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Investors’ Corner
Investors' Corner | 16 October 2009
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By: Lai Wyai Kay
Articles (53) Profile

Keppel Corp
Price – $8.15
Target – $9.40

Keppel announced that FloaTEC Singapore has concluded the contracting and negotiation process for the P-61 Tension Leg Wellhead Platform with the Papa-Terra Joint Venture. A Letter of Intent for this Unit for the Papa-Terra field in Brazil has been signed, with the contract to be sealed at a later date. Based on Rigzone, the potential contract size of the P-61 is around US$1b. Assuming 60% of the contract is allocated to Keppel, together with the YTD new order win of $415m, total new order win could amount to about $1.255b. Our current new order forecast is $1.7b (FY09E), $2.5b (FY10E) and $3.7b (FY11E). The signing of this LOI is positive and reinforces the overall improvement in the O&M sector. It also demonstrates that new orders within this sector is typically lumpy and a lack of wins versus its peers in previous months do not signal any potential issues. Maintain BUY.
– Deutsche Bank (9 Oct)

Singapore Press Hldgs
Price – $3.88
Target – $4.30

Singapore Press Hldgs’ (SPH) 4Q09 results beat expectations due to contribution from Sky@eleven and Paragon and stringent cost control. Balance sheet remained solid with 13% net cash to equity. We believe valuations remain attractive for a near-monopoly cash-rich media business. Its core advertising revenues are highly correlated to the performance of the Singapore economy, which we believe is in a V-shaped recovery. SPH should also benefit from a significant decrease in newsprint costs in FY10E-11E when high-priced inventory is cleared out. Thus, we expect earnings and margins to improve from FY10E onwards. Current valuations look compelling, especially considering SPH has a near-monopoly in the local print media business.We apply a 10% “holding company discount” to account for risks related to SPH’s property ambitions. BUY.
– Citigroup (12 Oct)

StarHub
Price – $1.97
Target – $1.58

We maintain our earnings forecasts pending details on the impact on StarHub’s top and bottom lines from the loss of British Premier League (BPL) broadcasting rights. We remain concerned about: 1) a potential spike in pay-TV churns; 2) an unravelling of its hubbing model; and 3) the prospect of SingTel snaring more content. We believe the group had underestimated the threat posed by SingTel, could not match the financial muscle of SingTel and was handcuffed from bidding too aggressively as it would be unable to pass on the increased costs given probable caps on retail tariffs. As customers who sign up before 1 Oct-09 can cancel after Jul-10 without paying a penalty, StarHub’s FY10-11 core profits could be reduced by 19-25% as customers churn and its topline is crimped by some 10% for both years. Losses could escalate if a mass defection occurs. Maintain UNDERPERFORM.
– CIMB-GK (12 Oct)

COSCO Corp (S)
Price – $1.18
Target – $1.17

We visited COSCO recently and came away less upbeat on the company’s prospects, due to: (1) Stockpile of steel at high locked-in prices; (2) Inefficiencies in execution; (3) A drop in the Baltic Dry Index, which dampened earnings expectations for the group’s bulk shipping segment. COSCO will remained saddled by high costs for steel plates at over US$1,000/tonne until end 2010, which will be allocated to 30 new dry bulk carriers under construction. This will keep the group’s shipbuilding margins under pressure until FY11F. Thus far, COSCO has experienced order cancellations of 13 bulk carriers and postponements for delivery of 39 bulk carriers. Management indicated that there is a possibility that order cancellations and delivery reschedulement would continue to occur given the weak demand for dry bulk carriers. Downgrade to HOLD.
– AmFraser Securities (13 Oct)

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
Singapore Press Hldgs  2.110 +0.03 +1.44%   
Business: Co is S'pore's main newspaper & magazines publisher that also has investment in properties. [FY18 Turnover] Media (66.7%), property (24.7%), others (8.6%).

Insight: Apr-19, 1H19 operating revenue fell 3% to $477.6m ... Read More
COSCO Shipping Int'l (S)  0.285 -0.005 -1.72%   
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
StarHub  1.320 +0.020 +1.54%   
Business: [FY18 Turnover] Mobile (34.9%), sale of equipment (22.4%), enterprise fixed (21.6%), pay TV (13.2%), broadband (7.9%).

Insight: May-19, 1Q19 total revenue rose 6% to $596.8m attr... Read More


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