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Investors’ Corner
Investors' Corner | 09 September 2010
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By: Cassandra Sim
Articles (14) Profile

Tiger Airways Hldgs
Price – $1.96
Target – $1.58
Tiger Airways has been cancelling a high percentage of its flights recently, and we suspect this is caused by a shortage of pilots region-wide. Although Tiger claims to be recruiting replacement pilots from Mandala Airlines and others, its cancellation rate of 14.8% is significantly higher than that of Valuair/Jetstar (7%) and AirAsia (1.8%) departing out of its home base in Changi Airport. We also see the unexpected news that Tiger will be leasing out two A319 to the Philippines-based Southeast Asia Airlines (SEAIR) as another indication of Tiger’s difficulty in staffing its current fleet operating out of Singapore. As these signifies negative implications for Tiger’s earnings outlook, we cut our expectation of fleet expansion from 20 to 12 aircraft over the next three years, and also raise our unit wage cost increase this year to 8% (from 3.7%). As a result, we cut our 2011-13 earnings by 19% to 34%, lower our target price by 19% to $1.58. Downgrade to SELL. – RBS (02 Sep)

DBS Group Hldgs
Price – $13.88
Target – $16.00
Given tangible traction in leveraging franchise strength and laying the foundation for a proper execution of regional strategies, DBS looks overly discounted at 1.2x FY11 P/B and 11x FY11 P/E, especially with interest rate inertia already at consensus and ROE trending up. With 82% of its S$ deposit base composed of relatively interest rate-insensitive current and savings account (CASA), DBS is leveraging on this competitive edge to grow fixed-rate mortgage and corporate lending, and ROA as loan-to-deposit ratio (LDR) gains traction. With S$ LDR still at a low 58%, we estimate every 100bp rise in the Singapore Interbank Offered Rate (SIBOR) will boost FY10 PBT by $450m or 14% on an annualised basis. The building of support infrastructure and execution capacity is set for a FY11 launch. Factors mitigating soft margins and keeping FY10 earnings growth forecast on track are robust and broadbased loan growth and sustainable trading income which reflects a rising share of lower-beta customer flows generated from a more effective cross-sell between bank and treasury teams. Upgrade to BUY. – Nomura (02 Sep)

Yangzijiang Shipbuilding (Hldgs)
Price – $1.59
Target – $1.94
Notwithstanding the recent run-up in the share price, Yangzijiang (YZJ) is still trading at an attractive valuation of 9x FY11 P/E and 2.6x P/B, below the historical mean. Our SOTP-based PT of $1.94 implies a mean-cycle P/E of 13.5x and P/B of 3.3x, suggesting 22% potential upside. As we now see minimal risks in its orderbook, we are raising our earnings estimates by 56/156% for FY10/11 to reflect its entire US$5.2b orderbook. YZJ is well-positioned to ride the potential pick-up in containership orders in 2H10 and we expect more positive news flow will re-rate the stock following YZJ’s recent US$915m order win. YZJ has made use of its net cash balance sheet and government incentives to expand and vertically integrate after the financial crisis, and is on a continued lookout for acquisition targets at distressed valuations. We believe YZJ will emerge as one of the most dominant private shipbuilding enterprises in China over the next three years. Upgrade to BUY. – Nomura (03 Sep)

CitySpring Infrastructure Trust
Price – $0.60
Target – $0.80
CitySpring’s operating business provides limited downside – it receives stability of cash flows from City Gas’ regulated return, SingSpring’s concession contact and Basslink’s long-term services agreement. Its strong dividend yield along with predictable cash earnings could outperform volatile and cyclical industries. We arrived at our base-case valuation using a dividend discount model (DDM) and effective cost of equity of 7.4% (6.5% for Singapore and 10% for Australia). The valuation of each asset was determined by the present value of all future cash flows discounted at a rate reflecting the risk of attaining of those cash flows. However, failure to generate deal flow was the biggest risk to our valuation, as there was no NAV accretion and as credit markets remain tough, CitySpring’s ability to raise funds for finance acquisitions might be impeded. OVERWEIGHT. – Morgan Stanley (03 Sep)

DBS Group Hldgs  25.060 -0.14 -0.56%   
Business: [FY18 Total Income] Institutional banking (43.7%), consumer banking/wealth management (42.9%), treasury markets and others (13.4%).

Insight: Apr-19, 1Q19 net profit rose 9% to a record $1.7b.... Read More
Yangzijiang Shipbuilding (Hldgs)  1.370 -- --   
Business: Co is one of the largest non-state owned shipbuilders in China. [FY18 Turnover] Shipbuilding (58.1%), trading (32.8%), investments (6.7%), others (2.4%).

Insight: Apr-19, 1Q19 revenue jumped 26.8% to Rmb6.3b due t... Read More
Keppel Infrastructure Trust  0.470 -- --   
Business: Co is the largest Singapore infrastructure-focused business trust, with a diversified portfolio of core infrastructure assets, spanning waste management, water and wastewater infrastructure, power generation, telecoms infrastructure.

Insight: Apr-19, 1Q19 revenue jumped 98.7% driven by the co... Read More

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