Beruflich Dokumente
Kultur Dokumente
CHINA
Sector Consumer Weekly An update on the watch, jewellery and luxury goods market. Page 3
BDI 1340 CPO (RM/mt) 3380 Nymex Crude (US$/bbl) 109 Source: Bloomberg
Top BUYs/SELLs
Current Price (lcy) 34.55 17.98 13.50 10.34 0.68 9.14 2.80 162.00 347.00 2.16 Target Price (lcy) 49.00 25.00 15.80 12.30 0.90 11.80 3.10 210.00 431.00 1.24 Pot +/(%) 41.8 39.0 17.0 19.0 33.3 29.1 10.7 29.6 24.2 (42.6)
Ticker Top BUYs China Shenhua CNOOC Kunlun Energy Hong Leong Fin Grp Ezion OCBC Starhub Bangkok Bank PTT Top SELLs TMB Bank 1088 HK 883 HK 135 HK HLFG MK EZI SP OCBC SP STH SP BBL TB PTT TB TMB TB
INDONESIA
Sector Consumer Page 5 1Q11 round-up: Performance in line. Further pressure on margins is limited while capex spending will accelerate.
MALAYSIA
Update Hong Leong Bank (BUY/RM10.44/Target: RM13.70) Page 7 Raise target price as acquisition is completed. A brand new start as the fourth-largest bank to go for larger market share and earnings.
Key Assumptions
2010 GDP (% yoy) US EU Japan Singapore Malaysia Thailand Indonesia Hong Kong China Brent Crude Oil (US$/bbl) Aluminium * (US$/mt) Copper * (US$/mt) Gold Price London * (US$/ounce) Iron Ore * (USc/dmtu) CPO (US$/mt) BDI *Bloomberg Source: UOB, UOB Kay Hian 2.8 1.8 4.0 14.5 7.2 7.8 6.1 6.8 10.3 83 2,173 7,543 1,232 179 840 2,758 2011F 3.1 1.7 1.3 5.0 5.6 4.0 6.4 5.0 9.2 95 2,415 9,335 1,457 134 980 1,700 2012F 3.2 1.7 2.0 5.0 5.4 4.5 6.3 4.3 8.6 98 2,464 9,544 1,462 134 900 2,000
SINGAPORE
Strategy 2011 Elections Time for a Re-Think? Page 10 We believe PAP's falling share of popular votes may prompt a review of long-term policies. Nevertheless, we see any major market weakness as a buying opportunity. Sector Property Page 12 Property Nuggets: Positive commercial sentiment offsets residentials. Results Page 14 COSCO Corporation (S) (BUY/S$2.19/Target: S$2.50) 1Q11: Lower shipping earnings but higher core shipbuilding margin despite cost provision. Oxley Holdings (HOLD/S$0.345/Target: S$0.36) Page 17 3QFY11: Savvy switch to industrial and office. United Overseas Bank (NOT RATED/S$18.80) Page 20 1Q11: More fees from growth in loans. Update World Precision Machinery (BUY/S$0.665/Target: S$1.07) Heading up north. Page 23
Corporate Events
Venue China Automation Group Corporate Roadshow Singapore & Malaysia Market Strategy Analyst Presentation Infrastructure/Property Corporate Day Singapore Europe Beg 9 May 9 May Close 10 May 17 May
Singapore
31 May
1 Jun
Page 1 of 29
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OVERWEIGHT
(Maintained)
Sector Update
Top Sector Picks
Company Top BUYs
Sa Sa China Yurun Luk Fook
Stock Code
178 HK 1068 HK 590 HK
2011F PE (x)
24.7 15.5 17.9
Top SELLs
Parkson 3368 HK 11.90 12.82 23.2
Stock Code
1368 HK 2331 HK 168 HK 3998 HK 8052 HK
1w chg (%)
8.3 8.0 6.6 5.9 5.5
2011F PE (x)
11.0 15.7 29.4 11.8 n.a.
Stock Code
2333 HK 8277 HK 398 HK 860 HK 1169 HK
1w chg (%)
(10.6) (8.9) (8.1) (8.1) (6.5)
2011F PE (x)
8.6 27.6 10.4 n.a. 14.0
--------------PE (x)---------------2010F 2011F 2012F 28.2 24.2 19.0 48.0 15.6 11.1 25.7 17.9 15.3 18.0 15.9 13.3
Page 3 of 29
CPI
(%) 10 8 6 4 2 0 -2 -4
Source: CICC
Source: CICC
Page 4 of 29
Consumer Indonesia
1Q11 round-up: Subsiding cost pressure could be next catalyst
Whats New 1Q11 net profit in line. Results of three (INDF, JPFA, MAPI) of the five companies we covered were in line, while two (KLBF, RALS) were below expectations. KLBFs performance was not overwhelming with net profit yoy growth boosted by non-core operations while qoq decline was larger than usual. RALS continued to disappoint with low same-store sales (SSS) growth. Sector net profit rose 32.5% yoy in 1Q11 but declined 14.8% qoq due to seasonality and rising costs. Their results were broadly in line with consensus. We increased INDFs net profit forecasts by 1.5% to account for strong IFAR results, and MAPIs by 6.9% on stronger-thanexpected SSS growth. 1Q11 Net Profit In line With Expectations
2011F qoq yoy % % Fcast Rev vs (%) Company chg chg Performance vs (%) (%) UOBKH Csus UOBKH Csus INDF 4.3 16.4 In line Inline 1.5 1.1 JPFA (26.2) 58.1 In line n.a.* n.a.* KLBF (17.8) 23.3 Below Below 0.3 MAPI (17.1) 45.2 In line In line 6.9 0.8 RALS (17.2) 19.8 Below Below Average (14.8) 32.5 Source: Bloomberg, Respective companies, UOB Kay Hian *UOB Kay Hian is the only broker covering this stock UOBKH vs Csus (%) 99.3 n.a.* 103.5 107.9 94.7 101.4
OVERWEIGHT
(Maintained)
Sector Update
Top Sector Picks
Company Indofood SM Rec BUY Target Price (Rp) 6,750 Share Price (Rp) 5,700
May 07
May 08
May 09
May 10
May 11
Rising cost pressures. On average, gross margin declined 1.8ppt qoq in 1Q11 but was still up 1.1ppt yoy. Subject to seasonality (eg year-end clearance at MAPI and a low shopping season at RALS), INDF and JPFA saw higher-than-average qoq decline in gross margin at -2.0ppt and 6.2ppt respectively despite a stronger Rupiah. INDFs margin was dragged by lower Bogasari margin in the absence of price increases, but we believe it should recover as Bogasari will seek more optimum tradeoff between profitability and market share, while the full-impact of instant noodles price increase in January will take effect in 2Q11. For JPFA, we expect more price increases to counter the high corn and soybean meal prices, while the spin-off of the consumer products division should lift operating margin. Overall, we believe further pressure on margins is limited as we expect more price increases to come, while commodity prices (such as CPO) should cool down in 2H11. 1Q11 Gross Margin: Rising Cost Pressures
Gross Margin (%) 1Q10 2Q10 3Q10 4Q10 INDF 30.0 35.0 32.1 32.8 JPFA 18.6 19.4 22.5 26.5 KLBF 50.2 51.0 52.3 48.7 MAPI 48.3 51.4 49.9 51.9 RALS 31.5 30.6 39.3 33.5 Average 35.7 37.5 39.2 38.7 Source: Respective companies, UOB Kay Hian Company 1Q11 30.9 20.3 51.8 49.5 31.7 36.8
Feb 11
Apr 11
May 11
UOBKH Consumer
JAKCONS Index
Peer Comparison
Company Indofood SM Japfa CI Kalbe Farma Mitra Adiperkasa Ramayana LS Ticker INDF IJ JPFA IJ KLBF IJ MAPI IJ RALS IJ Rec BUY BUY HOLD BUY BUY
Page 5 of 29
Balance sheets remained solid. On average, net gearing rose slightly to 12.8% in 1Q11 from 10.9% in 4Q10, and improved 20.1ppt yoy from 32.9% in 1Q10 boosted by the significant reduction in INDFs leverage post ICBPs IPO and JPFA as it repaid the restructured debt. Solid Balance Sheet
Net Gearing (%) 1Q10 2Q10 3Q10 4Q10 INDF 75.4 67.1 91.7 23.2 JPFA 91.7 88.2 63.6 48.6 KLBF (30.2) (28.2) (28.1) (34.9) MAPI 49.1 75.1 64.1 49.1 RALS (21.5) (36.3) (43.4) (31.7) Average 32.9 33.2 29.6 10.8 Source: Respective companies, UOB Kay Hian Company 1Q11 17.6 53.7 (37.2) 55.3 (25.6) 12.8
Action Maintain OVERWEIGHT. We believe the upside potential is justified by the sectors robust outlook. Our consumer universe is now trading at 13.0x 2012F PE, slightly below JCIs 13.2x but higher than its 5-year mean of 10.3x or at +0.9SD. However, we argue that current sector fundamentals are in better shape than before. Maintain INDF as our top pick. We retain INDF as our top pick due to its strong pricing power, while positive catalysts include further increase in selling prices and upcoming IPO of its plantation subsidiary Salim Ivomas Pratama (SIMP) on 9 June. Valuation wise, we also like JPFA which is trading at 9.3x 2011F PE, a 41% discount to Charoen Pokphand Indonesias (CPIN). Lower-than-expected inflation and stronger economic growth. None. We remain positive on the consumer sectors long-term outlook due to its attractive growth potential, supported by a stronger economic growth, swelling disposable income and a burgeoning middle-class. Higher-than-expected inflation, bigger increase in input costs and a smaller rise in selling prices.
Risks
Page 6 of 29
BUY
(Maintained)
Company Update
Share Price Target Price Upside (Previous TP RM10.44 RM13.70 +31.2% RM11.90)
Company Description The fourth-largest bank in terms of asset size focusing on retail banking with presence in China through 20%-owned Bank of Chengdu. Stock Data GICS sector Bloomberg ticker: Shares issued (m): Market cap (RMm): Market cap (US$m): 3-mth avg daily t'over (US$m):
Price Performance (%) 52-week high/low RM10.64/RM8.27 1mth 3mth 6mth 1yr YTD 3.4 11.5 12.4 21.3 13.5 % 64.2 9.6 4.96 13.3
Major Shareholders Tan Sri Quek Leng Chan Employees Provident Fund FY11 NAV/Share (RM) FY11 CAR tier-1 (%) Price Chart
(lcy) 11.00
HONG LEONG BANK BERHAD Hong Leong Bank Berhad/FBMKLCI Index
10.00
7.00
4 3 2 1 0
Volume (m)
May 10
Jul 10
Sep 10
Nov 10
Jan 11
Mar 11
May 11
Source: Bloomberg
Analyst Vincent Khoo +603 2143 0829 vincentkhoo@uobkayhian.com Malaysia Research Team +603 2143 1180 research@uobkayhian.com
Page 7 of 29
Total Assets
Loan-to-Deposits Ratio
Top Five In Consumer Loans Bank Maybank Public CIMB HLB* AMMB RHBC Market Share (%) 17.1 16.8 11.8 11.2 9.0 7.9
Fair Value (RMm) 7,053 13,199 281 747 619 21,898 (1,254) (354) (619) (631) 19,660 1,052 18.69 14.95 10.34 -30.8%
13.70 1.44
* Enlarged HLBK Source: Respective banks, Bank Negara Malaysia, UOB Kay Hian
* Enlarged HLBK Source: Respective banks, Bank Negara Malaysia, UOB Kay Hian
Page 8 of 29
Balance Sheet
Year to 30 Jun (RMm) Cash with central bank Govt treasury bills & securities Interbank loans Customer loans Investment securities Derivative receivables Associates & JVs Fixed assets (incl. prop.) Other assets Total assets Interbank deposits Customer deposits Derivative payables Debt equivalents Other liabilities Total liabilities Shareholders' funds Minority interest - accumulated Total equity & liabilities 2010 394.0 16,993.4 7,470.6 37,749.1 2,913.1 0.0 1,248.2 332.8 17,604.4 84,705.6 3,876.4 69,712.7 0.0 650.5 4,042.0 78,281.6 6,424.0 0.0 84,705.6 2011F 2,344.9 17,333.3 7,693.5 81,527.2 10,372.0 28.5 1,329.0 695.7 28,056.5 149,380.6 10,660.5 117,329.3 39.0 5,811.4 6,769.1 140,609.3 8,771.3 0.0 149,380.6 2012F 3,256.0 17,680.0 8,001.2 88,028.7 11,410.6 0.0 1,329.0 723.5 29,674.2 160,103.3 12,259.6 124,369.0 0.0 5,811.4 7,658.1 150,098.1 10,005.2 0.0 160,103.3 2013F 3,907.2 18,033.6 8,401.3 95,089.7 12,511.5 0.0 1,329.0 767.0 31,150.5 171,189.8 14,098.5 131,831.2 0.0 5,811.4 8,259.2 160,000.2 11,189.6 0.0 171,189.8
Operating Ratios
Year to 30 Jun (%) Capital Adequacy Tier-1 CAR Total CAR Total assets/equity (x) Tangible assets/tangible common equity (x) Asset Quality NPL ratio Loan loss coverage Loan loss reserve/gross loans Increase in NPLs Credit cost (bp) Liquidity Loan/deposit ratio Liquid assets/short-term liabilities Liquid assets/total assets 54.1 33.6 29.3 69.5 21.0 18.3 70.8 20.8 18.1 72.1 20.4 17.7 1.9 117.4 2.2 (9.2) 83.7 2.3 114.3 2.6 167.2 81.9 2.1 125.3 2.7 (0.7) 106.1 2.0 134.2 2.7 0.1 96.1 15.1 15.1 13.2 13.3 13.3 14.3 17.0 19.7 14.4 15.4 16.0 18.1 15.2 16.3 15.3 17.1 2010 2011F 2012F 2013F
Key Metrics
Year to 30 Jun (%) Growth Net interest income, yoy chg Fees & commissions, yoy chg Pre-provision profit, yoy chg Net profit, yoy chg Net profit (adj.), yoy chg Customer loans, yoy chg Customer deposits, yoy chg Profitability Net interest margin Cost/income ratio Adjusted ROA Reported ROE Adjusted ROE Valuation P/BV (x) P/NTA (x) Adjusted P/E (x) Dividend Yield Payout ratio 2.6 2.6 16.7 2.3 38.4 2.1 2.4 13.2 2.3 30.3 1.8 2.1 10.4 2.3 24.0 1.6 1.9 8.9 2.3 20.4 1.8 44.6 1.2 16.3 16.3 1.8 38.1 1.1 16.8 16.8 1.8 43.8 1.0 17.2 17.2 1.9 44.2 1.1 17.9 17.9 2.2 0.7 (6.7) 9.1 9.1 8.5 3.2 44.1 25.0 54.7 29.2 29.2 116.0 68.3 33.6 25.0 17.5 26.3 26.3 8.0 6.0 10.6 16.0 10.2 17.5 17.5 8.0 6.0 2010 2011F 2012F 2013F
Page 9 of 29
Strategy Singapore
2011 Elections Time for a-rethink?
Strategy
Top Picks
Price Company 6 May 11 (S$) Ascendasreit CDL Htrust Ezion Keppel Corp OCBC OUE StarHub
Source: UOB Kay Hian
Target Price (S$) 2.40 2.50 0.90 13.50 11.80 4.30 2.96 Upside (%) 20.6 22.5 33.3 19.3 29.1 43.8 5.7
Whats New? Falling share of popular votes. As expected, the People's Action Party (PAP) returned to power with a significant majority, winning 81 of the 87 seats. Nevertheless, the incumbent's share of popular votes dipped to 60.1% from 66.6% in the 2006 general election (GE). The decline is notable and is the lowest in record for the incumbent. Notable events in 2011 election. The loss of a Group Representation Constituency (GRC) in Aljunied to the Workers' Party (WP) is unprecedented. The WP managed to cling on to its stronghold Single Member Constituency (SMC) in Hougang although PAP did manage to capture the opposition's Potong Pasir SMC with a slim majority. Otherwise, PM Lee Hsien Loong's Ang Mo Kio GRC won by a larger majority of 69.3% against the Reform Party's (RP) 30.7% (compared to a majority of 66.1% in 2006). Why the weaker share of popular votes? We believe the opposition parties' gain in popular votes is due to several factors, including: a) domestic issues such as rising cost of living, housing and the influx of foreign workers, b) more credible opposition candidates, and c) the proliferation of new media sources such as the internet which has helped highlight issues with the younger voters.
Action A needed review of long-term policies? Despite the expected victory, we think the PAP's falling share of popular votes could prompt a review of long-term policies over issues such as housing and foreign immigration. The government has started addressing some of these issues such as raising the supply of public flats and a push to drive productivity with a less emphasis on the use of foreign labour. As an indication, the number of new permanent residents grew only 1.5% in 2010 compared with at least 6% in 2005-09. Although we think the government may review some of its long-term policies, we do not see a major near-term shift in issues, such as getting in foreign talent. A drastic change could curtail Singapore's drive to be a global city. In addition, Singapore's low birth rate of 1.16 is a historic low and below the replacement rate of 2.1. In summary, we think a fine-tuning is more likely, with the government being more selective with the inflow of foreigners. Sectors with potential impact. In our view, sectors that could see longterm impact from any potential fine-tuning of policies include residential property, land transport, gaming and labour-intensive sectors such as construction and shipyards. However, we do not anticipate any major near-term shift in government policies but a gradual move or tweaks in policies. Limited direct market impact as in previous elections. Looking at previous GEs and the performance of the stock market post elections, we see no discernible patterns. For example, 1991 saw the biggest win of four seats by the opposition parties but the FSSTI rose 4% six months after the election vs a decline of 1.3% prior to the elections. In the last three GEs, the PAP won all but two seats. Despite the steady performance, the stock market registered mixed performances of -3% to +31% over a six-month period after the GE.
Page 10 of 29
Assumption Changes
Risks
Page 11 of 29
Property Singapore
Property Nuggets: Positive commercial sentiment offsets residentials
Whats New? Residential sector weighs on real estate sentiment index. The Current Sentiment Index, which represents present market conditions vs six months ago, fell to 4.9 in 1Q11 (4Q10: 5.7), according to Redas-NUS. The Future Sentiment Index, which represents the expectations of the property market conditions over the next six months, also slipped to 5.1 (4Q10: 5.8). A score below 5 indicates deteriorating market conditions and vice versa. The survey also showed only 14% of developers polled (4Q10: 62%) expect a moderate price rise while 69% (4Q10: 30%) expect prices to remain flat over next six months. The data indicates that the government measures are slowly taking effect. Positive commercial sentiment offsets weak residential sentiment. The overall outlook for real estate market remains positive with respondents expecting the residential slack to be offset by the favorable outlook for other sectors. They expect the most favourable outook for the office sector (+62%) followed by hotel/serviced apartment (+58%) sector. This is followed by a strong outlook for the business park/high tech (+52%) and industrial/logistics (+48%) as well as a stable retail (+22% for prime retail and +30% for suburban retail sector. Action The sentiments echoed are in line with our favourable stance on the office, industrial and hospitality sectors and a cautious outlook on residential sector. Our top picks are OUE, AREIT and CDL Hospitality Trusts for these segments respectively. Sector Catalysts Positive newsflow on office pre-leasing activity, office conversions and improving liquidity at benchmark levels. Pick-up in industrial rents and capital values, new foreign direct investments and yield-accretive acquisitions. Strong growth in visitor arrivals leading to sustained high occupancies and further pick-up in room rates. Assumption Changes None. We forecast office rental and capital values to increase 15-20% and factory, warehouse and business parks rentals to increase 5-10% in 2011. We forecast hotel RevPAR to grow 17% in 2011 while overall residential prices are expected to fall 5-10% this year. Peer Comparison
Company Developers Allgreen CapitaLand City Devt GuocoLand Ho Bee Keppel Land OUE SC Global Wheelock Wing Tai REITs Ascendasreit AscottREIT CapitaComm CapitaMall CDL Htrust FrasersCT K-REIT Sabana REIT Starhill Gbl Suntec REIT Ticker Rec Price 06 May 11 (S$) Target Price (S$) Upside/ (Downside) to TP (%) Market Cap. (US$m) Curr PE (x) Fwd PE (x) Curr Yield (%)
MARKET WEIGHT
(Maintained)
Sector Update
Top Stock Picks
Company A-REIT OUE CDL Htrust
Source: UOB Kay Hian
Key Indicators
Indicator Period Figure GDP Growth yoy 1Q11 8.50% Unemployment Rate 1Q11 1.90% CPI Inflation Mar 11 5.00% Prime Rate Apr 11 5.38% 3-month SIBOR May 11 0.44% Source: Bloomberg, MAS, MTI, UOB Kay Hian
Upcoming Events
Date
13 May 15 May 23 May
Event
Retail sales index URA monthly statistics Consumer Price Index
Analysts
Vikrant Pandey +65 6590 6623 vikrant@uobkayhian.com Vijay Natarajan +65 6590 6626 vijaynatarajan@uobkayhian.com Terence Khi +65 6590 6614 terencekhi@uobkayhian.com
Fwd Yield (%) Book NAV ps (S$) Price/ Book (x) RNAV ps (S$) ROE (%) Net Gearing * (%)
AG SP CAPL SP CIT SP GUOL SP HOBEE SP KPLD SP OUE SP SCGD SP WP SP WINGT SP AREIT SP ART SP CCT SP CT SP CDREIT SP FCT SP KREIT SP SSREIT SP SGREIT SP SUN SP
HOLD HOLD HOLD HOLD HOLD BUY BUY SELL HOLD HOLD BUY BUY BUY SELL BUY HOLD BUY BUY HOLD HOLD
1.11 3.28 11.24 2.53 1.46 4.04 2.99 1.33 1.80 1.54 1.99 1.18 1.40 1.89 2.04 1.47 1.28 0.94 0.62 1.50
1.25 3.70 12.00 2.70 1.60 5.35 4.30 1.50 2.05 2.05 2.40 1.40 1.70 1.90 2.50 1.65 1.65 1.15 0.70 1.65
12.6 12.8 6.8 6.7 9.6 32.4 43.8 12.8 13.9 33.1 20.6 18.6 21.4 0.5 22.5 12.2 28.9 23.0 12.9 10.0
1,428.8 11,334.1 8,272.4 2,423.1 867.9 4,747.7 2,375.5 446.3 1,743.3 989.6 3,352.0 1,072.7 3,204.3 4,873.2 1,584.8 916.7 1,408.4 479.9 975.1 2,687.8
9.5 25.5 15.3 20.8 5.4 13.4 19.4 5.9 8.1 5.8 15.3 18.1 21.5 22.1 17.1 19.1 31.3 12.5 13.8 30.1
9.6 18.9 13.7 8.4 5.6 12.7 14.4 6.0 7.5 5.2 14.4 17.2 20.0 22.0 15.8 17.3 20.0 12.3 13.6 28.7
2.7 2.1 0.9 3.6 1.4 2.5 2.6 1.5 3.3 3.2 6.7 6.8 5.1 5.0 6.0 5.7 5.7 9.3 6.7 6.3
2.7 2.1 0.9 3.6 1.4 2.5 3.5 1.5 3.3 3.2 7.1 7.3 5.4 5.3 6.4 6.1 6.4 9.3 6.8 6.1
1.67 3.27 7.03 2.00 2.08 2.91 2.86 1.56 2.31 2.21 1.76 1.26 1.49 1.55 1.49 1.29 1.49 1.01 0.85 1.80
0.67 1.00 1.60 1.27 0.70 1.39 1.05 0.86 0.78 0.70 1.13 0.94 0.94 1.22 1.37 1.14 0.86 0.92 0.73 0.84
1.78 4.64 13.30 2.92 2.33 5.34 4.30 2.18 2.70 2.72 1.77 1.26 1.57 1.54 1.62 1.28 1.56 0.99 0.87 1.79
7.1 3.8 10.2 6.2 12.6 9.8 5.3 13.6 9.3 11.9 7.8 5.2 4.2 5.5 7.4 6.0 2.7 7.8 5.2 2.8
14.0 19.8 28.7 143.2 35.5 24.0 48.9 182.2 (27.4) 35.1 34.9 39.9 20.1 25.8 18.7 30.2 31.0 19.5 26.0 37.9
* Property Developers: Net Debt to Equity * REITs: Net Debt to Total Assets Source: Bloomberg, UOB Kay Hian
Page 12 of 29
2011
Risks A weaker-than-expected pick-up in demand depressing rentals and capital values in the office and industrial segments. A delay in the opening of next phase of attractions resulting in lower visitor arrivals. Key Sector and Corporate Updates Residential: URA releases Choa Chu Kang and West coast residential sites. The site at West Coast Link has a maximum permissible gross floor area (GFA) of 381,600sf and can accommodate an estimated 360 units. The second plot at Choa Chu Kang Road has a maximum permissible GFA of 347,800sf and can house 335 units. The tenders for the site close on 23 June and 30 June respectively. Comment: We estimate top bids in the range of S$575-625psfppr for the West Coast site (assuming selling prices of S$1,050psf) and S$525575psfppr for the Choa Chu Kang site (assuming selling prices of S$950psf). The Choa Chu Kang site is expected to attract more developers interest due to its proximity to MRT station and lack of new projects in the area. Office: Singapore rentals rose the third-fastest in Asia-Pacific. According to Jones Lang LaSalle, Singapore office rentals grew 7.9% qoq in 1Q11, the third-fastest in the region. Jakarta recorded the fastest growth of 9.5%. Office capital values increased 4.5% in 1Q11, significantly lower than the 42% jump in office prices in Hong Kong. Comment: Yield compression is reversing as office rentals rise to keep pace with the rapid increase in capital values. Office demand remains positive as firms continue expansion plans and hiring momentum remains strong. Hospitality: Room rates to remain high. Hotel room rates are expected to climb a further 10-15% yoy in 2011 even as the new pipeline of 1,499 rooms comes on stream, according to CBRE Hotels Asia Pacific. Comment: The estimates are in line with our expectation of a 16% growth in hotel RevPAR this year. Growth in visitor arrivals will likely be supported by factors such as the two integrated resorts, the upcoming International Cruise Terminal as well as the recent efforts to rejuvenate Orchard Road. Share Price Performance
d Company Ticker Price Rec 06 May 11 (S$) n.a. n.a. n.a. n.a. HOLD HOLD HOLD HOLD HOLD BUY BUY SELL HOLD HOLD BUY BUY NR BUY NR NR NR NR NR BUY BUY NR NR BUY HOLD SELL NR NR HOLD NR HOLD 3099.52 692.61 713.01 660.70 1.11 3.28 11.24 2.53 1.46 4.04 2.99 1.33 1.80 1.54 1.18 2.04 0.21 1.99 0.945 0.935 0.495 1.11 0.89 0.935 1.4 0.79 0.21 1.28 1.5 1.89 1.27 3.84 1.47 0.54 0.62 --------- Price Performance ---------5D 1M 3M YTD 1Y (%) (%) (%) (%) (%) (2.7) (1.4) (1.9) (0.5) (5.1) (4.1) (4.3) 3.7 (2.0) (2.9) (2.9) (5.7) (2.7) (0.6) (0.8) 0.5 0.0 (1.5) (0.5) (2.6) (2.9) 3.7 (1.7) (1.6) (1.4) (0.6) (4.5) (2.3) 0.0 1.1 0.8 (0.8) (2.6) (2.7) (2.4) (2.2) (1.6) (2.2) (0.3) 0.0 (4.7) (3.4) 2.0 (0.7) (9.1) (6.6) (4.9) (3.7) (2.5) (0.8) 2.0 2.4 0.0 (1.6) (1.6) (1.0) 5.7 (3.3) 0.0 (0.7) 0.0 (12.5) (1.5) (2.6) 1.1 0.8 1.1 (2.6) (3.6) (1.6) (3.5) (4.2) (4.1) (4.4) 1.8 (9.1) (1.4) (4.5) (2.0) (7.7) (9.9) (14.0) (7.2) (8.3) (2.5) (1.4) (4.5) (5.7) (4.1) (4.1) (4.4) 1.8 (5.8) (4.6) (4.8) (9.7) (20.8) (9.9) (6.3) (1.0) 0.0 (6.6) (4.5) (3.6) (2.4) (2.8) (5.1) (6.2) (3.3) (5.9) (11.6) (9.7) (1.9) (9.9) (14.0) (9.1) (18.1) (7.7) (8.9) (3.3) (1.9) (4.5) (3.9) 1.6 (3.1) (5.3) 1.8 (7.8) (4.1) (6.7) (4.2) (22.2) (9.2) 0.0 (3.1) 2.4 (4.0) (2.0) 1.9 (0.8)
Source: Q43QBusiness003Q11Q33Q41Q63Q71Q93Q0 The 51 9 Q81 Times 1 9 Q 21 9 9 Q 73 9 Q 0 0 0 0 0 0 1 Q13 9 Source: URA, UOB Kay Hian 2 50
2 50
150 Res id en
200
10 0
Res id en
Ind us t rial Offic
Ret ail
150
50
Retail 10 0 50
0 1Q0 0
R e s ide ntia l
100
Indus tria l 50
FSSTI Real Estate Index Property Developers Index Property REITs Index PROPERTY DEVELOPERS Allgreen CapitaLand City Devt GuocoLand Ho Bee Keppel Land OUE SC Global Wheelock Wing Tai HOSPITALITY REITS AscottREIT CDL Htrust INDUSTRIAL REITS AIMSAMPIReit Ascendasreit AscendasIndT CACHE Cambridge MapletreeInd MapletreeLog Sabana REIT OFFICE REITS CapitaComm FrasersComm Indiabulls K-REIT SuntecReit RETAIL REITS CapitaMall Trust CapitaRChina Fortune Reit (HK$) FrasersCT LippoMapleT Starhill Gbl
FSSTI Index FSTRE Index FSTREH Index FSTREI Index AG SP CAPL SP CIT SP GUOL SP HOBEE SP KPLD SP OUE SP SCGD SP WP SP WINGT SP ART SP CDREIT SP AAREIT SP AREIT SP AIT SP CACHE SP CREIT SP MINT SP MLT SP SSREIT SP CCT SP FCOT SP IPIT SP KREIT SP SUN SP CT SP CRCT SP FRT SP FCT SP LMRT SP SGREIT SP
9.2 3089.71 3134.25 8.4 688.67 704.32 8.8 707.50 725.61 7.7 658.96 671.20 (4.3) (8.9) 9.4 18.7 (7.0) 13.4 (12.7) (16.6) (1.6) (12.0) 4.1 9.7 7.1 6.4 (4.5) (1.6) 0.5 19.4 7.8 (11.0) 19.7 9.0 (27.6) 17.4 13.6 (1.6) 5.8 6.4 9.7 11.3 9.7 1.09 3.33 11.25 2.45 1.41 4.23 3.04 1.36 1.87 1.53 1.18 2.00 0.21 1.99 0.94 0.94 0.50 1.05 0.90 0.94 1.41 0.80 0.25 1.30 1.51 1.85 1.26 3.88 1.49 0.54 0.63 1.12 3.48 11.60 2.55 1.47 4.35 3.17 1.46 1.90 1.60 1.20 2.03 0.21 2.04 0.94 0.95 0.51 1.06 0.93 0.96 1.45 0.82 0.26 1.36 1.53 1.88 1.25 3.94 1.50 0.55 0.63
* Property Developers: Net Debt to Shareholder Equity * REITs: Net Debt to Total Assets Source: Bloomberg, UOB Kay Hian
Page 13 of 29
BUY
(Maintained)
Company Results
Share Price Target Price Upside S$2.19 S$2.50 +14.2%
Company Description COSCO Corp (S) owns COSCO Shipyard Group (CSG), the fourth largest shipyard group in China. COSCO Corp also owns a dry bulk shipping business with a fleet of 10 bulk carriers. Stock Data GICS sector Bloomberg ticker: Shares issued (m): Market cap (S$m): Market cap (US$m): 3-mth avg daily t'over (US$m): Price Performance (%) 52-week high/low 1mth 3mth 6mth 0.9 (3.9) 10.1
profit at S$75.8m (adjusted for the (S)s earnings are recovering to 2007 >S$300m. Its earnings are highly Improved shipbuilding lead time sensitive to shipbuilding margin expansion given the current paper-thin net margin (3Q10:5.8%). Every 1ppt increase in 2011s shipyard GP New Building 432.1 505.0 17 Higher shipbuilding turnover Offshore 144.0 307.0 113 Higher a 9% contract wins margin would add S$20m to net profit or offshore increase on our 2010s Conversion (42) Lower ship conversion orderbook projected net 120.0 profit. 69.3
Shiprepair Shipyard Biz Shipping Others Turnover 104.0 800.1 32.0 2.9 835.0 108.9 990.2 17.3 3.2 1,010.7 5 24 (46) 8 21 Stabilised Lower charter rates, as proxied by BDI
COSCO Corp (S) (COSCO (S)) reported a net profit of S$37.1m (+17% yoy) for 1Q11. 1Q is seasonally the weakest quarter because of the winter season and the Chinese New Year holidays. Nonetheless, 1Q11 results were below our expectation because of lower shipping earnings and a cost provision of S$20.3m. Shipping turnover declined 46% yoy given the impact of lower dry bulk shipping charter rates as proxied by a depressed Baltic Dry Index (BDI) at 1,365 in 1Q11 vs 3,027 in 1Q10. The negative impact has kicked in faster than expected. That said, the impact on our fair valuation of COSCO (S) is muted as it is based on P/B instead of PE as we are always cognisant of the volatility of dry bulk shipping earnings. We expect dry bulk freight rates to improve in 2H due to seasonally higher dry bulk trades. COSCO (S) does not provide quarterly earnings breakdown. We estimate the shipping turnover decline of S$14.7m would have filtered to net profit. Moreover, COSCO (S) made a cost provision of S$20.3m for projected cost increases related to contracts secured in the last five months.
Key Financials
Year to 31 Dec (S$m) 2009 2010 2011F Net turnover 2,899.0 3,861.4 4,195.9 EBITDA 369.9 603.4 635.7 Operating profit 216.5 435.0 465.7 Net profit (rep./act.) 110.1 248.8 262.0 Net profit (adj.) 110.1 248.8 262.0 EPS (S$ cent) 4.9 11.1 11.7 PE (x) 44.5 19.7 18.7 P/B (x) 4.5 4.1 3.6 EV/EBITDA (x) 15.2 9.3 8.8 Dividend yield (%) 1.4 1.8 1.8 Net margin (%) 3.8 6.4 6.2 Net debt/(cash) to equity (%) (40.7) 10.4 3.5 Interest cover (x) 40.5 20.6 53.0 ROE (%) 9.9 21.8 20.5 Consensus net profit 275.3 UOBKH/Consensus (x) 0.95 Source: COSCO Corp (Singapore), Bloomberg, UOB Kay Hian 2012F 4,198.0 751.2 581.2 330.0 330.0 14.7 14.9 3.1 7.5 1.8 7.9 (16.5) 62.6 23.7 306.2 1.08 2013F 4,399.4 795.6 625.6 363.0 363.0 16.2 13.5 2.6 7.0 1.8 8.3 (37.3) 66.3 23.8 307.1 1.18
Major Shareholders COSCO Group FY11 NAV/Share (S$) FY11 Net Cash/Share (S$) Price Chart
(lcy) 2.60 2.40 2.20 2.00 1.80 1.60 1.40 1.20
80 60 40 20 0 COSCO CORP SINGAPORE LTD Cosco Corp Singapore Ltd/FSSTI Index
Volume (m)
May 10
Jul 10
Sep 10
Nov 10
Jan 11
Mar 11
May 11
Source: Bloomberg
Analyst Nancy Wei (65) 6590 6628 nancy.wei@uobkayhian.com Lawrence Li +8621 5404 7225 ext. 813 lawrenceli@uobkayhian.com
Page 14 of 29
1.3
Valuation/Recommendation
Page 15 of 29
Balance Sheet
Year to 31 Dec (S$m) Fixed assets Other LT assets Cash/ST investment Other current assets Total assets ST debt Other current liabilities LT debt Other LT liabilities Shareholders' equity Minority interest Total liabilities & equity 2010 2,208.0 296.6 867.2 2,681.6 6,053.3 555.1 3,262.4 437.1 4.3 1,198.6 595.9 6,053.3 2011F 2,338.0 293.0 944.9 3,302.9 6,878.8 555.1 3,865.3 437.1 4.3 1,361.0 656.0 6,878.8 2012F 2,468.0 293.0 1,254.7 3,256.3 7,271.9 655.1 3,933.8 337.1 4.3 1,591.5 750.1 7,271.9 2013F 2,598.0 293.0 1,684.1 3,401.4 7,976.6 355.1 4,272.9 637.1 4.3 1,854.9 852.3 7,976.6
Cash Flow
Year to 31 Dec (S$m) Operating Pre-tax profit Tax Deprec. & amort. Working capital changes Non-cash items Other operating cashflows Investing Capex (growth) Proceeds from sale of assets Others Financing Dividend payments Issue of shares Proceeds from borrowings Loan repayment Others/interest paid Net cash inflow (outflow) Beginning cash & cash equivalent Ending cash & cash equivalent 2010 (265.1) 358.6 (109.2) 168.4 (760.7) 91.8 (14.0) (148.3) (300.0) 11.2 140.5 (172.3) (69.7) 0.0 838.8 (899.9) (41.5) (585.7) 1,545.6 960.0 2011F 382.5 402.1 (56.5) 170.0 (191.6) 58.5 0.0 (80.0) (300.0) 0.0 220.0 (221.6) (179.6) 0.0 300.0 (300.0) (42.0) 81.0 863.9 944.9 2012F 611.3 504.1 (70.1) 170.0 (64.8) 72.1 0.0 (80.0) (300.0) 0.0 220.0 (221.6) (179.6) 0.0 300.0 (300.0) (42.0) 309.8 944.9 1,254.7 2013F 731.1 545.2 (73.4) 170.0 13.9 75.4 0.0 (80.0) (300.0) 0.0 220.0 (221.6) (179.6) 0.0 300.0 (300.0) (42.0) 429.5 1,254.7 1,684.1
Key Metrics
Year to 31 Dec (%) Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit Net profit (adj.) EPS Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x) 55.3 82.8 10.4 20.6 49.2 72.9 3.5 53.0 42.4 62.3 (16.5) 62.6 36.7 53.5 (37.3) 66.3 33.2 63.1 125.1 126.1 126.1 126.1 8.7 5.3 14.1 5.3 5.3 5.3 0.0 18.2 25.2 26.0 26.0 26.0 4.8 5.9 7.7 10.0 10.0 10.0 15.6 10.4 6.4 4.0 21.8 15.1 10.9 6.2 4.1 20.5 17.9 13.7 7.9 5.0 23.7 18.1 14.1 8.3 5.2 23.8 2010 2011F 2012F 2013F
Page 16 of 29
HOLD
(Maintained)
Company Results
Share Price Target Price Upside (Previous TP S$0.345 S$0.36 4.3% S$0.30)
Company Description Oxley Holdings is a developer specialising in affordable luxury residential developments. Oxley is also branching out into commercial and industrial developments.
Results Oxley Holdings (Oxley) reported 3QFY11 net profit of S$5.5m, bringing 9MFY11 net profit to S$7.1m. 3QFY11 revenue touched S$22.5m, up 275% qoq, due to progressive recognition from more projects and new contributions from Viva Vista. The results were below our expectations, at 25% of our full-year forecast, due to slower-than-anticipated revenue recognition from projects.
Stock Impact Oxley Bizhub 42% sold at S$677psf. Oxley has sold 42% of the total 728 units at its Oxley Bizhub development. The ASP is estimated at S$677psf. Our checks with agents revealed that most were single-level factory units sold at S$550-700psf, while the loft factory units at S$400-500psf and the ramp-up warehouse units at S$700-800psf saw slower demand. Developing freehold industrial projects. Oxley acquired two pieces of industrial land in March and Apr 11. The first parcel, at 124 Lorong 23 Geylang, was acquired for S$9.5m, or S$349psf ppr. The freehold property is zoned for light industrial use and is sited on a 10,890sf site with a plot ratio of 2.5. We estimate the ASP for the project at S$700-800psf.
Key Financials
Year to 30 Jun (S$m) Net turnover EBITDA Operating profit Net profit (rep./act.) Net profit (adj.) EPS (S$ cent) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) Consensus net profit UOBKH/Consensus (x) 2009 0.1 0.1 0.1 0.1 0.1 0.0 4,499.2 365.5 7,932.5 0.0 97.0 (37.9) n.a. 8.5 2010 0.7 0.8 0.8 0.5 0.5 0.0 794.7 52.8 1,015.1 0.0 73.8 622.3 n.a. 11.6 2011F 100.6 36.9 36.9 21.3 21.3 1.4 24.2 3.8 20.8 2.1 21.1 188.0 3.5 30.0 2012F 463.0 183.2 183.2 129.2 129.2 8.7 4.0 2.3 4.2 7.5 27.9 27.7 14.7 72.3 2013F 686.6 256.4 256.4 181.9 181.9 12.2 2.8 1.4 3.0 7.1 26.5 (36.8) 20.3 72.3 -
Stock Data GICS sector Bloomberg ticker: Shares issued (m): Market cap (S$m): Market cap (US$m): 3-mth avg daily t'over (US$m):
Price Performance (%) 52-week high/low S$0.415/S$0.305 1mth 3mth 6mth 1yr YTD (1.4) 1.5 (2.8) n.a. (1.4) %
Major Shareholders
38.6 27.1
0.09 0.17
0.40
0.35 90 0.30 80 70
0.25
150 100 50 0
Volume (m)
Oct 10
Nov 10
Dec 10
Jan 11
Feb 11
Mar 11
Apr 11
Source: Bloomberg
Page 17 of 29
Another record GLS industrial site bid. Oxley also acquired a second 60-year leasehold industrial plot at Ubi Road 1/ Ubi Avenue 4 from a government land sale (GLS) tender for S$72.2m, or S$217psf ppr, a new record price for an industrial site. The psf price is 28% higher than the S$169psf ppr acquisition cost for the Ubi Road 1 site for Oxley Bizhub. Oxley will have a 55% stake in this project. We believe that, with the strong sales demand for Oxley Bizhub, Oxley would be able to maintain ASP of at least S$600-650psf on NLA. Two more residential projects fully sold. Oxley has sold the remaining residential units at Loft @ Stevens and Vibes @ Kovan. This brings the number of sold-out residential projects to 8 out of the 14 residential projects in Oxleys landbank. The Devonshire Residences development launched in Mar 11 is 95% sold at a median price of S$2,505psf. We expect Oxley will continue to launch 2-3 projects per quarter. Savvy switch into industrial and office properties. Oxleys continued focus on acquiring industrial and office sites to build its landbank marks a savvy switch into industrial and office properties, which now form 42% and 26% of its RNAV respectively. Its portfolio diversification across segments reduces the risk of regulatory and government measures. Building a debt mountain. Net gearing rose from 212% in 2QFY11 to 370% in 3QFY11, driven by a 59% qoq increase in debt. This represents the highest net gearing among developers under our coverage. Average gearing for the developers under our coverage is 50%. The high gearing poses the greatest risk to Oxley, especially if interest rates were to rise substantially, or if there are difficulties in selling projects.
RNAV Asset Valuation NPV of Development Profits (1) Net Book Value (2) RNAV (1+2) Fully diluted no. of shares(m) Fully diluted RNAV (S$/share) RNAV at 10% discount (S$/share)
Source: UOB Kay Hian
RNAV (%) 32 42 26
Earnings Revision/Risk We lower our FY11 net profit estimate by 25% to S$21.3m to reflect a slower-than-anticipated project recognition schedule, and raise our FY12-13 estimates by 20-39% to reflect the deferred project revenue recognition and the acquisitions of the two additional industrial sites. Valuation/Recommendation Maintain HOLD and we raise our target price to S$0.36 (from S$0.30). This is based on a 10% discount to our revised RNAV of S$0.40/share (previously S$0.33/share) after factoring in the two additional industrial properties. Entry price is S$0.29. Share Price Catalysts High sales volume (>75%) at its Ubi Road 1 industrial site and its two Robinson Road office sites. Higher-than-expected ASPs and efficiency for its industrial and office sites. Competitively-priced land acquisitions.
Page 18 of 29
Balance Sheet
Year to 30 Jun (S$m) Fixed assets Other LT assets Cash/ST investment Other current assets Total assets ST debt Other current liabilities LT debt Other LT liabilities Shareholders' equity Minority interest Total liabilities & equity 2010 0.1 6.7 12.9 81.1 100.8 0.0 26.7 64.3 0.0 8.3 1.5 100.8 2011F 3.8 26.7 303.1 442.5 776.2 10.0 83.7 544.3 0.0 133.6 4.6 776.2 2012F 3.8 26.7 592.2 662.0 1,284.7 10.0 398.7 644.3 0.0 224.1 7.7 1,284.7 2013F 3.8 26.7 810.4 804.3 1,645.3 10.0 588.8 664.3 0.0 369.6 12.6 1,645.3
Cash Flow
Year to 30 Jun (S$m) Operating Pre-tax profit Tax Deprec. & amort. Associates Working capital changes Non-cash items Other operating cashflows Investing Capex (growth) Investments Proceeds from sale of assets Others Financing Dividend payments Issue of shares Proceeds from borrowings Loan repayment Others/interest paid Net cash inflow (outflow) Beginning cash & cash equivalent Changes due to forex impact Ending cash & cash equivalent 2010 (79.5) 0.8 0.0 0.0 0.0 (80.3) 0.0 0.0 (0.1) (0.1) 0.0 0.0 0.0 92.1 (1.0) 6.4 64.3 0.0 22.4 12.4 0.5 0.0 12.9 2011F (262.5) 26.2 (4.7) 0.0 0.0 (294.7) 0.0 10.7 (0.0) (1.0) 0.0 0.0 1.0 552.9 (10.6) 85.1 490.0 0.0 (11.6) 290.3 12.9 0.0 303.1 2012F 241.4 170.7 (30.7) 0.0 0.0 88.9 0.0 12.5 0.2 (1.0) 0.0 0.0 1.2 47.5 (38.8) 0.0 100.0 0.0 (13.7) 289.1 303.1 0.0 592.2 2013F 247.2 243.7 (43.9) 0.0 0.0 34.7 0.0 12.6 1.5 0.0 0.0 0.0 1.5 (30.5) (36.4) 0.0 20.0 0.0 (14.2) 218.2 592.2 0.0 810.4
Key Metrics
Year to 30 Jun (%) Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit Net profit (adj.) EPS Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x) 660.1 777.9 622.3 n.a. 401.2 414.9 188.0 3.5 282.4 292.0 27.7 14.7 176.4 182.5 (36.8) 20.3 644.0 681.4 679.6 466.2 466.2 466.2 13,424.2 4,771.1 3,369.1 3,769.4 3,769.4 3,187.3 360.1 396.3 550.9 508.2 508.2 508.2 48.3 39.9 42.7 40.8 40.8 40.8 101.9 101.6 73.8 1.1 11.6 36.7 26.1 21.1 4.8 30.0 39.6 36.9 27.9 12.5 72.3 37.3 35.5 26.5 12.4 72.3 2010 2011F 2012F 2013F
Page 19 of 29
NOT RATED
(Maintained)
Company Results
Share price Target price Up/downside
Company description United Overseas Bank was founded in 1935 and has a well-established regional presence in Singapore, Malaysia, Indonesia, Thailand and China. In Singapore, UOB is a market leader in credit and debit cards, private residential home loans and loans to SMEs. Stock data GICS sector Bloomberg ticker: Shares issued (m): Market cap (S$m): Market cap (US$m) 3-mth avg daily tover (US$m): Price performance 52-week high/low 1mth (1.6) 3mth (4.6) 6mth 1.6 S$20.06/S$17.80 1yr (2.7) YTD 3.3 % 17.4 5.4 12.51 12.51
Non-Interest Income Total Income Operating Expense Pre-Provision Profit Provisions Net Profit EPS () BVPS (S$)
Key Ratios (%): Net Interest Margin Loan/Deposit Ratio Tier-1 CAR NPL Ratio
Low interest rates and keen competition. Higher due to strong growth in loans. Lower due to strong growth in loans.
Results United Overseas Bank (UOB) reported 1Q11 net profit of S$612m (12.6% yoy), in line with consensus of S$623m. Acceleration in loan growth. Loans grew 6.7% qoq and 19.1% yoy, driven mostly by overseas markets (Malaysia +8.0% qoq, Indonesia +11.1% qoq and China +15.2% qoq). From an industry perspective, the acceleration in loan growth was driven by building & construction, general commerce and housing. UOB is likely to have gained market share with loan growth surpassing that of DBS and OCBC in 1Q11. Deposits expanded by a slower 3.0% qoq, thus loan/deposit ratio moved higher to 82.1%. More fees from growth in loans. Fee income grew 6.5% qoq to S$330m, coming mainly from a 59.1% qoq jump in contribution from loan-related activities due to the huge volume of loans approved and disbursed. Other sources of fee income were largely unchanged on a sequential basis. Improvement in asset quality. Provisions were much lower than in 4Q10 due to lower specific provision. NPL ratio improved from 1.8% to 1.6% due to lower NPLs in Thailand.
2007 2,980.3 1,892.0 2,109.5 2,109.5 136.0 13.8 1.7 3.9 2.0 41.4 111.8 2008 3,575.0 1,675.0 1,937.0 1,937.0 125.0 15.0 2.1 3.2 2.3 39.0 110.5 2009 3,674.0 1,732.0 1,903.0 1,903.0 119.0 15.8 1.7 3.2 2.4 38.4 112.5 2010 3,532.0 2,268.0 2,695.0 2,460.0 170.0 11.1 1.5 3.7 2.1 38.9 124.5 -
Major Shareholders
Wee Cho Yaw Wah Hin & Co FY10 NAV/Share (S$) FY10 NAV/Share (S$)
Price Chart
(lcy)
UNITED OVERSEAS BANK LTD United Overseas Bank Ltd/FSSTI Index
Key Financials
Year to 31 Dec (S$m) Net interest income Non-interest income Net profit (rep./act.) Net profit (adj.) EPS (S$ cent) P/E (x) P/BV (x) Dividend yield (%) Net int margin (%) Cost/income (%) Loan loss cover (%) Consensus net profit
(%) 110
100
90
80
Volume (m)
5 0
May 10
Jul 10
Sep 10
Nov 10
Jan 11
Mar 11
May 11
Source: Bloomberg
Analyst
Jonathan Koh, CFA +65 6590 6620 jonathankoh@uobkayhian.com
UOBKH/Consensus (x) Source: United Overseas Bank, Bloomberg, UOB Kay Hian
Page 20 of 29
Others 7.0%
4Q10 52 37 58 66 25 56 16 310
Loans Related Service Charges Trade Related Others Total Source: UOB
Source: UOB
Page 21 of 29
Balance Sheet
Year to 31 Dec (S$m) Cash with central bank Govt treasury bills & securities Interbank loans Customer loans Investment securities Derivative receivables Associates & JVs Fixed assets (incl. prop.) Other assets Total assets Interbank deposits Customer deposits Derivative payables Debt equivalents Other liabilities Total liabilities Shareholders' funds Minority interest accumulated Total equity & liabilities 2007 17,667.0 12,616.0 15,207.0 92,669.0 19,827.0 0.0 1,261.0 2,081.0 13,624.0 174,952.0 32,091.0 106,967.0 0.0 6,666.0 11,499.0 157,223.0 17,330.0 398.0 174,951.0 2008 20,290.0 11,310.0 15,196.0 99,840.0 15,813.0 0.0 1,096.0 2,094.0 17,302.0 182,941.0 28,452.0 118,171.0 0.0 6,246.0 14,353.0 167,222.0 15,573.0 146.0 182,941.0 2009 18,865.0 20,491.0 14,116.0 99,201.0 16,295.0 0.0 1,212.0 2,174.0 13,223.0 185,577.0 27,751.0 121,502.0 0.0 6,044.0 11,126.0 166,423.0 18,986.0 169.0 185,578.0 2010 30,743.0 24,389.0 13,458.0 112,440.0 16,064.0 0.0 1,198.0 2,144.0 13,342.0 213,778.0 31,862.0 142,299.0 0.0 6,263.0 11,700.0 192,124.0 21,473.0 180.0 213,777.0
Operating Ratios
Year to 31 Dec (%) Capital Adequacy Tier-1 CAR Total CAR Total assets/equity (x) Tangible assets/tangible common equity (x) 10.0 14.5 10.1 13.1 10.9 15.3 11.7 15.7 14.0 19.0 9.8 12.3 15.3 19.8 10.0 12.1 2007 2008 2009 2010
Key Metrics
Year to 31 Dec (%) Growth Net interest income, yoy chg Fees & commissions, yoy chg Pre-provision profit, yoy chg Net profit, yoy chg Net profit (adj.), yoy chg 10.0 27.4 (8.0) (17.9) 7.8 20.5 11.9 2.0 41.4 1.3 12.4 12.4 1.7 2.2 13.8 3.9 54.2 20.0 (14.3) 12.1 (8.2) (8.2) 7.7 10.5 2.3 39.0 1.1 11.8 11.8 2.1 2.5 15.0 3.2 48.0 2.8 (10.9) 4.1 (1.8) (1.8) (0.6) 2.8 2.4 38.4 1.0 11.0 11.0 1.7 1.9 15.8 3.2 50.4 (3.9) (91.9) 6.3 41.6 29.3 13.3 17.1 2.1 38.9 1.3 13.3 13.3 1.5 1.7 11.1 3.7 41.2 2007 2008 2009 2010
Asset Quality NPL ratio Loan loss coverage Loan loss reserve/gross loans Increase in NPLs Credit cost (bp) Liquidity Loan/deposit ratio Liquid assets/short-term liabilities Liquid assets/total assets 86.6 32.7 26.0 84.5 31.9 25.6 81.6 35.8 28.8 79.0 39.4 32.1 1.8 111.8 2.0 (45.8) 35.4 2.0 110.5 2.5 20.4 83.8 2.2 112.5 2.8 9.6 112.6 1.8 124.5 2.6 (4.6) 44.8
Customer loans, yoy chg Customer deposits, yoy chg Profitability Net interest margin Cost/income ratio Adjusted ROA Reported ROE Adjusted ROE Valuation P/BV (x) P/NTA (x) Adjusted P/E (x) Dividend Yield Payout ratio
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BUY
(Maintained)
Company Update
Share Price Target Price Upside (Previous TP
Company description WPM specialises in manufacturing mechanical and hydraulic press metal stamping machines and related components. Stock data GICS sector Bloomberg ticker: Shares issued (m): Market cap (S$m): Market cap (US$m) 3-mth avg daily tover (US$m): Price performance 52-week high/low 1mth 12.7 3mth 17.7 6mth 62.2 S$0.70/S$0.19 1yr 133.3 YTD 31.7 % 77.4 2.39 0.22
Major Shareholders
Wang Wei Yao FY11 NAV/Share (Rmb) FY11 Net Debt/Share (Rmb)
Price Chart
(lcy) 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10
20 15 10 5 0 WORLD PRECISION MACHINERY LT World Precision Machinery Lt/FSSTI Index
Volume (m)
May 10
Jul 10
Sep 10
Nov 10
Jan 11
Mar 11
May 11
Source: Bloomberg
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Source: BWPM
Valuation/Recommendation
1,000 0
Source: BWPM
Electronics 15%
Automotive 32%
Source: BWPM
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Balance Sheet
Year to 31 Dec (Rmbm) Fixed assets Other LT assets LT debt Cash/ST investment Other current assets Total assets ST debt Other current liabilities Other LT liabilities Shareholders' equity Minority interest Total liabilities & equity 2010 432.0 20.0 n.a. 62.1 748.6 1,262.7 22.6 414.0 n.a. 826.0 0.1 1,262.7 2011F 462.3 141.1 n.a. 62.6 948.6 1,614.6 150.0 508.6 n.a. 955.8 0.1 1,614.6 2012F 552.3 138.3 n.a. 43.7 1,118.3 1,852.7 150.0 600.4 n.a. 1,102.1 0.1 1,852.7 2013F 633.1 135.5 n.a. 54.2 1,317.1 2,139.9 150.0 705.5 n.a. 1,284.2 0.1 2,139.9
Cash Flow
Year to 31 Dec (Rmbm) Operating Pre-tax profit Tax Deprec. & amort. Working capital changes Other operating cashflows Investing Capex (growth) Investments Proceeds from sale of assets Others Financing Dividend payments Issue of shares Proceeds from borrowings Loan repayment Others/interest paid Net cash inflow (outflow) Beginning cash & cash equivalent Changes due to forex impact Ending cash & cash equivalent 2010 192.5 143.7 (18.6) 42.2 42.3 (17.1) (71.5) (89.3) 0.0 0.0 17.8 (130.4) (60.0) 0.0 22.6 (80.0) (13.0) (9.3) 55.9 1.4 48.0 2011F 134.8 222.3 (33.6) 48.6 (105.3) 2.9 (200.0) (200.0) 0.0 0.0 0.0 79.8 (47.6) 0.0 0.0 127.4 0.0 14.6 48.0 0.0 62.6 2012F 179.1 247.8 (37.2) 52.8 (77.9) (6.4) (140.0) (140.0) 0.0 0.0 0.0 (58.0) (58.0) 0.0 0.0 0.0 0.0 (18.9) 62.6 0.0 43.7 2013F 214.4 304.2 (45.6) 62.0 (93.8) (12.4) (140.0) (140.0) 0.0 0.0 0.0 (64.0) (64.0) 0.0 0.0 0.0 0.0 10.4 43.7 0.0 54.2
Key Metrics
Year to 31 Dec (%) Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit Net profit (adj.) EPS Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x) 2.7 2.7 (4.8) 33.6 15.7 15.7 9.1 18.7 13.6 13.6 9.6 19.4 11.7 11.7 7.5 23.9 85.2 232.7 121.6 109.1 114.8 114.8 30.2 80.0 54.7 50.3 55.2 55.2 17.7 12.7 11.5 11.9 11.9 11.9 17.8 23.4 22.8 22.8 22.8 22.8 9.6 13.8 12.0 10.7 15.8 13.2 16.4 13.9 13.1 21.1 12.7 15.6 13.2 12.1 20.4 13.3 16.2 13.8 12.9 21.6 2010 2011F 2012F 2013F
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HOLD
(Maintained)
Company Results
Share Price Target Price Upside Bt10.20 Bt10.84 +6.3%
Results LPN Developments (LPN) results were in line with expectations. Condominium sales grew 72% mainly from the ownership transfer of three completed projects. Gross margin declined qoq but improved 3ppt yoy. SG&A expense-to-sales ratio and net margin were stable qoq. 1Q11 net profit of Bt406m (+50% yoy but -29% qoq) accounted for 23% of our full-year forecast. We keep our net profit forecast unchanged. Stock Impact Presales and new launches targets for 2011 under review. LPN targets 2011 realised sales at Bt12b (+25% yoy), presales at Bt16b (+7% yoy) and new launches at Bt16b (+15% yoy). Since all of 2011 condominium sales are already in hand, LPN maintains its full-year forecast. Value of new launches to date was Bt6.4b (40% of its full-year target) and LPN can launch another four projects worth Bt6b. But LPN is still looking to adjust the schedule of new launches. The problematic area is the softer-than-expected selling pace amid a lacklustre market outlook with massive supply in the low-end condominium segment and strict borrowing measures. So far, the take-up in small projects worth less than Bt1b, like Nida-Seri Thai, La-Salle Baring and Pibulsongkram, are still at a healthy 75-100%. But big projects worth over Bt1b each still see soft takeup rate of 30-35%. Its mega Bt5.5b Riverside Rama 3, launched in 4Q10, was 53% sold so far. Presales in 4M11 of around Bt4b accounted for 25% of its full-year target.
Key Financials
Year to 31 Dec (Btm) 2009 2010 Net turnover 8,975 9,941 EBITDA 2,056 2,277 Operating profit 2,022 2,257 Net profit (rep./act.) 1,502 1,637 Net profit (adj.) 1,477 1,583 EPS (Bt) 1.00 1.07 PE (x) 10.2 9.5 P/B (x) 2.9 2.5 EV/EBITDA (x) 7.2 6.5 Dividend yield (%) 4.9 5.5 Net margin (%) 16.7 16.5 Net debt/(cash) to equity (%) (5.7) 10.4 Interest cover (x) 186.9 569.3 ROE (%) 30.9 28.9 Consensus net profit UOBKH/Consensus (x) Source: LPN Development, Bloomberg, UOB Kay Hian 2011F 12,059 2,456 2,436 1,785 1,785 1.21 8.4 2.1 6.0 5.9 14.8 (3.8) 327.5 27.2 1,825 0.98 2012F 13,780 2,827 2,807 2,052 2,052 1.39 7.3 1.8 5.2 6.8 14.9 (13.0) 377.0 26.9 2,080 0.99 2013F 15,150 3,032 3,012 2,202 2,202 1.49 6.8 1.6 4.9 7.3 14.5 (18.3) 404.2 26.8 2,484 0.89
Stock Data GICS sector Bloomberg ticker: Shares issued (m): Market cap (Btm): Market cap (US$m): 3-mth avg daily t'over (US$m): Price Performance (%) 52-week high/low 1mth 3mth 6mth 2.0 19.3 6.2
Major Shareholders Thai NVDR FY11 NAV/Share (Bt) FY11 Net Cash/Share (Bt) Price Chart
(lcy) 14 12 10 8 6 4
60 40 20 0 LPN DEVELOPMENT PCL Lpn Development Pcl/SET Index
Volume (m)
May 10
Jul 10
Sep 10
Nov 10
Jan 11
Mar 11
May 11
Source: Bloomberg
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Opt for conservative strategies but still firm on upcountry expansion. Source: LPN, UOB Kay Hian This year, LPN turned conservative by reducing the size of its new projects, Quarterly Results collecting higher down-payment and launching each project in phases Bt rather than all at one go. However, LPN is going ahead with its penetration 4000 into the upcountry market for the first time. It will launch two upcountry 3500 projects worth a total Bt2b in Pattaya this quarter. 3000 Limited upside from the governments new incentive. Housing loans with no interest for the first two years will be offered to the first time next week to home buyers who purchase a residential unit priced at less than Bt3m/unit. This scheme is good for buyers of completed condominiums that are ready to be transferred but not for LPN whose projects were mostly sold out two years ago. Buyers of new condominiums launched this year will also not benefit as these projects need another 18-24 months to be developed. However, LPN is looking to launch a special campaign similar to this scheme to spur demand for its new condominiums.
2500 2000 1500 1000 500 0 1Q07 3Q08 1Q10 Sales-LHS Net margin-RHS
Net profit-LHS
Quarterly results trend. LPN hints that its results will improve qoq in 2Q11 mainly from the completion of the Bt3.6b Pinklao project. This year, its profitability is likely to peak in 3Q, driven by the remaining portion of Pinklao sales and the full booking of the Bt3.2b Ratchayothin project. On the other hand, 4Q will the weakest quarter this year with around Bt2b of sales from Rama 4 and Nida 1 projects. Earnings Revision None. Valuation/Recommendation Maintain HOLD with a target price of Bt10.84, pegged to its five-year PE mean of 9x. Our entry level is below Bt9.00. The outlook for mid- to lowend condominium segment has not been rosy since 4Q10. With massive new supply coming out at end-10, the industrys average take-up rate has plunged to 30-50% in the past two quarters. It will take at least another six months to absorb the surplus. A rapid rise in development costs and interest rates is also hurting market sentiment.
+1SD 12x
Sep-07
Jan-09
Project Update
Project value (Btm) Ratanathibet 1796 Navamin (A-C) 1727 Ratburana 1284 Bangkae 686 Chokechai 4 1423 Navamin D 576 Rama 9 ph 2 2575 Pinklao 3600 Ratchayothin 3200 Rama 4 1500 New launches in 2011 Nida SeriThai 1 Nida SeriThai 2 Riverside Rama 3 Pibulsongkram Changwattana Pattanakarn Northern Pattaya Mega Bangna Wong-amat Pattaya Petchkasem Source: LPN Sold Complete 92% 94% 83% 74% 100% 100% 90% 100% 100% 100% 2009 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2012 2012 2012 2012 Sales Book 2Q09 4Q10 4Q10 4Q10 4Q10 1Q11 1Q11 2Q11 3Q11 4Q11 4Q11 1Q12 2Q12 3Q12 3Q12 2Q12 4Q12 4Q12 4Q12 1Q12
Risks to our forecast are: a) fierce competition as more developers are trying to penetrate the low-end market, b) rising development and marketing costs, c) slow selling pace, and d) pricing pressure. Share Price Catalysts a) Improvement in take-up rate, b) normalisation of interest rates, c) falling crude oil prices, and d) pick-up in consumer confidence.
450 100% 640 53% 5500 53% 900 100% 1850 31% 1650 35% 1200 n.a. 2800 n.a. 800 n.a. 1200 n.a.
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Balance Sheet
Year to 31 Dec (Btm) Fixed assets Other LT assets Cash/ST investment Other current assets Total assets ST debt Other current liabilities LT debt Other LT liabilities Shareholders' equity Total liabilities & equity 2010 527 985 1,122 7,746 10,380 890 2,448 863 99 6,080 10,380 2011F 547 968 770 7,730 10,016 0 2,376 500 100 7,040 10,015 2012F 547 968 1,568 8,178 11,261 0 2,443 500 120 8,199 11,261 2013F 547 968 2,217 8,814 12,546 0 2,522 500 150 9,375 12,546
Cash Flow
Year to 31 Dec (Btm) Operating Pre-tax profit Tax Deprec. & amort. Associates Working capital changes Non-cash items Investing Capex (growth) Others Financing Dividend payments Issue of shares Proceeds from borrowings Loan repayment Others/interest paid Net cash inflow (outflow) Beginning cash & cash equivalent Ending cash & cash equivalent 2010 (42) 2,359 (722) 20 (29) (1,634) (36) (120) (132) 12 (35) (767) 0 732 n.a. 0 (197) 1,319 1,122 2011F 1,777 2,529 (744) 20 (50) (23) 45 (50) 0 (50) (2,079) (826) 0 n.a. (1,253) 0 (352) 1,122 770 2012F 1,690 2,907 (856) 20 (55) (381) 54 0 (20) 20 (893) (893) 0 n.a. 0 0 797 770 1,568 2013F 1,665 3,119 (918) 20 (60) (556) 60 10 (20) 30 (1,026) (1,026) 0 n.a. 0 0 650 1,568 2,217
Key Metrics
Year to 31 Dec (%) Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit Net profit (adj.) EPS Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x) 28.8 28.8 10.4 569.3 7.1 7.1 (3.8) 327.5 6.1 6.1 (13.0) 377.0 5.3 5.3 (18.3) 404.2 10.8 10.7 12.8 9.0 7.2 7.2 21.3 7.9 7.2 9.1 12.8 12.8 14.3 15.1 15.0 14.9 14.9 14.9 9.9 7.2 7.3 7.3 7.3 7.3 22.9 23.7 16.5 17.7 28.9 20.4 21.0 14.8 17.5 27.2 20.5 21.1 14.9 19.3 26.9 20.0 20.6 14.5 19.5 26.8 2010 2011F 2012F 2013F
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We have based this document on information obtained from sources we believe to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Expressions of opinion contained herein are those of UOB Kay Hian Research Pte Ltd only and are subject to change without notice. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of the addressee only and is not to be taken as substitution for the exercise of judgement by the addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. UOB Kay Hian and its affiliates, their Directors, officers and/or employees may own or have positions in any securities mentioned herein or any securities related thereto and may from time to time add to or dispose of any such securities. UOB Kay Hian and its affiliates may act as market maker or have assumed an underwriting position in the securities of companies discussed herein (or investments related thereto) and may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. UOB Kay Hian (U.K.) Limited, a UOB Kay Hian subsidiary which distributes UOB Kay Hian research for only institutional clients, is an authorised person in the meaning of the Financial Services and Markets Act 2000 and is regulated by Financial Services Authority (FSA). In the United States of America, this research report is being distributed by UOB Kay Hian (U.S.) Inc (UOBKHUS) which accepts responsibility for the contents. UOBKHUS is a broker-dealer registered with the U.S. Securities and Exchange Commission and is an affiliate company of UOBKH. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact UOBKHUS, not its affiliate. The information herein has been obtained from, and any opinions herein are based upon sources believed reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. All opinions and estimates herein reflect our judgement on the date of this report and are subject to change without notice. This report is not intended to be an offer, or the solicitation of any offer, to buy or sell the securities referred to herein. From time to time, the firm preparing this report or its affiliates or the principals or employees of such firm or its affiliates may have a position in the securities referred to herein or hold options, warrants or rights with respect thereto or other securities of such issuers and may make a market or otherwise act as principal In transactions in any of these securities. Any such non-U.S. persons may have purchased securities referred to herein for their own account in advance of release of this report. Further information on the securities referred to herein may be obtained from UOBKHUS upon request. http://research.uobkayhian.com
MICA (P) 048/03/2011 RCB Regn. No. 198700235E
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