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Investors’ Corner (Ezion Hldgs, Kingsmen Creatives, Rotary Engrg, Noble)
Investors' Corner | 08 March 2013
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By: Nicholas Tan
Articles (71) Profile

Ezion Holdings
Price – $1.945
Target – $2.33

Ezion is now reviving its marine supply base project on Melville Island, in the Northern Territory of Australia, after receiving endorsements to proceed. The supply base business adds another attractive avenue of growth and could start contributing to revenue from as early as end-2013. We see strong growth potential in the future given the growing volume of offshore oil and gas projects in Australia. Separately, Ezion is selling its 33.3% stake in Offshore Marine Alliance to its joint venture (JV) partners for A$35m. This would result in a one-time gain of about US$18m. The receipt of A$35m cash from the sale would cover the US$30m capital expenditure required for development works in the Melville supply base before it starts operations. Ezion has solved its short-term funding problems with a credit line from DBS, which would allow it to take on more projects on a 100% basis and rely less on JV. We also note that Ezion has not unveiled detailed plans for YHM yet after acquiring a stake, and this could be another stock price catalyst. Maintain BUY. – Maybank Kim Eng (4 Mar)

Kingsmen Creatives
Price – $0.79
Target – $0.93

In line with expectations, 4Q12 PATMI grew 6.2% y-o-y to $6.4m, as revenue jumped 25.3% to $102.1m. Besides the record quarterly performance, Kingsmen also maintains its strong balance sheet, with a net cash position of $48.4m. This healthy position, coupled with its strong cash flows from operations, would place Kingsmen in a comfortable position to take on more projects. Alternatively, this cash hoard would come in handy as Kingsmen is also looking to build its own office building in Singapore, when its current lease expires in 2016. Kingsmen expects FY13 to be another good year, backed by the strong demand for its services and Asia’s growth as an events and theme parks destination. Having completed works for a number of regional events and theme parks, Kingsmen is in a good position to benefit from these trends. As consumerism in Asia is still relatively healthy, new malls sprouting, existing ones undergoing refurbishment and new internationals branding trying to penetrate the region, this would benefit Kingsmen’s Interiors business. Its orderbook currently stands at $81m, which is expected to be recognised in FY13. Maintain BUY. – RHB Research (4 Mar)

Rotary Engineering
Price – $0.51
Target – $0.34

4Q12 net loss of $18m was the second straight quarter of losses for Rotary, albeit lower than 3Q12’s $66m net loss. FY12 revenue was down 16% to $444m, while net loss was $80m, compared to profit of $31m for FY11. After 2 quarters of steep cost over-run, it now expects to complete all the major works at SATORP by Apr-13 and commissioning by Oct-13. However, the financial deficit at its 51%-owned SATORP joint venture (JV) is still unresolved and remains a potential risk to shareholders. (Rotary’s non-controlling interest showed $82m of deficit as of end Dec-12). In our view, if Rotary decides to continue participating in projects in Saudi Arabia under the same operating entity, the JV would need a capital injection. Otherwise, if the JV ends after the SATORP project, there is still the risk of an impairment loss for the deficit amount owed by its minority JV partner. Another concern is the tight labour market in Singapore, which represents about 50% of Rotary’s orderbook. Profit margins could be depressed due to increase in worker levies and tighter man-year entitlements. Maintain SELL. – OCBC Investment (4 Mar)

Noble Group
Price – $1.185
Target – $1.45

4Q12 core earnings surged 72% y-o-y and 85% q-o-q to US$124m (excluding US$32.8m losses from supply chain assets), beating consensus and our estimate of US$94m to US$102m. This was aided by a tax credit of US$19m. Margins recovered across the Energy and MMO segments q-o-q, however, the agriculture business remained the key drag as grain and oilseeds crush margins remained depressed in Argentina and China, offsetting improvement in other soft commodities. FY12 core profits grew 47% y-o-y to US$472m. For FY13, we expect core earnings to grow further with: 1) the bounce in grain and oilseeds crush margins from 2Q13 when the harvest season commences; 2) 15% to 20% volume increase in sugar cane and US oil, gas and power; and 3) improving economic activities in China, leading to strong coal and MMO businesses; and 4) US$100m cost savings especially net interest expense. Further upside potential may be realized if Noble deploys US$788m in cash proceeds from recent asset sales. Maintain BUY. – DBS Vickers (1 Mar)

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
Kingsmen Creatives  0.500 -- --   
Business: Designs & produces exhibits & interiors. [FY18 Turnover] Retail & corporate interiors (47.7%), exhibitions & thematic (44.4%), research & design (4.7%), alternative marketing (3.2%).

Insight: May-19, 1Q19 revenue rose 25.7% due to the contrib... Read More

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