Friday, May 7, 2010

LMIR Trust-ocbc


1Q10 misses the mark as rental guarantees expire

1Q10 results
Revenue = S$21.6m (+3.4% QoQ)
Distributed income = S$12.9m (+3.5% QoQ)
Distribution per Unit = 1.20c
Mall occupancy = 93.8% (-2.2%)

Malls such as The Plaza Semanggi (the second largest income contributor among the retail malls), Bandung Indah Plaza (third largest contributor) and Ekalokasari Plaza recorded occupancy declines of 600 basis points, 470 bps, and 820 bps respectively. The manager attributed the occupancy declines (-220 bps overall) mainly to the expiry of rental guarantees, granted by the vendor at the time of LMIR’s IPO, on spaces that had undergone extensive asset enhancement.

After including temporary leasing and new leases committed by way of signed letters of intent, occupancy at Mar 2010 is 96% (flat). The manager said that with improving sentiment, it continues to receive various leasing enquires for vacant space. It is also re-mixing its tenant profile as it positions the portfolio for a more favorable retail climate.

Easing earnings estimates slightly. LMIR re-iterated that while the retail property market might start to benefit from a strong macro environment, LMIR will not see any “material benefit” in 2010 as “the portfolio has a very defensive position with very low upcoming expiries and already high occupancy levels”. The REIT manager said it continues to source for new acquisitions to take advantage of its low leverage of 10.2% debt-to-assets.

We are now factoring in lower occupancy assumptions for FY10 and FY11. Our revenue estimates decline 2.7% and 3.7% for FY10-FY11F. In line, we adjust our DPU estimates for FY10-FY11F down by 3.3% and 4.3% to 5.0 S cents and 5.2 S cents respectively. Our fair value estimate, at a 20% discount to SOTP value, declines to S$0.55 from S$0.59 previously. With a 23% estimated total return, we maintain our BUY rating.

DJIA Top five intraday point swings

Yesterday's plunge of 1,010.14 points - almost nine per cent - was the single biggest intraday drop in the history of the Dow. Here are the top five intraday swings:

1. Oct 10, 2008: The Dow surges for a single intraday record swing of 1,018.77 points, reaching a high of 8,901.28 from a low of 7,882.51, before closing at 8,451.19.

2. May 6, 2010: After an early high of 10,879.76, the Dow plunges 1010.14 points to 9,869.62 before closing at 10,520.32.

3. Oct 13, 2008: The Dow soars 965.81 to a high of 9,427.99 from a low of 8,462.18 after opening at 8,451.19 to close at 9,387.61.

4. Nov 13, 2008: After sinking about 300 points to 7965.42, the Dow rockets up 911.17 points to a high of 8,876.59, and closes at 8,835.25.

5. Oct 28, 2008: The Dow soars 907.35 points, from a low of 8,174.73 to a high of 9,082.08 and closes at 9,065.12. AFP

Wednesday, May 5, 2010

FSL Trust - DBS

First Ship Lease Trust
(downgrade from BUY)
HOLD S$0.545
Price Target : 12-Month S$ 0.55 (Prev S$ 0.78)

Unexpected counterparty issues

• Key customer Groda Shipping reneges on contract, returns product tankers prematurely to cut losses

• Worst case, DPU down 15-18% in FY10-11

• Risk of knock-on effect on other customers, despite the presence of corporate guarantees as recourse

• Downgrade to HOLD, TP reduced to S$0.55

Charterer wants to return 2 vessels prematurely. FSLT has been requested to take immediate re-delivery of two of their vessels by charterer Groda Shipping, much before the scheduled charter expiry of November 2014. The two vessels are product tankers of about 47,000 dwt each and are currently on a back-to-back sub-charter to Russian statecontrolled energy company OJSC Rosneft, under a long-term Contract of Affreightment (“COA”). Utilisation by Rosneft was probably low and high bunker prices rendered the arrangement unsustainable for Groda. FSLT is likely to settle amicably and will receive US$3m security deposit on each vessel, which translates to about 5 months charter-hire.

Impact cash flow significantly. The two charters are currently fixed at US$20,700 per day each and contribute about 15% to FSLT's topline. The ships are still employed by Rosneft and FSLT could go into a direct contract with them. However, the COA revenue should be significantly lower than the current bareboat charter rate, and FSLT would have to assume operating risks as well. The other option for FSLT is to scout for 3rd party employment, but current charter rates could be around 40% lower than the existing bareboat rate.

Quarterly DPU could fall to 1.1UScts from 1.5UScts in the near term. Assuming a conservative 50% cut in income from the Groda vessels, our DPU estimate for FY10-11 is reduced by 15-18% to 4.8-5.3UScts from 5.6-6.5UScts earlier. Pending further clarity on negotiations with Groda and how the trustee manager employs the ships in future, we downgrade the stock to HOLD at a TP of S$0.55 (higher peg of 12% target yield to reflect increased risk of charter renegotiations by customers). Impact on DPU could be lower if part of the U$6m security is channeled into distributions.

Tuesday, May 4, 2010


04 May 2010
Price: M$3.00
Price Target: M$2.70
52-wk range (M$) M$2.34-3.44
Visit note: Construction orderbook replenishment frustratingly slow

• No orderbook replenishment in 2010? A recent visit to Gamuda suggests that orderbook replenishment is looking increasingly unlikely in 2010, as the outcome of large-scale project awards appear to be delayed back both domestically and in the Middle East while low margins on the new contracts are keeping Gamuda selective on bids. The projects which the company is vying for at present are: 1) LRT extension works; 2) Langat 2 WTP; 3) Southern Double Tracking works; 4) LCCT Runaway; and 5) Middle East contracts – all with varying degrees of success.

• Property leg up depends on Vietnam: FY10 domestic property sales are likely to hit M$800M, after strong 1H10 sales figures of M$490M. Gamuda expects a similar target for FY11. However, it is on the Vietnam front, where expected sales launches of M$700M to M$800 are expected based on maiden US$150M sales value from Yenso and US$100M from Tan Thang in FY11. Both Vietnam properties are expected to target their respective soft launches in July/August 2010, with the official launch toward October/November 2010.

• SPLASH offer remains a wild card: Gamuda expects a resolution to the longstanding saga on the Selangor water privatization over the next two to three months. While it believes it has a credible offer on the table, there is a likelihood of several twists and turns still as the various interested parties in this privatization put forward their views before a final outcome is reached. At the very minimum, Gamuda hopes to be taken out at its previously agreed price with the Selangor State Government.

• Maintain UW, revising our earnings down by 7% and 12% for FY10E and FY11E: as we reduce the prospects of orderbook replenishment in our earnings forecasts. However, our December-10 price target of M$2.70 remains unchanged as our cut in construction value (based on lower earnings and lower P/E target multiple of 12x vs. 15x) has been offset by higher property value (factoring in Vietnam earnings), Litrak’s higher share price, and Gamuda’s stronger balance sheet (vis-a-vis 2009). The key risk on the upside is that Gamuda unexpectedly wins a large construction contract or if Vietnam proves to be a runaway success.

Management guidance was fairly downbeat, but would not be overly negative given that we may have seen the bottom and outlook should improve going forward. Also interesting to flag that recent warrants issue should be viewed positively. A company would normally issue warrants at the bottom end of the cycle, in hope of conversion when the cycle improves. This implies that management expects outlook to improve from here on with possible :
1) recovery in Vietnam;
2) pick in construction order book; and
3) SPLASH reaching a resolution.

Also in view of Datuk Lin's impeccable timing in the past (sold at the high), I believe that his ability to read the cycle should be fairly reliable. I will be inclined to buy the stock on weakness and for those with the appetite, the warrants provides better leverage.


FSL Trust: Requested to take re-delivery of two vessels

Summary: FSL Trust (FSLT) announced today that the charterer Groda Shipping has requested FSLT to take re-delivery of two of its product tankers Verona I and Nika I on the basis that Groda does not intend to continue to make full lease payments under the charter agreements. To recap, both vessels are under a seven-year bareboat charter agreement fixed at US$20,700 each per day until November 2014. For the month of May 2010, Groda has made full payment for only one of the two vessels. It has also told FSLT that from June 2010 onwards, full payments should not be expected for either vessel. The charter agreement was structured with a cash security deposit of US$3m/vessel and an assignment of the long-term Contract of Affreightment between Groda and OJSC Rosneft Oil Company, a Russian state-controlled energy company and the ultimate employer of the ships. FSLT said it was exploring legal and commercial options, and that “best efforts will be made to ensure the uninterrupted operation of the vessels”. The two vessels contribute roughly 15% of total revenue.

A shortfall in revenue could affect FSLT’s ability to meet its distribution guidance through cash generated from operations (due to the loan repayment obligation each quarter).

It is also not clear if the re-delivery constitutes a “material event” for FSLT’s lenders. We place our HOLD rating and S$0.59 fair value UNDER REVIEW as we await further clarity on this development.

Fortune REIT

Fortune REIT 1Q 2010 Result

1Q 2010 versus 1Q 2009
Revenue = HK$209.1 million +24.3%
Net Property Income = HK$155.8 million +26.6%
Distributable Income = HK$106.2 million +28.2%
Distribution per unit - HK cents 6.38
Annual Yield (%) @ HK$3.59 03/05/10 = 7.11%
Portfolio occupancy rate = 97.3%
Passing rent = HK$27.4 psf
Borrowing costs was HK$28.4 million = +20.8%
The weighted average cost of borrowing =4.07%

Commentary Outlook
Outlook for the financial year ending 31 December 2010
Further to the successful completion of the recent refinancing and the rights issue in October 2009, Fortune REIT has reinforced its financial position with no refinancing needs until 2013. Besides, the acquisition of Metro Town, Caribbean Bazaar and Hampton Loft on 15 October 2009 will provide Fortune REIT with a more stable cash flow thereby enhancing the income profile of its portfolio.

In addition, the successful completion of the dual primary listing in Hong Kong provides Fortune REIT with access to both Singapore and Hong Kong capital markets, which is important for the growth and long term development of Fortune REIT.
Based on the portfolio asset performance for the quarter ended 31 March 2010, the manager of Fortune REIT expects the asset performance for the year ending 31 December 2010 to be in line with the market, barring any unforeseen circumstances.

Monday, May 3, 2010

Malaysian Airline (MAS) -rhb

Malaysian Airline System
Share Price : RM2.27 (30/04/10)
Fair Value : RM1.60

52wk Price Range (RM) 1.80-2.75
Recom : Maintain Underperform .

Deliveries Of A380 Delayed For A Third Time
♦ More delay. The deliveries of MAS’s six A380 aircraft on order have been delayed for a third time. The first A380 aircraft is now expected to arrive only in 1H2012 (vis-à-vis Aug and Jan 2011 according to the second and first revised schedules, and Jan 2007 based on the original schedule). The latest development is not quite a piece of “new news” to the market as MAS already made known the revised schedule during its Investors’ Day on 20 Apr 2010.

Also, it was revealed in Dec 2009 that MAS was entitled to RM330m compensation for the postponement from Jan 2007 to Jan 2011, and that the compensation covering the postponement from Jan 2011 to Aug 2011 was being assessed. It is unknown if MAS will be entitled to compensation, and if so the quantum, for the latest postponement from Aug 2011 to 1H2010.

♦ Not a “ life-and-death” matter. We are not perturbed by the latest development as MAS is not the only airline affected by the delays in the A380 aircraft deliveries. We believe MAS can make do with its existing wide-bodied fleet pending the deliveries of the A380 aircraft.

♦ Forecasts. Maintained. Despite the heavy aircraft deliveries in FY12/11-12, we assume minimal growth in terms of total capacity as the primary purpose of the new aircraft order is to rejuvenate MAS’s fleet (see Table 3 for MAS’s fleet renewal plan). In the event of a stronger-than-expected recovery in the airline sector, MAS does have the flexibility to grow its capacity by extending the leases of its existing leased aircraft while taking delivery of the new ones.

♦ Risks to our view . These include:
a) A stronger-than-expected recovery in the air travel sector;
b) Lower jet fuel cost; and
c) Effective containment of outbreaks of pandemic diseases.

♦ Road to recovery not without speed bumps. We believe the airline sector is poised for improved prospects over the near term, in line with the recovery in the global economy, but not without some speed bumps along the way such as: (1) A mild rebound in the global economy will not materially stimulate demand for air travel; (2) Over the short term, new capacity will continue to hit the market, intensify competition and capping yields; and (3) Rising crude oil prices that will crimp margins. Indicative fair

value is RM1.60 based on 14x FY12/10 EPS, in line with its nearest comparable Singapore Airlines Ltd. Maintain Underperform .
Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)

乔治·索罗斯(George Soros)



高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo

There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
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