Saturday, November 5, 2011
BUOYED BY THE European Central Bank’s unexpected 25 basis point interest rate cut to 1.25% on Nov 3, the Straits Times Index -- led by jumps in Jardine Matheson, Jardine Strategic, Overseas China Bank Corp and DBS Holdings -- opened on a high note on Nov 4, rising 1.9% to 2,863 points from the day before.
The ECB lowered rates partly because “what we’re observing now is slow growth heading toward a mild recession by the end of this year,” President Mario Draghi said during his first press conference in Frankfurt. However, the new president made no mention of plans to rescue the region’s weakest nations and warned that growth forecasts for the Eurozone in 2012 were likely to be cut owing to sluggish demand.
In that light, the current rally in the local bourse could be a precious opportunity to sell and take profit ahead of further volatility. In a Nov 2 note to its investors, Morgan Stanley warns that equities on the MSCI Singapore Index face earnings risks and increasing volatility owing to the city state’s high external capital and trade linkages to the West. The brokerage expects a 10.6% slide in earnings by 2013.
Already, consensus 2012 growth forecasts for the city state has declined from 5.8% to 5.1% during the last three months. Morgan Stanley expects that Singapore should record growth ranging from 1.5%-3.8% for 2012. “We expect Singapore’s GDP CAGR to slow down from 8.7% and 7.2% during 1990-1997 and 2002-07, respectively, to 5.2% during 2011-17. We also expect MSCI Singapore’s earnings growth to slow from 15.9% during 2001-10 to 3.9% during from 2010-13,” it cautioned investors.
The brokerage is urging its clients to sell into the recent bounce, and recommends investors buy “on dips” into other markets, particularly Indonesia, and continue selling Singapore equities in rallies. Since hitting a low of 291 points on Oct 4, the MSCI Singapore has bounced 11.6% but Morgan Stanley believes that the Singapore market will continue to underperform in the months to come, and is recommending a list of local stocks that look ripe for sale.
Among Morgan Stanley’s top sell ideas are the three commodity supply chain managers -- Olam International, Noble Group and Wilmar International -- which it believes are overvalued. Since the companies hit 52-week lows on Oct 4, Noble -- which recently made public its intentions of separately listing its soft commodities arm on the SGX -- has rebounded the most, rising 30% to $1.56 on Nov 4. Meanwhile, Olam and Wilmar have rallied by 17% and 23%, respectively. All three are due to report 3Q2011 results within the next 2 weeks.
It could also be time to sell Keppel Corporation. The rig builder recently announced earnings amounting to $1.25 billion, up 12% yoy, on the back of a 4% yoy rise in revenues to $7.2 billion for the nine months to Sept 30, 2011. It has secured some $8.7 billion worth of new orders to date, although some analysts expect that new orders are beginning to slow as capacity at Keppel’s yards fill up.
Meanwhile, investors should also sell ST Engineering and Genting Singapore PLC, which have rallied recently, but that Morgan Stanley believes to be over-popular despite weaker earnings recently. Also on Morgan Stanley’s sell list are property developers City Developments, UOL Group and Fraser & Neave, palm oil plantation owner Golden Agri-Resources and Jardine Cycle & Carriage.
High volatility and the market's new 'R' word
By R SIVANITHY
A FEW years ago it used to be that the 'R' word stood for 'recession', a no-no as far as financial markets were concerned.
This week saw that old 'R' word replaced with a new one - 'referendum' or to be more precise, the on-off referendum in Greece. Like its predecessor though, it also is a 'no-no' as far as markets are concerned.
The week kicked off on a sour note as doubts over the lasting impact of the previous week's European bailout plan surfaced. The resultant selling then picked up pace when Greece's Prime Minister George Papandreou shocked everyone by calling for a national vote on the bailout package. His logic was that since the package calls for severe austerity measures, it was the only democratic thing to do.
Financial markets, however, clearly decided that they prefer bailouts to democracy and concluded that a referendum might throw a spanner in the works. Panic selling ensued.
After intense pressure from the 'Merkozy' coalition, comprising German Chancellor Angela Merkel and French President Nicolas Sarkozy, Mr Papandreou changed tack and cancelled the referendum. This lifted spirits, as did an interest rate cut by the European Central Bank. Panic buying ensued.
The outcome as far as the local market was concerned was a seesaw week. Yesterday's 38.2-point bounce for the Straits Times Index (STI), however, couldn't help it avoid a 57-point or 2 per cent loss for the week at 2,848.24.
The three local banks and Singapore Airlines were among the top blue chips to release results this week. It was a mixed bag - DBS surprised on the upside, UOB and SIA on the downside while OCBC's figures were probably within expectations.
Over the course of the five days DBS ended 14 cents down at $12.66, UOB lost $1.06 at $16.43, OCBC fell seven cents to $8.53 and SIA dropped 51 cents to $11.28.
In its bank wrap yesterday, Credit Suisse said the Q3 figures illustrate that the FY12 outlook has dimmed. 'Loan growth can only slow from the current levels, banks appear to be happy to see margins just move sideways near term (even from the current historical lows) and credit costs can only go up from here,' said Credit Suisse.
In its report on SIA yesterday, DMG & Partners said it is maintaining its 'buy' with a fair value of $12.23, premised on 1.1 price/book value (P/BV).
'The stock, currently trading at 1x P/BV, has hit bottom. However, our BUY call, made in August, has yet to prove correct although SIA has outperformed the benchmark STI,' said DMG.
When markets are hugely volatile as they were this week and the outlook very uncertain, traders usually turn to structured warrants. These short-term, leveraged instruments offer large bang for the buck and so it was that Macquarie-issued warrants on the Hang Seng Index consistently topped the volume, percentage gainers and percentage losers' lists throughout the week.
Passing relatively unnoticed and without much fanfare this week was Morgan Stanley's Nov 2 Asean Equity Strategy report, in which it described the local market as 'volatile and vulnerable', the 'vulnerable' part a reference to earnings downgrades and a potential structural de-rating.
'High external capital and trade linkages increase the vulnerability and volatility of the Singapore market,' said Morgan Stanley. 'We expect 10.6 per cent downside risk to MSCI Singapore 2013 estimated earnings per share and potential deleveraging by EU banks could affect Singapore the most within the Asean as EU banks claims account for 83 per cent of Singapore's GDP'.
Business environment worse than post-Lehman, says SIA
Situation now more protracted and serious, with no sight of finality
By VEN SREENIVASAN
THE debt crisis in Europe and the economic slowdown in the US have made the operating environment for Singapore Airlines more unpredictable and difficult than the post-Lehman crisis in late 2008, said Singapore Airlines CEO Goh Choon Phong when asked about the outlook at a post-results briefing yesterday.
'The demand outlook after late 2008 was precipitated by a US financial crisis. That crisis also brought down operating costs, and fuel price tumbled to around US$50 pbl. But the pain was shortlived. Now, now even as demand softens, we are not seeing the same kind of cost reductions. And we are facing a situation that could be more protracted and with serious economic consequences, but with no sight of finality. So we are looking a situation which could potentially drag on much longer.'
On Thursday, the airline reported a 49 per cent second quarter profit drop to $194 million as yields continued to slip and fuel cost remained stubbornly high.
Net profit for the April-September 2011 first-half period dived 62 per cent to $239 million.
But the company managed to cushion itself from the full impact of a 45 per cent rise in fuel price by its astute hedging policy. The strong Singapore dollar helped as well.
Expenditure on fuel rose 35 per cent or some $747 million for the first half.
Mr Goh said that the company would continue to hedge between 20 and 60 per cent of its fuel requirements for the year, and has hedged 32 per cent of its second-half fuel requirements at US$124 per barrel.
But faced with steadily declining yield (11.7 cents/pkm in Q2 versus 11.8 cents/pkm in Q1) and stubbornly high costs, the airline's breakeven load rose to 78.6 per cent for the second quarter and 78 per cent for the first half. Actual load factor came to 79.3 per cent for the July-September quarter, and 77.5 per cent for the first six months.
'We have a razor thin margin,' said senior vice-president for finance Chan Hon Chew in his presentation.
The company was also asked if its already deteriorating demand outlook could be further damaged by cannibalisation from SIA's soon-to-be-launch low-cost long-haul carrier, Scoot.
'The two (SIA and Scoot) have completely different business models and are targeted at different market segments,' Mr Goh said. 'Scoot will complement SIA's overall strategy.'
He added that despite the challenges on the coach class segment, SIA's premium segment was doing well. 'Business demand is stronger than coach. And we are doing everything to retain this segment of the market, ranging from strategic alliances with partners like Virgin Australia to more aggressive marketing to corporate clients.'
It has often been reported that the premium seats account for around 40 per cent of the income of premium carriers such as SIA, though the airline itself does not give a specific breakdown.
Asked if SIA could end up posting quarterly losses - as it did for the April-September 2009 period - if the current slowdown dragged on, Mr Goh said: 'We are doing everything possible to avoid this.'
SIA posted a loss of $307 million for the April-June 2009 quarter, and a loss of $159 million for the July-September 2009 quarter. But a $404 million profit for the October-December third quarter and a $278 million profit for the January-March 2010 final quarter enabled the airline to claw its way back to profitability for the full year ended March 2010, with a net profit of $216 million.
MAS-AirAsia share swap under probe
Minister tells Parliament that Bursa and SC are looking into possible insider trading
By S JAYASANKARAN
IN KUALA LUMPUR
A SHARE swap deal between Malaysia Airlines (MAS) and AirAsia three months ago is being investigated by Bursa Malaysia and the Securities Commission for possible insider trading, Deputy Finance Minister Awang Adek Hussin told Parliament yesterday.
Mr Awang said investigations were still ongoing.
'It will take time because it involves so many accounts and a huge value,' he told lawmakers. 'So we need to separate those that are genuine and those with inside information.'
Since the deal was announced on Aug 9, it has attracted all sorts of criticism - from both right-wing elements in the dominant United Malays National Organisation and MAS's powerful unions.
Among other things, they accuse AirAsia's maverick owner, Tony Fernandes, of taking advantage of the loss-making national airline to fuel his personal ambitions, the latest being the acquisition of English Premier League club Queens Park Rangers, and MAS's subsequent sponsorship of the football club. AirAsia had already agreed to be a sponsor.
MAS's deteriorating finances had pushed the government to prod the two airlines into the share swap. The global economic uncertainty has hurt MAS, which reported a RM770 million (S$312 million) loss for the first half of the year.
The government then said it had no other option. 'We had no choice,' Mr Awang had then explained. 'If it (MAS) continues to make losses and the government has to inject funds, then there will be even more anger.'
The deal subsequently saw Khazanah Nasional swap a 20.5 per cent stake in MAS for 10 per cent of Tune Air, which is the majority shareholder in both AirAsia and AirAsia X, the budget carrier's long-haul airline.
Tune Air, a private firm, is owned by Mr Fernandes and his business partner Kamaruddin Meeranun while Khazanah is MAS's single largest shareholder. Both Mr Fernandes and Mr Kamaruddin have been appointed to MAS's board.
The insider trading allegations came about after media reports showing the rise in the share price of AirAsia in the period leading up to the deal.
The budget airline's shares had traded for as low as RM3.14 on June 23 and were finally traded at RM3.92 before being suspended on Aug 8.
Meanwhile, MAS was suspended when its share price was RM1.60 but rocketed to RM1.90 following the deal.
Answering questions in parliament, Mr Awang said that there was no need for either company to file any announcement with Bursa if there was no material development prior to the deal as the matter was considered private and confidential.
Despite the deal, things haven't looked up for MAS. In August, it announced a net loss of RM527 million for the second quarter of 2011 due to higher fuel costs despite recording a better yield and 9 per cent growth in passenger revenue from the same period last year.
To compound matters, the airline has said that its outlook for the second half of the year remained bleak.
Created 11/05/2011 - 16:04
Created 11/05/2011 - 17:05
Publish date: 05/11/11
If you had to sell short a member of your class, and you had to pay ten percent of their income, you would look for certain shady character traits. Think about the person that you would go long on and the type of person that you would go short on, and then try to become the best person you can if you want to be successful.
Nebraska Furniture Mart will do more than $230 million in sales, which is more than any other single furniture store. It was started by an immigrant who started it from nothing, worked 7 days a week, can't read or write, and she built it to wear it is today. If you can find a great business that is run by someone like that, then you will make a lot of money.
Any good investment idea can be summarized in a single paragraph. You must be able to remain within your circle of competence. It doesn't matter how large the circle is. What matters is that you stay within the circle. You will do much better than someone who understands five times as much as you, but who steps out of his boundaries sometimes. Then you want competent and honest management running the business. Ideally, you want a business that is so great that even an idiot can run it, because eventually one will. These types of businesses are so hard to find that you shouldn't really sell it because it is too hard to replace. It is almost always a mistake to sell a great business just because the price is a bit too high. The price might keep going up and you'll never get a chance to own it again.
Gillette is an example of a great business. Shaving has been around forever. Men are always growing beards, and they don't switch brands very much. The shaving industry isn't going to change a lot in the future. It is a very comfortable feeling to imagine 2 and a half billion males growing beard while you sleep.
In investing, there is no such thing as a called strike. You don't have to swing at every pitch. Just wait for the great opportunity to come around.
Publish date: 23/05/11
By Rick Rothacker
REUTERS - Bank of America Corp shares fell 6 percent after the second-biggest U.S. bank revealed plans to issue common stock in exchange for preferred shares.
The decline in the bank's stock on Friday was deeper than the broader market and the 1.5 percent decline in the KBW Bank Index. The shares closed at $6.49, down 51 percent for the year.
Bank of America said in a filing Thursday that the stock swap it was exploring was "economically advantageous" because of the lowered market value of the bank's preferred shares. But issuing up to 400 million common shares would dilute the holdings of other shareholders.
"We believe this is purely a financial engineering tactic to enrich BAC's capital base in an earnings per share neutral transaction," Guggenheim Partners analyst Marty Mosby said in a research report Friday. "However, we also believe investors are in no mood to give any bank management team the benefit of the doubt and will likely sell shares on this news."
Bank of America CEO Brian Moynihan has repeatedly said the bank does not need to issue common stock to cover mortgage losses or meet new international standards. A bank spokesman said the move should be viewed as a swap that leaves the company with more common stock, which is viewed more favorably by regulators.
The exchange would reduce Bank of America's book value by 2 to 3 percent and increase its Tier 1 common capital ratio by about 20 basis points to about 8.8 percent, CLSA analyst Mike Mayo wrote in a note to clients.
"An increase in common equity is probably a necessary step given unresolved mortgage-related issues, the Fed's unwillingness to grant a dividend increase in (the second half of 2011), and a Tier 1 common ratio that is lower than peer," Mayo wrote. "However, this also reflects poorly on management who were previously adamant that BAC did not need to raise any additional common capital."
Source/转贴/Extract/Excerpts: Yahoo Finance
Created 11/04/2011 - 19:29
Created 11/04/2011 - 19:28
B N P首席執行員普洛特（Baudouin Prot）還向媒體表示，他不排除希臘倒債可能性，儘管該結果“並不樂見”，不過他們將有能力因應。
BNP的資產負債絕大部份來自躉售融資市場（whole sale funding markets）與它所持有的龐大歐債部位。這次歐洲爆發債務危機，也讓該銀行受創慘重。
Tuesday, 23 September 2008 18:25
BARGAIN HUNTING in the sea of red?
Singapore-listed China stocks may under-perform in bear markets, but one must concede China’s GDP growth of close to 10% is still the highest among major economies.
In comparison, Singapore is expecting GDP growth of up to 5% this year, said Prime Minister Lee Hsien Loong during his National Day rally speech.
NextInsight short-listed 12 “bargain” S-chips below using the following criteria:
1. Dividend yield greater than 3%
2. Trading at discount to net assets
3. Positive free cash (operating cash > capex)
Close to 10% of S-chips met the above ‘fundamental value’ criteria (See figure 1 below). Of this, more than half were trading at less than 4 times historic PE:
Mkt Cap S$mln
Discount to Book
Sky China Petroleum
China Sky Chemical
China Sun Bio-chem
Considering the risky nature of S-chips, what are some potholes to avoid when stock-picking from the “bargain department”?
There are 10 barometers that suggest to seasoned investors there’s more than meets the eye. Many of these include detailed checks on cash, which is harder to manipulate than earnings.
In its recent report, JP Morgan identified the following companies as passing their “warning alerts” screen: COSCO Corp, Yanlord Land, Delong Holdings, People's Food, Chin Fishery, Hsu Fu Chi, China Aviation Oil and EPURE Intl.
Among them, China Fishery, People’s Food and Hsu Fu Chi have the following attributes (using consensus estimates for the non-rated companies):
FY09E P/E < 10x; FY07-09E EPS growth CAGR > 20%;
FY08E dividend yield > 2%;
Net-working-capital-to-sales ratio < 15%. Does your 'bargain gem' fail any of these 10 warning alerts? Readers should note there could be sound reasons behind some of these “warning alerts”, so the discerning investor would investigate further before writing any stock off. 1. Extremely low deposit rate for cash This is a major warning alert. Using China’s annualized cash rates as an example:
|1.8%||3-month time deposit|
|2.5%||12-month time deposit|
It is thus reasonable to expect interest on bank deposits for S-chips to exceed 1%.
JP Morgan screen
Deposit rate for cash <1% Total cash/market cap > 5%
2. High cash reserves, but high debt
A high-cash and high-debt scenario indicates poor financial discipline since companies can logically cut finance costs by paying down their debt with excess cash.
Investors begin to wonder there is “balance sheet management” around the book closure date, or in the worst case scenario, a possibility of fraud or embezzlement of cash.
JP Morgan screen
total debt/market cap > 30%
total cash/market cap > 30%
3. Much higher capital expenditure for the same capacity
If a company's fixed asset investment per ton of production capacity increases sharply over its expansion schedule, investors begin to wonder if the increasing depreciation expense that shows up on the profit and loss statement could in fact be excesses in other operating expenses.
Inability to sustain growth
4. High gearing, high working capital requirement
High working capital requirements, low net margin and high gearing will slow growth.
JP Morgan screen
High net working capital to sales ratio (>20%)
High gearing ratio (>35%)
Net working capital to sales ratio – net margin > 15%
5. Frequent fund-raising
JP Morgan screen
Issues of new shares or convertible bond more than twice during 2004-2007.
Changes of key officers
When a controlling shareholder dilutes its stake to below 50% within a few years of listing, there may be reason for investors to ask questions. Another situation would be a passive investor holding the controlling stake.
7. Resignation of key managers, directors or auditor
Most auditor replacements in Asia are related to unsettled disputes on accounting practices. Investors should be alert if senior managers resign without a proper reason. If the company was doing well, why would they leave instead of enjoying the corporate spoils? Often, the resignations potentially indicate corporate governance issues that investors were unaware of before, said JP Morgan.
Poor corporate governance8. Acquisitions that do not make sense
Investors require acquisitions to show synergy, and a fair acquisition price. This is especially so if the seller is an interested party or an affiliated company. Volume and size of transactions could mask sharp unwarranted jumps in certain accounting items.
9. Lack of sufficient disclosure
This could include failure to disclose large payments related to subsidiaries acquired from a related party, and such payments were subsequently highlighted by independent auditors.
10. High cash reserves, but low dividend payout
JP Morgan screen
net cash/market cap > 10%
rising cash level in the past two fiscal years
dividend payout ratio < 20%
Publish date: 05/11/11
Source/转贴/Extract/Excerpts: youtube /PhillipCapital
Publish date: 05/11/11
市场传出美华国际可能赶上最近的并购热潮，可能提出收购献议的包括丰益国际（Wilmar International）或马来西亚的IOI集团。美华国际集团首席财务总监拉杰斯（Rajesh Chopra）受询时表示，现阶段无可置评。
大和证券(Daiwa Securities)分析师梅农（Pyari Menon）表示，棕油的基本面从11月预料将有所改善，并将延续到明年上半年，及在第二季达到高峰，但近期可能受黄豆供应的影响。
Publish date: 05/11/11
另一方面，空中客车公司（Airbus）昨日宣布，新航已签约让它为新航在今年9月订购的15架A330客机，提供“飞行小时服务”（Flight Hour Services）。这是空中客车为新航量身定制的综合式全面服务，包括组件支援、机身维修以及机队技术管理服务。
Publish date: 05/11/11
Publish date: 05/11/11
輯錄自 427期 Book A 【曾淵滄教路】
Publish date: 01/11/11
輯錄自 427期 Book A 【東觀點】
Publish date: 01/11/11
分析不能提供路線，主因是能影響一項資產的因素，實在太多，而且會不停推陳出新。至於各項因素反映的時序，沒有一定規律，數據甚至落後於資產價格走勢。財經專家費雪（Ken Fisher，股神二號師父Philip Fisher孻仔），在其著作《大揭穿》（Debunkery）中，就闡明以經濟數據，尤其是單一因素，對捕捉股市走勢，並無幫助。例如傳統智慧認為，失業率升不利股市，在二○○八年確是如此，但美國失業率升幅最勁的一年是二○○九，也是近年股市最亮麗一年。
輯錄自 427期 Book A 【大英Blog物館】
Publish date: 01/11/11
3Q11 Results- Another Disappointing Quarter
Closing Price S$1.02
Target Price S$0.82(-19.6%)
52w k High (1/19/2011) 2.44
52w k Low (10/4/2011) 0.86
• 3Q11 results came in below expectations.
• Expected losses from construction contracts continue to escalate.
• Shipbuilding margins expected to trend down.
• Downgrade from HOLD to SELL with a revised target price of $0.82.
Cosco Corp reported 3Q11 revenue and PATMI of S$970 mil (+2% Y-o-Y) and $32 mil (-42% Y-o-Y). PATMI fell sharply mainly due to 1) lower profits from dry bulk shipping 2) lower margins from shipyard ops (expected losses on construction contracts) and 3) higher selling expenses (distribution expense) in a difficult operating environment.
Another Disappointing Quarter-Expected Losses Escalates
Cosco 3Q11 results came in below expectations (Actual PATMI: S$32 mil vs. PSR PATMI estimate: S$39 million). The main culprit was higher expected losses on construction contracts of S$47 mil. We understand from management that the bulk of these expected losses originate from its offshore projects where it experienced cost overruns. The expected losses also provides for penalties stemming from a probable late delivery of one of its vessels currently under construction. The company also mentioned that they might have to recognize further losses in subsequent quarters if they experience further cost overruns or negotiate new shipbuilding/offshore projects at a loss, which we think is highly possible given 1) as it embark on the construction of model/class of rigs not built previously (Letourneau jackups, DP3drillships) and 2) current shipbuilding market remains weak with little signs of improvement (current rates on construction of bulk carriers not profitable). Hellanic Shipping News quoted NDRC saying on Tuesday that 30% of China’s 1,526 shipbuilding enterprises received no new orders in September, forcing some to shut or stop production.
Shipbuilding and offshore margins remain weak
Management guided that gross margins for shipbuilding in 3Q11 lies somewhere between 8 to 9%. The company is working on improving its delivery lead-time as well as efficiencies in the construction of its dry bulk carriers but conceded that there may be a limit to it. Going forward, current margins might not be sustainable due to lower value of shipbuilding contracts in the market now. Cosco currently has enough shipbuilding contracts to keep its yard busy till 2H2012.We note that Cosco has not won any order for dry bulk carrier construction since December last year and if the shipbuilding market does not improve, Cosco may have to accept shipbuilding orders at a loss to cover its fixed costs.
For its offshore projects, management guided that gross margins for its offshore projects lies near the region of 5% and added that it is “ not so promising” as the company is mindful of the potential costs of scaling the “learning curve” when executing its offshore orderbook.
No signs of order cancellations yet
Other than the order cancellation of a dry bulk carrier in March, the company has not yet received any request for order cancellation or postponed delivery. The company also guided that about half of its current shipbuilding orderbook comes from European customers, of which Greek customers make up the highest proportion of its European customers with the rest made up of Netherlands, UK, Belgium and Norwegian customers.
We downgrade Cosco from Hold to Sell with a revised target price of $0.82 as we lower our FY11e and FY12e EPS to 6cts and 5.8 cts from 7.2 cts and 6.6 cts previously, taking into account possible losses from its marine engineering projects as well as a weak dry bulk market that is expected to persist at least till 2012. Our target price of $0.82 is based on 14x FY12e EPS, in-line with mid-cycle valuations. SELL.
Source/转贴/Extract/Excerpts: Phillip Securities Research
Publish date: 03/11/11
Tighter Norway shipbuilding credit concerns appear overdone
According to Reuters (28 October), Moody’s downgraded Eksportfinans (ESF; Norwegian Institution for Export Financing) to Aa3 from Aa1. This follows the Norwegian Ministry of Finance’s decision to allow ESF an extended (but not permanent) exception until 31 Dec 2012, to abide by the new rules on large single customer exposure (based on the EU’s Capital Requirement Directive, which Norway follows as it is a member of the European Economic Area). As ESF is a large lender to the Norwegian shipbuilding and O&M industry, we think the market expects a negative impact on new orders outlook. Indeed, STXO – which has 70-80% of orderbook from Norwegian customers and 50% of orderbook being financed through ESF – saw its share price fell 7% today, versus a 5% decline for the sector.
At first glance, it appears negative for new orders as: (1) cost of funding could rise following Moody’s downgrade and; (2) customers would see tighter financing from 2013, given the new rules. We see these concerns as overdone given: (1) Moody’s Aa3 rating is still Prime-1 investment grade. Hence, while funding cost for ESF may rise, it is likely immaterial; (2) the exception has been extended twice already and could happen a third time. Companies in the industry we talked to also appeared optimistic that the government would find a solution (i.e. keep to the rule and still allow available financing) on this in due course. In fact, even if this rule is strictly implemented, we believe commercial banks can step in to fill the financing gap, as our European banking team believes banks are willing to lend to high quality customers (e.g. O&M-related companies). We have already cut our STXO 2011-13E new orders estimates by 14-37% in our 19 Oct report to account for a potentially weaker outlook ahead.
We see the negative market reaction as overdone, and think this is an attractive opportunity for investors to add to STXO’s shares. Target price unchanged.
Target price S$2.19
Placement to keep gearing healthy
CMT is carrying out a placement to raise up to S$300m. The main objective of this placement is to finance its asset enhancement projects. The placement also helps to strengthen the trust's balance sheet, lowering its gearing to about 39% from 40.1%. Maintain Buy.
CMT is carrying out a private placement to raise S$250m from institutional and other investors. The placement also has an upsize option which allows CMT to raise another S$50m.
The issue price range is between S$1.79 and S$1.85 per unit, representing a 1.3-4.5% discount to CMT's last traded price of S$1.875.
Depending on the price of the placement share and whether the upsize option is exercised, CMT will issue between 135.1-167.6m new units, representing a 4.2-5.3% increase in the total number of units in issue.
The management has stated that 90-95% of the proceeds would be used to finance its existing capital expenditure and asset enhancement projects, including JCube, The Atrium @ Orchard and Iluma. The remaining 5-10% will be used for general purposes. We estimate that a total of S$250m would be required for the refurbishments of these three assets next year.
We believe that this placement will have limited impact on CMT. We estimate that the placement would lead to a 1.4-1.8% decrease in our valuation. However, it also helps CMT to lower its gearing to about 39%, from 40.1%. We estimate that gearing would increase to about 42% next year due to increased capex from the refurbishments, assuming there was no placement. CMT has indicated that it intends to maintain its gearing level at 40% and below.
We view the placement as mildly positive, as it will keep gearing low. It also signals that more significant refurbishments of other assets, such as Clarke Quay and IMM Building, are in the pipeline, in our view. We maintain our Buy rating on CMT, TP S$2.19.
Saturday November 5, 2011
MPCorp to begin works on city in Iskandar soon
By CHOONG EN HAN
PETALING JAYA: Malaysia Pacific Corp Bhd (MPCorp) hopes to start civil construction works for its flagship project in Iskandar Malaysia by the first quarter next year, starting with the infrastructure surrounding its Asia Pacific Trade and Expo City (APTEC).
Speaking on the sidelines of the World Chinese Economic Forum, chairman Datuk Bill Ch’ng the company would collaborate with the Government to integrate and build the infrastructure and amenities like roads, rails and highways that would connect to the city.
He said the investment for APTEC, one of Iskandar Malaysia’s flagship projects, was about RM2.9bil from the total investment of RM4.5bil in the Lakehill Resort City.
“We are still in the midst of discussion with different investors and it will be partly funded by AmanahRaya,” he said.
APTEC and the LakeHill Resort City are developed by LakeHill Resort Development Sdn Bhd, a joint-venture between MPCorp and AmanahRaya Development Bhd.
Ch’ng said the development of APTEC, which was envisioned to be a major trading hub in the region for manufacturers and buyers alike, would not be undertaken on a piecemeal basis.
Source/转贴/Extract/Excerpts: The Star Online
Publish date: 05/11/11
Publish date: 3/11/11
上海交通大学高级金融学院副院长 朱宁 为英国《金融时报》中文网撰文 2011-11-01 (www.ftchinese.com)
在电影《大而不倒》中，观众经常听到监管者和高管们提到的一句话是“我们已没有时间（Time is running out）”。一句话，略去了多少应该进行的深入讨论。所幸的是，对于这一次以温州为代表的中小企业融资危机，因为关注比较及时，所以中国无论在防范风险向更大规模扩散、减小危机对地方经济的影响、还是扶持救助受困企业及员工方面，都比两三年前的美欧政策制定者处于更有利的地位，也更能够对整个事态进行认真和科学的分析。
（注：本文仅代表作者观点，作者同时是耶鲁国际金融中心教授研究员 。本文编辑 徐瑾 firstname.lastname@example.org）
Publish date: 1/11/11
The beverage manufacturer’s revenue rose 27% to RM147.13 million from RM116.28 million. Earnings per share came in at 5.42 sen against 2.65 sen in the previous corresponding period.
The sharp jump in YHS’ earnings was mainly due to the one-off RM4.11 million gain from liquidation of a subsidiary during the quarter under review.
“The increase in sales is mainly due to more advertising and promotion activities undertaken during the Hari Raya festive period,” YHS said in notes accompanying its financials.
Its sales for Malaysia, Indonesia, and Singapore plus other countries grew year-on-year by 18%, 368% and 8% respectively during the quarter, YHS said.
For the nine-month period ended Sept 30, net profit surged by 363% to RM20.02 million from RM4.32 million a year earlier, while revenue rose by 12% to RM414.86 million from RM370.7 million.
“The improved profitability in the quarter and year-to-date was due to better sales, less bad debts write-off and gain on disposal of machinery,” YHS said.
For the nine-month period, sales from Malaysia accounted for 76.3%, Indonesia 6.3% and Singapore/other countries 17.4%.
“Yeo’s brand sales in Malaysia grew by 12%, Indonesia sales grew by 227% and Singapore/export sales grew by 18%,” YHS said of its year-to-date results.
It is noteworthy that over the past seven years, the earnings that have been achieved so far is YHS’ best cumulative nine months results, in terms of net profit.
YHS has a clean balance sheet that sits on a net cash pile of RM22.8 million with no borrowings.
Shares in YHS closed four sen lower to RM1.71 yesterday, giving it a market capitalisation of RM262.57 million. Its stock has gained 16.3% year-to-date and traded between a 52-week high of 2.04 sen and a low of 1.40 sen.
This article appeared in The Edge Financial Daily, November 4, 2011.
Publish date: 04/11/11
MSC said on Friday that revenue increased by 25.9% to RM907.04 million from RM719.96 million. Earnings per share were 41.80 sen compared with loss per share of 49.40 sen.
It posted a 121.7% increase in pre-tax profit of RM51.91 million before unusual items from RM23.41 million. This was due to higher profits from its tin mining and smelting operations in Malaysia and Indonesia mainly due to an improved operating performance and higher average tine prices.
There was an impairment provision for goodwill arising from acquisition of subsidiaries totaling RM73.63 million.
“However, for the current year is expected the operating environment to be difficult and challenging due to the weaker demand for commodities due to prevailing global economic slowdown and on-going uncertainty in the global finance markets,” it said. However it expected to remain profitable in the fourth quarter.
For the nine-month period, it recorded net profit of RM106.39 million versus net loss of RM58.20 million in the previous corresponding period. Revenue increased by 25.2% to RM2.497 billion from RM1.994 billion.
It said for the nine-month period in 2010, the impairment provision for goodwill arising from acquisition of subsidiaries was RM121.63 million
Publish date: 04/11/11
Friday, November 4, 2011
Price (01 Nov 11 , S$) 0.57
TP (prev. TP S$) 0.60 (0.95)
52-wk range (S$) 1.24 - 0.49
3Q11 below estimates; another weak quarter
● Hi-P reported weak 3Q11 results, and below our estimates, with revenue at S$308.6 mn (+8% YoY, +34% QoQ) and a net profit of S$6.5 mn (-83% YoY, -42% QoQ). 9MTD revenue and net profit achieved 65% and 47% of our full-year forecasts, respectively.
● Gross margin declined to 8.7% (from 22.6% a year ago, and 13.2% in 2Q11) due to pricing pressure, a less favourable product mix (more high level assembly work with higher material input costs), as well as higher-than-expected increases in labour and depreciation charges.
● Hi-P’s balance sheet was at S$201 mn net cash (from S$193 mn at end-June 2011). Into 4Q11, management expects revenues to rise both QoQ and YoY, and full-year revenue to rise YoY but earnings to decline YoY.
● We have cut our forecasts by 33-39% on lower gross margin assumption, with management now targeting 12% for the year (from 13-16% previously). With increasing vulnerability at RIMM, we cut our target price to S$0.60. We see support at 0.8x P/B and net cash of S$0.23/share. Maintain NEUTRAL rating.
3Q11 results below estimates
Hi-P reported weak 3Q11 results, and below our estimates, with revenue at S$308.6 mn (+8% YoY, +34% QoQ) and a net profit of S$6.5 mn (-83% YoY, -42% QoQ). 9MTD revenue and net profit achieved 65% and 47% of our full-year forecasts, respectively.
Gross margin missed
Gross margin declined to 8.7% (from 22.6% a year ago, and 13.2% in 2Q11) due to pricing pressure, a less favourable product mix (more high level assembly work with higher material input costs) as well as higher-than-expected increases in labour and depreciation charges.
Balance sheet at S$201 net cash
Hi-P’s balance sheet was at S$201 mn net cash (from S$193 mn at end-June 2011). Into 4Q11, management expects revenues to rise both QoQ and YoY, and full-year revenue to rise YoY but earnings to decline YoY.
Source/转贴/Extract/Excerpts: Credit Suisse
FULLY VALUED S$1.14
Price Target : 12-month S$ 1.05
Bigger losses, as expected
• Net loss of US$91m largely in line with estimates
• Low freight rates compounded by high fuel costs
• Balance sheet could come under increased stress
• Maintain FULLY VALUED with S$1.05 TP
Losses continue to mount. As we had expected, NOL recorded a bigger net loss of US$91m in 3Q11 – compared to the US$57m net loss in 2Q11 – and quite close to our recent projection of US$75m net loss. NOL was unable to pass through any peak season surcharges in 3Q11 given the prevailing oversupply of vessels. Average freight rates for 3Q11 came in at US$2,539/ FEU, down 19% y-o-y and flat q-o-q. The container shipping division reported an operating loss of US$88m, despite overall volume growth of 6.7% y-o-y.
Volumes were driven by the Intra-Asia trades (up 25% y-o-y), while Transpacific volumes were again disappointing (down 10% y-o-y). High bunker fuel prices YTD have meant a 45% increase in unit fuel costs in 3Q11, leading to a 3% q-o-q increase in operating expenses per TEU to US$2,850/ FEU, and dragging down profitability further.
Outlook remains grim. We remain pessimistic on the container liners’ outlook in the near term. Unless we see a coordinated effort by the liners to lay up capacity to the tune of at least 5-6% of fleet or clear signs of inventory restocking activities in the US, we are unlikely to call for a bottom. We expect NOL to remain in the red in FY12/13.
Balance sheet looking increasingly stretched. NOL has already incurred more than US$1.2bn in capex YTD in FY11, and will need to invest similar amounts in FY12/13 to finance its existing orderbook of 34 new vessels. Net gearing level is already up to 0.56x at end-3Q11 from 0.12x at end-FY10, and could fast hit unsustainable levels if losses continue, which could even lead to a cash call by the end of FY12. Hence, given the heightened uncertainties, we maintain our FULLY VALUED call on the stock with an unchanged TP of S$1.05.
Source/转贴/Extract/Excerpts: DBS Vickers Research
Publish date: 01/11/11
TARGET : SGD2.09
Proposed private placement to raise up to SGD300m
CapitaMall Trust (CMT) has proposed to carry out a private placement of up to 139.7m new units at an issue price range of between SGD1.79 and SGD1.85 per new unit, to raise gross proceeds of about SGD250m, subject to an upsize option to issue an additional of 27.9m new units to raise up to an additional SGD50m.
Use of proceeds for asset enhancement initiative (AEI) works
CMT intends to use most (90-95%) of the proceeds to fund its asset enhancement works, including on-going projects at JCube, The Atrium@Orchard and Illuma. Management had earlier guided SGD350m capex requirement for these 3 projects and we estimate SGD100m has been used so far. The remaining 5-10% is for working capital purposes.
Slight DPU dilution by 4.2-5.4%
We estimate the placement will dilute DPU by 4.2-5.4%, depending on the final placement quantum. The debt-to-asset ratio would improve from 40.1% to 38.8%. Asset value remains well supported by firm retail asset valuation (revalued up by SGD137m in June 11, over December 2010). By proactively managing its capital structure, CMT will have greater financial flexibility to meet capex requirements for asset enhancements that could generate high ROIs, such as JCube (ROI estimated at 9.7% post-AEI works), Atrium@Orchard (10.4%) and Illuma (at 22.4%), and preserve cash pile for new AEI projects, or even opportunistic acquisitions. We maintain our BUY rating. CMT currently trades at 1.2x 2012E P/B.
Source/转贴/Extract/Excerpts: BNP PARIBAS SECURITIES
Publish date: 31/10/11