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Investors’ Corner
Investors' Corner | 26 June 2009
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By: Lai Wyai Kay
Articles (53) Profile

Property Developers
The pace of price recovery in the residential market has surpassed expectations. As a result, we moderate the decline in the Property Price Index (PPI) and bring forward our pricing trough to 2Q09 (from 3/4Q). We maintain our view of a 20% recovery into 2010, but due to higher trough values, our price forecasts increase by 8%. In past property cycles, the first rally in share prices occurred in the period preceding trough q-o-q change in the PPI. In line with history, stocks are up 57% since the -13% q-o-q decline in 1Q09. More importantly, the second leg of performance historically occurs when the index turns positive. We expect share price momentum to return in 4Q09 when we see confirmation that q-o-q growth in the PPI has reverted to positive territory. We expect a short and sharp V-shape recovery in the Singapore residential market. Post 2010, we are less positive longer-term given pending supply. Maintain BUY for City Developments (Target: $10.80), CapitaLand ($4.55). Upgrade Keppel Land to NEUTRAL ($2.60). CapitaLand remains our top pick. – Bank of America-Merrill Lynch (22 Jun)

Wilmar Int’l
Price – $4.88  Target – $5.80
The potential listing of Wilmar’s China unit would help fund further growth in China and unlock shareholder value. Its presence in China makes it more than a pure plantation stock. Its high-volume oilseeds and grains business caters to rising soybean meal demand in China. We estimate soybean meal consumption there to rise by 6% y-o-y next year. Wilmar’s consumer pack oils remain leading brands in China, Indonesia, and India. We believe this business is comparable to branded Chinese consumer names trading at about 18x FY10E P/E. Increasing signs of an El Nino return put CPO production at risk. The stock-usage ratio is expected to reach 13.7% by Sep-09, the lowest since Sep-03. Tight soybean supply from crop losses in South America provides further price support. We add the potential valuation accretion of 24 cents from the Chinese business listing to our DCF value, assuming the listing of 30% of the business at 18x FY10E P/E. Initiate with OVERWEIGHT. – JPMorgan (22 Jun)

Midas Hldgs
Price – $0.745 Target – $0.93

Midas Hldgs (Midas) has won 4 contracts to supply aluminium extrusion profiles for various inter-city high-speed projects worth a total of Rmb775m, to be delivered from 2H09 to 2011. With these latest contract wins, we estimate that Midas has secured our projected revenue for the rest of 2009 and more than 80% for 2010. Midas is still bidding for more train projects, which should further boost its order books and increase earnings visibility to 2011 and beyond. Associate Nanjing Puzhen also has a backlog of over 750 train cars to be delivered, worth Rmb4.5b, and with its production capacity on track to be enhanced to 500 train cars by the end of 2009, it is also in a prime position to win more metro train projects. We raise our target price by rolling over our valuation multiple of 15x PE to FY10 earnings as Midas’ earnings visibility has improved substantially. HK-listed peers, CSR Zhuzhou and China South Locomotive, are trading at over 20x earnings. Maintain BUY. – DBS Vickers (23 Jun)

Neptune Orient Lines
Price – $1.55 Target – $1.62
Neptune Orient Lines (NOL) released their 2-29 May, or Period 5 (P5) operating numbers on 22 Jun. P5 volume contracted at a slightly slower pace of 21.1% y-o-y, against P4’s 22.3% fall. This indicates that there is some stabilisation at a low level of trade. Average rate per box, however, declined at a faster pace, falling 23.1% y-o-y against P4’s 21% fall. M-o-m, average box rate rose 0.2%. NOL’s statistics are consistent with broad transpacific and Asia-Europe trends, which are still trending down, and in most trades, the rate of decline is still deteriorating. Historically, NOL traded within a P/BV band of 0.5-2.5x. The container shipping industry appears to be trying to find a bottom, and we believe that it may see better volume and stable rates in the run-up to this year’s peak season. Our rating on NOL stays because we believe its US$1b rights issue will put it in a strong position to buy assets at distressed valuations, in order to secure its long-term capacity growth. Maintain NEUTRAL. – CIMB-GK (23 Jun)

City Developments  9.780 -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
CapitaLand  3.510 -0.03 -0.85%   
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
Wilmar Int'l  3.850 -0.05 -1.28%   
Business: Co's integrated agribusiness model encompasses the entire value chain of the agricultural commodity processing biz, from origination and processing to branding, merchandising and distribution of a wide range of agricultural pdts.

Insight: May-19, 1Q19 revenue fell 6.2% to US$10.4b driven ... Read More
Midas Hldgs  -- -- --   
Business: Manufacturer of aluminium alloy extrusion products for China's rail transportation sector. [FY16 Turnover] Aluminium alloy (99.3%), polyethylene pipe (0.7%).

Insight: Jan-18, Co announced that its JV company, CRRC Nan... Read More

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