Saturday, July 17, 2010

Cambridge Industrial Trust -dbsv

Cambridge Industrial Trust
BUY S$0.51
Price Target : S$ 0.54

Divesting non-core assets is positive

• DPU of 1.24 Scts in line

• Restructure portfolio with aim of lowering leverage is positive in the longer term

• Stable 9.9% yields, maintain BUY, TP S$0.54.

Comment on Results

No surprises in 2Q10 results. Topline was slightly lower at S$18.3m (-0.9% yoy) due to divestment of properties; offset somewhat by higher rentals from its periodic rental escalation clauses. Portfolio occupancy remained high at 99.9%, with incomes relatively secured. Net property income improved marginally to S$16.1m (+0.5%) due to lower operating expenses. Despite relatively flat distributable income of S$10.8m, DPU was down 7.8% yoy to 1.24 Scts due to larger unit base.

Portfolio revaluation remained stable. CREIT’s portfolio was revalued at S$831.1m at half time, up S$6.1m (+1%) after netting off its divested properties, translating to 59.9 Scts NAV.


Positive capital recycling strategy. We are positive on management plans to continuously sell its non-core assets, keeping the portfolio relevant. To date, CREIT recorded S$49.7m in asset sales and has contracted to sell another S$40.5m worth in the coming quarters. A majority of the proceeds (up to S$60m) will be used for debt repayments to strengthen balance sheet and lower gearing to <40% by end FY10. The rest will be channeled towards planned asset enhancement initiatives (AEI).

Time to look for growth opportunities? Planned AEI on a couple of its assets could further enhance portfolio yields in the medium term, which are not factored in our numbers yet. Acquisitions however, could be challenging given relatively high-implied yields of c9.0%. With gearing of 42%, any acquisitions would have to be partially funded by new equity, which is expensive.

Buy for stable yields of 9.9%. CREIT remains attractive for its stable FY10-11F DPU yields of 9.9%, 300 bps above the Sreit peers and 740 bps above the Singapore government bond yields.

Cambridge Industrial Trust -dmg

Cambridge Industrial Trust delivers stable results 2Q2010 (SGXnet)

The news: CREIT reported 2Q10 DPU of 1.24¢ (-8.0% YoY; -2.8% QoQ). In 2Q10, CREIT divested 3 properties with total gross sale proceeds of S$31.3m, exceeding its book value by S$1.1m. A distribution reinvestment plan (DRP) was also implemented to strengthen the balance sheet. In 1Q10, DRP received a take-up rate of approximately 14%, an increase from 10% in 4Q09. CREIT will trade ex-2Q10 distribution on 21 July.

Our thoughts: 1H10 annualised DPU came in at 5.02¢, marginally below our forecast of 5.26¢. We believe this is due largely to its cash hoarding, where CREIT currently holds S$89m on its books and has yet to pare down its gearing. We continue to favour CREIT for its bondlike characteristics anchored by: 1) long tenant leases of 4.2years; 2) high levels of bank-guaranteed security deposits of 15.1 months; 3) built-in portfolio rental escalation of 2.5% pa; 4) high occupancy (99.9%) and diversified tenant mix. Maintain BUY, TP of S$0.64. CREIT offers an FY10 yield of 10%.

Friday, July 16, 2010

Berlian Laju Tanker -cimb

Berlian Laju Tanker

Berlian Laju Tanker -cimb

Berlian Laju Tanker
Debt Profile

Berlian Laju Tanker -cimb

Berlian Laju Tanker
Outstanding Order Book

Berlian Laju Tanker -cimb

Berlian Laju Tanker
RP280 (S$0.045) @14/07/10
Target: Rp680 (S$0.11)

Is the worst over?

Rights issue almost completed

Value has emerged. We met BLTA in Singapore during its rights issue roadshow last week. Value has emerged as a steep 51% decline in its share price over the past three months has taken the stock to almost 60% discount to our sum of parts. We also feel that the risk of further dilutive fund-raising exercises has dissipated as the rights proceeds can cover the equity portion of its newbuilding commitments while a possible separate listing of its Indonesian cabotage business may help raise funds for an expansion into this segment.

To recap, BLTA is in the midst of completing its 1-for-1 rights issue at Rp220/share. A total of 5,569.2m new shares will be issued, raising US$131m in proceeds and increasing the share base to 11,138.4m shares excluding treasury shares . The major shareholder, PT Tunggaladhi Baskara has given its commitment to take up only 1,064.2m shares of its 3,263.3m entitlement, which means that its shareholding in BLTA may fall from the present 54.6% to 37.5% post rights at the minimum.

However, the final shareholding may be between 41% and 47%.

The intention was to place out the rest of its 2,199.1m rights entitlement to institutional investors. But with book building already closed, we understand that external demand has been insufficient and the underwriters will have to take up a portion. Assuming that PT Tunggaladhi Baskara sells the 2,199.1m rights at Rp78 each, it can raise up to US$19m in proceeds, which can then be reinvested in BLTA shares. Assuming a total entry cost of Rp290, the major shareholder can buy an additional 591m shares, taking its total holdings in BLTA to 4,918.5m shares or 44% shareholding post rights. We stress that the final shareholding level of PT Tunggaladhi Baskara is still undeterminable.

Risk of further capital raising limited

Equity portion of orderbook should be covered. With US$131m in rights proceeds already assured, BLTA’s need for additional equity capital will be limited, in our view. The newbuilding orderbook will require approximately US$400m in capital expenditure over the next three years (US$108m in 2010, US$220m in 2011 and US$83m in 2012). Assuming debt financing of 70%, a total of US$120m in equity will be required, which is more than covered by the rights proceeds. We note that BLTA has not arranged debt financing for these newbuildings, but we do not expect any problems here given BLTA’s track record of raising financing even during the tough 2009.

BLTA should have enough operating cash flow to service its debt and pay instalments. We are currently forecasting 2010 EBITDA of US$272m and net interest expense of US$111m. After deducting loan instalments of US$80m, the expected 2010 cash flow (excluding capex or new debt raised) should be around US$80m. However, as at 31 March 2010, BLTA has a cash balance of US$96m and available for sale investments of US$100m, against total notional debt of US$1.9bn. Hence, BLTA will need to have the support of its creditors for a long time.

No lumpy repayments of bonds are due in the near term. The convertible bond due 2012 was put back to BLTA on 17 May 2010 for US$146m and was fully repaid. The newly-issued US$125m convertible bond is due only in 2015 but stands a strong chance of being converted since the conversion price is a relatively low Rp412. At the earliest, the bondholders have the option to get back their money from 10 February 2013 onwards. The US$400m nominal value notes payable is due in 2014. Of the Indonesian bonds, Rp1,095bn (US$122m) is repayable in 2012 while Rp245bn (US$27m) is repayable in 2014. BLTA also has US$914m in bank loans. The top three loans amounting to US$689m are detailed in Figure 8. These are amortising loans with quarterly instalments.

Cabotage expansion may be funded via a separate listing of Indonesian assets. In order to pursue cabotage opportunities in Indonesia, BLTA will need additional funds, as each FPSO may cost US$100m-150m each. Assuming 30% equity, BLTA will need US$30m-45m equity capital for each FPSO. Since BLTA is participating in five tenders, total equity requirements could range between US$150m and US$225m, assuming all five tenders are successful. BLTA has a cash balance of only US$96m at the end of March 2010 and since a minimum amount of cash is required for day-to-day operations and to cover immediate liquidity requirements, it may need to raise additional equity to expand its cabotage business.

We understand that BLTA intends to raise cash by separately listing its Indonesian based vessels that are engaged in the cabotage trade. This comprises a total of 21 tankers, mostly its fleet of gas tankers and its single-hull crude tankers. These are currently earning EBITDA of US$60m p.a. Assuming an EV/EBITDA target of 6x, the entity could be listed at an EV of US$360m. This entity can then be used to raise funds from investors for the purposes of expanding its cabotage footprint. BLTA is likely to continue to hold a majority stake in the cabotage entity. Although BLTA’s stake in the cabotage business will be diluted in such a structure, BLTA shareholders will not be burdened with the capital required for expansion.

Chemical tanker rate outlook

Still looks oversupplied... Chemical tanker rates have generally strengthened over 1Q10, recovering from their mid-2009 lows but giving up some of the gains during 2Q. In general, rates are still weak relative to their mid-2008 highs. The main reason has been the modest demand growth relative to the very high fleet supply growth. In 2009, for example, demand for chemical tanker shipping inched up just 0.1% against fleet growth of 16.1%. Drewry expects the fleet growth in 2010 to be 12.2% against demand growth of 2.3%. In 2011, supply growth will again exceed demand. Only from 2012 onwards will demand exceed supply growth

…but rate declines should reverse in 2011. Despite this seemingly bleak demand supply balance, Drewry is forecasting only a modest decline in average time charter equivalent (TCE) rates for chemical tanker vessels in 2010, relative to the material decline seen in 2008. For instance, 8-9,000 stainless IMO 2 tankers are expected to see average rates decline 6.5% this year, against a 35% fall last year. We think that most of the decline will be in 1H10 and that 2H10 should be better. Moving into 2011, rates for the same category of ships are expected to rise 6.6%. In the coated 30-32,000 segment, the average TCE rate plunged 36% in 2009 and is expected to fall another 7.2% this year before rising 15% next year .

Longer-haul Middle East to China shipments should boost tonne-mile demand. The reason why rates are expected to stabilise in 2010 before rising in 2011 in spite of the seemingly unfavourable equilibrium may be because of greater long-haul shipments of chemicals from Middle East to China. Therefore, tonne-mile demand should rise at a faster pace than the measure of demand based purely on tonnage terms. The intra-Asia market is the largest chemical shipping market globally, with organic petrochemical

exports flowing between Japan, S. Korea, Taiwan and China. As China’s own petrochemical production is unable to meet its internal demand, imports from its neighbours are required. However, the Middle East has ambitious petrochemical expansion plans, which are back on track after disruption during the global financial crisis. Because of low feedstock cost of ethane, Middle East producers are expected to have cost advantages over the East Asian producers and take a larger market share of Chinese imports. As a result, the petrochemical trade will increasingly sail longer distances from the Middle East to China while flows from Japan, S. Korea and Taiwan to China may not grow as fast. This tonne-mile expansion will absorb more of the world’s chemical tanker fleet for longer periods of time. Because of the cargo imbalance, more ships will have ballast (sail empty) to the Middle East, which further reduces the productivity of the shipping fleet. The net effect is to shift the demandsupply equilibrium of vessels towards the owners’ favour.

Cabotage opportunities

BLTA is targeting cabotage as an additional source of growth for the company. While such opportunities are available, we think that the implementation of cabotage will take time and the impact on BLTA’s P&L will be gradual. This is because many of these cabotage contracts involve oil and gas production platforms such as FSO/FPSO units that require a competitive tender bid with various oil and gas majors. The submission of the bid and the subsequent evaluation will be time-consuming. Also, the winning bidder will then have to source for the tanker or gas vessel to convert, design the conversion, select the conversion yard, purchase the topside equipment and then wait for the yard to complete its work. Additionally, equity and debt capital will need to be raised.

According to BLTA, offshore service vessels operating in Indonesian waters will need to be Indonesian flagged/owned by 1 January 2011. As a result, about 14 FSO/FPSO units will need to be replaced by 2011. BLTA is participating in five tenders for delivery in late 2011 although we think that the timeline is unlikely to be met since it is already mid-2010.

But more competition and implementation delays possible. Finally, very aggressive rates of return were obtained by BLTA in its recent VLGC contract with Pertamina. The contract was awarded on 19 January 2010 and was the first contract awarded to an Indonesian company to carry LPG around the Indonesian archipelago. The 7-year contract with a rate of US$35,000/day and opex of US$7,800/day is expected to give an EBITDA of US$9.6m p.a. Taking into account the capex of US$39m for the purchase of a 1991-built 78,543 cbm gas tanker and the estimated residual value of US$21m at the end of its 7-year contract, BLTA estimated a project IRR of 21% and equity IRR of 49% (assuming 70% debt and 30% equity financing). We believe that such eye-popping returns are bound to attract attention and inject more competition into the future bidding process. We are therefore unclear if such astronomical returns can be repeated in future contract awards. In conclusion, although we view the implementation of cabotage rules as an opportunity for BLTA, we believe that this will still be a secondary source of growth for the company given the long implementation period and the possibility that greater competition in future bids could reduce returns. We think that the primary source of earnings growth will still be anchored to a recovery in chemical tanker rates.

Valuation and recommendation

Maintain OUTPERFORM. BLTA’s share price has declined considerably over the past three months, especially after announcement of the rights issue on 26 May. At the current price, we think the downside risk is very limited because (1) chemical rates have bottomed and are on the way up gradually, (2) cabotage opportunities will provide an additional source of growth, (3) dilutive and risky transactions such as the Camillo Eitzen acquisition are no longer on the table, (4) future equity raising is unlikely given

that BLTA has enough cash to finance the entire equity portion of its newbuilding pipeline and capital raising for cabotage vessels may be executed via a separate listing of its Indonesia-based shipping assets. The first two reasons may also be potential rerating catalysts.

Earnings cut in 2010 but raised in 2011 and 2012. We have cut our core net profit estimate for 2010 by 37% as we raise our depreciation forecast. This is because BLTA revalued upwards its vessel values during 1Q10 and is expected to revalue them up again in 2Q. Consequently, depreciation charges should rise together with asset values. We have left our EBITDA forecast for 2010 essentially unchanged. For 2011 and 2012, we raise our core net profit by 8% on the back of the recently-secured cabotage contracts.

Our reported EPS forecast for 2010 has been raised 249% as we factor in vessel revaluation gains in our exceptional line, partially offset by an increase in the share base post rights issue. However, our reported EPS estimates for 2011-12 have been slashed 46% for the higher share base.

Target price reduced to Rp680. We have reduced our SOP-based target price from Rp1,000 to Rp680 because we previously overestimated the value of BLTA’s vessels and we now impute in the potential dilution from the possible conversion of CBs due 2015. Despite this downgrade, there is still considerable upside from the current share price. The share price has fallen considerably since the start of this week as we are now within the rights trading period of between 13 July and 26 July and there was an initial arbitrage opportunity in the sale of the mother shares in favour of buying the rights on the open market and adding the conversion price of Rp220. With the shares already lingering at multi-year lows, we believe that investors will not get BLTA much cheaper and should position for an eventual share price recovery.

Wednesday, July 14, 2010

Fajarbaru -rhb

Fajarbaru Builder Group
hare Price : RM0.95
Fair Value : RM1.39
Recom : Outperform (Maintained)
Greenfield Hotel Project In Melaka A Safe Bet

♦ Greenfield hotel project a safe bet. Fajarbaru is projecting about RM70m GDV from the 3.5-acre land with sea frontage in Pulau Melaka it is acquiring for RM15m cash, comprising a 4-star hotel with about 300 rooms (RM50m) and some retail shops next to it (RM20m). Fajarbaru intends to hold the hotel as an investment property with a fixed return. This can be achieved via the wholesale of the hotel rooms to tour operators on a long-term basis. For the retail shops, Fajarbaru intends to sell them at a profit and use the cash flow generated to part finance the development of the hotel. Also, the construction of the hotel and retail shops will translate to construction work to Fajarbaru.

♦ Local construction market remains highly competitive. Fajarbaru felt that the flow of small-scale public jobs has improved in recent months, as evidenced in its staff members having to “work over weekends to get tender documents ready for submission”. However, for now, it will rather stay conservative as far as job wins are concerned as severe price undercutting remains the order of the day in the market. Not helping either, we believe, is the “lobbying” element that is making a quiet comeback as a force to be reckoned with.

♦ Forecasts. In our Market Outlook & Strategy 2H2010 Report dated 30 Jun 2010, we already reduced FY06/11-12 net profit forecasts by 9% and 21%, having cut our assumption on new contracts secured in FY06/11-12 to RM250m p.a. from RM400m previously. Our forecasts have yet to reflect any contribution from the proposed hotel and retail shops in Melaka.

♦ Risks. The risks include: (1) New contracts secured in FY06/11-12 coming in below our target of RM250m per annum; and (2) Rising input costs.

♦ Maintain Outperform. We are upbeat on the construction sector as we foresee construction stocks to generally outperform the market in 2H2010, buoyed by news flow, particularly, from: (1) The RM36bn KL mass rapid transit (MRT) project; (2) The RM7bn Ampang and Kelana Jaya light rail transit (LRT) line extension project; and (3) Federal land deals. Fajarbaru, via Fajarbaru Builder Sdn Bhd – Signatium Construction Sdn Bhd JV, has been pre-qualified to bid for the LRT line extension project as the main contractor as well as segmental box girder sub-contractor. Also, additional kickers will come from its still undemanding valuations, coupled with a strong balance sheet with a net cash of RM123.7m as at 31 Mar 2010, translating to a whopping 74sen/share. Indicative fair value is RM1.39 based on 10x fully-diluted CY11 EPS of 13.9sen, in line with our benchmark 1-year forward target PER for the construction sector of 10-16x.

Monday, July 12, 2010

STI: Targeting the 2,984 level ??

DXN Holdings Berhad - aaa

DXN Holdings Berhad
RecommendationTRADING BUY
Current Price : RM 0.505
Target Price : RM 0.825
Share Issue : 240,764,000
Par Value : RM 0.25
Financial Year End : End February

Nature of Business

The Group's principal activities are manufacturing and selling health supplement and other products on a multi-level marketing (MLM) basis. Its product lines include health food supplements, food and beverages, personal care products, skin care, household products and water treatment system. Other activities include property development, tour operator, small scale biodiesel manufacturing and trading of timber concession right. Today, DXN is one of the world fastest growing network marketing organisations with operation over 110 countries.

Investment Highlights

_ “One Dragon” company with own cultivation, own R&D, own manufacturing facility that produce and selling its product under its own Brand “DXN”.

_ Impressive and solid balance sheet with cash in hand about RM55mil and NTA of RM0.78.

_ Aggressive and strong multi-level marketing agency force throughout worldwide through its “One World One Market” strategy.

_ Management is committed to stay focus on its core business activities, focus on cost efficiency, profitability enhancement and higher dividend distribution.

_ Relatively DXN is undervalued.

_ Successful new market development in North America, Middle East, European, Mongolia and Africa are expected to bring explosive growth in profit in near future.

_ Successful and impressive achievement on its township “Stargate” Phase 1 development project in Alor Setar, Kedah.

_ In today “influenza A” scary market, investors tend focus on Glove & Mask producer but overlook the Health Food Supplements player, such as DXN that can potentially benefited from this investment climate

Corporate Developments

Operations Review

The Group recorded RM 64.8 million revenues for current quarter ended 31 May 2009, representing a decrease of 11.4% as compared to RM 73.1 million in the corresponding quarter ended 31 May 2008. The decreased was mainly due to lower revenue contributed from property development segment recognition.

The Group recorded a higher profit before tax (“PBT”) of RM 6.6 million with PBT margin of 10.1% for the current quarter ended 31 May 2009 as compared to the corresponding quarter ended 31 May 2008 of RM 6.1 million with PBT margin of 8.3%. The improvement in the Group’s PBT margin was due to the improvement of cost efficiency from Multi-Level Marketing Segment.

The Group reported RM55 million cash on hand and declaring a 1st interim dividend of 3% which was an evidence of management to focus on higher dividend yield.

Future Outlook

Global Expansion and Potential

The rapid global expansion of DXN in more than 110 countries for its global presence with its own brand name is recognized internationally by its vast growth of members worldwide and its amplification of footprint in key strategic locations. Looking at the Bursa Listed Companies, DXN is unique in the MLM industry that applying “One Dragon Concept” from cultivation, manufacturing and marketing are fully integrated under its own brand name and apparently its has differential with established strong global presence in a diversified overseas market that so called “One World One Market” Concept.

Product Development

The company has a strong based for its R&D activities in Mycological and Biotechnology, that will lead the exploitation of new products such as skin care and cosmetic products which was launched to the Malaysia Market but yet to its overseas market. The pipeline product development of the vitamin series product is expected to launch by early 2010. The company is also the 1st company in Malaysia to start cultivation for Spirulina and granted the Pioneer Status for 10 years tax exemption from MAIDA, it is notice that the Spirulina sales has been picking up steadily and the company is now under construction to build more Spirulina cultivation pound to expand its capacity.

Product Quality

DXN Pharmaceutical Sdn. Bhd and DXN Industries (M) Sdn Bhd are an integrated factories that involved Lingzhi and Spirulina Cultivation, Coffee factory, GMP factory for Health Food Supplement and beverage, juice, skin care, household products and its R&D centre with approximately 25 hectres land located at Bukit Wang, Jitra, Kedah. The company is certified by ISO14001, 9002, TGA from Australia, GMP, Skim Organic Malaysia and Halal.

Stargate Project

The Stargate Project is a township development project involving 300 acres of development land that comprises of commercial building for shop office, private institutional, private hospital, hypermarket, petrol station and residential project. The project is strategically located just an exit from Alor Setar South Toll of South-North Highway. The company had signed a S&P to dispose a piece of land to Tesco Store for its hypermarket operation and fully sold off all its freehold shop office building in Phase 1. The company is now undergoing the land acquisition for its next phase of development and expected to launch 113 units of shop office building on 1st quarter of 2010. Its Richmont Residence project at Jelutong Penang is completed and pending on application of certificate of fitness, the 70 units out of 94 units are sold and on hand there are still 24 units are available but it is on hold by the company for higher sale price due to “Built & Sell” premium.

Valuation & Recommendation


We expect full year earnings for FY2010 to be around RM26 million which will equate to EPS of RM0.11. Given most of its peers are trading at average P/E of around 9x, we think it is rather conservative to value DXN at 7.5 times FY2010 EPS.

We have a Trading Buy call on DXN Holdings Berhad with a target price of RM0.825, which is translate to apotential upside of 63% from the current price of RM0.505.

REITs -ocbc

NOL is likely to appreciate further -Cimb

• Prices are now retesting this cluster of resistance at S$2.06-2.13, which is the underside of its long term uptrend channel.
• Friday’s close is mildly positive for the stock in the near term. Strong resistance is seen around the S$2.18 levels. At this point in time, we
do not think that bulls have enough buying power to lift prices past the said resistance. Closing below S$1.87 would suggest that prices are headed lower towards S$1.75 and S$1.50 next.
• Its MACD has reconfirmed its golden crossover while RSI still has room to climb before reaching its own resistance.

INSIDER BUYING From 02/07/10- 09/07/10

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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