By Carey Wong
Thu, 13 May 2010, 08:58:31 SGT

Market Pulse: UOL, SingTel, Wilmar, Golden Agri, CityDev, Parkway, ASL Marine, Koda, KS Energy and Soilbuild (13 May 2010)

FOCUS

UOL Group Ltd: Core PATMI growth remains strong

Summary: UOL Group reported a good set of 1Q10 results that was in line with our expectations. Revenue increased 26.7% YoY to S$249.2m., driven by property development and hotel operations. Reported PATMI plunged 73.5% YoY to S$87.9m but excluding the impact of one-off items, we estimate that core PATMI would have increased by 54.6% YoY to ~S$83.6m. We have now raised our selling price assumption for Waterbank, from S$1,050 psf to S$1,120 psf and this adds S$0.04 per share to our RNAV. Despite its depleting land bank, we are not overly concern over UOL’s growth outlook as earnings for the next three years will be underpinned by properties sold over the past year. Management remains focused on cost discipline in its land bids and there will be ample opportunity for UOL to replenish its land bank going forward. Our fair value has increased to S$5.33 and we maintain our BUY rating on UOL. (Foo Sze Ming)


Singapore Telecom: Strong 4Q10 results

Summary: SingTel posted a much stronger-than-expected set of 4Q10 results this morning. Revenue jumped 25.4% YoY (+0.5% QoQ) to S$4470.6m, or nearly 32% ahead of our forecast, driven by a robust 13% growth in Singapore, while Optus’ revenue grew by 6.1%; the steep 26% strengthening of the AUD also played a large part. Net profit climbed 12.4% YoY and 2.5% QoQ to S$1015.2m, or nearly 50.8% above our estimate; this after associate earnings grew by 6.1% YoY, boosted by the significant 15% appreciation of the IDR and other fair value gains on mark-to-market valuations of foreign currency denominated liabilities of associates. For the full year, revenue rose 13% to S$16,870.9m, or 6.8% ahead of our forecast, while net profit also climbed 13% to S$3907.3m, or 9.6% above our estimate. SingTel declared a final dividend of 8 S cents per share. For FY11, SingTel expects its Singapore operating revenue to grow at mid single-digit level, driven by higher mobile, IT & Engineering and mio TV revenue; but EBITDA margin is expected to decline to around 35% and EBITDA to grow within low to mid single-digit range. Capex is estimated at around S$830m, while free cash flow is expected around S$1.1b. For Australia, both operating revenue and EBITDA are expected to grow at mid single-digit levels; capex is estimated at around A$1.2b, while free cash flow is expected to be above A$1.0b. Associates-wise, SingTel expects their ordinary dividends to increase, with higher profits reported by Telkomsel in 2009. SingTel also expects a dividend payout of around 45-60% of underlying net profit. We will have more after the analyst briefing later; maintain BUY with S$3.51 fair value. (Carey Wong)


Wilmar: 1Q10 results mostly in line

Summary: Wilmar International Limited’s (WIL) 1Q10 results were mostly in line. Revenue grew 36.4% YoY (but fell 2.2% QoQ) to US$6764.1m, meeting 24.8% of our full-year forecast. Net profit grew 5.6% YoY to US$401.4m, or around 21.4% of our full year estimate; but down 9.2% QoQ due to the extra US$17.0m fair value gain on its biological assets in 4Q09. Going forward, WIL remains upbeat about the economic activities in Asia, especially in China, India and Indonesia; it adds that it will continue to leverage on its well-established presence in these markets for growth. But WIL also notes that some countries have started to tighten credit to restrain inflation. We are maintaining our FY10 estimates and our 20x FY10F EPS valuation peg, but our fair value eases from S$8.23 to S$7.95 due to weaker USD/SGD assumptions. We also maintain our BUY rating. (Carey Wong)


Golden Agri-Resources Ltd: Strong 1Q10 Showing

Summary: Golden Agri-Resources (GAR) reported a strong set of 1Q10 results yesterday. Revenue jumped 51.5% YoY (down 2.9% QoQ) to US$624.5m, but was slightly below our forecast of US$639.4m. Net profit surged 10.3x YoY to US$88.5m; core net profit (excluding exceptional items) came in at US$88.5m, or about 3.6% above our US$85.9m forecast. As expected, GAR benefited from lower fertiliser cost (about 20% lower YoY) but this was slightly negated by the stronger IDR (+20% YoY) which resulted in higher labour cost. For the rest of 2010, GAR remains positive on the entire palm oil industry as it believes that long-term fundamentals are intact, despite periods of volatility. As such, GAR intends to spend US$400m in capex to expand its palm oil plantations by 50k hectares (planting and acquisition), build up milling capacity in line with the growth in fruit production, and add more downstream processing capacity and distribution and logistics facilities in both Indonesia and China. To reflect the strong start to the year, we are raising our FY10 revenue and earnings estimates by 3.5% and 8.1% respectively and also our valuation from 17x FY10F EPS to 18x; but due to weaker USD/SGD assumptions, our fair value remains unchanged at S$0.72. Maintain BUY. (Carey Wong)


City Developments Ltd: Earnings momentum remains strong

Summary: City Developments (CDL) reported a good set of 1Q10 results which came in within our expectations. Revenue increased 20.6% YoY to S$750.5m, largely driven by the strong performance from property development. PATMI jumped 67.6% YoY to S$139.3m, but excluding the impact of one-off items, we estimate that core earnings would have increased by 16.1% to ~S$98m. Recovery in hotel operations is still intact. Management continues to see signs of recovery but remains cautiously optimistic over its outlook. CDL plans to reserve at least 100 units at The Residences at W for investment or en bloc sales and we think that this is a sound move. Over the near term, CDL plans to launch the former Concorde Residence at Thomson Road and a joint venture project next to Livia. No changes have been made to our estimates but with the increase in M&C’s share price, our fair value has increased to S$11.11. With an upside potential of 2.3%, we maintain our HOLD rating. (Foo Sze Ming)


Parkway Holdings: Good start to 2010

Summary: Parkway Holdings reported a healthy set of 1Q10 results last evening. Revenue grew by 7.8% YoY to S$247.6m, driven mainly by its hospital segment, while PATMI rose 22.2% YoY to S$26.0m due to lower finance costs and an absence of S$2.2m impairment loss in 1Q09. Both revenue and PATMI were largely in line with our expectations, forming 22.7% and 21.0% of our full-year sales and earnings forecasts respectively. With the gradual recovery in the global economy, Parkway expects medical tourists to continue to visit Singapore in the coming quarter and benefit its local hospitals. Management also updated that the new hospital development at Novena is progressing according to schedule and expects to recognize profits from sale of the medical suites from 2H10 onwards. We keep our FY10 forecasts largely intact as the results were within our expectations. However, we now raise our fair value to S$3.71 from S$3.53 as we ascribe a higher PER of 32x (30x previously) to our core FY10F EPS in SOTP valuation to factor in management’s strong execution and a more affirmative outlook. At current price, we continue to see an attractive 10.7% upside potential. Maintain BUY. (Kevin Tan)


ASL Marine: Results within expectations

Summary: ASL Marine (ASL) reported a 3% YoY rise in revenue to S$110.1m and a 17.3% drop in gross profit to S$14.2m in 3QFY10, accounting for about 23% of our full-year estimate. Core net profit came in at about S$7.4m such that the 9MFY10 figure made up 73% of our full-year estimate. With greater competition, ASL has experienced pricing pressure in the repair segment. However, the increased number of jobs undertaken supported revenue. Ship charter rates are stabilising, but they are unlikely to recover in a great way soon as market demand is still relatively weak. The environment remains challenging but ASL’s diversified operations mean that its outlook should be comparatively better than pure shipbuilders in the region, considering minimal new order flows. Besides a growing global vessel fleet that should support ship repair in the long term, there may be additional vessel charter opportunities in areas such as Australia. Given an upside potential of about 18%, we maintain our BUY rating on the stock with a fair value estimate of S$1.09. (Low Pei Han)


Koda Ltd: On track for a turnaround in FY10 despite weak 3Q

Summary: Koda Ltd (Koda) reported its 3Q10 results with revenue jumping 46.6% YoY to US$9.5m. Net losses narrowed to US$0.5m from US$1.0m a year ago. While we had anticipated mild losses in view of 3Q being its seasonally weakest quarter, the extent of the loss was wider than expected. Nevertheless, the group remains on track to return to profitability in FY10. The group’s 9M10 earnings have returned to the black with profits amounting to US$0.4m versus a US$0.2m loss in 9M09. We expect margins to improve from 4Q10 onwards on account of ASP increments and efficiency enhancements. Resurgent demand from US along with the housing market recovery is expected to boost sales going forward. We have adjusted our earnings estimates and roll over our valuation to FY11F, deriving a fair value estimate of S$0.30 (previously S$0.295). Maintain BUY. (Lee Wen Ching)


KS Energy: Additional issue of convertible bonds

Summary: KS Energy (KSE) announced that TAEL One Partners and DnB NOR Bank have agreed to subscribe for additional convertible bonds worth up to S$57m (3% coupon, due 2015). S$29.5m will be subscribed by DnB NOR Bank and the rest by TAEL One Partners. Recall that KSE first announced its S$50m convertible bond issuance in January – today’s event is a further issue in relation to that. As with the initial convertible bonds, the conversion price is S$1.60/share, representing a 28% premium over yesterday’s close. The proceeds will be used to refinance existing debts of KSE. This development is not surprising, as highlighted in an earlier report of ours (27 Jan 2010). Maintain HOLD with fair value estimate of S$1.23. (Low Pei Han)


Soilbuild Group Holdings Ltd: Still on track to deliver

Summary: Soilbuild Group reported a soft set of 1Q10 results. Revenue fell 49.8% YoY to S$32.4m on the absence of contributions from several completed development projects – Espa, Centrio and Leonie Parc View. On a brighter note, revenue from property rental increased by 40.3% YoY to S$4.4m, thanks to higher rental income and the leasing of additional units of its investment properties. PATMI fell 47.6% YoY to S$10m but this was due to the absence of a fair value gain on investment properties that was recognized in 1Q09 (S$6.5m). Excluding this item, PATMI would have declined by a smaller percentage of 22.2%. With the repayment of loans, net gearing position improved from 0.9x to 0.8x. Despite its weaker results, Soilbuild is still on track to meet our earnings expectation for this year. We expect earnings to be stronger in 2H10, when Soilbuild will start recognizing the profit from Mezzo (100% sold), Meier Suites (36% sold), Woodlands BizHub (100% sold) and the recently launched West Point BizHub (>50% sold). We maintain our BUY rating on Soilbuild but put our fair value under review, pending adjustments to our estimates. (Foo Sze Ming)


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


NEWS HEADLINES

- According to Bloomberg, corporate bond issuance worldwide dropped 62% YoY to US$15b in Apr 2010.

- US trade deficit rose to a 15-month high as rising oil prices pushed crude oil imports to the highest level since the fall of 2008.

- Kencana Agri reported net profit of US$2m in 1Q10 compared to US$504k in 1Q09.

- According to the BT, Prudential is still very much committed to its listing on the SGX.

- Sofa retailer HTL International reported a 34% YoY fall in net profit to S$9.82m in 1Q10.

- SC Global posted a 28% YoY rise in net profit to S$13.4m in 1Q10.

- According to the BT, Courts has decided to open a high profile store on Orchard Road.