Author: kktan

Land Transport – Kim Eng

Forging ahead along the bus route

Pair trade opportunity. The heat issuing from the massive MRT disruptions last December has hardly dissipated when commuters are again getting hot under the collar over the sheer deluge of tax dollars being deployed to solve a problem created by operators and who now seem to be benefiting from the government’s intervention. From recent sector events, we believe that ComfortDelgro (Buy, TP $1.85) rather than SMRT (Sell, TP $1.41) will be the overall winner and this presents a unique pair trade opportunity to gain from both a 20% upside to ComfortDelgro (long) and 19% downside to SMRT (short).

Hybrid system the best model. Under Budget 2012, the government will set aside $1.1b under the Bus Services Enhancement Programme (BSEP) to fund a significant expansion of bus capacity in response to rail woes. This is the latest intervention in a long series to improve a public transport system that has proven poor in self-regulation. But even before the latest MRT breakdowns and overcrowding that prompted this move, the government’s hand is already obvious in a number of areas, most notably, control of rail capacity expansion and central planning of bus routes. If indeed the government is needed to continually intervene in private sector matters, why not just take it over wholesale? In our view, the hybrid system is perhaps the best model possible under the circumstances.

ComfortDelgro the clear winner. The BSEP and other initiatives are clearly directed at promoting bus ridership. Putting more buses on the road is a quicker fix compared to adding new rail lines. We believe this move is a boon for ComfortDelgro as the market leader in bus operations. However, an expanded fleet will mean stiff competition for bus captains, and we think that SMRT may get the short end of the stick. There is also the consideration of wage negotiations with labour unions that must be adroitly handled. From a longer-term perspective, one can argue for a consolidation in the public transport market, in which case we think ComfortDelgro would be the preferred operator. But this matter would first require a rethink of the government’s sacred cow policy of having at least two operators in every market.

Buy ComfortDelgro, avoid SMRT. We reiterate our preference for ComfortDelgro over SMRT, and believe that it justifies a higher 16x PER valuation based on recent initiatives to improve bus ridership. Its geographically diverse business also offers greater earnings resiliency and more upside potential versus SMRT’s all-domestic model.

kktan April 6, 2012 ComfortDelgro, SBSTransit, SMRT Comments Off

SingPost – Lim and Tan

• The stock has reacted positively to recent news of (a) strong demand for new office space coming up in various parts of the country, including Paya Lebar ($1800 psf for Guthrie‘s development), close to its Post Centre.; (b) successful launch of the $350 mln 4.25% senior perpetual cumulative securities.

• In the process, the stock appears to have ended the technical downtrend that began after it topped up at $1.24 in Oct ’10 from a low of 63.5 cents a year before.

• Key point to note is that full potential of Post Centre has not been tapped. And we are not talking of conversion to residential use, which Sing Post cannot do, as the Post Centre is zoned commercial.

• Of the almost 1.5 mln sf space at Post Centre, 300,000 sf represents office, and the balance retail and industrial.

• We believe in the hands of “experts”, there is much that can be done to enhance shareholders value. (car show rooms?)

• At current price, Sing Post’s market cap is “only” $1970 mln, or simplistically $1330 psf.

• Until then, shareholders should be happy with the “sustainable” 6.1% yield, another strong reason to go for the ordinary shares rather than the 4.25% perpetual securities. (6.25 cents a share for the last 5 years.)

kktan April 4, 2012 SingPost Comments Off

StarHub – CIMB

Show me the money

Our recent chat with StarHub executives has given us reason to believe that the company is more likely to raise dividends than undertake a one-off capital management exercise. Competition in fixed broadband is likely to stay benign as we expect fibre connections to remain slow.

We tweak our EPS estimates upwards as we now assume it will raise DPS rather than pay out 25 cts in a capital reduction. StarHub remains an Outperform and our top Singapore and regional telco pick. Our DCF-based target price is unchanged.

More cash than it needs

StarHub continued to downplay the possibility of a one-off capital management exercise to optimise its capital structure as it does not sustain the share price. In addition to the uncertain economic conditions which it earlier cited as a reason to be cautious, StarHub is also erring on the side of caution due to regulatory developments such the common-feature set top box. As a result, we now think a higher dividend is more likely than a capital reduction exercise.

NGNBN stuck in the slow lane

Unless the Minister steps in, we understand that there is little the regulator can do to compel OpenNet to step up its service delivery of 2,400 premises per week. This is because OpenNet is already adhering to an agreement with the regulator, which has been revised up from 2,050 in the earlier agreement.

Such a scenario favours StarHub as the adoption of higher-speed broadband is slowed down, which poses less of a challenge to StarHub’s dominance. StarHub’s cable broadband has superior bandwidth over SingTel’s copper-based broadband.

Small step towards monetising data

All three telcos are offering a lower data bundle of 10GB for the latest iPad vs. the previous bundle of 12GB, indicating that they are making baby steps in trying to monetise the surging data traffic.

Raising our DPS estimates

We now assume StarHub will raise its quarterly DPS from 5 cts to 5.5 cts starting 3Q12 and 6 cts from 1Q13 vs. our earlier assumption that it will pay out 25cts in FY12 from a capital reduction. We strongly feel that StarHub will soon have to take steps to optimise its increasingly under-leveraged balance sheet.

kktan April 4, 2012 StarHub Comments Off

April 2012

Results Announcement

13 Apr 12 : SPH (1H12)
16 Apr 12 : M1 (Q112)

STI = 2985.04 (-29.94)

Stock	Period	EPS cts	DPS cts	Mkt	Yield	PE	Div Breakdown
HL Fin	FY11 (Dec)	22.65	12.00	$2.510	4.781%	11.08	Interim 4ct ; Final 8ct
SingPost	FY11 (Mar)	8.369	6.25	$1.025	6.098%	12.25	Q1, Q2, Q3 1.25ct ; Q4 2.5ct
SPH	FY11 (Aug)	24	24.0	$3.900	6.154%	16.25	Interim 7ct ; Final 9ct + Special 8ct

Aviation Services

Stock	Period	EPS cts	DPS cts	Mkt	Yield	PE	Div Breakdown
SATS	FY11 (Mar)	17.40	17.0	$2.550	6.667%	14.66	Interim 5ct ; Final 6ct + Special 6ct
SIA Engg	FY11 (Mar)	23.77	30.0	$3.990	7.519%	16.79	Interim 6ct ; Final 14ct + Special 10ct
ST Engg	FY11 (Dec)	17.28	15.5	$3.180	4.874%	18.40	Interim 3ct ; Final 4ct + Special 8.5ct

Note : SIA Engg & SATS Special Div are Observed to be Non-Recurring

Transport

Stock	Period	EPS cts	DPS cts	Mkt	Yield	PE	Div Breakdown
SBSTransit	FY11 (Dec)	11.89	5.9	$1.705	3.460%	14.34	Interim 3.1ct ; Final 2.8ct
ComfortDelGro	FY11 (Dec)	11.27	6.0	$1.540	3.896%	13.66	Interim 2.7ct ; Final 3.3ct
SMRT	FY11 (Mar)	10.6	8.5	$1.745	4.871%	16.46	Interim 1.75ct ; Final 6.75ct

TELCO

Stock	Period	EPS cts	DPS cts	Mkt	Yield	PE	Div Breakdown
SingTel	FY11 (Mar)	24.02	25.8	$3.110	8.296%	12.95	Interim 6.8ct ; Final 9ct + Special 10ct
M1	FY11 (Dec)	18.1	14.5	$2.550	5.686%	14.09	Interim 6.6ct ; Final 7.9ct
StarHub	FY11 (Dec)	18.40	20	$3.170	6.309%	17.23	Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct

Note : SingTel Special Div is Observed to be Non-Recurring

Funds / Infrastructure

Stock	Period	DPS cts	Mkt	Yield	NAV	Div Breakdown
SPAus	1H – Sep11	A4.0 (Gross)	$1.370	7.543%	A$0.89	2H11 A4.0ct ; 1H11 A4.0ct
MIIF	2H – Dec11	2.75	$0.585	9.402%	$0.83	1H11 2.75ct ; 2H11 2.75ct

* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.2918) fm Yahoo

NOTES :

Mkt Price is as on 4-Apr-12
ST Engg : 1H11 (Jun) – 3ct ; 2H11 (Dec) – 4ct (Final) + 8.5ct (Special)
MIIF : 1H11 (Jun) – 2.75ct ; 2H11 (Dec) – 2.75ct
ComfortDelgro : Q411 (Dec) – 3.3ct ; Q211 (Jun) – 2.7ct
SBSTransit : Q411 (Dec) – 2.8ct ; Q211 (Jun) – 3.1ct
StarHub : FY12 Div Guidance – 5ct/Q
StarHub : Q411 (Dec ) – 5ct ; Q311 (Sep) – 5ct ; Q211 (Jun) – 5ct ; Q111 (Mar) – 5ct
SingPost : Q312 (Dec11) – 1.25ct ; Q212 (Sep11) – 1.25ct ; Q112 (Jun11) – 1.25ct
M1 : 2H11 (Dec) – Final 7.9ct ; 1H11 (Jun) – Interim 6.6ct
SATSvcs : Q212 (Sep11) – Interim 5ct
SingTel : 1H12 (Sep11) – Interim 6.8ct
SMRT : Q212 (Sep11) – Interim 1.75ct
SPH : 2H11 (Aug) – 9ct (Final) + 8ct (Special) ; 1H11 (Feb) – 7ct
SPAus : 2H11 (Mar11) – A4ct (before tax) / A3.7721ct (after tax) ; 1H11 (Sep10) – A4ct (before tax) / A3.7772ct (after tax)

kktan April 4, 2012 Yield Comments Off

March 2012

Results Announcement

13 Apr 12 : SPH (1H12)

STI = 3010.46 (+16.37)

Stock	Period	EPS cts	DPS cts	Mkt	Yield	PE	Div Breakdown
HL Fin	FY11 (Dec)	22.65	12.00	$2.540	4.724%	11.21	Interim 4ct ; Final 8ct
SingPost	FY11 (Mar)	8.369	6.25	$1.020	6.127%	12.19	Q1, Q2, Q3 1.25ct ; Q4 2.5ct
SPH	FY11 (Aug)	24	24.0	$3.920	6.122%	16.33	Interim 7ct ; Final 9ct + Special 8ct

Note : From Mar-12, STI ETF Removed (Become SIP + <4% Yield) ; Added SIA Engg + HLFin (Both >4% Yield)