Yongnam is expected to report an operating loss in the upcoming 3Q13 due out November 11, due mainly to two factors, according to Maybank Kim Eng.
First, the company is expected to have incurred incurred cost overruns from three ongoing project.
"Based on our channel checks with other industry players, we understand that the cost overruns primarily relate to the Sports Hub that is to be completed by April 2014. This could be due to the complexity of the construction works and tight schedule," said Maybank.
Second, the company is also seen to suffer a "significant" one-off loss on disposal of fixed assets.
This led OCBC to lower its earnings estimates for FY13-15 by up to 37%.
"In view of the upcoming losses, which will dent FY13 earnings, and in the absence of new contracts being secured YTD, we are less optimistic about its earnings prospects," reckons Maybank.
Still, the research firm saw some potential upside in new contracts that may be secured in the coming months.
"We suspect M+S projects will be the key contract. MRT Thomson Line contracts are periodically placed out to main contractors and sub-contracts should be announced in 4Q13, at the earliest. We have factored in S$150m and S$350m new contracts into our FY13-14 forecasts, respectively," said Maybank.
Ezra Holdings Limited (SGX: 5DN) flew 8.9% so far this week to close at S$1.34, making it snatch the “Singapore “Flyer” of the Week” accolade from our hands.
Ezra is an offshore contractor and provider of integrated offshore solutions across a broad spectrum of the support supply chain.
On 30th of October, the company announced that the Subsea Services (EMAS AMC) and Offshore Support Services (EMAS Marine) divisions have been awarded some US$110 million worth of new projects in subsea construction and offshore support services.
Ezra’s Group Chief Executive Officer and Managing Director, Mr Lionel Lee, elatedly said, “I am delighted with the steady progress that EMAS AMC has made this year. Not only are we continuing our winning momentum, but we have also demonstrated that we have positively rebounded, and that project execution is reaching a higher level of operational efficiency. We are now beginning to see various repeat clients, which mean we are gaining recognition for the good work we are doing.”
Last week, the company announced a record US$1.26 billion in revenue for its full year results in FY2013 and the order book stands upwards of US$2 billion.
Ezra is trading at a historical PE ratio of 19 and sports a dividend yield of 0.5%.
R Sivanithy
The Business Times
Friday,Nov 01, 2013
In response to the tumultuous events of the past three weeks involving the speculative trio of stocks Asiasons, Blumont and LionGold, the Singapore Exchange (SGX) last Friday issued a detailed clarification to correct what it believes are misconceptions about its role as frontline market regulator.
Clearly intended to be the final word on the subject, SGX's explanations are useful as they address gaps in the public's understanding of the way regulatory matters are handled and how the exchange views its role.
Last Friday's release should be compulsory reading for all parties interested in regulatory matters, how discipline is maintained in daily trading, and overall governance.
From a close reading of SGX's release, the first point to note is that the exchange's powers are limited almost wholly to issuing warning signals to the market if trading takes an unusual turn.
These warnings range in strength, starting with a query - the first signal that something may be amiss. Then it progresses to designation (which occurs if there may be possible manipulation and/or excessive speculation); and ends with an exchange-driven suspension (when the exchange thinks the market is not orderly, informed or fair).
A temporary suspension could, of course, come ahead of designation as shown in the case of the speculative trio. But the point that should be stressed is that SGX's primary regulatory role in daily trading - apart from enforcing its listing rules - is to sound warnings.
The second point is that once signalling has progressed to a suspension, the market is then assumed to be fully warned.
In this context, "warned" may be equated with "informed", and a lifting of the suspension should not be seen as an automatic all-clear that everything is above board.
In fact, the very opposite may hold true because SGX took pains to emphasise that its three signalling tools are completely divorced from any behind-the-scenes investigations that might be simultaneously undertaken into insider trading and market manipulation, and that such investigations can be ongoing without trading being suspended.
The official stance is therefore that if SGX has progressively raised its warning level from a query to a designation or a suspension and then lifts the trading curbs, traders and punters should approach the stocks in question with extreme caution as investigations could be in progress. According to SGX, this is in line with global practice, the logic being that if everyone has been warned, then orderly trading is possible - even if the market does not know whether there are investigations underway.
Fair enough; after all, the exchange is in the business of operating a marketplace by bringing buyers and sellers together, and that has to be a priority. However, there were traders who jumped into the three stocks last week after their designations were lifted only to be told a few days later that investigations were on - information which promptly led to all three collapsing.
It would have been much better if the market had been told of continuing investigations before the designation was lifted or if Friday's clarification was issued before normal trading in the three stocks resumed. That way, punters would have been under no illusions that a lifting of an SGX-initiated designation meant all was well.
Timing issues aside though, there remains one grey area which hasn't been resolved: SGX's Friday declaration that it does not specify contra trading since this is wholly the purview of individual broking houses.
This, of course, makes sense as it is brokerages and their dealing staff who bear the risks of contra trading. So it is probably wise to leave it to brokers to decide whether to allow such trading or not.
However, when the exchange classified the trio as designated securities earlier this month, reports from brokers were that they were told by the exchange not to allow contra trading, even for clients who had already paid upfront. This caused tremendous confusion and unhappiness among dealers and their customers - quite naturally, because money was lost.
There's therefore a contradiction here which should be cleared as soon as possible. Does SGX designation mean contra trading is automatically suspended? Or is it only prohibited by the exchange in certain special cases? If so, what are the circumstances under which the exchange can stop contra trading, given that it has said it does not interfere with such trading?
In Singapore it is often a case of Courts Asia (SGX: SGX: RE2) or Challenger Technologies (SGX: 573) when it comes to buying electrical and electronics goods. And let’s not forget Best Denki, which runs one of Japan’s largest networks of chain stores.
Courts, which can trace its history to an 1850 tinker shop in Cambridge, has delivered one of the highest Return on Equity (RoE) in the market. At around 19%, its RoE is significantly better than the average for the Singapore market’s 10%, as measured by the 30 companies that make up the Straits Times Index (SGX: ^STI).
Interestingly, Courts Net Income Margin is not especially high. At 5.4% the retailer only makes a bottom-line profit of $5.40 on every $100 of sales it rings up at its till. The margin is uncannily similar to that of shopping-mall rival Challenger. What’s more, it closely resembles that of supermarket retailers Dairy Farm (SGX: D01) and Sheng Siong (SGX: OV8).
But what Courts lacks it Net Income Margin it makes up for in sales efficiency. The company generates $1.30 of sales for every dollar of asset employed in the business. So if you are ever approached by enthusiastic in-shop sales staff, just remember they are not being pushy, they are simply focussed on the Asset Turnover.
Courts Asia has taken on a fair bit of debt, though. Its Leverage Ratio of 2.6 is quite a bit higher than the market average’s 1.7.
Assembling the three key parts of Courts Asia’s financials, it is easy to see what sparks the electrical retailer. Its Return on Equity of 18.3% is the product of a low Net Income Margin of 5.4%; an above average Asset Turnover of 1.3 and a weighty Leverage Ratio of 2.6.
