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:

• Slowdown on the economy
• Further related transactions between the Group or M&A

Source: OUB KayHian

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.

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

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

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.

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

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