Saturday, November 12, 2011

Italy Debt Impact on U.S. Economy

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Source/转贴/Extract/Excerpts: ABC News
Publish date: 09/11/11

貶值加劇通膨‧亞幣結束競貶








Source/转贴/Extract/Excerpts: 星洲日報
Publish date: 12/11/11

滙控比重封頂 基金須沽3.4億

滙控比重封頂 基金須沽3.4億
儘管是次恒指成分股檢討,加入「食品股」為新元素,但沒有改變金融股獨大情況,調整後金融股佔恒指比重不減反增,由原來百分之四十五點七四增至百分之四十六點二,建行(00939)、中行(03988)、平保(02318)最受惠。相反滙控(00005)因比重超過上限,因此需要由變動前百分之十五點四六,調低至百分之十五上限,粗略估計,追蹤恒指的被動基金約需沽售價值三點四四億元滙控股份。

金融股續坐大
恒生指數公司資料顯示,建行、中行、平保比重均有調高,當中建行增加零點九七個百分點,中行增加零點三個百分點,平保增加零點二八個百分點,預期被動基金合共需要斥資十一點五八億元增加三隻股份,當中建行涉及買入的股份,金額或高達七點二三億元。

不過,並非全部中資金融股同樣受惠,工行(01398)及交行(03328)所佔比重,分別降低零點二及零點零二個百分點,被動基金需要分別沽售一點五二億元工行及零點二一億元交行股份。

業界人士稱,旺旺(00151)及康師傅(00322),市值難與滙控及一眾中資金融股等「巨無霸」相比,惟寄望續有更多大型國際企業來港上市,方能扭轉金融股獨大情況

滙控28億注滙豐中國
滙控(00005)宣布,向旗下滙豐中國增資28億元人民幣,總額增加至108億元人民幣,為首家完成人民幣增資的外資銀行。滙豐亞太區行政總裁王冬勝表示,用人民幣增資內地子銀行,是一個重要里程碑,同時為進一步拓展在華業務帶來機會。

傳炒投行數百人
滙控積極拓展內地業務,精簡架構計劃卻進行得如火如荼,不斷剝離核心資產及削減職位,包括開始削減投資銀行業務職位。外電引述消息透露,滙豐開始裁減數百名投資銀行員工,涉及所有辦公室與職位。

另一家英資大行蘇皇,英國《每日電訊報》引述消息透露,蘇皇逾一成或約2千名投行業務員工或會失去工作,主要為信貸交易與新興市場業務。

滙控原計劃出售195間紐約分行予美國First Niagara Bank的交易遇上枝節,外電報道,First Niagara Bank擬出售購自滙控的26間分行,以釋除政府有關反壟斷的疑慮。

大摩下調目標價
滙控季績令投資者失望,再有大行調低其目標價,摩根士丹利表示,滙控資產負債表與融資能力均優於歐資同業,但季度減值撥備令人失望,而且實際收入疲弱,目標價由81元微降至80元,然而「增持」投資評級維持不變。德銀表示,調低滙控一一至一三年每股盈利預測5至10%,目標價削11.4%至80元。

另滙豐經濟研究亞太區聯席主管范力民表示,歐洲銀行業去槓桿化勢影響亞洲,隨着借貸不斷增加,歐資銀行將收緊對亞洲的信貸。

Source/转贴/Extract/Excerpts: 東方日報
Publish date: 12/11/11

Raffles Education:Weak fundamentals persist (DBSV)

Raffles Education
HOLD S$0.435
Price Target : 12-month S$ 0.48 (Prev S$ 0.52)

Weak fundamentals persist
• 1Q12 core earnings in line supported by corporate activities
• In view of decline in Gao Kao numbers, we trim FY12F earnings by 12.4%
• Successful monetising of land it owns in China will provide long term catalyst
• Maintain HOLD, TP lowered slightly to S$0.48

1Q12 supported by corporate activities. 1Q12 earnings came in at S$17m boosted by S$16m gain on 50% sale of Zhongfa Shanghai College in FY11. Stripping this out, PBT would be S$2.1m, contributing to 16% of our core PBT estimates for FY12F. Revenue of S$36m was in line with our estimates but other operating expenses were 15% higher than expected. Asia Pacific (ex PRC) revenue grew 13% yoy to S$16.4m, but China revenue fell by 30% yoy to S$19.5m.

Decline in Gao Kao numbers continue to affect earnings. Private education market in China will be affected by smaller number of students taking the Gao Kao, down c.3% to 9.33m in 2011 from 9.57m in the previous year. Given higher than expected operating costs and weak Gao Kao outlook in China, we are trimming our EPS estimates for FY12F by 12%.

Monetizing its land in China. RLS owns a 3.3m sqm land between Beijing and Tianjin. OUC currently occupies c.50%. Monetization of the rest of the unused land could be potential catalyst over the longer term.

Maintain HOLD, TP S$0.48. We lowered our SOTP valuation of RLS to S$0.48 on revised earning. As such, we maintain our Hold rating and our TP is pegged to a PE of 21x at -0.5SD.


Source/转贴/Extract/Excerpts: DBS Vickers Research
Publish date:10/11/11

TigerAirways: Worst is likely over (DBSV)

Tiger Airways Holdings
HOLD S$0.685
Upgrade from FULLY VALUED
Price Target : 12-Month S$ 0.71 (Prev S$ 0.83)

Worst is likely over
• Expect net loss of more than S$30m in 2Q12; results should get better thereon
• Recent rights issue will strengthen balance sheet
• Growth will hinge on new management’s ability to renew and ramp-up Australian operations
• Post rights-issue, our TP is adjusted down to S$0.71, upgrade to HOLD given limited downside

2Q12 will be the worst quarter.
With passenger numbers declining 38% q-o-q and 23% y-o-y in 2Q-FY12, and the airline incurring significant costs of grounding the fleet for 6 weeks and subsequent efforts in bringing the airline back from suspension in Australia, we reckon 2Q12 will be much deeper in the red than 1Q12. Revenue could decline about 35% q-o-q and net loss could be in excess of S$30m in 2Q12, but better profitability can be expected in the seasonally stronger 3Q.

Rights issue proceeds will keep growth plans afloat.
At the end of 2Q12, Tiger’s net gearing would have likely moved up to 3.5-4.0x, restricting Tiger’s ability to raise further debt to fund its committed orderbook. Even if half of the new aircraft is financed by sale-and-leaseback transactions, we estimate capex requirements of close to S$250m per year for new aircraft in FY12/13. The rights issue raised S$155m net proceeds and will help keep net gearing at a reasonable 1.6-1.7x in FY12/13.

Execution will be key.
Given the lower passenger number assumptions, we raised our full-year FY12 net loss assumption to S$54m and cut net profit forecasts for FY13 by 10% to S$47m. We adjust our TP, which is based on 7x FY13 EV/EBITDAR, to S$0.71 to account for the rights issue. At current prices, we deem the risk reward ratio as fair, and upgrade the stock to HOLD. Re-rating could occur if the new management team can quickly turn Australian operations profitable and hopefully, grow new markets like Indonesia, where Tiger has taken a 33% stake in the re-structured Mandala Airlines, which could start operations next year.

Steep brakes applied to growth momentum.
Since the suspension of the entire Tiger Airways Australian fleet (10 aircraft) in July 2011 by the Australian air safety regulator, Tiger Australia resumed operations after 6 weeks on the ground, and with limited scope. Initially restricted to just 18
sectors per day, Tiger Australia is now operating 22 sectors per day and only 4 routes, compared to more than 60 sectors per day and more than 15 routes at the peak of its operations. Hence, passenger numbers in the 3 months to September have fallen off the cliff for Tiger Airways as a whole. The airline group carried only 1.1m passengers in the period, compared to 1.8m passengers in the preceding quarter and 1.4m passengers in the same period last year.

2Q12 numbers should be worse than 1Q12; lowering our FY12/13 earnings estimates.
Tiger Airways reported net loss of close to S$14m, excluding exceptional items in 1Q12, the seasonally weakest quarter was affected by high fuel prices as well as volcanic ash related travel disruptions in Australia. However, with passenger numbers declining 38% q-o-q and 23% y-o-y, and the airline incurring significant costs of grounding and subsequent efforts to bring the airline back from suspension in Australia, we reckon 2Q12 earnings will be much deeper in the red. 2Q12 revenue could decline about 35% q-o-q and net loss could come in excess of S$30m. Given the lower passenger number assumptions, we raised our full-year FY12 net loss assumption to S$54m from a more optimistic net loss estimate of S$10m. We now expect Tiger Airways to turn around in FY13 with net profit of S$47m, revised down 10% from our earlier projection of S$53m.

Future turnaround will hinge on recovery in Australian operations.
We believe the fortunes of the Group beyond 2Q12 will depend on its execution in Australia, as the new management will look to make a fresh start and learn from previous mistakes to ensure faster breakeven and focus on profitable routes. As the Australian operation ramps up to fully utilize its fleet of 8 aircraft (down from 10 aircraft earlier), it needs to cut costs and fly on high-traffic routes to boost profitability. To start off, Tiger Australia has closed its Adelaide Airport crew base and temporarily suspended its Avalon Airport crew base to focus exclusively on its Melbourne (Tullamarine) hub.

New management is in place to restore growth and stability.
After initially seconding erstwhile Group CEO Mr. Tony Davis to the Australian operations to replace Tiger Airways Australia outgoing CEO Mr. Crawford Rix and guide the airline out of suspension, the Board of Tiger Airways accepted Mr. Davis’ resignation in end-August 2011 and appointed Mr. Andrew David as CEO of Tiger Airways Australia with effect from 17th October 2011. Mr. David is an aviation veteran, having served as COO of Virgin Blue previously and held several senior management positions at Air New Zealand. Meanwhile, Mr. J.Y. Pillay, much-respected corporate denizen of Singapore, was appointed the Board Chairman and SIA and Silk Air veteran Mr. Chin Yau Seng was appointed CEO of Tiger Airways Holdings. We remain hopeful that the management overhaul will help Tiger Airways turn a new leaf and restore profitability

Losses also meant unsustainable gearing levels.
Tiger Airways ended 1Q12 with gross cash of S$156m (which included S$80m advance ticket sales) and a net gearing ratio of 2.7x, up from 1.8x at the end of FY11, as the airline made additional payments for new aircraft during the quarter. After the substantial losses expected in 2Q12, and return of advance ticket sales to customers in Australia whose flights were cancelled during the grounding period, we estimate net gearing of between 3.5-4.0x during the quarter, assuming unsustainable proportions and likely restricting Tiger’s ability to raise further debt.

Rights issue resolves near term balance sheet concerns.
Hence, Tiger Airways’ cash call by way of rights issue in September 2011 was timely, as it needs to fund its committed orderbook, involving delivery of 9-10 aircraft per year over the next 5 years. Even if half of the new aircraft is financed by sale-and-leaseback transactions, we estimate capex requirements of close to S$250m per year for new aircraft, which has to be funded with a mix of bank loans, equity and operating cash flows. After the close of the rights issue, which raised net proceeds of around S$155m, net gearing is expected to remain at around reasonable levels of 1.6-1.7x in FY12/13.

Tiger gains foothold in Indonesian market but impact limited in near term.
In end-September, Tiger completed the acquisition of 33% stake in Indonesia's troubled carrier, Mandala Airlines. Mandala has been undergoing financial
restructuring since early 2011 when its flying license was suspended by the regulator in view of its financial problems. The airlines’ debt has now been converted into a 15% shareholding. The largest shareholder in the restructured Mandala will be Indonesia’s diversified investment firm Saratoga Group, which will hold 51% stake. Tiger’s stake will be in lieu of technical and licensing services and does not involve any cash component. The acquisition is subject to the parties rectifying certain corporate actions and regulatory approvals. Completion will take approximately 3 months, and Mandala is hopeful of commencing operations by end-2011.

We believe Mandala's existing flight license will expire in January 2012, and hence, any delays in completing the deal before year-end could push the start of operations well into next year. However, given that it will be equity-accounted on Tiger’s P&L, we do not envisage any material impact on bottomline in the near term.

Improves fleet deployment options though.
Mandala will adopt the Tiger model, and run A320 aircraft, and will allow Tiger more options to deploy its incoming fleet. Given the possibility of Thai Tiger never taking off, and the Philippine venture with SEAIR constrained by regulatory issues, we estimate Tiger could be able to lease out up to 5 aircraft to Mandala by March-2012 and more in the next financial year.

Downside limited after steep decline in share price, upgrade to HOLD.
We adjust our TP, which is based on 7x FY13 EV/EBITDAR to S$0.71 to account for the rights issue. At current prices, we deem the risk reward ratio as fair, and upgrade the stock to HOLD. Re-rating could occur if new management can demonstrate better profitability in Australian operations and hopefully, contributions from new markets like Indonesia, where Tiger has taken a 33% stake in re-structured Mandala Airlines, which could start operations next year.


Source/转贴/Extract/Excerpts: DBS Vickers Research
Publish date:11/11/11

正确解读未来 现在正是购股良机

正确解读未来 现在正是购股良机
作者:Ken Fisher 2011-11-03

美国即将面临又一场衰退的可能性并不大,我们不太可能在未来15个月内面临一轮大熊市。牛市并不取决于就业增长

投资者如今最大的担忧可归结为一件事:经济衰退。虽然无法保证美国经济不会出现二次衰退,但我可以肯定地告诉你,如果以史为鉴,那么美国经济目前再次陷入衰退将是前所未有的事情。

我们从未在传统的领先经济指标(LEI)指数连续五个月处于高位而且不断攀升之后出现过经济衰退。然而,按照该指数绝对值及逐年同比情况来看,LEI指数目前确实是连续五个月处于高位而且还在不断攀升。对于那些有兴趣的读者来说,将2011年与糟糕的2007至2009年期间相比,就会注意到在那段时期LEI指数连续三年出现下滑。

领先经济指标的一个组成部分是收益率曲线。债券投资者对此密切关注,因为收益率曲线能向我们表明长期利率与短期利率之间存在的利差。在发生经济衰退之前,这个利差总是会很小或者变成负值。现在,长期利率与短期利率之间的利差是220个基点,或2.2个百分点。在2007年,这个利差是负值。美联储目前愚蠢地试图通过出售短期债券同时购买相同数额的长期债券来缩小长短期利差,但并没有取得预期效果。

还有一个很少注意到的证据。那就是自第二次世界大战以来,只有企业雇员人均创造利润连续下滑至少六个月,才可能发生经济衰退。目前正在发生的事情恰恰相反,这个指标正在持续攀升。
那些拍着桌子声称要有经济增长必须先有就业增长的专家们往往忽略了上述统计证据。但事实是,盈利性永远是第一考虑要素。

如今,美国10年期国债收益率与标准普尔500指数的平均股息收益率之间的差异接近为零——这与2009年熊市底部的情况非常相似。当美国10年期国债收益率与标准普尔500指数的平均股息收益率之差低于两个百分点时,你不会在现代历史上找到美国出现经济衰退的先例。

考虑到美国即将面临又一场衰退的可能性并不大,我们不太可能在未来15个月内面临一轮大熊市。

市场观察人士及媒体都痴迷于标准普尔500指数是否下跌了19%以及——比如说纳斯达克综合指数等相比下滑了25%。一旦这些指数的跌幅超过20%以上,那么各大媒体的头条新闻就会迅速宣布美国股市正式进入全面而惨烈的熊市时期。但是,20%跌幅这个划分牛市转为熊市的分界线并没有真正的意义。

在目前股市动荡剧烈时期,投资者不要太多关注股市每天的涨跌波动,而应始终把关注点集中在那些如果美国经济实际表现优于唱衰者预期时会有很好表现的强势股上。

以下是我今天会买入的六只强势股:
总部位于匹兹堡、拥有450多家门店的迪克体育用品公司(Dick’s Sporting Goods)在其专门从事的利基市场,或者说细分市场上占据领先地位。在经济走强时,在诸如高尔夫及水上运动等领域发生的高端消费支出应会推高迪克公司股票的投资回报,而该公司盈利则会超过分析师的预期。这只股票本身也可以成为真正的圣诞礼物。该股目前股价相当于该公司每股年营收的90%,17倍于我预期的该公司本财年(2012年1月份结束)每股收益。

总部位于休斯敦的海洋钻井承包公司——阿特伍德海洋工程公司(Atwood Oceanics)自从我于2010年9月13日在该股股价为25美元时给予推荐以来,已上涨了许多。该公司业务及股票价格应会继续得到提升。其新购的大型钻井平台(该平台被命名为“鱼鹰”)正运行良好地为雪佛龙石油公司(Chevron)服务,而且该公司预计还将获得来自巴西国家石油公司(Petrobras)的多份新合同。能源价格处于高位会使海洋勘探业务保持良好的发展势头。这会使阿特伍德公司不仅是一只价值股,而且同样也是一只成长股。

新兴市场国家的公司股票今年表现欠佳,尤其是中国公司。从长远来看,中国仍然是精明投资者的投资目标。我偏爱东方航空这家公司。这家中国第三大商业航空公司拥有250多架飞机。四年前该股股价为65美元,去年为33美元。我认为该股有望回升至前高点。该股目前股价相当于其每股年营收的18%,为我对该公司2011年每股收益预期的六倍。

位列我买入名单上的另一只类似股票是南方航空。我想提及的最后一只中国公司股票是中芯国际。这家世界领先的集成电路芯片独立代工企业与全球经济形势之间存在巨大的关联性。该股目前股价相当于去年股价的44%。

在经济景气时期,各大芯片公司纷纷向诸如中芯国际等代工厂商采购芯片,在经济萧条时期,各大芯片公司则转而依靠自身内部产能。这些股票也按照市场对行业前景的预期而涨跌波动。中芯国际目前处于不赢不亏的状况,因此该股的市盈率看起来好像无限大。但该公司有望在2013年盈利,而不超过五倍的市盈率将促使这只被低估的股票价格上涨。

法国拉法基集团(Lafarge)目前股价相比2009年创出的最高价已下跌了54%。作为世界领先的水泥及骨料制造商之一,该公司对各种宏观经济因素较为敏感,因此一旦经济出现惊人增长时,该股应会开始上涨。拉法基公司目前股价相当于其每股销售收入的50%,为我对该公司2011年每股收益预期的13倍。

基金经理肯·费雪(Ken Fisher)的最新力作是《揭露真相:学习、实践并从中获利——识破华尔街发财神话》(Debunkery: Learn It, Do It, And Profit From It--Seeing Through Wall Street's Money-Killing Myths)。


Source/转贴/Extract/Excerpts:福布斯中文网
Publish date: 03/11/11

The going gets tough but the bargains keep coming (CIMB)

The going gets tough but the bargains keep coming
As macro risks are on the rise, we scale back our end-2012 KLCI target from 1,660 pts to 1,570pts, in sync with our economics team’s GDP growth downgrade. But value is emerging and investors should start trawling for bombed-out stocks.




Economic headwinds from the West will inevitably have knock-on effects on export growth for Asia and Malaysia. We now widen the discount to the KLCI’s 3-year moving average P/E from 5% to 10% to factor in the higher risks. Cutting 2012 GDP growth to 3.8%

We are cutting our GDP growth estimates from 5% to 4.5% for this year and from 5.5% to 3.8% for 2012. Since our review in Aug 11, global growth prospects have gone from bad to worse, exacerbated by the deepening European debt crisis and gyrations in equity markets. The risk that Malaysia’s export growth has already run out steam has certainly increased. While we believe that the take-off of ETP and 10th Malaysia Plan projects should help support domestic growth, it will not compensate fully for the lower contribution from the sustained subpar export growth.

How low can KLCI go?
During the 2003-07 stockmarket run-up, the trough P/BV valuation was 1.55x, which would bring the KLCI down to 1,130pts if applied to 2012 P/BV. This is lower than the 1,170pt level we get if the KLCI pulls back 27% from its early Jul peak, which is the high end of the 14-27% pullback suffered by regional markets in the Apr-May 2010 consolidation. However, we do not think that the market should fall to such low levels as it should bottom out at 1,280pts based on a more reasonable pullback of 20% from the Jul peak of 1,597pts.

Bottom-fishing for stocks
Applying a wider discount of 10% to the 3-year moving average P/E of 14x (previously 14.1x) or 12.6x 2013 EPS, we scale back our end-2012 KLCI target from 1,660pts to 1,570pts. For end-2011, based on a 5% discount (previously par) to the 3-year moving average, our KLCI is lowered to 1,490pts. Despite lower KLCI targets, we note that significant value has started to emerge for a lot of stocks, particularly those hard hit in the construction and property sectors over the past three months. For stocks that we have outperform recommendations on, we have provided entry points for investors to bottom-fish. We continue to believe the KLCI will stage a strong, albeit volatile, rebound once the dust settles on the European debt crisis.



GDP growth cut to 4.5% for 2011 and 3.8% for 2012
1. BACKGROUND
1.1 Deteriorating economic outlook
Since our review in Aug 11, global growth prospects have gone from bad to worse, exacerbated by the deepening European debt crisis and gyrations in equity markets. The risk that Malaysia’s export growth has already run out steam has certainly increased. We cut our GDP growth estimates for the G-3, largely in reaction to the ripple effects of the financial strain, deepening fears of a sovereign debt and banking crisis in the euro area and the limitations of monetary enhancement and fiscal support. We expect growth in the US to remain sluggish as consumer spending is being crippled by the bleak labour market conditions. The prolonged sovereign crisis in the peripheral economies as well as the spreading spillover effect on core economies will push the euro area into a recession in 2012.

1.2 Export growth dragged down
We expect the acute external uncertainties to further drag down Malaysia’s export growth in 2012. Export growth will face the strong headwinds of slackening global demand and weakening commodity prices. While G-3 economies make up a combined 28.6% share of Malaysia’s total exports, the rising trend of exports to Asia (56.3% of total exports) helped to avert a total collapse of export growth. We now expect Malaysia’s export growth to come in at the low end of 6-7% and we also cut 2012’s growth estimate to 4-5%. This is lower than the Treasury’s estimates of 6.8% for 2011 and 6% for 2012.

1.3 Domestic demand losing traction
Domestic demand which has been holding up well so far has lost some traction. Even though the 2012 Budget measures, which include personal tax cut and salary adjustment for civil servants, help to support consumer spending, concerns over weaker growth prospects and the negative wealth effect of falling share prices will bite into discretionary spending. Our estimate of private consumption growth of 4% for 2012 is significantly lower than the MOF’s 7.1%. 1.4 ETP and 10MP to support growth

We believe that the take-off of Economic Transformation Programme (ETP) projects and 10th Malaysia Plan projects should help support domestic growth. But it will not sufficient or strong enough to compensate fully for the lower contribution from the sustained subpar export growth. The MOF projects private investment to sustain strong growth of 15.9% in 2012 or 13.3% of GDP (an estimated 16.2% or 12.1% of GDP in 2011), compared to our estimates of 11.9% growth for 2011 and 8.6% for 2012. While a range of indicators support the continuing expansion of private investment, we are concerned that investors will turn cautious because of severe global uncertainties. As such, there is greater urgency to step up the six strategic reform initiatives to convince investors that Malaysia “walks the talk”.

1.5 GDP growth estimates cut
In all, we are cutting our GDP growth estimates from 5% to 4.5% for this year and from 5.5% to 3.8% for 2012. A sharp contraction in exports can be averted as there is no worldwide trade credit freeze, as occurred during the 2009 global financial crisis.

2. OUTLOOK
2.1 What is downside to KLCI?
During the 2003-2007 stockmarket run-up, the trough P/BV valuation was 1.55x. Should this level be reached this time around, it would bring the KLCI down to 1,130pts based on the 2012 P/BV. This is lower than the 1,170pt bottom assuming that the KLCI pulls back 27% from its early-Jul peak, which is the higher end of the 14-27% pullback suffered by regional markets in the Apr-May 2010 sharp consolidation. However, we do not think that the market will fall to such low levels. A more reasonable pullback of 20% from the Jul peak of 1,597pts would take the index to a trough of 1,280pts, which is merely 30pts below the Sep intra-day low of 1,310pts.

3. VALUATION AND RECOMMENDATIONS
3.1 Lowering 2011/12 KLCI targets
To factor in the lower GDP growth forecasts for 2011/12 and the considerable headwinds, we are widening the discount to the 3-year moving average P/E target basis. Applying a wider 10% discount (5% previously) to the 3-year moving average P/E of 14x (14.1x previously) or 12.6x 2013 EPS, we lower our end-2012 KLCI target from 1,660pts to 1,570pts. Based on a 5% discount (instead of parity) to the 3-year moving average, our end-2011 KLCI target is lowered from 1,580pts to 1,490pts. We would not discount the potential for further downgrades of our KLCI target as the past five quarterly results seasons have been disappointing and EPS numbers may be cut further if the economic environment deteriorates.

3.2 But maintaining OVERWEIGHT call
Despite the lower KLCI targets, we believe that the market will stage a strong rebound once the dust settles on the European debt crisis. Malaysia weathered the 2008/9 global financial crisis much better than most countries and it should continue to exhibit resilience, particularly on the back of the various transformation programmes and the commencement of large infrastructure projects such as the RM50bn Klang Valley MRT. Also, although we are assuming that Europe goes into recession in 2012, we are not yet forecasting a double-dip in the US. Given the likely mixed newsflow on both the external and domestic fronts, we expect the rebound to be choppy, as has been the sharp consolidation since Jul.

3.3 Preferred sectors and stocks
Our preferred sectors are still the key beneficiaries of the ETP, i.e. oil & gas, construction and property. Construction and property stocks in particular have been heavily sold down over the past three months and significant value has emerged. The worst-performing sectors since the KLCI peaked in early Jul are the high-beta technology, construction and property sectors. Not surprisingly, the best performer is the defensive and higher-yielding consumer sector. For investors with lower risk appetite, our preferred sectors are telecommunications and utilities where we have outperform recommendations on TM, Axiata, DiGi and PGas. Note that we have replaced SP Setia and Petronas Chemicals with AirAsia and Petronas Gas in our top pick lists. SP Setia was recently downgraded to Neutral when PNB undertook a conditional offer at RM3.90 per share while we recently initiated coverage on PGas.



Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date:10/11/11

Golden Agri's Q3 earnings rise 10.5% to US$110m

Business Times - 12 Nov 2011


Golden Agri's Q3 earnings rise 10.5% to US$110m

By FELDA CHAY

PALM plantation owner Golden Agri-Resources' third-quarter net profit climbed 10.5 per cent from a year ago, boosted by higher production and sales volumes, as well as a rise in selling prices for its products.

The Indonesia-based company said that earnings for the three months ended Sept 30, 2011 rose to US$109.6 million from US$99.2 million the previous year. In turn, earnings per share rose to 0.90 US cent, from 0.82 US cent over the same period last year.

Revenue jumped 61.9 per cent to US$1.56 billion from US$964.7 million.

While the European debt crisis and the slow recovery of the global economy continue to cloud its prospects, Golden Agri noted that demand for palm oil remains robust from the edible oil market and the plant and animal fats - or oleochemical - business.

In particular, demand from emerging markets remains strong, and it is seeing more interest from the renewable energy sector.

The China market, however, will prove to be a challenge, said Golden Agri.

'The high raw material prices, particularly soyabean prices and various government measures on domestic inflation continue to place some pressure in our profit margins. We will continue to manage our costs and to target our growth in the sale of various palm-based products through our extended distribution channels,' said Golden Agri.

It is currently developing its distribution channels to enter new markets in China - among the world's largest consumers of edible oils.

China accounted for 18.3 per cent of its overall revenue and just 2.9 per cent of net profit in the first nine months of fiscal year 2011.

Indonesia remains Golden Agri's biggest market, accounting for the rest of sales and earnings. The company is the second-largest palm plantation owner in the world.

Golden Agri said that capital expenditure in FY 2011 is expected to come up to US$400 million. It had previously estimated that it will spend US$450 million. Its plantation area will also expand by 20,000ha by the end of the fiscal year, which is at the lower end of its earlier estimate of 20,000ha to 30,000ha.

For the third quarter, Golden Agri's palm products output jumped 13 per cent to 687,000 tonnes. Free-on-board price of crude palm oil rose 25 per cent to US$1,037 per tonne.

Net asset value per share at the end of the quarter was 60 US cents compared with 56 US cents as at Dec 31 last year. Cash and cash equivalents held was US$404 million, up from US$159.1 million the previous year.

For the nine-month period, Golden Agri made a net profit of US$520.2 million - more than double the US$253.7 million it earned a year ago. Revenue was 99.7 per cent higher at US$4.6 billion.

Yesterday, Golden Agri's shares closed flat at 66 Singapore cents.



Source/转贴/Extract/Excerpts: www.businesstimes.com.sg
Publish date:12/11/11

Genting S'pore slides on market-share losses

Business Times - 12 Nov 2011


Genting S'pore slides on market-share losses

Its move to raise bad debt provisions in Q3 raises concerns about debt collections from VIP players in China

By GRACE LEONG

SHARES of Genting Singapore slid yesterday on its market-share losses and after its move to raise bad debt provisions sparked concerns over whether debt collections from VIP players in China - one of its biggest markets - may become more challenging as credit conditions there tighten.

Genting Singapore shares fell as much as 8.3 per cent in volatile trading yesterday, before closing at $1.595, down 5.34 per cent or nine cents.

In what Genting Singapore called a prudent move in the face of a slowing global economy and tightening credit conditions in China, the company raised its bad debt provisions to $56.9 million for the third quarter, up from $23.5 million a year ago.

That equates to 8.5 per cent of its gaming revenue, higher than the average of 3 per cent over the past six quarters, Citigroup said yesterday.

'However, this is in contrast to Marina Bay Sands, which has not shown higher provisioning, so we wonder if Genting Singapore's decision was driven by its aggressive credit extension that was seen in the first half of the year,' Macquarie Equities Research analysts Gary Pinge, Elaine Lai and Somesh Kumar Agarwal said in a report yesterday.

Also pressuring Genting Singapore's stock are concerns that its flagship casino, Resorts World Sentosa (RWS), continued to cede market share in both VIP and mass gaming segments to rival MBS.

'Genting Singapore lost significant gaming market share in 3Q11 and also did not see any ramp-up in non-gaming,' the Macquarie report said. 'We believe the VIP market share loss is more driven by lack of a competitive product relative to MBS.'

'We find it interesting that notwithstanding Genting Singapore adding more table game capacity, slots and electronic table games (ETGs) (quarter-on-quarter), mass market failed to ramp and showed 2 per cent QoQ growth. This essentially means that table, slot and ETG yields all declined QoQ - at a time when there was available hotel room capacity,' the Macquarie report said.

The scheduled opening of Bayfront MRT at MBS may also shift some mass-market players away from RWS, it said.

But it isn't all doom and gloom.

Some analysts say downside was capped by Genting Singapore's top management's renewed optimism on hopes that some of the junket licensing applications it endorsed may be approved in the next few months.

Also helping is the planned opening of the 200-luxury room Equarius hotel and 20-plus Beach Villas by year-end, which would triple RWS's VIP hotel offering to nearly 330 and help the casino claw back some VIP market share.

Morgan Stanley said RWS could see growth in its VIP roll as it ramps up the number of slot machines to 1,744 by year-end from its current 1,315.

With the resort's completion next year, RWS is expected to see a boost in operational performance in 2013.

'We believe Genting Singapore remains well-positioned to secure new gaming opportunities when they arise. Globally, governments are facing fiscal pressure and casinos remain an efficient policy tool for raising taxation revenues. We see Korea and Japan as key potential markets,' said HSBC analyst Sean Monaghan.

Aaron Fischer of CLSA Asia-Pacific Markets noted that Genting Singapore was 'especially optimistic on Japan and believes it could legalise gaming within the next 12 months'.

'This would be another major catalyst to the shares as we believe Genting Singapore, Las Vegas Sands and Wynn are the three front-runners for one of the two licences (which would probably be operated under a joint venture with a Japanese company,' he said.



Source/转贴/Extract/Excerpts: www.businesstimes.com.sg
Publish date:12/11/11

Noble Group founder buys shares, calms investors

Business Times - 12 Nov 2011


Noble Group founder buys shares, calms investors

NOBLE Group's founder Richard Elman stepped in yesterday to calm Noble Group investors, who suffered a US$2 billion hit on Thursday as the stock fell sharply on news of a quarterly loss and the resignation of its CEO.

Besides buying Noble shares on Thursday, Mr Elman told Reuters yesterday that the resignation of the CEO was not due to the quarterly loss.

The Singapore-listed commodities trader saw its share price plunge by more than a quarter on Thursday, hit by the surprise resignation of Ricardo Leiman and its first quarterly loss in more than a decade.

The shares recouped some of the losses in early trade yesterday, rising as much as 4 per cent, but ended unchanged at $1.18. Noble said late on Thursday that a vehicle linked to Mr Elman's family bought 10 million shares, raising its interest in the firm to 21.53 per cent from 21.37 per cent.

Mr Elman, who is now acting CEO and chairman, told Reuters in a phone interview yesterday that the company thought that it would be better to announce the departure of Mr Leiman before the planned listing of its agricultural unit.

'It was planned for some time, and we thought it would be better to get this out of the way since he will not be on the board of the new company (Noble Agri),' Mr Elman said, adding that 'it was coincidence of timing' that the announcement came a few hours after Noble reported its poor quarterly results.

Mr Elman, who is already in his 70s and has been cutting back on his role at the company over the past two years, did not elaborate on why the former CEO wanted to leave.

The company said late on Wednesday that Mr Leiman was leaving for personal reasons. Mr Leiman had been in the job for less than two years.

Mak Yuen Teen, a professor at the National University of Singapore's business school who specialises in corporate governance, said: 'If this was long planned and not connected to the results, the company should have disclosed the succession plan earlier rather than two hours after a negative results announcement. It would be difficult to convince the market that they are unconnected.'

Noble is the latest casualty among commodity traders caught up in the defaults in the cotton business.

It blamed part of its US$17.5 million quarterly loss on cotton as farmers defaulted on their contracts following a gyration in cotton prices, which forced it to cover physical deliveries to its customers by purchasing cotton in the spot market at elevated prices.

Investors are now turning their attention to another Singapore-listed rival, Olam International, which reports earnings on Monday.

Olam is among the world's top cotton traders, with a network of more than 100,000 farmers, ginners and suppliers, according to the company's website, said Reuters.

'Olam's industrial segment, which constitutes 23 per cent of 2011 financial year gross contribution, is largely driven by its cotton business,' Goldman said in a research note.

'We believe investors may have concerns regarding these (cotton counterparty) risks, and the stock price may see short-term weakness until there is more clarity provided by the company.'

Mr Elman tried to calm investor jitters over the volatile commodities market, which has forced global commodities giants from Cargill to Bunge to report steep decline in profits.

'Honestly, it was a minor loss, it's mark-to-market, and probably some of it or all of it can come back in the next quarter or at some point in the future,' Mr Elman said, referring to the possibility that the company can claw back the losses if commodity prices improved. 'It is not a major issue - markets made it a major issue. But that's fine, let the markets do what they want,' he added.

According to Reuters, Noble said that its processing margins in agriculture remained under pressure, while below-average crop yields in the sugar business in Brazil and continuing counterparty defaults in the cotton industry had undermined the operating environment.

Bloomberg said in a report yesterday that Mr Elman, a former scrap yard worker who created Asia's largest commodity supplier by sales, is looking for a successor for at least the second time in as many years.

As Noble transforms from a trader to a producer of food, metals and energy commodities, Mr Elman has to look for an executive skilled not only in trading, but also in industrial operations, said Bloomberg.



Source/转贴/Extract/Excerpts: www.businesstimes.com.sg
Publish date:12/11/11

S&P's French blooper roils global markets

Business Times - 12 Nov 2011


S&P's French blooper roils global markets

Ratings agency downgrades France 'by mistake'; move adds to mess in the marketplace

(New York)

STANDARD & Poor's roiled global equity, bond, currency and commodity markets when it sent and then corrected an erroneous message to subscribers suggesting that France's top credit rating had been downgraded. The benchmark Stoxx Europe 600 Index extended its decline to 1.5 per cent on Thursday to 234.11, and French 10-year bond yields surged as much as 28 basis points to 3.48 per cent, the highest level since July, after the mistaken announcement. The euro pared gains, and US equities briefly fell. Commodities erased gains before resuming increases after S&P affirmed France's 'AAA' rating in a later statement.

A downgrade of France's credit rating would affect the rating of the European Financial Stability Facility (EFSF), the bailout fund for struggling euro-member countries that has funded rescue packages for Greece, Ireland and Portugal partially through bond sales. If the EFSF has to pay higher interest on its bonds, it may not be able to provide as much funding for indebted nations.

'It was a mess,' said Lane Newman, the New York-based director of foreign exchange at ING Groep NV, the biggest financial services company in the Netherlands. 'It calls into question the credibility of people who can have that sort of impact not really being careful.' France also has the top rating from Moody's Investors Service and Fitch Ratings. S&P's error came after Sean Egan, president and founding principal of Egan-Jones Ratings Co, said earlier on Thursday that his namesake firm may lower France's credit rating. Egan-Jones currently rates France 'AA-'.

S&P's erroneous message was issued at 3.57 pm Paris time. The company sent a release at 5.40 pm Paris time saying that the message was incorrect and affirming France's rating. 'As a result of a technical error, a message was automatically disseminated today to some subscribers of S&P's Global Credit Portal suggesting that France's credit rating had been changed,' S&P said in the release. 'This is not the case: the ratings on Republic of France remain 'AAA/A-1+' with a stable outlook, and this incident is not related to any ratings surveillance activity. We are investigating the cause of the error.'

French Finance Minister Francois Baroin has asked market regulators in France and Europe to investigate the 'causes and potential consequences' of S&P's erroneous message.

'S&P denied the rumour and confirmed the French rating, but this had consequences,' he said at a conference in Lyon.

France's stock market regulator subsequently opened an investigation into S&P's dissemination of the erroneous message.

'It clearly raises issues about internal systems and controls,' said Christopher Whalen, managing director of Institutional Risk Analytics, a Torrance, California-based bank-rating firm. 'The onus is on them to be careful and it's troubling. Whether you're a broker dealer or a rating agency, everything you say has to be very carefully considered because of the weight that they carry.'

S&P downgraded the US's AAA credit rating by one level to AA+ for the first time on Aug 6, citing the nation's political process and criticising lawmakers for failing to cut spending or raise revenue enough to reduce record budget deficits.

Volatility in financial markets has increased since July on speculation that Europe's debt crisis would spread to larger countries such as Italy. The Mediterranean nation, the world's eighth-biggest economy, saw the yield on its 10-year bond jump above 7 per cent on Wednesday as leaders rush to approve debt-reduction measures.

Greece, Portugal and Ireland each sought bailouts after their bond yields traded above 7 per cent.

The Chicago Board Options Exchange Volatility Index, or Vix, as the benchmark measure of US equity derivatives is known, jumped 32 per cent on Wednesday to 36.16, the highest since Nov 1.

Implied volatility for the currencies of the Group of Seven nations rose to as high as 13.68 on Thursday, the most since Oct 6, according to a JPMorgan Chase & Co index. -- Bloomberg


Source/转贴/Extract/Excerpts: www.businesstimes.com.sg
Publish date:12/11/11

盘点民间借贷乱象 温州老板跑路频现

视频:盘点民间借贷乱象 温州老板跑路频现
http://msn.finance.sina.com.cn 2011-11-11 00:17 来源: 东方卫视《东方夜新闻》



Source/转贴/Extract/Excerpts: MSN中国
Publish date: 11/11/11

2011/11/11 財經抱抱: 歐洲拆彈 義發債成功 歐元區最大危機解除?



Source/转贴/Extract/Excerpts: youtube
Publish date:11/11/11

Noble : 3Q11 bad enough for the chairman to step in as CEO (Daiwa)

Noble Group
Target price: S$1.900 → S$1.800
Up/downside: +12.1%
Share price (9 Nov): S$1.605
12-month range 1.205-2.340
3Q11 bad enough for the chairman to step in as CEO

• Noble reported a net loss for 3Q11, a big negative surprise; the CEO has resigned and the chairman has stepped in
• All divisions saw margin compression, agriculture in particular
• We expect significant shareprice weakness near term; buy when the stock settles

�� What's new
Noble reported a 3Q11 net loss of US$17m. While sales rose by 40% YoY and 6% QoQ, margins were significantly compressed for all divisions. The company blamed the margin squeeze on: 1) tough market conditions, 2) counterparty defaults, particularly for cotton, 3) mark-tomarket losses in carbon trading credits, 4) forex-related losses due to the depreciation of the Brazilian Real, and 5) a poor sugar cane harvest in Brazil.

We agree with all of the above reasons but believe the extent of the disappointment, particularly given that volumes rose strongly, suggests significant speculative tradingrelated losses as well.

�� What's the impact
We believe the market is likely to view the results exceedingly bearishly and that near term the share price could see significant weakness. The key issue we believe is whether the losses for this quarter are one-off, or whether there has been a significant change in the company’s operating fundamentals. We note that volume growth for the quarter was strong across all divisions. This suggests to us that the fundamentals, with respect to the sourcing and distribution infrastructure that Noble has built up, remain sound. Against this backdrop, we would wait for the markets to sell down Noble over the next few days, and buy the stock for what could be significant upside based on fundamental valuations. Our earnings adjustments focus primarily on 2011, partly based on our view that the bulk of the negative earnings surprise was driven by trade-related losses and that some of the factors the company alluded to are indeed oneoffs.

We will revisit our 2012 and 2013 forecasts post a detailed conversation with the company, especially given that Mr Richard Elman, the chairman, has taken over as CEO and is likely to outline his views on the future strategy for the company.

�� What we recommend
We have a Buy (1) rating with a new six-month target price of S$1.80. Our target price is based on the average of our ROE-COE/growth methodology and a PER of 11x our 2012 EPS forecast, corresponding to the stock’s average trading PER over the past five years. The key risks to our call are lower-than-expected sales volume and gross-profit margins. Significant volatility in commodity prices could also affect Noble's earnings negatively, as it did in 3Q11.

�� How we differ
Our 2011 EPS forecast is 26% below the consensus forecast, while our 2012 and 2013 forecasts are 2.5% and 8.0% higher, respectively.


Source/转贴/Extract/Excerpts: Daiwa-Research,
Publish date: 10/11/11

Property Stocks Reshuffle In The Wake Of Market Turbulence

09 NOVEMBER 2011
Property Stocks Reshuffle In The Wake Of Market Turbulence

By MIGB

The Malaysian government’s investment arm Permodalan Nasional (PN) announced earlier that it will take over Malaysia’s second largest property developer by market value, SP Setia, at RM3.90 ringgit per share. On 28 September, PN and its partner Public Accounts Committee bought a total of 0.173% stake in SP Setia for RM10.58 million, raising its shareholding from 32.993% to 33.166% and triggering the full-scale takeover offer clause, in which it must buy over all stocks and warrants of SP Setia that it did not own at RM3.90 per share and 91 sen per warrant.

While SP Setia’s board of directors was looking for a higher bidder in the meantime, PN was actively buying up SP Setia’s shares and warrants from the open market. According to a statement released by SP Setia, the Securities Commission has approved PN’s acquisition application for SP Setia in a letter dated 13 Oct-11.

PN currently holds a significant stake in many prominent Malaysian listed companies, including two of the three market heavyweights – Malayan Banking and Sime Darby. Analysts believe that the recent collapse in property shares was more catastrophic than the market on the whole (27% plunge since early July, compared to the FTSE KLCI retreat of 15.9% over the same period), and SP Setia was one of the main laggers in the market.

PN’s acquisition of SP Setia was just one instance of the takeover exercises of major local developers following the earlier mergers and acquisitions of other property developers. Prior to this, Sime Darby acquired a 30% stake in Eastern and Oriental in 29 Aug-11 for RM766 million; state-owned UEM Land Holdings bought Sunrise for RM1.4 billion; entrepreneur Tan Sri Jeffrey Cheah merged the two property companies under his control – Sunway Holdings and Sunway City – into a single entity, Sunway. All these manoeuvres served primarily to enlarge the controlling companies’ scale. By acquiring SP Setia, PN, which manages about RM150 billion worth of assets, can further restructure the properties it owns and become a behemoth property group that boasts the combined assets of SP Setia, Sime Darby, I&P, Pelangi and Petaling Garden.

Malaysia’s property market is beginning to show softness as a result of domestic and international economic factors. Private property developers cannot help but worry about these large-scale integrations squeezing out their space for development. Responding to PN’s acquisition of SP Setia, Prime Minister cum Finance Minister Najib Tun Razak said that he does not wish to see government-linked companies being accused of being “the culprit behind private developers being squeezed out of the market”. Najib explained that the number of recent acquisitions in Malaysia does not mean that the government has lost confidence in the economy; rather it was motivated by “market forces” – since state-owned companies come in with their own strengths, and both buyers and sellers concerned have reached a consensus. “When the market presents an opportunity, they will seize it,” Najib remarked.

Najib offered some consolation at the Khazanah Forum 2011 when he mentioned his desire to abolish the Bumiputera shareholding system. That may help relieve the downward pressure that Malaysia’s property market faces. As a result of the Bumiputera shareholding and preferential issue, developers have to pay a 7% tax over their property sale prices to certain state governments before the reserved Bumiputera units could be released for sale. Poor sales of these Bumiputera units have caused cash flow problems for developers, which directly impacts housing development plans and sales volume. Nevertheless, there is a myriad of reasons behind Malaysian property developers revising their outlook of the property market from “optimistic” at the end of this year to “cautiously optimistic” over the first half of next year.

Firstly, after a double hit by high land prices and construction materials, Malaysia’s property prices over the next six months are expected to surge by 20%. At the same time, with the global economy being spooked by a double recession, this will definitely impact our GDP growth, which is tightly linked to property prices and transactions.

Secondly, the Ringgit has been weakening against other Asian currencies lately. With the stock market being rocked by political uncertainties triggered by the recent Sarawak election results and the on-going bet on the timing of the next general election, the property market is in for a rough ride. Even when we exclude these external factors, property developers have had two good years already. As we all know, what goes up must come down, so it is inevitable that the property sales target will be heading downhill soon.

In summary, as the flurry of merger and acquisition activities will have a short-term stimulating effect, it is not alarming to see a 10% drop in Malaysia’s overall property development. However, the industrial reshuffle has brought about the heavy selling of property stocks which resulted in their undervaluation. This presents a good opportunity for developers seeking to buy-over their competitors.

Source/转贴/Extract/Excerpts: http://www.sharesinv.com
Publish date: 10/11/11

ASL Marine:Order book above crisis levels (CIMB)

ASL Marine
Current S$0.52
Target S$0.61
Order book above crisis levels
Look out for stronger quarters as 1Q12was hit by one-off charges from shipbuilding and ship chartering. Order book outperformed expectations, with S$267m of shipbuilding contractslifting the booktoS$542m, above 2009 crisis levels.

1Q12 earnings meet Street and our expectations at 24% and 26% of FY11. We raise our EPS for FY13-14 to incorporate stronger shipbuilding but lower our TP, now at 0.7x P/BV (from 8x CY12 P/E), its average trading during the last crisis. Maintain Trading Buy.

Stronger quarters ahead
1Q12 net profit would have been better if not for several one-offs. First, shipbuilding’s gross profit margins dropped to a low of 7% (historically 8-9%) due to higher cost provisions for completed projects. Second, ship chartering booked additional depreciation charges from the cancellation of vessels held for sale. Gross margins here were 14% vs. above-20% historically.

We expect stronger quarters ahead without the above anomalies as margins normalise for shipbuilding and ship chartering. Management also guided for stronger ship repair and conversion in 2Q12 with larger projects to be completed and more repair jobs underway.

Small, but quality yard
We believe ASL could surprise further with contract wins. Indeed, its recent orders have differentiated it from Singapore peers (Otto Marine and Jaya) which are struggling with an order drought and execution. We raise our 2012 order target to S$330m from S$190m. Current order book has exceeded 2009 crisis levels of S$524m, enhancing its earnings visibility.

Below crisis valuations
With earnings expected to rebound in FY12, we believe ASL deserves to be re-rated. Valuations are undemanding at 0.6x P/BV, close to its previous trough of 0.5x. Catalysts should include stronger order wins and margins.


Source/转贴/Extract/Excerpts: CIMB-Research
Publish date:11/11/11

More wild rides with Italy as Europe's new worry

Weekend Comment Nov 11: More wild rides with Italy as Europe's new worry

JUST WHEN IT seems that some semblance of normalcy has returned to stock markets after the massive selloff in August and September, fears over the debt debacle in the euro zone have once again cast a pall over investors.

The MSCI World Index rose 10.3% in October after declining 15.5% in the previous two months. But markets worldwide suffered another bout of haemorrhaging this week, the sharpest pullback so far this quarter, as the prospect of Italy becoming the new centre of concern -- after Greece -- in the debt crisis send investors rushing for the exit.

The trigger was a surge in Italy’s bond yields past 7%. Greece, Portugal and Ireland required bailouts when interest rates on their bonds headed past that level. Naturally, investors took the spike in Italy’s borrowing costs as a cue that Europe’s third-largest economy might have to secure a life line to prevent a default by the government on its loans.

Major stock indexes in Europe declined more than 2% on Nov 9, while the Dow Jones Industrial Average lost 3.2%, its biggest single-session fall since Sep 22. Bourses in Asia tanked the day after, led by Hong Kong. Here in Singapore, the Straits Times Index pulled back 2.5%.

While markets rebounded slightly at the end of the week, visibility in the near term is expected to be clouded. Despite a successful bond sale by Italy on Nov 10, which enabled it to borrow €5 billion ($8.8 billion) at rates lower than analysts had expected, and Greece installing a new prime minister to lead the rebuilding of its economy, investors are likely to tread ever more carefully until they see evidence of progress in the euro zone.

According to Morgan Stanley, markets will likely shift their focus from sovereign risks in Europe to earnings risks in the next few quarters. Within Southeast Asian markets, it notes that Singapore faces the highest earnings risks given its linkages to the more-vulnerable developed world.

“We recommend investors sell the recent bounce,” says Morgan Stanley. “We continue to be ‘overweight’ telecom and bank stocks in Singapore as these are likely to be relatively defensive in these potentially volatile markets.”

Amid the uncertainties, though, other broking houses have picked out stocks in Singapore they think investors should start collecting.

“We are probably too early to call a bottom, but neither is the current inflationary environment conducive for staying in cash for too long. It is in this spirit that we recommend our ‘crisis recovery’ stocks,” says Kim Eng Securities. A “convincing indicator” of when value has emerged is when insiders, particularly executives running the business or major shareholders, start using their own money to buy back shares of their company, it adds.

Stocks in Kim Eng’s recovery portfolio comprise CapitaLand, DBS Group Holdings, Genting Singapore, Keppel Corp, Noble Group, Sembcorp Marine, Singapore Airlines, Singapore Exchange and Venture Corp.

The broking house has also recommended both an entry price and a floor price in a worst-case scenario for each of these counters -- $2.30 and $1.97 respectively for CapitaLand, $10.20 and $7.70 for DBS, $6.39 and $5.60 for Keppel, $1.25 and $0.50 for Noble, $3.50 and $3.00 for SembMarine, $5.85 and $4.00 for SGX, and $5.25 and $4.42 for Venture. Its proposed entry and floor prices are similar for both Genting and SIA, at $1.00 and $9.50 respectively.

Meanwhile, CLSA has identified Genting, Fraser & Neave, Keppel, Wilmar International and United Overseas Bank as stocks to own for the next five years. Of the companies in Singapore with a market value of more than US$2 billion ($2.6 billion) and a daily trading volume worth more than US$4 million, the five were selected based on a quantitative analysis of their revenue growth, margin stability and/or improvement, dividend payout, return on equity/capital, and earnings volatility. CLSA also took into account sector trends and dynamics over the next five years in picking these stocks.






Source/转贴/Extract/Excerpts: www.theedgesingapore.com
Publish date: 11/11/11

Osim: Wooing Chinese consumers (UBS)

OSIM International Limited
12-month rating Buy
Prior: Not Rated
12m price target S$1.50/US$1.18
Price S$1.16/US$0.91
52-wk range S$1.73-0.99/US$1.40-0.75

Wooing Chinese consumers
�� A premium brand for health and lifestyle products; Asia focused
OSIM International (OSIM) is a specialty retailer of health and lifestyle products, such as massage chairs and nutritional supplements, with a network of 582 OSIM and 268 GNC/RichLife stores. We believe its key competitive advantages are its premium brand perception, Asia-focused operations, good track record of launching new products, and self-managed stores. OSIM should benefit from the structurally rising discretionary income and demand for luxury/lifestyle products in Asia and China in particular.

�� Aggressive store expansion plans in China; M&A focus
The company already has 262 OSIM and 106 RichLife stores in 47 cities across China, and has aggressive store expansion plans in the country. OSIM also has a strategy (and history) of growing via M&A. It recently acquired a 35% stake in the luxury tea brand, TWG, and a 60% share in a JV for TWG’s expansion in North Asia. Having raised S$120m through a convertible bond issue in July, we expect more M&A activity in the coming months.

�� We forecast a net profit CAGR of 16% for 2010-13 and strong cash flow
Our forecast of 30-40 more stores a year for OSIM and 40-50 for RichLife in 2012- 15 is more conservative than management’s. We expect TWG to open 16 stores in North Asia by 2015. We forecast a 2010-13 revenue CAGR of 9% and net profit CAGR of 16%. Poor M&A judgement, a continuing weak macro environment and failure to execute on store expansion plans are the key risks to our forecasts.

�� Valuation: initiate coverage with a Buy rating and price target of S$1.50
We derive our price target from a DCF-based methodology and explicitly forecast long-term valuation drivers using UBS’s VCAM tool. We assume a 9.1% WACC and 3% terminal growth. Our price target implies 15.1x/14.3x 2012E/2013E PE.

Investment Thesis
We initiate coverage of OSIM International (OSIM) with a Buy rating and a price target of S$1.50. OSIM is a specialty retailer of health and lifestyle products, such as massage chairs (under the OSIM brand) and nutritional supplements (under the GNC/RichLife brands). Massage products contribute around 80% of the company’s revenue. It has a network of 582 OSIM stores and 268 GNC/RichLife stores. OSIM has aggressive store expansion plans in China for the next three to five years, where it intends to open 50-60 new OSIM stores and 60-100 new RichLife stores every year.

We believe OSIM’s key competitive advantages are:
�� Premium brand perception: In a 2008 independent survey conducted by market research firm, Synovate, and supported by International Enterprise Singapore, OSIM came out as the No.1 healthy lifestyle product brand in Asia. We believe brand perception is a key driver for the sale of discretionary and lifestyle products. OSIM also has a good track record of launching new and innovative products in the market every year.

�� Asia focused: OSIM’s business is Asia focused with 90%+ of its revenue derived from Asia. The company is well positioned to benefit from the structurally rising discretionary income and consumer demand for luxury and lifestyle products in Asia (especially China).

�� Self managed stores help control marketing and brand building: OSIM
operates a big network of self-managed stores, unlike its competitors, which sell through authorised dealers, distributors and online sales. We believe in-store experience is critical in the purchasing decision for discretionary and lifestyle products, such as massage chairs. Self-owned stores also help OSIM better control its marketing and brand building. Local competitors, such as OGAWA and OTO, have far smaller store networks.

OSIM also has a strategy (and history) of growing through M&A. It recently acquired 35% stake in luxury tea brand TWG and owns 60% in a JV for TWG’s expansion into North Asia. We estimate TWG will contribute 8% to net profit by 2015. We believe successful execution on TWG is critical, as it will determine investor confidence in management’s M&A strategy, especially after the Brookstone experience.

We believe the 34% correction in the share price from the recent peak in May was partly due to the company raising S$120m in convertible bonds to fund acquisitions. We believe the stock should rerate once acquisitions are complete and are well perceived by investors.

We forecast a 2010-13 revenue CAGR of 9%, net profit CAGR of 16%, and strong free cash flows (before acquisitions) of S$50m+ for 2012-13, driven by the company’s store expansion plans in China. Our price target implies a 2012E PE of 15.1x which is in line with OSIM’s average 12-month forward PE of 15.7x, or below 16.9x if we exclude Brookstone’s earnings.

Key catalysts
�� Favourable acquisitions could trigger rerating: While investors are concerned about the nature of potential acquisitions, management has stated that acquisitions will not be highly leveraged (as Brookstone was) and will be Asia focussed. We believe the stock could rerate once acquisitions are complete and are well perceived by investors. We forecast the company will invest S$50m each in 2012 and 2013 for acquisitions, and derive associate income of S$5m from 2014 onwards (a 5% return assumption compared to existing ROA of 16% and ROE of 37%).

�� Higher-than-expected store growth: Our store growth forecasts are conservative compared to management guidance. We forecast net additions of 30-40 OSIM and 40-50 RichLife stores each year in 2012-15 compared to management guidance of 50-60 OSIM and 60-100 RichLife stores each year. There could be upside risks to our estimates if the company can successfully achieve its store growth targets. Our sensitivity analysis suggests an additional 10 OSIM and RichLife stores would have a 4.1% impact on the following year’s net profit.

�� Higher contribution from TWG: We estimate TWG North Asia will expand from one store in 2011 to 16 stores by 2015 (six in Hong Kong, five in Taiwan and five in mainland China). While no details on TWG’s financials are currently available, we use management guidance on the associate income contribution from TWG and margins as a guide, and forecast that TWG (stakes in parent + TWG North Asia) will account for 8% of net income by 2015. Higher-than-expected store growth (especially in China) and profitability from TWG could serve as potential catalysts.

�� Brookstone IPO: OSIM wrote off its 55% holding in Brookstone during the 2008 financial crisis. The company expects Brookstone to achieve EBITDA of US$60m/year by 2014 (it is currently US$19m/year), which would put it in a position to potentially launch an IPO. We do not include any value from Brookstone in our forecasts, but we believe a successful IPO could contribute an additional S$0.13 per share (9% of our price target).

Risks
We believe the key risks for OSIM are: 1) poor judgement on M&A; 2) a weak macro environment; and 3) any failure to execute on store expansion plans. The company has a strategy (and history) of growing via M&A. Investors will likely be wary of the company’s track record of acquisitions because of the Brookstone acquisition in 2005, and a strategic investment in quoted securities in 2011 where it recorded a marked-to-market loss of S$7.7m. OSIM’s products are discretionary in nature and demand is highly leveraged to the macro environment.

Valuation and basis for our price target
We derive our S$1.50 price target from a DCF-based methodology and explicitly forecast long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of 9.1% and terminal growth of 3%. Our price target implies 2012E/2013E PE of 15.1x/14.3x, versus the current 11.6x/11.0x.

Our target PE compares to OSIM’s historical 12-month forward PE of 15.7x (16.9x if we exclude Brookstone’s earnings) and the average of 16.0x for comparable Hong Kong/China consumer discretionary companies.

The following is a summary of our key operating assumptions:
�� Net addition of 30-40 OSIM stores and 40-50 RichLife stores per year for 2012-15E. Same-store sales growth of 2-5% YoY and new stores achieving 30-40% of existing-store sales in their first year.

�� TWG to open 16 new stores in North Asia and contribute 8% of net earnings by 2015.

�� Revenue growth of 9-12% YoY for 2012-15E, driven by store growth forecasts. Gross margin to gradually decline from 70% in Q211 to 65% in 2015. Net income growth of 6-14% YoY for 2012-15.

�� The company to invest S$50m each in 2012 and 2013 for acquisitions and derive associate income of S$5m in 2014-15 (a 5% return assumption).

UBS versus consensus
For 2011-12, our revenue forecasts are 3-8% below consensus and our net income forecasts are 5-14% below consensus. We believe this is mainly due to our lower store growth and gross margin assumptions as well as differences in our forecasts for TWG. In terms of margins, Q1 and Q211 were the best quarters ever reported by the company and these levels may not be sustainable.

Poor judgement on M&A: While favourable acquisitions could trigger a rerating, acquisitions that are leveraged/perceived risky could lead to further derating. Investors will be wary of the company’s track record of acquisitions because of Brookstone in 2005 and the recent strategic investment in quoted securities, where OSIM recorded a marked-to-market loss of S$7.7m.

�� Weak macro environment persists/China hard landing: OSIM’s products are discretionary in nature and there could be a significant demand slowdown if the current macro uncertainty persists, or if there was a hard landing in China (which is not UBS’s base case). High operating leverage also magnifies the impact during a recession.

�� Execution on store expansion: While we conservatively forecast 30-40 new OSIM stores and 40-50 new RichLife stores per year in China for 2012-15, the company added only 25 stores/year between 2005 and 2010 (partly due to the global financial crisis). Lower-than-expected store growth will mean downside risks to our revenue and profit forecasts.

�� Inability to sustain margins above the historical average: While we forecast the company’s gross profit margin will gradually decline from the record high reported for H111, our estimates are still above the historical average due to a shift in production from Japan to China. There could be downside risks to our margin forecasts.

�� GNC/RichLife—competition from online stores: The nutritional supplement business is likely to face stiff competition from hundreds of online retailers that sell the same/similar products at lower prices. While the price difference can only offset shipping costs for bulk purchases, competition could potentially impact selling prices, margins and growth prospects for this segment.

�� Negative publicity and brand erosion: OSIM’s success depends largely on its brand value and product quality. Any negative publicity resulting from product defects could lead to brand erosion and impact sales.

Business segments and outlook
OSIM mainly operates in two business segments: 1) massage products, and 2) nutritional supplements (GNC/RichLife). We estimate that massage products contribute around 80% of the company’s revenue while GNC/RichLife contributes the remaining 20%.

In addition, the company recently acquired a 35% stake in TWG Tea (TWG parent), a luxury tea brand that owns high-end tea salons and boutiques in Singapore, the UK and Japan. OSIM has also set up a 60-40 joint venture with TWG (TWG North Asia) to expand TWG’s presence into the North Asian markets of Hong Kong, Taiwan, China and South Korea. For 2012, we do not expect a material contribution from TWG, but we expect TWG (parent + North Asia) to account for 8% of net income by 2015.

OSIM also owns a 55.6% stake in OSIM Brookstone Holdings (Brookstone), a US based specialty retailer. OSIM acquired this stake in 2005 and subsequently wrote it off its books in 2008 and recorded a loss of S$110m. In our estimates, we do not include any contribution from Brookstone.
Below, we examine each business segment and detail our operating assumptions:

Massage products
OSIM engages in the retailing and distribution of its own-brand massage products (such as massage chairs, head/shoulder massagers) and other household products focused on health and well-being. It has a network of 582 selfowned/ franchise stores in around 30 countries. We estimate this segment contributes around 80% of the company’s revenue.

OSIM stores can be broken down into three regions: North Asia (mainly China, Hong Kong and Taiwan); South Asia (mainly Singapore and Malaysia) and others. Of the 582 stores, we estimate that 262 are located in China followed by Taiwan (60), Malaysia (56), Singapore (39) and Hong Kong (39).

We estimate that massage chairs contribute around 60% of revenue within this segment. OSIM sells two to three different types of massage chairs with prices ranging from US$1,500-US$7,000. It generally launches a new variant of one of its existing massage chairs every year and an entirely new model every two to three years. Other products, such as head/shoulder/leg/small hand-held massagers, and other household products, such as air purifiers, contribute the remaining 40% revenue in this segment. These products are sold at various price points ranging from US$30 to US$600.

We think the company can meet its target of launching one new product every quarter given its track record (see History of product launches in the Appendix). These products have high gross margins of around 65%. Major operating expenses are store rentals, staff costs and marketing expenses. We believe the key revenue drivers of this business are: 1) store growth; 2) productivity (sales per store); 3) marketing and brand building; and 4) the frequent launch of new and innovative products.

Store expansion plans
After the net addition of 74 stores in 2010, the company has been focusing on improving productivity (sales per store) and has closed many unprofitable stores this year. In the first nine months of 2011, there was a net closure of 26 OSIM stores.

The company plans to add 50-60 OSIM stores in China annually in the next three to five years and add 10 stores per year in other locations. However, we are conservative in our store expansion estimates and forecast a net addition of 30-40 stores per year in China in 2012-15 and zero store growth in other markets.

This is mainly because:
(a) We believe the prevailing macro uncertainty globally and recent tightening measures in China are likely to slow the company’s store expansion plans.

(b) We expect further unprofitable store closures (in line with management’s focus on store productivity), which will partly offset the new stores.

Based on our discussions with management, we estimate capex of S$150,000 for every new OSIM store which could take around 24 months to break even. For sales per store, we forecast an 11% improvement in 2011 due to management’s renewed focus on productivity (and based on three quarters of reported results). For 2012-15, we forecast 2-5% YoY growth in same-store sales and also assume new stores in their first year achieve 30-40% of existing
stores’ revenue.

Owns 30% stake in its only supplier
OSIM’s massage products are manufactured by Daito-OSIM Healthcare (Daito) in which OSIM has a 30% stake. While OSIM products are designed in Japan, production has been entirely shifted from Japan to China since November 2010. Based on our discussions with the company, we believe OSIM is a major customer for Daito and accounts for approximately 50% of its manufacturing capacity, the remainder being utilised by Japanese retailers. There is also an agreement that Daito shall not supply products to competitors in markets where OSIM operates its own stores (China, Hong Kong, Taiwan, Singapore and Malaysia).

Having a 30% interest in its supplier helps OSIM plan its inventory and new product pipeline. However, since November 2010, Daito has been the company’s only supplier and this exposes OSIM to the risk of dependence on a single supplier.


We expect gross margins to gradually decline from 70% (in Q211) to 65% in 2015. The Q1 and Q211 gross margins were the best ever reported by the company and we think these margins may not be sustainable over the long term. However, our 65% assumption is still higher than historical average of 62% due to a shift in production from Japan to China.

Nutritional supplements
OSIM owns a 94.6% in OSIM Nutrients Incorporated Pte Ltd (ONI), a retailer of health and nutritional supplements (such as vitamins and minerals). ONI operates 162 franchise stores of US-based GNC Acquisition Holdings (GNC) in Singapore, Malaysia and Australia, and another 106 RichLife stores in China, its own brand. This business contributes the remaining 20% of revenue, and the gross margins are similar to those of massage products (around 65%). Besides GNC products, ONI also sells its own brand, LAC, and other third-party products at GNC outlets. In contrast, RichLife outlets mostly sell its own products and a few other third-party products (including GNC).

According to OSIM management, its GNC outlets are currently profitable and have been registering stable YoY growth. However, the RichLife business in China (launched in 2008) is yet to break even and management expects it to become profitable next year.

The company plans to open 60-100 new RichLife stores in China and another 10 stores in Malaysia annually for the next three to five years. Here too, we are conservative in our assumptions, and forecast 40-50 net new stores in China annually over 2012-15 and five new stores in Malaysia per year in 2012 and 2013.

This business is likely to face stiff competition from hundreds of online retailers that sell identical or similar products at lower prices. The price difference can more than offset the shipping costs for bulk purchases. This could potentially impact OSIM’s selling prices and margins for the segment. We also believe the company will close some of its unprofitable stores each year, which will partly offset the new stores.

That said, we think our assumption of 40-50 new stores annually is achievable because:
— The nutritional supplements market is still at a nascent stage in Asia and we expect strong demand growth (especially from China) due to increasing consumer focus on health and well-being. The company should also benefit from the fact that Chinese consumers consider international brands to be of superior quality than local brands, particularly for consumables.

— Competition from online retailers while real will only make sense for bulk purchases, and the majority of consumers are likely to continue buying smaller quantities from retail outlets.

We forecast 2-5% YoY growth in same store sales for 2012-15, and also assume that new stores in their first year achieve 30-40% of existing stores’ revenue. GNC/RichLife stores are smaller than OSIM stores and hence require lower setup costs as well as lower rents. However, they typically take longer than OSIM stores to breakeven. We estimate a setup cost of S$50,000 per new GNC/RichLife store, which could take around 24-30 months to break even.

TWG Tea
In April, OSIM acquired a 35% stake in TWG Tea (TWG parent) for S$31.4m. OSIM has also set up a 60-40 joint venture with TWG (TWG North Asia) to expand its presence to the North Asian markets of Hong Kong, Taiwan, China and South Korea.

TWG Tea is a luxury tea brand which owns 10 high-end tea salons and boutiques—eight in Singapore, one in the UK, and one in Japan. It also plans to open a store each in Malaysia and Dubai in the next 12 months. TWG generates 80% of its revenue from sales at its flagship stores and the remaining 20% via distribution to luxury hotels, restaurants and airlines. Of the 80% in-store sales, we estimate 70% is from tea sales and 30% from in-store F&B sales.

Of the S$31.4m spent on acquisitions, the company has classified S$25m as intangibles, which will be amortised over the next 20 years. OSIM will use equity accounting for its stake in TWG Parent and we estimate associate income of S$1.3-S$2.1m for 2012-15 from TWG. This will be partly offset by the S$1.25m annual amortisation.

TWG North Asia—16 stores by 2015E
TWG is a niche and premium brand with stores in prime locations (such as ION Orchard and Marina Bay Sands in Singapore). The company incurs high set-up and operating costs (rents). We believe the joint venture will be selective and sparing in opening of new TWG stores in North Asia.

We expect TWG North Asia to open its first store in Hong Kong, at IFC Mall in December 2011, followed by one store each in Hong Kong and Taiwan in 2012. In 2013, we expect five more stores to be opened (two in Hong Kong, one in Taiwan and two in Shanghai).

By 2015, we expect TWG North Asia to have opened 16 stores (six in Hong Kong, five in Taiwan, and five in mainland China, versus management guidance of seven to eight stores in each of these markets). We believe there is upside risk to our China stores forecast, as management could easily open more than five stores in five years in a market as big as China.

According to management, TWG’s gross margins are even higher than those of OSIM and GNC/RichLife. However, TWG’s operating costs are also higher, due to their premium locations (high rental expenses). While no details on TWG’s financials are currently available, we use management guidance on associate income contribution from TWG and margins as a guide, and forecast that TWG (parent + North Asia) will account for 8% of net income by 2015.

According to management, operating margins for TWG should improve after the completion of its headquarters in Singapore (its main packaging and distribution centre) in early 2012. We estimate capex of S$1.0-1.5m for every new TWG store.

Brookstone
OSIM owns a 55% stake in OSIM Brookstone Holdings (Brookstone) which it acquired in 2005 as part of a US$456m acquisition along with Temasek
Holdings and JW Childs Associates. The acquisition was a leveraged buyout and loaded Brookstone with a debt of US$205m.

Brookstone is a US-based specialty retailer that sells electronics, massage products, furniture and other home and travel accessories through its network of 310 stores in the US.

Brookstone’s EBITDA grew from US$32m in 2005 to US$55m in 2007. But during the global financial crisis in 2008, its recorded significant losses due to lower sales and high debt service costs (due to the leveraged buy-out). As a result, OSIM decided to make a non-cash impairment and wrote off the Brookstone investment from its books, recording a loss of S$110m. OSIM’s investment in Brookstone is ring fenced and there is no recourse to OSIM and, as a result, no requirement to account for any future losses.

Potential IPO exit
In October 2010, Brookstone restructured its debt from US$170m, due 2012, to US$135.5m, due 2014, which allows more time for a potential IPO. As part of this restructuring, OSIM invested US$9.6m in Brookstone’s senior preferred notes as they offered an attractive yield.

As at 2010, Brookstone was EBITDA positive (around US$19m) but recorded a net loss, mainly due to the high debt service costs. The company expects
Brookstone to achieve EBITDA of US$60m/year by 2014, which would put it in a position to potentially launch an IPO with a 5-6x EV/EBITDA multiple. If this is achieved, it could contribute an additional S$0.13 per share. In our estimates, we do not include any value from Brookstone.

M&A and fundraising activity
Equity investments in two listed companies
YTD, OSIM has invested S$12.8m for sub-5% stakes in two listed companies. On these investments, company has already recorded a marked-to-market loss of S$7.7m. However, according to management, these are strategic acquisitions and the company could consider increasing its stakes in the future.

S$120m CBs to fund acquisitions
In July 2011, the company raised S$120m through a convertible bond issue (due 2016) with a coupon of 2.75% and conversion price of S$2.025. The convertible bonds also have a call and a put option post July 2014. Assuming complete conversion, this would result in the issuance of 59.3m new shares (7.4% of the total outstanding shares).

Management plans to use this amount to fund future acquisitions. It hopes to take advantage of the recent turmoil in financial markets and is seeking attractive acquisition opportunities.

We believe investors are rightfully concerned about the nature of potential acquisitions given the company’s track record (Brookstone, and a recent investment where the company recorded marked-to-market losses). Management has acknowledged that excess leverage was the main setback for Brookstone, and has stated that the company will be more conservative regarding acquisitions in future. Management has indicated that future acquisitions will be Asia focused; where consumer demand and confidence is relatively buoyant (TWG Tea is an example of this).

We estimate company will invest S$50m each in 2012 and 2013 for acquisitions. We estimate associate income of S$5m per year from 2014 (a 5% return
assumption). We believe the stock could rerate once acquisitions are complete and are well perceived by investors.

TDR plan shelved
Earlier this year, the company was considering listing 42.5m shares on the Taiwan Stock exchange via Taiwan Depository Receipts (TDR). The share price was around S$1.70 at the time. Given the recent disruption in the financial markets and the sharp correction in OSIM’s stock price, the management decided not to continue with the TDR.

Warrants—no more dilution
OSIM issued S$135.5m warrants in March 2008, with an exercise price of S$0.35. Of this, 50.7m warrants were exercised in 2010 and the remainder during H111, including 75.4m exercised by the CEO, Ron Sim, which took his shareholding in OSIM to 67%. As at 30 June 2010, there were no outstanding warrants. Hence there will be no further dilution from warrants.

Financials
Profit and loss
�� Revenue: We estimate 9-12% YoY growth in revenue for 2012-15, driven by our store growth forecast. We forecast the company’s gross profit margin to decline from 70% in Q211 to 65% in 2015.

�� Operating costs: Driven by a 7-9% YoY increase in employee costs and 12- 15% YoY increase in store rentals for 2012-15E, we estimate the company’s operating margin will gradually decline from 18% in 2011 to 16% by 2015.

�� Net income: We forecast 6-14% YoY growth in net income for 2012-15, a 2010-15E CAGR of 15.0%.

�� Dividends: We forecast a 30% payout, in line with management guidance.

Operating costs
Operating costs for OSIM are a significant 53% of revenue. Of total operating costs, we estimate store rentals account for 37%, followed by staff costs (30%) and administration costs (16%). These are largely fixed costs (barring variable compensation to sales staff, and a small percentage of store rental can sometimes be pegged to store sales). The company also spends 6.5-7% of annual revenue on promotions and 2% on R&D.

As shown by our sensitivity analysis, OSIM has high operating leverage. We estimate the degree of operating leverage (DOL) = 3.6 (DOL is percentage
change in operating income / percentage change in sales) We expect operating margins to gradually decline in 2011-15 but to remain higher than the historical average due to higher gross margins.

Balance sheet
�� Cash and equivalent: We estimate S$222m cash and equivalent for end- 2011 mainly due to a S$120m convertible bond issue. OSIM should remain net cash over the forecast period.

�� Investment in associates and JVs: We estimate S$50m will be used for acquisitions in 2012 and 2013.

�� Treasury shares: OSIM’s treasury shares stood at 52.5m as at 10 October 2011. YTD the company has bought back 10m shares.

�� Cash conversion cycle: The company has a cash conversion cycle of 90-100 days due to high inventory turnover.

�� Intangibles: S$25m intangibles in 2011 due to the TWG Tea acquisition, to be amortised over 20 years.

Cash flow
�� Operating cash flow: We forecast operating cash flow of S$90-110m for 2012-15.

�� Capex: We forecast capex of S$23-28m for 2012-15, which is higher than historical capex, to reflect the company’s store expansion plans.

�� Free cash flow: We forecast a strong free cash flow of S$50-75m for 2012- 15. Management guides for a 30% dividend payout ratio.

Return on capital
�� Capital employed and total assets: These rose sharply in 2011 due to the S$120m CBs issued earlier this year. Hence, ROA and ROCE will depend on how this new capital is deployed by the company. Based on our assumption of S$50m acquisitions in 2012 and 2013 and a 5% return assumption, we expect ROA to gradually decline.

�� Net margin: We forecast the company’s net margin will gradually decline from the record high reported in Q211. However, we expect it to still be higher than the historical average, due to higher gross margins and associate income contribution.

�� Return on equity: We expect ROE to gradually decline from 37% in 2011 to 23% in 2015 mainly due to lower asset turnover (due to 120m CBs) and lower leverage. The company is likely to maintain an inefficient balance sheet as it maintains high level cash for potential acquisitions.

Valuation
Price target derivation
We derive our price target from a DCF-based methodology and explicitly forecast long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of 9.1% and terminal growth of 3%. Our price target implies 2012E/2013E PE of 15.1x/14.3x, compared with the current 11.6x/11.0x. Our target PE compares to the historical 12-month forward of PE of 15.7x, or 16.9x if we exclude Brookstone’s earnings (see PE band charts below). Our WACC of 9.1% is based on a risk-free rate of 1.6%, beta of 1.51 and an equity risk premium of 5.0%.

Comparables
Since 59% of OSIM’s revenue is derived from North Asia and almost all of the future growth plans are China focused, we compare OSIM’s valuations to Hong Kong/China specialty retailers and a few other China consumer discretionary companies.

OSIM is currently trading at 2012x PE of 11.6x. This compares to the average of 16.9x for Hong Kong/China specialty retailers, 15.1x for broadline retailers and overall average of 16.0x for comparable companies (see the comparables table on the next page).

In the China consumer discretionary sector, historically, retailers have always commanded a premium over the sector as a whole (see charts below). Currently, the MSCI China consumer discretionary retail trades at 16.9x while the MSCI Asia ex-Japan consumer discretionary retail trades at 14.2x.


Source/转贴/Extract/Excerpts: UBS Investment Research
Publish date:08/11/11

4Q11 Half-Time Review (Kenanga)

FBMKLCI/Market Update
4Q11 Half-Time Review
The U.S. and local markets have been more resilient than what we expected. We believe the strong performance of the local market for the last 1-1½ months could be due to the favorable seasonal pattern as well as stronger “foreign buying”. However, November is normally relatively weaker in MoM performance (which could be due to the normal higher base in October) before a typical rebound and good showing in December. As such, we believe that any weakness in November could be a buying opportunity to capitalise on a stronger performance by year-end. We have fine-tuned our 12-month trailing index target to 1,550 (1,530 previously). This target price is pretty much in line with the consensus target level of approximately 1,585. Should we extrapolate this index target until the year end, the FBMKLCI is estimated to be at 1,485 by then.

October is seasonally a good month, but how about November?
The Asian benchmarks jumped 7.3%, on average in the past one month, off most of their respective one-year lows in late-September 2011. While the external uncertainties remain, we believe the strong performance of the local market for the last 1-1½ months could be due to the favorable seasonal pattern. Based on our seasonal study, the 4Q is normally positive in terms of YoY and QoQ performance. Moreover, the month of October is likely to have higher chances of seeing positive YoY and MoM performance. November is normally relatively weaker in MoM performance, which could be due to the higher base in October, before seeing a good showing in December.

Stronger foreign buying.
We also notice that the strong performance of the local market was also driven by the stronger “foreign buying”, which amounted to RM1.6b between the period of 3 Oct and 4 Nov 2011.

The market now.
In line with the stronger index performance, we note that the probability of the market to dip below its low of 1,310 has turned relatively low, or <5% until end 1Q11. As such, while we believe that the market could potentially see another round of correction, as per our 178-week Time Cycle, its downside could be supported at the 1,365 level, the 1-standard deviation PER valuation below the 5-year mean. That said, we do not discount the possibility of a near-term correction as viewed from the short term technical outlook of the local and U.S. markets. In addition, note that the PER valuation of FBMKLCI is fast approaching its 5-year historical mean. However, even if such a short term correction occurs, we see it as buying opportunity to capitalise on a stronger performance by year-end.

As for our 4Q11 Top Picks,
our Top 10 Stock Picks have outperformed the FBMKLCI, rising 8.6% on average for the past one month (vs. 5.5% for FBMKLCI). AirAsia (MP, TP: RM3.98) was the top performer. It surged 24.2% in the last one month and surpassed our target price of RM3.98 briefly. As such, we have downgraded AirAsia to a Market Perform (from Outperform previously). We now also prefer Dutch Lady over Parkson Holdings. This is because we have downgraded Parkson Holdings (MP, TP: RM5.60), on valuation grounds after it turned into a “pure” holding company, which warrants a 25% discount in its SOP valuation. Ta Ann Holdings (OP, TP: RM5.66) is now our Top Pick for exposure in the Plantation sector, which we recently initiated coverage on. We believe its strong FFB growth is able to offset the negative outlook of the CPO price.

4Q2011 Half-Time Review
An overall rebound.
Asian stocks surged by its most for the last one month after some improvements in the Eurozone debt crisis (as European markets were very oversold on the Europe’s debts concern). Markets were also buoyed by the US economy growth accelerating to a 2.5% annualised rate in 3Q11 (up from 1.3% in the 2Q11) and as China hinted that that it may ease its monetary policy (see Figure 1). Surprisingly, the weak US market is now up 3.5% YTD, which could be in line with its historical one-year pre-presidential election performance (see our 3Q Investment Strategy – Bearish Mind, Bullish Heart dated 22/06/11 for details). Meanwhile, Asian indexes jumped 7.3% on average in the past one month, off most of their respective one-year lows in late-September 2011.

After this strong rebound, most of the regional and U.S. equity markets still offer high teen upsides as per the consensus numbers even after the recent rebound, except for FSSTI, TWSE and FBMKLCI, which only offer less than 10% upside.

October is seasonally a good month, but how about November?
While the external uncertainties remain, we believe that the strong performance of the local market for the last 1-1½ months could be due to the favorable seasonal pattern (see Figure 3). Based on our seasonal study (since 2000), the 4Q is normally positive in terms of YoY and QoQ performance. Typically, the month of October has always been very likely to have higher chances of seeing positive YoY and MoM performance. November is normally relatively weaker in MoM performance, which could be due to the higher base in October, before rebounding to a good showing in December.

Stronger foreign buying.
Apart from the favorable seasonal pattern, we also note that the strong performance of the local market in October was also driven by a stronger “foreign buying”, which had amounted to RM1.6b between the period of 3 Oct and 4 Nov 2011 (see Figure 4). This is somewhat within our earlier expectations where we believe foreign funds will flow back to this region for a better investment return once the dust settled.

The market now.
In line with the stronger index performance, we note that the probability of the market to dip below the recent low of 1,310 has turned relatively low, or less <5% until end-1Q11 (see Figure 6-7). Needless to say, the probability now for the market to drop to its rock-bottom valuation of 1,175 has approached zero, implying a remote scenario.

As such, while we believe that the market could potentially see another round of correction, as per our 178-week Time Cycle analysis, its downside could be supported at the 1,365-level, the 1-standard deviation PER valuation of the market below its 5- year mean. In other words, the market could well have completed its A-B-C correction wave minus a full-blown financial crisis occurring. In addition, we notice that the market trading activities have been dominated by a number of lower liners, implying a better market sentiment. Still, we do not discount the possibility of a near-term correction as per the short-term technical outlook of the local and U.S. markets (see Figure 8-11) as well as a potential relatively weaker November month ahead. Moreover, we note that the PER valuation of FBMKLCI is fast approaching its 5-year historical mean (see Figure 12-13). However, this could well be a buying opportunity to capitalise on a stronger performance by year-end.

In terms of stocks performance,
we note that Genting (OP, TP: RM12.57), MISC (UP, TP: RM6.05), IOI Corp. (UP, TP: RM4.11), MMHE (OP, TP: RM7.90), Tenaga Nasional (UP, TP: RM5.24), RHB Capital (MP, TP: RM9.80), PCHEM (Not Rated), YTL Power International (MP, TP: RM1.91), Digi.com (OP, TP: RM34.00) and YTL Corp. (Not Rated) were the Top 10 performers for the past one month. These stocks rebounded 13.2% on average in the past one month.

This is understandable as these stocks, with the exception of Genting and Digi.com, were the market leaders in the recent round of market sell-down. The strong performances of Genting and Digi.com were also in line with our positive view of their fundamental prospects. In fact, MMHE and Digi.com are two of our Top 10 Stock Picks for 4Q2011. Note however that except for Digi.com, PCHEM and MMHE, the other Top 10 performers still recorded an average decline of 13.2% YTD.

As for our 4Q11 Top Picks, our Top 10 Stock Picks have outperformed the FBMKLCI by rising 8.6%, on average for the past one month (vs. 5.5% for FBMKLCI). AirAsia (MP, TP: RM3.98) was the top performer. It surged 24.2% in the last one month and surpassed our target price of RM3.98 briefly. As such, we have downgraded AirAsia to a Market Perform (from Outperform previously). MMHE, Gamuda (OP, TP: RM3.66), Digi.com and Engkah Corp. (BUY, TP: RM3.82) were the other Top 5 performers. These Top 5 performers jumped 13.4% on average over the past one month.

Prefer Malaysia Airports over AirAsia.
At this juncture, we prefer Malaysia Airports (OP, TP: RM7.30) over AirAsia. In fact, we have recently upgraded Malaysia Airports after it announced that it was granted the approval to increase the PSC charge for international passenger at both the LCCT and other airports together with a revision of the parking and landing charges. The new tariff for PSC charge will be at RM32 per pax (RM25 per pax previously) for LCCT KLIA and RM65 per pax for the other airports (from RM51 per pax previously. The new charges will take effect on 15th November 2011. These new charges will impact MAHB’s FY11 and FY12 earnings positively by 1% and 8% respectively.

Prefer Dutch Lady over Parkson Holdings and Nestle (Malaysia).
We have also downgraded one of our Top Picks, Parkson Holdings (MP, TP: RM5.60) on valuation grounds. Operationally, we remain positive on its business operations in China, Malaysia, Vietnam and Indonesia. However, valuation-wise, we are cutting our target price for Parkson to RM5.60 (from RM6.30 previously) due to several factors, the main one being that we have now applied a 25% discount rate to our valuation due to its “new” pure holding company status. In addition, we are also seeing the lower valuations of Singapore’s retail stocks compared to their Malaysian peers. Given the lower valuation, we had downgraded our rating on Parkson from an Outperform to a Market Perform. We now prefer exposure to Dutch Lady (OP, TP: RM22.30) as a proxy to the Consumer Sector and private consumption. We believe Dutch Lady offers better value as opposed to its peer – Nestle (M) (MP, TP: RM52.90). This is because the recent surge of Nestle’s share price has almost hit our target price with only a mere 5.8% upside left. In addition, Dutch Lady is a also famous household name in Malaysia and best known for its quality branded dairy products spanning from infant formula and growing up milk to fruit juice and yoghurt snacks. Dutch Lady also has strong earnings track records and has been consistently distributing high dividend yields of 4%-5% for the past number of years (except for 2008 due to the higher working capital and capital expenditures needed then). We value the company at RM22.30 based on a Dividend Discount Modal (“DDM”).

Ta Ann Holdings is now the Top Pick for exposure in the Plantation sector.
We have recently initiated coverage on Ta Ann Holdings with an OUTPERFORM rating and a Target Price of RM5.66, based on 9.8x forward PE (-0.5 standard deviation below Ta Ann’s 5-year average forward PE) on its FY12E EPS of 57.8 sen. We like Ta Ann for: 1) its young oil palm tree age profile of 4.5 years, 2) an expected surge in its Fresh Fruit Bunch (FFB) volume (to double in 3 years), 3) its recognition as a planter will provide a re-rating catalyst from its current level of 8x to 11x-12x forward PE, 4) its attractive dividend yield, and 5) an expected earnings jump in FY11-FY12E of 94%-23%.

Fine tuning our index target.
Since the publication of our 4Q11 Investment Strategy Report, we have done some revisions on our estimates and target prices for Digi.com, IOI Corp, Malaysia Airports, Maxis (MP, TP: RM5.39) and SP Setia (Accept Offer, Offer Price: RM3.90). We are also in the midst of reviewing our Target Prices for all the banks under our coverage. As such, we have fine-tuned our 12-month trailing index target to 1,550 from 1,530 previously. This target price is pretty much in line with the consensus target level of approximately 1,585. Should we extrapolate this index target until the year end, the FBMKLCI is estimated to be registered at 1,485 by then.


Source/转贴/Extract/Excerpts: Kenanga-Research,
Publish date:08/11/11
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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