Author: kktan
SPAusNet – BT
SP AusNet to raise A$434m in offer to shareholders
SP AusNet, the Australian electricity distributor 51 per cent owned by Singapore Power, will raise A$434 million (S$547.2 million) in a share offer to existing investors to help fund expansion, Bloomberg reported.
Separately, the company also said that the Supreme Court of Victoria has formally approved the compensation offered in a bushfire class action in Australia.
As for the share offer, Bloomberg reported that SP AusNet will offer investors three shares for every 20 that they hold at A$1 apiece. That is an 11 per cent discount to yesterday's closing price of A$1.125.
SingPower will take its 51 per cent entitlement with the balance to be underwritten by Macquarie Group and UBS AG.
SingTel – TODAY
Bharti Airtel in money laundering probe
The authorities are investigating top mobile phone carrier Bharti Airtel under its money laundering and foreign exchange rules in a probe related to the grant of airwaves a decade ago.
Bharti shares fell as much as 5.1 per cent during trade yesterday after Minister of State for Finance S S Palanimanickam told Parliament that the Directorate of Enforcement was investigating the company. The shares pared most losses to close 1.2 per cent down.
Indian mobile market leaders Bharti and Vodafone’s local unit are not involved in a massive scandal over alleged below-market-price sale of lucrative telecoms licences in 2008 that has rocked the once-booming sector. They are, however, being investigated over airwave grants during 2001 and 2002.
Bharti, controlled by India’s fifth-richest man Sunil Mittal, said in a statement it was cooperating with investigators. It did not give the reason for the investigation, but a company source told Reuters that it was related to the probe over airwave grants.
“Bharti Airtel maintains the highest standards of corporate governance and regulatory compliance. We have already provided all relevant details asked for by the relevant authorities in this matter and will be happy to cooperate further,” the company said in the statement.
The Minister, who was replying to questions from a lawmaker through a written statement, declined to give further details.
Bharti, nearly one-third owned by South-east Asia’s top phone company, SingTel, operates in 20 countries across Asia and Africa and is the world’s fifth-biggest mobile phone carrier by subscribers. India is its biggest market.
Shares in Bharti, valued at more than US$21 billion (S$26 billion), lost 3.6 rupees (S$0.08) to close at 304.15 rupees, after hitting an intra-day low of 292.05 rupees.
A series of corruption scandals during Prime Minister Manmohan Singh’s second term have rocked the government and businesses, sparking street protests by anti-graft activists and spurring a flurry of investigations of companies.
The scandal over the 2008 licence grant has ensnared prominent politicians and high-profile corporate executives. The police have charged a total 19 people and six companies in the scandal, which the CAG has estimated has cost the exchequer as much as US$34 billion in lost revenue.
Last November, the police conducted searches at offices of Bharti and Vodafone India seeking details of airwaves allocated to them in 2001 and 2002 by a government then led by the Bharatiya Janata Party (BJP), now in opposition.
The investigation is continuing and police are yet to file any formal charge against the companies. Both Bharti and Vodafone India have denied any wrongdoing.
The BJP had attacked the Congress-led government over the corruption scandals and forced a near-shutdown of Parliament for much of last year. The BJP had alleged that the government was trying to “divert the attention” by probing spectrum grants during its term in power. REUTERS
ComfortDelgro – DMG
Overseas ops continue to support growth
1Q12 results in-line with our expectations. ComfortDelGro’s (CD) 1Q12 PATMI came in within our expectations at S$54m (-5% QoQ, +7% YoY) on the back of higher revenue of S$855m (-4% QoQ; +7% YoY) with operating margins flat at 10.9% (versus 10.8% EBIT margin for both 4Q11 and 1Q11 period). 1Q12 PATMI made up 21.3% of our full year estimate. Amidst this difficult period for domestic bus and rail operators that are facing cost pressures, we continue to favour CD who has displayed strength in its overseas business, with 1Q12 overseas EBIT up 27% YoY to S$46m and contributing 49% to total EBIT. Maintain BUY with TP of S$1.75 based on DCF (WACC: 9.3%; TGR: 1.5%).
Growth in bus business came from overseas. 1Q12 Singapore (SG) bus EBIT fell 63% YoY to S$2.8m. Performance remained lacklustre as high fuel, staff, and repair and maintenance costs continue to compress margins. CD has commented that 40% of its FY12 fuel costs for SG and UK have been hedged. Despite SG bus ridership growth of 4.2% YoY in 1Q12, we continue to foresee a difficult domestic bus operating environment should cost pressures persist while average fares remain depressed. On the other hand we remain positive on CD’s overseas bus operations in which 1Q12 EBIT grew 41% YoY to S$30m.
DTL costs start creeping in, but not the key concern for rail. 1Q12 rail EBIT fell 49% YoY to S$3.9m due to higher repair and maintenance, and electricity costs. Stage 1 of Downtown Line (DTL) is expected to be completed by 4Q13, and CD has since hired additional 40-50 staff for DTL. Headcount for DTL is expected to increase throughout the year and is targeted to hit additional c.180-200 staff before DTL commences operations. However, DTL staff cost increases are not a major concern for us given that the new hires will largely be lower level staff. Moreover rail operations accounted for just 7% of overall FY11 EBIT.
Valuations attractive. At FY12 P/E of 12x, CD remains relatively more attractive than SMRT’s 16x FY13 P/E (FYE Mar). CD’s widespread overseas network allows it better overseas growth prospects which we view as a strong advantage.
SATS – Phillip
A strong finish to the year!
Company Overview
SATS Ltd is a provider of Airport Services & Food Solutions with a dominant presence in Singapore’s Changi Airport. The Group also has a network of JVs across Asia and holds a majority stake in TFK Corp, an inflight catering business based in Japan.
• Stronger than expected end to the year
• B/S still below optimal capital structure, paving the way for higher dividend distributions in the future
• Final & Special DPS of 21.0cents
• Maintain Buy with revised TP of S$2.80
What is the news?
SATS announced a 10.7% decline in net income for the year, mainly due to the lack of contributions from Daniels Group that was divested in the year. After adjusting for the effects of one off items, underlying profits from continuing operations declined by 4.3%. EBITDA margin declined by 2.3ppt as a result of slight margin compression at its core business in Singapore and lower profitability at TFK Corp. SATS announced special dividend of 15.0cents and final dividend of 6.0cents, taking full year payout to 26.0cents per share.
How do we view this?
SATS’s result for FY12 was stronger than our expectations, mainly due to lower than expected staff cost incurred in 4QFY12. Even after accounting for the special dividend payout, SATS is still expected to have a healthy balance sheet with a net cash position. The company’s capital structure would also be significantly below management’s long term net gearing target of 30%. Hence, we believe that SATS have the capacity to pay and would likely increase its long term dividend payouts, in the absence of suitable M&A opportunities.
Investment Actions?
We maintain our Buy recommendation on SATS and revised our target price to S$2.80 as we roll forward our valuation basis and account for the special dividend payout. At the current price, SATS offers a yield of >10% over the next 12 months.
ComfortDelgro – Phillip
A resilient stock for uncertain times
Company Overview
ComfortDelGro Corporation (CDG) is a land transport conglomerate with businesses across various business segments and geography. The bus and taxi businesses are the largest profit contributors for the Group.
• Net income increased 6.8%y-y
• Rail profitability declined in preparation for DTL
• Australia’s bus business the best performer
• Maintain Buy with unchanged TP of S$1.65
What is the news?
CDG reported a strong 6.8% growth in net profit for the quarter due to strong underlying business growth with relatively unchanged margins. Profit contributions increased across all business segments, except for the Rail & Driving centre business. Despite revenue growth of 13% for the Rail business, profitability declined as the company ramped up its headcount in preparation for DTL.
How do we view this?
The results were in line with our expectations. Most business units performed well with healthy margins and revenue growth. However, contributions from CDG’s China bus business disappointed and reported a second consecutive quarter of loss due to lower mileage operated. Among the more significant profit contributors, Australia’s bus business performed the best with an estimated 18.5% increase in profits in local currency terms.
Investment Actions?
CDG remains our preferred stock in the Land Transport sector. The Group’s overseas diversification shields them from the near term headwinds facing Singapore’s Land Transport sector. Maintain Buy.