Friday, April 30, 2010

Fajarbaru Builder-KN

29/04/10

Fajarbaru Builder Group
BUY RM1.06
Target Price: RM1.32
52-week range: RM0.86-RM1.29

Diversifies income stream

9MFY10 Results Review
- Net profit of MYR6.6 mln (+23.4% YoY)
- Revenue MYR43.4 mln +26% YoY

l 9M10 net profit of RM24.1m came within expectations. It accounts 71% and 78% of our forecast and consensus. The net margin improved from 9% to 14% despite of slight drop in revenue by 6%. This is due to more lucrative contract secured during FY10 ie: double track railway and Tampin Hospital. The shrimp farm project for Khazanah unit in Terengganu is currently on track and a large portion of the revenue will be recognised in FYJune11.

l YoY, net margin is still intact at 15% on the back of higher revenue. Ebitda margin was slightly higher to 23% from 22% in FY09. This is due to higher progress billings during the year which the revenue increased by 26%.

l QoQ, 15% higher in revenue accounts for Khazanah’s unit project. The fast track shrimp project for Khazanah subsidiary project in Terengganu has kicked in 3Q10 revenue. The project is expected to be completed within 12 months started from Feb 2010. The Ebitda margin was slightly lower from 24% to 23% due to higher administration cost as the management had given out bonus for its staff.

l LRT extension project will not impact earnings in the near term. We expect the order book of RM400m to be stable for the next 2 years. The management is actively bidding for more projects including the remaining LCCT contract that could be worth c. RM300m while bidding for LRT extension project. Fajarbaru jointly bid for the LRT project with Signatium Construction Sdn Bhd. However, it’s too preliminary to gauge the value of the project due to delays from SPNB. Should the contract award come in
by end of 2010, the impact on Fajarbaru earnings in FY11 will be minimal.

l Property development, the natural progression. The management is actively looking for options in diversifying its income stream including property development to mitigate the slowdown in construction sector. At present, Fajarbaru has about 80ha of land in Port Dickson and it is yet to commence any development at this time and they are eyeing to acquire more strategic land in Klang Valley which have better turnover for property development.

l Maintain BUY with TP of RM1.32 based on 10x PE FY10.

Outstanding Orderbook
Seremban-Gemas double-tacking (KM502.6-KM535.5) RM226m
Tampin Hospital RM131m
Aqua-culture project in Terengganu RM70m

Fajarbaru Builder -sp

Date: April 29, 2010
Fajarbaru Builder Group
Recommendation: BUY
Price: MYR1.06 / 12-Month Target Price: MYR1.30

9MFY10 Results Review
- Net profit of MYR6.6 mln (+23.4% YoY)
- Revenue MYR121.3 mln - 6.3% YoY


• We have raised our FY10 and FY11 net profit forecasts by 4% and 5% respectively after incorporating: (i) an increase in construction margins; offset by (ii) a push back in recognition of construction revenue and (iii) increase in our effective tax rate slightly to 23% (vs. 22% previously). We expect, however revenue to pick up in the subsequent quarters as projects such as the newly secured MYR70 mln prawn aquaculture farm and MYR138.4 mln Tampin Hospital gain momentum.

Recommendation & Investment Risks
• We maintain our Buy recommendation with an unchanged 12-month target price of MYR1.30. Trading at prospective FY10 and FY11 PERs of 7.8x and 6.3x for FY10 and FY11 respectively, we believe valuations are decent, given projected net profit growth of about 24% in FY11. We anticipate stronger earnings growth in FY11 as key
projects secured are expected to gain momentum. In addition, we believed FBB’s decent dividend yield of 5.7% in FY10 should provide support to its share price.

• We continue to value FBB based on blended PER target of 9x (unchanged) and P/B target of 1.6x (unchanged) based on our FY10 estimates. We expect FBB’s bid for parts of the new LCCT project such as the apron and runway and on-going tenders for about MYR400 mln worth of local jobs to provide potential earnings upside.

• The group is in a comfortable position as its outstanding orderbook which stands at MYR440 mln will last until 2012. The group has a healthy balance sheet (net cash of MYR123.7 mln at end-March 2010 or 74 sen per share) which will place it in a good position to secure larger projects and diversify into property development.

• Risks to our recommendation and target price include fewer-thanexpected new contracts secured, higher-than-expected material costs and slower-than-expected profit margins for construction projects.

Outstanding Orderbook
Seremban-Gemas double-tacking (KM502.6-KM535.5) RM226m
Tampin Hospital RM131m
Aqua-culture project in Terengganu RM70m

Thursday, April 29, 2010

Suntec REIT-Phillip

29/04/10

Suntec REIT

1QFY10 Results
• 1Q10 revenue = $62.5 million (-3.8% y-y, +1.1% q-q),
• Net property income = $47.8 million (-2.7% y-y, +1.3% q-q),
• Distributable income = $45.4 million (-2.1% y-y, -5.1% q-q)
• 1QFY10 DPU = 2.513 cents (-13.9% y-y, -13.0% q-q)

• Rebound in office reversionary rent
• Maintain hold recommendation with fair value of $1.34
.
Results within expectations
The decrease in DPU was mainly attributed to the larger share base in 1Q10 from the issuance of the deferred units. Although there was a general drop from a year ago, however the revenue trends showed that things have stabilized over the last 3 quarters. The office portfolio is showing signs of improvement. Office occupancy has inched up slightly to 96.9% and reversionary rent has also increased from $7.11 achieved in 4Q09 to $7.34 in 1Q10. For the retail portfolio, revenue contribution remained stable, but occupancy fell slightly to 97.2%. On the overall, the office portfolio contributed 47% to total revenue while the retail portfolio accounted for the rest at 53%.
Suntec REIT has total debt of $1.752 billion. Gearing is 33.4%. $532.5 million is due in 2011.

We are raising our revenue estimates as Suntec REIT portfolio is showing better resiliency than we had previously thought. Both Park Mall and Chijmes had achieved 100% occupancy for the past 3 quarters running. Previously we were concerned on the performance of Suntec City Office Tower, but the latest 1Q10 results showed that occupancy has improved and overall revenue trend shows stabilization. Our attention is now shifted to Suntec City Mall, which has registered slight drop in occupancy. Our estimates revisions reflect 1-3% increase in revenue and 2-7% increase in DPU for forecast years 2010E-2012E. We raised our fair value from $1.21 to $1.34 and maintain our Hold recommendation.

Fajarbaru-RHB

29/04/10

Fajarbaru Builder Group
Share Price : RM1.06 / Fair Value : RM1.31
Recom : Outperform (Maintained)


9MFY10 Results Review
- Net profit of MYR6.6 mln (+23.4% YoY)
- Revenue MYR121.3 mln - 6.3% YoY


♦ Better job flow in FY06/ 11. Among the new projects Fajarbaru is currently eyeing/tendering are the RM400m teaching-hospital in Kuantan based on the private finance initiative (PFI) model, the remaining work packages of the new LCCT including parking apron (RM200m), taxiway (RM100m) and runway (RM400-500m), a bridge/road project in Peninsula Malaysia and the LRT line extension project. The winning bids for these jobs are likely to be announced from 2H2010.

♦ Forecasts. Maintained.

♦ Improved investors’ risk appetite. We are now more upbeat on the construction sector, prompted largely by investors’ improving risk appetite for construction stocks following: (1) The massive underperformance of the sector vis-à-vis the market in 4Q2009 and 1Q2010; and (2) A better sector news flow and new expectations leading up to the announcement of the 10th Malaysia Plan (10MP) in June 2010.

♦ Maintain Outperform. Fajarbaru is a good proxy to the construction sector due to its still undemanding valuations. Its balance sheet is strong with a net cash of RM123.7m as at 31 Mar 10, translating to a whopping 74sen/share. Indicative fair value is RM1.31 based on 10x fully-diluted CY10 EPS of 13.1sen, in line with our benchmark 1-year forward target PER for the construction sector of 10-14x.

Outstanding Orderbook
Seremban-Gemas double-tacking (KM502.6-KM535.5) RM226m
Tampin Hospital RM131m
Aqua-culture project in Terengganu RM70m

Wednesday, April 28, 2010

FCOT – Citi

28/04/10
FCOT – CitiGroup
Analyzed Non-Rated Snapshot

• DPU — FCOT management stated that with the recent quarterly earnings results from Jan- Mar 10, the DPU of 0.32c now reflects a purer figure after successful completion of refinancing and recapitalization at end-2009 as well as acquisition of Alexandra Technopark. Gearing of FCOT is currently at 40%.

• Not concerned about upcoming supply of Grade A office buildings in Singapore — Management expects positive rent reversions from Australian properties with rent reviews mechanism taking place for premium grade Central Park property in Perth. Management is not particularly concerned about upcoming supply of Grade A office buildings in Singapore as it is focusing more on mid-range commercial properties catering to SMEs, small MNCs and companies dealing with consumer products.

• Focusing on countries with sponsor’s presence — Management revealed that it would be concentrating on countries with sponsor’s presence, namely Australia and Singapore. To that effect, FCOT will be looking at divesting current assets in Japan and has hired a sales agent for Cosmo Plaza, Osaka. Sale of Cosmo Plaza is expected to bring gearing down 2% to 38%.

• Going forward — Management will be focusing at AEI for the 25-storey Keypoint development in Singapore to improve the current occupancy rate of 70%. Future potential acquisitions will come from buying mid-range assets of the market and pipeline properties from sponsor’s development in the Sydney area between the CBD and Broadway. Management is comfortable with bringing gearing up to 45% in order to fund any potential acquisitions.

Suntec REIT-DMG

Suntec REIT: Value not fully appreciated (BUY, S$1.38, TP S$1.56)

1Q10 earnings in-line.
Suntec REIT 1Q10 results DPU = 2.51¢ (-13.9% YoY; - 12.9% QoQ),

Net property income fell 2.7% YoY on the back of negative rental reversion.

We adjust our FY10 DPU forecast to 9.6¢ as we assume slightly higher negative rental reversions for the next few quarters. Suntec will trade ex- 1Q10 distribution on 3 May. Maintain BUY, DDM-based TP of S$1.56.

Suntec retail occupancy slipped marginally. Suntec REIT’s portfolio office occupancy remained stable at 96.9%. Both Park Mall and One Raffles Quay remain 100% occupied while Suntec City office registered a 0.2ppt QoQ improvement in occupancy to 95.5%. In contrast, Suntec’s retail occupancy saw a slight occupancy decline of 0.9ppt to 97.2%, due largely to the 1.2ppt decrease in Suntec City mall’s occupancy, which now stands at 96.4%. Management indicated that this is due to temporary frictional vacancy.

Office rents will bottom by end-2010 and may stay flat till 2012. Whilst there is every sign that office rents have stabilised, it may be premature to make a call on an early return to rental growth. We expect prime office rents to fall to the S$6/sqft level by end-2010 and remain at that level till 2012. We believe the huge supply of new completions (at only 38% precommitment level) as well as the substantial amount of secondary supply from tenants relocating to new mega-schemes may place a brake on rental recovery.

Tenant retention remains key focus in 2010; BUY with TP of S$1.56. The focus on tenant retention remains paramount for Suntec REIT, in view that the bulk of leasing activity currently involves replacement demand, i.e. tenants moving from older office blocks to newer ones. We believe Suntec REIT will likely register negative rental reversion in 2010 in view that expiring leases are higher than current spot rates. Nevertheless, we believe the Singapore office sector is at the point of 'L' inflection and long-term rental growth prospects are likely to be robust once excess capacity is absorbed. At our TP, stock still offers an attractive yield of 6.9%, above its heyday yields of 4.6%.

Courage Marine -ke

28/04/10
Courage Marine Group [CM] – Company Visit

What’s New
FY09 results
4Q09 Turnover rose US$11.4m +53% YoY,
Net Profit US$2.9m
Dividend of US cents 0.472 per share
Net cash position of US$36.4m
Fleet utilization rate of 70%

Result in tandem with the steady recovery in the Baltic Dry Index (BDI), which averaged about 3,000, compared to 2,000 the same period last year.

Our View
CM managed to return to profitability in FY09, despite weaker average freight rates particularly in 1H. Notably, 4Q09 earnings almost doubled to US$2.9m from US$1.5m last year. In our view, the expected appreciation of the RMB coupled with an improving demand‐supply dynamics may result in upside surprises for the freight rates.

The lower fleet utilization rate of 70% in FY09 (versus 90% a year earlier) was largely due to the volatility of the BDI. But we understand that fleet utilization has picked up since 4Q09 and management is confident of securing higher deployment for its vessels.

Bolstered by strong operating cash flow, CM has declared a final dividend of US cents 0.472 per share, implying a yield of about 2.8%. As at end‐December 2009, the company, unlike most of its peers, posted a net cash position of US$36.4m. This should enable CM to acquire vessels at a reasonable price if the opportunity arises.

Action & Recommendation
We see CM as a close proxy of any upswing of the BDI, which is hovering around the 3,000 level (versus its peak of 11,800 in May 2008). Other near‐term share price catalysts include M&A to achieve vertical integration as well as potential dual listing in Taiwan

Suntec REIT -OCBC

28/04/10

Suntec REIT: 1Q10 results in line; office portfolio holds steady

Gross revenue = S$62.5m, - 3.8% YoY but + 1.1% QoQ.
Distributable income = S$45.4m - 2.1% YoY and +5.1% QoQ,
DPU = 2.513 S cents per unit.

The results were in line with our expectations. Suntec City Office’s occupancy of 95.5% has picked up 20 bps versus Dec 09. Achieved rent also recorded the first increase in six quarters. Meanwhile, Suntec City Retail’s occupancy fell 120 bps versus Dec 09 due to “temporary frictional vacancy”. Esplanade and Promenade, the two Circle Line stations connected to Suntec City, opened on Apr 17. The development’s increased connectivity could boost traffic to the retail mall, in our view. Barring any unforeseen circumstances, the manager remains “cautiously optimistic of the outlook for 2010”. Our earnings estimates are unchanged. Maintain BUY and S$1.44 fair value (11.3% estimated total return).

1Q results in line. Suntec REIT posted S$62.5m in 1Q10 gross revenue, down 3.8% YoY but up 1.1% QoQ. The manager attributed the YoY decline to weaker contributions from both office and retail assets. Distributable income of S$45.4m for the quarter fell 2.1% YoY and 5.1% QoQ (likely due to higher interest expenses). The results were in line with our expectations with revenue and distributable profit within 0-3% of our estimates. Suntec will pay out 2.513 S cents per unit, down 13.9% YoY and 12.9% QoQ due to a larger unit base (roughly 1.8b units now versus 1.6b units a year ago). The payout was just 3% shy of our 2.59 S cents estimate.

Office holding steady. Suntec City Office’s (SO) occupancy of 95.5% – while still down 80 basis points from Mar 09 – has picked up 20 bps versus Dec 09. Suntec secured achieved rents of S$7.34 per square foot per month at SO, down 26.3% YoY but up 3.2% QoQ (the first increase in six quarters). In 1Q10, Suntec renewed or replaced about 50% of office leases expiring this year, with another 193k or 10.4% of total office NLA outstanding. Suntec still faces a tough market as REIT assets compete for tenants with newer developments but a pick-up in leasing activity, and the portfolio’s fairly high occupancy, could help it maintain its negotiation position. Still, we continue to factor in the risk of negative rent reversions impacting distributable income in 2010.

Circle Line stations now open. The average passing rent at Suntec City Retail (SR) of S$10.89 psf pm was down 1.4% but up 1.3% QoQ. The asset’s occupancy continued its slide down to 96.4%, down 120 bps from three months ago and 220 bps from a year ago. The manager attributed this to “temporary frictional vacancy”. Meanwhile, Esplanade and Promenade, the two Circle Line stations connected to Suntec City, opened on Apr 17. The eleven new stations that opened last week are projected to increase ridership on the Circle Line to 200k commuters per day from 40k per day previously (Land Transport Authority). The development’s increased connectivity could boost traffic to the retail mall, in our view.

Valuation. Suntec said it believes its portfolio is “well positioned” to meet “continuing challenges in both the retail and office sectors”. Barring any unforeseen circumstances, the manager remains “cautiously optimistic of the outlook for 2010”. We have left our earnings estimates unchanged. Maintain BUY and S$1.44 fair value

Suntec REIT -cimb

28 April 2010
Suntec REIT -S$1.38
OUTPERFORM -Maintained
Target: S$1.59
Starting out right

Suntec REIT DPU = 2.51¢ (-13.9% YoY; - 12.9% QoQ),

• DPU in line; maintain Outperform. DPU of 2.51cts forms 26% of our full-year estimate and 28% of the Street’s.

Although DPU fell yoy due to poorer occupancy rates and rents, quarterly performance held up well, with offices surprising with moderate occupancy and rental improvements where we had anticipated a fall. With limited office leases due for renewal in the rest of FY10, as well as greater bargaining power in retail rental negotiations with the opening of the Esplanade Circle Line and Marina Bay integrated resort in April, we believe Suntec REIT will be on track to meet our full-year expectations. Our estimates and DDM-based target price of S$1.59 (discount rate 8.1%) are intact. Suntec REIT still trades below book value (0.7x vs. sector average of 1.0x)) while it offers prospective yields of 7%, in line with the sector average. We see stock catalysts from upside for retail rents.

• Weaker yoy performance from fall in occupancy. Distributable income of S$45.4m fell 2.1% yoy mainly due to lower occupancy for the office and retail segments. DPU fell by a steeper 13.9% yoy from an increase in units as deferred payments in units to the original vendors of Suntec Development are paid out every June and December.

• Better office performance over 4Q09 heartening. Qoq, occupancy at Suntec City surprised us, with office occupancy improving to 95.5% (+0.2% pt) while retail occupancy dipped to 96.4% (-1.2% pts), where we had anticipated the opposite. Management explained the fall in retail occupancy as temporary frictional vacancy. Portfolio office leases secured in the quarter improved moderately by 3% to S$7.34 psf while portfolio retail rents improved marginally by 1%.

• Limited office leases due for renewal in FY10. For the rest of FY10, there is less than 100,000sf of office space left for renewal due to successful forward renewals of half of the space due for expiry. There is more retail space for renewal (185,269sf) in the same period. We believe increased traffic in the Marina Bay area with the opening of the Esplanade Circle Line and Marina Bay integrated resort will enhance Suntec management’s bargaining power in retail lease negotiations.

Monday, April 26, 2010

CapitaRetail China Trust (CRCT) -JPM

26/04/10
CapitaRetail China Trust (CRCT)
1Q10 DPU = S$0.0214

• 1Q10 results slightly ahead of expectation, The better than expected earnings was a result of lower than expected interest expenses.

• Capital management a big focus this year. Whilst the trust has extended S$88million term loan for another two years to 2012, CRCT has yet to refinance S$283.5million worth of debt (68.2% of total borrowings), comprising S$200.5million term loan due Dec-10 and S$83million short-term money market line. With expectation of RMB appreciation at high level, we see upside risk for the trust to refinance at a better than expected rate. Current gearing for CRCT is 33.8% with average cost of debt at 2.4%.

• Operating performance to turn around in 2H10, in our view. Whilst net property income grew 7.5% in RMB term, the increase is largely a result of new contributions from Xizhimen Phase 2. Net property income for initial portfolio grew only 1% Y/Y due to still challenging Beijing retail market as well as the repositioning of Qibao Mall in Shanghai. That said, as tenant sales started to increase with 9% sequential growth and the new commitment at Qibao Mall to be started in July, we see potential turn around in underlying performance in 2nd half this year.

• We retain our Neutral rating, with Dec-10 DDM based price target at S$1.25/unit. Key risks to our rating and price target include surprises on operating fundamentals both on the upside or downside, and the uncertain timing of the introduction of China REIT code, which is likely to support or even lift up the valuation of the trust.

CapitaRetail China Trust (CRCT)-Daiwa

26/04/10

Subdued organic growth, rental reversions

What has changed?
• CapitaRetail China Trust (CRCT) 1Q10 Distribution per unit (DPU) of 2.14¢ was 1.9% above our forecast.

Impact
• Net-property income (NPI) was 1.6% above our forecast. In local currency terms, gross revenue dipped by 0.8% QoQ due to an 11% QoQ drop for the Qibao Mall. NPI (in local currency) was 1.5% above our forecast, with Xizhimen Mall, Anzhen Mall and Wangjing Mall exceeding our forecasts, while Qibao Mall fell short.

• Rental reversions for 1Q10 (involving 52 leases) were subdued at an average of 2.4% above preceding rents. Only Wangjing Mall (21 leases) recorded a positive average rental reversion (of 9.2%). CRCT’s portfolio occupancy improved slightly over the previous quarter to 95.2% from 95.0%. The overall leasing environment appears stable, but still delicate, in our opinion.

• We have revised up our FY10 DPU forecast by 0.5% after revising up our NPI forecast by 0.9%. However, we have revised down our DPU forecast for FY11 by 14.1%. We assumed previously that CRCT would acquire about S$1bn of China-mall properties annually from its sponsor’s private equity funds from the start of FY11. We assume now that these acquisitions will begin from FY12.
Valuation

• We maintain our six-month target price, based on parity to our RNG (a finitelife Gordon Growth model) valuation, of S$1.11. We have assumed an effective cap rate of 6% (consisting of a discount rate of 11% and an internal growth rate of 5% p.a. over the portfolio’s remaining leasehold of 34 years). Our valuation also assumes the inclusion of about S$966m of acquisitions at a yield of 7.5%.
Catalysts and action

• We maintain our 4 (Underperform) rating for CRCT and believe it is on track to record a year-on-year decline in DPU for FY10. Moreover, FY11 could be another listless year for DPU growth, by our estimates, unless CRCT makes a major

FIRST REIT -CIMB

26 April 2010

FIRST REIT
BUY; TP :S$1.08
Price @23/04/10: S$0.87
Recommendation – Maintain BUY

• 1Q10 DPU) of 1.9cts.

• The management will continue to focus on upgrades and asset enhancements for its portfolio. Adam Road Hospital will be the main project this year till mid 2011.

• First REIT is trading at 0.95x P/BV and offers a forward dividend yield of 8.5%, significantly higher than its closest peer PLife REIT which is trading at 0.96x P/BV and a lower forward yield of 6.8%.

1Q10 results in line

• First REIT’s 1Q10 results came in line with expectation. DPU of 1.9cts announced for the quarter forms 26% our full year forecast. This was achieved on the back of a 0.6% yoy increase in gross revenue to S$7.5m. Higher rental from the Indonesia assets were partly eroded by the deferment of rental income from Pacific Cancer Centre @ Adam Road as the property is currently under redevelopment.



• Management is ready to continue with its acquisition plans as global economy comes out of the 2008 financial crisis and demand for private healthcare services picks up strongly. They hope to add on new properties to the portfolio from 2H10. We see likelihood of injection of the sponsor’s assets in Indonesia, which includes Siloam Hospitals Lippo Cikarang and Lippo Hospital Semanggi. Separately, the manager is also considering assets in the China market, but does admit that it would require “more evaluation and restructuring work for it to be able to meet First REIT’s criteria”.



• We will be more positive on potential acquisitions from the parent in Indonesia as we are more confident in of asset and tenant quality, as well as underlying domestic demand of healthcare services on its home ground. Venturing beyond Indonesia and Singapore could add significant country and execution risk on this REIT.

Fajarbaru-rhb

26/04/10

Fajarbaru Builder Group
Share Price : RM1.06
Fair Value : RM1.31
Recom : Outperform (Maintained)
9MFY06/10 Results To Beat Our Expectation

♦ 9MFY06/ 10 results to surprise on the upside.
We expect Fajarbaru’s 9MFY06/10 net profit to come in at RM16.5-17.5m that is equivalent to 80- 85% of our full-year forecast, beating our expectation. The stronger-than- expected performance will likely have been driven by higher-than-expected margins from key on-going construction projects.


♦ Weak job flow in FY06/ 10. Having re-assessed Fajarbaru’s current tender book, it appears that the company is unlikely to announce any new contracts over the next 2-3 months (between now and the end of FY06/10). The winning bids of new contracts that Fajarbaru is currently eyeing/tendering will only be announced beyond FY06/10, comprising, among others, the RM400m teaching-hospital in Kuantan based on the private finance initiative (PFI) model, the remaining work packages of the new LCCT including parking apron (RM200m), taxiway (RM100m) and runway (RM400-500m), a bridge/road project in Peninsula Malaysia and the LRT line extension project. This means Fajarbaru is unlikely to meet our FY06/10 new orderbook target of RM400m. So far in FY06/10, Fajarbaru has only managed to secure one contract, i.e. the RM70m earth, infrastructure and civil works for Phase 1 of an equa-culture/shrimp farming project in Setiu, Terengganu

Outstanding Orderbook
Seremban-Gemas double-tacking (KM502.6-KM535.5) RM226m
Tampin Hospital RM131m
Aqua-culture project in Terengganu RM70m

Malaysia Plan (10MP) in June 2010.

* Maintain Outperform. Fajarbaru is a good proxy to the construction sector due to its still undemanding valuations. Its balance sheet is strong with a net cash of RM134.7m as at 31 Dec 09, translating to a whopping 82sen/share. Indicative fair value is trimmed by 3% from RM1.35 to RM1.31 based on 10x revised fully-diluted CY10 EPS of 13.1sen, in line with our benchmark 1-year forward target PER for the construction sector of 10-14x.


♦ Forecasts and assum ptions. We are raising FY06/10 net profit forecast by 9% largely to reflect a higher blended margin of 15% vis-à-vis 11.3% previously. However, FY06/11-12 net profit forecasts are cut by 11-13% largely to reflect the impact of the shortfall in new contracts secured in FY06/10 (RM70m actual vis-à-vis RM400m we assumed). We are keeping our new orderbook target of RM400m per annum in FY06/11-12 assuming the roll-out of public projects is to pick up from 2H2010.

♦ Improved investors’ risk appetite. We are now more upbeat on the construction sector, prompted largely by investors’ improving risk appetite for construction stocks following: (1) The massive underperformance of the sector vis-à-vis the market in 4Q2009 and 1Q2010; and (2) A better sector news flow and new expectations leading up to the announcement of the 10th Malaysia Plan (10MP) in June 2010. We believe these may to a certain extent, moderate the negative elements that have weighed down on the performance of the construction stocks over the last two quarters such as: (1) The slow pace of the roll-out of public projects, shrinking margins and declining dominance of established players in large-scale projects locally; and (2) The not-so-rosy outlook and increased operating risks in key overseas markets (following the Dubai credit crisis, Dong’s devaluation and rising arbitration cases).

♦ Maintain Outperform. Fajarbaru is a good proxy to the construction sector due to its still undemanding valuations. Its balance sheet is strong with a net cash of RM134.7m as at 31 Dec 09, translating to a whopping 82sen/share. Indicative fair value is trimmed by 3% from RM1.35 to RM1.31 based on 10x revised fully-diluted CY10 EPS of 13.1sen, in line with our benchmark 1-year forward target PER for the construction sector of 10-14x.

Chart 1: Fajar Technical View Point

. The share price of Fajar hit a high of RM1.29 in Aug 2009 after a successful rally from below the RM0.40 level in Dec 2008, but the subsequent profit-taking leg dragged it down to below the RM1.23 important resistance level.

♦ The stock’s trading sentiment deteriorated further when it dipped to below the RM1.10 level in Nov 2009, and thereafter, it found trouble trying to cut above RM1.10. It ended last Friday at RM1.07.

♦ Technically, there is a lack of significant chart signal for the stock to stage a breakout in either direction.

♦ Therefore, it could continue to fluctuate between the support of RM0.96 and the resistance of RM1.10, with an additional hurdle at RM1.23 in the near term.

♦ A negative signal will only be flashed if the stock falls below the previous low of RM0.99 and the key support at RM0.96.

Pacific Shipping Trust - DBS

26/04/10
Pacific Shipping Trust
BUY US$0.305 STI : 2,988.49
(Upgrade from HOLD)
Price Target : 12-Month US$ 0.37 (Prev US$ 0.30)

Counterparty risk wanes
• 1Q10 DPU = 0.793UScts & 70% payout policy maintained
• CSAV concludes 3rd round of fund raising, chances of renegotiating charter rates appear slimmer
• FY10 DPU estimate thus raised by 10%
• Upgrade to BUY, TP raised to US$0.37

Results within expectations.
DPU = 0.793UScts (US$4.7m )
Revenue = US$15.2m
loan amortisation payments = US$4.3m
Net distributable cash =US$6.5m
retained Cash = US$1.8m
Payout ratio = about 72%.


Operating expenses were 3% higher though, on a sequential basis, owing to vessel off-hire expenses, and as a result, 1Q10 net profit declined 6% q-o-q to US$6.7m.

CSAV looks a safer bet for now. The outlook for the Trust continues to improve, in line with the underlying recovery in the container-shipping sector. Key customer CSAV has recently completed its third round of equity infusion. In this 3rd round of re-capitalisation of CSAV, German ship-owners acquired a 16.5% stake in the shipper worth US$360m, bringing the total amount of capital raised to approximately US$780m, and effectively bailing the shipper out of its balance sheet woes. Of late, CSAV has been quite active in the charter market, and has introduced some new services as well, fuelling confidence in its operations.

Conservative business model should reap dividends.
With CSAV in a more stable position now, the chances of renegotiating charter rates with PST - as proposed at the beginning of the crisis - look lower now. With this thorn removed, PST looks to be the best bet among the shipping trusts now – with its conservative business model, which seeks to preserve NAV and provides flexibility to fund future acquisitions.

Upgrade the stock to BUY, at a TP of US$0.37, pegged to 9% target yield (lower counterparty risk profile). We raise our FY10 DPU assumption by about 10% to reflect full charter-hire payment assumptions from CSAV in FY10.
Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)
“错过时机”胜于“搞错对象”:不会全军覆没!”
做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
曾淵滄-散户明灯
每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
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