By Carmen Lee
Tue, 3 Feb 2009, 08:19:42 SGT

Market Pulse: Micro-Mechanics & LMIR Trust (3 Feb 2009)

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Micro-Mechanics: Soft 2QFY09 forebodes economic calamity

Summary: Micro-Mechanics (MMH) delivered a weak set of 2QFY09 results, with revenue dipping 7.5% YoY (-23.3% QoQ) to S$9.0m, and net income plunging 93.3% YoY (-91.9% QoQ) to S$0.2m, due to an unprecedented fall in customer orders across its manufacturing locations. In view of this, the group plans to step up its efforts to structurally lower its cost base and improve its operational efficiency. While MMH is likely to achieve a leaner cost structure from its cost reduction measures, we believe that the group’s profitability would be afflicted by the exceptionally harsh market conditions. In 3QFY09, particularly, we are expecting the group to sink into the red amid the shorter/slower quarter (due to Chinese New Year). As such, we again ease our FY09 forecasts by approximately 3-79%. As MMH enters into 3QFY09, we now roll over our valuation to FY10, deriving a fair value estimate of S$0.24 (S$0.31 previously), based on 7x FY10F EPS. Maintain HOLD on MMH as negatives appear to be priced in. (Kevin Tan)

For more information on the above, visit www.ocbcresearch.com for detailed report.

Lippo-Mapletree Indonesia Retail Trust: Disappointing 4Q08 results

Summary: Lippo-Mapletree Indonesia Retail Trust (LMIR Trust) posted S$21.4m in gross revenue, 1% higher than the trust’s forecast at IPO but 19% lower QoQ. The REIT recorded net property income of S$12.4m, 38% lower than LMIR’s forecast and 51% lower QoQ. Meanwhile, property values slipped 9% in Indonesian Rupiah terms, by our estimates, at the annual revaluation. Because of that downward shift in valuations as well as adverse IDR-SGD forex movements, LMIR Trust booked a S$344.5m fair value loss on its P&L statements. The trust will distribute S$3.2m to unitholders, 79% lower than LMIR’s forecast and 81% lower QoQ. This translates to a DPU of 0.3 cents for the quarter, or an annualized yield of just 4.3%. The results did not meet our expectations. The trust said that certain tenants have given notice of termination of their leases and it has made provisions for S$7m in receivables. With the wide deviation in actual versus LMIR’s forecast 4Q results, we are placing our rating and fair value estimate (prev: BUY, S$0.39) under review until we speak with management. (Meenal Kumar)

NEWS HEADLINES

- China is considering additional measures beyond a RMB4 trillion spending plan to boost its economy.

- Sembcorp Industries is discussing with several financial institutions for funding for the US$1b-plus Salalah independent water and power project in Oman.

- SIA Engineering posted a 17.5% surge in net profit to S$63m for 3Q09 on the back of a 8.6% rise in revenue to S$270m.

- Fastech Synergy, which has been negotiating with a creditor over a loan, said all its creditors are “receptive” to its loan restructuring plan.

- Olam International has bought a peanut shelling and blanching company in Argentina for US$7m, as part of plans to build a fully integrated peanut supply operation.

- Yeo Hiap Seng expects to report a net loss for 4Q08 and FY08 as there will be a S$5.9m building revaluation loss and a net fair value loss of S$1m for investment properties, among others.

- Chosen Holdings’ net profit for 1H09 fell 25.5% YoY to S$1.83m as revenue fell 20.6% to S$57.1m.

- The Hour Glass warned it will incur a net loss for 3Q09 due to a chargeable impairment loss of about S$14.1m on its investment securities. It expects to remain profitable for FY09.

- Gul Technologies reported a 284% rise in net profit to US$40.3m for FY08 despite flat revenue of US$144.7m mainly because of a US$34m gain in waiver of loans and other payables due to a substantial shareholder.

Please refer to the full report for more information and additional disclosures.