Stock Picks

LC Development: Buy (Kim Eng, 23 May)
LCD posted a net 3Q loss of $0.98 million compared to a $4 million gain during the same period last year. Revenue however rose by 11.2% to $17.7 million due to the better contributions from the Holiday Inn Phuket (HIP). Its hotel operations saw operating profit rise by 27% y-o-y to $5.2 million. LCD has two upcoming residential projects in Koh Samui and Phuket, which will contribute to earnings only in late FY09 and FY10. The group's Crowne Plaza Changi Airport which opens end-May will only make significant contributions in FY09. We believe FY08 should be seen as the year where LCD strengthens its earnings base. Our target price of $0.54 based on a 20% discount to RNAV.

Tat Hong: Outperform (Credit Suisse, 21 May)
The continued demand strength and tight supply within the heavy equipment market bodes well for Tat Hong's crane rentals business. We expect crane rental revenue to grow 87% y-o-y to S$169 million for the full year. Crane rentals now contribute to 19% of revenue and 49% of profits, and is estimated to grow to 36% and 69% respectively by FY2010, driven by sustained strength in infrastructure activities, firm utilisation rates and improvement in fleet profile. Tat Hong's valuation at 9 times P/E is compelling given its scale (it's the largest crane rental company in Asia) and improving growth and profitability profiles. Our S$3.50 target price implies 67% upside.

ASL Marine Holdings: BUY (DBS Vickers, 21 May)
ASL is a vertically integrated marine services group engaged in shipbuilding, repair and conversion as well as ship chartering with customers from Asia Pacific, South Asia, the Middle East and Europe. It has moved up the value chain into the oil and gas sector and has a shipbuilding order book of S$750 million that provides earnings visibility till FY2011. We estimate that ASL will have around 75% increase in shiprepair capacity before end-2009, which will position the group to benefit from growing demand for shiprepair in the region. In addition, the chartering business will benefit from the strong regional demand in offshore oil and gas, dredging, land reclamation, and marine construction works. Our fair value of S$2.01 is based on 10 times diluted FY09 PE for its shipbuilding and charter operations and 12 times diluted FY09 PE on its higher margin shiprepair business.

Wheelock Prop: Outperform (CIMB-GK, 21 May)
Wheelock is a developer of high-end properties with its projects located in the prestigious Orchard Road and Ardmore area. Its balance sheet is one of the strongest in the sector with over S$1.6 billion off pre-sales revenue expected to come through between FY08 & FY10. Both Wheelock Place and Scotts Square form the crux of its investment properties in Orchard Road. These assets could be redeveloped if higher plot ratios are granted. Current share price represents a 24% discount to our RNAV estimate, which we think is over-bearish. Target price of S$2.85.

Cacola Furniture: Buy (Phillip Securities, 16 May)
Cacola recorded a 38% increase in revenue (y-o-y) for the 1st quarter FY2008, which should improve going forward with the opening of its second megastore in Chongqing, China. The group has currently seven stores in Chengdu which are still open for business despite the Sichuan earthquake. We have revised our estimates and revalued our fair value estimate to S$0.56 per share, derived from a P/E of 5.7x pegged to FY2008 earnings. This implies a 51.35% upside.

Soilbuild: BUY (Phillip Securities, 15 May)
Soilbuild reported 1Q revenue of S$31.7m (+10% yoy) and net profit after tax of S$6.2m (+0% yoy). The revenue was higher due to revenue contributions from two ongoing residential property projects, One Tree Hill Residence and Espa, as well as rental contributions from the business space properties. Soilbuild has won the tender by JTC Corporation to develop and lease Fusionpolis Phase 2B. We are valuing the stock at a discount to RNAV as the construction costs of the residential projects have increased and the expected sales prices have been reduced in our estimates to reflect the current cautious property market sentiment. Our fair value for the stock is S$1.48 based on 40 percent discount to RNAV of S$2.46.

HONG LEONG ASIA : Buy (DMG, 15 May)
HLA recorded 1Q08 net profit increase of 38% y-o-y to S$30.2m.  Excluding a one-time tax credit of S$5.8m from Xinfei, net profit would have expanded 11% y-o-y.  Revenue rose 34% y-o-y to S$1.1 billion with higher unit sales volume from China contributing to higher sales and improved earnings.  We are positive on HLA’s China growth potential from both the consumer products and diesel engines business.  We value HLA at S$4.00, based on the sum-of-the-parts methodology. 

ARMSTRONG: Buy (DMG, 15 May)
Armstrong saw 1Q08 revenue increase 13.8% to S$46.6 million while net profit leapt 37.6% to S$4.2 million mainly attributed to the 18% and 50% growth in its Automotive and Data Storage businesses respectively. Going forward, Armstrong would continue to improvise on its product mix through its focus on the higher-margined businesses. Based on a PEG of 0.5x, we attain our target price of S$0.47.

KS Energy: Buy (DBS Vickers, 12 May)
KS Energy reported this morning an in-line set of 1Q08 results, with revenue growing 70% y-o-y to S$107.7m, and net profit rising 107% y-o-y to S$11.1m. This is attributed to broad-based growth for both its distribution and chartering business to the oil and gas industries. There is no change to our fair value of S$3.00, based on 8x FY08 PE for its distribution business, and 15x FY08 PE for chartering business involving mainly land rigs and jackup rig. We are maintaining our BUY rating as the counter is trading at an undemanding valuation.

Noble Group: Buy (Phillip Securities, 12 May)
Strong demand for bulk commodities such as grains, coal and iron ore have led to double-digit growth in tonnage volumes. Gross margins too have improved from the agriculture and mineral ore segments. Besides demand, strategic investments and acquisitions along the various supply chain pipelines have been vital in widening margins. We rate the counter as a strong buy with a revise fair value of $3.26. Investors are advised to accumulate upon price weakness.

HupSteel Ltd: Buy (DBS Vickers, 12 May)
3Q08 revenue was up a robust 56% y-o-y to S$120 million, bringing the 9-month sales to S$291.8 million for FY2008, exceeding that recorded in FY07 of S$284 million. Net profit was up 84% y-o-y at S$10.8 million, with net margins displaying 1.4 percentage point improvement to 9%. This performance came on the back of strong sustained demand stemming from the shipbuilding segment, as well as acceleration in demand from customers in the construction segment. We have adjusted our FY08 and FY09 earnings estimates upwards by 16% and 6% to S$37.2 million and S$41.8 million respectively, to account for the higher than expected demand for the Group’s products. Price Target: 12-Month S$ 0.57 (Prev S$ 0.51)