Author: kktan
M1 – OCBC
Looking forward to NBN
Likely decent start to 2010. M1 Ltd will kick off the reporting season for the telcos and we expect to see a pretty decent set of 1Q10 results on 16 Apr 2010, driven by the rapidly recovering economy in Singapore; a MAS poll of 20 economists pegs the average GDP growth forecast at 9.5% for 1Q10. Mobile subscriber numbers have also been pretty encouraging, with total subscribers (2G+3G) up 0.1% from Dec to 6.865m in Feb, as the number of 3G subscribers continued to grow. We suspect one reason for this increase is probably due to the ongoing demand for the Apple iPhone 3GS, which M1 had started distributing in Dec 2009.
Outlook for mobile market remains buoyant. Although the mobile phone penetration rate has already hit 137.6% in Feb 2010, we believe that the proliferation of mobile Internet devices with standalone 3G SIM cards – like the Apple iPad 3G version – will continue to drive growth in the mobile market. We believe that M1’s recent capex in building up its own backhaul capabilities will enable it to garner a bigger share of this growing mobile data market. For the overall market, industry watcher Research and Markets predicts that Singapore’s mobile subscriber base will hit 7.750m in 2014, up 13% from 2009.
Looking forward to NBN. Besides the still buoyant mobile market, M1 is also looking towards the NBN (National Broadband Network) initiative for growth. More specifically, access to the previously restricted (or totally unavailable) home and business broadband markets will offer the highest growth opportunities for M1 and also allow the telco to become a “full service” provider. Already we see that its move to buy over Qala Singapore in Sep 2009 has started to bear fruits – we note that M1 has already started marketing its business broadband packages, with prices from as low as S$105.93/month for a 4Mbps Dynamic ADSL.
Maintain BUY with S$2.28 fair value. For the upcoming 1Q10 results, we expect M1 to post operating revenue of S$211.9m, up 13.7% YoY (but down 2.0% QoQ) and a net profit of S$39.8m, down 4.9% YoY (but up 7.1% QoQ). In any case, we intend to hold off adjusting our FY10 estimates until after the results. We also maintain our BUY rating as M1 could potentially benefit the most when NBN kicks off from mid-2010.
Thomson Medical – AmFraser
After a Long Wait, Finally in Sight
• Q2 results in-line with forecast. Thomson Medical Centre (“TMC”) announced a 21% YoY rise in FY2010 Q2 revenue to S$18.87m. Together with Q1, the recent 2 quarters saw TMC’s best results since inception. ‘Specialised and other services’ segment contributed strongly mainly due to increased patient load in TMC’s Thomson Women’s Clinics, a full six months’ contribution from Thomson Women Cancer Centre (“TWCC”) and the addition of Thomson Paediatric Centre (“TPC”) which started operations on 1 Jan 2010.
• Bottom line gains. NPAT increased 19.1% YoY to S$3.64m in the absence of a S$4m asset revaluation loss in the comparative quarter. Gross and net margins remain at a healthy 41.8% and 19.3% respectively. Number of babies delivered fell slightly in Q2 to 2,207 from Q1’s record of 2,478.
• Synergy between core and other services. We like how Management builds on the Company’s brand name by breaking new grounds . Both the TWCC and TPC are showing promise after a few months in operations. While growing TMC’s suite of services, the tie-ups with the new senior consultants added referrals to the hospitals own services. To cater to increased demand, Management has stated plans to add 2 Operating Theatres, 2 delivery suites and 1 day surgery centre. Total capex is expected to be ~S$4m.
• Vietnam venture in sight. After a slight delay, the Management has planned the soft opening of the Hanh Phuc Women and Children Hospital (“HPWCH”) in Sep 2010. This is the Company’s first overseas venture and a major milestone. To date, the main structure, exterior and helipad are largely complete. The 260-bed hospital will be launched in phases once the medical equipment are moved in. Concurrently, the Management is scouting for sites in Hanoi to build their 2nd hospital under the same consultancy contract.
• Interim dividend. TMC declared an interim dividend of 1.2 SG cents per ordinary share (one-tier). This represents a 48.7% payout ratio, in line with what the Company has traditionally declared.
• Downgrade to ‘ACCUMULATE’ after share price rise. The in-line results and lack of new major short-term catalyst deprive us a chance to make significant changes to our forecast. Furthermore, HPWCH will now only start contributing in FY2011. It will not be until FY2012 when the hospital gets up to speed that we expect to see major contribution. Things will get really interesting if and when TMC takes up equity stake (up to 25%) in the hospital as allowed under the contract. Considering the above, we arrive at a FV of 77 SG cents. The recent increase in TMC’s share price has moved it to within a whisker of our FV. So while we continue to like the Company, we believe the counter now merits a less compelling ‘ACCUMULATE’ recommendation.
SingPost – OCBC
Growth rate depends on investment decisions
Historical analysis. Charting Singapore Post’s (SingPost) share price against the STI reveals that the ratio is currently below its historical average ever since SingPost’s IPO in 2003. If one were to hold the view that most of the easy money has been made in the high beta stocks during the stock market rebound since Mar 09, it is then likely that this ratio may stay stable or even rise (i.e. limited downside). We also did a peer comparison and found that SingPost has generally outperformed some of its peers in terms of returns over a five-year period, excluding dividends. As the group proceeds with its regional expansion plans and seeks to diversify its businesses, the stock should continue to perform well, assuming no major hiccups.
Nature of business both a boon and bane. SingPost’s resilient earnings and stable operating cash flows mean that it can weather downturns with ease, and lack of financing should not be a problem with regards to its expansion plans. Besides a cash pile of S$149m as at Dec 09, the group also recently issued S$200m worth of notes that seems well priced amidst a 3x oversubscription rate (refer to earlier report 24 Mar 2010). The onus is on management to avoid over-paying for acquisitions and to make good investment decisions, especially since there is a need to seek new business drivers to sustain growth as the domestic postal industry has limited growth prospects.
Industry updates. The stock price of Pos Malaysia [NOT RATED] surged to a 32-month high yesterday after newswires reported that Nationwide Express Courier Service Bhd may be interested in bidding for a stake in the postal company. Pos Malaysia also said it will double the price of postage stamps for standard mail weighing up to 20g to 60 sen starting 1 Jul 2010. Developments should be monitored for insights regarding the value of Pos Malaysia.
Maintain BUY. The future of SingPost over the long term hinges heavily on its ability to make astute investment decisions as it seeks new business opportunities. Meanwhile, we also like the group’s enthusiasm in pursuing new initiatives in the areas of innovation, social responsibility and its attempts to stay relevant in today’s fast changing world. With a total upside potential of about 15% (including dividend of 5.9%), we maintain our BUY rating with a fair value estimate of S$1.16.
StarHub – BT
StarHub halves sports group price to $12
Other enhancements include NBA deal as it tries to make up for loss of BPL
STARHUB hopes to rebound from its Barclays Premier League (BPL) defeat with a combination of a steep subscription discount and a slam dunk in NBA (National Basketball Association) programming.
From June 1, the operator will halve the monthly price for its sports group from $25 to $12. In addition, it will add a host of exclusive sports programming to make up for the loss of its BPL broadcast rights to rival Singapore Telecom.
Topping StarHub’s sports list is a multi-year content deal with the NBA. This will allow StarHub to screen more games from the NBA play-offs, as well as the NBA finals.
From next season, StarHub will screen three matches weekly on its Supersports channel and one ‘live’ NBA game per week on a new offering called NBA TV.
Although the BPL has many followers in soccer-mad Singapore, StarHub’s chief operating officer Tan Tong Hai said that the NBA is the other ‘pre-eminent’ sport with a strong local following.
That is why StarHub moved quickly to lock down the NBA deal after it lost the BPL to SingTel, he told reporters yesterday.
As the contract was signed before March 12 – the date that the Media Development Authority’s new cross-carriage mandate kicked in – StarHub will not need not share its NBA programming with SingTel.
ESPN currently shows two ‘live’ NBA matches a week, but the long-time StarHub tenant will move to SingTel’s mioTV platform from June.
With the ESPN pact, SingTel is laying claim to additional sporting events from ESPN, including Formula One, the Australian Open, Wimbledon and the US Open Golf Championship
In response, StarHub will offer a new Racquet Channel from May 23. Major tennis tournaments such as the US Open, the French Open and the ATP World Tour will be shown on this channel. Competitions involving other racquet sports such as the All England Badminton Open and the World Table Tennis Championship will also be televised, StarHub said.
Other enhancements to StarHub’s sports offerings include a new PGA Tour on Demand channel for golf enthusiasts and a new cricket channel called Ten Sports.
‘We’re not just hoping to retain current customers. We’re hoping to attract new ones,’ Mr Tan said.
STEng – BT
ST Aero bags US$105m China airline contract
It’ll service A320 jets of Spring Airlines in eight-year deal
IF there is one company that is on a roll, it has to be ST Aerospace. The ST Engineering unit yesterday announced another contract win – this time a US$105 million deal with Shanghai-based budget carrier Spring Airlines for component maintenance-by-the-hour (MBH) services.
The news comes just days after ST Aero announced one of its biggest-ever single deals – the 10-year US$750 million MBH contract with India’s Jet Airways.
Under the Spring Airlines deal, ST Aero will provide maintenance, repair and overhaul services for the carrier’s current fleet of 15 Airbus A320 aircraft, which will grow to 78 of the same type.
The contract starts this month and will last eight years. It also includes setting up a warehouse at Spring’s base at the Pudong International Airport. The airline already has a warehouse at its base at Hongqiao International Airport. The new warehouse will allow easy access to component consignment services at Pudong.
ST Aero’s relationship with Spring began in 2005 when it secured an MBH contract to provide component services, including component maintenance, repair and overhaul, pool access and consignment services. Since then, ST Aero has also provided airframe services, seats and slides overhaul and aircraft-on-ground and tapped on its aviation logistics facility at Guangzhou to provide import, export, warehousing and logistics services of components.
The latest contract underscores the popularity of ST Aero’s MBH offering, especially for narrow-body Boeing 737 and Airbus A320 aircraft. ST Aero is providing engine and component support for more than 650 aircraft on an MBH basis for a large number of airlines.
Spring is one of China’s pioneer low-cost carriers. Established in 2005 by Spring Travel, China’s domestic travel agency, it started operating with three Airbus A320s. Today it operates out of Shanghai’s Hongqiao and Pudong airports as well as Sanya’s Fenghuang Airport, serving more than 50 routes within mainland China. It hopes to go international this year.