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BreadTalk Group (HOLD; Target Price: S$0.57)

As expected, BreadTalk Group (BTG) turned in its strongest quarterly performance in 4Q11. Revenue grew 20.7 per cent YoY to S$100.5 million while its bottomline fell 15.4 per cent YoY to S$4.4 million due to the absence of one-time disposal gains. BTG’s expansion into Thailand is proceeding well and will continue exploring other food court and restaurant opportunities, which took a backseat during the earlier floods. In addition to its Thai aspirations, BTG invested S$18 million in PRE 8 Investments, which bought Chjimes for S$177 million. Similar to its Katong Mall investment, BTG will benefit from the asset enhancement of Chjimes as well as allow it to extract additional value via a selection of its F&B offerings at the popular hotspot. With BTG’s results largely in-line with expectations, we keep our FY12 revenue growth assumptions of 14.3 per cent unchanged. Furthermore, we retain confidence in management’s ability to control costs as gross profit margins have been stable over the past four years despite fluctuating raw material costs. – OCBC Investment Research


Ezion Holdings (BUY; Target Price: S$1.17)

Ezion announced a share placement of 110 million shares at S$0.88/share, which accounts for 15.4 per cent of its existing share base. Net proceeds of S$94.6 million will be used to finance potential service rig projects. Ezion’s 4Q11 net profit of US$10.5 million was 8 per cent ahead of ours but in-line with consensus. FY11 net profit grew 45 per cent YoY to US$58.1 million and the strong growth re-affirmed our BUY call on the stock. We raise our FY12-13F net profit by 15 per cent and 9 per cent respectively to reflect: three new service rig projects secured YTD 2012; impact from sale-and-leaseback of Teras Conquest 4 which is a US$15 million one-off gain to be booked in 2012 but US$5 million lower recurring net profit per annum due to the lease payment. Following the share placement, we expect to see some weakness in the share price but believe Ezion can continue to deliver impressive EPS (earnings per share) growth. We upgrade our target price from S$1.00 to S$1.17 on an unchanged target P/E of 10x on blended FY12/13F FD EPS. – DMG Research


Hi-P International (Not Rated)

Hi-P’s full year results of S$45 million PATMI (net profit) on the back of S$1.2 billion revenue is in line with our estimates. In view of the needs to develop new business opportunities; automate manufacturing processes; and align with market trends and demands; the management announced a massive capex plan of S$180 million to acquire additional machinery, equipment and to expand production facilities. The capex will be deployed in phases and is expected to contribute to the performance of the group only from 2H2012 onwards. Furthermore, the group also gave a bullish guidance towards outlook its FY2012. We have underestimated the group’s capex plans as the group raised its capex plan further upwards in view of the new business opportunities. We reiterate our belief that the group has already secured adequate orders given its conservative capex spending track record. Significant portion of these orders is derived from the new metal casing business which is expected to yield much better gross margin (>20 per cent), boosting the group’s performance from 2H2012 onwards. However, the group is expected to incur some net losses in 1QFY2012 mainly as a result of the higher depreciation expense with enlarging PPE. – DMG Research


SC Global (HOLD; Target Price: S$1.05)

SC Global reported a net loss of S$18.6 million for 4Q11, primarily due to a S$25 million write-down on its Ardmore Park project, which is currently under construction. Excluding the write-down, net profit for 4Q11 was S$4.6 million, below our expectation as operating expenses were higher owing to higher sales and promotion expenses as well as higher service charges for its completed inventory. Full-year FY11 revenue was S$769.1 million and net profit was S$132.2 million. The luxury segment has seen very little sales since the introduction of the 10 per cent Additional Buyer’s Stamp Duty (ABSD) for foreigner purchases in December last year. The only project that has bucked the trend is The Scotts Tower by Far East Organization, where up to 25 units were sold after the ABSD took effect, at a median price of S$3,300 psf. In 4Q11, SC Global sold only a unit from its landbank in Singapore, although that unit at The Marq on Paterson Hill achieved a record price of S$6,841 psf. There were no sales last month. With the residential component of Martin No. 38 obtaining TOP in November last year, SC Global has almost fully recognised its outstanding orderbook of pre-sold units, with the exception of Seven Palms, which we estimate has less than S$10 million in after-tax profits from the 10 units sold. Seven Palms is expected to complete construction by year-end. Earnings going forward will be underpinned by any new sales from its completed projects, The Marq on Paterson Hill, Hilltops and Martin No. 38, with a total of 337 units. Pre-sales in Ardmore Park have not commenced. – Maybank Kim Eng Research


Sembcorp Marine (BUY; Target Price: S$6.00)

Sembcorp Marine (SMM)’s 4Q11 net profit of S$229 million was 20-25 per cent ahead of ours (S$191 million) and street estimates (S$183 million) as 4Q11’s operating margin of 22 per cent outperformed expectations. FY11 net profit fell 13 per cent YoY to S$752 million. SMM has a net orderbook of S$6.3 billion, 1.6x non ship repair revenue in FY11. Management is seeing improved level of enquiries across all product segments compared to three months ago. Specifically, SMM pointed out the strong demand for customised harsh environment rigs to be used in the North Sea. The two Atwood jackup options have lapsed and we believe there are six more outstanding options for Seadrill and Noble with a total value of S$1.2 billion. Semisub rates have improved from US$450,000-500,000 per day in 2H11 to US$500,000-550,000 per day this year, and we expect to see some semisub orders. Petrobras orders could lift backlog to record levels. Petrobras has announced that they have agreed to contract 26 rigs from Sete Brasil and Ocean Rig. According to Upstream, SMM is in the running for six drillship orders from Sete Brasil with a potential value of up to US$4.8 billion. Winning all six drillships will boost its net orderbook by 94 per cent and raise its revenue visibility. Management will be conservative on margin recognition for the drillship project. – DMG Research


Sheng Siong (NEUTRAL; Target Price: S$0.50)

Revenue declined 8 per cent YoY due to closure of two outlets which were partially offset by the opening of four new outlets during the year. Net profit was down 36 per cent YoY due to a reduction in one-off investment gain of S$9.6 million in 2010 and loss of retail rental income from closure of Ten Mile Junction outlet. Management proposed a final dividend of 1.77 S-cents per share, at a payout ratio of 90 per cent. Net profit came in 13 per cent below our expectations and 24 per cent below street expectations. Revenue however was in line with forecast. The lower than expected earnings were due to lower other income which stems from a S$1.5 million lower rental income from the closure of its Ten Mile Junction outlet, where management had previously rented out excess space to generate rent income. There was also a higher than expected tax charge due to non tax deductible IPO charges. – DMG Research


Sino Grandness (SELL; Target Price: S$0.37)

4Q11 net profit of RMB22 million was below our assumed RMB35 million, largely due to higher than expected selling expenses and convertible bonds related expenses. On a full year basis, although beverage net profit would likely come in within expectation at RMB70 million, non-beverage net profit would be flat YoY despite enjoying 30 per cent growth at gross profit level. We now expect FY12 earnings to contract 20 per cent YoY to RMB122 million, assuming non-beverage net profit to contract 50 per cent YoY due to a deteriorating export outlook and beverage profit to grow by only 10 per cent YoY, constrained by a funding gap of some RMB100 million for its intended expansion plan. We maintain our FY12 revenue estimates but cut our export GPM (gross profit margin) to 23 per cent, its trough in 1Q10. The corresponding net profit would be reduced to RMB122 million, or -20 per cent YoY. – DMG Research


Venture Corp (HOLD; Target Price: S$7.83)

Venture Corp (VMS) reported its 4Q11 results, which came in mostly in line with our estimates. Revenue fell 10.3 per cent YoY to S$632.5 million, or around 5 per cent below our forecast; net profit fell 29.8 per cent YoY to S$38.0 million, or 0.4 per cent above our estimate. FY11 revenue slipped 9.1 per cent to S$2,432.4 million, or just 1.4 per cent below our forecast, while net profit fell 16.8 per cent to S$156.5 million, it was 0.7 per cent above our estimate. Going forward, we note that the outlook is not as negative, with VMS expecting to see a better picking from 2H12 onwards; this as it anticipates improved traction with several key customers this year. VMS further adds that it expects to capture full-year revenue from products launched towards the end of 2011; in fact, a number of new products in all business segments are at the threshold of market release. Nevertheless, 1Q12 is traditionally a slow quarter; and management further notes that it is cognizant of the uncertainty in the global economy and the relative weakness in some customers’ business. – OCBC Investment Research


Wilmar International (NEUTRAL; Target Price: S$5.22)

Wilmar’s FY11 core earnings of US$1517.1 million was below our forecast by 10.8 per cent and below consensus by 8.9 per cent owing to the tough overall operating environment. The palm & laurics segment fared badly as its profit margin shrank in 4Q to US$20.3 per tonne from US$29.2 in 3Q. The change in Indonesia’s export duty structure for palm oil benefited its Indonesian operation but hurt its Malaysia refinery. The full year margin of US$28.9 per tonne was below our expectation of US$35.0. We are trimming our margin assumption to US$30 from US$40 per tonne earlier, with our volume growth assumption maintained at 5 per cent. Following 7 months of price control in China, Wilmar enjoyed a price increase in August, resulting in this segment’s profits surging by 130.8 per cent QoQ. PBT per tonne increased to US$28.1 in 4Q, bringing the full year margin to US$19.4 per tonne compared with our expectation of US$25.0. As we are still optimistic that margin could improve further this year, we maintain our assumption of US$35 for 2012. The plantation segment performed as expected, with the core PBT of US$471.2 million matching our previously lowered forecast of US$464.7 million. FFB production growth was strong at 21.6 per cent for the year. We expect Wilmar’s FFB output to grow to 4.4 million tonnes this year. No change in our segment forecasts. – DMG Research