M1 – BT
M1 Limited announced on Thursday that its net profit for the second quarter ended June 30, 2010 was up 10 per cent from a year ago, at S$40.8 million, fuelling the telco's optimism that FY2010 net profit will be better than FY2009.
'Based on the current outlook, net profit after tax for the year 2010 is likely toimprove, compared to 2009,' said Karen Kooi, M1's chief executive officer,
The improved bottomline was due to higher service revenue.
Operating revenue for the second quarter was up 17 per cent year-on-year atS$223.1 million.
M1's total customer base was 1.849 million as at 30 June 2010. For 2Q10, M1 added 53,000 customers, of which 21,000 were postpaid customers and 32,000 were prepaid customers.
Non-voice services contributed 30.8% of service revenue, up from 25.1% a year ago, driven by growth in the mobile broadband and smartphone customer base.
M1's board has declared an interim dividend of 6.3 cents per share, up from 6.2 cents a share a year ago.
STEng – Phillip
Growing with resilience
Singapore Technologies Engineering Ltd (STE) is an established integrated engineering company with a strong position in defence and aerospace business. While maintaining a strong base in Asia, STE increased its exposure to global markets through organic growth and acquisitions over the years.
Strong dividend record. As the stock has a strong track record of high dividend payout, the dividend grew in line with the company growth at CAGR of 6.1% over the past 10 years. STE paid out all of its earnings for the year from 2003-2008. However, we believe that on the long run, maintaining a 100% payout ratio is not sustainable as the company needs to retain cash for further expansions.
Strategic partner of Singapore’s defence. STE has strong roots in Singapore’s defence ecosystem and its dominant position in the local defence industry enabled the company to anchor a base load of business.
Resilience of earnings. The four business segments of Aerospace, Marine, Electronics and Land systems provided diversity that enabled the company to stay profitable during the recent economic downturn.
Sustainable Growth. The top line of the company grew at a CAGR of 10.5%, while bottom line grew at a CAGR of 4.3% over the past 10 years. With the order book at an all time high of S$11.8bn (as of 31 March 10), we expect growth for the company to be sustainable.
Key drivers of growth:
• Being one of the largest MRO players in the world, recovery in aviation traffic would increase the flight hours clocked by aircrafts. With the increase in utilization, the demand for MRO services could rebound strongly.
• Increase in automation and networking requirement of infrastructures, such as railways, traffic, buildings and military systems would propel the growth of the electronics segment of the business.
• The Marine business in US has exhibited strong growth in recent years and we expect their growth to continue with the significant contracts won.
• Growth for the Land system segment would be fueled by contract wins with foreign militaries and commercial sales of specialty vehicles in emerging markets.
Key risks:
• Due to concerns over sovereign debt in Europe and US, scale back of Defence and Government expenditure could hinder global growth in the medium term, although we expect this to be mitigated by growth in Asia, to which revenues are skewed.
Valuation:
• We used a Free Cash Flow to Equity (FCFE) model (COE: 8.4%, Terminal growth rate: 3.5%) to arrive at a 12-monthly target price of S$3.64. After considering our projected dividend payout, total returns for the stock over the next 12 months would be 15.0%. We initiate with a BUY call.
SPAusNet – BT
SP AusNet aims to grow asset base
SP AUSNET will continue to focus on growing its regulated asset base, with the aim of being a stable and secure investment for security-holders.
Chairman of the electricity network operator in Australia, Ng Kee Choe, said at the company’s annual general meeting (AGM) yesterday that the group will aim to meet increasing customer demand and connections, as well as focus on expanding and commercialising its asset services business.
Mr Ng highlighted some emerging developments that are likely to have a positive effect on financial outcomes this year.
On June 4, 2010, new Australian tax legislation came into effect. This new tax law confirms the availability of additional tax deductions or carry forward losses available to SP AusNet, which enables the company to book a benefit of around A$10 million (S$12 million) this financial year.
In addition, SP AusNet has been able to utilise the Federal Government’s investment allowance incentive. The company expects that this will also yield a tax benefit this financial year.
SP AusNet is also starting to see the benefits of its enhanced reliability programme, with incentive payments being received under the AER’s S-Factor incentive scheme. These payments are received two years after the network’s reliability performance is assessed.
Apart from highlighting the positive financial effects, Mr Ng also highlighted certain events that caused uncertainty.
SP AusNet is involved in court proceedings in respect to two of the fires that occurred on Feb 7 last year in Beechworth and Kilmore East.
More than 600 victims of the firestorm sued SP Ausnet in Victoria’s Supreme Court, alleging that the fire was caused by the company’s failure to maintain its 43-year-old power line and install a safety device, known as a vibration dampener.
Mr Ng said the company continued to extend its full support and help to the 2009 Victorian Bushfires Royal Commission.
‘Many SP AusNet employees were involved in providing evidence to the commission. The commission is due to release its final recommendations at the end of this month,’ he said.
As the matters were before the courts, it was not appropriate to comment on them, Mr Ng said.
SP AusNet is 51 per cent owned by Singapore Power.
SPH – Lim and Tan
Strong Home Sales & Weak Euro
• The highlight of SPH’s Q3 performance (3 months to May ’10) is the strong rebound in print advertisement revenue and profit, reflecting the launch of:
– several property developments, as seen in strong home sales, especially in April when 2208 units were sold;
– European cars, because of the weak euro.
• Profit from Sky @ 11 continued to play a key role in SPH’s bottom-line, except that with TOP having been obtained, contributions have largely been recognized. As at end May ’10, revenue and profit came to $674 mln and $480 mln respectively.
• The value of Paragon may have risen, to $2.28 bln as at mid July, but upgrading spend will likely continue to rise, given the ever-intense competition along the Orchard road shopping belt.
• Clementi Mall, a 60–40 JV with NTUC Income / Fairprice, will commence operations in H1 2011.
• As at end May ’10, investible funds totaled $1.1 bln (up from $800 mln three months ago), spread among cash 26.2%; equities (23.6%), bonds (31.6%), and investment funds (18.6%). The biggest increase was the allocation to bonds, rising from 19.6% at end Feb ’10, reflecting a cautious stance by management.
• SPH’s main attraction remains its 6.3% yield, assuming unchanged 25 cents dividend per share for ye Aug ’10. (Interim was 7 cents per share.)
• Maintain BUY.
SPH – Lim and Tan
Strong Home Sales & Weak Euro
• The highlight of SPH’s Q3 performance (3 months to May ’10) is the strong rebound in print advertisement revenue and profit, reflecting the launch of:
– several property developments, as seen in strong home sales, especially in April when 2208 units were sold;
– European cars, because of the weak euro.
• Profit from Sky @ 11 continued to play a key role in SPH’s bottom-line, except that with TOP having been obtained, contributions have largely been recognized. As at end May ’10, revenue and profit came to $674 mln and $480 mln respectively.
• The value of Paragon may have risen, to $2.28 bln as at mid July, but upgrading spend will likely continue to rise, given the ever-intense competition along the Orchard road shopping belt.
• Clementi Mall, a 60–40 JV with NTUC Income / Fairprice, will commence operations in H1 2011.
• As at end May ’10, investible funds totaled $1.1 bln (up from $800 mln three months ago), spread among cash 26.2%; equities (23.6%), bonds (31.6%), and investment funds (18.6%). The biggest increase was the allocation to bonds, rising from 19.6% at end Feb ’10, reflecting a cautious stance by management.
• SPH’s main attraction remains its 6.3% yield, assuming unchanged 25 cents dividend per share for ye Aug ’10. (Interim was 7 cents per share.)
• Maintain BUY.