Month: September 2009
STEng – BT
ST Engg on track to deliver on £150m arms deal
Armoured Warthog vehicles to be delivered to UK army from year-end
ST KINETICS yesterday unveiled a new armoured car ordered last year in a breakthrough £150 million (S$337 million) deal by the British army and said the vehicles would be delivered on schedule from the end of the year.
The land systems arm of listed ST Engineering said the ‘Warthog’, a heavily armoured all-terrain vehicle for deployment in Afghanistan, would be delivered to the UK Ministry of Defence in four variants from the end of the year, with most of the deliveries in 2010.
Twelve UK Armed Forces staff are undergoing maintenance and operations training in Singapore.
The deal is seen as significant because it is the company’s first major contract with one of the world’s premier armed forces. ST Engineering had previously failed in a bid to supply armoured vehicles to the US Army and the successful delivery of the Warthog – and its performance in combat – is seen as vital to the company winning further major international orders.
The British army bought over a hundred of the vehicles in December last year. The Warthog is a modified version of the Bronco all-terrain tracked carriers supplied to the Singapore Armed Forces.
It will be powered by a 7.2-litre engine producing 350 bhp and will be able to move through water – all while carrying up to 14 troops. When not in water, the highly agile, all-terrain vehicle will be able to climb steep gradients, cling to severe side slopes, tackle vertical obstacles and roll across trenches.
ST Kinetics said that it had procured production materials and components ahead of the Warthog contract award. To ascertain the vehicle’s performance in extreme heat and dust conditions, it put a 19-tonne Warthog test vehicle through desert trials in United Arab Emirates this summer.
‘We are proud to roll out the first Warthog ATV within UK MOD’s demanding delivery schedule and rigorous requirements. This is possible because of the close and productive relationship we have forged with the UK MOD from day one,’ said Sew Chee Jhuen, president of ST Kinetics.
Brigadier Ian Simpson of the UK MOD said: ‘The Warthog itself has proven itself to be a very capable vehicle in tests and trials. I am impressed by the high standards of engineering applied to this vehicle and the quality of the support package; providing our deployed forces with the higher levels of protection and mobility.’
SPH – DBS
Go for the cash
• Final dividend (DBSV forecast 13 Scts) could have upside surprise (to 17 Scts) in FY09 results expected to release on 12 Oct.
• Raise FY10F earnings by 10% on higher AdEx growth assumptions, along with revised GDP (+5.2% in 2010)
• Ad revenues to ride on media-worthy activities in 2010.
• Buy, sum-of-parts TP at S$4.21
Upside surprise on cash dividends. Our conservative expectations of a final + special dividend of 13 cents per share could surprise on the upside when the company announces its FY09 results on 12 Oct. Assuming a payout of 76% of operating profits, the final dividend could be 17cents, bringing full year to 24cents vs DBSV current forecast of 20 cents, as SPH has historically paid out around and above 80% of operating profits since FY02. This equates to an immediate yield of 3.5% – 4.5% before the year’s end.
Raise FY10F by 10% on better GDP. Historically, ad revenues track closely to GDP growth. We revised our FY10F earnings up by 10% on a better ad revenues growth rate (+4%, vs +2% previously) along with our economist’s revision of 2010 GDP to 5.2%, as well as adjustment of profit recognition to its property development project, Sky@Eleven, towards FY10F.
Expect more media-worthy events. We expect ad revenues to pick up along with more media-worthy events next year and the lead up to it. The opening of the two Integrated Resorts and Youth Olympics Games (YOG) are just two examples. Furthermore, we saw a slump in ad revenues in early 09 (c. -20% yoy) following the global crisis and this should magnify any reasonable growth next year.
Go for the cash; Buy, TP: S$4.21. Our sum-of-parts TP is raised to S$4.21 as we revised up our FY10F earnings. We believe the prospect of a higher than expected final-cumspecial dividend is an attractive investment thesis, along with improving operational prospect in the near term.
SingTel – BT
SingTel may keep 25% stake in Bharti-MTN
SINGAPORE Telecommunications (SingTel) could maintain a 25 per cent stake in the combined entity created as a result of a potential merger between India’s Bharti Airtel and South Africa’s MTN, Morgan Stanley said in a report yesterday.
‘We do not expect the Bharti-MTN transaction to have material dilutive impact to SingTel’s EPS (earnings per share),’ analysts at the US investment bank said.
‘Indeed, if the Bharti-MTN transaction goes through and SingTel increases its stake in the new entity using debt (which is very likely), we see room for slight EPS enhancement.’
SingTel, South-east Asia’s biggest phone firm, owns about 30.4 per cent stake in Bharti Airtel, India’s leading mobile operator.
SingTel has said in the past it will remain a significant shareholder after any deal, though some analysts have expressed concerns that its stake in the combined entity could fall below 20 per cent.
Bharti Airtel’s planned tie-up with MTN faces scrutiny from regulators and politicians. It said on Tuesday that the deal would comply with the laws in both countries and any required waivers would be sought when appropriate.
Bharti Airtel’s statement came shortly after the Indian market regulator amended takeover regulations by bringing depositary receipt holders with voting rights on par with shareholders.
Morgan Stanley said the latest change in takeover regulations in India creates uncertainties about the deal, but if the transaction goes through, it expects SingTel could borrow to increase its stake in the combined entity.
SingTel could enhance its earnings-per-share compound annual growth rate by 200-300 basis points assuming a 25 per cent stake in the new entity, the research report said. — Reuters
STEng – BT
ST Engg’s US unit gets repeat order for articulated tug barge
SINGAPORE Technologies (ST) Engineering’s US shipyard unit VT Halter Marine has clinched a repeat order to outfit and commission a second 350,000-barrel-capacity articulated tug barge (ATB) unit for OSG Ship Management.
Work will commence in November and is expected to be completed by mid-2010. VT Halter Marine was contracted in April by OSG to undertake similar work on another 350,000-barrel ATB, expected to be delivered by the end of this year. The two units were reportedly uncompleted jobs removed from Mobile-based Bender Shipbuilding by OSG in March due to delays in the delivery schedule.
ST Engineering declined to reveal contract values but they are not expected to have any material impact on its consolidated net tangible assets per share and earnings per share for the current financial year.
However as an indication, VT Halter received a contract to build four smaller units of a similar type of vessel for US$240 million in September 2006. This was a full construction job and included the cost of owner-furnished equipment. The 199.65m by 32m ATBs will be the largest ever built by VT Halter Marine. These state-of-the-art ATBs will be used to perform lightering services and equipped with specialised equipment to meet stringent vapour balancing regulations in the Delaware Bay, where the vessels will trade.
‘Delivering these vessels to an important customer is a top priority for OSG. We selected VT Halter Marine due to their experience in constructing similar types of ships and the company’s high quality of operations, which extends to the quality of vessels they have built, the skills and experience of the shipyard workers and management’s commitment to working with us on this high-profile project,’ said Robert Johnston senior vice-president, OSG Ship Management.
M1 – CIMB
Best exposure to broadband segment
• Maintaining earnings forecasts, target price and NEUTRAL. M1 remains our top pick in the telco sector where we are maintaining our NEUTRAL position. Our DCFbased target price of S$1.71 (WACC: 10.5%, LT growth: 1%) is unchanged. While there is a lack of re-rating catalysts, we like M1 for its attractive yields of 8%, the best exposure to wireless broadband and the biggest upside from the upcoming NGNBN.
• M1 offers the best exposure to the wireless broadband growth, in our opinion, given its more concentrated cellular exposure. Its mobile data revenue had grown to 10.9% of service revenue in 2Q09 from 9.1% in 1Q08 on the back of a rapid increase in subscriber usage. About 15% of M1’s postpaid subscribers used its wireless broadband services in 2Q09, up from 9% in 1Q08. The growth should continue and the industry could see 1m wireless broadband subscribers in three years’ time, up from the current estimate of 400K-500K.
• NGNBN another avenue of growth. We reiterate that M1 offers the greatest upside for NGNBN as it has no legacy business to cannibalise and NGNBN would give M1 a chance to address its single-product disadvantage. OpenNet’s rollout is progressing according to schedule with a target of 5% coverage by end-Sep 09, 15% by Dec 09 and 60% by end-2010.
• No capital management initiatives this year. Beyond the usual payout, M1 will not be returning excess cash to shareholders this year due to still-fragile economies and tight credit markets. However, it is not opposed to capital-management initiatives in FY10.