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ASL Marine Holdings (BUY; Target Price: S$0.83)

ASL Marine announced that it has secured another S$132.5 million worth of shipbuilding contracts for 4 tugs and 1 PSV, bringing FY12 YTD order wins to S$481 million, exceeding our existing order win assumption of S$380 million. These order wins will boost ASL’s shipbuilding orderbook to close to S$650 million, implying book-to-bill ratio of 2.5x. Shiprepair division is climbing up the value chain, having secured conversion and upgrading works for 2 drilling rigs, and contracts for more offshore oil & gas refurbishment/reactivation jobs. These jobs will yield higher margin and further boost growth. Given the latest set of contract wins, we revise up FY13F earnings up by 6 per cent to S$45 million. We believe ASL’s earnings have bottomed over the past few quarters, and look forward to sequential earnings growth. ASL now boasts of a significantly enhanced order backlog and earnings visibility – 90 per cent of shipbuilding revenue in FY13F is backed by existing orders – and in line with orderbook execution, earnings are expected to rebound 41 per cent YoY in FY13, with possibility of further upside from better margins. Given the robust shipbuilding orderbook and resurging shiprepair activities, we maintain our BUY call on ASL. Current valuations are undemanding, with the counter trading at 5.5x FY13 PE (price earnings) and 0.6x FY13 P/BV (price to book value). – DBS Vickers

 

Cache Logistics Trust (BUY; Target Price:S$1.11)

Cache Logistics Trust (CACHE) released its 1Q12 results after market close Wednesday. NPI (net property income) grew 11.6 per cent YoY to S$16.1 million, while distributable income rose 7.6 per cent YoY to S$13.4 million. The YoY performance was mainly driven by incremental rental income from upward rental adjustments and acquisitions over the past year. DPU (dividend per unit) for the quarter came in at 2.086 S-cents and represented a 6.9 per cent YoY increase. The results were in line with our expectations, with DPU forming 25.0 per cent of our full-year estimate. As at March 31, CACHE’s portfolio properties remained 100 per cent occupied with a combination of triple-net master leases and multi-tenanted lease structures. The weighted average lease expiry (WALE) stood at 4.4 years, relatively unchanged from the WALE of 4.65 years seen in prior quarter. Management reiterated that there will be no lease renewal in 2012. This provides a significant amount of earnings visibility and stability. With the recent issuance of 60 million new units to raise S$57.1 million in net proceeds via a private placement, we note that CACHE’s aggregate leverage improved from 29.6 per cent as at 31 December 2011 to 27.7 per cent. This gives the REIT an estimated S$110 million of additional debt headroom for future investment opportunities. Going forward, we believe CACHE will actively seek growth avenues to improve its DPU payout now that it is well capitalised. In the meantime, we understand that the acquisition of Pan Asia Logistics Centre at 21 Changi North Way is due to complete by end April. The warehouse has an expected initial NPI yield of 7.7 per cent and is likely to provide marginal lift to its income. – OCBC Investment Research

 

Elec & Eltek International Company (Not Rated)

E&E’s share price has corrected significantly since our last update in April 2011, shortly after it successfully pulled off a dual listing on the Hong Kong Stock Exchange (HKSE). However, its generous final dividend of US$0.12 per share, representing 98 per cent of its 2H11 profits, will go ex on 9 May 2012. We anticipate there will be a trading opportunity between now and May 9. Following its HKSE dual listing in April last year, E&E was hit by the perfect storm of higher raw material costs, a hike in labour costs due to its exposure in China, as well as the flooding in Thailand that affected its extensive manufacturing operations in the country. Its 2Q11 results were also affected by dual-listing professional fees. Through it all however, cash flow stayed healthy. Even as E&E reported its worst quarterly profit in 4Q11 (net profit fell 59 per cent YoY), operating cash flow recovered strongly to the highest level in the past two years on the back of good working capital management. As at end-2011, net gearing was just 0.2x. Although the company did cut its final dividend per share in 2011 from US$0.25 to US$0.12, it was able to declare healthy 2011 dividends of US$0.27 per share, maintaining its traditional payout ratio of 90-100 per cent. Demand remained soft at the beginning of the year, with the company expecting revenue and profits to decline sequentially. However, its medium-term orderbook is beginning to build up again, and E&E anticipates a recovery from 2Q12 onwards. Capacity-wise, the company continues to expand and rationalise its capacity, with a new plant in Yangzhou, China, expected to begin commercial production in 2Q12 with full ramp-up likely by year-end. – Maybank Kim Eng Research

 

Keppel Land (BUY; Target Price: S$4.04)

Keppel Land enjoyed a 70.3 per cent YoY growth in its 1Q12 PATMI (net profit) to S$141.9 million, thanks largely to profits from Reflections at Keppel Bay from the completed units previously sold under the Deferred Payment Scheme. While 1Q12 PATMI already accounts for 40 per cent of full-year consensus estimates, we believe the results were largely in line with expectations due to the irregular recognition of development profits under current accounting rules. Buy now, to be entitled to the proposed 20 S-cents/share dividend. Singapore accounted for 77.2 per cent of KepLand’s 1Q12 PATMI, mainly on the back of higher development profits recognised from Reflections and Marina Bay Suites. Operationally, KepLand sold over 90 residential units in Singapore in the first quarter, mainly from The Luxurie in Sengkang. Phase 2 of MBFC has already obtained TOP, with Tower 3 about 67 per cent committed. During the quarter, KepLand sold about 190 homes across China, mainly from its township projects and The Springdale in Shanghai. As buying sentiment remains subdued, KepLand has scaled down its launch programme for China to 3,988 units for 2012, mainly cutting back on the units to be launched from Tianjin Eco-city and Stamford City in Jiangyin. With the recent positive political outcome in Myanmar, KepLand’s Sedona hotels in Yangon and Mandalay enjoyed improved occupancy and room rates, driven by more tourists and business travellers. While KepLand may have first-mover advantage for opportunities in Myanmar, we note that it is still early days and earnings contributions from its hotels remain negligible. – Maybank Kim Eng Research

 

M1 (HOLD; Target Price: S$2.60)

Postpaid mobile market share declined for the fourth consecutive quarter to reach 25.9 per cent versus 26.0 per cent in 4Q11 & 26.6 per cent in 1Q11. While smart phone subscribers comprise 69 per cent of its postpaid subscriber base, they do not generate higher ARPU (average revenue per user) as M1 had projected in fair value accounting for handsets. Adjusted postpaid ARPU fell 6 per cent YoY to S$52.9. Regulator IDA plans to auction spectrum in 1800MHz, 2.3GHz and 2.5GHz bands in 2013. Telcos should be keen to acquire these spectrums as the current use for the 1800MHz band will expire in 2017 and the remaining two bands in 2015. M1 had previously bid S$21.7 million for 30 MHz block of 1800MHz spectrum in April 2011 valid for 7 years. The new spectrums auctioned will be valid for 13 15 years and therefore hold more value for telcos. The stock is trading at 13x FY12F PE (price earnings). Among the telcos, StarHub is the most expensive at 17.5x and 6 per cent yield. SingTel is the cheapest at 12x and offers superior growth plus 5 per cent yield, although it is in the middle of re-organisation. – DBS Vickers