Summary: Midas Holdings Ltd (Midas) reported a strong set of 3Q07 results with topline growing 44.7% to S$39.1m and net profit rising 44.9% YoY to S$9.5m. For 9M07, Midas' bottomline grew 50% YoY to S$23.2m. Midas continued its contract winning spree with 3 secured in 3Q07 and its JV winning a significant part of a RMB2.16b job for the Shanghai Line 10. We expect Midas to plan for additional capacity expansion to be operational by 1Q09 to address current railway markets as well as other possible high value segments. In view of its failed 30% bid for NELA, we think that Midas is on the prowl for an equivalent M&A opportunity. We resume coverage with a BUY rating using a PE-based methodology as we believe that earnings will be the key share price driver in the future. Pegged at 30x FY08 PER, our fair value is S$1.85 cross checked with an undemanding 0.5x PEG ratio. We project 52% net profit CAGR in our FY07-09 forecast period. (Kelly Chia)
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Tat Hong Holdings Ltd: Surpassing expectations again!
Summary: Tat Hong Holdings (THH) posted stellar 2Q08 results yesterday. Net profit surged to S$22.9m (147% YoY, 32% QoQ), underpinned by an increase in revenue to S$160.2m (52% YoY, 16% QoQ), and record gross profit margins of 40.6% (increment of 11.4% YoY). Improvement came from across all business segments, with Crane Rental division registering the highest growth. THH's Australian-listed subsidiary also did well from recent acquisitions. As such, the management has declared interim after-tax dividends of 3.26 cents per share. Going forward, TBG intends to expand the operations and secure long-term structured rental contracts in Australia. Over in Singapore, the recent move by the government to postpone several public projects is working in THH's favour as this translates to a longer income visibility. Against this positive results and continued boom in the construction and infrastructure industry, we are bumping up our FY08 and FY09 earnings forecast. Rolling over our valuation to FY09, our fair value is now S$3.30 (from S$2.34) based on 16x FY08/09F blended earnings. Maintain BUY. (Serene Lim)
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City Developments Ltd: Most defensive developer
Summary: City Developments (CDL) reported a very good set of 3Q07 results with revenue improving 20% YoY to S$796.2m, and net profit growing over 32% YoY to S$169.5m. But PATMI was distorted by a high base effect and tax credits; excluding the one-off items, the pre-tax growth was even stronger at 61% YoY. All divisions saw strong growth, but the key driver came from CDL's residential segment. Going forward, the residential segment is likely to continue to be the key growth driver as it has over S$1.6bn of pre-tax profit yet to be recognised. Finally in the current volatile market, with uncertainty of the credit market and continued appreciation of S$, we prefer developers with a defensive earnings profile. In that context, we like CDL for its domestic residential and office market exposure. Moreover, with S$3.9bn worth of investment assets to be unlocked, we see CDL as most defensive in an uncertain market. We maintain our fair value of S$18.80 and BUY rating. (Winston Liew)
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Pacific Andes Holdings: CFG will continue to drive growth
Summary: Pacific Andes Holdings (PAH) posted a 46% YoY increase in 3Q07 net earnings to HK$85.2m, buoyed by stronger performance from China Fishery Group (CFG). The latter reported a 72% YoY jump in 3Q07 net earnings to US$19.6m on a 143% surge in revenue to US$95.5m. PAH completed the increase of its stake in CFG in Jul 2007, which currently has 23 super trawlers and about 6% of the total fishmeal processing capacity in Peru. CFG, with its enlarged operation in the North Pacific and Peru, will continue to drive PAH's growth. We are expecting CFG to report a doubling in profits to US$94m in FY07 versus US$49.0m in FY06. We believe that consumer demand in China, especially for fish products, will remain strong. We have lowered our fair value estimate from 96.5 cents to 87 cents mainly due to the 6% appreciation of the S$ against the HK$. As the upside potential is around 20%, we maintain our BUY rating. (Carmen Lee)
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Unisteel: 3Q07 damped by higher taxes, forex loss
Summary: Unisteel Technology Limited (UTL) posted a pretty mixed set of 3Q07 results; although revenue jumped 30.6% YoY (+53.0% QoQ) to S$79.3m (5% above OIR forecast) in the seasonally stronger quarter, which also included 2 months' contribution of S$13m from recently acquired JC Metal (JCM), earnings fell14.2% YoY (+40.6% QoQ) to S$11.5m (15% below OIR forecast). Nevertheless, management expects further sequential improvement in 4Q07, as orders from its HDD customers remain strong. But unless 4Q07 turns out to be an exceptional quarter, UTL is likely to meet our original FY07 estimates. As such, we are paring back our revenue (down 5.1%) and earnings (down 14.8%). We also need to reduce our FY08 estimates to reflect higher tax and lower margin assumptions. While this drops our fair value from S$2.59 to S$2.16, based on 15x blended FY07/08 PER, it still offers a decent 23.2% upside. Hence we retain our BUY rating. (Carey Wong)
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Golden Agri-Resources Ltd: 3Q07 boosted by high CPO prices
Summary: Golden Agri-Resources (GAR) released its 3Q07 results yesterday. Revenue increased 83.3% YoY from US$291.2m to US$533.7m, mainly due to the trend of rising CPO prices. Although gross profit margin increased from 24.07% to 34.39%, cost of sales rose from US$221.1m to US$350.2m, +58.4% YoY. This was mainly attributed to rising CPO prices as GAR, due to logistics reasons, purchases CPO/palm kernel in some areas. On a YTD basis, revenue rose 47.1% YoY to US$1.2bn and profit attributable to equity holders rose 36.5% to US$591m. Traditionally, FFB production during the fourth quarter is the highest due to favourable weather conditions of heavier rainfall. Following the drought conditions in 2H06 that affected FFB production, it appears that GAR is in the recovery phase in 2H07 with improving weather conditions and FFB production. Pending the analysts' briefing later today, we would be reviewing our previous BUY rating and fair value estimate. (Selena Leong) Jishan Holdings Ltd: Weaker than expected 3Q07 results Summary: Jishan Holdings Ltd (Jishan) released a weak set of 3Q07 results yesterday. Revenue dropped 14.6% YoY to RMB60.2m, due to declining export sales in an increasingly competitive export market. Net profit fell 77% YoY to RMB0.3m due to lower sales and increased costs. With recent reports casting "Made-in-China" labels in a negative light, overseas consumer confidence could be affected and export demand could decline. This could result in oversupply in the domestic market, resulting in a reduction in ASP and lower margins. In addition, if the central bank allows the RMB to appreciate at a substantially faster rate against the US$, Jishan's translation losses would grow. A 5% appreciation of the RMB YTD affected Jishan's YTD earnings negatively by 27.1%. In view of the challenging operating environment, our FY07 and FY08 earnings were lowered from S$6.5m and S$8.4m to S$5.8m and S$5.9m, respectively. As Jishan's share price has come off from a recent high of 16 cents to 9 cents currently, we are upgrading our previous SELL rating to HOLD, with a fair value of S$0.08 (P/B of 0.8x). (Selena Leong)
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NEWS HEADLINES
- Wilmar International Limited reported a 175% YoY surge in 3Q07 net profit to US$195.1m, helped by record performances in all key business segments.
- HTL International Holdings posted a 0.5% YoY dip in 3Q07 revenue to S$164.2m and net loss of S$4m (3Q06 net profit of S$11.7m), due to increasing competition and rising costs.
- Boustead Singapore achieved a 227% YoY rise in 1H07 net profit to S$26m and 48% jump in revenue to S$206.2m, benefiting from higher revenue from its energy-related engineering division and real estate solutions division.
- Olam International registered a 14% YoY gain in 1Q08 net profit to S$9.2m and 53% climb in revenue to S$1.38b due to robust growth in both sales volume and net contribution across all its four business segments.
- Hotel Properties posted a 67% YoY increase in 3Q07 net profit to S$15.2m and 45% jump in revenue to S$110.4m due to its hotels and resorts in Maldives, Bali and Singapore.
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