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Investors’ Corner (ARA, EzionHldg, Kep Corp, Sp Land, Yongnam)
Investors' Corner | 12 August 2011
Related stocks:
5ME
BN4
By: Choo Hao Xiang
Articles (151) Profile

ARA Asset Management
Price – $1.40
Target – $1.71
Despite 50% of ARA’s revenue being denominated in US$ and HK$, the firm’s 2Q11 net profit rose 17% year-on-year (y-o-y) to $14.7 million. That brought its 1H11 figure to $29.6 million (+18% y-o-y), 48% of our FY11 estimate. 2Q11 results were buoyed by a 6% increase in recurrent management fees on MBFC 1 acquisition and higher valuation of REITs under management. As of 30 Jun-11, asset under management (AUM) grew to $18.8 billion, inclusive of its 30%-stake in Hui Xian REIT. With this, ARA is on track to achieve its 2012 target AUM of $20 billion and is confident of achieving incremental $2 billion growth per year. Meanwhile, ADF II’s first closing with commitments of US$300 million was commendable given the difficult fund raising conditions. The firm remains confident of achieving a further US$700 million closing by end-Dec. Maintain NEUTRAL. – Credit Suisse (9 Aug)

Ezion Holdings
Price – $0.67
Target – $0.79
For 2Q11, Ezion posted a 7.3% and 3.6% y-o-y growth in revenue (US$26.3 million) and net profit (US$12.2 million) respectively. Higher contributions from Ezion’s liftboat charters and offshore logistics vessels deployed in Australia offset lower marine services turnover. 1H11 net profit formed 60.7% of our full year estimate while core net profit of US$23 million made up 52%. Operating margin remained at 41% (2Q10: 48.4%). Ezion’s balance sheet looks healthy with low net gearing of 0.18x and interest coverage ratio of 34.3x. Ezion’s proposed issue of perpetual capital securities is likely to be a hybrid security. We believe that Ezion is leaving some room for debt to finance additional liftboats in its newbuild programme. We have factor in the delay in deployment of Ezion’s 5th liftboat, due to equipment delay. In view of the continued weakness of the US$ and lower assumptions for marine services, we maintained BUY, while lowering our FY11 revenue and earnings estimate by 9% and 2.8% respectively.– OCBC (8 Aug)

Keppel Corporation
Price – $10.30
Target – $12.16
Transocean exercised one of its three options for the delivery of the KFELS Super B Class Bigfoot jack up rig. The US$195 million order is scheduled to be completed by 3Q13. Coupled with the $146 million worth of FPSO-related works Keppel recently bagged, the firm’s year-to-date order book and order wins had been lifted to about $9.5 billion and $7.8 billion respectively. We estimate that Keppel now has 9 options left that are worth around $2.6 billion. We are keeping our HOLD rating on Keppel due to lower oil prices. We also do not think that oil prices will be able to recover to above US$100 per barrel level (WTI cushing) in the short run given the current market turmoil. Keppel’s current share price now represents an 18% upside potential to our target price. – Phillip Securities (8 Aug)

Singapore Land
Price – $6.77
Target – $7.30
Fair value gain of $218.2 million bolstered Singapore Land’s (SingLand) 2Q11 net profit to $273.3 million. Stripping that, net profit would have been $55.2 million (2Q10: $63.1 million). Contributing to this was higher revenue from The Trizon and increased room and occupancy rates at Pan Pacific Hotel. However, rental income continued to slide on negative rental reversion, down by 6% y-o-y. Going forward, SingLand expects the growth in office rents to curtail with increased office space supply and darkening economic outlook. Hence, we lower our target price from the previous $8.30. On the other hand, SingLand’s hotels are projected to maintain strong results, supported by upcoming events such as the Singapore Grand Prix. We expect the core recurrent income from commercial and hotel properties to remain stable. We adjusted our overall average selling price estimate from $1,300 psf to $1,350 psf for The Trizon project. Pegged at a 30% discount to revalued NAV of $10.42 per share, we maintain HOLD. – Kim Eng (8 Aug)

Yongnam Holdings
Price – $0.25
Target – $0.40
At 25% of our FY11 estimate with 1H11 EPS forming 49% of our forecast, Yongnam achieved record quarterly net profit of $15 million for 2Q11. Lower turnover, attributed to the substantial completion of the remaining projects at MBS integrated resort in FY10, was outweighed by better gross margins and lower cost structures. This was due to Yongnam’s shift in revenue mix towards specialist civil engineering (49% of 2Q11 revenue). Earnings visibility remained solid, backed by an order book of $509 million at end-2Q11. We estimate that it is bidding for $1.2 billion worth of projects this year. Yongnam maintained a strong balance sheet with net gearing improving to 0.45x as at end-1H11 (FY10: 0.49x). We maintained our OUTPERFORM rating on the stock in light of the numerous opportunities in the domestic civil engineering space. – CIMB (8 Aug)

Haoxiang manages and oversees the portfolio of stocks in the consumer goods and hospitality sectors at Shares Investment.

Please click here for more information about this author.

Ezion Hldgs  -- -- --   
Business: Co develops, owns, and charters offshore assets to support the offshore energy markets. [FY17 Turnover] Liftboats (49.7%), Jack-up Rigs (39.5%), Offshore Support Logistic Services (10.8%).

Insight: Aug-18, 1H18, Co returned to the black with a net ... Read More
Keppel Corp  6.160 -0.06 -0.96%   
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


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