By Carmen Lee
Wed, 31 Mar 2010, 08:34:51 SGT

Market Pulse: Valuetronics, AusGroup & DBS (31 Mar 2010)

FOCUS

Valuetronics Holdings: Secured exclusive rights to use renowned brands

Summary: Valuetronics Holdings Limited (VHL) has recently entered into a licensing arrangement with Whirlpool Properties Inc, Maytag Corp and Maytag Limited for exclusive, non-transferable rights to use “Whirlpool”, “Maytag” and “Amana” brands for portable Air Purifier appliances in the North American market. We view this development positively as we see growth potential for this new product category, which is likely to be driven by higher quality of living and health awareness. Nevertheless, we are keeping our FY10-11 forecasts unchanged as contribution from this segment, as guided by management, is not expected to be significant until 2011. As we roll our valuation to FY11, however, our fair value is now raised from S$0.19 to S$0.29 (still pegged at 8x PER). We maintain our BUY rating on VHL. (Kevin Tan)

AusGroup Ltd: Slow tendering activity clouding earnings visibility

Summary: Woodside’s Pluto LNG project and BHP’s RGP 5 iron ore project are likely to underpin AusGroup Ltd’s 2H10 revenue and should help the group show sequential improvement. But we believe that subdued tendering activity continues to be a problem – there is a large potential pool of projects but many players are still taking their time to resume or launch projects. AusGroup has not announced a contract win since 14 Jan. Oil & gas projects have not been a saving grace, either. A report tabled in the West Australian Parliament found that just half of Gorgon-related contracts have been awarded to Australian companies. With little tendering activity, AusGroup may find it tough to replenish its order book as current projects end. This could impact FY11 earnings or lead to another lop-sided year like FY10 (weaker 1H, stronger 2H). Management tells us that it expects more activity from 1HFY11 onwards. It may be prudent to adopt a wait-and-see approach: maintain HOLD and S$0.60 fair value on limited earnings visibility. (Meenal Kumar)

DBS: Sold stake in Cholamandalam DBS Finance

Summary: DBS announced that it has sold its 37.5% stake in Cholamandalam DBS Finance to the Murugappa Group, its joint venture partner. This transaction was done at Rs 91 per share or S$2.84, a premium of 1.2% over yesterday’s closing price. Based on this, the total transacted price is about S$56m. The group also announced that this is in line with its strategy to focus on corporates, high net-worth individuals (HNIs) and emerging affluent customers. Meanwhile, DBS India has also been growing its footprint. For the year ended 31 March 2009, DBS India recorded revenues of Rs 617 crore (S$192m) and profit after tax of Rs. 259 crore (S$81m). Over the same period, DBS India’s headcount has grown by over seven times to about 400. We do not expect the above transaction to have a material impact on DBS. As such, we are maintaining our BUY rating and fair value estimate of S$16.60. (Carmen Lee)

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

NEWS HEADLINES

- SingTel has priced its issue of 10-year bonds with a semi-annual coupon of 3.4875% per annum.

- CapitaMall Trust intends to issue US$500m 4.321% fixed rate notes due 2015.

- A unit of Noble Group has secured a US$30m loan from the European Bank for Reconstruction and Development to support the company’s future development.

- Ramba Energy said the acquisition of Ellipse Energy Jatirarangon Wahana Ltd was completed on 29 Mar 2010.

- TPV Technology reported net profit of US$141.2m in FY09 compared to US$97.2m in FY08.

- Celestial Nutrifoods has received a qualified audit opinion.

- “Going concern” red flags have been raised at Sunmoon and Ocean International.