Yangzijinag & SIA Eng (13 Apr 2010)

By Carmen Lee
Tue, 13 Apr 2010, 08:23:44 SGT

Market Pulse: Yangzijinag & SIA Eng (13 Apr 2010)

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Yangzijiang Shipbuilding: Steadiness for the win

Summary: Yangzijiang Shipbuilding (YZJ) has seen its share price appreciate about 19% since we raised our fair value estimate on 24 Feb 2010 compared to the STI’s 8% rise. Factors that have contributed to this out-performance include consistent deliveries of vessels with no order cancellations, expectations of a dual-listing in either Hong Kong or Taiwan, as well as stellar stock price performance by Cosco. Talks of possible IPOs by fellow shipbuilders also contributed to the positive sentiment. YZJ is developing its offshore capabilities, but it is still in the early stages of achieving this end. We like the group’s good execution ability and steady results as it proved capable of weathering the shipbuilding crisis thus far. However, we would caution against over-enthusiasm at current price level. A peer comparison shows that YZJ is trading at around the industry average. We are raising our fair value estimate to S$1.44 (based on 12x FY10F earnings) but as the upside potential is less than 10%, we are downgrading our rating to HOLD. (Low Pei Han)

SIA Engineering: MRO market sees brighter outlook

Summary: The aviation industry has been picking up momentum since the beginning of 2010. We view this continued improvement in demand for scheduled air traffic as a positive for MRO provider SIA Engineering Company (SIAEC), as airlines look to rebuild capacities, hence translating to more MRO projects for the group. Nevertheless, we acknowledge that the growth outlook for MRO market in the near term may still be tenuous and is largely linked to the health of the global economy. As such, we keep our FY10 forecasts unchanged, but adjust our FY11 estimates upwards by 2.4-4.8% to factor in a more affirmative recovery in the MRO market expected from 2H10 onwards. Our fair value is raised from S$3.19 to S$3.66 as we peg a higher PER of 18x (14.5x previously) to our SOTP earnings component. At current price, we maintain HOLD on SIAEC. (Kevin Tan)

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NEWS HEADLINES

- China’s 1Q10 new lending constituted just 35% of the government’s target for the full year, compared to 48% in 1Q09.

- Banyan Tree has terminated its management contract for the Banyan Tree Al Areen Resort in Bahrain.

- A unit of CapitaMalls Asia has established a S$2m MTN programme.

- Beauty China Holdings will be delisted from the SGX by 24 Apr 2010.

- Hup Soon Global has said it is reconstituting its board.

- Japan Land posted net loss of S$4.92m in 3Q10 compared to net profit of S$817k in 3Q09.

- Cityneon Holdings said its order book has increased to S$53.6m in Mar 2010 compared to S$48.5m a month earlier.

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