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Investors’ Corner
Investors' Corner | 07 August 2009
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By: Lai Wyai Kay
Articles (53) Profile

Price – $3.99
Target – $4.55

CapitaLand’s (CAPL) results came in above expectations, accounting for 60% of our FY09 estimates. We have increased our FY09-11 estimates by 22% to account for the better than expected results. CAPL’s convertible bond (CB) issuance would further strengthen the group’s balance sheet, increasing cash level to $5.3b. Our FY09-11E EPS would decline by 5% with the rising interest cost. Management has mapped out CapitaLand’s future growth path targeting 4 core markets: Singapore, China, Australia and Vietnam. In particular, CAPL targets to expand its business in China and Vietnam to represent 35-45% (currently <30%) and 5-10% (currently ~1%) of its total business respectively in 3-5 years. CAPL has built up its war chest with the rights offering and CB issuance and we believe acquisitions are on the cards. Reiterate with BUY.
– Bank of America-Merrill Lynch (3 Aug)

Price – $1.32
Target – $0.23

COSCO’s sales of $719m in 2Q09, down 31% and net profit of $37m, down 71%, were largely in line with expectations. However, gross margins, compressed to 11% (1Q09: 21.3%, 2Q08: 23.4%), was a disappointment. With a murky outlook still for dry bulk shipping, it may be better for the group to extricate itself entirely from dry bulk shipbuilding. While the consequential penalties and the write-off of receivables and advances to suppliers could be massive, we will have a firm base for our forecasts. Alternatively, COSCO could begin to show that it is able to execute its dry bulk order book profitably. With GP margins of 1%, we doubt that it will happen in the near future. COSCO has delivered one ship so far, cancelled 13 and delayed another 37. There are another 100 left to go. 11 are on sea trials and due by end 2009. The group is currently working on 39 ships, excluding these 11.Unchanged at REDUCE.
– BNP Paribas (4 Aug)

Oversea-Chinese Banking Corp
Price – $7.80
Target – $8.00

A relatively muted price response to a better than consensus 2Q result suggests that the recent price rally had largely discounted a good result, with valuations already close to mid-cycle levels. Revenues were largely capital markets driven, while net interest income dipped on limited loan opportunities and softer margins. Management explained that the q-o-q rise in NPLs, especially in Singapore, was due to some lumpy accounts that were classified as substandard for early recognition but management do not anticipate losses from them; generally the new NPL trend is slowing. Rising equity markets lifted available-for-sale reserves by $580m. Loan growth is coming from mortgages and SMEs. Loan spreads may have peaked, but the near-term margin squeeze is from lower gapping profits. Management believes that the $250m provision against the “GreatLink Choice” redemption will prove to be adequate. BUY.
– Citigroup (4 Aug)

Price – $1.72
Target – $1.89

SMRT announced 1Q10 revenue of $215.8m, a decrease of $0.1m y-o-y. Net profit rose 19.6%, but stripping the one-off $7.5m rise in other operating income, bottomline figures are flattish as well. It is evident that the fare reduction package introduced in April this year, which will last for the next 15 months from the 1st of April, has shown signs that it has taken its toll on SMRT’s train and bus revenues despite rising average daily ridership for the train segment. SMRT is expected to be facing headwinds in the coming periods due to the fare reduction package affecting train and bus revenue segments as well as the uncertain economic backdrop already affecting taxi operations and advertising revenues. We have adjusted some of our operating expenses as well as revenue segments to arrive at our target price. Downgrade to HOLD.
– Phillip Securities (4 Aug)

CapitaLand  3.550 -0.05 -1.39%   
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
COSCO Shipping Int'l (S)  0.295 -- --   
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
Oversea-Chinese Banking Corp  11.030 -0.05 -0.45%   
Business: [FY18 Turnover] Global corporate/investment banking (35%), global consumer/private banking (34.8%), OCBC Wing Hang (11.5%), insurance (11%), global treasury & mkts (7.7%).

Insight: May-19, 1Q19 total income rose 14.7% driven by str... Read More

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