Ascott Residence Trust (Oct 25: $1.63) TP: $1.94
UPGRADE TO BUY. Revenue was $42.3 million (9 % above forecast) and distributable income was $12 million (9% above forecast) due due to outperformance in Singapore, the Philippines and Vietnam. Distribution per unit (DPU) was 1.99 cents, better than our estimate of 1.70 cents. In light of the good performance, we are adjusting our FY2007 and FY2008 forecast from 6.8 cents and 6.9 cents to 7.65 cents and 8.01 cents, respectively. Since our last report, ART has corrected from $1.85 to its last traded price of $1.58. More importantly, the price correction means that ART's price-to-book ratio has come down from 1.34x (April) to the present 1.14x. Fair value of $1.94. - OCBC Investment Research (Oct 25)
Guocoland (Oct 25: $5.45) TP: $6.16
MAINTAIN BUY. Net profit growth of 241 % to $27.1 million y-o-y for 1Q2008 is within expectations, mainly driven by contributions from the West End Point project. It is expected to launch the Goodwood Residence project this year. We expect strong sales and selling prices, and raise our selling price assumptions from $2,200 to $3,000 psf, raising our net present value surplus from Singapore development projects by $187 million. We have re-worked our assumptions for the integrated projects with more insights after the site visit, higher capital value assumptions for Tung Centre, Goodwood Residence as well as factoring in the Toho Garden site. Target price of $6.16 with 10% premium. - DBS Vickers Securities (Oct 22)
Qian Hu (Oct 25:19.5 cents) TP: 25 cents
MAINTAIN BUY. Qian Hu reported 3QFY2007 revenue growth of 19.6% from $18.9 million to $22.7 million. The growth was backed by strong performance from Qian Hu's ornamental fish and accessories sales. As a result, net profit attributable to shareholders doubles from $600,000 in the same period a year ago to $1.2 million in the current period. Contributions from ornamental fish and accessories account for 88% of total revenue while the plastic business accounts for the other 12 %. We project a three-year CAGR revenue growth of 17% in our estimates. Our fair value of 25 cents is pegged to a 15x blended FY2007/2008 earnings. - Phillip Securities Research (Oct 23)
CapitaMall Trust (Oct 25: $3.68) TP: $4.56
MAINTAIN BUY. CMT announced 3Q2007 distribution income of $53.2 million. 3Q2007 DPU was 3.4 cents. CMT has continued to reap the benefits of its successful asset-enhancement initiatives. We expect its results to be even better in 4Q as income from its recently acquired CRS malls is progressively booked. We have added two new AEI (asset-enhancement initiatives) projections for Lot One ($40 million) and Tampines office ($69 million). Management has a target AUM (asset under management) of $8 billion by 2010. Our one-year forward DCF price target of $4.56 is unchanged and offers 24 % potential upside with CY2008E DPU yield of 4.0%. - UBS Investment Research (Oct 23)
Keppel Land (Oct 25: $8.30) TP: $8.97
MAINTAIN HOLD. For 3QFY2007, Keppel Land reported net earnings of $81.8 million, equivalent to a 30% q-o-q rise and doubling from a year ago. Revenue was up 6.4% q-o-q and 49% y-o-y. Including the $125.5 million reported in 1H2007, net earnings YTD amounted to $207.3 million, largely in line with our forecast of $277.7 million for the full year (excluding the sale of One Raffles Quay). Property sales performed strongly from projects in Singapore and overseas, with net attributable profit rising 48% q-o-q and 136% y-o-y. Sale of ORQ to add $221.6 million to net profit in 4Q. We maintain our target price of $8.97. - Citigroup Research (Oct 23)
Raffles Medical Group (Oct 25: $1.53) TP: $2.05
BUY (initiating coverage). Raffles Medical Group (RMG) is an integrated private healthcare provider. Raffles Hospital has stepped up the pace of expansion adding 25 beds in 1H2007 and making plans to add another 25 beds in 2H2007 to bring the total to 200 beds. RMG operates the largest network of 60 family medicine clinics in Singapore. It leverages on this extensive network to build up a base of 5,000 corporate clients. Corporate clients account for 65 % of patient volume at its chain of clinics. RMG is the prime beneficiary of the liberalisation of Medisave. Our target price is $2.05 based on our three-stage DCF model. - UOB KayHian (Oct 23)
Delong Holdings (Oct 25: $3.04) TP: $3.67
MAINTAIN OUTPERFORM. Delong's recent profit warning for 3Q2007 was its second consecutive one. The surge in iron ore prices had been faster than HRC selling-price increases in 3Q, squeezing margins. We now expect gross margins to decline from 16.3 % in 2Q to 12% in 3Q, with a $433.2 million revenue and $32.7 million net profit. We have cut our FY2007-2009 earnings forecasts by 35% to 43%, producing a new target price of $3.67 (previously $4.70), based on a new CY2008 PER target of 10x (previously 12x) to reflect higher execution risks and Delong's inability to mitigate exposure to higher raw material prices. - CIMB-GK Research (Oct 23)
Man Wah Holdings (Oct 25: 72 cents) TP: 41 cents
MAINTAIN SELL. Man Wah Holdings announced on Oct 16 that Schieder Cheers GmBH, a company that is 40% -owned by Man Wah and 60% by the Schieder Group, has been declared insolvent by the German courts as a result of its parent company, the Schieder Group being declared insolvent. We have revalued our fair value estimate to 41 cents per share, derived from a PER of 7x (based on the Group's P/E band) pegged to FY2008 earnings, implying a 42.25 % downside. Our negative view is based on the technical outlook of the Group's shares, insolvency of the German subsidiary and the Group's exposure to the US housing industry. - Phillip Securities Research (Oct 22)
Silverlake Axis (Oct 25: 67 cents) TP: 83.5 cents
UPGRADE TO BUY. Silverlake Axis (SAL) has signed a non-exclusive licensing agreement with Silverlake International Capital Market Solutions Limited for its back-end Silverlake Integrated Banking Solution software platform. Under the deal, SAL will also receive US$7.35 million ($10.7 million) in license fees, which SAL expects to have a positive impact on its FY2008 earnings. This deal will bump up our FY2008 revenue estimate by nearly 15.7% to RM182.1 million ($79.05 million), our net profit estimate will get a larger 18.7% boost to RM108.0 million. Our fair value also improves from 71 cents to 83.5 cents, although still based on 20x FY2008F earnings. - OCBC Investment Research (Oct 23)
Elec & Eltek Int'l (Oct 25: US$1.97) TP: US$3.32
MAINTAIN HOLD. We expect yield issues at Elec & Eltek's (ELEC) Kaiping plant to have improved further in 3Q2007, but do not think they have been completely resolved. We expect marginal improvement of GPM (gross processing margin) to 16 % in 3Q2007 (15.3 % in 2Q2007), and estimate revenue of US$141.8 million (flat y-o-y, + 7.6% q-o-q) and net profit of US$8.7 million (-47.3 % y-o-y, + 21.5 % q-o-q) for the third quarter. We expect a payout ratio of 60% or 10.9 US cents for FY2007, or 5.6% net yield on the latest close, although we suspect full-year net dividend could be higher than our estimate. We retain our fair value of US$3.32 based on 10x FY2008E EPS. - CPhillip Securities Research (Oct 25)
Miyoshi Precision (Oct 25: 24.5 cents) TP: 31 cents
BUY (initiating coverage). Miyoshi Precision, a manufacturer of top covers for HDD, offers an opportunity to ride the growth potential of the other OEM HDD makers, namely the Japanese makers such as Hitachi CST. Miyoshi posted a very positive set of 1H2007 results ended Feb 28, with revenue up 25.7% y-o-y and 19.6% h-o-h at $81.7 million, while net profit jumped 81 % y-o-y and 61.8% h-o-h to $6.8 million, aided by strong demand from its Data Storage segment. Miyoshi also branching out into other areas to tap the growing demand for metal stamping and precision engineered components. Fair value estimate of 31 cents based on undemanding 9x FY2008 earnings. - OCBC Investment Research (Oct 23)
Sim Lian Group (Oct 25: 71.5 cents) TP: $1.03
BUY. The outlook of the local residential property market is expected to remain positive. The buoyant interest bodes well for Sim Lian Group (SLG) which has land parcels for the development of mid-tier and mass homes. We favour SLG for its strong balance sheet which enables the Group to embark on development projects single-handedly, providing management with nimbleness in decision-making. ROE is attractive at about 30% (FY2006/2009). Taking into account the launch of four projects in Singapore and two in Malaysia, SLG is valued at RNAV per share of $1.03. At 71 cents, Sim Lian is trading at a steep 31 % discount to valuation. - NRA Capital (Oct 24)
Frasers Centrepoint Trust (Oct 25: $1.49) TP: $1.96
MAINTAIN BUY. For 4QFY2007, FCT announced a DPU of 1.67 cents (flat q-o-q) translating to a FY2007 DPU of 6.55 cents. Northpoint 2 (NP2) acquisition is likely in 4QFY2008. Anchorpoint will be fully opened in December 2007. Lowered FY2008E and FY2009E DPU estimates due to potential income decline during the AEI works at Northpoint. We have raised our target price marginally as future income stream (post-AEI) from NP will more than offset the decline, and we have also factored in the NP2 acquisition. FCT is worth some $2.03, including a 12-month DPU of 6.8 cents. Target price raised to $1.96. - Citigroup Research (Oct 22)
Nera Telecommunications (Oct 25:40 cents) TP: 54 cents
MAINTAIN BUY. Net profit of $3 million was 20% above our expectations of $2.5 million. Net profit was up 40% compared to recurring net profit of $2.1 million in 3Q2006. In 3Q2006, $28.78 gain came from divestment of Nera Electronics. Inventory although lower than 2Q2007, is relatively high and indicates strong topline for 4Q2007. We are likely to revise our earnings upwards for FY2007 and FY2008. Orders secured till date in FY2007 for transmission equipment are $130 million better than our estimate of $100 million. Target price of 54 cents is pegged at 15x FY2008 earnings based on peer average. - DBS Vickers Securities (Oct 19)
United Engineers (Oct 25: $4) TP: $6.16
OUTPERFORM (initiating coverage). UE is known for its infrastructure engineering and facility management capabilities. The group has been able to keep its order book at between $600 million and $1 billion in the last five years. We estimate that property development and investment properties will comprise 79 % of the group's end-CY2008 RNAV, with the rest lying in construction and engineering projects. UE paid out 50% of its earnings as dividends last year, representing a DPS (dividend per share) of eight cents. We expect payout this year to fall to around 25%. Target price of $6.16, based on end-CY2008 RNAV. - CIMB-GK Research (Oct 24)
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Looking for Bloggers
Sunday, October 28, 2007
The Edge - Brokers' Digest (October 29 - November 4, 2007)
Monday, October 22, 2007
Black Monday
As anticipated, Singapore shares plunged 2.81% or 105.34 points. I'm not panicking as I have already liquidated most of my stocks. In fact, I'm looking to buy more; I'm currently looking at companies who will be posting good 3Q results and giving out dividends.
Several reports will be out this week which will determine the market outlook. In US, existing and new home sales will be released on Wednesday and Thursday respectively and China is also expect to announce measures to curb their overheating economy - another increase in interest rate?
If Dow drops another 100+ points tonight, expect another round of selling tomorrow.
Saturday, October 20, 2007
The Edge - Brokers' Digest (October 22 - October 28, 2007)
Cheung Woh Technologies (Oct 18: 28 cents) TP: 37 cents - 31 cents
MAINTAIN BUY. For the half year ended Aug 31, 2007, Cheung Woh's net profit rose 86.8 % to $4 million on the back of a 28.9% increase in turnover to $43.7 million. Owing to a less than proportionate increase in the cost of sales, gross margin improved 4.3 percentage points. Cheung Woh has recommended an interim dividend of 0.5 cent per ordinary share, five times the 0.1 cent paid out in the corresponding period last year. We are raising our earnings forecast for the year from $7.7 million previously to $9 million. Cheung Woh is currently trading at 8.4 times our FY2008 EPS estimate of 3.4 cents. Pricing Cheung Woh at a forward PE of between 11 and 12 times, we derived a 12-month target price range of between 37 cents and 41 cents. - SIAS Research (Oct 15)
Ezra Holdings (Oct 18: $7.25) TP: $8.05
UPGRADE TO BUY. Ezra Holdings surpassed market expectations with a record FY2007 net profit of $104 million, up 68 % y-o-y, while topline surged 98 % to $219 million. Its performance was boosted by its Offshore Support Services (OSS) business and rising chartering rates. Stripping away the net gain of $49 million from the dilution of its interest in EOC Ltd and other gains, Ezra's recurring net profit grew at a five-year CAGR of 73 % to $48.9 million. We believe the buoyant outlook, especially with current high oil prices, justifies a re-rating of the stock to 18 times FY2008 earnings. We are raising fair value estimate to $8.05, giving a potential upside of 15 %. - OCBC Investment Research (Oct 17)
Oculus (Oct 18: 38.5 cents)
UPGRADE TO NEUTRAL. Oculus has dropped initial plans to acquire hydropower plants in China in favour of a reverse takeover with Aretae Pte Ltd, an environmental solutions company, for $600 million via an issue of 1.2 billion shares at 50 cents each. Aretae is positioned to benefit from the implementation of the Kyoto Protocol in 2008. Management of Aretae has provided an EBITDA guarantee of not less than $50 million for FY2008 and FY2009. In addition, its current portfolio of projects is expected to generate 50 million metric tonnes of carbon credits, which are tradable and could be a potential booster to earnings. - DMP & Partners Securities (Oct 17)
China Auto Electronics Group (Oct 18: 73 cents) TP: $1.16
BUY (initiating coverage). China Auto Electronics designs, assembles and manufactures wire harnesses, connectors, moulds, crimping machines and electronic modules for the automobile industry. China Auto's net profit is anticipated to rocket 283 % y-o-y to 117.2 million renminbi ($22.77 million) in FY2007, due to strong operating leverage. Its net profit in FY2008 is expected to be further boosted by reduction in tax from 33 % to 25 % for Chinese companies. We project China Auto to achieve high net profit CAGR of 136% in our FY2007-2009 forecast. Our fair value on the counter is $1.16, using 15 times FY2008 PE and implying an undemanding 0.1 times PEG. - DBS Vickers Securities (Oct 16)
Golden Agri-Resources (Oct 18: $1.39) TP: $1.78
BUY (initiating coverage). Golden Agri Resources is the world's second-largest oil palm plantation company in terms of planted hectarage and the largest in terms of total landbank. Golden Agri is also top three in terms of oil yield. Valuation-wise, recent stock price outperformance has put it nearly on par with most large-cap peers. Nevertheless, given (i) its size, (ii) long-term growth prospects, (iii) foothold in Indonesia and (iv) bullish industry outlook, we are recommending Golden Agri as a core holding for exposure to the plantation sector. In terms of valuation, Golden Agri is trading at between 14 to -16 times PE based on earnings for the next two years. Target price of $1.78, based on 20 times FY2008 earnings. - OSK Research (Oct 17)
Sihuan Pharmaceutical Holding Group (Oct 18: 83 cents) TP: $1.35
MAINTAIN BUY. Sihuan entered into a sale and purchase agreement to acquire Shenzhen Sihuan Pharmaceutical from three independent parties for 60 million renminbi ($11.65 million). Shenzhen Sihuan recorded a net profit of 3.1 million renminbi for FY2006 and 8.5 million renminbi for 9M2007. The price of 60 million renminbi represents 19.6 times the net profit of FY2006. We expect net profit growth of 93.1 % and 34.1 % for FY2007 and FY2008. Based on our free cash flow to equity model with a discount rate of 12% and terminal growth rate 2 %, we derived a fair value of $1.35, which is 15.6 times of forward 12-month earning and 13.5 times of FY2008's earnings (45 % upside). - Phillip Securities Research (Oct 12)
ComfortDelGro Corp (Oct 18: $1.96) TP: $2.27
MAINTAIN BUY. Higher capex related to fleet upgrades, plus higher oil prices, have us fine-tuning earnings and reducing DCF fair value on ComfortDelGro. The company's overseas investments will drive near-term growth with recent acquisitions in bus and taxi operations in Australia and China, as well as the UK, likely to contribute more significantly to earnings in FY2007F and FY2008F. With the earnings cut and increased capex spend assumptions, our fair value now stands at $2.27 (previous: $2.65) based on DCF (method unchanged). Group ROE remains at 16%, while the dividend yield remains relatively attractive (5.6% for FY2007F, 4.4% for FY2008F). Implied upside is 16 %. - Nomura Singapore (Oct 18)
K-REIT Asia (Oct 18: $2.80) TP: $3.31
BUY (initiating coverage). Apart from Keppel Land's income support for One Raffles Quay (ORQ) till 2011, we believe the ORQ acquisition paves the way for potential injection of more prime properties under partial ownership from the Keppel Group. Almost 70% of K-Reit's total NLA (ex-ORQ) is up for renewal from FY2008 to FY2010. Free float is likely to improve to over 42.2 % from 27.9%. K-Reit offers a three-year DPU CAGR of 28.3 %, one of the highest among S-REITs under coverage. Our target price of $3.19 includes the acquisition of ORQ and other prime Singapore office properties from the Keppel Group. We estimate K-Reit is worth $3.31, including a 12-month distribution per unit of 12 cents. - Citigroup Research (Oct 17)
Singapore Press Holdings (Oct 18: $4.52) TP: $5.84
BUY. SPH reported recurring earnings (profit before investment income and exceptional items) of $434.2 million (+ 20.2 %). The maiden profit of $47.8 million from the sale of the Sky@eleven condominium was included in the recurring earnings. Excluding the Sky@ eleven contribution, recurring earnings would still have grown 7%. FY2007 full-year DPS of 26 cents is slightly below our forecast of 26.5 cents. The FY2007 dividend payout as a percentage of recurring earnings is about 96 %, lower than the 103 % figure for FY2005 and the 106% figure for FY2006. Nevertheless, we forecast DPS of 32 cents in FY2008 and have raised our target price from $5.39 to $5.84 (implied FY2008 dividend yield of 5.5 %). - Kim Eng Research (Oct 15)
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Hong Leong Finance
The Business Times
Published October 19, 2007
HLF: Firing on all pistons, no CDO shock
By SIOW LI SEN
WHEN Hong Leong Finance (HLF) posts its third-quarter results next month, it is likely to announce a special dividend to use up its tax credits before they expire at year's end.
Singapore's largest independent finance company is also expected to report good results, driven by strong loans growth and burgeoning fee income - and with no risky collateralised debt obligation (CDO) exposures to take the shine off its numbers.
Among big companies, HLF is one of a few to have unused tax credits left before they expire on Dec 31.
These credits - a legacy from the previous tax system - are a boon especially for retiree shareholders as many can claim a tax refund when dividends are paid to them by companies with these tax credits in hand.
Ng Wee Siang, a BNP Paribas analyst, said this week that HLF is believed to have unutilised tax credits of at least $100 million or 23 cents per share, translating into a potential net dividend yield of 5.9 per cent.
In a July 2005 interview with BT, HLF president Ian MacDonald said the company had more than sufficient tax credits left for a 75 per cent payout of profit for the next two years, which it did for its 2004 earnings.
In a statement earlier this year, HLF chairman Kwek Leng Beng said the use of its remaining tax credits would be considered in any future dividend payout. 'In deciding on the quantum of the distributions, the company aims to balance prudential considerations with the utilisation of Section 44 tax credit balance where possible before the cut-off date,' he said.
The company paid a special dividend of nine cents for 2006 and 15 cents in 2005.
HLF, with 28 branches islandwide, is on course to report strong Q3 results fuelled by a surging Singapore economy, and the benefits from efforts to expand its fee income business.
In addition, the third quarter will have a new source of net interest income from an acquisition in June. In that deal, it bought ABN Amro Bank's car loan portfolio for $405 million, boosting its total loan book by about 6.2 per cent.
The ABN Amro purchase augments the finance company's position as a major car-financing player here.
Fee income should continue to post a big jump as the company expands its range of services to its traditional small and medium-enterprise (SME) base, and sell more investment products to its niche heartlander customers.
In May, HLF launched a business current account for SMEs, becoming one of the few finance companies in the world to offer cheque-book facilities after the regulator gave it more leeway in providing financial services.
For the first half of 2007, net profit rose some 30 per cent to $57.7 million with a smart pick-up in fee income which jumped 177 per cent to $11.1 million.
The company also said in August when it announced its first-half numbers that it has no holdings of CDOs and/or asset-backed securities.
Many analysts expect the Q3 results of the three local banks - DBS, United Overseas Bank and OCBC Bank - to be clouded by some CDO-related losses.
HLF is often ignored by the bigger broking houses as its share market liquidity is deemed too low for their global clients. Its market capitalisation was $1.7 billion at yesterday's closing price of $3.88, which is about 9 per cent lower than the year's high of $4.26.
Still, because of its small size relative to the banks, HLF has merger and acquisition potential and some think its majority shareholders, the Kweks, are fully aware of this.
I have highlighted the important points in bold. Base on the target dividend of $0.23/ share, HL Finance should easily surge past the $4 mark but as past experience has taught me, I will not see a sudden spike in price but rather a gradual one because as mention in the article, liquidity is too low. Nevertheless, I will be keeping HL finance in my long term portfolio and will buy more if the market goes into a recession.
Friday, October 19, 2007
Don't sell all your CPFIS-OA investments when purchasing a flat unless...
you have to fork out excess cash or your loan interest is high. The reason is simple, to have an excess buffer in the event of unforeseen circumstances e.g. retrenchment.
How much to keep as a buffer varies. As a general rule, the higher your loan amount is and/or the longer your repayment period is, the less buffer you should keep.
HDB has a monthly installment calculator that allows you to check how much to pay per month base on your loan amount and repayment period.
Consider this scenario: a $150K loan for 20 years and a $140K loan for 20 years using the HDB interest rate of 2.6%.
Using HDB's monthly installment calculator, the monthly payment will be $803 and $749 respectively. This is a difference of $54/mth or $12,960 for 20yrs. If we make use of this 10K to continue our investment at say 3.5% (base on CPF interest) compounded, we will have $19225.01 at the end of 20 years. Calculating backwards, your $10K investment will need an annual return of about 1.4% to break even. Surely, 1.4% per annum for 20yrs is not too hard to achieve.
Wednesday, October 17, 2007
Day 1 - Time Management
I will be starting on setting a finance site and I will keep track on my progress here. It might be disruptive to some who are here solely with the intention on reading about stocks and investment but I believe there will also be people who benefit from my experience in setting up a web site on Finance and also some who will provide feedback and suggestions.
Before I can progress further, I will need to allocate time to this project. Time Management is especially crucial as I'm holding a full-time job.
My plan is as follow:
Weekday (approximately 4hrs)
8pm - 9pm: Finance Site
9pm - 10pm: Work
10pm - 10.30pm: Personal
10.30pm - 11.00pm: Work
11pm - 12am: Finance Site
Weekend - a total of 6hrs on Sat and/or Sun on Finance site.
Ideally, I will be spending 16hrs a week on my Finance site. However, I might not be able to achieve that every day, hence I have set myself a minimum of at least 8hrs a week. I'm not too sure how my progress will be with 8-16hrs spent each week but this is what I'm comfortable with now. If progress is really slow, I will have to find some way to squeeze out more time.
Until I find a tool that I can insert into my blog, I'll be tracking the number of hours spent each day on a sheet of paper.
Tuesday, October 16, 2007
PSC Corporation Ltd
PSC closed at $0.455 today. Pretty disappointing if you consider that the last price before consolidation was $0.12. Hence after a 5:1 consolidation, I'm expecting about $0.60. Even if it is calculated base on $0.10 per share (figure used by PSC to calculate the rights issue price), I should still expect at least $0.50. However, I half expected that it will happen because trading on its share prior to its consolidation and rights has been low.
All is not lost though. Interestingly, Super Coffeemix has become a substantial share holder by purchasing shares through Goi Seng Hui. Super Coffee Mix and Goi Seng Hui are still increasing their stakes in PSC through open market purchase. It's not hard to guess the direction where PSC is going given the strong China roots of both Goi Seng Hui and Super Coffemix.
I'm waiting eagerly for PSC rights circular - I'm optimistic that its major shareholders including Super Coffeemix and Goi Seng Hui will exercise their rights fully which also means that the outlook for PSC is bright.
Saturday, October 13, 2007
The Edge - Brokers' Digest (October 15 - October 21, 2007)
Allco Commercial REIT (Oct 10: $1.14) TP: $1.65
MAINTAIN BUY. Allco has announced the acquisition of KeyPoint, a commercial asset located at the junction of Beach Road for $370 million. Based on the acquisition price, the asset is acquired at a net property income yield of 4.65%, with an income support of $10.5 million for a period of two years. Despite increasing its portfolio by 119% (excluding upward revaluations) since listing through third-party acquisitions, Allco continues to trade at a steep discount of 25% to book value, one of the cheapest SREITs offering an attractive yield of 6.3 %. Target price of $1.65 backed by DCF valuation. - DBS Vickers Securities (Oct 8)
Lian Beng Group (Oct 10: 59 cents) TP: 89 cents
MAINTAIN OUTPERFORM. Lian Beng Group (LBG) announced that it had clinched a $200 million construction contract to build 600 condominium units at Simon Road. This 189,811 sq ft URA site was awarded to newcomer developer, Duke Development Pte Ltd, on Oct 3 for $290 million or $437 psf per plot ratio. LBG's order book now stands at $575 million. We are upgrading our FY2008-2010 earnings estimates by 12 % -29 %. We expect FY2008 net profit to expand 232% y-o-y from $4.4 million to $15.5 million, driven mainly by its order book, margin expansion, property development profit recognition and new IR contracts. We maintain our target basis of 15 times CY2008 PE. Target price of 89 cents. - CIMB-GK Research (Oct 9)
Tsit Wing Int'l Holdings (Oct 10: 28 cents) TP: 30.5 cents
BUY (resuming coverage). Tsit Wing Int'l Holdings (TWI) has sought to grow via the Chinese market. We project revenue from TWI's China segment to grow by 60% for FY2007 and FY2008. TWI offers price stability with decent dividend yields. The stock has been hovering between 24.5 cents and 30.5 cents over the past year. We expect TWI to maintain a dividend payout ratio of 60 % for FY2007 (implying a dividend yield of 8.1 %) and still enjoy a comfortable net cash position for its expansion plans in China. Fair value estimate of 30.5 cents, based on eight times blended FY2007/2008 PER (or a 12 % potential upside from current price). - OCBC Investment Research (Oct 9)
Asia Environment Holdings (Oct 10: 76.5 cents) TP: $1.06
UPGRADE TO BUY. Asia Environment (AENV) recorded a 7% increase in revenue to 150.8 million renminbi ($29.42 million) in 1H2007. The management attributed this growth to the increase in build-operate-transfer (BOT) projects and the sales of equipment, which amounted to 5.5 million renminbi and 3.6 million renminbi, respectively. Gross profit increased by 9 % to 51.2 million renminbi in 1H2007 while gross profit margin improved slightly to 34 %. Net profit rose smartly by 22.1 % from 22 million renminbi to 26.9 million renminbi in the same period. At 77 cents, the counter is now trading at 13 times FY2008 forecasted earnings. We are pegging our target price at 18 times FY2008F earnings, which would give us $1.06. - SIAS Research (Oct 8)
MacarthurCook Industrial REIT (Oct 10: $1.21) TP: $1.39
MAINTAIN BUY. MacarthurCook Industrial REIT (MIREIT) announces its third acquisition since its IPO, bringing the total value of announced acquisitions to $126.1 million. MI-REIT completed the acquisition of 541 Yishun Industrial Park A on Oct 4. With an acquisition target of $500 million annually, we believe there will be more announcements coming up. We revise our revenue to factor in the contributions from the latest acquisition. Our forecasted distribution per unit increases to 7.48 cents for FY2008 and 7.96 cents for FY2009, translating to a yield of 6.33 % and 6.74 %. Our fair value remains at $1.39, derived from our DCF model. - Phillip Securities Research (Oct 5)
Unisteel Technology (Oct 10: $1.99) TP: $2.42
UPGRADE TO BUY. Unisteel Technology has benefitted from an uptrend in seasonal demand. Its HDD segment is expected to see a strong recovery in 2H2007. Revenue contribution from its new acquisition, JC Metal, and a wider adoption of Uni-Lube coating will improve its margin in 2H2007. In fact, capacity utilisation at Unisteel for HDD fasteners improved from 70% in 2Q2007 to 90 % -95 % in 3Q2007. JC Metal's total revenue is expected to top $70 million in FY2007, and its FY2007 revenue contribution to Unisteel is estimated at $27 million as JC Metal will only contribute five months of revenue. Our target price is $2.42, or 2008 PE of 15 times. - UOB KayHian (Oct 5)
China Sky Chemical Fibre (Oct 10: $2.48) TP: $3
MAINTAIN BUY. We recently visited China Sky Chemical Fibre (CSCF)'s plant in Quanzhou and noted a few developments one being the strong expected demand for super-resilient (SR) nylon fibre. An acquisition deal could be inked by year-end after the ironing out of issues that dragged negotiations. CSCF has started processing pre-oriented yarn into air-textured yarn and drawn-textured yarn for customers since June. Rolling forward our valuation to FY2008 earnings, our fair value is raised to $3 (potential upside of 20 %) on sector average forward PE of 15 times. Strong earnings contribution expected from the new SR products in 2Q2008 and strengthening of market leadership position through M&A justify the enhanced valuation. - NRA Capital (Oct 9)
Sing Holdings (Oct 10: $1.17) TP: $1.64
BUY (initiating coverage). Sing Holdings is a boutique developer with more than 40 years' experience in the Singapore property market. The company has a landbank of about. 500,000 sq ft in gross floor area, which is capable of being developed into mid to high-end residential developments. Sing Holdings may be relatively small, but it has established a good standing with a number of illustrious names. The proposed sale of EastGate is expected to generate proceeds of about $60 million. Target price of $1.64, representing a potential upside of 56%. We think that the company is undervalued (FY2008 PER of 3.5 times), despite its proven track record of delivering quality products and exciting prospects. - Kim Eng Research (Oct 4)
United Overseas Bank (Oct 10: $22.30) TP: $27.50
MAINTAIN BUY. We like United Overseas Bank (UOB) for its domestic exposure, especially in the housing loan market complemented by its diversified regional presence. We believe that UOB is poised to deliver sustainable earnings from stronger loan growth. Positive surprises could arise from its regional network, especially in Thailand. We estimate 3Q2007 net profit to grow by at least 20 % y-o-y. Non-interest income to remain strong for FY2007, built up from 1H2007. We expect UOB to pay total (gross) DPS of 80 cents, of which 35 cents was paid during 2Q2007. Target price of $27.50 based on the Gordon Growth Model. This yields an implied 2.1 times FY2008 adjusted book value, based on peak valuations. - DBS Vickers Securities (Oct 5)
CSE Global (Oct 10: $1.31) TP: $1.60
MAINTAIN BUY. According to E-Health Insider (EHI), the Fujitsu Cerner Module has been disappointing and implementation has been plagued by delays. This raises the prospect that CSE can benefit from Fujitsu's failure to deliver its obligation on schedule for the Southern cluster. A contract re-negotiation is positive for CSE. EHI reported that several trusts in the Southern cluster are in favour of adopting CSE's RiO solution. At $1.29, CSE is currently trading at around 13 times 2008E PE, with our target price of $1.60 representing an expected total return of 27 %. New contract wins from the Southern cluster as well as the oil and gas sector could add upside surprises to our 2008E forecasts. - Citigroup Research (Oct 5)
SSH Corp (Oct 10: 40 cents) TP: 60 cents
BUY. SSH trades in and distributes more than 15,000 line items such as stainless steel, steel pipes and top-quality valves to the marine, petrochemical, infrastructure and oil and gas sectors. In January last year, SSH established a new business unit to supply steel plates and structural steel tubular pipes to the oil and gas industry. The order book currently stands at $38 million, with deliveries in May 2008. We believe that SSH's sizeable contract win worth $80 million from Shell Houdini would open up numerous potential business opportunities, including ExxonMobil's cracker. Our target price of 60 cents is based on 15 times PER FY2007/2008F blended earnings. - OCBC Investment Research (Oct 8)
Valuetronics Holdings (Oct 10: 30.5 cents) TP: 47 cents
MAINTAIN OUTPERFORM. The company is on track to report record quarterly earnings next month. Order flow from major customers remains good, with the exception, of KitchenAid. Business momentum is coming from a combination of organic growth and new programme wins. Valuetronics has also been securing new customers, though contributions remain small. We have kept our FY2008FY2010 net profit forecasts intact. At 2.4 times EV/EBITDA, the stock remains cheap against its competitors, and offers a yield of 6 %. Our target price of 47 cents conservatively pegs the stock at a low eight times CY2008 PE, despite its high ROES and strong balance sheet to account for its small size and lack of a listing track record. - CIMB-GK Research (Oct 9)
HTL Intl Holdings (Oct 10: 84 cents) TP: 47 cents
MAINTAIN SELL. 2Q2007 gross margins hit its lowest for more than two years, dropping below the 30 % mark for the. first time since 3Q2004. The margins were largely affected by the increase in raw leather hides prices, exacerbated by a 5 % reduction in the China export VAT refund rate. On the macro front, subprime woes will likely affect the US housing market and demand for furniture goods. At the company level, it continues to face an uphill struggle to maintain margins. We have further downgraded our earnings by just 30% to factor in increases in raw material prices and freight costs. Keeping our eight times FY2008 PE valuation, our new target price is 47 cents. - CLSA Asia-Pacific Markets (Oct 5)
StarHub (Oct 10: $3.10) TP: $3.64
MAINTAIN OUTPERFORM. Singapore's population boom (+4.4% y-o-y) on immigration influx and wage growth ( + 8 % y-o-y) helped drive Singapore's mobile and broadband penetration rates to 113 % and 75 %, respectively, in July. We reiterate our view that StarHub offers the best exposure to Singapore's telco services consumption growth story. We reiterate our view that consensus is due to upgrade its 5.6% CY2008 yield expectations towards our expectation of a 10% yield. Upgrading target price to $3.64 as we roll forward our DCF valuation (WACC: 6.9 %, terminal growth: 1 %) to CY2008 basis. Starhub is our preferred Singapore telco pick over the next 12 months. - CIMB-GK Research (Oct 5)
Yangzijiang Shipbuilding Holdings (Oct 10: $2.61) TP: $3.04
BUY (initiating coverage). Yangzijiang is the largest private containership builder in China and among the Top 10 in the world. Backed by a record order book of 35.8 billion renminbi (or $6.97 billion), representing nine times its FY2007 revenue, this underpins earnings visibility till FY2010. Yangzijiang's FY2009 earnings will capture the full impact of the new shipyard. The recent re-rating of regional shipyards, led to a doubling of PE to 24 times on FY2008 earnings. We have imputed a target PE of 28 times on FY2009 earnings for Yangzijiang, which is in line with the industry average of Singapore and China-listed peers. This will give rise to a 12-month forward valuation of $3.04. - DBS Vickers Securities (Oct 8)
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Friday, October 12, 2007
Looking for bloggers to blog about Personal Finance
This blog has been around for several months now. I started with the intention of sharing my own views and also to keep track on my finance. However, I have decided to bring it one step further by hosting this blog in a web host.
There are already several blogs relating to Finance in Singapore but they are usually pertaining to the individual. While setting up a blog is pretty simple, it could still be a hassle for some. My intention is to bring these people together and consolidate their experience, thoughts or expertise into this blog.
They can either drop me an email on what they would like to share on the blog or I can create an account for them to the blog. In this way, they do not have to be concern on the technical issues and just concentrate on blogging.
Ultimately, I would like to create an informal and enjoyable discussion on Personal Finance and dispel the myth that Personal Finance is boring.
Feel free to Contact Me.
Any comments or feedback are welcomed as well.
Wednesday, October 10, 2007
Critical Illness coverage after age 75
I recently voice my concerns about Critical Illness (CI) coverage in sgfunds.
"Maybe I'm just paranoid but I always imagine myself getting a critical illness when I'm old. It doesn't help when the government says that 1 in 2 will live till 85yrs.
I imagine the worst case scenario that I'm all alone and barely surviving with my retirement fund. How do I cover myself if I have a CI after age 75?"
After a healthy exchange of views, the solutions are as follow:
- WholeLife with CI. Premium payable till age 80/85 or so.
- Limited Pay WholeLife with CI. Premium payable for 15/20/25 years or so. Premium is more expensive than (1).
- Term with CI till age 90/99
- Integrate CI need into retirement sum. For example, you estimate $1.2mil for retirement, and $200k for CI need after retirement, then your target retirement sum is $1.4mil. Before retirement, cover CI need with Term with CI till retirement age, premium is lower than (3).
- Similar to (4) but separate the investment component for CI need from retirement portoflio. Also use Term with CI till retirement age. Invest the rest with reasonable expected return so that at the expiration of term, the investment amount is equal or more than the sum assured.
For me, since I already have a traditional WholeLife plan, I will be exploring option 1, 4 and 5.
Lunch Disucssion on Insurance
Had a discussion with an IFA over lunch on Critical Illness (CI) coverage. I came to the conclusion that the best way to have insurance coverage for CI after 75 yrs is through a Whole Life plan. I will write more when I'm back home.
Saturday, October 6, 2007
The Edge - Brokers' Digest (October 8 - October 14, 2007)
Advance SCT (Oct 4: $1.02) TP: $1.34
MAINTAIN BUY. AAdvance SCT entered into a joint venture with a Chinese smelter company, to own and operate an existing copper smelter in China. This acquisition would also strengthen the group's position as a copper supply chain management provider. Meaningful contribution to the Group from this smelter is expected from 2008. We estimate earnings of $21.1 million for FY2007 (EPS: 8.5 cents) and $37.2 million for FY2008 (EPS: 13.8 cents). We compare Advance SCT with other environment stocks, namely water treatment companies. These are trading at an average of 12 times PE. Applying it to the average EPS for FY2007/2008, we arrive at a target price of $1.34. - DMG & Partners Research (Oct 3)
China Haida (Oct 4: 31.5 cents) TP: 34 cents
HOLD. The group saw 1H2007 revenue surging 36.1% y-o-y to 219.2 million renminbi ($43.26 million) due to higher contribution from its domestic sale of aluminium composite and single panels. Profit before tax grew a respectable 12.8% y-o-y to 24.4 million renminbi but this was eroded by a 151.8% increase in taxes that led to net profit falling 8.8% from 18.7 million renminbi to 17.1 million renminbi. The increase in prices of raw materials, especially aluminium, compressed Haida's gross margins from 20.7% in I H2006 to 17.3 % in I H2007. Using a discounted cashflow model, we peg the fair value per share at 34 cents, which offers limited upside potential from the current share price of 31.5 cents. - NRA Capital (Oct 2)
SembCorp Marine (Oct 4: $5.25) TP: $6
MAINTAIN BUY. SembCorp Marine (SMM) has signed a memorandum of understanding with Brazilian engineering group WTorre to co-own and operate a shipyard in Rio Grande, Brazil. Most significantly, in a very explicit endorsement of the joint venture, Petrobras, Brazil's state oil company, is expected to sign a rental contract spanning 10 years. Our derivation is now set at 28 times our 2008 earnings estimate versus 21 times previously. SMM has traded at 22.5 times forward earnings and, as its order book visibility is stronger now, we believe this is justified. Furthermore, it reflects appropriately the re-rating of its Cosco shares, now worth 51 cents/ SMM share. Price target raised to $6 from $4.75. - UBS Investment Research (Oct 3)
Celestial Nutrifoods (Oct 4: $1.49) TP: $2.10
MAINTAIN BUY. We saw the work-in-progress of the biodiesel plant. Production is expected to commence by the end of 2007. We remain positive on the company's prospects on the back of growing affluence, demand for health food and beverages and increasing consumerism in China. We have lowered our FY2007F net profit down by 5.8% as we increase our forecast of its interest expense (from its convertible bonds), higher effective tax and a lower gross margin due to higher soybean prices. We have also factored in contributions from its new products in FY2008F and FY2009F. Our target price is revised to $2.10 (premised on 15 times earnings) as we roll over our valuations to FY2008F. - DBS Vickers Securities (Oct 1)
Fibrechem Technologies (Oct 4: $1.81) TP: $2.23
MAINTAIN OUTPERFORM. We visited Fibrechem's Xiamen facilities recently and noted two key developments. First, Fibrechem's microfibre product is gaining rapid customer traction. Second, the company is preparing to launch a new product, quite aggressively. In 2008, upstream expansion into polyester chips should give Fibrechem the ability to produce another new product. Our earnings estimates remain unchanged but with the major part of 2007 over, we have rolled forward our valuation basis to CY2008 from CY2007. Our target remains based on DCF valuation (WACC 12 %). Our new target implies 15.2 times CY2008 and 11.1 times CY2009 fully diluted PER. Raising target price from $1.98 to $2.23. - CIMB-GK Research (Oct 3)
Singapore Telecommunications (Oct 4: $3.98) TP: $4.27
MAINTAIN OUTPERFORM. Singapore Telecommunications' diversified earnings base, liquidity and exposure to the world's fastest-growing mobile markets offer a unique investment proposition in an uncertain market environment. Based on the current prices of Singtel's other associates and our fair valuation of SingTel's Singapore operations, Indonesia's Telkomsel is trading at an implied 12.5 times CY2008 PER. India's Bharti continued to gain the largest share of new subscribers and outpace industry growth. Our sum-of-parts-valuation has been raised primarily on a higher target price for Bharti and changes in currency assumptions. Our earnings have been raised by 1 % for FY2008-2010 to reflect earnings upgrades for Bharti. Higher target price of $4.27. - CIMB-GK Research (Oct 1)
China Essence Group (Oct 4: $1.13) TP: $1.38
MAINTAIN BUY. We have recently visited China Essence's new plant in Sui Ling, Heilongjiang. The facility, housing four potato starch production lines with an annual capacity of 80,000 tons, combined with the Daqing plant (60,000 tons capacity) and Alihe plant (40,000 tons), will boost the g roup's total capacity. Management is confident of ramping up its new capacity to achieve about 80% utilisation in the next six months. We tweaked our FY2003/2008F and FY2003/2009F net profit estimates upwards by about 2 % and 4 %, respectively, to account for the higher average selling price of potato starch. Rolling over our valuation to FY2003/2009F, our 12-month price target is raised to $1.38, still pegged at 12 times forward PER. - SBI E2-Capital Securities (Oct 2)
Noble Group (Oct 4: $2.07) TP: $2.20
HOLD (resuming coverage). 1H2007 saw a 64% y-o-y growth in revenue to US$10.1 billion ($14.96 billion) and a corresponding 66% y-o-y improvement in net profit to US$99.5 million. The recent cut in the US Federal funds rate has many implications; one of which is the expected sustaining of economic activity due to lower borrowing costs. We expect continued demand for basic commodities. As we expect Noble to be a beneficiary of this trend, we are raising our FY2007 revenue and net profit forecasts to US$19.7 billion (previously US$14.8 billion) and US$192.5 million (previously US$158.0 million), respectively, and derive a fair value estimate of $2.20 based on 17 times blended FY2007/2008 PER. - OCBC Investment Research (Oct 3)
Venture Corp (Oct 4: $16.20) TP: $18.90
MAINTAIN BUY. Venture was on a week-long roadshow with us from Sept 24 to 28, meeting almost 20 fund managers including shareholders in four major cities in the US. From the meetings we have had, it appears that many investors are not quite clear about Venture's differentiation from the run-of-the-mill contract manufacturers and thus have not been able to fully gauge the company's prospect. We are convinced that Venture's growth strategy is well mapped-out and its current position in the marketplace is stronger than ever. The key challenge going forward, in our view, would be execution and the retention of good talent in key business units. Target price of $18.90 based on 17 times FY2007 earnings. - DBS Vickers Securities (Oct 3)
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Thursday, October 4, 2007
My Asset Allocation
There is a thread on "What is your overall asset allocation?" in Sgfunds. I find it really useful gauge of each person investment appetite and risk. Below is my asset allocation.
Stocks : 53.00%
Insurance : 27.56%
Cash: 14.84%
Fix Income: 4.24%
Gold: 0.36%
Insurance: I still have 2 endowment and 1 whole life policy. I guess I'm one of those with the highest allocation in insurance but I will be surrendering them soon in favor of unit trusts.
Fix Income: Parking in Phillips MMF. It is for buying stocks should the opportunity arises.
Gold: UOB Gold savings account. I have not touch it since I first open the account. Kind of put off by the administrative fee. I will be looking at other forms of gold investment.
Wednesday, October 3, 2007
September Portfolio
I was in reservist for the whole of September. Hence, I didn't have much time to monitor my stocks or update my blog. But hey, isn't that what investments are about - ignore market noise and let it run. It's a pretty good month, with the Fed cutting interest rates and the market rebounded. The sub-prime issues seem so long ago. I guess it's human nature to look at the positive and ignore the negative.
My Current Holdings as of 3 October 2007 (% returns base on initial purchase price).
1. CapitaRChina 163.04%
2. FirstREIT 0.35%
3. HL Fin 1.32%
4. CitySpring 20.20%
5. PSC Corp -21.67%
6. AscendasIndT 3.69%
No trades this month. My biggest loss is still PSC Corp but with the share consolidation and rights issue coming up, I hope to be able to recoup the loses.
HL Finance is still my largest holding. I'm pretty disappointed that there is no issue of rights to clear their S44 credits. I can now only hope for a large cash dividend. I have come across some reports that HL Finance might not even exercise their S44 credits at all. Hopefully that will not happen.
I realize that I made a mistake in calculating my returns - I did not include the dividend received. Hence my returns are as follows:
Current Stock Portfolio: 6.01%
Overall Returns for the year: 0.69%
Though I have a unit trust, it is invested using CPF and I want to keep it separately. I will be adding some UTs invested using cash in future.
