs in Japan, said
in Tokyo yesterday. Increased volatility: The fact that there is no alternative to the US
dollar is a major source of concern, says a former Japanese cabinet official He called for
international cooperation to prepare for a possible loss of market confidence in the
greenback and warned of increased volatility in currency markets.The fact that there is
'no alternative' to the dollar at present is a major source of concern, Mr Gyohten told a
symposium. Mr Gyohten, who is president of Japan's Institute for International Monetary
Affairs (IIMA), said that the international monetary regime supported by a dollar standard
is coming under increasing stress as a result of heavy US indebtedness and that
markets would be looking for signs that the new US administration can control the
situation. (BT)
Y Y Y
Company news
[ 3 ] CIMB-GK Research Pte Ltd 19 February 2009
Millennium & Copthorne Hotels (M&C) yesterday announced lower fourth-quarter and
full-year net profits - due chiefly to impairment charges and revaluation deficits - and a
halving in dividends to conserve cash.Recession-hit: M&C, which is about 53% owned
by CDL, reported £4.5m net earnings for the fourth quarter, a fraction of the £68.9m in
the same year-ago period The London-listed hotel arm of City Developments Ltd (CDL)
also warned of rough weather ahead and revealed that group revenue per available
room (RevPAR) for the first five weeks of this year declined 21.2 per cent against the
same period last year, with New York posting the sharpest fall of 41 per cent. The
group's hotels in regional US posted a 23 per cent RevPAR drop, followed by Asia, down
20 per cent, and London, which was 4 per cent lower.M&C, which is about 53 per cent
owned by CDL, reported net earnings of £4.5 million (S$9.78 million) for the fourth
quarter ended Dec 31, 2008, a fraction of the £68.9 million net earnings in the same
year-ago period. (BT)
Y Y Y
Debt - Ridden trading company TT International (TTI) could get a cash injection of $50
million - a proposed investment in the form of a loan from a Hong Kong-based investor.
The company is also in talks with other parties over a retail development.
As part of its restructuring, TTI has also retrenched about 1,000 staff, mostly overseas,
and is looking to close some operations, executive director Julia Tong and corporate
adviser Nicky Tan said yesterday at a news conference.The number of workers
retrenched represents close to 30 per cent of TTI's original headcount of 3,800.The
proposed $50 million loan - with a conversion feature - will come from Hornington
Enterprises, a Hong Kong company that distributes computers, related accessories and
electronics.This will be done in two tranches - $20 million first, then the remainder after
three months. The interest rate will be 12 per cent per annum. (BT)
Y Y Y
Two independent directors (IDs) of copper recycling firm Advance SCT have resigned,
accusing the management of lack of cooperation to help them discharge their duties.
Mr Tea: Was accused by the IDs of not helping them discharge their duties Their
leaving, which took effect on Tuesday, came just days after the abrupt resignation of
founder and group chief executive officer Terrence Tea Yeok Kian.
When Advance SCT announced the resignation of Mr Tea last Friday, it also made
known the desire of non-executive chairman Andy Lim and the IDs to inform
shareholders of their unhappiness with management. The management was accused of
not providing the IDs with sufficient cooperation, assistance and information to help
determine the current state of business and affairs of Advance SCT and its subsidiaries.
The two IDs who stepped down - Wu Shen Kong and Lee Ai Boon - both cited difficulties
in discharging their duties as IDs because of the lack of timely information and regular
updates from management.Following Mr Tea's resignation, Advance SCT has appointed
executive director Kang Hui Huat as acting group CEO. Mr Kang could not be reached
yesterday and Mr Tea declined comment. (BT)
Y Y Y
Sell
Enzer Corp 05-Feb-09 Tan Lee Peng Sell 1180 n.a. 7.02 6.03
Fortune Reit 03-Feb-09 Lim Hwee Chiang * Sell 2435 n.a. 1.92 1.62
Singapore Petro 03-Feb-09 Koh Ban Heng * Sell 375 n.a. 0.17 0.1
Keppel Land 02-Feb-09 Schroder Invest Mgt Grp * Sell 2000 n.a. 5.12 4.84
SP Chemicals 30-Jan-09 Concord Asia Hldgs Sell 31777 n.a. 5.79 0
Hotung Invest Hldgs 30-Jan-09 Third Avenue Mgt * Sell 146864 n.a. 13.4 13.98
Hotung Invest Hldgs 30-Jan-09 CIM Invest Mgt * Sell 4269 n.a. 9.72 9.37
Innovalues Ltd 30-Jan-09 Atlantis Invest Mgt * Sell 800 n.a. 10.53 10.28
Innovalues Ltd 29-Jan-09 Atlantis Invest Mgt * Sell 584 n.a. 10.71 10.53
E3 Hldgs 29-Jan-09 Armorcoat Intl Sell 3000 n.a. 6.7 6.5
China Lifestyle 29-Jan-09 Orange capital, LLC * Sell 20000 n.a. 7.89 3.92
Enzer Corp 05-Feb-09 Tan Lee Peng Sell 1180 n.a 7.02 6.03
Keppel Land 02-Feb-09 Schroder Invest Mgt Grp * Sell 2000 n.a 5.12 4.84
ARA Asset Mgt 06-Feb-09 Prudential Asset Mgt (S'pore) * Sell 2107 n.a 11.09 10.73
Fortune Reit 03-Feb-09 Lim Hwee Chiang * Sell 2435 n.a 1.92 1.62
Hiap Moh Corp 09-Feb-09 Ng Kah Lin * Sell 8243 n.a 13.09 0
Hiap Moh Corp 09-Feb-09 Sie Kam Shuat * Sell 8243 n.a 13.09 0
Hiap Moh Corp 09-Feb-09 Joshua Ng Hock Hwa * Sell 8243 n.a 13.09 0
Hiap Moh Corp 09-Feb-09 Gracefield Invest Pte Ltd Sell 8243 n.a 13.09 0
Hiap Moh Corp 09-Feb-09 Michael Wee Soon Lock * Sell 9304 0.4 14.77 0
Jackspeed Corp 11-Feb-09 Ang Kian Lee Sell 9380 0.09 4.48 0
Olam Intl 09-Feb-09 JPMorgan Chase & Co * Sell 14399 n.a 6.75 5.91
Advance SCT 10-Feb-09 Terence Tea Yeok Kian Sell 20000 0.07 11.79 5.45
Hiap Moh Corp 09-Feb-09 Hiap Moh Hldgs Sell 32130 n.a 51 0
Others
China Hongxing 06-Feb-09 Wasatch Advisors Inc * IP 5664 n.a 6.79 7
Soup Res Grp 02-Feb-09 Then Khek Koon SA 11172 0.01 5.61 5.61
Soup Res Grp 02-Feb-09 Then Khek Koon SA 11458 0.01 5.61 5.61
Soup Res Grp 02-Feb-09 Pang Cheng Jin SA 21721 n.a 10.92 10.92
Soup Res Grp 02-Feb-09 Wong Chi Keong SA 26061 n.a 13.1 13.1
Soup Res Grp 02-Feb-09 Wong Wei Teck SA 27394 0.01 13.77 13.77
Soup Res Grp 02-Feb-09 Mok Yip Peng SA 37122 0.01 18.65 18.65
PacShip Trust 02-Feb-09 YC Chang ST 1300 n.a 0.22 0
RSH Ltd 04-Feb-09 Mohamed Ali Rashed Alabbar ST 70067 n.a 19.87 0
RSH Ltd 04-Feb-09 FZC ST 72548 n.a 0 20.57
Source: The Business Times
ST: Shares transfer, IP: Investment purposes, PL: Placement
February 2009
8 9 10 11 12 13 14
Jan 09 Intl Reserves Results: Results: Results: Dec 08 Retail Sales &
Results: 4Q08 - NOL, StarHub, 2Q09 – Tiong Woon, 4Q08 – Comfort Catering Trade Indices
4Q08 Rickmers Capland Ellipsiz, ASL Marine 3Q09 – Yellow Pages Results:
3Q09 Macarthurcook REIT 3Q09 - SIA 2Q09 – Eu Yan Sang 4Q08 – ChSports, DBS
1Q09 - WBL 3Q09 - FJ Ben, Tat Hong
15 16 17 18 19 20 17
Map Tech 4Q08 results Jan 09 Merc Trade 4Q08 Ctrl Govt Debt Venture 4Q08 results 4Q08 Wholesale Trade
Results
4Q08 – Meiban, OCBC
22 23 24 25 26 27 24
Jan 09 CPI Results: Results: Jan 09 IIP 4Q08 GDP *
4Q08 – Rotary, Straits 4Q08 – Aztech, CAO, CSE Results: 4Q08 BOP *
Trading 4Q08 Armstrong, HTL, 4Q08 Ave Mthly Earnings*
Petra, Hiap Hoe, LKT, 4Q08 Biz Receipts
Sembcorp Ind Jan 09 Ctrl Govt Ops
Jan 09 Pdr&Intl Trade Px
Results:
4Q08 - Broadway,
Yongnam, Indofood
March 2009
8 9 10 11 12 13 14
Feb 09 Intl Reserves* Feb 09 RSCTI
1Q09 results – China Flex
15 16 17 18 19 20 21
Feb 09 Merchandise Trade
22 23 24 25 26 27 28
Feb 09 CPI Feb 09 IIP
29 30 31
Feb 09 PITPI Feb 09 Cent Gov Debt
Feb 09 CPI *
Feb 09 External Debt *
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