Summary: Infrastructural developments continue unabated especially in the Asian region. The Asian Development Bank expects Asia ex-Japan to grow by 8.3% in 2007 (+7.4% YoY) and 8.2% in 2008. These growth drivers are expected to come from rising domestic demand and consumerism which will push the region's affluence. In China, the government is committing about US$1 trillion to develop its transport infrastructure. In this report, we highlight companies that are able to leverage on this economic growth to give investors a good return in the medium to long term. ST Engineering's aerospace division is anticipated to ride the boom in air travel, Midsouth is poised to ride China's growth in the trucking industry and Midas is in the sweet spot for the estimated RMB1,500b government investment plan for the railway industry as a licensed manufacturer of rolling stock. We are positive on these companies that provide a parallel play to the infrastructural boom. Under our coverage, we have BUY ratings on ST Engineering, Midsouth and Midas. (Kelly Chia)
For more information on the above, visit www.ocbcresearch.com for detailed report.
Ezra Holdings Ltd: Clinches US$148 m contract
Summary: Ezra Holdings Ltd (Ezra), through its 48.9%-owned EOC Limited, has jointly clinched a regional contract worth US$148m to provide transportation and installation services for the Malaysian-Thailand Joint Development Area (MTJDA). This contract, which will commence in 3Q08 and end a year later, involves the use of various support vessels from Ezra, including EOC's heavy-lift, accommodation, pipe-lay vessel, the Lewek Champion. We understand that this is Ezra's maiden endeavour to jointly cooperate with a regional partner and to integrate Ezra's various business synergies, providing a "one-stop-shop solution" offshore support and marine service. We expect this contract to contribute positively to FY09F EPS by approximately 5 cents. Taking into consideration the bonus issue, we maintain our fair value estimate of S$4.03, based on 18x FY08F earnings. We reiterate our BUY rating on Ezra. (Serene Lim)
NEWS HEADLINES
- Wilmar International plans to raise up to US$600m in a 5-year convertible bond, with proceeds for the repayment of existing borrowings and for expansion.
- Keppel Land has entered into a 60-40 JV in Vietnam to develop a 9.7ha waterfront villa project in Ho Chi Minh City. The project, yielding about 140 premier luxury villa homes, has a total investment capital of US$55.2m.
- STX Pan Ocean is buying 3 bulk carriers for US$257m to meet demand for moving iron ore, coal and other commodities.
- Citing turbulent market conditions, Allco REIT has decided to cancel its non-renounceable preferential offering. The existing unit will not trade "ex-entitlements" as scheduled today.
- SembMarine has entered into a 60-40 JV with a Saudi Arabian partner to build, own and operate a 21ha floating dock for shipbuilding and ship repair in Saudi Arabia.
- Mermaid Maritime has secured 2 contracts worth about US$32m to US$38m to provide remotely operated vehicle and diving services to BP Indonesia.
- Oculus said it had entered into an agreement with Aretae and the vendors to extend the time for definitive agreements on the RTO deal by two months from Nov 30. The terms of the definitive agreements are still being finalized.
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