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Capitaland (BUY; Target Price: S$4.61)

Capitaland has announced it has entered into a third joint venture with Khang Dien Sai Gon Real Estate JSC to develop a 29,000 square metres site in Ho Chi Minh City (HCMC), Vietnam into 974 units of value homes. The site is located about 9 km from HCMC’s Central Business District and is in close proximity to Saigon Sports City. The total project cost is US$70 million and Capitaland will take 70 per cent of this project and its JV partner the remaining 30 per cent. This will be the group’s sixth development in Vietnam (total 5,500 units) and the third value home project in Asia and boost Capitaland’s pipeline of value homes in Asia to 3,500 units. It is on track to build 10,000-15,000 value homes in China and Vietnam over the next 3-5 years. Acquisition of a 40 per cent stake in Surbana Pte Ltd, to tap into its expertise in this area, is also expected to help accelerate the group’s expansion into this arena. We expect contributions from this segment to impact bottomline only in the medium term, once these developments grow in scale. – DBS Vickers

City Developments Limited (HOLD; Target Price: S$10.86)

City Developments (CDL) reported 1Q11 PATMI (profit after tax and minority interest) of S$282.2 million. Adjusting for one-time items, we estimate core 1Q11 PATMI to be S$134.4 million. This makes up 18 per cent of our FY11 estimate which we keep mostly intact due to expected incremental profits from more developments later in FY11. H2O Residences launched successfully in March and we also expect the EC site at Segar (estimated 602 units) to launch by 3Q11. In 1Q11, CDL bid successfully in three GLS tenders: a hotel site at Robertson Quay, an EC site at Choa Chu Kang Dr and a residential site at Bartley Rd. Management continues to execute well but we believe residential upside remains limited this year due to policy overhang and headwinds from interest rates and physical supply ahead. We update assumptions and maintain a HOLD rating on CDL with a revised fair value of S$10.86. – OCBC Investment Research

Goodpack (BUY; Target Price: S$2.30)

Goodpack’s 3QFY11 profit of US$10.6 million was slightly below our expectation due to an unrealised foreign exchange loss of US$1.4 million. Core profit was up 24 per cent YoY, testifying to Goodpack’s ability to grow its core business organically. We lower our FY11F earnings by about 2 per cent to account for the foreign exchange loss. However, we are not unduly concerned about this as it does not cloud Goodpack’s long-term ability to grow its core earnings, which is the premise for our BUY recommendation. We continue to await concrete development for its auto sector, with trials still ongoing. Our target price of S$2.30 is pegged at 25x FY11F. – Kim Eng Research

Keppel Corp (BUY; Target Price: S$15.30)

Keppel Corp has secured contracts to build two high-specification KFELS B Class Bigfoot jackup rigs from returning customer Gulf Drilling International of Qatar. This deal, worth about US$393 million, is partially related to one of GDI’s shareholders, Japan Drilling Company, which ordered a newbuild jackup rig in March. The latest orders are scheduled for delivery in the third quarters of 2013 and 2014. The two rigs are GDI’s first new orders in six years and will increase its jackup fleet count to seven units. Customised to the company’s requirements, the new jackup rigs will be designed to operate in the higher ambient temperature of the Middle East. The KFELS B Class Bigfoot is equipped with larger spud cans for reduced bearing pressure and expands its operational coverage in more places, especially areas where soft soil is predominant. The rigs will also feature an enhanced leg design for added robustness. Each rig will have a full 15,000 psi BOP system, 75-feet cantilever outreach and be able to accommodate 150 persons. The momentum for rig orders continues. – Kim Eng Research

Marco Polo Marine (BUY; Target Price: S$0.55)

Marco Polo Marine’s (MPM) 2QFY11 results fell short of our expectations if the S$3.8 million gain on vessel disposal were excluded. Despite robust revenue growth of 43 per cent YoY to S$22.1 million, spurred mainly by the group’s shipyard operations, net profit slid by 27 per cent YoY to S$5.4 million. This followed a decrease in associate income (-94 per cent YoY) given the ongoing restructuring exercise with its JV partner, Glencore. We keep our FY11-13 estimates largely unchanged in anticipation of a stronger 2HFY11. In particular, the recovery in its transshipment business, which generally commands a better margin, should help to improve operational performance. – Kim Eng Research

Noble Group (Target Price: S$2.75)

Revenue grew by 76 per cent YoY to US$20.0 billion on the back of a 17 per cent growth in tonnage. The revenue growth was partly due to a change in sales mix towards higher-priced commodity, especially oil and gas, which is a business the group has been building up and incurring start-up costs last year. Gross profit grew by 37 per cent YoY and net profit by 75 per cent YoY. The net divestment gains of US$52.5 million relates mainly to the sale of a fleet management business, which supplies crews to third-party ship operators. The energy segment saw a 165 per cent jump in gross profit, with contributions from its budding North American power and gas business division as well as the first full-quarter contributions from Sempra Energy, which was acquired for US$582 million late last year.  The recent entry of Korea Investment Corporation (KIC) as a strategic shareholder in Noble and the impending IPO of Glencore signal an increasing interest in companies in the commodity space. We maintain our estimates but adjust our target price to S$2.75, still pegged at 20x FY11F while accounting for US dollar weakness and share placement. – Kim Eng Research

Otto Marine (SELL; Target Price: S$0.20)

1Q revenue/EBITDA/EBIT/EPS came in +93 per cent/-7 per cent/-13 per cent/+40 per cent, respectively against our estimates. Reported 1Q EBITDA (earnings before interest, tax, depreciation and amortisation) margin was 10 per cent, against our forecast of 21 per cent, as it was negatively impacted by the losses incurred in the seismic segment, associated with vessel downtime. Management highlighted that there are enquiries for new orders; however, the asking prices are under rising competitive pressure. Based on our understanding, management prefers not to surrender margins to get orders. It would rather build vessels internally for its joint venture and strategic partners, such as Go Marine. Thus, we have reduced our 2011e new order estimate by S$133 million. We have revised our estimates mainly to account for: 1Q roll over; lower utilisation for the tugs and barges fleet; lower contributions from shipbuilding segment on lower new order estimate for 2011e; and higher seismic contributions, based on the higher existing order backlog disclosed. – DnB Nor Markets

PEC (BUY; Target Price: S$1.62)

PEC announced that it has received a notice from Emirates National Oil Company Ltd (ENOC) that it intends to award it an EPC (engineering, procurement and construction) contract for the ENOC Fujairah Distribution and Trading Terminal in the UAE, worth US$82.5 million. Work is expected to commence in June 2011, with completion 21 months later, around late 1Q2013. Note that contract award is subject to the parties executing a

definitive contract, expected within 60 days. If firmed up, this will bring FY11 year-to-date order wins to a mere S$180 million, versus our full year assumption of S$300 million. With 2 months left to FY11, the weak order flow implies downside risk to our FY12 numbers of up to 4 per cent. Notwithstanding, valuation is undemanding at 3.5x FY11 net cash PE (price-earnings), versus its peers’ 4.9-6.8x. – DBS Vickers

Ryobi Kiso Holdings (NEUTRAL; Target Price: S$0.155)

3QFY11 PATMI (profit after tax and minority interest) of S$0.7 million fell 91.6 per cent YoY. The steep decline in profit was largely due to a 34.6 per cent YoY increase in costs of sales to S$23.6 million ensuing from higher costs of material, in particular, concrete and steel bar, subcontractors, diesel, transportation and depreciation of machinery and equipment. As a result, gross profit margin (GPM) fell 23.1 percentage points YoY to 20.5 per cent (3QFY11). Orderbook remains healthy at S$75.1 million as at March 31, contributing from both public and private sectors. Going forward, we expect the orderbook to remain stable but the public sector is likely to contribute a larger portion to revenue ensuing from plans from HDB to launch up to 22,000 new Build-to-Order (BTO) flats as well as infrastructure projects. Private sector contracts from the development of en-block sites will provide another source of revenue. RK’s balance sheet is relatively strong with net cash of S$7.4 million as at March 31. Although this is a decline from net cash of S$15.2 million as at 31 December 2010 due to loan repayment and purchase of more machinery and equipments for operation, RK is still under-leveraged, compared to industry peers. We lower our forecast and expect earnings decline of 68 per cent (FY11F) and 27 per cent (FY12F). At S$0.16, the core piling business is trading at a fair valuation of about 12x PER (price-earnings ratio) (FY11), compared to industry average of 13.2x (FY11). The share price is also supported by RK’s current price-book-ratio (PBR) of 1.0x which is relatively low compared to industry PBR of about 1.4x. – NRA Capital

Sembcorp Industries (HOLD; Target Price: S$4.95)

Sembcorp Industries’ (SCI) 1Q11 net profit came in at S$159.9 million, up just 1 per cent but in line with our expectation. The numbers generally mirrored the performance of Sembcorp Marine (SMM), which remains the largest contributor. The utilities business turned in a steady performance. Going forward, most of the upside will continue to come from Marine, while utilities are expected to show steady growth. We expect FY11F earnings to dip by 4 per cent on a core basis (ex-exceptionals in FY10), based on the revenue recognition at SMM. The outlook for Marine remains firm, and we prefer direct exposure through SMM. Reiterate HOLD on SCI with the stock trading in line with our SOTP (sum-of-the-parts)-based target price of S$4.95. – Kim Eng Research

SIA Engineering (HOLD; Target Price: S$4.21)

SIA Engineering Company (SIAEC) reported its 4QFY11 results, which were within expectations. Revenue eased 0.2 per cent YoY but edged up 0.9 per cent QoQ to S$272.0 million, or 0.1 per cent above our forecast, while net profit slipped 17.6 per cent YoY to S$60.9 million, or 3.9 per cent below our estimate. For the full year, revenue increased 10.0 per cent to S$1106.9 million, almost spot on our forecast, while net profit climbed 13.0 per cent to S$258.5 million, or 1.0 per cent below our estimate. Meanwhile, SIAEC declared a final dividend of S$0.14/share, as well as a special dividend of S$0.10, bringing the full-year payout to S$0.30/share. Going forward, management expects the demand for its core businesses (line maintenance, airframe and component services) to be sustained in the near-term; while it also expects the business volumes of its JVs to grow, it notes that the prevailing economic environment, including the weak US dollar, will continue to pose challenges. In line with likely higher cost pressures in FY12, we pare our earnings forecast by 1.6 per cent; this in turn also eases our fair value from S$4.30 to S$4.21. But given the still attractive 5 per cent expected yield in FY12, we maintain our HOLD rating. – OCBC Investment Research

ST Engineering (BUY; Target Price: S$3.57)

ST Engineering (STE) reported 1Q11 revenue growth of 15.2 per cent YoY to S$1567.2 million, meeting 24.9 per cent of our full-year estimate. Net profit increased 19.7 per cent YoY to S$111.1 million, meeting 20.7 per cent of our FY11 estimate. Margin squeeze due to product mix was one of the main reasons for the below expectations earnings. Going forward, management expects to achieve higher revenue in 1H11; this as its orderbook currently stands at S$11.3 billion, with S$3 billion expected to be delivered over the next nine months, but STE expects overall PBT (profit before tax) in 1H11 to remain “comparable” to 1H10. Nevertheless, management still believes that it should see higher revenue and PBT for FY11, suggesting that profitability is likely to pick up in 2H11. Still, we see the need to reduce our earnings forecast by 4.0 per cent to account for a potential margin squeeze; this in turn lowers our fair value from S$3.71 to S$3.57, still based on 21x FY11F EPS (earnings per share). With STE expected to pay out some 90 per cent of underlying net profit as dividend, potentially translating to an attractive 5.2 per cent yield this year, we maintain our BUY rating. – OCBC Investment Research

Stamford Tyres (Not Rated)

Stamford had reported a convincing turnaround in FY10, even after including a S$3.2 million provision for the mining tyre business (as it wrote off its entire large earthmover tyre inventory) as well as losses of S$1.2 million from Thailand and S$0.6 million from India. At the time, management was confident that FY11 would be a better year, assuming it did not suffer a cut in country tyre allocation or higher raw material costs. For the nine months to January 2011, revenue rose 11 per cent accompanied by a 10 per cent increase in net profit despite challenges that included forex losses due to the strong Singapore dollar, higher staff costs as well as higher procurement cost for rubber tyres in tandem with higher rubber prices. However, it does not appear to have had any problems with allocation from its tyre principals. In fact, Falken tyre supplier, Sumitomo Rubber, has purchased a 1.8 per cent stake in Stamford for S$0.35 a share. Despite the better results and equity investment by Sumitomo Rubber, Stamford still trades at just 0.6x book value of S$100 million. Arguably, the company is worth more as book value does not include the more intangible value of its long-standing relationships with its tyre principals such as Sumitomo and Continental, which dates as far back as 1975. In addition, net gearing is not demanding at 0.25x and it generates fairly healthy cash flow. – Kim Eng Research

Super Group (BUY; Target Price: S$1.72)

Super’s 1Q11 results were slightly above expectations, with net profit forming 28 per cent of consensus forecasts. Topline growth remained robust, driven by sales of ingredients and branded consumer products, while margins have picked up from the trough of 4Q10. The results reinforce our belief that Super is well-placed to manage its margins despite considerable near-term challenges, while the potential for topline growth remains robust. We believe the current lull in the share price is a great opportunity to buy into this stock. – Kim Eng Research

Yongnam (BUY; Target Price: S$0.37)

Yongnam Holdings announced that it has secured a landmark contract worth S$75 million for providing structural steel works in the construction of the Singapore Sports Hub. This is one of the significant potential contracts we had highlighted in our last report, and is in line with our expectations. The new iconic 7-storey Stadium is being built off Nicoll Highway in Singapore and key features include a movable roof cover and a retractable grandstand.

Yongnam will support the main contractor, Dragages Singapore, in the connection design of the structural steel members of the stadium’s roof structure and the design of the tertiary steelworks. Yongnam expects to complete the sub-contract works of the fixed roof structure by 4Q12 and the movable roof structure by 1Q13. This is the third contract announced by Yongnam year-to-date, following 2 earlier contract wins for the MRT N-S line extension and the National University Hospital medical centre, respectively, and we estimate new order wins YTD in FY11 should add up to approximately S$150 million, including unannounced contracts. This translates to more than 35 per cent of our full-year order win projections of around S$400 million, and should enhance Yongnam’s end-FY10 orderbook of S$450 million. We remain bullish on the Company’s prospects and maintain our estimates, as well as our BUY call and target price f S$0.37. More contract wins, especially from the Downtown Line 3 projects in the next 6-12 months, should provide further catalyst to the share price. – DBS Vickers