By Carey Wong
Mon, 3 May 2010, 09:01:07 SGT

Market Pulse: SingPost, SMRT, Micro-Mechanics and Swiber (03 May 2010)

FOCUS

Singapore Post: FY10 results within expectations

Summary: Singapore Post (SingPost) reported a 9.2% rise in revenue to S$525.5m and a 10.9% increase in net profit to S$165.0m in FY10, both within 4% of our full-year estimates. However, net profit was better than the street’s expectations (S$153m Bloomberg consensus). In 4QFY10, group revenue rose by 15.9% YoY due to improvements in all business segments (mail, logistics, retail), as well as inclusion of revenue of Quantium Solutions. The outlook for the group is now better with a pick up in business activities as SingPost’s earnings are directly dependent on the Singapore economy. SingPost said it has been actively exploring investment and business opportunities in Singapore and the region. A dividend of S$0.025/share has been declared, bringing the full year payout to S$0.0625/share, same as FY09’s. With a total expected return of about 12% (including 5.7% dividend yield), we maintain our BUY rating on SingPost with a DCF-based fair value estimate of S$1.16. (Low Pei Han)


SMRT Corporation: Higher opex dents 4QFY10 earnings

Summary: SMRT’s 4QFY10 results were below expectations. Revenue grew 3.7% YoY to S$225.1m, vs. our projection of S$231.0m due to lower-than-expected train, rental and advertising revenue. Net profit, on the other hand, eased 41.3% YoY to S$22.7m, coming in significantly lower than our S$34.9m estimate, due to higher staff and maintenance costs. With commencement of Circle Line Stages 1-2 in April, SMRT expects its 1QFY11 revenue to register YoY growth. However, management cautioned that it expects operating expenses to trend upwards as well, mainly due to increased headcount and train runs. We trim our FY11 forecasts by 0.3-7.3% to factor in lower-than-expected revenue and higher ramp-up costs, but hike our dividend estimates to assume a higher earnings payout (roughly in line with FY10 payout of 79.2%). This raises our DDM-based fair value to S$2.33 from S$2.22 previously. Noting its share price’s outperformance (+9.1% since last report, +18.8% YTD), we now see limited upside potential. Downgrade SMRT to HOLD on valuation grounds. (Kevin Tan)


Micro-Mechanics: Robust 3QFY10 growth

Summary: Micro-Mechanics Holdings (MMH) delivered a strong set of 3QFY10 results. Despite our upward revision in forecasts almost a week ago, the quarterly revenue of S$10.1m (+85.1% YoY, +3.6% QoQ) came in higher than expected due to sustained activity in the semiconductor industry segment and nascent recovery in the capital equipment market. On the back of improved margins from higher capacity utilization and operational efficiency, its net profit of S$1.3m (+5.8% QoQ) also exceeded our earnings expectation and reversed the loss of S$1.4m incurred in 3QFY09. Going forward, however, MMH is keeping a relatively cautious tone on the outlook, cautioning that the global markets and business environment are likely to witness more volatility. We will be meeting management later in the morning for more updates. For now, we keep our BUY rating but place our fair value under review. (Kevin Tan)


Swiber Holdings: Secures US$148m contract from oil and gas operator

Summary: Swiber Holdings has secured a notice of award from an undisclosed oil and gas operator in South Asia worth about US$148m. Work scope comprises engineering, procurement, transportation and installation of pipelines in South Asia including platform modifications. The offshore work will commence in 4Q10 and should be completed by 2Q11. We think this contract is likely to be from the Mumbai High North job by India’s ONGC, in which Swiber was the lowest bidder at US$148.37m (next in line was Punj Llyod at US$165.75m, according to Upstream). Our new order wins estimate for FY10 is US$480m, and Swiber’s share of contract wins YTD comprise about 61% of this figure. Pending more details from the management, we maintain our HOLD rating with S$1.10 fair value estimate. (Low Pei Han)


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


NEWS HEADLINES

- Singapore’s unemployment rate dipped from a revised 2.3% last Dec to 2.2% in Mar.

- DBS Group is confident of earning a ROE of 10% or more in the near future, according to its CEO.

- MTQ Corp turned in a 10% rise in earnings to S$12m in FY10.

- Mercator Lines has signed two charter contracts for its vessels.

- Helped by strong sales and progressive revenue and profit recognition of a property project in Shanghai, Tuan Sing Holdings posted net profit of S$20.9m in 1Q10, up from S$724k in 1Q09.

- Noble Group said it has no interest in having any talks with Macarthur Coal over potential merger transactions related to any of its coal assets.

- Private equity firm AIF Capital will buy a 10% stake in a Chinese university owned by Raffles Education.