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Investors’ Corner (Rex Int’l Holding, SPH, Nam Cheong, Hutchison Port Holdings Trust)
Investors' Corner | 27 September 2013
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By: Shane Goh
Articles (99) Profile

Rex International Holding
Price – $0.85
Target – $1.27
Rex International Holding uses proprietary oil and gas exploration technology, including Rex Virtual Drilling (VD), to identify and characterise reservoirs in the areas to be drilled and lower the chances of hitting a dry well. Rex is positioned to capture the highest value in the exploration and production value chain through successful discoveries and limiting capital expenditure requirements in expensive offshore areas. We estimated that the use of Rex VD could yield a success rate in excess of 50%, compared to a global average of around 15% using traditional methods, thus potentially boosting each project’s return on investment to more than 100%. Rex currently has stakes in 15 concession areas in mature oil and gas development areas with plans to expand the portfolio further. Over the next 2 years, we expect Rex to rapidly add on to its license portfolio, while also delivering on its drilling programmes in various regions, with the first well results from Oman likely in early FY14. We initiate coverage with BUY. DBS Vickers (23 Sep)

Singapore Press Holdings
Price – $4.09
Target – $4.08
Singapore Press Holdings’ (SPH) FY13 dividends could fall short of FY12’s $0.24 per share. We think there is a strong possibility that FY13-14 dividends (excluding $0.18 special dividend) could be cut if the management does not raise the payout ratio. FY13’s core earnings are likely to come in around 13% lower than FY12 because of weak advertising revenues. Even if the climate for advertisers picks up in FY14, it may not be able to offset the fall in earnings from the loss of 30% property income to SPH REIT. Furthermore, interest expense is set to rise as the overall cost of borrowing increased after the REIT transaction. However, the $757m raised from the initial public offering of SPH REIT should compensate if the management successfully develops new retail malls. Additionally, having a platform to recycle capital allows SPH to bid more aggressively for land sites, knowing that it has a ready buyer. Maintain NEUTRAL. CIMB Securities (22 Sep)

Nam Cheong
Price – $0.29
Target – $0.38
Nam Cheong (NC) has entered into a joint venture (JV) with PT Bahtera Niaga Internasional to own and operate offshore supply vessels in the Indonesian market, where the enforcement of a cabotage law has led to charter rates spiking up 33% last year. We calculated that a 5,150bhp anchor handling tug supply (AHTS) vessel in Indonesia today can fetch net margins of 41%. At 30% equity financing, the return on equity on each vessel is 44%. We are assuming that this JV would own the smaller 5,150bhp AHTS vessels as well as a low growth rate of 3 vessels per year starting from FY14, relative to NC’s large building capability. NC will be able to recognise 51% of each AHTS vessel’s shipbuilding revenue and 49% of the charter profit at the associate-income level. Further upside is possible as NC has yet to unveil its FY15 shipbuilding programme, which would boost its FY14-15 shipbuilding revenue if the numbers exceed our 25-vessel assumption. Maintain BUY. DMG & Partners (19 Sep)

Hutchison Port Holdings Trust
Price – US$0.77
Target – US$0.86
We have lifted our estimates, target price and rating for Hutchison Port Holdings Trust (HPHT) as 1H13’s decline in throughput appears to have bottomed out and there are signs that Western consumption is poised to recover. August throughput numbers were uniformly positive for HPHT’s Hong Kong terminals, which had previously flagged. We have raised our throughput assumptions for the remainder of FY13-14 to reflect better China export numbers in August and signs that throughput in Kwai Tsing and COSCO-HIT are recovering. HPHT’s yields top the table of Singapore comparable companies – even when adjusted for its falling distribution growth between FY12 and FY14’s estimate, which reflects its capital expenditure programme. While still markedly higher than the REITs, we believe it should trade closer to Cityspring Infrastructure Trust at around 7%. With rising cash flows, we have increased our distribution estimates for FY13-14, along with our rating from Neutral to OUTPERFORM. Credit Suisse (18 Sep)

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

Please click here for more information about this author.

Rex Int'l Hldg  0.084 -0.001 -1.18%   
Business: An independent oil & gas exploration & pdtn Co which has access to a set of proprietary & innovative exploration tech that mitigates exploration cost & risk.

Insight: May-19, 1Q19 no service revenue was generated from... Read More
Singapore Press Hldgs  2.110 +0.03 +1.44%   
Business: Co is S'pore's main newspaper & magazines publisher that also has investment in properties. [FY18 Turnover] Media (66.7%), property (24.7%), others (8.6%).

Insight: Apr-19, 1H19 operating revenue fell 3% to $477.6m ... Read More
Nam Cheong  -- -- --   
Business: An offshore marine group specialising in the building of offshore support vessels. [FY18 Turnover] Shipbuilding (59.2%), vessel chartering (40.8%).

Insight: May-19, 1Q19 revenue jumped multiple times to RM29... Read More
Hutchison Port Hldgs Trust US  0.168 -0.006 -3.45%   
Business: Co invests in, develops, operates and manages deep-water container ports in the Pearl River Delta.

Insight: Apr-19, 1Q19 revenue inched up 0.3% as combined co... Read More

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