| UOB KAYHIAN | PHILLIP SECURITIES |
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First Resources (FR SP) Expect A Satisfying 1Q17 FR reported a record-high 1Q FFB production in 1Q17 on the back of a yield recovery and supported by new mature areas. FFB nucleus production decreased 18.5% qoq on seasonality but improved significantly yoy. We are expecting weaker 1Q17 qoq earnings due to weak production and a sharp decline in palm kernel prices, but a better yoy performance on stronger FFB production and a jump in CPO prices. Maintain BUY. Target price: S$2.15.
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Sembcorp Marine Ltd Expecting tardy recovery Revenue was in line with our expectation. Gross profit substantially missed our expectation, mainly due to costs incurred for a floater project which is pending finalisation with the customer. No details were given by the management on this project. The divestment of Cosco Shipyard Group Co., Ltd (Cosco) was completed in 1Q17. We upgrade our call to Neutral with an unchanged TP of S$1.58, based on a PER of 23.9x, since the last done price of S$1.63 is near our TP. This implies a downside of 3.1% from the last close price.
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OCBC |
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Venture Corp: Count on its growth momentum Venture Corporation Ltd (VMS) recorded a strong start to FY17 as 1Q17 revenue jumped 33.7% YoY to S$843.1m on the back of new product and programme execution with several customers. In-line with revenue growth, 1Q17 operating expenses rose 33.1% YoY to S$784.2m. Consequently, 1Q17 profit before tax (PBT) jumped 41.3% YoY to S$60.0m. Despite a 72.7% increase in tax expense, PATMI surged 35.6% YoY to S$48.6m, and met our expectations as it formed 23.7% of our FY17 forecast. Note that the first quarter has historically always been the weakest period in any given year since FY13. In our view, VMS’ strategy of value creation for customers that has been in the works for the past few years is now bearing fruit and we expect it persist in the years to come. In order to appropriately factor in VMS’ longer-term growth outlook, we are switching our valuation methodology from P/E-based to DCF-based (risk free rate: 2.6%; WACC: 7.7%; terminal growth: 2%) over a five-year horizon to derive a 12-month FV of S$13.00 (prev: S$11.00). Reiterate BUY on VMS.
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| CIMB | |
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Yangzijiang Shipbuilding Fortified builder ■ 1Q17 net profit of Rmb667m was 48% above our forecast and 40% above consensus on delivery of high-margin LNG vessels and resale of cancelled bulkers. ■ Shipbuilding gross margin was stable at 23% in 1Q17 vs. FY16’s 24%. ■ YZJ has proven to be a quality builder with the delivery of its maiden LNG vessels four months ahead of schedule, paving the way for more orders in this segment. ■ Enquiries on bulk carriers have improved yoy and management is confident of achieving US$1.5bn in orders for 2017. ■ Maintain Add with a higher TP of S$1.25, based on SOP (1x P/BV for shipbuilding and 0.85x for HTM business).
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