Excerpts from latest analyst reports....
AmFraser says STX OSV is a world-class leader, buy with a TP of $1.60
Analyst: Lee Yue Jer
Non-fundamental market noise drowning out true valuations. We initiate coverage on STX OSV with a BUY and a fair value of $1.60.
STX OSV is a world leader in building top-class Offshore Support Vessels (OSVs), having built 6 of the 13 vessels named ―"Ship of the Year".
In recent months, fears of European debt contagion, a Chinese slowdown/hard landing, a jobless US recovery, and most recently rumours of STX OSV’s parent selling its 51% stake have together depressed the stock 35-50% from its high.
These are all non-fundamental market noise. STX OSV’s operations remain intact – the order pipeline was delayed, not cancelled, and its margins are at an all-time high courtesy of operational efficiency.
It pays dividends too. We expect 2011F dividends of $0.10, or a 8.8% yield (of which $0.05 has been paid). Fair value $1.60. BUY.
This is another of our top picks with a strong potential to double within the next 3 years for 30%+ compounded returns including dividends.
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DBS Vickers says Hi-P (57 cents) is 'fully valued'
Analyst: Tan Ai Teng
Margin compression accelerated. Hi-P’s net profit fell 81% y-o-y to S$6.5m despite 8% higher revenue. Sequentially, sales grew 34% but profit plunged 42%. Stripped off almost S$7m of impairment charges, core profit would be S$13.5m, ahead of our lowered estimate.
However, margins are crashing big time – underlying net margin shrank to 4.4% from 6% in Q2, 10% in Q1 and 16% in the year ago period. Weak margin was due to more assembly work (higher RMAT without value add), pricing pressure and higher labour costs.
We believe low yield of new products is partly to blame.
Outlook remains uncertain. Hi-P expects q-o-q recovery for 4Q11 but not y-o-y growth given continued margin pressure, and the need for more restructuring until 3Q12 as well as investment in new capabilities.
We are more concern that over time, the bigger risk for Hi-P is market share loss in the tablet/smartphone segment (which accounts for 60-70% of sale) if major customer RIM
continues to weaken and/or if Hi-P could not fend off new competition in the Apple’s supply chain or cultivate new accounts in time.
Hence, in view of wavering prospect, we maintain Fully Valued on Hi-P and TP of S$ 0.43 based on –1SD FY12 PE.
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