By Carey Wong
Fri, 14 May 2010, 08:47:54 SGT

Market Pulse: Genting, Olam, SingTel, Soilbuild, Li Heng and Swiber (14 May 2010)

FOCUS

Genting: Roaring Start to 2010

Summary: Genting Singapore (GS) reported a very strong set of 1Q10 results, with revenue jumping 337.0% YoY and 268.4% QoQ to S$460.4m, meeting 24.2% of our FY10 forecast. Underlying net profit came in at S$54.1m, marking a sharp turnaround from losses of S$23.3m in 1Q09 and S$82.3m in 4Q09. The strong outperformance came from the start of the Resorts World Sentosa (RWS) integrated resort where the operations were not only immediately profitable but also achieved an impressive adjusted EBITDA margin of 32.6%. While we are keeping our revenue estimates intact, we are drastically revising up our earnings estimates for FY10 to an underlying profit of S$187.9m from a net loss of S$15.1m; we are also raising our FY11 profit forecast by 192.5%. As a result, our DCF-based fair value jumps from S$1.04 to S$1.29. Maintain BUY. (Carey Wong)


Olam International: 3Q10 results in line with expectations

Summary: Olam International’s (Olam) 3Q10 results came in within expectations. Revenue grew 18.4% YoY to S$2.7b on account of a 21% increase in volume, while core net profit improved by 34.1% YoY to S$83.7m. 9M10 core earnings have met 75% of our full year estimate, putting the group on track to meet our FY10 projections. The group’s performance in 3Q10 was propelled by broad-based revenue and volume growth across all segments. Management reiterated its growth strategy via upstream and midstream expansion, which we believe should lift the group’s profit margins over the medium term. Broader market weakness has enhanced the stock’s attractiveness and we maintain our BUY rating on Olam. Our fair value estimate has been lifted to S$3.61 (from S$3.36) as we rollover our valuations to FY11. (Lee Wen Ching)


Singapore Telecom: Paring fair value to S$3.40

Summary: SingTel posted a pretty decent set of 4Q10 results, although part of the outperformance came from the steep 26% strengthening of the AUD and 15% appreciation of the IDR against the SGD. 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, bringing the total dividend for FY10 to S$0.142, or a payout ratio of 58%. For FY11, SingTel expects its Singapore operating revenue to grow at mid single-digit level; but EBITDA margin is expected to decline to around 35% and EBITDA to grow within low to mid single-digit range. For Australia, SingTel expects both operating revenue and EBITDA to grow at mid single-digit levels. 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. In line with the latest guidance and fresh forex assumptions, we raise our FY11 revenue estimate by 10.7% and our earnings forecast by 4.3%. But to account for the recent declines in the market value of its associates, we pare our SOTP-based fair value from S$3.51 to S$3.40. Given that there is still 13% upside from here, we maintain our BUY rating. (Carey Wong)


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. PATMI fell 47.6% YoY to S$10m but this was also due to the absence of the fair value gain on investment properties that was recognized in 1Q09. Excluding this item, core PATMI would have declined by a smaller 22.2%. Despite weaker results, Soilbuild is still on track to meet our earnings expectation this year. Over the last quarter, management continues to see steady interest in Solaris and expect more pre-commitments ahead of its completion. Previously, we assumed contribution from Solaris to start in 2H10 but we realize that this assumption is too aggressive and we are now shifting the contribution timeline to 1H11. The impact is a decline of S$0.05 per share in our RNAV, hence our fair value has been lowered to S$1.76. We maintain our BUY rating on Soilbuild. (Foo Sze Ming)


Li Heng: Decent start to FY10

Summary: Li Heng Chemical Fibre (LHCF) reported a decent set of 1Q10 results. Revenue rose 20.3% YoY to RMB568.3m, or about 7.6% above our forecast, while net profit surged 5.8x YoY to RMB59.6m; however if we exclude the impact of forex, core earnings would have still jumped by an impressive 90.0% to RMB58.8m, which was also 35.8% ahead of our estimate. We note that the stronger-than-expected showing came from a better-than-expected recovery in gross margin from 12.9% in 1Q09 to 15.9%; this was also slightly ahead of the management’s target of just 15.0%, likely boosted by the increased efficiency of its new PA chip plant, which helped to lower its cost of production. More importantly, we are pleased to see continued sequential improvement, where revenue added 3.0% and core net profit climbed 49.2% QoQ despite the first quarter being the traditionally slower one. Going forward, management retains its cautiously optimistic outlook but notes that uncertainties remain; we will also be checking with LHCF to get more details on the impact of the anti-dumping tariffs recently imposed on imported PA chips. We will have more after an analyst briefing – meanwhile, we maintain our BUY rating but put our S$0.34 fair value under review. (Carey Wong)


Swiber Holdings: Better results; seeking listing for subsea services business

Summary: Swiber Holdings (Swiber) reported a 2.9% YoY fall in revenue to US$84.5m and a 18.1% drop in net profit to US$8m in 1Q10, which was slightly lower than expected. However, we expect better performance in 2H10 as the group executes contracts that it secured in the past half a year. We are also encouraged to see that gross profit margin has recovered from 15% in 3Q09 and 0.2% in 4Q09 to last quarter’s 21%. Core net profit was also respectable at about S$7.9m as gains from asset disposals was minimal in 1Q10, unlike previous quarters. In a separate announcement, the group mentioned that it intends to seek a proposed listing of its subsea services business on the Catalist board of the SGX. We are reviewing our HOLD rating and fair value estimate of S$1.10 pending an analyst briefing later in the afternoon. (Low Pei Han)


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

NEWS HEADLINES

- Bank Negara Malaysia has raised its overnight policy rate by 25bp to 2.5%.

- Yanlord Land Group reported a 23% YoY fall in net profit to S$18.8m in 1Q10.

- Ezion reported net profit of S$7.7m in 1Q10 compared to S$3.3m in 1Q09.

- Jaya Holdings posted a 79% YoY fall in net profit to S$4.6m in 3Q10.

- euNetworks Group posted a net loss of 8.4m euros in 1Q10 compared to a net loss of 3.7m euros in 1Q09.

- Kingsmen Creatives reported a 2.5% YoY fall in net profit to S$2.3m in 1Q10 despite a 30.8% rise in revenue.

- Courage Marine posted net profit of US$3m in 1Q10 compared to a net loss of US$578k in 1Q09.

- Hyflux Water trust announced 1Q10 DPU of 1.16 S cents, up from 1.15 S cents in 1Q09.