Excerpts from analyst reports …..


Westcomb Securities raises target price of Oceanus to 53 cents
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Sum of the parts valuation of Oceanus by Westcomb Securities' report of Sept 10

Analyst – Lee Khai Chian: If Oceanus’ restaurant business progresses as planned, Oceanus (www.oceanus.com.sg) could achieve an astonishing growth, a rate far outperforming its peers in any measure. Revenue is expected to grow from RMB 25m in FY09 to RMB 786m in FY11 while net profit is set to increase from RMB 0.8m to RMB75m in FY11.

In view of greater contribution from restaurant business in coming years, we prefer Sum of The Parts (SOTP) valuation methodology which allows us to evaluate each division of the company separately.
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Creative dish: Abalone on a shish kebab stick. Photo: Oceanus

At this juncture, valuation on food processing division is deferred until the segment’s revenue becomes significant. Farming and food restaurant divisions are valued at 6x and 10x FY10 EV/EBITDA respectively.

The lower multiple for farming business as compared to restaurant business is due mainly to risk associated with biological assets, volatility in abalone’s selling price and potential damages caused by natural calamity.

The 10x multiple attached for restaurant business is undemanding given that the restaurant companies in China are trading at average multiple of 12.6x.

Net debt is then netted off to derive a target price of S$0.53 (previous S$0.44). We believe there is potentially significant upside for our target price, if the restaurant business could achieve better turnover and operating efficiency. Maintain BUY; Raise target price to S$0.53:


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Phillip Securities raises fair value of Sinotel to 93 cents
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Comparison of Sinotel with its US-listed peers by Phillip Securities.

Analyst – Mark Chow:
Sinotel’s share price when we issued our report in August was only S$0.275, it has run up to S$0.585 since and we attribute the main reason to the announcement of the American Depository Receipt (ADR).
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Sinotel installed a wireless mobile phone enhancement system for the Beijing Railway station.

With the ADR just round the corner, we are pricing Sinotel (www.sinotel.com.sg) closer to its US-listed peers such as China Grentech Corp Limited and Telestone Technologies Corporation (above table), which are currently trading at a PE of 13.53x and 6.66x, respectively.

With US investors likely to come in, the view that Sinotel is priced at a discount versus its
peers is not unlikely. We thus move our PE to 10x FY09 forecasted earnings. This gives us a fair value of S$0.93, maintaining our BUY call. From the last traded price of $0.585, this represents an upside potential of 59%.

As we mentioned earlier, we view the ADR as a significant catalyst to the recent run up in share price, approval of which provides US investors a channel to purchase Sinotel shares that is still trading at a significant discount versus its peers.

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