Offshore Oil & Gas Services - OSV sector remains sanguine. Top picks: Ezion and Nam Cheong
We
hosted some of Singapore's premier offshore support companies at our
Pulse of Asia conference last week which attracted many investors. The
companies agree that the offshore support vessel market remains strong
with continued enquiries for tonnage, and rates are stable. There have
been concerns about possible capex (capital expenditure) cuts by some
international oil companies, but what most experts agree on is that
development and production opex (operating expenditure) remain buoyant.
Continued opex spend in offshore E&P space will benefit Ezion and POSH.
The opening up of Mexico's energy sector means incremental opportunities for Offshore Support Vessel (OSV) players. Pacific Radiance has recently set up a JV in Mexico to explore the possibility of deploying some of its existing orderbook, while Nam Cheong has sold four vessels in this market already. POSHis
an established player in the market, and despite facing near term
issues at its JV, is likely to keep a presence there. Indonesia remains
the bright spot in Asia. Top picks: Ezion and Nam Cheong.
We raised our target price for Nam Cheong to S$0.52 after we rolling
over the valuation base to blended FY14/15 earnings, in line with better
visibility and continued vessel sale momentum.
SIIC Environment Holdingsis
placing up to 1,000m shares at the placement price of S$0.158 per
Placement Share. The Placement Shares will represent approximately
10.43% of the enlarged issue share capital while the Placement Price
represents a discount of 8.56% to the last volume-weighted average
price. The estimated net proceeds of about S$154.8m will be used to
finance the Group's business expansion, enlarge the general working
capital of the Group, to repay existing borrowings, and for general
corporate purposes.
Overall,
this share placement is positive in strengthening SIIC's balance sheet
to grow for more acquisitions. The cash proceeds will lower net gearing
to 0.28x from 0.4x at the end of 1Q14. But, it would dilute earnings by
approximately 12% in the near term until the company achieves
immediately earnings accretive acquisitions to offset these dilution.
Hence, we have lowered our target price to S$0.22 following dilution of
this placement.
Yoma Strategic Holdings
has entered into an agreement with Mitsubishi Corporation (MC) to
provide sales support for Bridgestone tires in Myanmar. MC and
Bridgestone, the world's top tire maker by market share, already have a
series of tire manufacturing and sales joint ventures in South East
Asia, particularly in Thailand, Vietnam and Malaysia.
Moody's
expects local banks to post weaker profits over the next 12-18 months
on higher loan-loss provisions for overseas operations and a modest
uptick in interest rates next year. The banks' margins - measured on a
net interest basis - are also among the thinnest compared with those of
their Asian peers in advanced economies that include Australia, China
and Hong Kong. The weak margins from Singapore banks reflect a saturated
domestic market, and the lenders' conservative nature in making foreign
loans - which made up 47% of all their loans at the end of last year,
according to Moody's. Lack of scale also hinders them from benefiting
from regional expansion.
Low Keng Huat,
which last August acquired 15 commercial units and an apartment at
Balestier Towers for nearly $77.4m, yesterday exercised options to
purchase the balance 36 units in the mixed-use development for slightly
above $63.9m. The group plans to redevelop the 29,986-sq-ft site into a
mixed residential and commercial development.
Nervousness that corporate earnings may not match the current high market valuation led to a drop in US stocks. High
PE stocks such as Twitter Inc. and Pandora Media Inc. tumbled. The
Nasdaq Biotechnology Index fell as its component stocks sold off. The
S&P 500 trades at a valuation of 18x reported earnings, the highest
since 2011. The
Federal Reserve will release minutes from its June meeting tomorrow.
Officials are debating the timing for the first increase in the main
interest rate. After the bell, Alcoa reported 2Q earnings and sales that
beat analysts' expectations after an increase in the price of aluminium
including regional delivery premiums.
Source: DBS
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