By Carmen Lee
Wed, 28 Jul 2010, 08:25:59 SGT

Market Pulse: Koda and Telecom Sector (28 Jul 2010)

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Koda Ltd: Value emerging following sell-down over US economic concerns

Summary: Koda Ltd’s (Koda) shares have underperformed over the last two months, falling 13% vs. the STI’s 3% gain, possibly on concerns over disappointing US economic data and lackluster home sales. While recent data suggests that the US economy’s recovery has softened, economists do not expect a renewed downturn. With its stock trading at just 0.7x NTA, we believe that negatives have been more than sufficiently priced in. We highlight that Koda is poised for a return to profitability in FY10 and expect a five-fold rebound in FY11 earnings. Nevertheless, we acknowledge that renewed weakness in consumer spending could potentially dampen its recovery, and have toned down our projections accordingly. We see value at current levels and maintain our BUY rating on Koda in anticipation of a strong earnings rebound in FY11. Our fair value estimate has been trimmed to S$0.275 (previously S$0.30) following revisions to our projections. (Lee Wen Ching)

Telecom Sector: All three telcos to launch iPhone 4G

Summary: M1, SingTel and StarHub will simultaneously launch the new Apple iPhone 4G on 30 Jul; pricing for the phone ranges between S$0 and S$630 depending on service plans taken up. We note that the promotions/subsidies for the iPhone 4G are not that aggressive; this as most of the existing M1 and StarHub iPhone 3GS users are still locked in a 2-year contract, given they only launched the phone in mid-Dec last year. And as expected, the telcos are continuing with the existing iPhone price plans. Separately, Apple launched its widely popular iPad tablet in Singapore last Friday to overwhelming response as well. The proliferation of these smart devices will trigger further growth in the mobile data segment. Already we note that all the three telcos have introduced new standalone mobile data packages for the iPad, but without the margin-sapping subsidies for the device. We believe that the iPhone 4G launch should be quite positive as it is unlikely to result in further margin compression. The impending roll-out of the NBN (new fibre-to-home network) will provide further catalyst for all the three telcos in the latter part of 2010. As we continue to like their defensive earnings and attractive dividend yields, we remain OVERWEIGHT on the sector. (Carey Wong)

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

NEWS HEADLINES

- SIA said it is considering several candidates to become CEO as Mr. Chew Choon Seng has signaled he will step down.

- Singapore’s visitor arrivals rose 26.7% YoY to 950k in June, and this is the seventh straight monthly rise.

- Australand posted net profit of A$72.2m in 1H10 compared to net loss of A$268.8m in 1H09.

- Consciencefood, an Indonesian maker of instant noodles, has launched an IPO to raise S$18.8m.

- Van der Horst Energy reported net loss of S$20.4m in FY10, compared to net profit of S$7.56m in FY09.

- Biosensors International posted a 23% YoY fall in net profit to US$3.24m in 1Q11.

- Addvalue Technologies reported net profit of S$1.37m in 1Q11 compared with net loss of S$582k in 1Q10.

- The trustee manager of Treasury China Trust has announced the completion of a five-year S$658m multi-currency loan facility.

- According to BT, Ho Bee Investment is planning to invest about S$1b to develop a commercial project at North Buona Vista Drive.