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Investors’ Corner
Investors' Corner | 01 May 2009
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By: Xavier Lim
Articles (51) Profile

Chartered Semiconductor Manufacturing
Price – $0.16          Target – $0.11

Revenue of US$244m and net loss of US$99m exceeded top-end of guidance while utilization at 38% was in-line. Recent US$300m rights issue solves near-term refinancing needs. Depending on magnitude of recovery, management calculates additional funding of US$400m may be required by 2010 when ~US$1b debt repayment becomes due, with partial repayment via drawing down of credit facilities, internal cash, and reduced capex of US$500m over FY09-10. Funding issues could resurface as Chartered may need to negotiate with banks on covenants and repayment terms. We expect moderate revenue growth in FY10E (+14% YoY) and FY11E (+10% YoY) but EBIT to break-even only in 4Q11 given high operating leverage and lacklustre shipments. Chartered has clearly executed well but recent sharp rally has priced in most positives particularly given concerns over sustainability of end-market demand and sharper book value erosion from losses. Maintain SELL.– Citigroup (27 Apr)

Keppel Land
Price – $1.76          Target – $2.07

Keppel Land (KepLand) announced that it will be raising gross proceeds of ~$712.3m through a renounceable 9-for-10 rights issue at a subscription price of $1.09 apiece. Upon the completion of the rights issue, KepLand’s net debt/equity ratio will decline to 0.22x and NTA per share will decrease to $2.35 per share. As a demonstration of support, Keppel Corporation has undertaken that it will subscribe for its entitlement in full. Even though we have not anticipated this fund raising exercise from KepLand, we are viewing this exercise positively. The rationale for undertaking the rights issue is to further strengthen KepLand’s balance sheet and to pursue strategic opportunities in core markets. We believe that developers with stronger balance sheets will continue to be favored by investors and KepLand now deserves a re-rating. We are now upgrading KepLand from HOLD to BUY.– OCBC Investment (27 Apr)

Olam Int’l
Price – $1.63          Target – $1.65

Olam Int’l will publish its 3Q09 results on 14 May. We expect more than half of our 2H09 net profit forecast of $177m (+37% YoY) to be achieved during the quarter. Olam is likely the only foreign MNC that has integrated sourcing operations from Ho Chi Minh City and right upcountry into all of Vietnam’s key coffee-growing regions. These give Olam market intelligence, which is in turn used by its clients in sourcing decision-making and also links it tightly with its network of small collectors and farmers – these have helped the company grow its market share rapidly in Vietnam. For example, Olam is the only foreign company exporting Vietnamese Arabica beans, with a 25% share. Its extensive network allows it to roll out customisation, blending, traceability and even farm certification – all these help to boost net contribution margins. By September, it will also extend into operating a plant for freezing and spraydrying instant coffee, which offers higher margins than supply chain margins. OUTPERFORM.– Macquarie Research (27 Apr)

Price – $1.52          Target – $1.65

4Q net profit of $38.7m (+13% y-o-y, -6% q-o-q) was in line with expectations. Topline ended at $116.2m, up 4% y-o-y. Bus division was affected by higher diesel costs and maintenance, while losses at Taxi division was due to lower hired out rate and losses on disposals. A final dividend of 6 cents was proposed, bringing total dividends to 7.75 cents for the full year. Train ridership for FY09 was up 9% to 510.2m rides. We expect ridership to remain relatively firm, albeit growing at a slower pace. We are assuming a 3% and 1% growth for its train and bus ridership in FY10F respectively. Rental should continue to see growth, albeit slower, on higher lettable space. Advertising should be affected by the slower economy. Our forecasts are trimmed slightly by 3-4% largely on a lower ridership growth. We believe the stable operations, relatively resilient business model and a 5% yield should provide support to the share price. Maintain HOLD.– DBS Vickers (27 Apr)

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

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Keppel Corp  5.890 -0.05 -0.84%   
Business: [FY18 Turnover] Infrastructure (44.1%), offshore & marine (O&M) (31.4%), property (22.5%), investments (2%).

Insight: Apr-19, 1Q19 revenue rose 4.1% underpinned by high... Read More
Olam Int'l  1.880 -0.030 -1.57%   
Business: Co is engaged in sourcing, processing, packaging and merchandising agricultural products. [FY18 Turnover] Food staples & packaged foods (47.6%), confectionery & beverage ingredients (23.4%), industrial raw materials, infrastructure & logistics (14.9%), edible nuts & spices (14.1%).

Insight: May-19, 1Q19 revenue rose 16.7% due to increased t... Read More

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