Summary: SingTel's Australian unit Optus said it is considering all of its options after the Australian Government canceled a A$958m funding for its consortium's (Opel) planned regional broadband network; this after the government found that Optus' proposed WiMax network would only meet 72% of specified premises in the under-served regional areas and not the 90% condition spelt out under the contract.
If Optus cannot make any claims, SingTel will write off A$9m it had spent on building a broadband network; Opel had intended to invest an additional A$918m on the network. While SingTel noted that the disappointing event is not expected to have a material impact on its FY08 results, there may be other implications.
For one, Optus will miss out on extending its reach into the rural areas and becoming a true network-driven competitor to Telstra. Secondly, we suspect Optus may need to increase capex on the A$500m 3G mobile phone network extension, as it will now be unable to piggyback on the subsidized Opel fibre network.
Meanwhile, Optus will need to focus on the FTTN (Fibre To The Node) tender, but current odds appear to favour Telstra. We are leaving our estimates unchanged for now and will review them once we get a clearer picture after its FY08 results announcement (due in early May). As such, we retain our BUY rating and S$4.35 fair value. (Carey Wong)
StarHub: S$10 UEFA Season Pass
Summary: StarHub has announced that it plans to charge S$10 (all prices before 7% GST) for its Sports Group subscribers to catch the 2008 UEFA European Football Championship in Singapore across all three platforms – cable TV, mobile and online.
However, those who sign up after 8 May will need to pay S$20 to catch these matches on four new channels, while non-Sports Group subscribers need to pay S$50. Out of StarHub's 500,000 subscribers base, we estimate that at least 50% will subscribe, scoring a minimum of S$2.5m for the event.
However, we believe the price that StarHub paid for the TV rights may be more than that. Hence, we would not be adjusting our figures. We retain our BUY rating and S$3.51 fair value. (Carey Wong)
Noble Group Ltd: Raising S$209m via share placement
Summary: Noble Group Ltd (Noble) has announced that it will be raising S$209m via a placement of approximately 100m new shares to institutional investors. The placement shares priced at S$2.09 each represent around 3.83% of the Group's existing share capital.
Net proceeds will be used for general corporate purposes and to support the Group's continued business expansion. In line with soaring commodities prices, we expect Noble will need more working capital to fund its business operations.
While the placement will serve to strengthen its capital base, there will be dilutive impact for existing shareholders. Pending further discussion with the management, our fair value of S$2.64 is under review. Nevertheless, we retain our BUY rating. (Lee Wen Ching)
Singapore Food Industries: Renewal of key catering contract
Summary: Singapore Food Industries (SFI) has announced the renewal of its key catering contract for a further 5-year term expiring 31st March 2013. This comes as no surprise as there is no major local competitor for this aspect of its business. We are retaining our HOLD rating with fair value estimate of 82 cents. (Carmen Lee)
BBR Holdings: Secured orders until 2011
Summary: BBR Holdings, with its three core business activities in General Construction, Specialist Engineering and Property Development, is well placed to benefit from Singapore's construction boom.
According to the BCA Singapore, construction demand is expected to hit some S$23-27b this year. BBR currently sits on some S$518m worth of confirmed orders which will last out to 2011. Based on our estimates, BBR should be able to recognize about S$200m this year and next year.
Management is also confident that it will be able to add further to its order book, given the plethora of projects currently in the pipeline. Besides its construction and engineering business, BBR also intends to focus on its property business, where it wants to be a residential boutique developer as well as a value-added property player.
BBR is also looking to grow its construction/engineering business regionally, where it can leverage on the global BBR network of 46 countries and latest internationally approved technologies. We do not have a rating on the stock. (Carey Wong)
For more information on the above, visit www.ocbcresearch.com for detailed report.
Tiong Woon Corporation: World-Class Heavy Lifter
Summary: Tiong Woon Corporation (TWC) is one of the leading one-stop integrated service providers in heavy lifts, heavy haulage, marine transportation and equipment installation works operating in numerous countries in the Asia Pacific region.
TWC derives the bulk of its revenue from its Heavy Lift and Haulage segment, which contributed some S$44.2m (or 67%) of its 1H08 revenue of S$65.8m, fueled by increased construction activities both domestically and from emerging markets such as Indonesia, Vietnam and the Middle East.
Going forward, TWC plans to actively seek business opportunities in the emerging markets as well as invest in higher capacity and specialized equipment. And in view of the good growth prospects in the oil-rich regions, TWC also plans to develop its fabrication and engineering competency for marine, oil & gas projects.
TWC also remains confident and will continue to work hard to grow its new income stream from fabrication and engineering projects. We do not have a rating on the stock currently. (Carey Wong)
For more information on the above, visit www.ocbcresearch.com for detailed report.
NEWS HEADLINES
- Brazil's Petrobras says it will order a new giant platform modeled on a working production unit and it wants the same firms, led by SembMarine's Jurong Shipyards, to build it. The original unit cost US$900m.
- Singapore's purchasing managers' index – seen as an early barometer of manufacturing – is at its lowest level in almost five years. - Island-wide office occupancy dipped in 1Q08, easing 50 basis points QoQ to 97.1%.
- Motorola is shutting down its handset production unit in Singapore by the end of this year, a near one-third cutback of its local workforce.
- CityDev's Chairman Kwek Leng Beng said the government should review its current land sales program, which was fixed in last year's buoyant market, and to rethink its decision to scrap the deferred payment scheme.
- DBS chairman Koh Boon Hwee said that although Asian banks were less affected by the US sub-prime crisis, all banks would feel the impact of the ensuing liquidity shortage.
- Biosensors announced the full launch of its drug-eluting stent system in major European markets as well as in key markets in the Middle East, Africa and Asia.
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