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Investors’ Corner
Investors' Corner | 15 May 2009
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By: Lai Wyai Kay
Articles (53) Profile

City Developments
Price – $8.05          Target – $6.28

City Developments (CDL) reported 1Q09 net profit of $83.1m, which was down 50% y-o-y and 17% q-o-q. This makes up about 15% of our FY09 estimates. The decline was largely attributed to the property development segment and hotel operations. Share of after-tax profit from associates fell 69% due to completion of St Regis Residences and The Sail. PBIT from hotel operations fell 60% y-o-y on the back of a slump in RevPar, while PBIT from rental properties managed an increase of 47% on improvement in occupancy and rental rates from a year earlier. However, portfolio occupancy has fallen from 94% in 4Q08 to 91% as at 1Q09. Although CDL has a relatively strong balance sheet to withstand the turmoil, the stock has run a massive 98% from its Mar-09 trough and is now trading at a 35% premium to our RNAV of $5.98 and at 32% to its latest book value of $6.11. We think a hefty premium is not justified until some pricing power on the physical market returns. Maintain SELL.– Citigroup (11 May)

Keppel Corp
Price – $6.85          Target – $9.40
We believe the recent rise in oil prices and recovery in confidence may lead to a resumption in Exploration & Production spending, which had previously been put on hold. We view Keppel Corp (KEP) to benefit from Petrobras’ plans. Credit markets should ease over time, and when they do, we expect offshore-related new orders to return. We firmly believe that accelerating global reserve decline rates will prompt industry capex to continue growing. We raised our 2009E-2011E new order assumptions by about 13-25%. Our target multiple for Offshore & Marine (O&M) has been raised from 12x to 15x, which we believe is justified considering our expectation of the resumption of new orders and KEP’s strong branding. In line with our more positive view on O&M, we have increased our earnings estimates for KEP by between 3% and 10% for the next three years. We consider KEP well-positioned and its recent strength in Infrastructure has been a pleasant surprise. BUY.– Deutsche Bank (11 May)

Sembcorp Marine
Price – $2.69          Target – $0.95

Sembcorp Marine’s (SM) Indonesian subsidiary secured a $230m contract to construct two offshore platforms, bringing YTD total contract wins to $601m. However, Petroprod, whose CJ70 jack-up was to be delivered in 3Q10, has been declared insolvent. New contract win accounts for 22% and 57% of our 2010-11E earnings but risks to earnings on existing order book from exposure to Larsen group are quite significant. Additional risks from COSCO Corp, contract cancellations and rig prices are also not insubstantial. We believe SM’s valuations at these levels are stretched. Excluding COSCO’s earnings, SM’s O&M 2010E P/E is heading towards its upcycle period average, implying that order momentum will resume the pace in 2004-8, which appears aggressive. Also, average P/Es mask earnings trends, which does not reflect the risks associated when based on full earnings potential. Maintain UNDERPERFORM.– Credit Suisse (12 May)

SIA Engineering Co
Price – $2.35          Target – $2.97

SIA Engineering’s (SIAE) 4Q09 net profit of $66m was 13% above expectations, thanks to stronger-than-expected revenue from line maintenance and fleet management. FY09 net profit of $260.6m was 3% above our estimate, while FY09 revenue from line maintenance, 10% above estimates, was surprisingly strong with more flights handled. Fleet management also beat our estimates by 59% as fleet size grew. Airframe and components overhaul came in lower, dropping 7% y-o-y. FY09 EBITDA margins were up to 14.8% from 14.1% in FY08, due to better operating leverage from stronger revenue and a lack of staff bonuses. FY09 interest income dropped 64% y-o-y but JVs and associates remained strong, growing 10% y-o-y, contributing to 58% of group PBT. We raise earnings estimates by 1-6% for FY10-11, to account for stronger fleet management and line maintenance revenue. Our dividend payout assumption for FY10 is reduced from 80% to 60%. Maintain OUTPERFORM. – CIMB-GK (12 May)

City Developments  9.870 +0.04 +0.41%   
Business: Co is an international property & hotel conglomerate. [FY18 Turnover] Property development (48.4%), hotel operations (39.8%), rental properties (8.5%), others (3.3%).

Insight: May-19, 1Q19 decreased 29.5% to $746.2m compared t... Read More
Keppel Corp  6.080 -0.02 -0.33%   
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
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
SIA Engineering Co  2.570 +0.06 +2.39%   
Business: A leading aircraft maintenance, repair and overhaul (MRO) company providing total maintenance solutions to a client base of international airlines. [FY18 Turnover] Airframe and Line Maintenance (97.5%), Engine and Component (2.5%).

Insight: May-19, FY19 revenue was 6.8% lower at $1b largely... Read More

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