Month: November 2007
MIIF – BT
Macquarie Fund buys China expressway stake
MACQUARIE International Infrastructure Fund Ltd bought an 81 per cent stake in the Hua Nan Expressway in China for about four billion yuan (S$773.8 million), its first toll road investment in the world’s fastest-growing major economy.
The fund, managed by Sydney-based Macquarie Group Ltd, will finance the purchase from the sale of stakes in Brussels Airport and oil operator TanQuid, along with existing debt facilities, it told the Singapore stock exchange yesterday.
Managing director Gavin Kerr is selling non-Asian assets so he can focus on acquisitions in countries such as China, where vehicle sales rose almost 25 per cent in the first nine months of this year. The 31-kilometre Hua Nan Expressway runs through the centre of Guangzhou, the capital of Guangdong province and China’s third-most populous metropolitan area, the fund said.
‘Toll roads are cash generators and with low operating risk,’ said James Chua, who helps manage US$400 million of assets for Philip Capital Management in Singapore. ‘They are a good proxy for anybody who wants exposure to China’s infrastructure.’
The acquisition allows the fund to profit from Hua Nan Expressway’s tolling rights until 2026, and 13 per cent annual growth in traffic on the road since 2004, it said. — Bloomberg
STEng – BT
ST Engg Q3 earnings rise 9.1%
Results boosted by earnings in the group’s marine and aerospace divisions
SINGAPORE Technologies Engineering (ST Engg) yesterday reported a 9.1 per cent year-on-year rise in third-quarter net profit to $125.5 million, thanks to improved earnings in its marine and aerospace divisions.
Revenues for the group rose 6.6 per cent year on year to $1.24 billion for the quarter.
While this is the first time this year that the group’s quarterly earnings growth has dipped into single digit, chief executive Tan Pheng Hock said the results were despite a fall in investment and interest income of nearly $20 million, due to a weaker interest rate and gains from divestments last year.
Core businesses are doing well, with Ebit (earnings before interest and tax) growing by a fifth during the quarter and return on equity improving to 8.4 per cent, Mr Tan said.
But the housing market slowdown in the United States has had ‘some impact’ on ST Engg’s specialty vehicles business there, he said.
Though the unit saved about half a million dollars from synergistic benefits through acquisitions, the slowdown has eroded these savings, he said.
The strategy is now ‘to go into military vehicles, which we have never entered before and are new to, and to export to markets like Latin America’, said Mr Tan.
Research and development (R&D) expenses also led to higher costs at the Land Systems division, which saw revenue dip slightly to $267 million and profit before tax (PBT) fall by a fifth to $14.5 million, he said.
Notwithstanding the above, the division’s results will improve going forward, Mr Tan said.
ST Aero, the group’s aerospace division, saw revenue remain flat year on year at $443 million, though PBT grew 10 per cent to $83.9 million.
This was thanks to better sales mix in the Aircraft Maintenance and Modification business, but offset by reduced investment income from the Engineering and Materials Services unit.
ST Marine saw revenue rise by 38 per cent to $256 million, thanks to significantly higher turnover from shipbuilding in the US, and from ship conversions.
The segment’s PBT increased by 7 per cent to $19.7 million, offset by higher administrative expenses.
The electronics sector saw a 5 per cent growth in revenue to $237 million, though PBT stayed flat at nearly $30 million.
The group’s earnings per share rose 8 per cent year on year to 4.24 cents for the third quarter. Its share price closed at $3.78 yesterday.
Mr Tan also said the group had won a landmark project in Saudi Arabia for an integrated traffic management and security system, which would prime it for further contracts in the Gulf region.
ST Engg’s order book now stands at $9.91 billion, with $1.09 billion to be delivered by the end of the year.
SingTel – CIMB
Strong follow-through from 1QFY08
• In-line. Reported 2QFY08 earnings of S$988m (+3.4%yoy) was 4% ahead of our estimates but beat consensus by 10%. Excluding exceptional gain of S$75m (mostly sale of Network i2i to Bharti), core earnings of S$914m (12.1%yoy). This was a strong follow-through from 1QFY08’s results. Key positives were: 1) 10.9%yoy top-line growth; 2) 17%yoy associates growth; 3) Interim DPS of 5.6 cts (+24%yoy). Key disappointment was qoq EBITDA margin decline of 120bps.
• Top-line sparkles. 2QFY08 revenue growth (10.9%yoy) was powered by continued robust Singapore operations (+9.6%yoy) as well as a stronger A$ which helped lift Optus S$ revenue (+12%yoy). Singapore revenues was driven by mobile (+13%yoy) on solid prepaid (+79%yoy) and subscriber growth (6.8%yoy). ARPU also increased for prepaid (S$15, +15%yoy) on MOU growth and postpaid (S$90, +3%yoy) on MOU as well data usage growth. In A$ terms, Optus top-line grew 3.7%yoy which was slightly above our expectation on new product launches
and increased customer acquisition activities.
• EBITDA margin decline was higher than expected primarily due to faster growth of low-margin IT business (a product mix issue) in Singapore and more aggressive marketing at Optus. EBITDA margin for Singapore telco operations were within our expectation.
• Associates PBT contribution grew 17%yoy. Growth was powered by Bharti (+79.3%yoy) and to a lesser extent, Telkomsel (+9.6%yoy) which was dragged down by a weaker rupiah. In rupiah terms, Telkomsel posted 16%yoy gain in PBT contribution. Globe’s core PBT grew 23%yoy. AIS was the only disappointment which grew 3.7%yoy which essentially boosted by a stronger baht.
• Maintain Outperform and target price of S$4.54. We continue to like SingTel for liquid exposure to high-growth associates, namely Bharti and Telkomsel. We also like the rejuvenated Singapore operations and reiterate our expectation for SingTel to surprise consensus on the dividend front. SingTel remains our top pick for Singapore telcos over the next 6 months.
StarHub – Phillip
Q3 FY07 Results
3Q results. StarHub reported 3Q operating revenue of S$513.1m (+11.4% yoy) and net profit of S$81.3m (-0.2% yoy). Moreover, EBITDA increased to S$164.1m (+4.8% yoy). It also declared an interim dividend of S$0.04 per ordinary share, which was significantly higher than the interim dividend of S$0.03 last year.
On a half-year basis, operating revenue of S$1,474.9m was 10.8% better yoy while 1H06 net profit of S$232.0m was 6.2% higher.
Performances of the various business units. StarHub reported strong growth in its business units: mobile revenue was S$266.2m (+13.9% yoy), cable TV revenue was S$85.8m (+8.5% yoy), broadband revenue was S$62.0m (+11.7% yoy), fixed network service revenue was S$73.4m (+3.9% yoy) and sale of equipment was S$25.7m (+18.7% yoy). As at 30 September 2007, the number of customers for its mobile, cable TV, broadband businesses were 1,683,000, 499,000 and 338,000 respectively.
However, total operating expenses increased to S$405.4m (+13.4% yoy). This was due mainly to the amortisation of the costs for the new season of Barclay Premier League programming rights.
FY 2007 Outlook. StarHub expects continued growth in its operating revenue and will pay a minimum annual cash dividend of 15.5 cents per ordinary share for 2007. This amounts to a dividend yield of 5.0 percent for 2007 based on its previous close price of S$3.12.
HOLD recommendation, target price at S$3.16. StarHub remains attractive as a dividend play although its operations are focused on the Singapore market. In view of the recent rise in share price, we have a HOLD recommendation on the stock due to limited upside. We are maintaining the fair value at S$3.16.