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Investors’ Corner (Keppel Corporation, Super Group, Olam International, CourtsAsia)
Investors' Corner | 14 June 2013
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By: Shane Goh
Articles (99) Profile

Keppel Corporation
Price – $10.45
Target – $12.50

Keppel Corporation has recently received an order from Caspian Drilling for a US$800m semisub. We expect orders going forward to consist of an increasing mix of semisub orders given the optimism echoed by leading drillers on the deepwater space in their 1Q13 results. This should lift confidence in the market that the offshore rigbuilding cycle is indeed on the upturn. Notwithstanding that FY13 margins would be driven by efficiency gains from delivering a record number of jackups, we believe that higher rig prices would keep operating margins above the 14% level in FY14-15. The risk in Keppel’s Brazil semisub orders is comparatively lower given the yard’s long established presence there and its familiarity with building semisubs. Year-to-date order wins have now reached $3.1b, which is 59% of our full year forecast of $5.4b. With a record orderbook of $13.1b at 1Q13, and as a diversified conglomerate, Keppel offers a certain level of defensiveness. Maintain BUY. Maybank Kim Eng (10 Jun)

Super Group
Price – $4.65
Target – $5.35
Super is a market leader in Myanmar, with at least 15 years of experience in the country. The firm’s mainstay coffee products has a penetration rate of more than 80% and a market share of more than 40%. It operates a packaging plant with an annual output of 100-150 tonnes. Myanmar’s Branded Consumer’s (BC) revenue slowed in 1Q13 affected by riots, which prevented its distributors and customers from stocking up additional inventory. We do not think that the slowdown in Myanmar is likely to be permanent, but however expect sales and restocking to take place in the next few quarters. The Food Ingredients (FI) segment has now reached a sizeable revenue base since FY09, and is now breaking into Indonesia and winning more customers. Although BC revenue was flat in 1Q13, we expect sales to normalise in the next few quarters with restocking and increased marketing campaigns. We believe that growth from both BC and FI segments remain sustainable. Recommend BUY. DBS Vickers (10 Jun)

Olam International
Price – $1.71
Target – $2.35
When the Muddy Waters saga kicked-off in Nov-12, Olam became a three-tiered confidence play: confidence of banks, confidence of customers and confidence of investors. We believe that following Temasek’s open market acquisitions (24% stake), a floor of $1.60 per share has been established. With facilities increasing by $1.6b between Sep-12 and Mar-13 as well as volumes continuing to grow, both banks and customers have shown their confidence in the firm. Olam, during its strategy review, promised to enhance shareholder communication. Part of this commitment included setting up a calendar of field visits and organising a series of platform-based investor days. In 2009, the trip to Olam’s Vietnam operations had a positive impact on the share price. This new multi-country multi-product programme should create multiple catalysts. Investor confidence is key and better understanding is typically confidence/rating supportive. Maintain OUTPERFORM. Stanchart (6 Jun)

Price – $1.06
Target – $1.32
Courts recorded weaker-than-anticipated 4Q13 y-o-y revenue growth of 3% versus our expectation of 29%. The weak growth was the result of lacklustre sales of Apple products as well as the temporary renovation of Suntec City, a major convention centre in Singapore for electronic trade shows. More importantly, revenue growth appeared weak because 4Q12 revenue was boosted by a $7.5m positive transfer of service charge income while the same transfer in 4Q13 amounted to only $0.2m. Stripping away the service charge income transfer, revenue would have increased 8% for the quarter. Growth drivers for Courts (store expansion, credit sales, and higher same-store-sales growth) remain intact, in our view. The opening of the Megastore in Kuala Lumpur and 2 new stores in Singapore in FY14 put Courts on a strong trajectory to beat its articulated expansion plan. Following the issuance of a $125m fixed rate note in May-13, we believe Courts is in a solid position to grow organically as well as inorganically. Share price correction creates a good entry point. Reiterate OVERWEIGHT. HSBC (3 Jun)

Currently pursuing his Chartered Financial Analyst qualification, Shane provides coverage on the property, consumer and environmental sectors at Shares Investment.

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Keppel Corp  6.080 -0.02 -0.33%   
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
Olam Int'l  1.890 +0.070 +3.85%   
Business: Co is engaged in sourcing, processing, packaging and merchandising agricultural products. [FY18 Turnover] Food staples & packaged foods (47.6%), confectionery & beverage ingredients (23.4%), industrial raw materials, infrastructure & logistics (14.9%), edible nuts & spices (14.1%).

Insight: May-19, 1Q19 revenue rose 16.7% due to increased t... Read More

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