CIMB - 14 Nov 2007

What’s on the table

Hiap Seng Engineering (S$0.625) - 1HFY08 results - Murky near-term outlook Hiap Seng’s 1H08 core net profit of S$4.6m (-39% yoy) was 46% below our expectations on slower-than-expected revenue and lower-than-expected margins from the gas compressor segment. Order book, however, remained stable at S$210m. We have cut our forecasts by 19-22% for FY08-10 to reflect the lower margins for gas compressors and slower contract wins ahead. Our target price has been lowered to S$0.71 from S$1.20, now based on 11x CY08 revised earnings (from 15x previously). We recommend investors to switch to Rotary Engineering for exposure to the oil and gas EPC sector, driven by Jurong Island expansion and a boom in the Middle East.

Downgrade Hiap Seng to Neutral from Outperform.

Quick Takes

· Plantation sector - Crude oil holds more sway over CPO price
· Indofood Agri Resources (S$2.2 - Beneficiary of rising CPO prices
· Golden Agri Resources (S$1.97) - Good proxy for rising CPO prices
· Sino-Environment (S$3.06) – 3QFY07 results - No headway in desulphurisation
· C&G Ind (S$0.54) – 3QFY07 results - Margins wobble, but sales on full throttle
· KSH Holdings (S$1.01) - 1HFY08 results - Slow start but 2H better
· ComfortDelgro Corporation (S$1.85) - 3QFY07 results - A walk in the park
· Ho Bee (S$1.7 - 3QFY07 results - Kickers from remaining Sentosa projects
· United Engineers (S$3.90) - 3QFY07 results - Improving performance
· Parkway Holdings (S$3.94) - 3QFY07 results - Another great quarter
· Luzhou Bio-Chem (S$0.355) - 3QFY07 results - High corn price caps margins
· Celestial Nutrifoods (S$1.25) - 3Q07 results - Robust sales offset higher costs
· Valuetronics Holdings (S$0.25) - 2QFY08 results - On its way