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Investors’ Corner
Investors' Corner | 17 April 2009
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By: Xavier Lim
Articles (51) Profile

Chip Eng Seng Corp
Price – $0.185           Target – $0.29

Chip Eng Seng has fully redeemed and cancelled in full the medium term note, financed by a $60m loan facility granted by Standard Chartered Bank. Given that this loan is short term in nature, we believe the interest cost will be slightly higher. As we expect Chip Eng Seng to pay off the loan with proceeds from Devonshire Suites@Central project, which obtained TOP in Feb-09, we are keeping our forecast for now. We understand from management that the 157 units will be handed over to buyers in phases. We maintain our earnings forecast and continue to use sum-of-the-parts valuation methodology to value its property development and construction business. We have revalued all of its unsold development projects at lower than recently transacted price to assume 100% sales in current market and continued to value construction business at 3x FY09F construction earnings. Maintain BUY. – Westcomb (13 Apr)

Price – $2.55           Target – $3.05

The Australian government’s decision to build the country’s broadband network has lifted concerns about Optus possibly being awarded the project, which would stretch the Group’s finances. Also, the proposed merger between Vodafone and Hutchison Australia should rein in competition. Telkomsel had added users at a faster clip in the first two months of 1Q09 despite seasonal weakness. Also, industry tariffs are creeping up, supporting our view that competition continues to pull back. We do not believe competition in India is sustainable. The market is expecting the Singapore government to allow the S$ to depreciate to support the ailing economy. This should benefit SingTel as it derives 72% of its PBT from overseas. We have lowered our FY09-11 core net profit estimates by 0.1-2.5% and sum-of-the-parts target price by 5cts to $3.05, mainly after lowering our numbers for Bharti. Maintain OUTPERFORM. – CIMB-GK (13 Apr)

Swiber Hldgs
Price – $0.465           Target – $0.35

According to an article by upstreamonline, Thai contractor CUEL is planning to buy Swiber’s derrick pipelay barge, Swiber Chai, which will reduce Swiber’s leverage ratio. However, it is worth noting that 1Q09 earnings may continue to feel the impact of previous delays in vessel deliveries. There was an unexpected delay in the delivery of two vessels, Swiber Concorde and Swiber Supporter which hugely impacted 4Q08 earnings. Swiber’s net debt-to-equity ratio stood at 1x as of 31 Dec-08. It is imperative that deliveries of vessels under the sales and leaseback agreement are on time so as not to impact its cashflow. Swiber has a $15m bond maturing in 8 May 09, on top of its existing bank loans (ST: US$68.5m, LT: US$57.7m as of 31 Dec-08). There are also remaining medium term notes that will mature in 2010 and 2011. Downgrade to SELL. – OCBC Investment (13 Apr)

Singapore Press Hldgs
Price – $2.89           Target – $3.15

SPH announced weak 1H09 results, net profit of $160m, lower than JPMorgan and consensus estimates on the back of weaker than expected earnings from core publishing business, losses from investments and lower-than-expected profit recognized for Sky@Eleven in 1H09. SPH declared $0.07/shr interim dividend, 12.5% down YoY. We revised down our full-year dividend forecast to $0.15/shr, implying 70% payout ratio. Operating margin has fallen below 30% and revenue outlook remains challenging. However, raw material costs, newsprint price in particular have fallen substantially, which would help to improve the group’s operating margin. Based on our revised earnings estimates, SPH is trading at 12.4x FY10E earnings, at the lower end of its forward P/E trading range of 10.4-17.8x for the last 6 years, an undemanding valuation, in our view. Key risks to our rating and price target include: 1) unexpected further deterioration of adex spending; 2) high operating leverage, which could swing both ways; and 3) more proactive capital management. Maintain OVERWEIGHT. – JPMorgan (14 Apr)

Armed with an arsenal of investment knowledge, Xavier is the Senior Research Editor at Shares Investment.

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Chip Eng Seng Corp  0.645 -0.035 -5.15%   
Business: [FY18 Turnover] Property development (70.2%), construction (21.8%), hospitality (5.9%), Corporate, property investments & education (2.1%).

Insight: Feb-19, FY18 revenue increased 27% to $1.1b, contr... Read More
Singtel  3.250 +0.01 +0.31%   
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
Singapore Press Hldgs  2.040 -0.09 -4.23%   
Business: Co is S'pore's main newspaper & magazines publisher that also has investment in properties. [FY18 Turnover] Media (66.7%), property (24.7%), others (8.6%).

Insight: Apr-19, 1H19 operating revenue fell 3% to $477.6m ... Read More

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