Author: kktan
SIAEC – MayBank Kim Eng
Look beyond the soft quarter
- Weak set of 3QFY3/14 results with net profit sliding 9.7% YoY to SGD60.5m. The results disappointed.
- Economic uncertainties and rising business costs notwithstanding, management expressed confidence that group performance would remain stable.
- Structural drivers are still intact. Maintain BUY.
Disappointing results
SIA Engineering (SIAEC) reported a fairly weak set of 3QFY3/14 results with net profit sliding 9.7% YoY to SGD60.5m. Operating profit shrank 19.2% YoY, weighed down by labour costs, subcontract fees and material expenses. In line with HAECO’s earlier guidance for lower workload at HAESL, dividend contribution from the engine maintenance unit came in lower YoY. SAESL and IECO surprised on the downside, with the weakest earnings contribution in eight quarters at only SGD18.8m. As at end-2013, SIAEC’s net cash position of SGD444m was higher than the SGD425m in the same period the previous year. Despite global economic uncertainties and rising business costs, management expressed confidence that the group’s performance would remain stable.
Structural drivers intact
Although SIAEC’s third-quarter performance came in softer than expected, we believe the structural drivers of the stock are still intact. As a dominant MRO service provider, it is the best proxy to the unprecedented level of expansion at Changi Airport. Its network of associates and joint ventures would also continue to provide a solid stream of earnings and return cash dividends to shareholders. We see the spin-off of its JVs and bumper dividends as potential stock catalysts. SIAEC is one of our key stock picks in the Singapore transportation space. Reiterate BUY and SOTP–based TP of SGD6.34.
January 2014
Results Announcement
- 14 Jan 14 : SPH (Q114) – EPS 6ct
- 20 Jan 14 : M1 (Q413) – EPS 4.4ct (todate 17.4ct) ; Div = 7.1ct (Final) + 7.1ct (Special) = 14.2ct (todate 21ct)
- 28 Jan 14 : SMRT – EPS 0.9ct (todate 3ct)
- 3 Feb 14 : SIAEC
- 6 Feb 14 : StarHub
- 11 Feb 14 : SATS
- 12 Feb 14 : SBSTransit
- 13 Feb 14 (AM) : SingTel
- 13 Feb 14 : ComfortDelgro
STI = 3027.22 (-20.71)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
HL Fin |
FY12 (Dec) |
17.60 |
12.00 |
$2.720 |
4.412% |
15.45 |
Interim 4ct ; Final 8ct |
|
SingPost |
FY13 (Mar) |
6.435 |
6.25 |
$1.335 |
4.682% |
20.75 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
SPH |
FY13 (Aug) |
27 |
22.0 |
$3.990 |
5.514% |
14.78 |
Interim 7ct ; Final 8ct + Special 7ct |
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY13 (Mar) |
16.60 |
15.0 |
$3.130 |
4.792% |
18.86 |
Interim 5ct ; Final 6ct + Special 4ct |
|
SIA Engg |
FY13 (Mar) |
24.51 |
22.0 |
$4.930 |
4.462% |
20.11 |
Interim 7ct ; Final 15ct |
|
ST Engg |
FY12 (Dec) |
18.76 |
16.8 |
$3.790 |
4.433% |
20.20 |
Interim 3ct ; Final 4ct + Special 9.8ct |
Note : SATS Special Div is Observed to be Non-Recurring
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY12 (Dec) |
6.01 |
3.00 |
$1.305 |
2.299% |
21.71 |
Interim 1.35ct ; Final 1.65ct |
|
ComfortDelGro |
FY12 (Dec) |
11.89 |
6.40 |
$1.935 |
3.307% |
16.27 |
Interim 2.9ct ; Final 3.5ct |
|
SMRT |
FY13 (Mar) |
5.5 |
2.50 |
$1.145 |
2.183% |
20.82 |
Interim 1.5ct ; Final 1.0ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY13 (Mar) |
22.02 |
16.8 |
$3.530 |
4.759% |
16.03 |
Interim 6.8ct ; Final 10ct |
|
M1 |
FY13 (Dec) |
17.4 |
21 |
$3.360 |
6.250% |
19.31 |
Interim 6.8ct ; Final 7.1ct + Special 7.1ct |
|
StarHub |
FY12 (Dec) |
20.93 |
20 |
$4.270 |
4.684% |
20.40 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
1H – Sep13 |
A4.18 (Gross) |
$1.355 |
6.874% |
A$0.92 |
1H14 A4.18ct ; 2H13 A4.1ct |
|
MIIF |
2H13 – Guidance |
0.80 |
$0.110 |
14.545% |
$0.250 |
1H12 2.75ct ; 2H12 2.75ct + 3ct (Special) ; Capital Return = 44.329ct + 1.04ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.1142) fm Yahoo
NOTES :
- Mkt Price is as on 30-Jan-14
- SPAus : 2H13 (Mar13) – A4.1ct = A1.367ct (Franked) + A2.649ct (Interest) + A0.084ct (Capital Returns) ; 1H14 (Sep13) – A4.18ct = A1.393ct (Franked) + A2.396ct (Interest) + A0.391ct (Capital Returns)
- SingTel : 1H14 (Sep13) – Interim 6.8ct
- StarHub : Q313 (Sep) – 5ct ; Q213 (Jun) – 5ct ; Q113 (Mar) – 5ct
- SIAEC : Q214 (Sep13) – Interim 7ct
- SATSvcs : 1H14 (Sep13) – Interim 5ct
- SMRT : Q214 (Sep13) – Interim 1ct
- SingPost : Q214 (Sep13) – 1.25ct ; Q114 (Jun13) – 1.25ct
- SPH : 2H13 (Aug) – Final 8ct + Special 7ct ; 1H13 (Feb) – Interim 7ct
- MIIF : FY13 Guidance 2H13 (Dec) –0.8ct (Final) ; CXP Return of Capital = 9.7ct
- MIIF : 1H13 (Jun) –0.7ct
- ComfortDelgro : Q213 (Jun) –3ct
- ST Engg : 1H13 (Jun) – 3ct
- SBSTransit : Q213 (Jun) – 0.9ct
- HLFin : 1H13 (Jun) – 4ct
- M1 : 1H13 (Jun) – Interim 6.8ct
- MIIF : FY13 Guidance 1H13 (Jun) –0.7ct ; 2H13 (Dec) – 1.2ct (Final) ; APTT IPO Entitlement / 1000 MIIF Shares (Estimate) = 457 APTT Shares or $443.29
- SPAus : FY14 Guidance = A8.36ct
- SingTel : Div Policy – 60% to 75% of Underlying Net Profit
- StarHub : FY13 Div Guidance – 5ct/Q
SMRT – MayBank Kim Eng
Sustained losses at fare business
- Disappointing quarter as expected, with net profit plunging 44% YoY to SGD14.2m.
- Combined operating loss of SGD9.0m for its fare business. Impending fare hike unlikely to be sufficient to offset losses.
- Structural headwinds from DTL cannibalisation yet to be priced in by the market. Maintain SELL with TP of SGD0.60.
What’s New
SMRT reported another disappointing set of numbers for 3QFY3/14, with net profit plunging 44% YoY to SGD14.2m. The combined operating loss for its fare-based business stood at SGD9.0m [MRT: SGD0.4m, LRT: (SGD0.6m), bus: (SGD8.9m)], reflecting the challenging business environment for public transport operators. On the bright side, 3QFY3/14’s rental profits improved 9.2% YoY to SGD18.5m, mitigating negatives at its core fare-based business. As of 9MFY3/14, capex of SGD604m has exceeded management’s previous guidance of SGD500m for the full year. Consequently, the company’s balance sheet deteriorated with net gearing climbing to 64% at end-2013 (Mar 2013: 8%).
What’s Our View
We maintain our negative view on the stock. While the fare increase from Apr 2014 would give SMRT an estimated net benefit of SGD13.2m pa, or SGD3.3m per quarter, we do not think this alone is sufficient to offset losses in view of the current run-rate of SGD9m per quarter for its fare business. Furthermore, SMRT faces the threat of cannibalisation when Stage 2 of the Downtown Line (DTL) opens in 2016, which puts approximately 17% of its fare revenue at risk (Figure 4). While transiting to a sustainable business model for its train and bus operations appears imminent, we argue that it is highly speculative to conclude that the transition terms will be favourable to shareholders. Our TP of SGD0.60 is based on 14x FY3/14-16E P/E. Maintain SELL.
SATS – MayBank Kim Eng
New CEO sets out his vision
- Leverage on technology to ease labour cost pressure, new catering centre required to support Changi Airport expansion
- Higher capex could put our DPS forecasts at risk, but we see scope to optimise capital structure
- Valuation still attractive at 15x FY15E P/E with dividend yield of 5.0-5.6% over the next three years. Maintain BUY.
What’s New
Mr Alex Hungate, the new CEO of SATS, held his first meeting with the analyst community yesterday and shared his strategy for the group. His key points are: 1) cement its presence in Asia, 2) leverage on technology to ease labour cost pressure, 3) take advantage of Changi Airport’s expansion, and 4) raise capex if needed but there would still be room to gear up the balance sheet.
We also visited SATS’s Inflight Catering Centre (ICC) 1 and were impressed with the attention to detail, cleanliness and organised operations at the facility. This has enabled us to better appreciate the synergies between SATS and its non-aviation food business, which processes food before final packaging at the airport.
What’s Our View
We remain positive on the stock as ongoing initiatives to drive productivity will better position SATS for the future. With demand for air travel in the region on the rise, the outlook for its aviation business is bright. Incremental contributions from its non-aviation business will also continue to provide stable income and enhance economies of scale for the group.
Although guidance for a higher capex could put our call for higher dividends over the next three years at risk, we reiterate our view that SATS could enhance shareholders’ returns by optimising its capital structure. At 15x FY15E P/E, valuation remains attractive with the stock offering a dividend yield of 5.0-5.6% over the next three years. Maintain BUY with unchanged TP of SGD4.00 (DCF based: WACC= 7.6%, tg= 1.0%)
SATS – MayBank Kim Eng
New CEO sets out his vision
- Leverage on technology to ease labour cost pressure, new catering centre required to support Changi Airport expansion
- Higher capex could put our DPS forecasts at risk, but we see scope to optimise capital structure
- Valuation still attractive at 15x FY15E P/E with dividend yield of 5.0-5.6% over the next three years. Maintain BUY.
What’s New
Mr Alex Hungate, the new CEO of SATS, held his first meeting with the analyst community yesterday and shared his strategy for the group. His key points are: 1) cement its presence in Asia, 2) leverage on technology to ease labour cost pressure, 3) take advantage of Changi Airport’s expansion, and 4) raise capex if needed but there would still be room to gear up the balance sheet.
We also visited SATS’s Inflight Catering Centre (ICC) 1 and were impressed with the attention to detail, cleanliness and organised operations at the facility. This has enabled us to better appreciate the synergies between SATS and its non-aviation food business, which processes food before final packaging at the airport.
What’s Our View
We remain positive on the stock as ongoing initiatives to drive productivity will better position SATS for the future. With demand for air travel in the region on the rise, the outlook for its aviation business is bright. Incremental contributions from its non-aviation business will also continue to provide stable income and enhance economies of scale for the group.
Although guidance for a higher capex could put our call for higher dividends over the next three years at risk, we reiterate our view that SATS could enhance shareholders’ returns by optimising its capital structure. At 15x FY15E P/E, valuation remains attractive with the stock offering a dividend yield of 5.0-5.6% over the next three years. Maintain BUY with unchanged TP of SGD4.00 (DCF based: WACC= 7.6%, tg= 1.0%)