Mencast (SGD0.58) BUY (TP: SGD0.76)
Enterprise Of The Year
Mencast received the Enterprise of the Year award at yesterday evening’s Singapore Business Awards presentation dinner. Other preeminent companies that have won this award include Tee Yih Jia Food Manufacturing, Super and The Coffee Bean & Tea Leaf. The win reinforces our view of Mencast as a long-term growth player in the oil & gas (O&G) industry. We maintain our BUY call and SGD0.76 TP.
Excellence in all criteria.
The Enterprise of the Year Award recognises companies along four criteria: i) innovation record, ii) entrepreneurial skills, iii) growth record, and iv) financial performance. Mencast has indeed successfully reinvented itself to encompass multiple points in the maintenance, repair and overhaul (MRO) business along the O&G value chain from just a sterngear manufacturer initially.
History as a guide. Tee Yih Jia Food Manufacturing Pte Ltd, whose executive chairman Sam Goi won the Businessman of the Year Award last night, was the first Enterprise of the Year Award winner in 1986. Recent winners include Super (SUPER SP; BUY; TP: SGD3.99) in 2012, The Coffee Bean & Tea Leaf in 2011 and YCH Group Pte Ltd in 2010. If history is any guide, we hope to see Mencast achieving the same prominence in the O&G industry as these others have in theirs.
Sending a strong positive signal to all stakeholders. We believe that this award sends a strong signal to all stakeholders on Mencast’s sustainability and growth potential. We continue to see clear sources of growth in each of its offshore and Engineering, Marine, and Energy divisions, notwithstanding the labour supply issues in Singapore. Its heavy investment in automation and productivity improvements should begin to bear fruit this year.
Maintain BUY with SGD0.76 TP unchanged.
This award serves to reinforce our view of Mencast as a long-term growth player in the O&G industry. Our TP is based on 12x recurring FY14F P/E, which is a conservative multiple for its 80% core earnings growth potential this year.
Source:DMG
Showing posts with label Singapore Stock Picks. Show all posts
Showing posts with label Singapore Stock Picks. Show all posts
Monday, April 7, 2014
Sunday, March 23, 2014
Singapore Stock Picks: Frencken Group (TP SGD0.49)
Frencken Group (SGD0.30) BUY (TP: SGD0.49)
Grossly Undervalued In a Booming Sector The recovery in Europe’s auto sector is apparent in the climb in car sales six months in a row. The sector is revving up as the market responds positively to Amtek Engineering’s bid for an auto components maker at a 21.9x FY13 P/E. However, we prefer Frencken given its lower gearing and stronger business. We lift our TP to SGD0.49, based on a 9.6x FY14 P/E and 20% discount to the peer average, as its valuation tries to catch up.
Frencken to benefit from Europe’s auto recovery. The 7.6% y-o-y growth in February registration of new passenger cars to 894,730 marks the sixth consecutive month of rising car sales in Europe, signaling that the region’s car sales are on a firm path to recovery.
We expect Frencken to benefit strongly from this recovery trend as the bulk of its automotive components is exported to European customers. Sector boom to fuel M&A activities. Amtek (AMTK SP, NR), which is also a precision component supplier, plans to shift its focus to the booming auto sector via the proposed acquisition of Interplex, an automotive components company renowned for its miniature parts.
Amtek could pay up to USD210m for Interplex, valuing the company at a 21.9x FY13 P/E and 2.6x FY13 P/NTA (FYE May). This demonstrates the level of interest in auto component suppliers during this auto boom. Prefer Frencken at current valuations. Following news of the proposed acquisition, Amtek’s share price has rallied 38.9% to a high of SGD0.75/share.
At the current price of SGD0.66, the stock is trading at a consensus FY14 P/E of 10.5x and FY14 P/BV of 1.6x. While Interplex has certain cutting-edge capabilities in areas such as plating and insert moulding in the automotive industry, the uncertainty surrounding the acquisition, the post-acquisition execution as well as the high net gearing (134.6%) of the new entity, make Amtek less attractive compared with Frencken. Although smaller in size,
Frencken boasts a portfolio of blue-chip clients such as Valeo and Continental in Automotive, as well as engineering knowhow in the fields of medical, life sciences and semiconductors. Most importantly, the stock is trading at a 5.9x FY14 P/E and 0.55x FY14 P/BV, while its minimal gearing and strong earnings growth potential provide a good margin of safety.
Grossly Undervalued In a Booming Sector The recovery in Europe’s auto sector is apparent in the climb in car sales six months in a row. The sector is revving up as the market responds positively to Amtek Engineering’s bid for an auto components maker at a 21.9x FY13 P/E. However, we prefer Frencken given its lower gearing and stronger business. We lift our TP to SGD0.49, based on a 9.6x FY14 P/E and 20% discount to the peer average, as its valuation tries to catch up.
Frencken to benefit from Europe’s auto recovery. The 7.6% y-o-y growth in February registration of new passenger cars to 894,730 marks the sixth consecutive month of rising car sales in Europe, signaling that the region’s car sales are on a firm path to recovery.
We expect Frencken to benefit strongly from this recovery trend as the bulk of its automotive components is exported to European customers. Sector boom to fuel M&A activities. Amtek (AMTK SP, NR), which is also a precision component supplier, plans to shift its focus to the booming auto sector via the proposed acquisition of Interplex, an automotive components company renowned for its miniature parts.
Amtek could pay up to USD210m for Interplex, valuing the company at a 21.9x FY13 P/E and 2.6x FY13 P/NTA (FYE May). This demonstrates the level of interest in auto component suppliers during this auto boom. Prefer Frencken at current valuations. Following news of the proposed acquisition, Amtek’s share price has rallied 38.9% to a high of SGD0.75/share.
At the current price of SGD0.66, the stock is trading at a consensus FY14 P/E of 10.5x and FY14 P/BV of 1.6x. While Interplex has certain cutting-edge capabilities in areas such as plating and insert moulding in the automotive industry, the uncertainty surrounding the acquisition, the post-acquisition execution as well as the high net gearing (134.6%) of the new entity, make Amtek less attractive compared with Frencken. Although smaller in size,
Frencken boasts a portfolio of blue-chip clients such as Valeo and Continental in Automotive, as well as engineering knowhow in the fields of medical, life sciences and semiconductors. Most importantly, the stock is trading at a 5.9x FY14 P/E and 0.55x FY14 P/BV, while its minimal gearing and strong earnings growth potential provide a good margin of safety.
Monday, March 10, 2014
Singapore Stock Picks GuocoLeisure: SGD 0.84 BUY (TP: SGD1.43)
Dawn Of a New Era
GLL is embarking on a hotel-operator model that will see it expanding to 100 major cities by 2023. Its hotel division CEO, Michael DeNoma, has an impressive record for value-creation in his previous appointments, and we are positive on his execution capability. We reduce our holding company discount from 30% to 20%.
Maintain BUY, with a higher TP of SGD1.43. New broosweepm s clean. Since Michael DeNoma came on board as CEO of GLL’s hotel operations about two years ago, the group has embarked on an overhaul of its business model, retrofitting its flagship hotels to revitalise earnings while introducing new brands to serve niche segments more effectively. Underpinning the overall strategy is a vision to become a global hotel operator with a presence in 100 major cities by 2023.
Capable CEO whose interest is aligned with shareholders’. Mr DeNoma has a sound record in creating value in his previous capacity as CEO of Standard Chartered Global Consumer Bank. With his experience in brand-building coupled with GLL’s portfolio of prime hotel properties, the shift towards an asset-light hotel management model will enhance returns on capital as well as catalyse the stock’s re-rating. Notably, the interests of Mr DeNoma and his top managers – who have received up to 33m share options exercisable at SGD0.86 each - are aligned, and there is now incentive to move the options deep into the money.
Earnings on an upswing. London’s hospitality market is poised for strong gains in 2014-15, with revpar (revenue per available room) projected to grow 4-5% over 2014-15 as hoteliers regain pricing power, spurred by rising corporate demand. As one of the largest hotel operators in London, we expect GLL to benefit from the upswing. While retrofitting cost will weigh on earnings in the current year, this will be offset by interest savings from expiring high-cost mortgage bonds.
Maintain BUY, with higher TP of SGD1.43. We are reducing our holding company discount from 30% to 20% as the group makes the transition to an earnings-driven model. GLL has defined hospitality as its core business, while its non-core assets such as its Molokai property or Bass Straits Royalty may be divested at the right price, with the potential proceeds re-invested in its hospitality business
Source: DMG Research
Maintain BUY, with a higher TP of SGD1.43. New broosweepm s clean. Since Michael DeNoma came on board as CEO of GLL’s hotel operations about two years ago, the group has embarked on an overhaul of its business model, retrofitting its flagship hotels to revitalise earnings while introducing new brands to serve niche segments more effectively. Underpinning the overall strategy is a vision to become a global hotel operator with a presence in 100 major cities by 2023.
Capable CEO whose interest is aligned with shareholders’. Mr DeNoma has a sound record in creating value in his previous capacity as CEO of Standard Chartered Global Consumer Bank. With his experience in brand-building coupled with GLL’s portfolio of prime hotel properties, the shift towards an asset-light hotel management model will enhance returns on capital as well as catalyse the stock’s re-rating. Notably, the interests of Mr DeNoma and his top managers – who have received up to 33m share options exercisable at SGD0.86 each - are aligned, and there is now incentive to move the options deep into the money.
Earnings on an upswing. London’s hospitality market is poised for strong gains in 2014-15, with revpar (revenue per available room) projected to grow 4-5% over 2014-15 as hoteliers regain pricing power, spurred by rising corporate demand. As one of the largest hotel operators in London, we expect GLL to benefit from the upswing. While retrofitting cost will weigh on earnings in the current year, this will be offset by interest savings from expiring high-cost mortgage bonds.
Maintain BUY, with higher TP of SGD1.43. We are reducing our holding company discount from 30% to 20% as the group makes the transition to an earnings-driven model. GLL has defined hospitality as its core business, while its non-core assets such as its Molokai property or Bass Straits Royalty may be divested at the right price, with the potential proceeds re-invested in its hospitality business
Source: DMG Research
Wednesday, March 5, 2014
Singapore Stock Picks: Centurion Corp: SGD0.62 BUY (TP: SGD0.82)
More Sterling Growth Ahead
CENT’s 4Q13 core PATMI of SGD5.6m (+26.3% y-o-y), made on the back of SGD17.6m in revenue (+1% y-o-y), was in line. Its outlook remains positive, as total beds are expected to increase 60% to 54k which leads to a 32% core earnings CAGR in FY13-16. Expect further upside from new acquisitions of student accommodations in the UK and Australia. Maintain BUY, with a DCF-based TP of SGD0.82.
Drastic shortage of supply leads to 43% growth in accommodation business. Within Singapore’s workers accommodation business, an additional 50k-60k beds are expected to be delivered by the end of this year. This will increase the total supply of dormitory beds to 200k-210k, which falls well short of the demand created by the 500k work permit holders in Singapore. The evident shortage of supply will continue to put upward pressure on rental rates and occupancy levels coupled with CENT’s rapid expansion plans, we can expect the company to see strong growth from FY13 to FY16.
Gross and net margins continue to improve. All in all, we expect CENT’s gross and net margins to continue to improve. It grew 4% and 5% to 52% and 28% respectively in FY13 due to the: i) increase in contributions from its accommodation business, and ii) a 30% decrease in contribution from the optical business. We expect optical disc’s contribution to continue declining at a 30% rate annually, and the unit to cease operations by the end of 2015 - which would improve its margins as the optical business has been a drag on their earnings and margins.
Dividend increases 50% y-o-y to SGD0.006. Due to the company’s strong performance in FY13, management has declared a dividend of SGD0.006, up 50% from FY12. However, its dividend payout will remain low as the company is on an aggressive expansion plan.
Diversifying further into student accommodation business. After the acquisition of RMIT village, we expect management to further diversify into the student accommodation business by making acquisitions focused in Australia and London. For this segment, 2014 will be an exciting year of expansion
Source: RHB Research
CENT’s 4Q13 core PATMI of SGD5.6m (+26.3% y-o-y), made on the back of SGD17.6m in revenue (+1% y-o-y), was in line. Its outlook remains positive, as total beds are expected to increase 60% to 54k which leads to a 32% core earnings CAGR in FY13-16. Expect further upside from new acquisitions of student accommodations in the UK and Australia. Maintain BUY, with a DCF-based TP of SGD0.82.
Drastic shortage of supply leads to 43% growth in accommodation business. Within Singapore’s workers accommodation business, an additional 50k-60k beds are expected to be delivered by the end of this year. This will increase the total supply of dormitory beds to 200k-210k, which falls well short of the demand created by the 500k work permit holders in Singapore. The evident shortage of supply will continue to put upward pressure on rental rates and occupancy levels coupled with CENT’s rapid expansion plans, we can expect the company to see strong growth from FY13 to FY16.
Gross and net margins continue to improve. All in all, we expect CENT’s gross and net margins to continue to improve. It grew 4% and 5% to 52% and 28% respectively in FY13 due to the: i) increase in contributions from its accommodation business, and ii) a 30% decrease in contribution from the optical business. We expect optical disc’s contribution to continue declining at a 30% rate annually, and the unit to cease operations by the end of 2015 - which would improve its margins as the optical business has been a drag on their earnings and margins.
Dividend increases 50% y-o-y to SGD0.006. Due to the company’s strong performance in FY13, management has declared a dividend of SGD0.006, up 50% from FY12. However, its dividend payout will remain low as the company is on an aggressive expansion plan.
Diversifying further into student accommodation business. After the acquisition of RMIT village, we expect management to further diversify into the student accommodation business by making acquisitions focused in Australia and London. For this segment, 2014 will be an exciting year of expansion
Source: RHB Research
Singapore Stock Picks: Kingsmen Creatives: SGD0.95 BUY (TP: SGD1.10)
KMEN’s 4Q13 PATAMI rose 23.1% y-o-y to SGD7.6m on the back of a 8.2% y-o-y revenue growth, as it completed some projects during the quarter. The company’s outlook remains healthy, supported by the pipeline of MICE events and theme park launches across the region - although growth may be limited by its ability to take on more projects. Maintain BUY with a SGD1.10 TP, based on a 8x FY13F P/E (ex-cash).
Expect a better year ahead. Kingsmen Creatives (KMEN) has a healthy current orderbook of SGD138m (vs SGD81m a year ago), of which SGD117m is expected to be recognised in FY14. KMEN typically continually secures interior fit-out contracts throughout the year. That, coupled with the planned developments in the region (ie new malls and theme parks), indicates revenue and PATAMI are likely to continue to grow. On top of that, KMEN’s strong balance sheet (net cash of SGD59.2m as of end-FY13) puts it in a good position to bid for upcoming projects.
Regional developments a boon for KMEN. The pipeline of theme parks and shopping malls across Asia would be beneficial for KMEN. Closer to home, the Government’s plans for Changi Airport’s Project Jewel (a new mixed-use complex) is likely to benefit KMEN. International luxury brands are still expanding into Asia and into new markets, eg travel retail (in order to establish a retail presence in airports). As airports are being refurbished and new terminals built, such developments would provide more opportunities for the company. Other developments that could be positive for the company include the pickup of meetings, incentives, conferences and exhibitions (MICE) events as well as the pipeline of theme park launches in Asia.
Opportunities to enhance portfolio. There are several exciting theme parks expected to be launched over the next few years, which would benefit KMEN. Given the size of its operations, KMEN successfully securing some parcels of work in each theme park project – which is likely, given its track record - would enhance its portfolio. As such, we remain positive on its outlook for growth. Maintain BUY with a TP of SGD1.10.
Source: RHB Research
Expect a better year ahead. Kingsmen Creatives (KMEN) has a healthy current orderbook of SGD138m (vs SGD81m a year ago), of which SGD117m is expected to be recognised in FY14. KMEN typically continually secures interior fit-out contracts throughout the year. That, coupled with the planned developments in the region (ie new malls and theme parks), indicates revenue and PATAMI are likely to continue to grow. On top of that, KMEN’s strong balance sheet (net cash of SGD59.2m as of end-FY13) puts it in a good position to bid for upcoming projects.
Regional developments a boon for KMEN. The pipeline of theme parks and shopping malls across Asia would be beneficial for KMEN. Closer to home, the Government’s plans for Changi Airport’s Project Jewel (a new mixed-use complex) is likely to benefit KMEN. International luxury brands are still expanding into Asia and into new markets, eg travel retail (in order to establish a retail presence in airports). As airports are being refurbished and new terminals built, such developments would provide more opportunities for the company. Other developments that could be positive for the company include the pickup of meetings, incentives, conferences and exhibitions (MICE) events as well as the pipeline of theme park launches in Asia.
Opportunities to enhance portfolio. There are several exciting theme parks expected to be launched over the next few years, which would benefit KMEN. Given the size of its operations, KMEN successfully securing some parcels of work in each theme park project – which is likely, given its track record - would enhance its portfolio. As such, we remain positive on its outlook for growth. Maintain BUY with a TP of SGD1.10.
Source: RHB Research
Tuesday, January 28, 2014
Singapore Stock Picks: Osim International BUY TP(SGD2.60)
OSIM International: SGD2.39 BUY (TP:
SGD2.60)
Growth Momentum To Continue
OSIM's 4Q13 PATAMI surged 22.1% y-o-y to SGD27.6m, on the back of strong
revenue growth of 15.5% y-o-y. The PATAMI growth was boosted by a SGD42m FV
gain at its subsidiary, TWG Tea. Business volume is expected to remain
positive, supported by the region's demand for lifestyle products. We are
keeping our BUY recommendation and DCF based TP of SGD2.60.
Revenue growth likely to continue. OSIM's 4Q13 results met our
expectations. The revenue growth was attributed to healthy take-up rates of
its products, particularly uInfinity and uAngel, as well as contributions
from TWG Tea (TWG), which became a subsidiary in 4Q13 after OSIM increased
its stake in TWG to 53.7%. OSIM subsequently raised its stake further to
70%. We expect continued revenue growth for FY14-15, as OSIM is set to
benefit from rising demand for its products given its ongoing marketing
initiatives, as well as from increased y-o-y contributions from TWG.
Outlook to remain healthy. OSIM has been sticking to its strategy of riding
on celebrity appeal to reach out to customers in the region, which so far
has paid off for the company. We believe this strategy would continue to
work well, as OSIM has established itself as Asia's No.1 brand in
well-being and healthy lifestyle products, supported by rising purchasing
power of households in the region, especially China.
Maintain BUY, SGD2.60 TP. OSIM declared a final dividend of SGD0.02/share,
bringing the total dividend for FY13 to SGD0.06/share. We remain positive
on OSIM as it is a proxy to the region's growing demand for lifestyle
products. Its balance sheet
Singapore Stock Picks : Marco Polo Marine. BUY TP (SGD0.55)
Marco Polo Marine: SGD0.38 BUY (TP: SGD0.55)
Awaiting The Catalyst
At a glance, MPM’s 1QFY14 numbers look below expectations, with earnings down 28% y-o-y. However, adjusting profit from operations for comparability, core earnings grew 25%, dragged down only by finance costs from the SGD50m drawdown in medium term notes. We believe MPM will announce the deployment of these funds soon – providing a highly-visible near-term catalyst. Maintain BUY and SGD0.55 TP.
Adjusted profit from operations grew 25%, but earnings down due to much higher finance costs. MPM’s 1QFY14 earnings are down 28% to SGD3.2m, but this was due to the SGD2m finance costs incurred vs SGD0.3m a year ago and SGD1.6m a quarter ago. Adjusting 1QFY13 associate income, profit from operations actually grew 25%, which we see as an encouraging sign of core profit growth.
MPM likely to rapidly deploy the funds drawn. We do not believe that MPM will tap the medium term notes funds at 5.75% without having an immediate near-term deployment plan. As such, we think that a strong possibility exists for the company to announce, in the near-term, the acquisition of some new assets to drive growth. We previously flagged certain sub-sectors within the Indonesia’s offshore market that may soon become cabotage protected, which dovetails with MPM’s strategy.
Trim FY14F earnings by 10%, but highlight upside potential. We are trimming FY14F/15F earnings by 10%/5%, as we factor in the higher finance costs. This does not take into account the contribution from the new asset(s). Hence, we will simultaneously highlight the potential for upward revision after any such announcement.
Maintain BUY and SGD0.55 TP. We continue to like MPM for its: i) exposure to the cabotage protected Indonesian offshore support vessel (OSV) chartering segment, ii) outstanding technical capabilities, and iii) low valuations. We believe that the challenges faced by its tugs and barges fleet, and shipyard division have been priced in, with the stock trading at 0.75x P/BV. The asset(s) acquisition is the near-term key rerating catalyst.
Source:DMG
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