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Investors’ Corner (Boustead Singapore, SMRT Corporation, SATS, Sembcorp Marine)
Investors' Corner | 29 May 2014
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By: Jonathan Khoh
Articles (26) Profile

Boustead Singapore
Price – $1.88
Target – $2.06

At 112% of our full-year forecast, Boustead’s FY14 core earnings were above our expectation, mainly due to strong results in its energy-related engineering division. We raise FY15-17 core EPS estimates by 3.4-8.8% to reflect the expanding margin and strong order book in its energy-related engineering division. A healthy order book of $380m underpins FY15 outlook. We expect strong demand for its energy engineering products from the continued oil and gas investment given the robust oil price at above US$100 per barrel. The real estate division is likely to remain lacklustre due to the downcycle of industrial property investment as well as squeezed margins from rising labour costs. The geo-spatial division is expected to resume high single-digit growth, driven by the recovering Australian demand and increasing utilisation of geo-spatial technology in ASEAN region. Overall, we expect a flat to mild growth in FY15. Maintain ADD.
- CIMB Securities (27 May)

SMRT Corporation
Price – $1.47
Target – $1.40

Operating profits for SMRT’s fare business has been on the downtrend since FY09. This even slipped into the red in FY14. We believe the transition of the public bus industry towards a “government contracting model” will help to alleviate the pressures for the operators such as SMRT, as the revenue risk will now fall under the government. There are now stronger expectations for updates from the government on the rail financing framework. Based on our estimates, the net book value of SMRT’s rail assets is worth approximately $1b. If the sale of these assets back to the government does eventually materialise, it would strongly bolster SMRT’s balance sheet. Given SMRT’s robust share price run-up in recent weeks, we believe these positives have been priced in. Maintain HOLD.
- OCBC Investment (23 May)

Price – $3.21
Target – $2.95

Without a major breakthrough in transforming the group, we think that its near-term operations could remain challenging as both top line and margins could be under pressure. FY14 net profit missed our forecast by 11% and consensus by 6% due to weakness in food solutions (weak contribution from TFK and lesser meals served). Associates/JVs were also affected by high costs in Hong Kong and weak cargo volume. However, the longer-term outlook (beyond FY17) could be positive, driven by tourism in Singapore and growth in Changi Airport, but valuations (above 5-year mean) look stretched for now. While SATS did not elaborate much on the reasons for its recent move to terminate the acquisition of Singapore Cruise Centre, it has decided to focus on the potential of services provided to the Marina Bay Cruise Centre. Downgrade to REDUCE.
- CIMB Securities (22 May)

Sembcorp Marine
Price – $3.95
Target – $5.00

Sembcorp Marine announced that it has secured a US$236m contract to build jack-up rig for Hercules North Sea, scheduled for delivery in 2Q16. With the latest win, Sembcorp Marine’s YTD orders have increased to $1.93b, meeting 39% of our $5b order win assumption for the year. Its net order book, which runs until FY19, stands at $13.2b. We reiterate the fact that the company’s operating margins for 1Q14 were stable at 11.1%, while overall revenue fell 21% q-o-q – indicating a core margin recovery. We continue to prefer Sembcorp Marine, whose margins are likely to improve, over Keppel Corporation (rated BUY with a target price of $12.45), which is likely to face continuous headwinds from its non-rig building businesses. Sembcorp Marine’s earnings growth profile is also significantly stronger. Maintain BUY.
- DMG & Partners (22 May)

Driven by passion in investments, Jonathan’s research emphasizes in incorporating critical thinking with value and income investing surrounding companies listed in Singapore. Well trained in banking and finance, Jonathan has intern experience at various industry players including GIC Pte Ltd.

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Boustead Singapore  0.735 +0.005 +0.68%   
Business: A global infrastructure-related engineering services & geo-spatial technology firm. [FY18 Turnover] Real estate solutions (48.8%), geo-spatial technology (28.2%), energy-related engineering (23%).

Insight: Feb-19, 9M19 revenue surged 25% as contributions i... Read More
SATS  4.810 +0.02 +0.42%   
Business: Asia's leading provider of gateway services and food solutions. [FY19 Turnover] Food solutions (54.1%), gateway svcs (45.8%), others (0.1%).

Insight: May-19, FY19 revenue rose 6% to $1.8b driven by hi... Read More
Sembcorp Marine  1.290 -0.020 -1.53%   
Business: Co is a leading global marine & offshore engineering group. [FY18 Turnover] rigs & floaters, repairs & upgrades, offshore platforms (98.8%), ship chartering (1%), others activities (0.2%).

Insight: May-19, 1Q19 revenue fell 31.3% to $810.6m due to ... Read More

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