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Investors’ Corner
Investors' Corner | 10 October 2008
Related stocks:

COSCO Corp (S)
Price – $1.42 Target – $2.50

Fundamentally, COSCO Corp’s (Cosco) core franchise values in shipbuilding and O&M is now better positioned to become a dominant global player. It is on track to achieving the $1.5b in new orders that we have assumed for this year, having already secured $1.4b. The strategic strength of Cosco’s 8 shipyards favours it to become a major ship repairer, with an attractive gross margin of 35-38% as a result of the cost advantage that Chinese yards enjoy. The Sevan design was given the vote of confidence by Petrobras and the influx of demand coming from Petrobras and the potential lifting of the offshore drilling ban in the US will provide another wave of demand. Margin compression risk is now more subdued with steel prices having eased and is more than priced in since the stock’s 75% YTD correction. With tighter control processes to manage orderbook risks, we see more upside potential in declining steel prices and an increase in order momentum. Upgrade to OVERWEIGHT. – JPMorgan (6 Oct)

Price – $3.04 Target – $3.50

SingTel recently hosted a presentation of Warid Telecom (Warid). In the past 4 quarters, Warid’s revenues have been flattish in US$ terms, while margins have been under pressure. We believe that the short-term outlook for Warid remains challenging given Pakistan’s turbulent macro-environment, high inflation and toughening competitive environment. Real mobile penetration in Pakistan, despite headline figure of 60%, is estimated to be almost half that due to the dual SIM phenomenon. Warid’s indication of the increase in net debt could bring a potential capital injection from SingTel in the next 12-18 months. Little impact is expected of SingTel’s recent increase of fixed-line subscription rates and our view of the stock’s high valuation relative its listed components, lack of immediate catalyst and continued adverse currency movements, e.g. the recent depreciation in A$ against S$, will prevent any meaningful outperformance in the coming 6 months. Retain EQUAL-WEIGHT. – Morgan Stanley (6 Oct)

Hyflux Water Trust
Price – $0.51 Target – $0.53

Hyflux Water Trust (HWT) have been in negotiations to obtain funding to finance the acquisition of the first tranche of 9 assets from sponsor Hyflux, which deteriorating credit conditions may render unviable. HWT may choose to acquire only a portion of the portfolio, thus limiting the growth rates initially envisaged. The exit of its CFO could also compound the situation. We see possible further downside to the stock, as current spread of HWT’s dividend yield over 3 months US$ LIBOR at 4.9% is lower than the YTD peak of 6.2%. Compared to other listed business trusts, including peer CitySpring, HWT then, trades at a much lower yield. Our fair value is based on blended valuation methodology, DDM and dividend yield valuation, to reflect the importance of target yield for investors in this asset class, especially in the absence of credible growth amidst current credit uncertainties. We cut our FY08 and FY09 DPU estimates by 3% and 13% respectively, to factor in possible lower utilisation in existing assets. Downgrade to HOLD. – DBS Vickers (7 Oct)

Price – $1.94 Target – $2.33

While MobileOne (M1) and its partners lost out on the tender to deliver the NGNBN, we believe the decision will pave the way for M1 to concentrate on the tender to operate it. M1 stands to benefit most as its service offering would widen considerably relative to other operators. Earnings is expected to remain resilient although the pace of new additions in the pre- and post-paid segments could slow in 2009, with some deterioration in ARPUs. M1 is expected to announce its 3Q08 results on 17 Oct. We estimate revenue to be down 1.5% q-o-q at $202.2m, as subscribers wait for the usual year-end promotions, especially for the Apple iPhone 3G, before committing. Net profit is likely to ease by a smaller 1.2% to $40.6m as margins recover slightly. No dividend is likely to be declared in 3Q, but we continue to expect a final dividend of $0.074 in 4Q, bringing the total payout to $0.136/share. Maintain BUY. – OCBC Investment (7 Oct)

COSCO Shipping Int'l (S)  0.290 -- --   
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
Singtel  3.180 -- --   
Business: Asia's leading communications group. [FY19 Turnover] Mobile Comm (31.1%), Data & Internet (19.2%), Infocomm Technology (17.5%), Sale of Eqmt (16.5%), Digital Biz (7.2%), Fixed Voice (5.2%), Pay-TV (2.1%), Leasing (0.8%), others (0.4%).

Insight: May-19, FY19 operating revenue remained flat at $1... Read More

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