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Investors Corner (Vard holding, Starhub, ComfortDelGro, Midas Holdings)
Investors' Corner | 28 June 2013
By: Shane Goh
Articles (99) Profile

Vard Holdings
Price – $1.095
Target – $1.65

Vard’s share price is off its low of $1.015 following an unwarranted selldown previously. Optimism expressed by leading Offshore Support Vessel (OSV) owners following their 1Q13 results generally support our view that high end OSV newbuild ordering is on the verge of picking up again in 2H13. Average utilisation and charter rates for Anchor Handling Tug Supply Vessels and Platform Supply Vessels are generally rising although there are still occasional bouts of volatility. An oversupplied order backlog may still hinder new orders but that should ease as most vessels get delivered in 2013. A common notion brought up by the OSV owners is that a large number of rigs, more than 50, entering into service over the next 12 months would warrant the need for more support vessels. A batch of pipelay vessel orders from Petrobras potentially worth NOK3b is still in the cards which would be a bonus to our expectation of NOK11.5b in new order wins for Vard this year. Reiterate BUY. Maybank Kim Eng (24 Jun)

Starhub
Price – $4.03
Target – $4.52

The key takeaways from our meeting with Starhub’s CEO at our annual Asia Pacific conference are 1) it is eyeing the enterprise segment as a growth driver, 2) it introduced single rate roaming to encourage data roaming, and 3) forging overseas alliance such as its partnership with Vodafone and ensure good regional connectivity. The government has mandated all buildings to have access to fibre broadband and therefore paves the way for Starhub to engage more enterprise customers on its own versus buying wholesale from SingTel, in the past. We believe Starhub introduced the single rate roaming to encourage data roaming as roaming revenues are under pressure because users seek out free WiFi hotspots to access data. The partnership with Vodafone will allow the telco access to devices earlier and cheaper from the former’s bulk procurement. Maintain NEUTRAL. CIMB-GK (21 Jun)

ComfortDelGro Corporation
Price – $1.81
Target – $1.95

ComfortDelGro (CDG) is showing signs of stabilising after the partial stake sale by the Singapore Labour Foundation about a month ago. Domestic challenges aside, the group’s overseas growth prospects, which have been its key growth driver, remain unchanged. As a recap, CDG recently made an acquisition for its UK operations that expanded its fleet size by 41% and increased its market share to joint-second in the city. In addition, CDG is in the process of tendering for additional bus routes in New South Wales (Australia) and we are hopeful for positive results come July this year. More importantly, its UK and Australian bus segments are operated on a cost-plus model, which significantly limits its downside risk. Despite a delay of submission from the Fare Review Mechanism Committee’s findings by a few months, in our view, the likely outcome of a fare increase remains on track. Upgrade to BUY. OCBC Investment (20 Jun)

Midas Holdings
Price – $0.47
Target – $0.60

We hosted Midas’ CEO and CFO for a NDR (non-deal roadshow) in Hong Kong, and key concerns revolved around when the new high-speed train orders would be coming through. With China planning to double its High-Speed Rail (HSR) network to 18,000km by end-2015 and lack of orders for rolling stock in the last 2 years, there is firm optimism that the newly-formed China Railway Corporation could be placing orders for new HSR rolling stock in 2H13, which should lead to substantial contract wins for Midas. Meanwhile, the group has won a number of metro and overseas train contracts to boost its order book to Rmb650m, up from Rmb400m at the end of 2012.  Midas’ associate, Nanjing Puzhen, has won 5 metro contracts worth nearly Rmb4b in the last 6 months to bring their order book to over Rmb10b, which should contribute positively to Midas’ bottom line from 2H13 onwards. Maintain BUY. DBS Vickers (20 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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