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Investors’ Corner
Investors' Corner | 13 August 2010
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By: Cassandra Sim
Articles (14) Profile

Tiger Airways Hldgs
Price – $2.07
Target – $1.95
Tiger Airways reported $1.9m earnings in 1Q11, a turnaround from a $6m loss in 1Q10 but significantly lower than both consensus and our expectations. Tiger’s revenue grew 45% y-o-y in 1Q11, thanks to 18% y-o-y growth in revenue passenger kilometre (RPK) and 23% y-o-y growth in yield. 1Q11 revenue of $145m amounts to 21% of full-year Bloomberg consensus estimate, which we would describe as ‘in line’, given the April-June quarter is typically the weakest for Tiger. However, Tiger’s operating cost in 1Q11 was substantially higher than we expected as cost per ASK (a measure of unit costs), repair and maintenance costs, fuel costs and airport and handling charges all contributed to this higher-than-expected cost performance. Tiger’s 1Q11 results were weakened further by the AUD weakening in that quarter. Stripping the forex effect would result in 1Q11 earnings of $7.6m, just 9.8% of full-year consensus earnings forecast of $78m. Therefore, Tiger’s stock price is expected to weaken. HOLD. – RBS (06 Aug)

Neptune Orient Lines
Price – $2.13
Target – $1.25
Strong improvement in rates on Asia-Europe routes and volumes on Transpacific and Asia-Middle East routes supported a profitable quarter, with Asia-Europe volumes rising by 24% y-o-y each in 2Q and 1H while rates jumped 51% y-o-y for 1H to US$3,073/FEU. These enabled the company to report a US$100m net profit for 1Q and US$1m profit for 1H. Higher Transpacific rates only take effect from 3Q, so it appears likely that NOL will be profitable for the full year. NOL will not pay a dividend for 1H but plans to maintain its payout ratio of 20% in considering its dividend for the full year. The recovery in both containership volumes and rates has exceeded our expectations. NOL’s greater exposure to the Transpacific and intra-Asian routes leaves it less vulnerable to the economic wobbles in Europe. The P/BV of 1.4x based on 2010E consensus, however, is rich relative to Orient Overseas. UNDERPERFORM. – Macquarie (06 Aug)

StarHub
Price – $2.33
Target – $1.90
StarHub’s FY10 guidance of 28% service margins with low-single digit revenue growth implies 32% EBITDA margin in 2H10, which may be achievable with a $50m BPL content savings. Other variables in 2H10 will be smart-phone subsidies, NBN impact on ARPUs, other content costs and BPL impact. Total revenue growth of 7% y-o-y was ahead of consensus, whereas a 13% y-o-y drop in EBITDA to $141m was 5% lower. NPAT of $58m, down 25% y-o-y, missed consensus estimates by 16%. StarHub is likely to benefit from gaining fixed/enterprise share, and thus we assume a 17% revenue CAGR for the next three years or $170m in incremental revenues. StarHub is trading at an FY11 P/E of 16.9x, which is not cheap given the overhangs. In view of the uncertainties related to the launch of NBN platform and also potential subscriber loss, StarHub’s full-year margin guidance also includes potential dilutive impact of iPhone4. Maintain REDUCE. – Nomura (06 Aug)

Hyflux
Price – $3.13
Target – $3.98
2Q10 net profit was up more than 300% q-o-q to $27.3m, meeting our expectation and consensus. 2Q10 and 1H10 net profits make up 30% and 39% of our FY10 forecasts respectively and we believe Hyflux will be a prime candidate to benefit from government infrastructure. 1H10 revenue, which rose 9% y-o-y to $241.8m, was anchored by the municipal sector, which contributed 86%. Revenue from the industrial sector slightly recovered in 1H10 to $31.5m while raw material, WIP and staff costs fell. As a result, 1H10 gross margins were lifted by 1% to 43%. There was cheer as the group declared an interim dividend of 1 ct/share for the first time. Management is bidding for water projects on smaller scales in Libya, and its JV with Mitsui has put the group in a sweet spot to participate in more complex water-infrastructure projects which could potentially trigger an avalanche of long-term and sustainable earnings, particularly in China. Maintain OUTPERFORM. – CIMB-GK (06 Aug)

StarHub  1.520 -- --   
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
Hyflux  -- -- --   
Business: Provides integrated water management & environmental solutions. [FY17 Turnover] Municipal (82.5%), industrial (16%), others (1.5%).

Insight: Mar-19, 9M18 revenue sank 75% due to lower enginee... Read More


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