OCBC Report - 14 Jan 2008

FOCUS Ezra Holdings Ltd: Exceptional gain boosted Ezra’s profits

Summary: Ezra Holdings (Ezra) posted an impressive set of 1Q08 results; topline grew by 110% YoY, while bottomline surged 4014% to S$189.2m. Stripping away the following one-off exceptional items, Ezra's recurring net profit rose 250% to S$16.0m.

The proceeds from the divestment in EOC, denominated in NOK, would be used to fund the construction of two 27,000 bhp deepwater MFSVs.

As such, the proceeds resulted in translation currency losses as the NOK depreciated against the strong reporting currency, SGD. Going forward, we note that the Saigon Shipyard would be fully operational by mid 2008.

Taking into consideration the recent gain from EOC’s disposal and the remaining stake in EOC, we expect recurring net income to rise 63% in FY08 and 132% in FY09. Rolling over our valuation to FY09, we maintain our fair value estimate of S$4.02 based on PER 18x FY09. Reiterate BUY. (Serene Lim)

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Tee International: Maintaining growth, but fairly valued at this stage

Summary: Tee International’s (TEE) reported a 50% YoY and HoH drop in 1H08 revenue due to the shift in its focus to property development. However, bottom line improved substantially by 280% YoY and 169% HoH due to the upwards revaluation of its property holdings.

TEE has secured 15 projects to date in Singapore and Malaysia with an approximate value of S$40m, bringing its total outstanding order book to approximately S$73m. We have raised our FY08 net profit estimate from S$2.8m to S$4m, on account of the revaluation of properties.

Management has declared that no dividends will be paid out for FY08, but instead proposed a 3-for-20 bonus share issue and a 1-for-5 bonus warrants issue. Our fair value estimate has been raised from S$0.37 to S$0.51 based on 15x FY08 PER. As TEE is currently trading close to our new fair value, we are upgrading it to a HOLD. (Ritesh Menon)

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Property Sector: The niche players

Summary: Recently, we visited four property developers with market cap of S$1b and below to see how this segment of the market is performing. These are Hiap Hoe, Ho Bee, Sim Lim and Soilbuild.

These companies target the mass to mid-tier segment of the property market and two of them (Hiap Hoe and Sim Lian) have the added advantage of tapping on their construction arms as they are developer/contractor.

Sim Lian and Soilbuild have their land banks in suburban areas, and Soilbuild enjoys a reasonable rental income from its business space. Ho Bee and Hiap Hoe are focusing on the mid-to-high end segment, where the bulk of their land banks are located in prime districts.

Although Ho Bee’s residential developments on Sentosa Cove remain its main highlight, it is able to derive stable rental income from its current portfolio of industrial and commercial properties.

Most of these companies have enough projects to ensure earnings visibility till 2009, largely riding on projects already launched or soon-to-launched. We do not have ratings on the four stocks. (Brandon Lee)

For more information on the above, visit www.ocbcresearch.com for detailed report.

NEWS HEADLINES

- Mapletree Logistics Trust is set to acquire a warehouse in South Korea for S$17.7m, its first acquisition in the country.
- TUI AG, Europe’s largest travel company and owner of the Hapag-Lloyd shipping line, denied a report by a French newspaper that it is in merger talks with Neptune Orient Lines. NOL refused to comment.
- Chemoil Energy has appointed Clyde Michael Bandy as its Chairman and CEO. Mr Bandy has over 35 years experience in the energy industry.
- STATS ChipPAC plans to distribute US$813m to shareholders though a proposed capital reduction. The amount works out to 39 US cents per share based on present share capital.
- A second Airbus A380 joined SIA flight this weekend, which will also be employed on the Singapore-Sydney route. SIA said it has firm orders for another 17 A380s, for a total of 19 aircraft.
- Yanlord Land Group has launched another batch of apartments at its Shanghai Riverside City project. The company said the latest batch of pre-sold apartments commanded an ASP of about 34,500 yuan psm, a 42% increase since July 2007.
- E3 Holdings’, formerly Ei-Nets Holdings, president Anthony Soh unveiled a new China-driven strategy, focusing on real estate in the North-east region as well as solar energy.