The Edge - Brokers' Digest (July 23 - July 29, 2007)
Courtesy: http://my-personal-finance.blogspot.com/
Bukit Sembawang Estates (July 19: $12.70) TP: $16.41
MAINTAIN OUTPERFORM. Traditionally known as a mid-range developer., BSE recently shifted its focus to hig-end projects. Since July 2005, it has acquired eight freehold sites with a total GFA (gross floor area) of 982,898 sg ft, with most located in prime locations. We believe gross margins for upcoming launches could be high, at 40% to 60%. We have rolled over our revised NAV (RNAV) estimate to CY2008 from CY2007, to better reflect earnings streams from its residential development projects. Accordingly, our target price has been lifted from $14.36 to $16.41, with upside of 23%. - CIMB-GK (July 16)
SembCorp Industries (July 19: $5.65) TP: $7.50
MAINTAIN BUY. There was a good turnout for SCI's corporate presentation during our Pulse of Asia conference on July 11 with management focusing on growth drivers for both utilities and marine. In addition, SCI's RNAV will benefit from our recent upgrade in subsidiary SMM (SembCorp Marine)'s target price from $5 to $7.90. Besides organic growth, utilities will see growth coming from new beachheads, developing greenfield and acquiring brownfield projects and new M&A opportunities. Marine's earnings will be underpinned by its $9.1 billion order book, with visibility starting to extend into 2010. Our target price has been raised to $7.50. Management has also highlighted that its dividend payout policy can comfortably be 50% to 60%. - DBS Vickers Securities (July 18 )
Synear Food Holdings (July 19: $1.92) TP: $2.42
BUY (initiating coverage). Synear Food is China's leading quick-freeze food producer, with strength in savory and sweet dumplings. With the last three years' net profit CAGR growing at 82%, Synear has been one of S-Chip's leading success story. We expect 2006 to 2011 five-year EPS CAGR to grow at 20%, through new product initiatives and expansion into second-tier cities, riding on the growing per-capita consumption of frozen processed food in China. We value the company with a target price of $2.42 based on 25x 2008 PER, which equals 1x PEG 2007 to 2009 CAGR, with 27% upside. Synear is one of the higher-quality S-Chip companies with a strong brand name, and deserves to trade at similar levels to its Hong Kong-listed peer. - CLSA Asia-Pacific Markets (July 16)
Epure Int'l (July 19: $2.24) TP: $2.64
MAINTAIN BUY. Epure has placed 30 million new shares (7.5% of the existing share capital) and 21.4 million old shares (5.4%) at $2.16 each. The placement price was at a 9.6% discount to the last closing price before suspension. The 328 million renminbi ($65.6 million) raised would largely be sued to acquire environmental equipment firms and construction project management companies. The share price of Epure has risen only 5% in the past month, clearly a laggard in the sector. To reflect strong order book momentum, we have raised our FY2008-09 revenue forecasts by 2%. We expect fully diluted EPS to surge 36% in FY2008. Based on a higher PEG of 1.5x,in line with the sector average, we raised our target price to $2.64. - Citigroup Research (July 13)
SNP Corp (July 19: $1.06) TP: $1.26
MAINTAIN BUY. SNP's 1H2007 net profit grew 39% y-o-y to $18.2 million, boosted by a $10.8 million net gain from the disposal of an office property in Hong Kong. Net gearing improved to 1.15x in 1H2007. We are maintaining our 2007 and 2008 net profit forecasts. Apart from a recovery in pop-up printing, additional capacity from its Shanghai plant will also help to drive growth. The group has captured more than 50% market share in colour-magazine printing in China. Our 12-month target price of $1.26 is derived based on the DCF method and includes the projected net dividend per share of four cents. - Standard & Poor's Research (July 18 )
United Engineers (July 19: $4.10) TP: $5.10
BUY (initiating coverage).UEL is the largest homegrown builder, with a market capitalization of more than $900 million. UEL is currently developing a mixed development project in Buona Vista, Singapore, which was awarded by JTC in 2005. We are optimistic about the company's growth, particularly on the Vista Xchange mixed development and its expansion plan into China's wastewater-treatment business. Based on RNAV valuation, we arrive at a fair value of $5.10 per share, which represents an upside of 22% from its previous close. Our estimates show that its forward PER is 23.8x and 16.6x for FY2007 and Fy2008 respectively. - Phillip Securities Research (July 18)
Rotary Engineering (July 19: $1.35) TP: $1.57
MAINTAIN BUY. Rotary Engineering recently secured another $150 million worth of orders in Singapore and Indonesia, significantly raising Rotary's order book to $701 million and suggesting that the order momentum continues to be robust. We have consequently upgraded our EPS between 8% and 9% for FY2008-09. The landmark project will be used as a reference to secure other higher-value order, particularly in the Middle East. We rate Rotary as one of the better proxies to the region and Singapore's increasing refinery/oil terminal capex cycle. We have raised our target price to $1.57 from $1.30. We believe the stock deserves a minimum ex-cash multiple of 17.5x 2007 PER (based on 0.8x PEG). - Kim Eng Research (July 17)
STX Pan Ocean Co (July 19: $2.33) TP: $3
BUY (initiating coverage). STX Pan Ocean is primarily involved in dry bulk shipping. About 88% of STX's revenue comes from the bulk business. With its bulk fleet of 267 across different sizes, including charter-in vessels, it has one of the largest, most diversified operating fleets. We think the market may have under-anticipated the pace of demand growth, so our FY2007-08 net profit numbers are 30% and 46% above consensus, respectively. Our 12-month target price of $3 per share is based on a 2.34x FY2008 P/BV. We think it should trade above its historical range because of the favorable industry position, leading to a net EPS growth of 148%, 0.7% and 18% in FY2007 to FY2009, respectively. - Deutsche Bank (July 17)
Valuetronics Holdings (July 19: 35 cents) TP: 49 cents
BUY (initiating coverage). Valuetronics is an integrated manufacturing services provider. We are forecasting Valuetronics to deliver 21% bottom line CAGR over FY2007 to FY2010F, with strong orders from existing and new customers. We are also anticipating steady net margin expansion underpinned by economies of scale as its order book is expected to grow 17% in FY2008 and 25% in FY2009, and management's continued focus on maintaining healthy gross margins of between 18% and 20%. Fair value is at 49 cents, based on 8x FY2009 PER, implying a 42% upside potential. Valuetronics trades at a compelling 5.7x FY2009 PER. Management is confident of keeping to is 30% dividend payout ratio, implying a FY2009 dividend yield of 5.3%. - Kim Eng Research (July 17)
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