Month: May 2012
STEng – OCBC
1Q12 EARNINGS IN LINE
•Gross margin gain, PATMI up 20%
•Marine – most improved segment
•Order book remains healthy at S$12.2m
1Q12 financials in line with market expectations
ST Engineering (STE) 1Q12 revenue slipped 2% YoY to S$1.5b but PATMI jumped 21% higher to S$134m. This set of results is aligned with the market’s expectations, with both its 1Q12 revenue and PATMI meeting 24% of consensus and our full-year estimates. STE’s higher PATMI in 1Q12 can primarily be attributed to two factors – 1) a 2.2ppt gain in gross margin to 21% and 2) a 173% jump in share of profits of associated companies which, according to management, was boosted by contribution from its associated company that organized the biannual Singapore Airshow.
Most segments remain healthy
STE’s Aerospace and Electronics segments displayed stable growth in 1Q12. Aerospace and Electronics revenues and grew 1% and 2% respectively to S$456m and S$452m, while their pre-tax profits 5% and 4% to S$60m and S$34m. However, STE’s Land Systems revenue and pre-tax profit contracted 11% and 7% respectively to S$317m and S$24m. This contraction was due to the completion of deliveries of Warthog vehicles to the British military in 1H11. On a positive note, Marine segment’s pre-tax profit rose 20% to S$29m, despite recording 10% lower revenue of S$244m. The Marine segment’s improved margin was the result of a more favourable sales mix, coupled with loss provisions made in 1Q11 to a Ropax ferry shipbuilding contract with Louis Dreyfus Armateurs.
Maintain buy
Management remains optimistic and maintained its guidance of revenue and pre-tax profit growth for FY12. STE’s recent strong flow of new orders should provide investors ample confidence on its ability to replenish, or even grow, its healthy order book of S$12.2b at end-1Q12. We maintain our fair value estimate of S$3.50/share and BUY rating on STE.
MIIF – AmFraser
Picture looks good
• Good set of results, very positive signs: MIIF released 2012 Q1 results that indicate strong sustainable performance. Generally, pricing power was maintained and organic growth continues to be delivered.
• Changshu Xinghua Port (CXP) enjoying pricing power: The port slightly underperformed our expectations in volumes, but this was more than made up by “higher average tariffs on general cargo volumes”, raising revenues by 8.8% on a 2% fall in tonnage. A one-off expense with regard to building a temporary stackyard to store the large paper and pulp volumes dampened EBITDA margin this quarter to 43% from 52% – we expect full-year margin at 48%.
• Large 17.3% vehicle volume jump at Hua Nan Expressway (HNE) allowed revenue to step up 12.6%, beating our expectations. Management attributed the improvement to the opening of GuangHe Expressway, a complementary road which feeds into HNE, and the return of vehicles from the now-severely-congested Xinguang Expressway whose detolling last year reduced vehicle volume at HNE. The key risk remains a potential toll-rate reduction, but our valuation already factors this in.
• Taiwan Broadband Communications (TBC) growth exactly in line, with revenue growing 4.5% YoY and EBITDA margin up 0.9ppt. We attribute the margin increase to the high growth in the Digital TV (up 52.6%) and Broadband (up 6.6%) segments, for which we expect 38% and 7% full-year growth respectively. We see a potential for upward revision in the Digital TV segment in coming quarters if the current growth rate persists.
• Now DPU looks to be covered just after 2013: We expect the 5.5c dividend to be maintained. Given the improved outlook on MIIF’s assets, we now expect operating earnings to cover the dividend by early 2014 instead of late 2014, and even as early as 2013 if the potential upward revisions do materialize.
• Fund selling action halfway done: The Abu Dhabi Investment Agency (ADIA) reduced its stake from 10% to 4.9% in the last half year. We take heart in the emergence of two value-oriented funds—Asset Value Investors and Long Investment Management—as substantial share-holders. We believe the buying speaks stronger than the selling (which is for internal reasons).
• Still our high-yield TOP pick: At 9.6% yield, MIIF continues to outshine other yield plays, especially given the strong organic growth in their assets. Our RNAV for MIIF is maintained at $0.690, with the increases in asset valuations offsetting the fall in cash due to share buybacks. MIIF offers a very high yield, future dividend growth, and a decent capital gains potential. Buy.
SingTel – TODAY
SingTel Q4 profit up 30% on-year to S$1.29 billion
Telco easily beats analyst forecasts
Surpassing analyst forecasts, Singapore Telecommunications (SingTel) this morning announced that fourth quarter net profit for the Group grew 30 per cent to S$1.29 billion, up from S$991.7 million a year earlier, primarily from an exceptional net tax credit of S$270 million on an increase in value of assets transferred to an associate.
Excluding this and other one-off items, underlying net profit grew 3 per cent, driven by strong mobile revenue growth from Singapore and improved contributions from the regional mobile associates. The stronger Australian Dollar also lifted net profit.
Profit beat the S$966 million average of seven analysts’ estimates, reported Bloomberg.
“We assume both Singapore and Australia achieve 2012 financial year earnings before interest, tax, depreciation and amortisation guidance but only by the slimmest of margins, and with a strong fourth quarter,” Commonwealth Securities said before the earnings report.
For the full year, net profit increased 4 per cent to S$3.99 billion, while underlying net profit declined 3 per cent. Group revenue grew 4 per cent to S$18.83 billion, boosted by mobile growth in Singapore as well as its overseas subsidiries.
SingTel reported yesterday morning that its global mobile customer base had grown 42.9 million, or 11 per cent, to 445 million in the 12 months ending March 31, led by an 19.1-million spike in its Airtel unit in India. the company added about 12 million mobile-phone subscribers in during the quarter.
That number includes customers at six phone companies in Asia and Africa in which the company holds minority stakes, as well as the 13 million mobile subscribers in SingTel’s domestic business and its Australian subsidiary Optus.
“There’s strong demand for handsets, especially the iPhone 4S,” analyst Carey Wong at OCBC Investment Research said before the announcement. “Most people are more and more mobile. You’re not on a computer, you’re on a smartphone or tablet.”
In the fourth quarter, revenue for the group rose 3 per cent to S$4.78 billion, SingTel said in its press release this morning. Ordinary pre-tax earnings from the regional mobile associates grew 6 per cent to S$510 million.
The Singapore company controls around a third of India’s biggest mobile phone operator Bharti Airtel, which this month reported a ninth straight fall in quarterly profit partly due to amortisation and interest costs on its 3G network investments, as well as higher tax provisions.
Bharti’s earnings have been on a downtrend since it paid US$9 billion (S$11.3 billion) to expand into Africa.
SingTel’s Indonesian affiliate PT Telekomunikasi Selular posted a 23-per-cent rise in net profit for the quarter ended in March as growth in data services due to the popularity of smartphones offset its declining voice segment.
Said SingTel group CEO Chua Sock Koong in the press release: “It was a challenging quarter but we kept focused on executing our strategy and met the guidance we had set out. The regional mobile associates turned in marked improvements in their operating and financial performance.”
SingTel – BT
Singtel's Q4 net profit up 30% to S$1.29 bln
Singapore Telecommunications Limited (SingTel) announced on Thursday a 30 per cent increase in its Q4 net profit to S$1.29 billion, from S$992 million a year ago.
Earnings per share for Q4 increased by 2.6 per cent to 6.42 Singapore cents from 6.26 Singapore cents a year ago.
For its full year results in the year ended March 31 2012, its total net profit increased by 4.3 per cent to S$3.99 billion.
The overall earnings per share for the year ended March 31 2012 was at 23.07 Singapore cents, a 3.3 per cent drop from 23.86 Singapore cents a year ago.
SIAEC – DBSV
Resilience pays
• 4Q and FY12 results in line with expectations; higher revenues offset by lower operating margins
• Final dividend slightly better than expected at 15Scts
• No major signs of stress in the aviation market and outlook for MRO services remains steady,
• Maintain BUY with revised TP of S$4.30
Highlights
Another strong quarter. 4QFYMar12 results were in line with our estimates, as SIE reported S$269m in net profit for FY12, up 4% y-o-y, on the back of 6% rise in revenues. While 4Q was another record quarter for revenues, operating margins were subdued at 10.3%, due to the higher proportion of revenue from fleet management programme and cabin interior reconfiguration projects, which involve higher overheads and subcontract costs. Despite the weak US$, contribution from associates and JVs continued to recover– up almost 9% y-o-y to S$157m – and represented 52% of SIE’s PBT.
Dividend adds cheer. The company ended the year with close to S$500m net cash and declared a final DPS of 15Scts for FY12, in addition to the interim DPS of 6Scts paid earlier. This is higher than the final DPS of 14Scts declared in FY11 (though there was a special payout of 10Scts in FY11), and represents a healthy payout ratio of about 85%.
Our View
Stable outlook. The risks of slower global economic growth and high fuel costs continue to weigh on the airline industry in 2012. However, we do not see any alarming signs yet and most carriers in the Asia-Pacific region continue to add capacity. Passenger and aircraft movements at Singapore’s Changi Airport continue to hit new records (13% y-o-y growth during 1Q-CY12) and SIE’s management believes demand for its core businesses will remain stable in the near term. We expect SIE to record steady 5-6% growth in FY13/14F.
Recommendation
Maintain BUY with fairly secure yield of 5.5%. With its steady earnings outlook, strong balance sheet and healthy dividend prospects, SIE has outperformed the choppy market in recent months. Given the prevailing economic uncertainties, high oil prices and limited signs of growth acceleration in the US and EU, we believe SIE will continue to generate interest as a safe haven stock with limited possibility of earnings shocks. Hence, we maintain our BUY call on the stock. Our TP is rerevised up to S$4.30 as we roll over our valuations to FY13.