By Carmen Lee
Mon, 19 Apr 2010, 08:35:28 SGT

Market Pulse: CapitaLand, M1 & Yangzijiang (19 Apr 2010)

FOCUS

CapitaLand Ltd: No major surprises

Summary: CapitaLand (CapLand) reported a good set of 1Q10 results. Revenue increased 41.1% YoY to S$687.3m, largely underpinned by its residential projects in Singapore, China and Vietnam. PATMI jumped 169.3% YoY to S$115.4m due to the increase in revenue and progressive profit recognition from Orchard Residences. In Singapore, CapLand sold residential units valued at about S$800m in 1Q10. Sales momentum in China remained strong in 1Q10. While we reckon that tightening measures in China will have greater impact on investment purchases and dent buyer sentiment over the near term, the impact on CapLand could be mitigated by its diversified landbank in China. Our fair value, which was pegged at parity to RNAV, has been raised to S$5.09 due to the increase in market values of its listed entities. While we see short term headwinds arising from policy uncertainties in the Singapore and China property markets, we remain optimistic over the long term prospects of CapLand. With an upside potential of 24.2%, we maintain our BUY rating on CapLand. (Foo Sze Ming)

MobileOne: Upgrades 2010 earnings guidance

Summary: M1 Ltd posted its 1Q10 results over the weekend, with revenue was up 33.6% YoY and 15.2% QoQ to S$249.0m, or about 17.5% ahead of our estimate, but it was mainly due to handset sales (iPhone). Net profit fell 6.2% YoY, though up 5.6% QoQ, to S$39.3m, and was 1.3% below our forecast. Nevertheless, the iPhone 3GS has definitely helped M1 to further increase its post-paid customers by 2.3% QoQ to 933k (+21k); it also managed to reduce its monthly churn from 1.6% in both 1Q09 and 4Q09 to 1.4%. Buoyed in part by internal efficiency, a return to normalcy in economic activities and new business opportunities (provided by the NBN), M1 now expects 2010 earnings to improve as compared to 2009 (vs. comparable previously). To reflect the higher handset sales and recent margin trend, we raise our FY10 estimates for operating revenue by 20.8% and net profit by 1.5% and FY11 by 23.0% and 7.6% respectively. This also bumps up our DCF-based fair value from S$2.28 to S$2.40. Maintain BUY. (Carey Wong)

Yangzijiang Shipbuilding: Aiming to enter offshore sector

Summary: Yangzijiang Shipbuilding (YZJ) will place out 83.555m new ordinary shares at an issue price of S$1.295/share to a Middle East investor (investor), raising proceeds of about S$108m which will be used to acquire PPL Holdings Pte Ltd (PPL) from Baker Technology Ltd (Baker) in a joint bid. YZJ, the investor and Mediterranean Success Group plan to acquire stakes of 50.1%, 45% and 4.9% in PPL respectively. PPL holds a 15% stake in PPL Shipyard Pte Ltd and the balance is held by Sembcorp Marine. If YZJ successfully obtains control of PPL, it would strengthen the group’s capabilities in the design and construction of offshore drilling rigs. YZJ has issued a binding letter of offer to Baker which has up to 4 May 2010 to accept the offer. As shareholders of Baker also have to approve the sale, we maintain our HOLD rating with S$1.44 fair value estimate for now, pending details from management. (Low Pei Han)

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

NEWS HEADLINES

- China Fibretech warned it will be reporting “significantly lower” revenue and pre-tax profit for 1Q10 compared to 1Q09.

- Federal International (2000) Ltd has won its first batch of contracts worth US$210m to supply coal, iron ore and manganese ore to a Singapore subsidiary of a China company.

- C2O Holdings posted net profit of S$2.6m in FY10 compared to S$828k in FY09.

- SATS and Air India will form a JV that will house three existing ground and cargo handling JVs in Bangalore and Hyderabad.

- Starhill Global REIT has entered into conditional sale and purchase agreements to acquire Starhill REIT’s interests in Starhill Gallery and Lot 10 Shopping Centre for about S$450.1m.

- China Milk has appointed KPMG Advisory Services as special auditors.

- Asia Pacific Breweries has raised its effective interest in PT Multi Bintang Indonesia to 80.6% from 68.5%.