Stock Picks

SMRT: Buy (DBS Vickers 30 Apr)
SMRT continues to impress with effective cost management and with strong ridership growth. Full year earnings came in slightly ahead of expectations, up 11% y-o-y to S$150 million while revenue grew 8% y-o-y to S$800m. EBIT grew 23% y-o-y, led by the MRT segment (+25%), rental and ads (+22%) and a turnaround from a loss of S$5.1 million for the taxi segment to a profit of $0.6m. EBIT margin has expanded from 15% five years ago to over 22% currently. Furthermore, SMRT has highlighted the possibility of giving a special dividend. We estimate that SMRT can pay another 10-15 cents in special dividends As such, we have raised our target price to from S$1.78 to S$2 and upgrade the stock to a BUY.

SMRT: Buy (DMG 30 Apr)
SMRT reported FY08 net profit of S$149.9m, up 10.7%. Average daily rail ridership was up 7.6%, which contributed to the strength in revenue and earnings. We expect rail ridership numbers to remain robust in the following quarters, mainly due to commuters switching from taxis to rail following taxi fare hikes last December. This will lead SMRT earnings higher. SMRT remains a BUY with a S$2.08 target price.

SMRT: Underperform (CIMB-GK, 30 Apr)
SMRT's FY08 net profit of S$149.9m (+10.7% yoy) was within market consensus and attributable to strong cost-control despite rising energy costs. Revenue rose 7.9% yoy to S$802.1m, driven by higher train and bus ridership, improved hire-out rates for taxis, better advertising and rental income. Overall expenses were well-managed but SMRT could be challenged in FY09 by higher energy costs for both its train and bus operations, and start-up expenses ahead of the opening of Circle Line Stage 3 in mid-2009. We have cut our FY09-10 earnings forecasts by 2-4% on higher energy costs and the cost of increased frequencies for its trains, but our DCF target price rises to S$1.93 from S$1.82 Underperform rating maintained for lack of near-term catalysts.

SembCorp Marine: Buy (DMG 30 Apr)
Exploration & Production (E&P) spending remains strong, particularly in deepwater areas, buoyed by high oil prices and the continual search for new oil production areas. As a leading player in the offshore rig building business, SembCorp Marine (SCM) is poised to benefit from this continued strength in the E&P cycle. Its current strong net orderbook of S$7.4b provides good earnings visibility till 2011. We are projecting revenue of S$5.5 billion and S$5.9 billion and net profit of S$478 million and S$522.7 million for FY08F and FY09F respectively. Our 12-month target price of S$4.65 based on a sum-of-the-parts valuation at 20 times FY08F PE

Amara Holdings: Buy (DBS Vickers 30 Apr)
The sale of its 70% equity stake in Amara Hotel Saigon will free up cash flow to trim debt and to refocus on ‘higher yielding’ assets and other opportunities in Vietnam. Amara’s hotel management segment is expected to perform well due to the strong tourism outlook. But its property development segment could drag earnings if sales do not pick up. We are maintaining our price target at S$0.82 based on 20% discount to RNAV, in line with its property peers. Price Target: 12-Month S$ 0.82

Raffles Education Corp: Buy (Citigroup 29 Apr)
REC is the largest private vocational education provider in Asia and is expected to benefit from secular trends such as robust GDP growth and competition in the loabur market. The education sector in Asia provides a defence play given concerns of a slowing global economy. We expect REC to strengthen its earnings due to a broader geographical coverage (China, India, Vietnam) and expansion of its education programmes such as nursing and engineering. Target price at S$1.50.

Cambridge Industrial Trust: Buy (Phillip Securities, 28 Apr)
CIT completed two new acquisitions in the 1st quarter to raise the number of properties in its portfolio to 42, valued at S$956 million. It has also signed options of another two properties worth about $93 million. In addition, the private investment house, Oxley group which has vast experience in Australia and Asia has also taken a 20% stake. CIT has managed to cost of borrowing at a time of low interest rates. We also like its for its underlying stable cashflow and good execution by its management. Fair value of S$0.92

Cosco Corp: BUY (DMG 25 April)
Cosco's current orderbook translates into strong earnings visibility till 2011. Its aggressive plan towards capcity expansion with 8 yards along coastal China will enable it to capture agreater market share of shiprepair and conversion jobs. The stock has corrected more than half from its high and we believe this provides good accumulation opportunities. Although its PE valuations of 16 times (FY08) and 13 times (FY09) are higher than its regional peers, it annual growth for after-tax profit of 39% makes it an attractive stock. With a target price of S$4.17, there is an upside potential of 19%. Key risks include timely deliveries of projects, rising prices of steel and the rising reminbi.

CSE Global: Buy (BNP Paribas 22 Apr)
We expect strong 33% y-oy growth to S$11.5 million and good order inflows of S$120 to 130 million from not just oil & gas IT systems jobs but also healthcare systems in the UK and ERP systems in Singapore. CSE is on track to secure S$500m new orders for the full year. CSE is trading at 8 times FY08 PE with 27% p.a. earnings growth (2008-2010) and 4.4% yield. Target price S$1.57

Datacraft: Buy (BNP Paribas 22 Apr)
Datacraft’s end-2007 order backlog of US$202m continued to rise in Mar 2008 quarter. There is no slowdown in order flow despite concerns about banking sector cutbacks. Datacraft is trading at 12 times FY08 PE with 18% p.a. earnings growth (2008-2010) and 6.4% yield. Target price US$1.35

Unisteel: Buy (BNP Paribas 22 Apr)
Unisteel could see a 9% YOY drop in profits to S$11.5 million due to the weak performance of major customers Seagate and Motorola. But despite the anticipated poorer results, we think Unisteel's stock price is likely to hold up due to potential M&A. Management is currently reviewing strategic options available. The stock is trading at 11 times FY08 PE with 22% p.a. earnings growth (2008-2010) and 6.0% yield. Target price S$1.78.

Jiutian Chemical Group: Downgraded to UNDERPERFORM (CIMB-GK 17 April)
We expect some shift in Jiutian's sales mix from dimethylformamide (DMF - a solvent used in the production of acrylic fibers and plastics) to methylamine in the near term, on the back of weak DMF prices and surprisingly strong methanol prices in China. A competitor of Jiutian had announced a massive DMF expansion plan last week, which may aggravate the oversupply situation through 2011-12. There are also concerns that a slowing global economy might not be able to digest China's growing DMF net exports. Hence, we have cut our FY08-09 EPS forecasts by 5-8% based on lower utilisation rates and DMF prices, as well as higher methylamine and methanol price assumptions. Target price lowered from S$0.38 to S$0.12. Downgrade from Outperform to Underperform.

COSCO CORP SINGAPORE: UNDERPERFORM (CLSA Asia-Pacific Markets, 17 April)
Cosco has not secured deposits for 4% of its orderbook. With only 13% of the total US$6.6 billion orderbook value received so far, there is potential for more cancellations given the current global credit environment. Hence, we have revised figures for new orders in FY08 to US$2.5bn instead of US$3.2bn previusly. Furthermore, Cosco will face margin pressures over the next few quarters due to the rapid increases in steel and labour costs. We have reduced our target price by 15% from S$3.65 to S$3.10. The stock continues to trade at a premium to its Korean and Singaporean peers. While we believe some premium is justified, further increases would not be so. Due to the limited upside to our target price and margin pressure risks remain, we maintain our Underperform rating.

Bright World Precision Machinery: BUY (OCBC Research 11 April)
While Bright World managed to raise its ASP (average selling prices) for its products in Oct 07 and again in Mar 08, it could only do so in small increments of less than 5% each time, as it was not fully reduce the impact of rising raw material prices. It is still in the progress of outfitting its new factory whioch is on track to become fully operational by end-1H08. However, it may face indirect risk from the slowing US economy and the depreciating US dollar – both factors are expected to impact its downstream customers. Given the more uncertainty economic outlook and lower margin assumptions, we have revised down our FY08 estimates by 9-16%. We are also slightly more conservative in our FY09 estimates. Fair value drops from S$0.76 to S$0.57, or around 7.9 x FY08F PER. While we retain our BUY rating, we do not see much positive catalyst in the near term.

Yellow Pages: BUY (OCBC Research 10 April)
Yellow Pages has outlined its plans to introduce new print products, accelerate digital platform growth through multi-pronged strategy, and seek M&A prospects and synergistic opportunities with strategic partners. Tapping on the growing local tourism industry, YPS is launching a new print product known as the Hotel Edition Yellow Pages. However, for the immediate to medium term, the bulk of its revenues and profits will continue to come from the phone directory business. For FY09, we are expecting a marginal increase in revenue of 4.6% as part of its new initiatives kick in. Based on its expansion plans, we are lowering our dividend payout expectation from 100% to 90%, giving DPS estimate of 7.1 cents for FY09. At current price of 86 cents, this works out to an attractive yield of 8.3%. We are upgrading the stock to a BUY with fair value of S$1.01.

Sino-Environment: OUTPERFORM (CIMB-GK 8 April)
Sino-Environment has secured an agreement with a Japanese partner (CICC) for the transfer of technology related to the production of catalysts used in the denitrogenation process in coal-fired power plants. With the catalyst technology, SINE could service third-party power plants and could facilitate its penetration of the denitrogenation industry. The CICC tie-up should allow it to leverage SINE’s relationships in China and generate recurring royalty income. We have raised FY09-10 EPS forecasts by 10-11% to account for the new income stream, lifting our target price marginally from S$1.86 to S$1.87.

TPV Technology Ltd: OUTPERFORM (CIMB-GK 8 April)
TPV appears to retain its ability to excel in a difficult environment, underpinned by market-share gains and new customer wins in both the LCD monitor and TV businesses. We have raised our FY08-09 net profit forecasts by 7-9% to factor in higher unit shipment and margin assumptions. We have also rolled over our target PE from CY08 to CY09, but applying 10x instead of 12x in view of PE compressions for the tech sector. Nevertheless, this still translates into a target price of HK$7.52 (S$1.33) representing 54% upside potential.

CSE Global: BUY (AmFraser 4 April)
CSE's revenues are growing at more than 25% on the back of its strength as a systems integrator in control, telecommunications, electrical and IT systems in industrial projects for end-users in the oil & gas, power & water utilities, healthcare and transport sectors. About 75% of revenues come from oil & gas while income from mining and utilities are rapidly growing, albeit from a low base. It's also in a good position to gain market share in the UK healthcare sector. Strong earnings growth also supports higher dividend payouts. Target S$1.34.

Straits Asia Resources: BUY (DBS Vickers 2 Apr)
Straits Asia's aggressive expansion has paid off. It's acquisition of the Jembayan and expansion of Sebuku mines has boosted volumes of resources by nearly three-fold from 103 million to 387 tonnes. Performance will benefit from rally in spot coal prices while supply constraints and growing demand will keep prices high. We expect revenue to grow by 143% and 42% for FY08 and FY09. Bottomline for the same period to grow 541% and 95%.