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Investors’ Corner (Genting SP, NOL, StarHub, Mermaid)
Investors' Corner | 30 March 2012
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By: Gerald Teo
Articles (40) Profile

Genting Singapore
Price – $1.74
Target – $2.50
Whilst junkets are positive for long-term market growth, our sense is that the bears on Genting Singapore (GENS) are still taking a wait-and-see approach on the stock. Junkets could boost VIP revenues via new clients, and will take on credit risk which in turn is positive for GENS’ balance sheet. GENS is a potential beneficiary of strong tourism trends (Jan-12 tourist arrivals +13% y-o-y), positive economic growth in the region, a high proportion of local millionaires, mainland Chinese property owners in Singapore, and rising commodity prices in Malaysia. GENS is still rolling out new luxury hotel accommodation (fully on stream mid-2012), which will likely address the shortage in high-end hotel capacity. Meanwhile, GENS is on the lookout for a major integrated resort project overseas and this could potentially make a long term catalyst for the stock. Maintain OUTPERFORM. –Credit Suisse (27 Mar)

Neptune Orient Lines
Price – $1.38
Target – $1.85
Management is aiming to carve 6% (US$500m) out of the cost base in 2012. If achieved, it is equivalent to another US$180m in pre-tax profits relative to our expectations. With 71% of revenues and 53% of volumes generated from long-haul markets, Neptune Orient Lines (NOL) has significant exposure to rising freight rates. However, volume related discounts and as-yet unexpired contracts may delay the full impact on earnings until 2013. Group expectations for logistics revenues are to double as a proportion of total over the forecast period, supported by consistent margins of about 5% and diminishing asset intensity. However, where our revenue estimates (based on 10-12% annual increments) see logistics’ proportion of group sales running at about 15%, NOL is targeting closer to 30%, suggesting more rapid growth. We expect the company to regain a PB of 1.5x by mid-2012, equivalent to mid-2010 and early 2008 when liner rates last hit the levels projected. Assume coverage with OUTPERFORM –Credit Suisse (27 Mar)

Price – $3.05
Target – $3.10
We note that the pricing for the UEFA Euro 2012 football tournament is a lot steeper than what it charged four years ago. According to media reports, the pricing for broadcast rights for the 2012 event has more than doubled the 2008 event. Starting from 27 Mar-12, all viewers (from StarHub or SingTel) will be able to purchase the Pay-Per-View pack. The Euro 2012 event will also be the first test of the new cross-carriage mandate of exclusive content. StarHub will be able to sell the content into more households beyond its 545k subscribers; SingTel has some 353k mio TV customers although we estimate that 50% may already own a StarHub setup box. With the steeper pricing, we believe that StarHub is likely to just break even at best. Downgrade to HOLD -OCBC Investment (27 Mar)

Mermaid Maritime
Price – $0.30
Target – $0.44
Strengthened by a new management team, we expect Mermaid to be back in the black following two years of losses. We expect Mermaid’s subsea arm to make further headway with its plans to merge the 3 subsea business units for more effective deployment of resources across markets to maintain utilisation. Earnings risks are on the upside, as we have conservatively projected a 68% utilisation rate for FY12 (FY11: 69%). Average projected day rates are also lower at about US$48,000 (FY11: US$52,000). We expect much stronger drilling contributions in 2H12, the first time that both tender rigs, MTR-1 and MTR-2, will be gainfully employed. We expect MTR-2 to extend its contract with Chevron Indonesia ending in Apr-12. Further, we expect contracts for its new build jack-ups by 2H12, which could rerate Mermaid’s share price. Downside risks are limited with the stock trading at 0.5x CY12 PB – the revalued NAV of its subsea fleet could be even higher than the trading price. In addition, CY12 Enterprise Value/EBITDA of 3x highlights its strong operating cash flow generation and implies a cash payback of three years. Maintain OUTPERFORM–CIMB (26 Mar)

Genting Singapore  0.920 -- --   
Business: Develops, operates & mkts casinos & IRs globally, including Australia, M'sia, Philippines & UK. [FY18 Turnover] Gaming (66.1%), non-gaming (33.8%), others & invs (0.1%).

Insight: May-19, 1Q19, despite Co's non-gaming business reg... Read More
StarHub  1.290 -- --   
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
Mermaid Maritime Public Co  0.069 +0.001 +1.47%   
Business: Co is a provider of subsea & drilling services for the offshore O&G industry.

Insight: May-19, 1Q19 total revenue rose 25.5% primarily du... Read More

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