Month: February 2009
SPAusNet – BT
SP AusNet faces class-action lawsuit
Groups in Victoria state claim its power lines caused bushfires
SP AusNet, a subsidiary of Singapore Power, is facing a class-action lawsuit relating to the bushfires that have ravaged south-eastern Australia.
The Australian electricity and gas distributor said yesterday that a writ had been filed in the Supreme Court of the state of Victoria from groups claiming that faulty power lines had caused loss and damage. This confirmed earlier Australian media reports of the law suit.
A company spokeswoman said ‘the claim is premature and inappropriate, given the establishment of the Royal Commission’ and that SP AusNet will vigorously defend the claim.
‘Our bushfire mitigation and vegetation management programmes comply with Electricity Safety (Bushfire Mitigation) Regulations and are audited annually by Energy Safe Victoria,’ the spokeswoman said yesterday.
SP AusNet, which is 51 per cent owned by Singapore Power and listed on the Australian and Singapore bourses, services more than one million customers in south-eastern Australia. It owns Victoria’s primary electricity transmission network, an electricity distribution network in eastern Victoria and a gas distribution network located in central and western Victoria.
Some 1,500 properties had power restored by SP AusNet crews over the weekend, including more than 200 in parts of King- lake, Kinglake West, Castella, Glenburn and Marysville.
SP AusNet and mutual aid crews have restored power to more than 11,200 homes since last Saturday’s firestorm ripped through the state.
‘The areas still to be restored include those hardest hit by the fires in King- lake, Marysville, Narbethong and Flowerdale areas. There are still about 2,800 connections to be made in these areas, where possible,’ SP AusNet said.
Yesterday, the company also stressed that it has insurance policies in place consistent with industry standards.
Listed on the Singapore Exchange (SGX) in December 2005, SP AusNet had said in its IPO prospectus that it carried various types of insurance, including property damage and combined liability (including bushfire liability, product liability, personal injury, automobile liability and professional indemnity).
But it had also mentioned that while it maintained insurance that it believed was consistent with industry standards to protect against operating and other risks, not all risks were insured or insurable. SP AusNet self-insures its towers, poles and wires and associated equipment.
Extensive bushfires in 2003, which destroyed 185 electricity poles and disrupted service to numerous customers, cost SP AusNet some A$1.3 million (S$1.3 million) in repair costs.
SPAusNet – BT
Aussie inferno survivors file lawsuit against SP Ausnet
Australian wildfire survivors have launched a lawsuit against a Singapore-owned electricity firm alleging a downed power line sparked one of the blazes, it was reported yesterday.
Kinglake residents are launching a class action against SP Ausnet and the Victoria state government claiming that the power line set off a fire near the town that killed at least 100 people, The Age newspaper said.
The newspaper said that police investigating the causes of the fires had removed a length of fallen cable and a power pole as evidence.
The firm reportedly handling the class action, Melbourne-based Slidders Lawyers, on its website urges residents affected by the bushfires to contact it and seek compensation.
SP Ausnet, part of the Singapore Power Group, refused to comment directly on the lawsuit, saying its priority was restoring power to fire-affected areas as quickly as possible.
‘We stand ready to assist the relevant authorities with their inquiries if it is necessary for us to do so,’ it said in a statement.
The fire at Kinglake, about 50 kilometres north of Melbourne, was one of the most ferocious to sweep through Victoria state last week, killing at least 100 people and destroying about 1,000 homes.
Victoria Police chief commissioner Christine Nixon said authorities were still determining how the Kinglake fire started.
‘At this stage we are not able to confirm how it started. I understand there is some legal action that people are taking, but at this stage we’re still investigating its cause,’ she told Channel Nine television.
More than 180 people have been killed in multiple blazes in Australia’s worst ever bushfire disaster. — AFP
SingTel – Phillip
3Q FY2009 Results
3Q FY2009 Results. SingTel reported 3Q FY2009 operating revenue of S$3,701m (-3.2% yoy) and net profit of S$799m (-16.1% yoy). Revenue dropped as a result of the 23% decline of the Australian dollar against the Singapore dollar. This caused lower revenue contributions from Optus. Moreover, net profit fell by a larger percentage of 16.1 percent because the pre-tax profit contributions from the regional associates decreased by 24 percent to S$486m.
Despite the fall in profit, SingTel highlighted that it had a strong financial position and aimed to achieve cost efficiencies. For instance, it froze the hiring of employees. Although there were economic uncertainties, it was looking for acquisitions to grow its regional revenue contributions.
Performances. The Singapore operations recorded 21.0 percent increase in revenue due mainly to contributions from Singapore Computer Systems Ltd (SCS), which was acquired in 3Q FY2009. Even when SCS was excluded, revenue grew by 7.1 percent.
Similarly, Optus reported a 10.2 percent increase in revenue as it added 213,000 new mobile and wireless broadband customers in 3Q FY2009. The weaker performances of the associates were due to the depreciation of the regional currencies and poor performances by Telkomsel, Globe and Warid.
FY2009 Outlook. It expects the operating revenue for the Singapore and Australian businesses to grow at single-digit level. However, the regional mobile associates are likely to report lower pre-tax earnings. At the same time, it expects its earnings to be negatively affected by the depreciation of the Australian dollar and the regional currencies against the Singapore dollar.
Maintain BUY recommendation and target price reduced from S$3.86 to S$3.80. We have reduced the target price slightly from S$3.86 to S$3.80 as we have cut our estimated profit contributions from SingTel’s regional mobile associates. This is mainly due to expectations that Telkomsel and Globe will report lower profits due to greater competition in their markets.
However, we continue to rate SingTel as a BUY. It is the strongest player in Singapore, number two in Australia and has profit contributions from its regional mobile associates.
ComfortDelgro – DMG
Earnings hurt by high diesel costs, but forward earnings to grow as diesel costs fall
ComfortDelgro reported 2008 net profit of S$200.1m, down 10.3% YoY. This is in line with our S$198.3m expectation and consensus’ S$195m.
Turnover rose S$104.3m or 3.5%. Excluding the negative FX translation, turnover would have risen S$244.3m or 8.2%. This was driven by Australian business’ turnover surging 19.6% in AUD terms, and China business’ turnover rising 8.3% in RMB terms. The mild 0.9% rise in UK turnover (in GBP terms) was due to expansion in bus offsetted by taxi turnover reduction due to lower corporate bookings.
Lower fuel costs to drive 2009 and 2010 earnings. WTI price was fallen from 2008 average of US$100/bbl to the current US$36/bbl. Although ComfortDelgro has hedged 43% of its 2009 diesel requirements (at higher-than-current WTI prices), there will be cost savings from the balance 57% that is unhedged. We are assuming effective 2009 WTI price of US$63/bbl for ComfortDelgro, which will lower its 2009 energy costs by 30% from 2008 levels. We expect 2010 earnings to rise further on our assumption of 2010 WTI price of US$45/bbl.
Lower payout ratio to disappoint investors. ComfortDelgro declared a final dividend of 2.4S¢/share, giving a FY08 payout ratio of 52%. This is sharply lower than FY07’s 85% (which includes special dividend). The market is likely to be disappointed with this. Looking ahead, management said that they will payout more than 50% of its earnings.
We raise target price from S$1.63 to S$1.78, on the back of a lower market risk premium for our SBST DCF valuation. The other components of our sumof- the-parts valuation are obtained from PE valuation. Pending imminent announcement on fare cuts, investor interest may be more muted. But we b elieve investor interest will emerge thereafter.
ComfortDelgro – DB
FY08 showing ridership growth and impact of oil
FY08 results above consensus and in line with our expectations
The company delivered a commendable set of results, with earnings declining by 10.3% YoY to S$200.1m on a 31.8% YoY increase in energy costs as the oil price hit a peak in 2008. We expect CD’s earnings to rebound in 2009 as the company could benefit from resilient ridership and moderating costs due to lower oil prices. We reiterate Buy on the stock and our TP of S$1.75.
Cut in dividend payout ratio to conserve cash for future acquisitions
CD has cut its DPR from 85% to 52% for FY08 as management wants to conserve its cash to seek opportunities for growth overseas. The company has a strong balance sheet with a strong FCF and is conserving its cash to have the flexibility for acquisitions. The company has a track record of acquisitions (it has acquired S$1.0bn in overseas assets) and has generated decent earnings from its offshore acquisitions. Listed transport companies in the UK are trading at single-digit multiples and as such could present attractive acquisition targets.
Watch out for a potential reduction in fares at the end of Feb09
We believe the government’s past actions in reducing fares in 1999 during the Asian Financial Crisis are indicative of actions they will likely take during the current recession. We have already factored in a potential cut in train and bus fares (through the introduction of a 5% rebate in FY09E) into our model. We would be buyers on weakness given the PTC’s potential fare reduction at the end of Feb09.
TP of S$1.75 implies 15.2x FY09E
Our DCF-derived TP is based on a COE of 8.0% and a TGR rate of 1.0%. Downside risks include: 1) increase in oil prices; 2) exposure to foreign exchange volatility; and 3) regulatory risks in both domestic and overseas ventures.