By Carey Wong
Tue, 6 Jul 2010, 08:59:57 SGT

Market Pulse: StarHub and Oceanus (06 Jul 2010)

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StarHub Ltd: Attractive Dividend Yield

Summary: StarHub Ltd saw a spate of insider selling of shares from former CEO Terry Clontz over the last two weeks. As of 29 Jun, Clontz sold another block of 30,000 shares, bringing his total share sale to 1,197,200 shares. We understand Clontz was accelerating his capital gains in response to the new US Senate Tax Extenders Bill; although currently still in debate, the Bill will effectively raise the tax on capital gains, dividends and ordinary income. According to management, Clontz indicated to them that while he may choose to accelerate more capital gains this year, he intends to keep a substantial amount of StarHub shares intact for as long as he is a director of the company. Based on the latest announcement, Clontz still owns 5,791,450 shares (or a 0.338% stake). But even with more share sales from Clontz, we do not expect any overhang on the share price. In light of the more volatile markets, spooked by concerns of slowing economies in US and China as well as the ongoing EU sovereign debt crisis, we continue to maintain our preference for defensive plays. We also like StarHub’s attractive dividend yield of 8.7% (StarHub has committed to pay S$0.05 per quarter as dividend). Maintain BUY with S$2.32 fair value. (Carey Wong)


Oceanus Group Ltd: Short-term pain, long-term gain

Summary: We visited Oceanus Group’s (Oceanus) abalone farms, processing plant and Ah Yat Tian Xia restaurants in China last week. The group’s CEO reiterated his long-term growth plans, and envisions Oceanus growing from its current status as an abalone farmer to being a dominant seafood supplier within the next decade. While we are positive over the group’s long-term plans, we remain concerned over near-term challenges which could result in an overhang on the stock. The greatest uncertainty, in our view, stems from how the management will deal with its loss-making Ah Yat Tian Xia restaurant chain and its impact on the group’s earnings outlook. In addition, the group’s potential appetite for additional equity raises uncertainty as management now expects to generate positive cash flows only in 2012 as opposed to its initial 2010 target. We have cut our FY10 dividend assumptions and maintain our HOLD rating and S$0.32 fair value estimate. (Lee Wen Ching)


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


NEWS HEADLINES

- UOB has agreed to subscribe for shares worth US$100m in the global offering of AgBank’s IPO.

- The CEO of CapitaLand’s Singapore residential business has resigned.

- Three Parkway Holdings directors said that their agreements with Fortis Healthcare would not stand in the way of their fiduciary duties to Parkway.

- According to Reuters, palm oil player Mewah Group is planning an IPO in Singapore to raise about US$500m.

- According to Reuters, STX Group plans to list its European unit in Singapore in October to raise as much as US$570m.

- The proposed management buyout of Contel Corporation for US$22.5m in cash by Good Idea Ltd has lapsed.

- Bonvests Holdings has incorporated a new company in Tunisia with S$14m in share capital.

- Cosco Corp said its Dalian yard will build two bulk carriers following the payment of initial deposits by the shipowners.

- Sino-Forest has secured funding support from China Development Bank Corporation.