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Investors’ Corner
Investors' Corner | 13 March 2008
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PRICE – $4.21 TARGET – $6.80

Cosco’s FY07 results came within our expectations. Revenue surged 86%, while net profit jumped 64% helped by a lower effective tax rate of 3.9%. Gross profit margins (GPM) came in at 27%, lower than our forecast for 30.5%. While management believes they will start to enjoy economies of scale as the production of new builds ramp up, we are concerned about the squeeze in margins and we revise our GPM forecast lower to 25% for the next two years. Yard expansions are progressing well to cater to the voracious demand in China, with docking capacity expected to reach 3.03m dwt in 4Q10. Cosco indicated that building and conversion works are also progressing on schedule and they expect to deliver 11 vessels in FY08. Recent contracts won in FY08 amount to US$422m, which brings current order book to US$6.5b. With deliveries stretching into 2011, we continue to expect buoyant growth for Cosco, supported by a strong financial position with net cash of $906m as at FY07. Maintain BUY.

– AmFraser (25 Feb)

PRICE – $6.18 TARGET – $6.37

CAPL reported record FY07 net profit of $2.76b (+173% YoY), which came in 16-20% above our and street forecasts. Stripping out $2.2b of revaluation gains at its REITs and portfolio, and divestment gains, we estimate recurrent net profit at $605m. We expect reported profits to dip going forward as revaluation gains and divestments slow, and development earnings dominate. We are cutting our net profit in FY08 by 19% as we push out profit recognition schedule for some of its profitable residential projects. We continue to peg our target price to RNAV. CAPL remains one of the best managed developers, leveraging on opportunities across the real estate value chain. It is the only developer to still trade at premiums to trailing RNAV, amid global uncertainties. Maintain UNDERPERFORM.

– Credit Suisse (25 Feb)

PRICE – $1.11 TARGET – $1.41

Based on the guidance that FY07 profits will be better than FY06, it seems that 4Q07 net profit could be as high as $29m, twice of what HiP did in the last 6-7 quarters. Operationally, a doubling in net profit is achievable. Based on the projected sales of $285m sales in 4Q07, gross margin (GM) needs to hit 17.8% to get the desired net profits of $29m. This may seem high vs. the GM of 12-15% in 2006-07, but prior to its startup losses, HiP was enjoying GM of 18-24% in 2004-05. Even if we assume a 50% fall in Motorola orders in FY08, HiP can show revenue growth as work from RIMM, Braun and Nokia are coming through. Even by using a modest GM of 14.3% in FY08, net profit could easily grow 12%. Despite the 10-12% jump today, HiP still trades below 7x forward P/E, and 0.8x P/B. We could to find the stock attractive, and would accumulate at current levels. Maintain OUTPERFORM.

– Credit Suisse (25 Feb)

PRICE – $3.53 TARGET – $4.00

Although it was no surprise SembCorp Marine’s 4Q07 bottomline would be negatively impacted by exceptionals, underlying operations pleasantly surprised with stronger than expected performance; FY07 recurring net profit beat both consensus and our estimates by 15% and 8%, respectively. Although the stronger performance was largely due to faster billings at its rig building and conversions, we were relieved to see margins significantly improve in 4Q, operating margins grew by more than 300bps qoq to 9.5%, driving FY07 recurring net profit growth of 66% vs 27% yoy topline growth. Reported net profit was still up marginally last year, despite exceptional losses mainly arising from its forex issues. Order backlog stands at $7.4b. We are revising our FY08E/09E earnings, given lower than expected backlog with FY07ʼs faster billings. Maintain NEUTRAL.

– Goldman Sachs (25 Feb)

CapitaLand  3.530 +0.02 +0.57%   
Business: Co develops, owns, and manages real estate properties. [FY18 Geographical] China (41.2%), S'pore (38.5%), Europe & others (18.6%), Vietnam & Others (1.7%).

Insight: Apr-19, 1Q19 revenue fell 23.8% while net profit d... Read More
COSCO Shipping Int'l (S)  0.285 -0.005 -1.72%   
Business: Engaged in shipping and other logistics services. [FY18 Turnover] Logistics (69.7%), property management (11.9%), Shipping (9.5%), ship repair and marine related activities (8.9%).

Insight: Mar-19, FY18 revenue jumped 340% to $163.7m and gr... Read More
Sembcorp Marine  1.260 -- --   
Business: Co is a leading global marine & offshore engineering group. [FY18 Turnover] rigs & floaters, repairs & upgrades, offshore platforms (98.8%), ship chartering (1%), others activities (0.2%).

Insight: May-19, 1Q19 revenue fell 31.3% to $810.6m due to ... Read More

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