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Investors’ Corner (Olam Int’l, Sino Grandness Food Industry Group, Sin Heng Heavy Machinery, Ezion Hldgs)
Investors' Corner | 21 November 2013
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By: Ong Qiuying
Articles (131) Profile

Olam Int’l
Price – $1.54
Target – $1.57

Management has shifted its focus towards de-risking the group’s balance sheet. We hold a less optimistic view than management, expecting free cash flow positive territory delayed to 1H15 instead of 1H14. Though the worst is behind, it will continue to be held hostage by volume growth and commodity prices volatility. Due to a scale-back in capital expenditure, we expect slower volume and earnings growth. Given the large working capital required to support full value chain operations, its highly leveraged balance sheet is unlikely to improve significantly. This makes it vulnerable to a spike in global interest rates – based on our estimates, every 1 percentage point increase in cost of debt would lead to an 18.5% decline in forward earnings. At 0.9x 1H14 BVS – more than 1 standard deviation below its trailing P/BV average since Jan-08 – we see limited share price downside. Upgrade to HOLD. – MayBank Kim Eng (19 Nov)

Sino Grandness Food Industry Group
Price – $0.75
Target – $0.88

3Q13 net profit surged 97.4% y-o-y to Rmb168.2m as revenue grew 56% y-o-y. The company’s outlook remains positive, supported by higher production capacity and continued growth of its in-house brands in China. During a Chengdu trade show in 1H13, Sino Grandness secured a number of new customers. Helped by an increase in distribution points and an expanded product range, sales of its Garden Fresh (GF) juices and domestic canned food products hit record highs in 3Q13. The company intends to aggressively expand its retail and distribution channels across 20 provinces. The potential in China’s beverage segment remains huge, given the growing trend of juice consumption. The firm recently launched a new snack food category under its GF brand. It plans to leverage on its existing distribution network in China to grow this business further. Plans for an IPO of its beverage business are on track. Our target price assumes: i) GF will achieve a profit target of Rmb250m, and ii) a 4 times FY13F P/E for its canned food business. Maintain BUY. – DMG & Partners (19 Nov)

Sin Heng Heavy Machinery
Price – $0.205
Target – $0.30

Sin Heng Heavy Machinery (SHHM) is the only crane operator among its listed peers that is actively engaged in the trading business, which provides an additional income source. It also provides an indirect opportunity for investors to gain exposure to the growth of emerging countries as it is a likely beneficiary of the boom in infrastructure spending in the region, with its branded crane equipment already the leading standard in the infrastructure arena. SHHM is also likely to benefit from the partnership with Toyota Tsusho Corp (TTC) given TTC’s established network and strong presence in countries like Thailand and Myanmar. The weaker yen has also benefited SHHM in the form of lower purchase costs for high quality Japanese cranes and made it more cost competitive as it narrows cost disparity against China-made cranes. We forecast earnings to grow at CAGR rate of 20% from 2013 to 2015 and an expected dividend yield of 3.9%. Initiate BUY. – AmFraser Securities (19 Nov)

Ezion Hldgs
Price – $2.13
Target – $2.65

Ezion’s 3Q13 net profit surged 137% y-o-y and 5% q-o-q to US$38.2m, bringing 9M13 net profit to US$102.9m, or 73% and 77% of our and consensus’ FY13 estimates. Growth was driven by fleet expansion, commencement of 3 LNG projects at Curtis Island and margin improvement. Gross margin expanded by 1.9 percentage point q-o-q to 48.2%, though impact on the bottomline was partially offset by lower joint venture and other income. Ezion took delivery of 2 service rigs for deployment in Myanmar and Mexico in 3Q13. 3 more units are expected to come onstream by end-FY13 for Caspian Sea, India and Middle East, bringing its total fleet to 18 vessels (double that of 9 in early 2013). Current valuation is undemanding and we believe Ezion’s strong earnings growth and contract wins will drive the stock price further. Maintain BUY. DBS Vickers (18 Nov)

Qiuying oversees the construction and real estate investment trusts sectors at Shares Investment.

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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
Sino Grandness Food Industry Group  0.046 -0.001 -2.13%   
Business: Integrated manufacturer & distributor of own-branded Garden Fresh juices as well as canned fruits & vegetables. [FY17 Turnover] Beverage (72.4%), canned pdts (27.6%).

Insight: Aug-18, 1H18 revenue jumped 10.6% to Rmb1.7b mainl... Read More
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

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