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Investors’ Corner (Ezion, SIA, Hyflux, DBS)
Investors' Corner | 09 November 2012
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By: Nicholas Tan
Articles (71) Profile

Ezion Hldgs
Price – $1.335
Target – $2.20

Ezion Hldgs will issue 10m new shares to Tan Boy Tee at $1.2635 per share, representing a 5% discount to the volume weighted average price (VWAP) on 5 Nov-12, and raise $12.5m cash from the subscription. The money will be used for asset acquisition and general working capital purposes. Concurrently, Ezion’s CEO, Chew Thiam Keng, will sell 10m of his shares to Tan at $1.1305 per share, representing a 15% discount to the VWAP on 5 Nov-12. We estimate this will reduce Chew’s stake from 20.1% to 18.7%. Ezion will engage Tan as a partner and ad hoc adviser. Tan, an existing shareholder of Ezion, is an oil and gas industry veteran with more than 30 years of experience in marine construction and engineering. Ranked 15th richest man in Singapore by Forbes with an estimated net worth of US$850m, he founded Labroy Marine in 1978 which was acquired by Drydocks World at $2.4b in 2008, of which he collected more than $1b for his stake. We are neutral on the move as we expect marginal EPS dilution of 1.16% from the share issuance and we view that with Tan’s support and network it may lead to more new projects. Maintain BUY – DMG & Partners (6 Nov)

Singapore Airlines
Price – $10.58
Target – $9.10

Singapore Airlines (SIA) published a 54% y-o-y decline in net profit to $90m in 2Q13, which was above our expectations but below the street’s estimates of $140m. Operating profit slumped 43% y-o-y mainly due to widening losses of $50m, which almost tripled y-o-y, at SIA Cargo. This was the biggest drag on earnings and SIA announced that it will park 1 of its 13 aircraft in Jan-13 until May-14. This should improve loads but also indicates that SIA does not foresee any improvement in the coming quarters. Operating cash flow improved 67% y-o-y due to lower working capital changes. However, free cash flow (FCF) was negative for 2Q13 and 1H13 FCF came in at $22.2m. Hence, SIA cut interim dividend to $0.06 from $0.10. Payout ratio was also cut from 50% to 42%. While the results were broadly within our expectation, we are concerned about the weak cash flow and believe the market will react negatively to the cut in dividend. Maintain SELL. – UOB-Kay Hian (5 Nov)

Price – $1.335
Target – $1.10

Hyflux reported a 77% y-o-y growth in 3Q12 revenue but poor margins negated net profit to increased only 15%, which was in-line with our forecast but below market expectations. Lower margins at its $1.1b Tuas SingSpring desalination plant project, which contributes about 70% of Hyflux’s revenue, were not comparable to previous Middle East and North Africa projects. In China, the environment remains challenging, as reflected by a lack of new contract wins and lower sales from industrial segment. We estimate current orderbook stands at $550m, mostly made up of the Tuas project which is expected to complete in 3Q12. To replenish its orderbook, the Dahej project in India which is expected to be closed in the next few quarters will add US$420m. Elsewhere, the Oman project estimated at US$250m to US$400m, of which Hyflux remains 1 of 2 remaining bidders, could be announced as early as this month. We maintain SELL despite a positive long-term outlook as valuations are too high, without the certainty of a strong orderbook. – Maybank Kim Eng (2 Nov)

DBS Group Hldgs
Price – $13.90
Target – $17.32

DBS Group recorded flat net interest income for 3Q12 (up 0.6% to $1.3b), as an increase in average interest bearing assets was offset by China margin compression and higher funding costs. Net interest margin fell 5 basis points q-o-q to 1.67%, largely due to interest rate liberalisation in China. Headline volumes were down 1.3% q-o-q due to the timing of China trade financing loans expiring. Despite maintaining the loan origination rate, its loan book still shrunk as the maturity amount was 40-50% higher. DBS believes that China activity levels bottomed-out in Sep-12 and credit demand shows signs of picking up in 4Q12. Investment banking fees doubled q-o-q in 3Q12 to $60m, as DBS’s leadership position led it to ride on the coat-tails of a booming Asia debt capital market. We opined that such investment banking fees seem more sustainable than perceived as corporates from non-traditional markets (India and Indonesia) are turning to Singapore for debt issuance on the back of an Asian infrastructure boom and an impending capital constraint on banks from Basel III. Maintain OUTPERFORM. – CIMB (1 Nov)

Well trained in aspects of finance and business, Nicholas oversees the finance and manufacturing sectors at Shares Investment.

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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
Singapore Airlines  9.160 -- --   
Business: Co provides air transportation services to destinations spanning a network spread over 6 continents. [FY19 Turnover] SIA (80%), Budget Aviation (10.5%), SilkAir (6.2%), SIAEC (3.1%), others (0.2%).

Insight: May-19, FY19 revenue edged up 3.3% to $16.3b. Pass... 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
DBS Group Hldgs  24.870 -0.18 -0.72%   
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

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