Month: December 2008
Transport – CIMB
A safe ride into 2009
• Opportunities amid uncertainties. 2008 was marked by radical changes in the government’s mindset and policies on public land transportation. Its new policies tried to address inadequacies in the current system to meet the country’s broader objectives of accommodating a population target of 6.5m by 2015. Its new task is to encourage more motorists to switch to public transport, while making changes to the land transport system so that passengers’ experience can be enhanced.
• Seamless travel is key. The perception and actual experience of seamless travel on buses and trains is key to encouraging motorists to switch to public transport. To this end, train and bus operators have increased the frequencies of their services and introduced new premium services to areas where there is demand for such services. In 2009, commuters can expect regular service improvements as the government, working together with the transport companies, strives to provide commuters with seamless, comfortable and efficient travel experiences.
• Demand push and pull factors. For investors, public transportation companies offer ridership growth potential, led by various push factors like rising costs of owning and using motor vehicles and rising unemployment while pull factors would include a burgeoning population and improved connectivity and convenience for existing and prospective commuters.
• Rising ridership should continue into 2009. With the addition of 895 train runs per week in 2008 since 4 Feb 08, ridership for the MRT has been very encouraging. In fact, even with the recent 0.7% fare hike in Oct 08, ridership has been growing by double digits yoy. Bus ridership growth has also perked up to a more consistent mid-single digit yoy, in contrast to the declining and erratic growth rates of past years. A steady outlook for ridership should translate into steady core earnings growth for both SMRT and ComfortDelgro.
• Maintain Overweight. The economic downturn, parking fees and ERP charges should continue to push more motorists into taking public transport given its affordability and growing connectivity. The government has also mandated the two key public transportation companies to increase their frequencies and provide greater choice of service routes. Combined, these should drive ridership growth in 2009.
• Outperform on ComfortDelgro. Maintain DCF-based target price of S$1.97 (WACC 11%). This factors in earnings risks from volatile forex. Dividend yield has been consistently 5-6%, providing good support.
• Outperform on SMRT. Maintain DCF-derived target price of S$2.08. We project average EPS growth of 10% for FY09-11 on higher ridership. Our DCF-derived target price of S$2.08 is based on a WACC of 8.5%.
STEng – BT
ST Engg wins $30m contract
SINGAPORE Technologies Engineering’s marine unit, ST Marine, sealed a $30 million design, construction and outfitting contract to build a 68-metre seismic survey vessel for Swire Pacific subsidiary Swire Pacific Offshore Operations (SPO).
SPO is one of the world’s most established offshore support providers with over 20 new vessels on order for delivery till 2011. It has done extensive planning for this newbuild vessel and will be providing the vessel’s basic design and major equipment, including the seismic survey equipment. The vessel will be in compliance the American Bureau of Shipping classifications, and will also have Ice Class Notation C.
ST Marine has also been slowly building up its expertise and reputation in the speciality vessel market. Just last month, it secured a contract to convert a platform supply vessel to a geotechnical survey vessel and in July, it got another job to build and outfit a diving support vessel.
Construction for the latest contract is expected to start in May and delivery is scheduled for the second half of 2010. The deal is not expected to have any material impact on the consolidated net tangible assets per share and earnings per share of the group for the current financial year.
‘As one of the global leaders in the offshore marine industry, we remain committed to continuously improving the standards in technical excellence and client-oriented services. Marine services in the seismic survey industry, like exploration and development support, is an exciting field in which we have now established a firm footing. Given ST Marine’s sterling reputation, I believe that we have found a reliable partner that is more than able to deliver a top quality product,’ said SPO deputy managing director Brian Townsley.
‘We are very honoured to partner Swire Pacific Offshore to augment its modern offshore fleet. This contract is a significant milestone in ST Marine’s relationship with SPO and we hope to partner SPO further in its dynamic growth. Through this contract, we shall be building our first seismic survey vessel in Singapore, leveraging our experience of having repaired and converted almost 100 seismic survey vessels,’ said ST Marine president Chang Cheow Teck.
ST Engineering shares closed seven cents lower at $2.29 yesterday.
SFI – BT
Temasek in talks to sell $321m SFI stake
Move aimed to unlock shareholder value and optimise returns, says Singapore investment company
TEMASEK Holdings’ wholly owned subsidiary, Ambrosia Investments, is in talks to sell its majority stake in Singapore Food Industries (SFI).
Singapore investment company Temasek owns 69.87 per cent of SFI, according to Bloomberg data.
Temasek’s total stake is valued at about $321 million, based on SFI’s current market value of about $460 million.
Ambrosia had told SFI in late October that it was evaluating its option with its SFI stake.
SFI said in an update yesterday: ‘The board has been informed by the company’s majority shareholder Ambrosia Investments that discussions are presently ongoing between the majority shareholder and a potential acquirer with respect to the majority shareholder’s stake in the company.’
The board cannot assure that any transaction would materialise, SFI said. No other details were provided.
Temasek’s managing director of investments, David Heng, said Temasek reviews its portfolio regularly as an ‘active investor’ and is exploring its options on SFI with the aim of ‘unlocking shareholder value and optimising returns’.
The SFI announcement comes after Temasek halted the sale of PowerSeraya last week, citing market conditions. In an earlier report, BT quoted sources as saying that lower-than-expected bids could be one reason prompting Temasek to call off the genco sale.
SFI is an integrated food group. Besides Singapore, it has established a presence in the UK, and also has operations in Ireland, China and Australia.
The group reported a 4.9 per cent year-on-year rise in net profit to $5.78 million for the three months ended September 2008. This was despite a 2.4 per cent slip in sales to $158 million.
SFI has $17.4 million in cash and cash equivalents as at Sept 30, down from $21 million a year ago.
Shares of SFI fell as much as 5 per cent yesterday and ended down 1.7 per cent at 89 cents. The stock has risen 9.2 per cent since Oct 23, when SFI said Ambrosia was evaluating its SFI stake. It hit a year-high of 97.5 cents on Nov 7.