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Investor’s Corner
Investors' Corner | 18 September 2009
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By: Lai Wyai Kay
Articles (53) Profile

Ezra Holdings
Price – $1.80
Target – $2.20

Ezra announced new and renewal charter contracts for three existing AHTS, valued at US$152m. We estimate that day charter rates for the three AHTS at about US$2.24 per bhp, assuming each AHTS has an average capacity of 10,800 bhp. This is higher than the US$2 per bhp day charter rates built into our earnings model, and the estimated <1.8 per bhp day charter rates for the initial contracts. This latest announcement by Ezra is in line with our previous forecast, when we highlighted the potential catalysts for the group in the coming months, including: 1) Higher charter rates for contracts renewal for 20-30% of its AHTS fleet, 2) Charter-out contracts for the two liftboats that were chartered in from Ezion Holdings, 3) More fleet management contracts update, and 4) Resolution of technical issues for 49%-owned associate’s, EOC, FPSO. Maintain BUY.
– DBS Vickers (14 Sep)

Noble Group
Price – $2.30
Target – $2.50

Noble’s growth prospects are backed by several drivers: (i) market share gains as buyers seek quality counterparties, (ii) normalising commodities markets, (iii) new capacity coming on stream, and (iv) inorganic growth. Noble recently acquired distressed assets of SemFuel via bankruptcy proceedings. The acquisition is expected to boost its product portfolio and enhance synergy. We believe that more distressed assets could emerge from the economic slump. Noble is well positioned to capitalise on such opportunities given its strong cash position (US$805.8m as of 1H09), allowing it to fund acquisitions without needing to raise additional capital. Despite the recent share price appreciation, Noble trades at just 13.6x FY09F PER, a sharp discount to Olam’s 22.7x PER. Current valuations are also undemanding against its historical valuations of 4.1x to 22.1x PER. Reiterate BUY.
– OCBC Investment (14 Sep)

City Developments
Price – $10.24
Target – $9.52

With the government reining in speculation in the residential market, possibly even over the risk of triggering asset-value declines, we believe City Developments’ (CDL) shares are unlikely to outperform the market, even if the Singapore economy gathers further momentum. We believe the environment is not conducive to owning property-developer shares, with the government set on pumping more land available for development from 1H10 and unlikely to reinstate, if ever again, the Interest Absorption Scheme until at least the next property-market bottom. We do not expect a property-market collapse, but CDL, one of the biggest developers with a significant portion of its earnings and NAV exposed to the residential market, is expected to be adversely affected. We have not changed our earnings forecasts because we do not expect the immediate pipeline of launches to be hit badly. Downgrade to UNDERPERFORM.
– Daiwa (15 Sep)

Neptune Orient Lines
Price – $1.90
Target – $1.00

NOL update for period 8 (25 July to 21 August 2009) showed that volumes continued to recover, down 7% y-o-y, compared with -11% in period 7. However, rates continued to weaken with average revenue per FEU down 30% y-o-y (down 1% m-o-m) to $2,189. Revenue was down 35% for the period and YTD revenue is down 38%. A severe global destocking over the past year appears to be coming to an end. We expect this to underpin an ongoing recovery in volumes. Anecdotal evidence suggests rates started to rise from early August so the sequential decline in freight rate recorded by NOL is a little disappointing. That said, management said they have seen y-o-y improvement in Intra-Asia volumes, which has helped offset volume declines on all other routes. We continue to think the scale of the over-capacity (orderbook + the idle fleet) will trap industry rates at just above EBITDA of zero. Unchanged at SELL.
– UBS Investment (15 Sep)

Ezra Hldgs  -- -- --   
Business: Co is a provider of integrated offshore solutions to the oil & gas industry. [FY16 Turnover] Marine Services (68.9%), offshore support and production services (25.7%), subsea services (5.4%).

Insight: Oct-17, The US Bankruptcy Court approved the appli... Read More
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

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