Month: May 2012
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.
SingTel – BT
SingTel buys Silicon Valley advertising startup
Singapore Telecommunications Ltd , Southeast Asia's largest telecoms company, has acquired a Silicon Valley startup in the mobile advertising sector, its second such purchase in two months.
SingTel's Amobee unit said on Tuesday it bought AdJitsu, which provides tools to make three-dimensional animated ads in mobile apps for iPhone and iPads. The acquisition of AdJitsu follows SingTel's purchase of mobile advertising firm Amobee in March for US$321 million.
Terms of the latest deal were not disclosed.
AdJitsu will be folded into Redwood City, California-based Amobee, according to both companies.
SingTel – BT
SingTel buys Silicon Valley advertising startup
Singapore Telecommunications Ltd , Southeast Asia's largest telecoms company, has acquired a Silicon Valley startup in the mobile advertising sector, its second such purchase in two months.
SingTel's Amobee unit said on Tuesday it bought AdJitsu, which provides tools to make three-dimensional animated ads in mobile apps for iPhone and iPads. The acquisition of AdJitsu follows SingTel's purchase of mobile advertising firm Amobee in March for US$321 million.
Terms of the latest deal were not disclosed.
AdJitsu will be folded into Redwood City, California-based Amobee, according to both companies.
STEng – BT
ST Engg Q1 profit up 20.9% to $134.37m
ST Engineering on Wednesday posted a 20.9 per cent increase in year on year earnings to $134.37 million for the first quarter ended March 31, 2012.
Turnover dipped 1.7 per cent to $1.54 billion from a year ago. Revenue of its aerospace and electronics sector was flat, while land systems and marine sectors registered lower revenue, down 11 per cent and 10 per cent, respectively.
The group posted earnings per share of 4.39 cents, up from 3.65 cents a year ago.
StarHub – DBSV
Great quarter but costs may rise in coming quarters
• Net profits of S$88m were 10% ahead of expectations; due to lower handset subsidy and traffic costs.
• Management has ruled out capital management in FY12F but has maintained guidance of 5 Scts DPS each quarter.
• Our DCF-based TP raised to S$3.10 as we raise FY12F earnings by 5% and roll forward our valuation base. Hold for 6% yield, however stock is not cheap at 17x FY12 PE versus historical average of 14x.
Highlights
Prudent cost management lifted earnings. Its 1Q12 net profits of S$88m (+28% y-o-y, -5% q-o-q) beat market expectations of S$80m. This was due to lower handset subsidy and traffic costs. The handset subsidy cost for each smartphone
was lower due to a higher adoption of Android phones which comprise 50% of new smartphone sales versus 25% a year earlier. Traffic costs also declined as StarHub, as a Vodafone partner, had managed to negotiate lower interconnect rates for some destinations.
Management sees cost pressures in upcoming quarters. Management has maintained its FY12F service EBITDA margins guidance of 30% despite having achieved 32% margins in 1Q12. The recent launch of the Galaxy S3 phone could raise the subsidy bill for telcos. The upcoming iPhone 5 launch is another cost factor (launch rumored in Oct 2012) to consider. StarHub will also incur the cost of exclusive UEFA Cup rights in 2Q12. It will be paying an undisclosed cross-carriage fee to SingTel for carrying Euro Cup matches on SingTel’s pay TV platform.
Our View
Raise FY12F earnings by 5% on higher margins. We project service EBITDA margins of 30.6% in FY12 compared to 29.7% earlier. We do not expect capital management in the near term, as the company may want to preserve cash for the spectrum auction for 1800 MHz and 2600 MHz bands, possibly in 2013.
Recommendation
Maintain HOLD. Our DCF-based (WACC 7.6%, terminal growth 0%) TP has been raised to S$3.10 as we had rolled forward the valuation to FY13F. Currently the stock is trading with a 6.3% yield, with minimal growth prospects. Its quarterly 5 Scts DPS is the key attraction; however that seems to have been priced in, with a FY12F PE of 17x versus the historical average PE of 14x.