Thursday, 30 March 2017

Stock Market Today:This well established industrial group has grabbed the attention of CIMB

SINGAPORE CIMB Research has issued a non-rated report on NSL Limited following the release of the industrial group's FY16 annual report last Wednesday.

NSL's key business segments comprise precast and prefabricated bathrooms (PBU) and environmental services.

The SGX-listed group has a majority 72.1% stake in marina club Raffles Marina, as well as a 33.33% stake in an associate in Germany, PEINER SMAG Lifting Technologies GmbH.

As at FY16A, NSL's net cash stood at $430.3 million. It declared a final dividend per share (DPS) of 5 cents in addition to a special DPS of 20 cents for the period.

In a note on Thursday, analyst William Tng highlights NSL's precast and PBU division as a market leader in manufacturing precast concrete components in Singapore, Malaysia and Dubai, with the business being a dominant producer in Scandinavia.

"Management guided that the precast business in Singapore and Malaysia remains very competitive, with downward pressure on project margins. However, management notes that the precast operation in Dubai and the PBU business in Finland are expected to perform satisfactorily, underpinned by a healthy order book," he recalls.

Meanwhile, Tng also notes the environmental services division as a key player in integrated environmental services in Singapore, in addition to being a major distributor of automotive diesel oil and other petroleum products in Singapore.

Management guided that business for this segment is likely to remain stable in light of the recovery of the manufacturing sector, adds the analyst.As at 11.14am, shares of NSL are trading flat at $1.74.

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Wednesday, 29 March 2017

Stock Market Today:Why UOB is upgrading Wilmar to hold

UOB KayHian is upgrading Wilmar to "hold" from "sell" with a $3.50 target price after its recent share price correction as core businesses are still operating as usual and the house expects better 2017 earnings on the back of steady growth from all three key divisions on higher sales volumes.

Our SOTP-based target price remains at $3.50. Entry price: $3.20, says UOB. As at 10.31am, shares of Wilmar are trading 6 cents higher at $3.58.

Wilmar share price has fallen 11.6% from a high of $3.98 on Jan 2 to $3.52 on Tuesday. The drop might be due to weakening commodity prices. Sugar prices dropped the most, followed by CPO spot prices and soybean prices which dropped 11.6% and 6.1% respectively in the same period.

In a Wednesday note, UOB says sugar prices were weighed down by ample supply but weaker demand while weakening CPO prices were mainly due to the market expecting a strong production recovery but demand growth is lagging.

The dip in soybean prices was largely due to better-than-expected production in South America and expected higher soybean planting in the US.

We think Wilmar's recent share price correction was driven by poor sentiment on weakening commodity prices. However, Wilmar's core businesses are still operating as usual and we expect all three key divisions to grow steadily in 2017, supported by higher sales volumes," says UOB.

However, UOB expects 1Q17 to be Wilmar's weakest quarter for the year due to weaker demand for consumer products post-Chinese New Year, lower soybean crushing margin due to slowdown in demand, weaker q-o-q FFB production due to seasonality and weaker contribution from the sugar division as sugar milling activity should only start contributing from 2H17 as the sugar cane crushing season in Australia only starts in 2H.

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Tuesday, 28 March 2017

Stock Market Today:Ezion acquires existing JVs & assets in efforts to improve earnings

SINGAPORE In a bid to improve its long-term earnings and reduce costs, Ezion Holdings has acquired its remaining 50% equity stakes in existing joint venture (JV) companies Strategic Offshore (SOL) and Strategic Excellence (SEL) for $3.5 million and $1.5 million respectively.

For the purpose of acquiring certain assets from the subsidiaries of SOL, the group has also established three wholly-owned subsidiaries in Labuan, Malaysia, for US$2 ($2.80) each, namely Teras Atlas (TAL), Teras Fortuna(TFL) and Teras Orizont (TOL) - all three of which are principally engaged in rig owning and the provision of rig services.

Through the three new subsidiaries, Ezion will be acquiring a vessel, charter contract and receivables each from SOL's subsidiaries GSP Atlas Limited (GAL), Strategic Fortuna (SFL) and GSP Orizont (GOL) for the respective sums of US$18.7 million, US $24.5 million and US$18.7 million, in addition to charter and payment guarantees from GAL and GOL.

In a Tuesday premarket announcement, Ezion says it intends to utilise the assets owned by the JV companies by working closely with their existing customers - in addition to improving the group's earnings in the long-term by, amongst other things, working towards cost-reduction through the realisation of economies of scale with its own fleet of assets.

While the Malta-incorporated SOL is an investment holding company and does not have an estimated carrying value of Ezion's 50% equity, SEL is incorporated in the Bahamas and its remaining 50% equity interest has an approximate carrying value of $5.2 million as at Dec 31, and is principally engaged in rig owning and chartering.

Both companies are JVs between Scott and English Energy (S&E), a wholly-owned subsidiary of Swissco Holdings, as well as Ezion Holding's subsidiary, Ezion Investments (EIPL).

Ezion explains that as SOL and SEL were not able to meet their obligations partially due to the "financial situation" faced by EIPL's joint venture partner S&E, the JV companies have not been able to operate effectively and therefore its purchase was necessary to ensure their continued operations and engagement with their existing customers.

The transactions will be funded through bank loans and international resources of Ezion, says the group, and are expected to have an impact on the company's financial statement in FY17.

Assuming that the acquisitions had been effected on Dec 31, Ezion's net asset value (NAV) per share would increase from 63.43 cents to 63.60 cents. Should they have been effected from Jan 1, 2016, Ezion's basic loss per share for the year ended Dec 31 would narrow from 2.30 cents to 1.40 cents.Shares of Ezion closed flat at 33 cents on Monday.

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Monday, 27 March 2017

Stock Market Today:Singapore telco sector's likely return to 3-player oligopoly viewed as favourable

UOB Kay Hian is reiterating its "buy" call on Singtel with a target price of $4.53, while keeping its overweight view on telecommunications sector after assessing the impact of increased competition with the entry of the fourth mobile operator, TPG Telecom.

In a Monday report, analyst Jonathan Koh says although TPG will bring about an increase in competitive intensity within the mobile space, this risk is offset by potential consolidation of Singapore's mobile industry within the next 3-5 years.

Although the industry is unlikely to consolidate in the near-term, Koh nevertheless sees prospects of a return to a three-player oligopoly as favourable.

The research house has, however, kept its "hold" recommendation on StarHub with a target price of $2.50, noting that the telco's share price has bottomed.

Competition will intensify with TPG Telecom entering the mobile market as the 4th mobile operator in 2018. The dire outlook has forced StarHub into exploring network sharing as a means to reduce capex and opex, says Koh.

Conversely, the analyst believes the overall impact on Singtel is likely to be marginal as its mobile business in Singapore accounted for only 7% of revenue, considering its proportionate share of revenue from tis regional mobile associates.

He also notes how shareholders of Singtel will be able to receive up to 17.5 cents per share in the form of a special dividend resulting from the initial public offering (IPO) proceeds of NetLink Trust, which it is to reduce its stake in to below 25% by April 18.

Highlighting TPG's recent set of good 1H17 results with all business units registering growth, the analyst observes that the new mobile entrant's recruitment and network planning activities are "progressing well", having already set up its local office as well as hired network engineers and project managers to oversee the rollout of its mobile network in Singapore.

As at 12.16pm, shares of Singtel, StarHub and M1 are trading at $3.89, $2.88 and $2.16 respectively.

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