Prospects still bright despite hiccup
Tiger Airway’s stock price reacted to two pieces of news yesterday: (1) A
pilot shortage resulting from industry poaching due to the strong rebound
in the airline industry and; (2) Its CEO and two substantial shareholders
(Indigo and Ryanasia) placing out 65.8m shares at S$1.90/share to a “broad
base of institutional investors”. We are factoring in a 4% increase in
staff costs that will reduce our FY11 and FY12 EPS estimates by 3.7% and 3%
respectively. We are also ascribing a lower P/E multiple of 16.5x
(previously 18x) to FY11 EPS to account for the current negative sentiment
arising from the pilot issue. This brings our new TP to S$2.13 (previously
S$2.45). Maintain BUY.
Pilots poached due to strong industry rebound. It was reported in The
Straits Times that Tiger had to cancel 10 flights over the past four days
due to a shortage of pilots with 20 pilots being poached since June by
other airlines. We understand that during an industry rebound most full
service carriers will tend to poach their staff from the low cost carriers
amid their own capacity expansion, while the LCCs will hire the fresh
graduates. With aggressive hiring in the airline industry, we have
factored in a 4% increase in staff costs.
Operationally sound; brighter prospects in Australia. We note that Tiger’s
operating statistics in July remained strong with 0.52m passengers being
carried (+42% YoY) despite the report that its pilots left in June. We
expect 6.95m passengers for FY11 and as of July, 2.5m passengers (36% of
forecast) were carried. In Australia, Virgin Blue has announced that they
intend to re-direct their focus to the higher end business class travelers
paving way for Tiger to gain more market share in the lower segment.
Thai Tiger likely to go ahead. Thai Airway’s EVP Chockchai Panyayong was
quoted in The Edge saying that the national carrier will review its
alliance with Tiger following the share sale but “if the selloff has no big
impact on management or the shareholding structure (of the JV), Thai Air
will go ahead.” Tiger’s management has revealed that they intend to proceed
with the JV as agreed upon with Tiger’s CEO Tony Davis and Ryanair’s
principal Declan Ryan sitting on Thai Tiger’s board.
Maintain HOLD with target price $1.95 (from previous post)
Source: UOBKH
Monday, August 23, 2010
Wednesday, August 18, 2010
Investor's Personalities
Our attitudes toward investing are as distinct as our fingerprints. They start taking shape when you think of money, way before we first start to invest.
When we focus about investing or managing our finances, we'll think from our past experiences. Our inner psychology become critical in preparing us to be a better investor. Moreover, our brains are often wired to project the past into the future; e.g. 'this stock has been going up this far, and will continue to go up and further up', as we all know, this is not the truth.
These investing personalities types may help you to realize your strength as an investor:
Attitude and belief to money and investing, can be changed or molded with the right education and mindset. The will to change will overcome all odds.
So, start identifying which type of investing personalities best describe you, choose which type you aim to become, and put in writing what you'll be doing to be one.
When we focus about investing or managing our finances, we'll think from our past experiences. Our inner psychology become critical in preparing us to be a better investor. Moreover, our brains are often wired to project the past into the future; e.g. 'this stock has been going up this far, and will continue to go up and further up', as we all know, this is not the truth.
These investing personalities types may help you to realize your strength as an investor:
- Reserved Investors - The average and ordinary investors. E.g. small business owners and blue to white collared employees.
- Herd Investors - First timers or beginners. E.g. self-employed or professional employees.
- Hard Headed Investors - Seasoned Investors.
- E.g. Seasoned long term investors or short term traders, or part time traders with several years of trading experience but with mixed performance.
- Laid Back Investors - High socialite investors. E.g. high net worth individuals who comprise of lawyers, airlines pilots, doctors, politicians, celebrities and business owners with lot of cash on hand.
- Speculative Investors - Syndicate and professional investors.
- Egoistic Investors - Professionals with scientific or technical backgrounds. E.g. doctors, engineers and airline pilots. Others include professionals fund managers, ex-stock market dealers/remisiers, veteran investors and retired investors.
- Opportunistic Investors - Experienced and professional fund managers. E.g. international and large overseas hedge fund managers/investors who move in and out of the country.
- Discipline Investors - Experienced, professional and high net worth investors and successful traders. E.g. reclusive master investors and full time investors/traders trading for a living.
Attitude and belief to money and investing, can be changed or molded with the right education and mindset. The will to change will overcome all odds.
So, start identifying which type of investing personalities best describe you, choose which type you aim to become, and put in writing what you'll be doing to be one.
Picking a Good Stock
Though there are thousands of stocks in stock market nowadays, not many of them are worth investing. In ever changing business environment, it is not easy for companies to remain profitable.
Worse, hardly any of them have shareholders' interest at heart. That is why, stocks represented by quality companies with effective management team is the key to get a higher investment return
Good stock pick should've consider effective management as it is everything in sustainable stock investment. Thanks to financial ratios, picking good stock is just a simple math away.
Above average EPSGR and excellent ROE is my first stock screening criteria to filter rubbish stocks in the stock market. You can choose any figure which you feel comfortable. But, the figure 10 I chose is because:
If you love speculative stocks, this method is not for you.
Worse, hardly any of them have shareholders' interest at heart. That is why, stocks represented by quality companies with effective management team is the key to get a higher investment return
Good stock pick should've consider effective management as it is everything in sustainable stock investment. Thanks to financial ratios, picking good stock is just a simple math away.
Above average EPSGR and excellent ROE is my first stock screening criteria to filter rubbish stocks in the stock market. You can choose any figure which you feel comfortable. But, the figure 10 I chose is because:
- 10 per cent EPS shows that the company has reliable high demand products or services.
- 10 per cent ROE shows that the company are managing shareholders’ fund effectively.
- 5 consecutive years means the company able to survive the ups and down of the market, business cycles or the ever-increasing competition.
- Debt to equity ratio so that the company has manageable debt during economic crisis.
- High profit margin which shows the management really did a great job in reducing operating cost to maximise profits.
If you love speculative stocks, this method is not for you.
Tuesday, August 17, 2010
Part Time Investors Tips
With the stock market at historical highs and retail investors getting into the groove, I thought I might as well join in the fun. A common question asked by many part-time investors is how to juggle their investments with their office work effectively without jeopardising either. Here're some suggestions, some tried, some theoretical, some partly tongue-in-cheek in the mood of a lazy Saturday morning, so tread with care (and don't blame me if you are caught with the smoking gun!).
1. Get your boss on your side. Get him/her interested in stocks. Many of them already are anyway, so you don't have to try hard. Once their views on the relative benefits/evils of the stock market are aligned with yours, they will be more lenient towards any minor offences of investing/monitoring investments on the job. They may even look to you for stock tips, hence cementing the win-win relationship.
2. Find like-minded colleagues and find strength in a group. Then you can exchange tips on stocks and on new innovative ways to juggle work and investments. Nothing bonds like sex and money, and if you can't have one, try the other.
3. Outsource monitoring operations to family members. Most often it's the wife, if she's not working. Now, not only are you both bonded by coital relations, you're also bonded by monetary interests. One more topic to talk about at the end of the day.
4. Be careful about using your office computer to check stocks. NEVER use it for online trading. Exception is lunchtime where companies are usually amenable to employee usage of PCs for whatever purposes. Note that the computer audit trail goes all the way to the IT department. If usage for stock market-related purposes is interpreted as overt evidence of using office resources, as well as paid time, to do one's own stuff, then it won't look too good. Not unless it's your ah-kong's company.
5. There are three periods in the day when the time belongs to you. Early morning, lunch-time and after-office hours. (For SAF personnel, insert in morning break and tea break for a total of five). Use them well. Early morning -- check out overseas market performances, and more importantly, read the papers to find out latest fundamental developments/trends. Lunchtime -- review mid-day stock prices and decide whether you want to buy/sell. After-office -- check out corporate developments and overall sector/stock performances, in order to decide possible action for next day.
6. Find a mobile device that enables you to monitor stocks. Check with your broker on what stock monitoring services they provide; they usually do. Don't monitor the stocks (using the mobile device) the office. Make full use of your time. Do it in the pantry when you're getting fresh water supply or in the toilet behind closed doors.
7. A good service to use could be Singtel's I-DEAS News/Finance service. You customise a list of stocks beforehand online; then send an info-requesting SMS everytime you want current quotes on these stocks. The service sends back the required information. Very useful except that it sets you back you 20 cents every time.
8. Familiarise yourself with various stop-loss/limit order options. You could place these orders online the night before or the early morning before going off to work, so that you limit any need for monitoring stocks during working hours. Some brokerages also offer SMS alerts if a stock hits a certain price from above or below. If you're chummy with your broker, he/she might also alert you to certain price triggers from time to time.
9. If one needs to place an urgent order and can't wait till lunchtime or end of the day, call the broker to do a broker-assisted trade. It costs more but don't penny-pinch; it's a matter of 0.1% more commission or so, that's all. Keep your reputation intact, don't use the computer.
10. Turn your weakness into a strength. Your job allows you insider knowledge to a particular industry; look around for new potential stocks in the industry that you know are doing well, in your interactions with your boss/colleagues/subordinates/peers/suppliers/customers. Not only does this confer an investment advantage over fund managers who will not have first-hand industry knowledge, it also makes you alert over time to industry developments and gives you a good overview of how various sub-sectors fit together within the industry you're in. Many companies/bosses fail to appreciate this fact and I genuinely believe that street-savvy employees are of more value to any organisation.
At the end of the day, the name of the game when using office time to undertake your market operations is: Be Discreet. Then you'll be alright. Because everybody does it, believe it or not.
Source: DanielXX
1. Get your boss on your side. Get him/her interested in stocks. Many of them already are anyway, so you don't have to try hard. Once their views on the relative benefits/evils of the stock market are aligned with yours, they will be more lenient towards any minor offences of investing/monitoring investments on the job. They may even look to you for stock tips, hence cementing the win-win relationship.
2. Find like-minded colleagues and find strength in a group. Then you can exchange tips on stocks and on new innovative ways to juggle work and investments. Nothing bonds like sex and money, and if you can't have one, try the other.
3. Outsource monitoring operations to family members. Most often it's the wife, if she's not working. Now, not only are you both bonded by coital relations, you're also bonded by monetary interests. One more topic to talk about at the end of the day.
4. Be careful about using your office computer to check stocks. NEVER use it for online trading. Exception is lunchtime where companies are usually amenable to employee usage of PCs for whatever purposes. Note that the computer audit trail goes all the way to the IT department. If usage for stock market-related purposes is interpreted as overt evidence of using office resources, as well as paid time, to do one's own stuff, then it won't look too good. Not unless it's your ah-kong's company.
5. There are three periods in the day when the time belongs to you. Early morning, lunch-time and after-office hours. (For SAF personnel, insert in morning break and tea break for a total of five). Use them well. Early morning -- check out overseas market performances, and more importantly, read the papers to find out latest fundamental developments/trends. Lunchtime -- review mid-day stock prices and decide whether you want to buy/sell. After-office -- check out corporate developments and overall sector/stock performances, in order to decide possible action for next day.
6. Find a mobile device that enables you to monitor stocks. Check with your broker on what stock monitoring services they provide; they usually do. Don't monitor the stocks (using the mobile device) the office. Make full use of your time. Do it in the pantry when you're getting fresh water supply or in the toilet behind closed doors.
7. A good service to use could be Singtel's I-DEAS News/Finance service. You customise a list of stocks beforehand online; then send an info-requesting SMS everytime you want current quotes on these stocks. The service sends back the required information. Very useful except that it sets you back you 20 cents every time.
8. Familiarise yourself with various stop-loss/limit order options. You could place these orders online the night before or the early morning before going off to work, so that you limit any need for monitoring stocks during working hours. Some brokerages also offer SMS alerts if a stock hits a certain price from above or below. If you're chummy with your broker, he/she might also alert you to certain price triggers from time to time.
9. If one needs to place an urgent order and can't wait till lunchtime or end of the day, call the broker to do a broker-assisted trade. It costs more but don't penny-pinch; it's a matter of 0.1% more commission or so, that's all. Keep your reputation intact, don't use the computer.
10. Turn your weakness into a strength. Your job allows you insider knowledge to a particular industry; look around for new potential stocks in the industry that you know are doing well, in your interactions with your boss/colleagues/subordinates/peers/suppliers/customers. Not only does this confer an investment advantage over fund managers who will not have first-hand industry knowledge, it also makes you alert over time to industry developments and gives you a good overview of how various sub-sectors fit together within the industry you're in. Many companies/bosses fail to appreciate this fact and I genuinely believe that street-savvy employees are of more value to any organisation.
At the end of the day, the name of the game when using office time to undertake your market operations is: Be Discreet. Then you'll be alright. Because everybody does it, believe it or not.
Source: DanielXX
Introduction to Types of Trading.
It's good to know the ABC of trading, including the process of it. Stock market and retail are two different thing, e.g: Stock markets operation are auction-type, where both buyers and sellers are actively setting the price, and retail price are only set by seller.
So how does the stock market price work? Buyers and sellers set the price which is 'bid price' and 'ask price'.
Bid price is the price which buyers are willing to buy the shares. Ask price is the price which sellers are willing to sell their shares. Both bid and ask price are rarely the same, generally the bid are slightly lower than ask price. The differences between both will go to the broker as profit.
There are few types of trading style you can use when it comes to executing your trades. The types of trading are:
Market Orders: As mentioned above, you tell your broker to purchase or sell a specified quantity of stock at the prevailing market price. These are often the lowest-commission trades because they involve very little work on the broker's part.
Limit Order: You tell your broker to buy a security at or below a specified price, or to sell a security at or above a specified price. This ensures that you will never pay more for the stock than whatever price you set as your "limit."
Stop Order: You tell your broker to buy a security at the market price once it reaches a level higher than the current market price. The opposite would be true if you were selling: you would tell your broker to sell your security once it reaches a level below the current market price.
Fill or Kill: You tell your broker to execute the trade immediately; if the trade is not filled right away then your broker does not execute the order.
Day Order: You tell your broker to execute the trade by the end of the day; otherwise, he or she does not fill the order.
So how does the stock market price work? Buyers and sellers set the price which is 'bid price' and 'ask price'.
Bid price is the price which buyers are willing to buy the shares. Ask price is the price which sellers are willing to sell their shares. Both bid and ask price are rarely the same, generally the bid are slightly lower than ask price. The differences between both will go to the broker as profit.
There are few types of trading style you can use when it comes to executing your trades. The types of trading are:
Market Orders: As mentioned above, you tell your broker to purchase or sell a specified quantity of stock at the prevailing market price. These are often the lowest-commission trades because they involve very little work on the broker's part.
Limit Order: You tell your broker to buy a security at or below a specified price, or to sell a security at or above a specified price. This ensures that you will never pay more for the stock than whatever price you set as your "limit."
Stop Order: You tell your broker to buy a security at the market price once it reaches a level higher than the current market price. The opposite would be true if you were selling: you would tell your broker to sell your security once it reaches a level below the current market price.
Fill or Kill: You tell your broker to execute the trade immediately; if the trade is not filled right away then your broker does not execute the order.
Day Order: You tell your broker to execute the trade by the end of the day; otherwise, he or she does not fill the order.
F&N
F&N: OUTPERFORM with TP: S$6.40 - S$6.50
- Growing breweries. It performed exceeding the expectations, with New Zealand, Mongolian and Indochina giving a helping hand. The parent company, saw a grew of 4-5% Q-o-Q.
- 3Q10 net at S$130.6m. After 2 previous quarters of strong growths, 3Q net profit came within expectations at S$130.6m, on a topline of S$1.4bn.
- Is more residential business going on? It grew at least 17% QoQ, as revenue from persold projects grew. CL forecast severe margin contractions, which will continue in 2010.
Residential business – Going strong. More redevelopment? Residential revenue grew 17%QoQ, as FNN recognised revenue from presold projects. On conservative terms, new projects can add S$0.05 and S$0.12/share estimate. Business operation in China and Australia progressed on plan.
Source: CL, DB, CIMB
- Growing breweries. It performed exceeding the expectations, with New Zealand, Mongolian and Indochina giving a helping hand. The parent company, saw a grew of 4-5% Q-o-Q.
- 3Q10 net at S$130.6m. After 2 previous quarters of strong growths, 3Q net profit came within expectations at S$130.6m, on a topline of S$1.4bn.
- Is more residential business going on? It grew at least 17% QoQ, as revenue from persold projects grew. CL forecast severe margin contractions, which will continue in 2010.
Residential business – Going strong. More redevelopment? Residential revenue grew 17%QoQ, as FNN recognised revenue from presold projects. On conservative terms, new projects can add S$0.05 and S$0.12/share estimate. Business operation in China and Australia progressed on plan.
Source: CL, DB, CIMB
Monday, August 16, 2010
Comfort Delgro
Result note - Boosted by stronger A$ - by Germaine Khong
2Q10 core net profit of S$58.2m (+1.6% yoy) was broadly in line with our estimate (S$58.3m) and consensus, accounting for 26% of our full-year estimates. 2Q10 group revenue was up 4.1% yoy to $789.3m thanks to growth in most business segments. Revenue growth was also boosted partially by a positive forex translation effect ($15.2m) thanks to a stronger A$, offset partially by weaker ï¾£ and RMB. We maintain our earnings estimates. Our target price rises from S$1.64 to S$1.83 (WACC: 10.4%, terminal growth: 2%), after removing a 10% discount to our DCF valuation as we believe that currency risks have been priced in. Maintain Outperform on the back of
OUTPERFORM - Maintained, S$1.55 - Tgt. S$1.83, Land Transport
Source: CIMB
2Q10 core net profit of S$58.2m (+1.6% yoy) was broadly in line with our estimate (S$58.3m) and consensus, accounting for 26% of our full-year estimates. 2Q10 group revenue was up 4.1% yoy to $789.3m thanks to growth in most business segments. Revenue growth was also boosted partially by a positive forex translation effect ($15.2m) thanks to a stronger A$, offset partially by weaker ï¾£ and RMB. We maintain our earnings estimates. Our target price rises from S$1.64 to S$1.83 (WACC: 10.4%, terminal growth: 2%), after removing a 10% discount to our DCF valuation as we believe that currency risks have been priced in. Maintain Outperform on the back of
OUTPERFORM - Maintained, S$1.55 - Tgt. S$1.83, Land Transport
Source: CIMB
Dividends
"Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.
When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend." - Wikipedia.
There are 3 types of dividends that you should know:
1) Know their declaration date. It is important as the company will pay the dividends on that exact day.
2) Record date. The company that are declaring the dividends will have to compile all the informations to the shareholders.
3) Ex-dividend date. It allows the investors to catch the last bus up for the dividend payments. It will allow the pending transactions for stock bought to clear before it cashes out money to all shareholders.
So, why buy stocks that gives out dividends? One, it is bonus money. Secondly, it is low risk as these companies are strong, stable and mature companies. They have alot of cash reserves. As their cash reserves grow, debts going low, value is going higher and higher, its all a win-win situation for all.
There are people who try to get in the wagon just in time before the announcements of dividends, they buy it before and sell it right after collected the dividends. Why not, right? You will get extra pocket money at no cost at all. Keep dreaming!
This usually doesn't work, because the stock price usually adjusts immediately to reflect the dividend payout, as interested buyers know the stock no longer includes the current dividend payment and they adjust the amount they're willing to pay accordingly.
When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend." - Wikipedia.
There are 3 types of dividends that you should know:
1) Know their declaration date. It is important as the company will pay the dividends on that exact day.
2) Record date. The company that are declaring the dividends will have to compile all the informations to the shareholders.
3) Ex-dividend date. It allows the investors to catch the last bus up for the dividend payments. It will allow the pending transactions for stock bought to clear before it cashes out money to all shareholders.
So, why buy stocks that gives out dividends? One, it is bonus money. Secondly, it is low risk as these companies are strong, stable and mature companies. They have alot of cash reserves. As their cash reserves grow, debts going low, value is going higher and higher, its all a win-win situation for all.
There are people who try to get in the wagon just in time before the announcements of dividends, they buy it before and sell it right after collected the dividends. Why not, right? You will get extra pocket money at no cost at all. Keep dreaming!
This usually doesn't work, because the stock price usually adjusts immediately to reflect the dividend payout, as interested buyers know the stock no longer includes the current dividend payment and they adjust the amount they're willing to pay accordingly.
Annual Reports
How do you read an annual report? Well, it's up to you.
What do you want from them?
a) Profits
b) Dividends
c) Risk / Stability
d) Growth
Reading Annual Reports are like decoding "MonaLisa". It is not a 5 years old kid book.
There are 8 sections in most annual reports. Not all reports will have all the sections or the same type and amount of information. Here are the sections, what you'll find in each, and questions you should ask yourself:
Chairman of the Board Letter: Should cover changing conditions, previous objectives met or missed and upcoming objectives, and actions taken or not to be taken. Is it well written? Read between the lines; what is being apologized for?
Sales and Marketing: Should cover what the company sells, how, where and when. Is it clear where it's making most of its money presently? Is the scope of lines, divisions and operations clear?
Management Discussion: Is it a clear discussion of significant financial trends over the past few years? How candid and accurate is it?
Financial Statements: Check sales, profits, R&D spending, inventory and debt levels over time. Read the footnotes to ferret out other information. (the balance sheets, the cash flow statements, and the income statements), which are discussed in detail in the Financial Statements section.
Subsidiaries, Brands and Addresses: Where is their headquarters? Is it clear what lines, brand names the company has and what their overseas distribution network is?
List of Directors and Officers: How many directors are insiders and how many are outsiders (a good mix is ideal)? Are the directors well-known and respected? Are there an unusual number of directors (5 to 12 is typical)?
Stock Price History: General trend of price over time. Up or down? On which exchange is the company listed? Do they have a history of paying dividends?
Qouted from IG.
What do you want from them?
a) Profits
b) Dividends
c) Risk / Stability
d) Growth
Reading Annual Reports are like decoding "MonaLisa". It is not a 5 years old kid book.
There are 8 sections in most annual reports. Not all reports will have all the sections or the same type and amount of information. Here are the sections, what you'll find in each, and questions you should ask yourself:
Chairman of the Board Letter: Should cover changing conditions, previous objectives met or missed and upcoming objectives, and actions taken or not to be taken. Is it well written? Read between the lines; what is being apologized for?
Sales and Marketing: Should cover what the company sells, how, where and when. Is it clear where it's making most of its money presently? Is the scope of lines, divisions and operations clear?
10 Year Summary (or less): Is this included? Have revenues and profits increased each year?
Management Discussion: Is it a clear discussion of significant financial trends over the past few years? How candid and accurate is it?
Financial Statements: Check sales, profits, R&D spending, inventory and debt levels over time. Read the footnotes to ferret out other information. (the balance sheets, the cash flow statements, and the income statements), which are discussed in detail in the Financial Statements section.
Subsidiaries, Brands and Addresses: Where is their headquarters? Is it clear what lines, brand names the company has and what their overseas distribution network is?
List of Directors and Officers: How many directors are insiders and how many are outsiders (a good mix is ideal)? Are the directors well-known and respected? Are there an unusual number of directors (5 to 12 is typical)?
Stock Price History: General trend of price over time. Up or down? On which exchange is the company listed? Do they have a history of paying dividends?
Oceanus
Recommend: BUY with target price of S$0.40
Cutting the loss-making restaurants.
Oceanus has shut down 5 of its restaurants due to loss of RMB8m in Beijing and Shanghai. F&B side has been pulling the stocks down as it is affecting the its whole operation. Meanwhile, Oceanus has opened a new restaurant in Taiwan which targets consumers from middle to upper income
group, in contrast to its previously opened restaurant outlets which target consumers from the average income group.
Expanding the abalone tanks.
It's their main products, adding more tanks (at least 1000) in 1H10. Oceanus is expecting to have at least 32,000 tanks, now have 26,000 tanks. Currently, land is not a problem for Oceanus as they have more than enough land to store all the tanks.
We like Oceanus for its
1) sheer abalone
farming capacity, and
2) low abalone production cost.
Key risks to our call are
1) lack of appetite from Chinese consumers for abalone, and
2) continuing and/or worsening losses of its F&B outlets.
Source: DMG
Cutting the loss-making restaurants.
Oceanus has shut down 5 of its restaurants due to loss of RMB8m in Beijing and Shanghai. F&B side has been pulling the stocks down as it is affecting the its whole operation. Meanwhile, Oceanus has opened a new restaurant in Taiwan which targets consumers from middle to upper income
group, in contrast to its previously opened restaurant outlets which target consumers from the average income group.
Expanding the abalone tanks.
It's their main products, adding more tanks (at least 1000) in 1H10. Oceanus is expecting to have at least 32,000 tanks, now have 26,000 tanks. Currently, land is not a problem for Oceanus as they have more than enough land to store all the tanks.
We like Oceanus for its
1) sheer abalone
farming capacity, and
2) low abalone production cost.
Key risks to our call are
1) lack of appetite from Chinese consumers for abalone, and
2) continuing and/or worsening losses of its F&B outlets.
Source: DMG
Sunday, August 15, 2010
Stock for Beginners: What is Stock?
What is stock? or wondered why shares of stock exist? This introduction to the world of investing in stocks will provide answers to those questions and show you just how simple Wall Street really is.
It is easier to learn with example.
Imagine you wanted to start a retail store with members of your family. You decide you need $1000 to get the business off the ground so you incorporate a new company. You divide the company into 1000 pieces, or "shares" of stock. You price each new share of stock at $1. If you can sell all of the shares to your family members, you should have the $1000 you need (1,000 shares x $1 per share = $1000 cash.
So, stocks in your family retail store and Wall Street Stocks are no different, take a look:
When you buy share of stock, you are purchasing a tiny piece of a company.
The current stock price of McDong's is S$2.00. The stock market is nothing more than an auction. Individual investors, just like you, are making decisions with their own money in a real-time auction. If someone wants to sell their shares of McDong's and there are no buyers at $2.00, the price would have to continually fall until someone else stepped in and placed a buy order with their broker, let's say S$1.90. If investors thought McDong's was going to grow its profits faster than other companies, they would be willing to bid up the price of the stock at S$2.10 (which is affected by supply and demand because there are only a fixed amount of shares in existence, in this case 1,000,000 shares). Likewise, if a large investor were to dump his or her shares on the market, the supply could temporarily overwhelm and drive the stock price lower.
It's simply supply and demand thing. McDong only have 1,000,000 shares to go around. If there are more demands than supply, the price will go up towards Mount Everest. If there are too much supply, and nobody is buying it, the price will sank down the sea. Get it?
It is easier to learn with example.
Imagine you wanted to start a retail store with members of your family. You decide you need $1000 to get the business off the ground so you incorporate a new company. You divide the company into 1000 pieces, or "shares" of stock. You price each new share of stock at $1. If you can sell all of the shares to your family members, you should have the $1000 you need (1,000 shares x $1 per share = $1000 cash.
So, stocks in your family retail store and Wall Street Stocks are no different, take a look:
When you buy share of stock, you are purchasing a tiny piece of a company.
The current stock price of McDong's is S$2.00. The stock market is nothing more than an auction. Individual investors, just like you, are making decisions with their own money in a real-time auction. If someone wants to sell their shares of McDong's and there are no buyers at $2.00, the price would have to continually fall until someone else stepped in and placed a buy order with their broker, let's say S$1.90. If investors thought McDong's was going to grow its profits faster than other companies, they would be willing to bid up the price of the stock at S$2.10 (which is affected by supply and demand because there are only a fixed amount of shares in existence, in this case 1,000,000 shares). Likewise, if a large investor were to dump his or her shares on the market, the supply could temporarily overwhelm and drive the stock price lower.
It's simply supply and demand thing. McDong only have 1,000,000 shares to go around. If there are more demands than supply, the price will go up towards Mount Everest. If there are too much supply, and nobody is buying it, the price will sank down the sea. Get it?
Sell It When You Know It
Fear!
It is our number one enemy. We tend to be afraid, fearful of losing. One important lesson of any investment skill is fear no more. We, the investors sell away our best stocks based on emotions, making mistakes:
Keep the dying stock.
The longer you keep it, the worst it will get. Its okay to lose sometimes. If you realize it earlier, the better it will get. Some companies do fall. Learn about them. Are they gonna be okay? Analyze their balance sheets. Read what the chairman's notes for the future.
Holding to gain more.
Greed. The more you have, the greedier you become. Be contented. Do not hesitate to sell it. Its better go gain S$100 than to gain nothing. There is always a risk that the price will keep shooting up and up, or worst, going down worst than you expected. Sometimes its is good to protect yourself, your portfolio even if you gain less than what you expected.
Timing the market.
You do not time the market. The market is the mother of all. They can do whatever they want, and you can't stop them. If she is happy, she goes up 10-fold in a day. When she is broken-hearted, she goes down 100-fold in an hour.
It is never your skill to time the market. Sell it when you have to, even though your stock are now S$1.93 and you are waiting for S$2 before you sell. Believe me, S$0.07 is not worth it. In the end, you might sell it at S$1.80. Who knows, right?
Pay attention.
Evaluation. Go through your portfolio every week or month. See what is going on in the company, are they doing well? Are they on track with what they are doing? Reevaluate all the company. Let go the "not-so-good". Is there any M&A? Who is the new competitors?
Well, now you know. Sell if you have to. Do not fear the market. The greatest enemy of all is you youself.
It is our number one enemy. We tend to be afraid, fearful of losing. One important lesson of any investment skill is fear no more. We, the investors sell away our best stocks based on emotions, making mistakes:
Keep the dying stock.
The longer you keep it, the worst it will get. Its okay to lose sometimes. If you realize it earlier, the better it will get. Some companies do fall. Learn about them. Are they gonna be okay? Analyze their balance sheets. Read what the chairman's notes for the future.
Holding to gain more.
Greed. The more you have, the greedier you become. Be contented. Do not hesitate to sell it. Its better go gain S$100 than to gain nothing. There is always a risk that the price will keep shooting up and up, or worst, going down worst than you expected. Sometimes its is good to protect yourself, your portfolio even if you gain less than what you expected.
Timing the market.
You do not time the market. The market is the mother of all. They can do whatever they want, and you can't stop them. If she is happy, she goes up 10-fold in a day. When she is broken-hearted, she goes down 100-fold in an hour.
It is never your skill to time the market. Sell it when you have to, even though your stock are now S$1.93 and you are waiting for S$2 before you sell. Believe me, S$0.07 is not worth it. In the end, you might sell it at S$1.80. Who knows, right?
Pay attention.
Evaluation. Go through your portfolio every week or month. See what is going on in the company, are they doing well? Are they on track with what they are doing? Reevaluate all the company. Let go the "not-so-good". Is there any M&A? Who is the new competitors?
Well, now you know. Sell if you have to. Do not fear the market. The greatest enemy of all is you youself.
Principle of Investing
Hi.
What's the principle of investing in stocks?
Start NOW!
Starting early does make a difference. In general, every year you wait doubles the required monthly savings to reach the same level when you retire.
An example:
If you keep S$500 every month for 5 years, then stop doing it, or save S$500 after 5 years of doing nothing. You have the save amount exactly after 10 years. So why not start early?
Understanding yourself.
Know yourself. Learn about yourself. What is your goal? What is your need in the future? What do you want? Start drawing a map of where you want to be in after 5 - 10 years. Set a goal, be there after 10 years. If you don't keep reminding yourself of what you want, I am afraid you might slack and go off track.
How healthy are you with your financial system? How much do you have? Earnings? Expenses? Debts? Financial Goals?
Risks?
If you don't make it here, what are you going to do next? Accepting failure and move on is part of life lesson nobody can teach you. Are you willing to take risks? How much risks can you handle? This is all about you. If you can figure it out, you can imagine the risks you can take and learn to adapt with it and expand it slowly in the future.
Plans! Long-term or short-term?
How do you spend your money? U have needs such as cars, houses, girlfriend, family, retirement. It should also detail where the money will come from. Hopefully the numbers will be about the same.
Don't try to time the market. Get in and stay in. We don't know what direction the next 10% move will be, but we do know what direction the next 100% move will be.
Review your plan periodically, and whenever your needs or circumstances change. If you are not confident that your plan makes sense, talk to an investment advisor or someone you trust.
Buy Stocks
Now that you understand yourself, the risk and your goal, invest in stocks. Buy it, and KEEP IT. It require two things, patience and discipline. The stocks will give you benefits, long-term view. Dividends and the stock you bought will definately be a winner. This approach reduces the entire universe of investment vehicles to two choices: stocks and stock mutual funds. In the long run, they're the winners: In this century, stocks beat bonds 8 out of 9 decades, and they're well in the lead again.
Get Help
Some people just can't handle DIY. Try it, and if it doesn't work, seek professional advise.
If you want others to handle your financial affairs for you, just make sure your money is being spent wisely.
What's the principle of investing in stocks?
Start NOW!
Starting early does make a difference. In general, every year you wait doubles the required monthly savings to reach the same level when you retire.
An example:
If you keep S$500 every month for 5 years, then stop doing it, or save S$500 after 5 years of doing nothing. You have the save amount exactly after 10 years. So why not start early?
Understanding yourself.
Know yourself. Learn about yourself. What is your goal? What is your need in the future? What do you want? Start drawing a map of where you want to be in after 5 - 10 years. Set a goal, be there after 10 years. If you don't keep reminding yourself of what you want, I am afraid you might slack and go off track.
How healthy are you with your financial system? How much do you have? Earnings? Expenses? Debts? Financial Goals?
Risks?
If you don't make it here, what are you going to do next? Accepting failure and move on is part of life lesson nobody can teach you. Are you willing to take risks? How much risks can you handle? This is all about you. If you can figure it out, you can imagine the risks you can take and learn to adapt with it and expand it slowly in the future.
Plans! Long-term or short-term?
How do you spend your money? U have needs such as cars, houses, girlfriend, family, retirement. It should also detail where the money will come from. Hopefully the numbers will be about the same.
Don't try to time the market. Get in and stay in. We don't know what direction the next 10% move will be, but we do know what direction the next 100% move will be.
Review your plan periodically, and whenever your needs or circumstances change. If you are not confident that your plan makes sense, talk to an investment advisor or someone you trust.
Buy Stocks
Now that you understand yourself, the risk and your goal, invest in stocks. Buy it, and KEEP IT. It require two things, patience and discipline. The stocks will give you benefits, long-term view. Dividends and the stock you bought will definately be a winner. This approach reduces the entire universe of investment vehicles to two choices: stocks and stock mutual funds. In the long run, they're the winners: In this century, stocks beat bonds 8 out of 9 decades, and they're well in the lead again.
Get Help
Some people just can't handle DIY. Try it, and if it doesn't work, seek professional advise.
If you want others to handle your financial affairs for you, just make sure your money is being spent wisely.
Saturday, August 14, 2010
Top 20 New Quarter Results
Profits of Singapore Listed Firms Rise 24%
An impressive set of corporate earnings. For those who haven't read The Straits Times (14 Aug2010), this is a scanned copy below.
Impressive. It seems that the downturn is going back North again.
Source: The Strait Times
An impressive set of corporate earnings. For those who haven't read The Straits Times (14 Aug2010), this is a scanned copy below.
Impressive. It seems that the downturn is going back North again.
Source: The Strait Times
OUB
- UOB net profits came in at S$602mn, higher than our expectations of S$572mn and closer to consensus of S$610mn. The details were less promising, with beat largely due to higher income from associate (up 90% q/q, largely one-time) and lower tax rate of 16%. PPOP of S$726mn was 7% below our estimates. We expect stock to trade lower following these results.
- UOB emphasised its regional franchise and admitted that the Singapore market is mature and competitive. Its S$ loan market share appears to be slipping as its S$ loans only expanded 2.3% qoq in a quarter when system loans grew 3.6% qoq. Much of the loan growth came from regional markets with Malaysia, in particular, appearing to have done very well. Management sees revenue opportunities in regional loan growth and fee-based income.
- Balance sheet strength remains the key positive for UOB. We think UOB offers the strongest balance sheet in the sector. In particular, collective provision coverage appears to present a substantial earnings buffer for future periods. The $57m 2Q10 collective provision top up ($77m 1Q10) saw coverage remain broadly flat, implying a $250m surplus to the last cyclical trough (1Q08). Going forward, we expect UOB credit costs to remain very low, as reflected in our forecast.
Ratings: From HOLD to OUTPERFORM with target price from S$19.40 to S$23 from 11 Brokerage Firm
Source: CIMB, CL, CSFB, DAIWA, DB, DBS, GS, JPM, KIM ENG, OCBC, UBS
- UOB emphasised its regional franchise and admitted that the Singapore market is mature and competitive. Its S$ loan market share appears to be slipping as its S$ loans only expanded 2.3% qoq in a quarter when system loans grew 3.6% qoq. Much of the loan growth came from regional markets with Malaysia, in particular, appearing to have done very well. Management sees revenue opportunities in regional loan growth and fee-based income.
- Balance sheet strength remains the key positive for UOB. We think UOB offers the strongest balance sheet in the sector. In particular, collective provision coverage appears to present a substantial earnings buffer for future periods. The $57m 2Q10 collective provision top up ($77m 1Q10) saw coverage remain broadly flat, implying a $250m surplus to the last cyclical trough (1Q08). Going forward, we expect UOB credit costs to remain very low, as reflected in our forecast.
Ratings: From HOLD to OUTPERFORM with target price from S$19.40 to S$23 from 11 Brokerage Firm
Source: CIMB, CL, CSFB, DAIWA, DB, DBS, GS, JPM, KIM ENG, OCBC, UBS
Golden Agri-Resources
Golden Agri-Resources (GAR) reported its 2Q10 results yesterday. Revenue climbed 28.4% YoY to US$726.2m. Net profit also showed a 19.9% rise to US$66.0m, but fell 25.4% QoQ due to higher fertilizer cost from increased volume applied in 2Q10.
One reason for the shortfall was due to higher export taxes paid (US$26m in 1H10 versus US$3m in 1H09). We understand that GAR also had to incur slightly higher freight costs (US$28m in 1H10 versus US$17m in 1H09) as it is now shipping to more destinations.
Lower production growth. While total production (including palm kernel) showed a seasonal 12% pick up from the previous quarter, overall production was down 13% from the year-ago quarter; management notes that the trees are still experiencing a biological slowdown after a peak crop in 2H09. While GAR now expects to see up to 5% increase in production this year, it admits that the increase will mainly come from its increased acreage and yields could continue to remain relatively low in light of the uncertain weather conditions.
Easing fair value to S$0.655. This drops our fair value from S$0.72 to S$0.655 but we maintain our BUY rating as current balance sheet strength suggests that GAR is well-equipped to handle any turbulence.
Source: Carey Wong (OCBC)
One reason for the shortfall was due to higher export taxes paid (US$26m in 1H10 versus US$3m in 1H09). We understand that GAR also had to incur slightly higher freight costs (US$28m in 1H10 versus US$17m in 1H09) as it is now shipping to more destinations.
Lower production growth. While total production (including palm kernel) showed a seasonal 12% pick up from the previous quarter, overall production was down 13% from the year-ago quarter; management notes that the trees are still experiencing a biological slowdown after a peak crop in 2H09. While GAR now expects to see up to 5% increase in production this year, it admits that the increase will mainly come from its increased acreage and yields could continue to remain relatively low in light of the uncertain weather conditions.
Easing fair value to S$0.655. This drops our fair value from S$0.72 to S$0.655 but we maintain our BUY rating as current balance sheet strength suggests that GAR is well-equipped to handle any turbulence.
Source: Carey Wong (OCBC)
Singtel
1Q11 Results Mostly In Line
SingTel released its 1Q11 results this morning, with revenue up 11.5% YoY; but it fell 4.1% QoQ and was also about 3.8% below our estimate, mainly hit by seasonally lower IT and Engineering revenue.
Net profit eased 0.2% YoY to S$943.2m; however, it fell 7.1% QoQ, again due mainly to seasonal factors and lower associate contributions (down 17.8% YoY and 6.9% QoQ); but it was just 1.6% shy of our forecast, as overall EBITDA margin was relatively steady at 29.3%, versus 29.9% in both 1Q10 and 4Q10.
Going forward, SingTel maintains its previous guidance for the rest of FY11, although it continues to caution that its consolidated operating revenue and operational EBITDA will be impacted by AUD movements and the earnings contributions from its regional associates will be affected by regional forex movements as well.
Until then, we place our BUY rating and S$3.40 fair value under review.
Source: Carey Wong (OCBC)
SingTel released its 1Q11 results this morning, with revenue up 11.5% YoY; but it fell 4.1% QoQ and was also about 3.8% below our estimate, mainly hit by seasonally lower IT and Engineering revenue.
Net profit eased 0.2% YoY to S$943.2m; however, it fell 7.1% QoQ, again due mainly to seasonal factors and lower associate contributions (down 17.8% YoY and 6.9% QoQ); but it was just 1.6% shy of our forecast, as overall EBITDA margin was relatively steady at 29.3%, versus 29.9% in both 1Q10 and 4Q10.
Going forward, SingTel maintains its previous guidance for the rest of FY11, although it continues to caution that its consolidated operating revenue and operational EBITDA will be impacted by AUD movements and the earnings contributions from its regional associates will be affected by regional forex movements as well.
Until then, we place our BUY rating and S$3.40 fair value under review.
Source: Carey Wong (OCBC)
Friday, August 13, 2010
SembCorp Industries Ltd
2Q10 net profit of S$161m (+14% YoY) was in line with expectation. 1H10
net profit of S$320m accounted for 49% of our net profit forecast. 2Q10 net profit
growth was driven by its offshore marine unit (+26% YoY), utilities unit (+8%
YoY) and environmental unit (+71% YoY) while the industrial park unit reported
slight decline (-3% YoY). Overall earnings remain solid, and we maintain BUY on
the stock with an unchanged SOTP-derived TP of S$4.96. Valuation remains
attractive and we expect stock to re-rate on incremental utilities earnings growth.
Marine: Strong performance but orderbook depleting. 2Q10 Marine net profit
jumped +26% YoY despite lower revenue (-27% YoY) on higher margins. Marine
unit accounted for 61% of 2Q10 net profit. Outstanding orderbook as at 3 Aug 10
slipped to S$4.3b vs. S$7.9b last year. We believe earnings decline is inevitable
in FY11 as order outlook (ex-Petrobras) remains clouded by uncertainties.
New projects and expansions in the pipeline that will drive growth
acquisition to be earnings accretive in FY11. Cascal reported US$23.5m net profit for
the in their latest financial year ending Mar 2010.
(O&M) will be carried out by a 70% owned subsidiary.
agreement (WPA) by Apr 2011.
S$2.1b and the plant is expected to be ready for operations by end-2013. Operations
and maintenance (O&M) will be carried out by a 70% owned subsidiary.
Source: UBS
net profit of S$320m accounted for 49% of our net profit forecast. 2Q10 net profit
growth was driven by its offshore marine unit (+26% YoY), utilities unit (+8%
YoY) and environmental unit (+71% YoY) while the industrial park unit reported
slight decline (-3% YoY). Overall earnings remain solid, and we maintain BUY on
the stock with an unchanged SOTP-derived TP of S$4.96. Valuation remains
attractive and we expect stock to re-rate on incremental utilities earnings growth.
Marine: Strong performance but orderbook depleting. 2Q10 Marine net profit
jumped +26% YoY despite lower revenue (-27% YoY) on higher margins. Marine
unit accounted for 61% of 2Q10 net profit. Outstanding orderbook as at 3 Aug 10
slipped to S$4.3b vs. S$7.9b last year. We believe earnings decline is inevitable
in FY11 as order outlook (ex-Petrobras) remains clouded by uncertainties.
New projects and expansions in the pipeline that will drive growth
- US$208m acquisition of Cascal. Takeover nearly completed. Major cost of acquisition
acquisition to be earnings accretive in FY11. Cascal reported US$23.5m net profit for
the in their latest financial year ending Mar 2010.
- 60% owned US$1b Salalah independent water and power plant (IWPP) in Oman is
(O&M) will be carried out by a 70% owned subsidiary.
- US$200m expansion of desalination capacity in Fujairah. This will increase capacity
agreement (WPA) by Apr 2011.
- 1,320MW power plant in India. SCI signed a deal to acquire 49% equity stake in a
S$2.1b and the plant is expected to be ready for operations by end-2013. Operations
and maintenance (O&M) will be carried out by a 70% owned subsidiary.
Source: UBS
Wilmar
First Take: 2Q10 in line, seasonal weakness and one-off expenses
News
2Q10 net profit of US$344 mn was 17% below our US$414 mn estimate, dragged down by losses in the fair value of embedded derivatives in convertibles bonds. On an adjusted basis, we estimate that 2Q10 core net profit was only 8% below our quarterly estimate. On a YTD basis, 1H10 core net profit comprised 40% of our full year 2010E forecast, 42% of Bloomberg consensus. However, 1H tends to be a
seasonally weak period. Historically, Wilmar’s 1H has comprised between 37%-46% of the full year net profit (based on 2005-2009, excluding 2007 which was a merger year).
Analysis
Palm and Laurics margins and sales volumes were below expectations, we believe as the result of the weak industry-wide CPO (crude palm oil) production during the quarter (from yield stress, the lagged impact of
lower fertilizer application and as heavy rains hampered harvesting). With seasonally higher CPO production and stronger CPO prices in 2H, we believe Palm and Laurics volumes and margins may accelerate. This may
also benefit the Plantations division, which was seasonally weak in 1H. Oilseeds and Grains earnings performed in line with expectations, withstrong sales volumes, up 27% yoy in 2Q10, largely due to commencement of new plants for oilseeds crushing, flour and rice milling. The Consumer
Products division however did not perform well during the quarter, with sales and margins both below our expectations.
Implications
Overall we see the results as being in line with our expectations, but given the subjectivity in assessing Wilmar’s seasonal earnings trend, we believe there is a risk that the market may react negatively, but we maintain our Buy rating. No change to earnings or target price.
Rating: Neutral
Source: Goldman Sachs
News
2Q10 net profit of US$344 mn was 17% below our US$414 mn estimate, dragged down by losses in the fair value of embedded derivatives in convertibles bonds. On an adjusted basis, we estimate that 2Q10 core net profit was only 8% below our quarterly estimate. On a YTD basis, 1H10 core net profit comprised 40% of our full year 2010E forecast, 42% of Bloomberg consensus. However, 1H tends to be a
seasonally weak period. Historically, Wilmar’s 1H has comprised between 37%-46% of the full year net profit (based on 2005-2009, excluding 2007 which was a merger year).
Analysis
Palm and Laurics margins and sales volumes were below expectations, we believe as the result of the weak industry-wide CPO (crude palm oil) production during the quarter (from yield stress, the lagged impact of
lower fertilizer application and as heavy rains hampered harvesting). With seasonally higher CPO production and stronger CPO prices in 2H, we believe Palm and Laurics volumes and margins may accelerate. This may
also benefit the Plantations division, which was seasonally weak in 1H. Oilseeds and Grains earnings performed in line with expectations, withstrong sales volumes, up 27% yoy in 2Q10, largely due to commencement of new plants for oilseeds crushing, flour and rice milling. The Consumer
Products division however did not perform well during the quarter, with sales and margins both below our expectations.
Implications
Overall we see the results as being in line with our expectations, but given the subjectivity in assessing Wilmar’s seasonal earnings trend, we believe there is a risk that the market may react negatively, but we maintain our Buy rating. No change to earnings or target price.
Rating: Neutral
Source: Goldman Sachs
Ezion
Ezion: BUY S$0.64; Bloomberg: EZI SP
Lifting up to expectations;
Price Target : S$ 0.86
At a Glance
· Stellar 2Q10 results were within our expectation
· Signed LOI worth AUD70m for marine logistics work
· Near term catalysts include more contract wins and further updates on
its liftboats
Comment on Results
Robust operating profits boosted by disposal gains. Ezion posted another
quarter of strong growth in 2Q10. Recurring net profit surged 103% yoy and
20% qoq to S$9.2m on revenue of S$32.9m (+55% yoy, +29% qoq), attributable
to a larger vessel fleet. The sequential improvement, we believe, came
largely from the progressive deployment of vessels to the Gorgon project,
with all 8 deployed by mid-2010 (from 4-5 vessels in 1Q). In addition,
Ezion made a disposal gain of S$7.5m from the divestment of a 51% stake in
a subsidiary that owned the Group's first multi-purpose self-propelled jack
up, which lifted its net profit to S$16.5m (+305% yoy, +114% qoq). EBIT
margin held up well at c. 26%.
Signed LOI worth AUD70m. Together with the results, Ezion announced that
its Australian operation has received a letter of intent (LOI) for marine
logistics work from a Multi-National Oil Major with an estimated contract
value of AUD 70m. The work is expected to be carried out over four years
from 2011 to 2014.
Recommendation
Expect sequential improvement. While 1H10 has accounted for only around 39%
of our FY10F, we are keeping our forecasts unchanged. We expect the group
to post sequentially stronger quarterly results with the delivery and
charter of its third and fourth liftboats in 3Q10 and 4Q10.
Maintain BUY, TP unchanged at S$0.86. TP is pegged to 12x blended FY10/11
EPS. We believe further near term catalysts could include more contract
wins and further updates on its liftboats. Ezion could potentially invest
in another 2 liftboats using cash proceeds raised from liftboat divestments
in 1H10.
By: Jeremy Thia (DBS Vickers)
Lifting up to expectations;
Price Target : S$ 0.86
At a Glance
· Stellar 2Q10 results were within our expectation
· Signed LOI worth AUD70m for marine logistics work
· Near term catalysts include more contract wins and further updates on
its liftboats
Comment on Results
Robust operating profits boosted by disposal gains. Ezion posted another
quarter of strong growth in 2Q10. Recurring net profit surged 103% yoy and
20% qoq to S$9.2m on revenue of S$32.9m (+55% yoy, +29% qoq), attributable
to a larger vessel fleet. The sequential improvement, we believe, came
largely from the progressive deployment of vessels to the Gorgon project,
with all 8 deployed by mid-2010 (from 4-5 vessels in 1Q). In addition,
Ezion made a disposal gain of S$7.5m from the divestment of a 51% stake in
a subsidiary that owned the Group's first multi-purpose self-propelled jack
up, which lifted its net profit to S$16.5m (+305% yoy, +114% qoq). EBIT
margin held up well at c. 26%.
Signed LOI worth AUD70m. Together with the results, Ezion announced that
its Australian operation has received a letter of intent (LOI) for marine
logistics work from a Multi-National Oil Major with an estimated contract
value of AUD 70m. The work is expected to be carried out over four years
from 2011 to 2014.
Recommendation
Expect sequential improvement. While 1H10 has accounted for only around 39%
of our FY10F, we are keeping our forecasts unchanged. We expect the group
to post sequentially stronger quarterly results with the delivery and
charter of its third and fourth liftboats in 3Q10 and 4Q10.
Maintain BUY, TP unchanged at S$0.86. TP is pegged to 12x blended FY10/11
EPS. We believe further near term catalysts could include more contract
wins and further updates on its liftboats. Ezion could potentially invest
in another 2 liftboats using cash proceeds raised from liftboat divestments
in 1H10.
By: Jeremy Thia (DBS Vickers)
Noble
Ratings: Still maintaining OVERWEIGHT
2Q10 earnings miss on lower margins, expansion costs
Noble reported 2Q10 ‘recurring’ net profit of US$47 million versus our estimate of US$140 million (as highlighted in our July 16, 2010 report, we thought 2Q10 would be weaker than expected
but closer to US$105-110 million), down 50% y/y. Key reasons for the variance were:
(a) lower dollar margins seen in agriculture (weak soy
crush margins), MMO and logistics, and
(b) substantial increase in SG&A costs mainly on start up costs on oil & gas expansion and other
segments (stands at 63% of gross profit with historical average being 44%). As a result we reduce 2010E/2011E earnings by 13.5%/5% and lower our SOTP-based Jun-11 PT from S$2.00 - S$2.50 to S$2
Management guided to a 15% RoE (down from 20% previously) for the current period given the challenging
operating environment and low-cost debt environment. However, the CEO, Ricardo Leiman, did highlight that he had never been “more optimistic” about the company, and reiterated goals of doubling earnings in the next 3-5 years.
Coal business remains the catalyst to watch out for; more investments likely, in our view: While we expect the stock to correct in the near term (on back of weak results), with over US$2 billion potentially available for investment, we believe we could see cash being invested in this regard, with a potential focus on coal investments (given the cash unlocking being undertaken within its GCL business).
Source: Bloomberg and JP Morgan
2Q10 earnings miss on lower margins, expansion costs
Noble reported 2Q10 ‘recurring’ net profit of US$47 million versus our estimate of US$140 million (as highlighted in our July 16, 2010 report, we thought 2Q10 would be weaker than expected
but closer to US$105-110 million), down 50% y/y. Key reasons for the variance were:
(a) lower dollar margins seen in agriculture (weak soy
crush margins), MMO and logistics, and
(b) substantial increase in SG&A costs mainly on start up costs on oil & gas expansion and other
segments (stands at 63% of gross profit with historical average being 44%). As a result we reduce 2010E/2011E earnings by 13.5%/5% and lower our SOTP-based Jun-11 PT from S$2.00 - S$2.50 to S$2
Management guided to a 15% RoE (down from 20% previously) for the current period given the challenging
operating environment and low-cost debt environment. However, the CEO, Ricardo Leiman, did highlight that he had never been “more optimistic” about the company, and reiterated goals of doubling earnings in the next 3-5 years.
Coal business remains the catalyst to watch out for; more investments likely, in our view: While we expect the stock to correct in the near term (on back of weak results), with over US$2 billion potentially available for investment, we believe we could see cash being invested in this regard, with a potential focus on coal investments (given the cash unlocking being undertaken within its GCL business).
Source: Bloomberg and JP Morgan
Genting Singapore
Strongest Quarter With or Without Luck
Why Overweight (S$1.06 - S$1.60)
Based on 2Q EBITDA of S$514 million, we have raised our EPS and EBITDA estimates by 57-88%. That
implies 2011e EV/EBITDA of 9.5x – attractive in our view. Lower operating costs and better understanding of local market should help company maintain market share Potential disposal of UK asset at a reasonable price (despite registering losses) is positive too. Our EBITDA estimates are 45-60% higher than consensus We remain wary of sustainability of such a high margin following increased competition from MBS.
Key Value Drivers
• Visitor arrival growth
• Full opening of Universal Studio
attraction and aggressive market
thereafter
• Issuance of junket license and
expansion of VIP business
• GENS’ gaming market share
• EBITDA margin
Potential Positive Catalysts
• Sustained market share and margin in
3Q could move consensus
expectations up
• Introduction of junkets could increase
VIP volume
• Introduction of new rides at USS
should drive the traffic
Risks
• Competition intensifies as gaming
industry in the region is liberalized.
• Cannibalization as MBS opens in
phases.
View what other broker's thought here.
Source: Morgan Stanley
Why Overweight (S$1.06 - S$1.60)
Based on 2Q EBITDA of S$514 million, we have raised our EPS and EBITDA estimates by 57-88%. That
implies 2011e EV/EBITDA of 9.5x – attractive in our view. Lower operating costs and better understanding of local market should help company maintain market share Potential disposal of UK asset at a reasonable price (despite registering losses) is positive too. Our EBITDA estimates are 45-60% higher than consensus We remain wary of sustainability of such a high margin following increased competition from MBS.
Key Value Drivers
• Visitor arrival growth
• Full opening of Universal Studio
attraction and aggressive market
thereafter
• Issuance of junket license and
expansion of VIP business
• GENS’ gaming market share
• EBITDA margin
Potential Positive Catalysts
• Sustained market share and margin in
3Q could move consensus
expectations up
• Introduction of junkets could increase
VIP volume
• Introduction of new rides at USS
should drive the traffic
Risks
• Competition intensifies as gaming
industry in the region is liberalized.
• Cannibalization as MBS opens in
phases.
View what other broker's thought here.
Source: Morgan Stanley
Genting Singapore
2Q10 results beat all expectations: Genting Singapore’s (GENS) 2Q10
results beat all expectations (we were in line with consensus). The
Singapore resort contributed 2Q10 revenue of S$861 mn and EBITDA of
S$503.5 mn, reflecting a full quarter of casino and theme park contributions.
We expect consensus upgrades on the back of these stellar results.
Raise target price to S$1.68; upgrade to OUTPERFORM: We have raised
our FY10E-FY11E EBITDA by 68-69% to reflect higher casino revenues and
higher EBITDA margins. We raise our target price on Genting Singapore to
S$1.68 and upgrade our rating to OUTPERFORM (from Underperform
previously).
UK proposal goes to vote next week: GENS has proposed to sell its UK
casino estate to Genting Malaysia for S$689 mn. This is equivalent to a
FY10E EV/EBITDA of 13.3x and 11.2x for FY11E, a 60-78% premium to UK
peer, Rank Plc. If this proposal goes ahead, Genting Singapore will book a
net loss of S$235 mn (due to exchange losses of S$339 mn)
Upgrade to OUTPERFORM/BUY from previous quarter.
View what other broker's thought here.
Source: Credit Suisse
results beat all expectations (we were in line with consensus). The
Singapore resort contributed 2Q10 revenue of S$861 mn and EBITDA of
S$503.5 mn, reflecting a full quarter of casino and theme park contributions.
We expect consensus upgrades on the back of these stellar results.
Raise target price to S$1.68; upgrade to OUTPERFORM: We have raised
our FY10E-FY11E EBITDA by 68-69% to reflect higher casino revenues and
higher EBITDA margins. We raise our target price on Genting Singapore to
S$1.68 and upgrade our rating to OUTPERFORM (from Underperform
previously).
UK proposal goes to vote next week: GENS has proposed to sell its UK
casino estate to Genting Malaysia for S$689 mn. This is equivalent to a
FY10E EV/EBITDA of 13.3x and 11.2x for FY11E, a 60-78% premium to UK
peer, Rank Plc. If this proposal goes ahead, Genting Singapore will book a
net loss of S$235 mn (due to exchange losses of S$339 mn)
Upgrade to OUTPERFORM/BUY from previous quarter.
View what other broker's thought here.
Source: Credit Suisse
Thursday, August 12, 2010
Tiger Airways
Maintain HOLD with target price $1.95
Tiger Airways reported S$1.9m earnings in 1Q11, a turnaround from a S$6m loss in 1Q10 but significantly lower than both consensus and our expectations. Stripping out the forex loss would lead to S$7.6m in profits, but even that number pales in comparison to consensus expectation of S$78m earnings in FY11.
-Revenue in line with consensus expectations. Tiger’s revenue grew 45% yoy in 1Q11, thanks to 18% yoy growth in RPK (revenue passenger kilometre, a measure of sales volume) and 23% yoy growth in yield (price). The latter is impressive, in our view, given stiff competition in Australia where Tiger operates nine of its 19 aircraft. 1Q11 revenue of S$145m amounts to 21% of full-year Bloomberg consensus estimate, which we would describe as ‘in line’, given the April-June quarter is typically the weakest for Tiger (it is winter time in Australia, resulting in less travel).
-Costs are racing up. However, Tiger’s operating cost in 1Q11 was substantially higher than we expected. Cost per ASK (a measure of unit costs) increased 17% yoy to S$ 6.38, compared to S$ 5.74 that we pencil in for FY11. Repair and maintenance costs (up 18% yoy), fuel costs (up 20% yoy) and airport and handling charges (up 53% yoy), all contributed to this higher-than-expected cost performance.
-Maintaining our recommendation and target price. Tiger’s 1Q11 results were weakened further by the AUD weakening in that quarter. Stripping the forex effect would result in 1Q11 earnings of S$7.6m, still just 9.8% of full-year consensus earnings forecast of S$78m. Therefore, we expect Tiger’s stock price to weaken on the back of this news. We retain our S$1.95 target price and Hold recommendation.
-THAI Tiger is not a decisively positive development, in our view. Earlier this week, THAI Airways and Tiger announced the launch of THAI Tiger, a budget airline to be based in Bangkok and slated to start operations in by March 2011. The news received positive reaction from the market, but we believe some critical questions (eg, whether THAI Airways will allow this new venture to profit at the expense of its existing operations) need to be answered before we arrive at a definitive verdict of its impact on Tiger’s valuation.
Source: RBS
Tiger Airways reported S$1.9m earnings in 1Q11, a turnaround from a S$6m loss in 1Q10 but significantly lower than both consensus and our expectations. Stripping out the forex loss would lead to S$7.6m in profits, but even that number pales in comparison to consensus expectation of S$78m earnings in FY11.
-Revenue in line with consensus expectations. Tiger’s revenue grew 45% yoy in 1Q11, thanks to 18% yoy growth in RPK (revenue passenger kilometre, a measure of sales volume) and 23% yoy growth in yield (price). The latter is impressive, in our view, given stiff competition in Australia where Tiger operates nine of its 19 aircraft. 1Q11 revenue of S$145m amounts to 21% of full-year Bloomberg consensus estimate, which we would describe as ‘in line’, given the April-June quarter is typically the weakest for Tiger (it is winter time in Australia, resulting in less travel).
-Costs are racing up. However, Tiger’s operating cost in 1Q11 was substantially higher than we expected. Cost per ASK (a measure of unit costs) increased 17% yoy to S$ 6.38, compared to S$ 5.74 that we pencil in for FY11. Repair and maintenance costs (up 18% yoy), fuel costs (up 20% yoy) and airport and handling charges (up 53% yoy), all contributed to this higher-than-expected cost performance.
-Maintaining our recommendation and target price. Tiger’s 1Q11 results were weakened further by the AUD weakening in that quarter. Stripping the forex effect would result in 1Q11 earnings of S$7.6m, still just 9.8% of full-year consensus earnings forecast of S$78m. Therefore, we expect Tiger’s stock price to weaken on the back of this news. We retain our S$1.95 target price and Hold recommendation.
-THAI Tiger is not a decisively positive development, in our view. Earlier this week, THAI Airways and Tiger announced the launch of THAI Tiger, a budget airline to be based in Bangkok and slated to start operations in by March 2011. The news received positive reaction from the market, but we believe some critical questions (eg, whether THAI Airways will allow this new venture to profit at the expense of its existing operations) need to be answered before we arrive at a definitive verdict of its impact on Tiger’s valuation.
Source: RBS
Comfort Delgro
2Q10 Results preview
We are forecasting revenue for 2Q10 to come in S$800.5m, operating profit of S$72.5m and net
profit of S$46.4m. Operating expenses will likely remain high this year with the higher oil price
and labour costs. CDG will be releasing their 2Q10 results on 13.08.10 after the market closes.
Both bus and rail ridership grew for the first 6 months
Bus ridership continues to grow modestly 4.8% y-y in June and 2.4% y-y for the first half of
2010. However we are likely to see some erosion of bus ridership from the opening of circle line
which opened in July. We are forecasting bus ridership to grow 1% for the whole year to 838
million trips from 830 million trips. Rail ridership continues to impress in June growing 9.8% y-y,
bringing year to date growth to 12.8%. Public transport are seeing better growth numbers this
year mainly due to the sky high prices of COEs and increased connectivity of public transport.
Comfort Delgro : Buy to Hold (Downgrade)
Closing Price : S$1.58
Target Price: S$1.73 (+9%)
Source: Philips Securities
We are forecasting revenue for 2Q10 to come in S$800.5m, operating profit of S$72.5m and net
profit of S$46.4m. Operating expenses will likely remain high this year with the higher oil price
and labour costs. CDG will be releasing their 2Q10 results on 13.08.10 after the market closes.
Both bus and rail ridership grew for the first 6 months
Bus ridership continues to grow modestly 4.8% y-y in June and 2.4% y-y for the first half of
2010. However we are likely to see some erosion of bus ridership from the opening of circle line
which opened in July. We are forecasting bus ridership to grow 1% for the whole year to 838
million trips from 830 million trips. Rail ridership continues to impress in June growing 9.8% y-y,
bringing year to date growth to 12.8%. Public transport are seeing better growth numbers this
year mainly due to the sky high prices of COEs and increased connectivity of public transport.
Comfort Delgro : Buy to Hold (Downgrade)
Closing Price : S$1.58
Target Price: S$1.73 (+9%)
Source: Philips Securities
Saturday, August 7, 2010
1H10 results preview: Genting Group
What's New:
• Our OVERWEIGHT call on the regional gaming sector reflects mainly our
BUY calls on Macau gaming stocks, SJM Holdings and Wynn Macau.
• Within the Genting Group, we expect GENHK’s (BUY) share price to
cruise into new year’s high even though it has risen 55.8% since our
recent initiate coverage. Target price raised to US$0.31.
• GENT (HOLD) remains the cheapest proxy to Resort World Sentosa, and
we have raised our target price to RM8.40.
• Maintain SELL on GENS although we may raise our fair price. We
recommend selling GENS on strength RWS’ earnings could have peaked in 2Q10.
• Maintain SELL on GENM but we lift our fair price from RM2.12 to RM2.61
after it clinched the Aqueduct racino project which partly addressed
concerns over management’s poor capital initiatives which include the
latest proposed pricey acquisition of Genting UK which is subject to shareholders approval by end-August.
Risk:
Source: OUB KayHian
• Our OVERWEIGHT call on the regional gaming sector reflects mainly our
BUY calls on Macau gaming stocks, SJM Holdings and Wynn Macau.
• Within the Genting Group, we expect GENHK’s (BUY) share price to
cruise into new year’s high even though it has risen 55.8% since our
recent initiate coverage. Target price raised to US$0.31.
• GENT (HOLD) remains the cheapest proxy to Resort World Sentosa, and
we have raised our target price to RM8.40.
• Maintain SELL on GENS although we may raise our fair price. We
recommend selling GENS on strength RWS’ earnings could have peaked in 2Q10.
• Maintain SELL on GENM but we lift our fair price from RM2.12 to RM2.61
after it clinched the Aqueduct racino project which partly addressed
concerns over management’s poor capital initiatives which include the
latest proposed pricey acquisition of Genting UK which is subject to shareholders approval by end-August.
Risk:
- Slowdown on the economy
- Further related transactions between the Group or M&A
Source: OUB KayHian
Friday, August 6, 2010
Noble
Noble: maintain BUY at targeted price (S$2.42 - S$2.46)
We revise down our earnings estimates for Noble to account in businesses such as iron ore, logistics, soybean crushing and a slower-than-expected ramp up in its new assets. We, however, maintain Noble as our top pick, based on comforting valuations and belief in its long-term re-rating story driven by new assets. Just announced Gloucester restructuring underlines turning newsflow and we believe Noble will make use of its strong cash and credit facilities to expand its asset base in energy/agriculture domain.
-Commodity price volatility implies balance sheet strength merits a premium. Also, strong demand prompts a favourable stance towards stocks leveraged to recovery.
- Not perfect yet, but turnaround is around the corner. Noble’s performance has been hurt on weak industrial demand, correction in freight markets, low crushing margins, China policy decisions, collapse of the Macarthur deal, and slow ramp-up in new businesses. However, we see operating metrics recovering over the next few months, which should lead the re-rating.
- Balance sheet even stronger, upside from coal valuation. Also, we believe the market is not appreciating the value of upstream coal assets, which can be a big driver once restructuring is in shape. On our estimates, Noble’s stake in all upstream assets is ~US$1.4bn, which is not yet fully captured in our and consensus valuations.
- 2Q10 a slow quarter for iron ore. Demand for iron ore weakened in 2Q10 as China’s steel mills cut production, a phenomenon which was reflected in the TSI Iron Ore index’s 26% tumble between Apr to Jun (exhibit 5). Lower iron ore trading activity could hurt Noble’s Metals, Minerals & Ores (MMO) segment’s performance. Nevertheless, we are not overly concerned over quarterly fluctuations as China’s iron ore purchases tend to be seasonal, as demonstrated by the Index’s 20% rebound over the last two weeks. Rather, we prefer to adopt a long term view, and expect China’s steel production to continue to buoy iron ore demand.
Source: Nomura/OCBC.
We revise down our earnings estimates for Noble to account in businesses such as iron ore, logistics, soybean crushing and a slower-than-expected ramp up in its new assets. We, however, maintain Noble as our top pick, based on comforting valuations and belief in its long-term re-rating story driven by new assets. Just announced Gloucester restructuring underlines turning newsflow and we believe Noble will make use of its strong cash and credit facilities to expand its asset base in energy/agriculture domain.
-Commodity price volatility implies balance sheet strength merits a premium. Also, strong demand prompts a favourable stance towards stocks leveraged to recovery.
- Not perfect yet, but turnaround is around the corner. Noble’s performance has been hurt on weak industrial demand, correction in freight markets, low crushing margins, China policy decisions, collapse of the Macarthur deal, and slow ramp-up in new businesses. However, we see operating metrics recovering over the next few months, which should lead the re-rating.
- Balance sheet even stronger, upside from coal valuation. Also, we believe the market is not appreciating the value of upstream coal assets, which can be a big driver once restructuring is in shape. On our estimates, Noble’s stake in all upstream assets is ~US$1.4bn, which is not yet fully captured in our and consensus valuations.
- 2Q10 a slow quarter for iron ore. Demand for iron ore weakened in 2Q10 as China’s steel mills cut production, a phenomenon which was reflected in the TSI Iron Ore index’s 26% tumble between Apr to Jun (exhibit 5). Lower iron ore trading activity could hurt Noble’s Metals, Minerals & Ores (MMO) segment’s performance. Nevertheless, we are not overly concerned over quarterly fluctuations as China’s iron ore purchases tend to be seasonal, as demonstrated by the Index’s 20% rebound over the last two weeks. Rather, we prefer to adopt a long term view, and expect China’s steel production to continue to buoy iron ore demand.
Source: Nomura/OCBC.
Starhub Q210 results disappoint
Margin recovery in Q210 less than expected
iPhone launch dragged down StarHub's earnings in Q1 and we had expected
earnings to recover in Q2 as iPhone sales slows. While net profit did jump from
S$42mn in Q1 to S$58mn in Q2, it was well below our expectation of S$72mn and
Bloomberg consensus of S$69mn
Weak subscriber trend for pay TV and broadband
Postpaid was the bright spot in Q2 as StarHub recorded wireless postpaid net adds
Postpaid was the bright spot in Q2 as StarHub recorded wireless postpaid net adds
of 29,000 and postpaid revenue increased 10% YoY and 4% QoQ. But for
broadband and pay TV, StarHub recorded zero net adds in Q2 (Table 2). Churn
rate for broadband increased to 1.6% from 1.2% in Q1 and churn rate for pay TV
increased to 1.2% from 0.9% in Q1.
Further challenges in H210
In H210, we expect StarHub's wireless profits to be pressured again as iPhone 4
Further challenges in H210
In H210, we expect StarHub's wireless profits to be pressured again as iPhone 4
was launched in July. And we expect market share to be pressured as on the pay
TV side StarHub has lost BPL content to SingTel and on the broadband side there
will be new entrants through NBN.
Valuation: Retain Sell rating and S$2.05 price target
The 8.6% dividend yield is the only support for StarHub share price, in our view.
Valuation: Retain Sell rating and S$2.05 price target
The 8.6% dividend yield is the only support for StarHub share price, in our view.
However, we recommend the Taiwan telcos over StarHub for investors seeking
defensive dividends in Asia. Reflecting weaker than expected Q2 results, we cut
2010/11/12 EPS forecast to S$0.144/0.172/0.174 from S$0.156/0.172/0.175,
respectively. Our price target is based on DCF using 7.8% WACC and 0% 'g'.Source: UBS Investment Research
Riverstone Holding Limited (6th Aug 2010)
Riverstone Holding (RSTON)
Previous close: S$0.60
Value: S$0.88
Rivestone revenue grew 43% to MYR 54 million in 2Q10(y-y).
Cash balance fell to MYR 44.1 million from MYR 51.3 million due to acquisition of property and higher dividends payout.
Riverstone able to increase annual production capacity to 1.8 billion gloves by end of 2010, more rapid than initial targeted capacity of 1.35 billion gloves.
Both company and industry outlook are expected to remain rosy, hence we maintain BUY rating and fair value estimate of S$0.88
Recommendation: Buy
Source: Phillip Securities
Previous close: S$0.60
Value: S$0.88
Rivestone revenue grew 43% to MYR 54 million in 2Q10(y-y).
Cash balance fell to MYR 44.1 million from MYR 51.3 million due to acquisition of property and higher dividends payout.
Riverstone able to increase annual production capacity to 1.8 billion gloves by end of 2010, more rapid than initial targeted capacity of 1.35 billion gloves.
Both company and industry outlook are expected to remain rosy, hence we maintain BUY rating and fair value estimate of S$0.88
Recommendation: Buy
Source: Phillip Securities
A Welcome Note
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Welcome aboard. This blog is created to share comments and thoughts of the stocks that we are interested in buying/selling/holding.
So, enjoy!
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So, enjoy!
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