Singapore Stocks Pick: Mencast

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

Malaysia CPO Intraday Trading Results for March 2014

Dear readers,

Following are my proprietary trading results for March 2014 that just concluded.

Total Gross Profit was MYR3,575!!

Here are the list of trades results. If you would like to subscribe for the 1 week trial, just send me a whatsapp(0164866892) message " Subscribe CPO".

Month	March 2014		Underlying Instruments: CPO 3rd month
Date	Long/Short	Entry	Exit	Pts	Profit
1
2
3	Short	2848	2836	12	300
4	Short	2809	2797	12	300
5	Long	2835	2847	12	300
6	Short	2822	2810	12	300
7	Long	2875	2887	12	300
8
9
10	Short	2873	2895	-22	-550
11	Long	2889	2914	25	625
12	Short	2848	2836	12	300
13	Short	2835	2823	12	300
14	Short	2782	2770	12	300
15
16
17	Long	2756	2766	10	250
18	Long	2743	2754	11	275
19	Long	2769	2781	12	300
20	Long	2756	2743	-13	-325
21	Short	2743	2731	12	300
22
23
24	Long	2743	2730	-13	-325
25	Long	2691	2702	11	275
26	Short	2717	2705	12	300
27	Short	2678	2691	-13	-325
28	Long	2652	2663	11	275
29
30
31	Short	2652	2640	12	300
			Total	151	$3,775
		Total Contracts Traded		42
	Brokerage Charges Intraday Per Contract			42	$525
		Total Brokerage Charges
			NetProfit/(Loss)		$3,250

Intraday Trade Signals for Malaysia Stocks

Dear readers, I am extending my service to cover intraday short term trades and day trading on malaysia stocks. For interested readers you can view my blog posting in http://klse.i3investor.com/blogs/tradesignals/ or via this page. For readers who would like to subscribe to my real time service please drop me a message via whatsapp 0124808221 " Subscribe KLSE".

I will post my last two months performance in a few weeks time. So keep reading. I'll be BACK :)

regards,
Keith

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.

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

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

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