Buy, Sell, Hold....What analysts say

DBS VICKERS :


Growing optimism about the improving US recovery and Europe’s economy moving past the recession trough should see a return in interest among recovery names and companies with significant revenue exposure in both regions.

We continue to prefer technology stocks - CSE Global and Venture, which are early recovery plays. Selected industrials – Ezion and Goodpack will leverage on their niche positions in the global arena. Stocks with earnings visibility supported by yield are likely to remain in favour - our picks are SingPost, Comfort Delgro, ST Engineering and HPH Trust and Overseas Education.


Continue to avoid stocks with exposure to emerging markets which are likely to underperform - Petra, Ascott REIT, Religare, AIT and SingTel.

CSE Global ---> DBS Vickers:

BUY S$0.87
Upcoming IPO a defining factor;
Price Target: 12-month S$1.07 (Prev. S$0.97)

• Our report addresses the rationale for divestment of UK business and potential use of proceeds
• We estimate that CSE will take three years to recover the earnings gap due to divestment of UK business
• Our TP is revised to S$1.07, implying potential returns of 28%. Maintain BUY

Likely to return most of the proceeds to shareholders. Management aims to reduce CSE’s over-reliance on a single country, single sector and a single program via divestment of UK healthcare business (~20% of group profit). However, standalone healthcare business may be too small for an IPO so management also seeks to divest UK automation business (~13% of group profit). Most importantly, UK business (~33% of group profit) can fetch higher PE than CSE itself, unlocking value for its shareholders. CSE intends to return most of the cash proceeds (we estimate 26-28 Scts DPS) to its shareholders and operate as a net cash entity, saving interest costs (~S$2m annually or 4% of profit)

CSE may take three years to recover lost earnings. About 10% earnings CAGR over 2013-16 could be inorganic as CSE can pursue acquisitions worth S$100m over the next three years. About 5-10% earnings CAGR can be achieved organically as CSE secures revenue from newer geographies in Asia (Vietnam & Indonesia), Africa and sees better momentum in the Middle East. There is a good visibility of non-UK business, which accounts for an estimated 75-80% of CSE’s outstanding order book.

Maintain BUY for potential 28% returns. Our TP of S$1.07 is based on its historical average of 9.6x FY13F PE plus an additional S$50m benefit from potentially successful IPO of UK business.

HI-P INTERNATIONAL ---> OSK-DMG


Last night marks the debut of Apple’s highly anticipated
iPhone 5s and iPhone 5c. While there are no surprises for the new features and designs, the pricing of iPhone 5c came as a disappointment, in our view.

Previously speculated to target the mid-end market, the iPhone 5c is now priced at USD549 in USA or CNY4488 in China, only 16.6% cheaper than yesterday’s iPhone 5 which will cease production. Despite coming in five youthful colors, it will not be easy for iPhone 5c to penetrate the emerging market.

Nonetheless, the fact that now Apple is able to sell its phones through the world’s largest wireless carrier China Mobile which has over 740m subscribers will ensure demand boost.

Therefore, we expect Apple’s Singapore casing component supplier and contract manufacturer - Hi-P (SGD0.76, BUY, TP:SGD0.96) to benefit. In line with our previous channel checks, Hi-P is a key source supplier of these colorful casings for Apple. (Edison Chen)

YANGZIJIANG ---> OSK-DMG

We upgrade Yangzijiang Shipbuilding (YZJ) from Neutral to BUY with a higher TP of SGD1.31 vs SGD1.00 previously. In our view, the shipbuilding capacity cut in China and the recovery of ship orders in the dry bulk sector arising from improved supply and demand will drive the stock’s re-rating. Our SGD1.31 TP implies 9.5x FY14F P/E.

The Baltic Dry Index jumped 120% YTD and 54% in the past month due to slower supply growth while demand remains steady. Ship prices have risen by 5-12% from the bottom six months ago, and seasoned shipping players are expanding their fleet aggressively.

NAM CHEONG ---> OSK-DMG:

We showcased NAM CHEONG LTD at our Hong Kong Asean Corporate Day last Thursday. Investors warmed up to the company’s business model, growth prospects and low valuations, which struck a chord with the value- and growth-oriented funds. Meanwhile, the recovery of commercial shipbuilding in China is a strong support to vessel prices. Maintain BUY with SGD0.37 TP.

YING LI ---> UOB KAY HIAN:

All economic indicators bode well for the demand for
Ying Li’s commercial and office properties. Ying Li has collected close to Rmb1b in pre-sales from Ying Li International Plaza and the retail mall has also secured 64% of contracted leases.

The SSE Property Index has risen 21% since August. Investors have remained bullish amid no news of further property tightening measures. Without this regulatory headwind, we believe the discount between share price and RNAV of Chinese developers should narrow. Maintain BUY and target price of S$0.64, pegged at a 23.5% discount to our RNAV/share.