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Investors’ Corner
Investors' Corner | 25 February 2010
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By: Lai Wyai Kay
Articles (53) Profile

City Developments
Price – $10.82
Target – $12.30
The Government introduced a seller’s stamp duty of 3% on properties sold within 1 year, and lowered LTV for home loans to 90% from 80%. These measures seek to discourage speculative activity that would distort prices. We believe more measures will come if 1) prices rise more than 5-7% per quarter; 2) new sale volumes rise above 1,000/month; 3) sub-sales make up over 25% of total sales; 4) other jurisdictions tighten policies which could result in inflows into Singapore assets. We believe investors are surprised by the swiftness of these measures and potential further measures by the Government and expect residential developers to correct in the short term. We expect prime home prices to stay flat in 2010. We downgrade City’s EPS estimates in 2010/2011 by 20% and continue to prefer office landlords such as CCT, Kepland and Suntec REIT to residential developers. Downgrade to NEUTRAL. – UBS Investment (19 Feb)

Overseas-Chinese Banking Corp
Price – $8.54
Target – $8.90
Despite Great Eastern’s stellar perfromance, OCBC managed to eke out an in-line result. The drag came from a surprisingly weak net interest income. 4Q09 net interest margin contracted to 2.08% (-8bp q-o-q; -39bp y-o-y), its lowest level in nine quarters. We are encouraged by the group’s sequentially strong loan growth of 4.7% – its strongest since 4Q07. As expected, asset quality is not an issue. Management is confident about loan outlook for 2010, guiding for growth in the low teens. It also does not see any need to equity fund raise under the proposed Basel 3 framework. OCBC is a clear-cut outperformer over the past two years and we think it may be hard to sustain, given its weaker prospective EPS growth relative to that of DBS and UOB. The integration of BoS could prove more difficult than expected. Unchanged at HOLD. – BNP Paribas (19 Feb)

COSCO Corp (S)
Price – $1.28
Target – $0.51
COSCO’s FY09 net profit was down 64% y-o-y. Its $2.9b revenue for the year, down 17% y-o-y, was also in line with our $2.9b estimate. COSCO has made some progress towards resolving its execution issue. The company delivered nine newbuild vessels in 2009, a further seven YTD. Management is targeting delivery of 38 vessels out of the 95 on order (valued at US$5.6b) in 2010. There is higher visibility on shipbuilding revenues and deliveries today, but the extent of improvement in margins remains unclear. We are forecasting 11% operating margin for the shipbuilding division in 2010 on expectation of stabilising operations. 2010-11E EPS is lowered by 9-10% on lower revenue outlook. The worst of COSCO’s shipyard problems may be behind it but further upside remains uncertain. At 19x 2010E P/E, the stock appears to be fully pricing in the yet-to-be achieved turnaround. Maintain UNDERPERFORM. – Credit Suisse (23 Feb)

Sembcorp Marine
Price – $3.37
Target – $4.25
Sembcorp Marine (SMM) delivered a solid set of results in FY09 with revenues up 13% y-o-y, while net income surged 63% y-o-y. Operating margins were up from 10% (FY08) to 15% (FY09). ROEs were at a record 43.7%, and total dividends were up 36% y-o-y to $0.15. Customer enquiries are up, and the group is confident of its new order prospects. Apart from Brazil, SMM is seeing strength in key markets such as West Africa, the Gulf of Mexico, the North Sea, India and other parts of Asia. Our FY10-12E new order forecasts are $2.8b, $4.2b, and $5.7b, respectively. Our US oil services team is observing significant pent-up demand within the industry and expects capital spending to be up roughly 10% globally in 2010, with additional 15-20% growth in 2011. Our FY10 and FY11 earnings estimates for SMM are raised by 23% and 38%, respectively. BUY. – Deutsche Bank (23 Feb)

City Developments  10.230 +0.35 +3.54%   
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
Oversea-Chinese Banking Corp  10.820 -0.04 -0.37%   
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
COSCO Shipping Int'l (S)  0.280 -- --   
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
Sembcorp Marine  1.200 -0.020 -1.64%   
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

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