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Amtek Engineering (BUY; Target Price: S$0.82)

Net profit of US$7.8 million surpassed our forecast, due to stronger than expected revenue of S$165.6 million. Almost all SBUs outperformed. By segment, revenue from Imaging & Printing grew 16 per cent YoY due to new wins. Sequentially, Mass Storage staged the strongest revenue rebound, rising 27 per cent, due to HDD restocking post floods. Apart from sales appearing to have bottomed out this quarter, net margins adjusted for non-operating items have recovered to 5.2 per cent from 3.3 per cent in 2Q12 although this is still a shade below 3Q11. Surprise interim dividend of 2.3 S-cents will be paid on June 8, against our expectation for a first and final DPS of 3.4 S-cents next quarter. However, based on healthy CFs and YTD capex of US$8 million vs initial budget of US$20 million, we believe Amtek could comfortably declare another dividend in 4Q12. Hence, FY12F DPS is raised to 4.3 S-cents as we increase dividend payout ratio to 55 per cent from 50 per cent previously. Near term earnings would improve on sustained HDD recovery whereas new programmes starting in April and towards the later part of the year should sustain growth into FY13. Upside could come from better margins of new auto programmes with higher value-add. – DBS Vickers


First Resources (BUY; Target Price: S$2.15)

FR’s 1Q results met 28.5 per cent of our full-year forecast and 26.2 per cent of consensus estimates. Its net profit growth was mainly boosted by sales revenue growth of 82 per cent YoY, underpinned by higher volume sales of CPO and refined palm products. The growth in volume more than offset the decline in CPO ASP sold in 1Q12 at US$932 per tonne. FR’s fractionation plant was running near full capacity in 1Q12, enjoying good downstream margins of USD89/t due to the export tax differentials between CPO and processed palm oil of 8-10 per cent for each tonne of palm oil. However, increased refining and processing activities in 1Q12, which generated lower margins vis-à-vis its upstream operations, resulted in FR posting a lower core EBIT margin of 45 per cent. FR recorded 4M12 FFB (nucleus) production of 539,407 tonnes (+19 per cent YoY) or 29 per cent of our full-year forecast. This is ahead of our expectations although we understand that the stellar growth rate may moderate going forward. Coupled with recent weakness in CPO price, we are inclined to keep our earnings forecasts for 2012 unchanged for now. Our CPO ASP estimates of MYR3,150/t (2012) and MYR3,000/t (2013-14) remain unchanged. – Maybank Kim Eng Research


Kingsmen Creatives (BUY; Target Price: S$0.76)

Kingsmen recorded an impressive 50.1 per cent YoY growth in 1Q12 PATMI, to S$2.1 million, on the back of a 29.9 per cent YoY growth in revenue to S$46.9 million. The results were in line with our estimates. Exhibition and Museums division was the main growth driver, boosted by the biennial events that were held in 1Q. This is seasonal of Kingsmen’s business – every alternate year (which sees major events being held in Singapore) would have stronger revenue growth. As a result of the larger number of projects booked in 1Q12, as compared with 1Q11, Kingsmen recorded strong cash flows during the quarter. The main driver for the strong operating cash flow of S$11.4 million was the amount due to customers for WIP, which indicates an increase in the number of projects it was involved in. Although the economic slowdown could have some impact on the MICE industry in general, Kingsmen is expected to continue doing well in FY12. Given its capabilities, Kingsmen has secured projects, enough to keep it busy for the rest of the year. As international retailers come to Asia to set up stores, Kingsmen is in a good position to secure new international customers, having done the interior fit-outs for a number of well-known labels. – OSK-DMG


KS Energy (HOLD; Target Price: S$0.85)

KS Energy (KSE) reported a 5.6 per cent fall in revenue to S$120.2 million and a net loss of S$315,000 in 1Q12 vs. a net loss of S$8.3 million in 1Q11. Revenue was within our expectations, accounting for 22.3 per cent of our full year estimates. We note, however that there was a one-off gain of S$10.6 million due to a reversal of fair value loss on an option relating to KS Endeavor; excluding that we estimate core net loss of S$10.5 million in the quarter, close to our full year net loss forecast of S$11.5 million. Revenue from the distribution business, which accounted for 71.1 per cent of total revenue, saw a 3.5 per cent drop in revenue in the last quarter, while the drilling division rose 40.2 per cent YoY as more assets were chartered. Costs remained mostly stable except for a significant increase in direct depreciation charges due to capital assets commencing work on their charters as well as accelerated depreciation on a rig. The group’s convertible bonds have an option by bondholders who may redeem the bonds in March 2013. Management has been “weighing the various options available to meet this funding requirement” should the redemption option be exercised. KSE has proven adept at raising funds from investors and partners such as Itochu of Japan, Dubai-based Dutco and private equity fund Actis. Hence we would not be surprised if there are news of further tie-ups in the near future. Business restructuring in the distribution segment is still ongoing, which will be a gradual process. Besides integration of different IT systems and operational procedures, there also has to be the amalgamation of employees from different companies and hence different working cultures. In line with recent weakness in market sentiment which has impacted valuations of the broader industry, we lower our peg from 1.5x to 1.4x FY12F NTA, and as such our fair value estimate slips to S$0.85 (prev. S$0.91). – OCBC Investment Research


Olam International (HOLD; Target Price: S$2.24)

Olam International Limited reported 9MFY12 revenue of S$11,947.7 million, up 6.3 per cent, meeting 63.2 per cent of our FY12 forecast, on the back of a 17.2 per cent increase in sales volume to 7.22 million metric tonnes (MT). Reported NPAT fell 13.6 per cent to $$261.4 million; but excluding gains from biological assets and derivative instruments, we estimate that core net profit would have fallen 16.5 per cent to S$215.3 million, or 60.5 per cent of our core FY12 forecast. But we believe that this is still in-line with the group’s historical seasonality where it typically achieves around 60-65 per cent of its earnings in the first nine months. Olam’s Food segment saw sales volume rise by 20.6 per cent in 9MFY12; net contribution (NC) climbed 30.9 per cent, as NC per tonne also increased 8.5 per cent to S$139. It now accounts for 84.2 per cent of overall volume and 78.4 per cent of 9MFY12 revenue. Going forward, Olam remains upbeat about its prospects, particularly upstream dairy farming in Russia and making biscuits and candy in Nigeria – the second largest market in Africa for packaged food consumption. Industrial Raw Materials category turned in a more muted performance. Although sale volume grew 2.1 per cent, NC fell 34.8 per cent on the back of a 36.2 per cent decline in NC per tonne to S$86. Olam notes that its Cotton and Wood Products BUs continued to face strong headwinds in 9MFY12. It now does not expect to see any rebound in the Cotton business in FY12. Nevertheless, it is slightly more optimistic about its Wood business, noting that the markets have began to see a slight recovery. While we are keeping our FY12 and FY13 estimates intact, we note that the market is adopting a more “risk off” approach in light of the renewed global economic uncertainties. In response, we lower our fair value to S$2.24 from S$2.63, based on 15x blended FY12/FY13F EPS (vs. 18x FY12F previously). We maintain our HOLD rating in anticipation of more near-term weakness among commodity plays. – OCBC Investment Research


Sino Grandness (NEUTRAL; Target Price: S$0.39)

SFGI announced that its subsidiary Garden Fresh HK (GFHK) has entered into a conditional subscription agreement for issue of up to RMB270 million zero coupon bonds (CB2) due three years from closing date. Compared to its first tranche of RMB100 million zero coupon bonds issued in October 2011 (CB1), we note a minimum RMB359 million payback value or 15 per cent p.a. effective interest rate based on our scenario analysis. We assume CB2 will be approved by shareholders at an EGM expected in June 2012, and revise up our FY12F-FY13F earnings estimates by 15 per cent-26 per cent to RMB171 million-RMB233 million respectively. Nonetheless, we caution that should GFHK fail to generate sufficient cash flow to meet early redemption demands, SFGI could see up to RMB662 million obligations as it acts as the guarantor. Given a heighten risk profile, we lower our target multiple to 3x FY12F PER (price earnings ratio) to derive at the same target price of S$0.39. We see sweeter deals for GFHK’s CB holders and maintain NEUTRAL on SFGI’s shares. – OSK-DMG


STX OSV (BUY; Target Price: S$2.00)

STX OSV reported 1Q12 results that were broadly in line with our and the street’s estimates. 1Q revenue decreased by 12 per cent YoY to NOK2.8 billion, while net profit fell by 13 per cent YoY to NOK269.0 million. During the quarter, the group delivered five vessels and secured contracts for four vessels, bringing its net order-book to 53 vessels as of quarter-end. Although its orderbook declined slightly to NOK16.0 billion, the new orders (i.e. 2 AHTS and 2 OSCVs) comprise larger and more complex vessels, signalling a possible rebound in activity for high-end offshore vessels. Should this trend persist, STX OSV would be well-positioned to secure new orders given its market leadership in constructing highly specialised vessels. According to STX OSV, vessel demand for the subsea support and construction segments continues to be strong, supported by increased offshore activity and increased backlog for subsea contractors. Charter rates for large AHTS have also continued to rise. The financing climate has somewhat improved over the past quarter, although concerns over the economic situation in the eurozone still persist. We updated our model with the 1Q12 results and lowered our contract win assumptions to NOK11.0 billion from NOK13.0 billion previously. To account for the uncertainty over the eurozone, we also tweaked our valuation peg to 9x (previously 9.7x). – OCBC Investment Research


Yamada Green (BUY; Target Price: S$0.30)

3QFY12 net profit of RMB82 million was below our projected RMB97 million due to wet weather that affected mushroom yield, as well as higher costs of production. Revenue was up 48 per cent to RMB243 million from a larger cultivation area of 5,614 mu, while GPM (gross profit margin) dipped 6 ppt to 39 per cent on an imperfect pass-through of higher raw material costs for fresh fungus segment. Shiitake mushroom revenue grew by 57 per cent to RMB194 million mainly because of a larger cultivation area of 5,134 mu. Shiitake volume was up 58 per cent to 28,500 tonnes while ASP stayed relatively flat at RMB6.8/kg. Processed food sales saw stable growth of 15 per cent to RMB41 million. Black fungus contributed RMB7 million, up from RMB5 million a year ago. Volume for black fungus was 1,550 tonnes while its ASP grew by 2 per cent from a year ago to RMB4.7/kg. We factor in a weaker than expected 3QFY12 performance, and reduce our FY12-13 earnings estimates by -11 per cent and -12 per cent to RMB162 million and RMB176 million respectively. As a result, our target price is now cut to S$0.30 (previously S$0.32), pegged to 3.5x FY13F earnings estimates. – OSK-DMG