SBSTransit – BT
SBS Transit Q1 profit falls 59%
SBS Transit on Friday reported a 59.2 per cent decrease in year on year net earnings to $$4.84 million for the first quarter ended March 31, 2012.
Revenue increase of 4 per cent year on year to $191.28 million was insufficient to offset the 9.3 per cent increase in operating expenses.
Bus Operations incurred an operating loss of $3.7 million as compared to an operating profit of $0.5 million a year ago due mainly to higher fuel cost, higher depreciation, higher staff costs and higher repairs and maintenance costs, offset by higher bus fare revenue.
Revenue from rail operations for 1Q12 at $34.2 million was higher by 5.3 per cent compared to 1Q11 due to the increase in average daily ridership, offset by the decrease in average fare.
STEng – Kim Eng
Off to a Strong Start
Strong profit growth. ST Engineering (STE) reported a strong set of 1Q2012 results, with Net Profit of SGD 134.4 mil reflecting an increase of 21% YoY. These results were broadly within our FY2012 expectations – we will be maintaining our forecasts and BUY recommendation based on STE’s historical P/E mean of 19x. STE’s growing orderbook, contributed by all four business segments this quarter will continue to provide earnings visibility and resilience amidst the backdrop of global economic uncertainty.
Boosted by healthier margins across the board. Although 1Q2012 revenue came in almost flat YoY, healthier net margins of 8.7% versus 1Q2011 margins of 7.1% boosted profits. Encouragingly, all four business segments posted improved margins, led by ST Marine which benefited from a favourable sales mix.
Strong cashflow. Another highlight of STE’s 1Q2012 financial performance was its strong operating cashflow at SGD 547 mil, which contributed to an improvement of its net cash position to SGD 565 mil from SGD 2.2 mil, and providing support for our forecasted FY2012 DPS of SGD 0.17 (increase of 10% vs FY2011).
Outlook positive. Management forecasts a positive outlook for three of its four business segments. Its Aerospace, Electronics and Marine sectors are expected to record higher PBTs in 1H2012 vs 1H2011. Only its Land Systems segment is expected to show comparable profit.
Solid business fundamentals – Maintain Buy. STE has a solid business model underpinned by defence contracts (40% of 1Q2012 revenue), with earnings visibility continually provided by its growing orderbook. Its business segments continue to show positive macro trends to support growth and provide a basis for earnings resilience. We reiterate our BUY recommendation for STE pegged at 19x FY12 PER, based on its 10-year historical PER mean.
STEng – Phillip
Boosters from Singapore Airshow
Company Overview
ST Engineering (STE) is an integrated engineering group with exposures to four key business segments: Aerospace, Marine, Electronics and Land Systems. The company is also an anchor customer of Singapore’s defence industry.
• 21% increase in PATMI on 1.5% improvement in EBITDA margins
• Associates contributions boosted by biannual Singapore Airshow
• Order Book of S$12.2bn (2.0X annual sales)
• Maintain Accumulate with unchanged TP of S$3.37
What is the news?
STE reported profit growth of 21% as compared to the same quarter a year ago. EBITDA margins improved by 1.5ppt largely due to more favourable product mix and provisions related to the ROPAX contract termination that was made in 1QFY11. The Group’s result was boosted by the biannual Singapore Airshow that was held in the quarter, which accounted for majority of the S$10.8mn increase in PBT contributions from its Associated companies. Order book was held steady at S$12.2bn (2.0X annual sales).
How do we view this?
The results were strong, considering that first quarter is usually a weaker quarter for STE, and had already formed 24.8% of our full year estimates. STE’s order book of S$12.2bn is probably above S$13bn, if the recent contract wins in April were included (See: Defence contracts lead the way!, dated 13th April 2012).
Investment Actions?
We kept our forecasts unchanged and maintain our Accumulate rating on STE. STE’s earning yield spreads and P/E multiples remain below historical averages, reflecting undervaluation in this defensive stock, in our view.
STEng – Phillip
Boosters from Singapore Airshow
Company Overview
ST Engineering (STE) is an integrated engineering group with exposures to four key business segments: Aerospace, Marine, Electronics and Land Systems. The company is also an anchor customer of Singapore’s defence industry.
• 21% increase in PATMI on 1.5% improvement in EBITDA margins
• Associates contributions boosted by biannual Singapore Airshow
• Order Book of S$12.2bn (2.0X annual sales)
• Maintain Accumulate with unchanged TP of S$3.37
What is the news?
STE reported profit growth of 21% as compared to the same quarter a year ago. EBITDA margins improved by 1.5ppt largely due to more favourable product mix and provisions related to the ROPAX contract termination that was made in 1QFY11. The Group’s result was boosted by the biannual Singapore Airshow that was held in the quarter, which accounted for majority of the S$10.8mn increase in PBT contributions from its Associated companies. Order book was held steady at S$12.2bn (2.0X annual sales).
How do we view this?
The results were strong, considering that first quarter is usually a weaker quarter for STE, and had already formed 24.8% of our full year estimates. STE’s order book of S$12.2bn is probably above S$13bn, if the recent contract wins in April were included (See: Defence contracts lead the way!, dated 13th April 2012).
Investment Actions?
We kept our forecasts unchanged and maintain our Accumulate rating on STE. STE’s earning yield spreads and P/E multiples remain below historical averages, reflecting undervaluation in this defensive stock, in our view.
MIIF – DBSV
Buoyant dividend income in 1Q
• Higher dividend income in 1Q12 driven by organic growth and bigger stake in Taiwan cable TV asset
• Key risk is toll rate cut at Hua Nan Expressway, but this is already expected
• Risk-reward continues to be attractive given 9.5% yield; Maintain BUY with TP of S$0.64
Highlights
1Q12 results in line. The fund generated net dividend income of S$21.3m, up 181% y-o-y, largely owing to the higher 47.5% stake in Taiwan Broadband Communications (TBC), compared to 20% last year. Even if we strip out the impact of a larger stake, dividends from TBC grew 6%, in line with organic growth at the asset last year. To note, 1Q dividend income is derived only from TBC (half-yearly payout) as the other two assets – Changshu Xinghua Port (CXP) and Hua Nan Expressway (HNE) – only pay dividends once a year in the 3rd quarter of the year.
Underlying assets performance healthy. Operational performance at TBC in 1Q12 continued to be healthy with EBITDA growth of 6% y-o-y, as growth in digital cable TV subscribers surpassed expectations. HNE also surprised on the upside, delivering 14% EBITDA growth in 1Q12, driven by higher traffic volumes benefiting from traffic feed from newly opened Guanghe Expressway. At CXP, revenue grew 9% y-o-y but EBITDA fell 10% owing to margin pressures and one-off costs.
Our View
Fund remains well on track to pay out 2.75Scts semi-annual dividends in FY12/13. Operational performance at HNE and CXP is expected to remain healthy. The key risk is a possible toll rate reduction at HNE Phase I, as the Guangdong government will be introducing uniform toll road standards in 2012. Our numbers already reflect a toll rate cut at HNE Phase I of about 20% by mid-2012, but this could be further delayed, as there has been no communication yet from local authorities.
Recommendation
Yield of 9.5% is hard to ignore. No change to our SOTP valuation of S$0.64, as we have already factored in downside at HNE. Maintain BUY for close to 20% total return potential. A worst-case impact from toll rate cut at HNE could be a cut in FY12 DPU to 5.0Scts to smoothen the impact in FY12/13. This still implies 8.6% yield at current prices. The fund bought back 13.7m shares in 1Q12 and we expect share buyback activities to continue, given the share price discount to fund NAV and the lack of suitable acquisition opportunities in the near term.