Saturday, August 13, 2011

Absolute Research: S&P downgrades US Credit Rating, How Now?

Source/转贴/Extract/Excerpts: youtube
Publish date:08/08/11

Genting S'pore Q2 profit drops 39%

Business Times - 13 Aug 2011

Genting S'pore Q2 profit drops 39%

Strong growth in its non-gaming segment


LOW win percentages in its VIP business segment dragged on the profitability of Genting Singapore in the second quarter, with recession fears keeping its short-term outlook cautious.

Signalling that RWS has lost VIP market share to MBS, analysts pointed to RWS's 13 per cent drop in VIP rolling volume quarter-on quarter, while those of MBS jumped 21 per cent.

Citing low luck factor, or gamblers being luckier than usual, Genting Singapore saw net profit drop 39 per cent to $242.9 million in its second quarter ended June 30, from $396.5 million a year ago.

Its flagship casino, Resorts World Sentosa, reported $347.2 million in earnings before interest, tax, depreciation and amortisation, while its rival, Marina Bay Sands, raked in US$405.4 million Ebitda.

RWS reported $529.6 million Ebitda a year ago and $529.4 million in the first quarter.

Total revenue dropped to $728.7 million in the second quarter from $874.4 million a year ago, while gaming revenue from the casino fell 24 per cent to $583.9 million.

'Following a strong win percentage in the first quarter, Lady Luck played a reclusive role in Q2 and brought down both revenue and Ebitda numbers,' Tan Hee Teck, Genting Singapore's president and chief operating officer, said in an earnings call yesterday.

'Our second quarter results were affected by Chinese New Year in the first quarter. We did very well over Chinese New Year. A number of customers lost a lot of money to us, so they had to take a lunch break over the second quarter,' he explained.

While ongoing global economic concerns and financial market turmoil hasn't affected the company's earnings to date, Mr Tan said the company has to 'prepare for some uncertainty going forward.'

Still, the group said that it saw strong growth in its non-gaming segment, boosted by higher visitor traffic to Universal Studios Singapore and hotel occupancy. Revenue from its non-gaming business jumped 40 per cent in the second quarter to $132.1 million from $94.2 million a year ago.

'Just a few weekends ago we achieved a record-breaking number of 20,330 visitors on a single day (to Universal Studios),' said Mr Tan. Daily average visitation to USS jumped to 10,300 in the second quarter with visitor spending averaging $83.

Aaron Fischer, head of consumer & gaming research with CLSA Asia Pacific Markets, said that he was 'more disappointed that mass market revenues were roughly flat, given more tourists to Universal Studios and hotel occupancy increasing to 88 per cent for Q2'.

The completion of the West Zone, RWS's luxury suites and villas for VIP highrollers, should help attract a bigger share of the high-end market, Mr Tan said.

That's critical, according to George Choi, a gaming analyst with Citi Investment Research & Analysis in Hong Kong, who said he believes RWS' VIP market share loss was largely due to a better hotel offering at MBS.

The opening of Equarius Hotel, which will consist of 190 luxury rooms, is now set for December, while Spa Villas, which will consist of 20-plus beach villas, is slated for opening next March. RWS's luxury suite offering will double from its current 120 with the opening of the West Zone.

Mr Fischer said the West Zone will be a major catalyst for RWS as its current premium hotel offering is lacklustre compared with MBS.

'Projects in other countries such as Japan look less likely and it appears that management are exploring more opportunities in Singapore, which could mean additional hotel capacity as Sentosa lacks critical mass in rooms,' he said.

According to Mr Tan, as RWS does not market to to locals, in order for the mass gaming market to grow, it 'needs overseas arrivals to grow and this can happen only with more hotel rooms (which) according to STB can happen in a couple of years time.'

'MBS has the advantage in terms of hotel rooms and number of hotel rooms surrounding it. They have a very good location because their location is downtown, whereas RWS doesn't have enough hotel rooms surrounding it, so we do have a location disadvantage,' he said.

RWS, which receives 25,000 to 30,000 casino visitors a day, also expects to expand its slot capacity to 2,500 machines by year-end from its current 1,800, while increasing its table games to 550 from 543 currently. It will also add two more gaming salons to its current 31.

Shares of Genting Singapore gained nearly 2.7 per cent or 4.5 cents to close at $1.725 yesterday.

Publish date:13/08/11

贵宾赌客大赢钱造成净利下滑 云顶新加坡市场占有率被金沙反超

贵宾赌客大赢钱造成净利下滑 云顶新加坡市场占有率被金沙反超


由于贵宾赌客(premium players)大赢钱,在圣淘沙经营赌场的云顶新加坡(Genting Singapore),今年第二季净利下滑21%至2亿4291万元,落在竞争对手滨海湾金沙(Marina Bay Sands)之后,但上半年净利还是增长43%至5亿4836万元。





  以营业额计算,圣淘沙名胜世界(Resorts World Sentosa)今年第一季的市场占有率达55.8%,而滨海湾金沙的市场占有率是44.2%,但到了第二季,则变成圣淘沙名胜世界44%,滨海湾金沙56%。






Source/转贴/Extract/Excerpts: 联合早报
Publish date:13/08/11

NOL posts Q2 loss of US$57m

Business Times - 13 Aug 2011

NOL posts Q2 loss of US$57m

Group warns of full-year loss unless adverse conditions improve


NEPTUNE Orient Lines (NOL), which had a first-quarter loss, sank further into the red in the second quarter.

The container liner yesterday posted Q2 net losses of US$57 million, largely within analysts' widely deviating estimates. In Q2 2010, it had a net profit of US$99.7 million.

Losses for the first half of 2011 totalled US$66.7 million, which the shipping giant blamed on higher fuel costs and a freight rate environment that is under pressure. In H1 2010, its net profit was US$1.2 million.

Revenue for Q2 was US$2.2 billion, up 1 per cent. H1 revenue was US$4.59 billion, up 9 per cent.

The results, which came within analysts' expectations, helped reverse the stock's weeks-long slump on the stock market, as it rose 4.5 Singapore cents to an intra-day high of S$1.18 yesterday. It ended the week at S$1.17, 3.5 Singapore cents higher than Thursday's close.

With global economic health threatened by debt issues on both sides of the Atlantic Ocean, NOL's blip on the charts may not last. It does not expect a return to profitability within the current fiscal year.

'Deteriorating conditions in the global economy are resulting in weakened trade demand and continued pressure on freight rates,' said NOL. 'Unless these conditions improve, NOL will post a full year loss.'

NOL's subsidiary APL said that it has levied the full peak season surcharges on its transpacific lane out of the East Coast on Aug 1, and will do so on the West Coast on Aug 15.

Many large container lines like NOL and Maersk have delayed imposing surcharges on the Asia-US route by two months because of softer spot rates.

APL president Kenneth Glenn noted that US retailers were de-stocking in Q2 and holding off re-stocking, which chased the usual pick-up in trade activity, to a later start date.

Although inventory levels now are low by 'historical standards', Mr Glenn was unsure if the delay seen in peak period shipping activity would mean a shorter peak period or just one that would last as long as is typical.

'If there is anywhere close to normal holiday seasonal demand, you could logically conclude that the peak starts and lasts longer into the fourth quarter,' he said. 'That remains to be seen, but the formula is there for that to happen.'

NOL enjoyed higher liner volume on its Asia-Europe, Asia-Middle East and Transatlantic trades in Q2 compared to a year ago. It has, however, faced declines in volume on the transpacific and Latin American trades.

Publish date:13/08/11

MIIF: Attractive yield of 10% (NRA)

Macquarie International Infrastructure Fund Ltd
Current Price S$0.525 12 August 2011
Fair Value S$0.60

Attractive yield of 10%
_ Distribution income only from TBC, as expected.
2QFY11 distribution income grew 77.9% YoY to S$0.7m as a result of higher distribution from MIIF’s increased share ownership from 20% to 47.5% on Taiwan Broadband Communications (TBC). 1HFY11 distribution grew 19.3% YoY to S$9.9m as the increased contribution from TBC more than offset the loss of earnings from Canadian Age Care (CAC) with the disposal in 1QFY10. As expected, there were no distributions from the other assets which typically distribute income in the second half of the financial year. As expected, MIIF declared an interim dividend of 2.75Stcs per unit for 1HFY11, representing an 83.3% rise from an interim dividend of 1.5Scts per unit for 1HFY10.

_ All assets showed improving performance except for Miaoli Wind which faces refinancing risks.
TBC and Changshu Xinghua Port (CXP) continued to perform well at operational level. At TBC, EBITDA grew 8.9% YoY and 4.2% QoQ as it continues to enjoy increasing subscription from basic CATV subscribers (2QFY11:1.8% YoY and 0.35% QoQ) and higher penetration rate of 9.6% from premium digital (1QFY11: 8.7%) and 21.5% from broadband services (1QFY11 : 21.3%) ensuing from continued marketing efforts. 2QFY11 EBITDA at CXP rose 29.2% YoY and 19.8% QoQ due to growth in general cargo volumes, particularly from a 20.5% YoY and 79.9% QoQ rise in steel trades and a 50.4% YoY and 8.7% QoQ increase in log trades. As expected, Hua Nan Expressway (HNE) continued to see EBITDA decline of 1.9% YoY arising from the detolling of Xingguang Expressway (XGE) since December 2010, the government’s directive to allow vehicles to carry fresh produce to pass through all toll roads for free since January 2011 and higher fuel prices in the region, which led to an 8.5% YoY fall in traffic volumes in 2QFY11. However, the negative impact of detolling at XGE continued to ease with 2QFY11 traffic volume at HNE showing increases of 9.4% QoQ, instead of a fall (-1.3% QoQ in 1QFY11 and -17.5% QoQ in 4QFY10). EBITDA margins for all three assets also remained relatively stable in light of cost control initiatives. Miaoli Winds (MW) continued to experience lower-than-expected wind speeds which raise refinancing risk on a NT$465mil (~S$19.43mil) debt due in Dec 2012.

_ Encouraging business outlook.
TBC is expected to see EBITDA and margin growth from higher penetration rates for both premium digital and broadband businesses from ongoing marketing efforts. There was a dip in the basic CATV cable subscription rates in two of the five franchise areas but this was offset against better pricing from content providers and will not impact EBITDA margin. At CXP, advance orders from steel and log traders in light of expected increases in export steel duty and log prices during 2011 resulted in strong trade volumes in 1HFY11. This is expected to moderate in trade volume growth from steel and logs in 2HFY11. At HNE, the negative impact from detolling of XGE will moderate as congestion worsens at XGE, and in FY11 we are expecting flat earnings performance followed by growth in FY12 with the planned opening of Guanghe Expressway (GHE), a perpendicular feeder road to HNE, in late 2011/eary 2012.

_ Valuation and Recommendation.
Management remains committed to reinvest the cash of S$137.9m as at 30 June 2011 into Asian infrastructure businesses and share buy-back program. We have lowered our dividend income expectations in light of lower than expected savings from debt refinancing at TBC. Using DCF and assuming a 20% discount to asset valuation (as previously), we lower our target price to S$0.60 (previously S$0.625), providing a potential upside of about 14%. Assuming an annual dividend profile of 5.50Scts, MIIF also offers a dividend yield of 10.5%. The share is also supported by our NAV per share of S$0.71 (previously S$0.72). There remains refinancing risks at MW but there is sufficient cash at holding company level for repayment should refinancing become unavailable. Possible upside catalysts include secondary listing and capital reduction exercise. An ongoing share buyback mandate will further underpin the share. Overweight.

Source/转贴/Extract/Excerpts: NRA Capital
Publish date:12/08/11

CapitaRetail China Trust: REIT poised to take off as China malls find footing

Analysts who attended CapitaRetail China Trust (CRCT)’s half-year results briefing were in for a pleasant surprise. Five years after listing, its portfolio appears to have reached an inflection point. This included double-digit y-o-y gains in renminbi for net property income (NPI) for 1H2011 and 2Q2011 and gains in the trust’s net asset value owing to an upward revision for asset values.

For 1H2011, CRCT announced an NPI of RMB214.8 million ($40.38 million), 12.4% higher than the RMB191.1 million for 1H2010. Gross revenue was just 4.3% higher at $61.6 million in 1H2011 compared with 1H2010. NPI was up 5.6% at $41.3 million. Distribution per unit was up 3.9% y-o-y to 2.15 cents for 2Q2011. This means an annualised DPU of 8.62 cents and a forecast dividend yield of 6.95%.

“In these five years, I’ve never seen these reversions before,” says an analyst. “Why don’t you start covering us, then?” asks Tony Tan, CEO of CRCT’s manager. “You are right to say we are beginning to reach an inflexion point,” Tan replies. A mall takes time to establish its position in the market, he adds. “Don’t underestimate the powerful effect of having a combined trade and tenant mix, and our own effort in driving traffic into the malls,” explains Tan.

In a recent report, Joy Wang, an analyst at JP Morgan, also agrees with such a view of CRCT’s performance. “Rental reversions for the overall portfolio came in at a historical high of 17% against preceding rents with the two biggest assets of the portfolio, CapitaMall Wangjing and Xizhimen, moving towards stabilisation. With an increasing number of assets getting stabilised and hitting the ‘inflection point’, we see rental reversion for the portfolio stabilising at a higher range of about 10% to 15%. These, together with the contributions from newly acquired Minzhong Leyuan, would help to sustain NPI growth,” says Wang.

One reason for CRCT’s strong growth: The Chinese government wants to drive consumer spending as a pillar of growth, and stimulating domestic consumption is one of the key strategies of the 12th five-year plan from 2011-16. For 1H2011, retail sales in China rose 16.8% y-o-y.

Another important reason is that CRCT has got its portfolio of malls right. Of its nine malls, six are multi-tenanted to drive portfolio growth. These have smaller units and can charge higher rentals. Three malls come with master leases to provide stability. Also, there is a mix between first- and second-tier cities. Four malls are in Beijing, of which three are recognised as suburban. The distinctive Capita- Mall Xizhimen is located atop a metro interchange on the second ring road. Another mall is in Shanghai, outside the city centre. And then there are malls in places such as Hohhot, Inner Mongolia, where CapitaMall Saihan is the city’s main shopping centre; Zhengzhou; Wuhu; and the central Chinese city of Wuhan.

CapitaMall Anzhen, CapitaMall Zhengzhou and the majority of the gross rentable area (GRA) of CapitaMall Shuangjing (in Beijing) are let out under master leases. These are long-term with a tenure of 20 years. For the remaining properties that are not under master leases, the typical lease term is 15 to 20 years for anchor tenants, five to seven years for mini-anchor tenants and one to three years for speciality tenants. Most leases provide for an annual step-up in the base rent and for rent to be payable on the basis of the higher of either base rent or a percentage of tenants’ gross sales turnover, providing stability and potential upside in rental revenue.

All the properties are positioned as necessity malls in sizeable catchment areas and located at transportation nodes. A significant portion of tenants also consists of major global and domestic retailers such as Wal-Mart, Carrefour and Beijing Hualian Group who are under master leases or long-term leases that provide stable and sustainable returns. Speciality brands such as Vero Moda, ZARA, Sephora, Watsons, KFC, Pizza Hut and Bread- Talk also provide upside.

As at June 30, 2011, the valuation of CRCT’s portfolio, excluding New Minzhong Leyuan Mall, was RMB6.4 billion, an increase of 4.8% over the previous valuation conducted in December 2010. Including New Minzhong Leyuan Mall’s valuation of RMB417 million, the total valuation of CRCT’s portfolio of nine shopping malls would have been RMB6.8 billion.

When CRCT was listed in 2006 at the height of the China craze, expectations were high — too high, as it turned out. From an IPO price of just $1.13 cents, it shot up to $1.60 on its first day of trading, and surpassed $2 at one stage. This was because it was viewed as a growth plus yield play, as it had right of first refusal to the 53 malls that CapitaMalls Asia (CMA) owns and manages.

However, CRCT has made only two acquisitions to date. CapitaMall Xizhimen was acquired in 2008 for RMB1.8 billion, and currently valued at RMB2.16 billion while New Minzhong Leyuan Mall in Wuhan was acquired this year for RMB395 million. In fact, CMA plans to hold on to its malls. In May, CMA converted its China Retail Development Fund into an income fund to achieve just that.

Despite these factors, CRCT remains an interesting prospect for any investor. For one, the manager has maintained that a listing on the Shanghai Exchange is inevitable once REIT listing guidelines are ready. CRCT is also in pole position for a renminbi listing on the Hong Kong Exchange. However, Tan is somewhat circumspect about turning CRCT into a renminbi play. “There is a lot of hype about a renminbi dual listing,” Tan notes, “but we are not ruling it out”. “No doubt Hui Xian REIT listed successfully but its subsequent performance has not been good.” Tan points out that other companies contemplating a renminbi listing are having second thoughts after watching the trading volume of Hui Xian REIT, whose sole asset is The Oriental Plaza in Beijing. The REIT is trading 11.4% below its IPO price of RMB5.24.

“Overall, it makes sense to have a renminbi listing as our cash flow is in renminbi,” Tan says of CRCT, “but Singapore is our home”. Also, the motivation for going to Hong Kong isn’t compelling. A renminbi listing should not be driven solely by the potential short-term unit price impact, he adds.

In a recent report, David Lum of Daiwa Securities says: “We believe the uncertain market conditions and prolonged price discovery process for Hui Xian REIT might delay a renminbi listing for CRCT, but in view of its China-focused portfolio and China’s plan to liberalise the renminbi, we believe an eventual renminbi listing of CRCT units is only a matter of time.”

Daiwa has a “buy” rating for CRCT, and forecasts a forward DPU of nine cents for next year. “We regard its forward DPU yield of more than 7% for 2012-13 as highly attractive for its China shopping-mall exposure. We maintain our six-month price target of $1.60, pegged to a gearing-adjusted DPU yield parity of 5.5%, based on our estimates, with Hui Xian REIT,” says Daiwa. JP Morgan also forecasts a DPU of nine cents in FY2012 and has a “neutral” rating on CRCT.

Publish date:08/08/11

Having Khazanah as shareholder is a boon for AirAsia

The Star Online > Business
Saturday August 13, 2011

Having Khazanah as shareholder is a boon for AirAsia

WHILE most analysts have considered the share swap between major shareholders of AirAsia and Malaysia Airlines (MAS) a blessing for the latter, there are those who believe that AirAsia will reap the greatest benefits.

AirAsia’s new shareholder, Khazanah Nasional Bhd, brings with it the re-assurance that the budget carrier can now receive new routes and ensure the development of more low-cost carrier terminals in Malaysia. A clear benefit of Khazanah emerging as a shareholder in AirAsia is “the connections it brings with it”. Khazanah, which is a major shareholder of MAS and Malaysia Airports Holdings Bhd, will now also be looking after the interest of AirAsia Bhd.

Instead of constant lobbying to secure new lucrative routes, AirAsia and sister airline AirAsia X can now be assured that the process of route allocation is expedited.

On the cards is the imminent approval of the much-sort-after KL-Sydney route by AirAsia X.

AmResearch Sdn Bhd says in an aviation report this week that AirAsia X may possibly gain access to key trunk routes which will feed into AirAsia’s network.

“Common interest allows issues such as landing rights and irrational pricing to be settled faster and in a more amicable manner,” it says.

Khazanah is also expected to take-up a 10% stake in AirAsia X through the issuance of new shares, before the latter is listed next year.

AirAsia can play a very big part in the development of Iskandar in Johor especially since tourism is a big part of Khazanah’s portfolio,” AirAsia chief Tan Sri Tony Fernandes tells StarBizWeek.

The collaboration could also result in potentially lower cost for AirAsia from outsourcing maintenance, repair and operations to MAS instead of third parties, AmResearch says.

The agreement focuses on immediate synergy opportunities, which means the airlines will potentially be able to realise savings and increase revenues in aircraft purchasing, engineering, ground support services, cargo services, catering and training.

The market has been swirling with talks that the potential synergies to be realised by these airlines through the collaboration can range from RM1bil to RM1.6bil.

Market observers say that AirAsia has also managed to pull the rug from under Firefly, which had just started to spread its wings earlier this year with the commencing of jet aircraft operations from the KL International Airport to East Malaysia. This was on top of its existing turbo prop operations based in Sultan Abdul Aziz Shah Airport in Subang.

With competition intensifying between AirAsia and Firefly, the former has successfully eliminated its competitor as the deal spells out that AirAsia will be the only short-haul low-cost carrier locally while AirAsia X focuses on the medium-to-long haul routes.

Firefly will be turned into a regional full-service carrier (FSC), which will feed traffic into parent airline MAS, which will focus on being a premium FSC.

“Some ideas involving Firefly includes revenue enhancing such as increasing its fares by 30% and making it a business class airline. The Subang airport can be positioned as an airport for business class passengers since most people going there are businessmen anyway,” says an industry source.

AmResearch says “the elimination of competition from Firefly could see AirAsia’s yield gap-up possibly in financial year-ending 2012 forecast and result in earnings upgrades.” The research house adds that a co-ordinated interlining with MAS may potentially increase AirAsia’s ancillary income. It says another benefit for AirAsia is a potential cargo service collaboration, where a synergy and feeder traffic can be derived from AirAsia’s point-to-point network versus MAS’ trunk route network.

While some AirAsia investors may be concerned with the share swap executed by AirAsia co-founders Fernandes and Datuk Kamarudin Meranun, both co-founders maintain that they are committed to AirAsia and will continue to manage the airline.

The shareholding swap between Tune Air and Khazanah is done to ensure both parties interests are aligned, says Kamarudin. “The biggest concern of this deal has been about people misunderstanding it. Some people think I will not be running AirAsia anymore - but nothing changes,” says Fernandes.

Source/转贴/Extract/Excerpts: The Star Online
Publish date:13/08/11

Fernandes: Low fares here to stay

The Star Online > Business
Saturday August 13, 2011

Fernandes: Low fares here to stay


A decade long rivalry between AirAsia and Malaysia Airlines (MAS) came to an abrupt end on Tuesday when major shareholders of both airlines extended the olive branch to forge a collaboration agreement.

The battles between AirAsia and MAS have been long and loud, to say the least, with Tan Sri Tony Fernandes protesting over stumbling blocks placed on the path of his fast growing low-cost carrier resulting in it not securing new lucrative routes and not having low-cost carrier terminals (LCCTs) to support growth.

With Khazanah Nasional Bhd holding controlling stakes in MAS and Malaysia Airports Holdings Bhd, AirAsia was relegated to a “step-child” status in the aviation sector.

But with this deal, Fernandes, who is best known for not having a defeatist attitude and his tenacity to push boundaries, can now give up the tiresome “lobbying” to grow AirAsia and its sister airline AirAsia X.

In an interview with StarBizWeek, Fernandes, who sits on MAS board and an executive committee set up to oversee the management of the airline until a new managing director is appointed, shares his thoughts on the deal.

SBW: As AirAsia’s group chief executive officer, you oversee AirAsia and advice AirAsia X, as well as keep an eye on Thai AirAsia and Indonesia AirAsia. Now, you have become a shareholder in yet another airline, MAS, and will provide your inputs. Do you think you have spread yourself too thin?

Fernandes: No, because the deal frees us from having to lobby, which took so much of our time. If you think about the amount of politics this airline (AirAsia) has endured to get to where it is now, that lobbying time is now cut and we can focus our resources into growing the airlines and strategising on the best way to deploy our resources. I’m free to do a lot more now and people forget that I already did a lot more outside of AirAsia - the Tune Group and owning a Formula 1 team but yet AirAsia’s profits have never been better.

In your opinion, what type of CEO will be apt to run MAS?

I would like a numbers-driven CEO. I would like someone like Azran (AirAsia X Sdn Bhd chief executive officer Azran Osman-Rani), to be honest. Someone who has a clear thinking mind and doesn’t come from the airline business. Someone who is humble, analytical, knows numbers and understands the basis of marketing. But I also think there needs to be a very strong commercial head at MAS. There has been a lot of good people brought into MAS, judging from the impressive board line-up so this signals a new beginning.

You are best known for being a “no-frills man” but you have been placed on the board and exco of MAS to give some inputs to turn it around into a premium full-service carrier. How do you expect to contribute to a premium airline?

In terms of running an airline, there will be similarities in certain areas such as aircraft utilisation, negotiation of aircraft prices, marketing and branding, route development and people management. Now, I’m not going to be the one to say what is the right cutlery to be used or food to be served.

Having said that, I have flown on first class many times, so as a consumer, there are inputs that can be given. But I’m just a board member at MAS and there will be a CEO leading the management so my inputs will be given to this CEO. In the same way I advise AirAsia X, I can advise MAS. But my job is with AirAsia – nothing changes.

Is cutting staff strength at MAS on the cards? And do you think MAS will be able to adopt the cost discipline AirAsia has executed based on its business model?

I don’t see staff as an issue at MAS. With the airline poised for growth, there are other ways of reducing costs – staff is not a major cost and it is about the same as AirAsia’s in terms of cost out of overall revenue. I think too much has been made out about staff – numbers are not really an issue but I believe we can always work to improve productivity in any organisation.

As far as cost discipline, in any business, cost is important. While we haven’t looked over the numbers extensively, you can start looking at some comparisons between peer groups and benchmark yourself. But ultimately, it is down to the people who manage the business and if there is a way of decreasing costs and increasing efficiency, then the staff will have to buy into it.

It would appear as if AirAsia benefits the most from this deal over the long-term, especially with the group’s route impediment removed? Do you think AirAsia has the best deal from all this?

People are evaluating that MAS has a better deal but we both have gotten a good deal. We (Fernandes and Datuk Kamarudin Meranun) are entrepreneurs and have a longer-term vision of what we would like the airline to be.

But what it means for AirAsia, on top of route approvals, is that we can channel our resources to building the airline and our network in Asean now.

Aside from this, the tie-up will also help us build more LCCTs around the country – Penang and Kuching while we are now allowed to remain in Kota Kinabalu Terminal 2. We don’t harbour hopes of running our own LCCT but giving us the right airport charges is extremely important.

There are concerns in the market that this collaboration will lead to air fares increasing, especially since there are bound to be some streamlining of routes operated by MAS and AirAsia. Will AirAsia’s air fares increase?

AirAsia’s fares will not go up because such a strategy is not our bread and butter. If we increase fares, less people are going to fly. The whole basis of AirAsia is to make people fly.

And in terms of rationalisation, it not necessarily has to come in the form of routes but instead, aircraft capacity. So we could look at first class and business class travel for MAS while AirAsia focuses on economy – this means a segmentation of the market. So instead of an aircraft with 180 seats flying seven times a day, you can re-configure the aircraft to have 140 seats flying seven times a day.

Would AirAsia and MAS ever consider a code-share agreement? A: No. Never. As both are two different models - AirAsia operates in the low-cost segment while MAS is to operate as a premium full-service carrier.

Source/转贴/Extract/Excerpts: The Star Online
Publish date:13/08/11

Back to golden days?

The Star Online > Business
Saturday August 13, 2011

Back to golden days?


A DECADE later, Malaysia Airlines (MAS) appears to be back in the cradle, taking baby steps for yet another recovery, this time accompanied by the rosy promise of returning to its golden era, no less from one of its new stewards, Mohammed Rashdan Yusof (newly appointed executive director).

The focus is to become a super premier class carrier. But that’s easier said than done for the airline, weakened by far too many detours and turbulent rides amidst a bitterly competitive industry, which gradually eroded its market share, not least to low cost carrier AirAsia Bhd.

The red flags are visible. For the first quarter of 2011, the airline shocked the market with a reported net loss of RM242mil. Investors wasted no time dumping the shares and the counter slipped to a 10-year low of RM1.45.

Another culprit was the move to sell seats at low fares just to fill the aircraft, which in turn led to poor revenue quality. That was a desperate attempt for an airline which has ordered so many new aircraft with financial obligations to meet. Those mis-steps will likely be seen in the airline’s third and fourth quarter results, says an analyst.

But while most analysts have written off financial year 2011 (FY11), none are ruling out a possible upgrade for the ensuing financial years, thanks largely to the pact that was signed over the week with AirAsia.

AirAsia boss Tan Sri Tony Fernandes, MAS’ biggest critic will now help MAS take to the premier skies. Back is also Tan Sri Md Nor Yusof, who a decade ago led the airline and implemented a restructuring which pulled it back from falling off the cliff.

“Investors who were never interested in MAS are now wanting to know more about MAS and what the collaboration will do for MAS. There is optimism and renewed enthusiasm,’’ says Maybank IB Research analyst.

MAS shares flew from its Aug 5 close of RM1.60 to RM1.87 this week, registering a gain of 27 sen. Some broking houses have a “call’’ buy on the stock for they see some upside potential.

If all goes as planned, MAS should turn around from the red in the fourth quarter. An analyst expects the airline to rake in RM1bil in net profits in FY12, provided of course that it remain on course.

But what had gone awry for the national carrier?

“If you look at our operating statistics, our cost per ASK is competitive but we are suffering in our RASK (revenue per available seat kilometer). (We lack) in the ability to charge for our seats on a global basis and that in turn is connected to our product,’’ says Rashdan or better known as Danny in an interview with StarBizWeek.

He says MAS was “once the paragon of the industry and we want to get there.’’

RASK is the best formula to maximise revenue but an industry source warns that in a competitive environment where prices are dictated by market forces and not the airline, the strategy could prove tricky.

Centre of Asia Pacific Aviation analyst Brendan Sobie added that “there are signs of an emerging recovery but there must be a question of whether the flag carrier is sufficiently well-equipped to survive through a future which is clearly going to be very turbulent and highly competitive.’’

Can the new team take MAS to where Emirates, SIA, Qatar Airways is?

A total revamp is in the works ... from product, services to the way things are done at the airline. Committees have been formed to use a fine tooth comb to scrutinise every thing right to ground level. From the first exco meeting, the new team has identified RM1.2bil cost savings for both airlines, the bulk of which will be enjoyed by MAS.

To be a premier carrier, MAS needs connectivity, frequency, and comfort and that means it needs at least two daily flights to destinations which offers lucrative yields. This would require realignments of its route network. Firefly will become its traffic feeder airline that has to work hard to get the premier passengers that MAS would need.

“A passenger sitting in premier class would only pay for something that is worth the money and if MAS wants to be in that league of providers, it has to change not just its outlook, but also perception, product and service, and that in itself can be a costly exercise. Is it ready to do this?’’ asks an observer.

The task at hand is aplenty. MAS needs to ground its B747 as soon as it can as they are fuel guzzlers, pretty up its website and make it simpler, improve its food quality to cater for the majority, enhance its flight entertainment and replace its premium class seats. The good thing is that 50% of its fleet will be new by next year, which should reduce its fuel bill and improve efficiencies and its hedging seems to be in order now.

All these would mean nothing without the human touch. MAS’ cabin crew has been voted the best many times over and this is no small feat. This may be as good a time as any for management to reward staff who have consistently stood by the airline during its many wild rides.

Source/转贴/Extract/Excerpts: The Star Online
Publish date:13/08/11

Friendlier skies

The Star Online > Business
Saturday August 13, 2011

Friendlier skies


MAS and AirAsia have given up their bitter feud to chase revenues. Can it work?

A DEAFENING theme rings through the historical pact between state-controlled Malaysia Airlines and entrepreneur-charged AirAsia Bhd the oft-quoted wisdom to “keep your friends close and your enemies closer” by Sun Tzu. Couched in corporate jargon as a “comprehensive collaboration framework”, what it implicitly does is slam the brakes on the sky warfare between both carriers. Let's face it collaboration eliminates competition.

Driving this long-elusive tie-up between the once-upon-a-time rival carriers (such a pact could have once been deemed preposterous) is a share swap deal, simple in structure but radical and far reaching in implications. For just over RM2bil, Khazanah Nasional Bhd and Tan Sri Tony Fernandes' Tune Air Sdn Bhd have swapped their 20.5% and 10% stakes in MAS and AirAsia respectively to each other.

Indeed, it's a “no frills” deal that took over two years in the making for the key protagonists to finally warm up to.

“The fact that it took a long time is a reflection of how much effort and thought went into this. It wasn't a spur of the moment deal or one that was driven by a specific event,” the deal's advisor and chief architect, CIMB Group Holdings Bhd's Datuk Seri Nazir Razak tells StarBizWeek.

What finally thawed the icy relations between Khazanah's head honcho Tan Sri Azman Mokhtar and AirAsia's Tony took place several months back. In High Street Oxford. Under the Magdelan bridge. In a boat.

Nazir, Azman and Tony were punting down the river a quintessential Oxford activity. But it wasn't quite a leisurely river activity. There was a single agenda on deck Nazir asked both men to contemplate on a share swap plan to align their widely-divergent interests and give a collaboration a realistic shot.

Perhaps, it was the soothing ambience of the surroundings' rich cultural heritage. Maybe, the stars were aligned. Or simply (and in less romantic terms), it could have been MAS' worryingly waning financial position that finally brought the two men over to the same side of the pitch.

With that, Azman readily admits in an interview that the airline industry will have “a period of calm for both airlines to focus and collaborate.”

Tony does little to hide his glee. “You dont have to be an enemy forever. Life is too short. I'm liberated in many ways that we all have the same aim now to make money and do a good job.”

Big deal masked in simplicity

The deal was so simple that both parties shared a common adviser (CIMB).

Following the share swap, Tune Air, controlled by Tony and chum Datuk Kamarudin Meranun will hold 20.5% interest in MAS and Khazanah will own 10% in AirAsia. Khazanah's stake in MAS will be reduced to 49% while Tune Air's interest in Air Asia would stand at 15%. The transaction valued MAS at RM1.60 a piece and AirAsia at RM3.95 a piece (last traded price on Aug 5).

Critics have slammed the swap ratio of 2.05:1 (MAS and AirAsia) shares given that MAS, is far superior to the low cost carrier (LCC) by certain benchmarks namely network reach, assets, operating revenue, less debt and cash position.

To widen the deal beyond its major shareholders, MAS and AirAsia will issue free warrants to each other's shareholders; AirAsia shareholders will receive one free MAS warrant for every 10 shares held while MAS shareholders will receive 1 free AirAsia warrant for every 30 shares held. The warrants entail a 2.5 year tenure with a RM2 (MAS) and RM4.94 (AA) strike price (both are priced at 25% premium to Aug 5 levels).

“AirAsia's share price rose significantly before the deal was announced. Setting the warrant strike price at 25% premium to its pre-announcement level is that good for MAS shareholders?,” asks an observer.

Nevertheless, the swap serves a single purpose of aligning the economic interests of the major shareholders of both airlines. Notably, it has managed to do so by avoiding the more complex and unwieldy merger option.

“The (intention) to collaborate was always there. But there had to be a proper structure to allow that. The economic alignment cemented that. Even so, if there's not enough trust or spirit of partnership, that is not going to be enough,” says Khazanah's Azman. “Collaboration doesn't mean mean consolidation. The companies are separate listed entities. We could have done a merger or amalgamation and we reviewed six to seven different structures but this one allowed for separate cultures and focus on respective areas,” he elaborates.

The five-year collaboration (with an option to extend by another 5 years), the details of which are expected to be thrashed out by November this year, is hoped will allow the airlines to utilise each other's respective competencies. The synergies, if worked out right, is aplenty from joint procurements, increased scale, lower cost, enhanced ability to capture non-captive third party revenues in areas such as maintenance, repair and overhaul, ground handling, training, catering and cargo.

The new crew

The boards of both companies will see the entry of new faces. Khazanah director Datuk Mohamed Azman Yahya, better known for his role in the Asian Financial Crisis as the chief of Pengurusan Danaharta Nasional Bhd, an asset management company set up to relief the tottering domestic banking system of its sour debts will join AirAsia's board. He also plays a key role in the collaboration as chair of the joint collaboration committee which members comprise Rashdan Yusof, MAS newly-elected executive director, Tony and Kamaruddin.

For MAS, it's no less than a massive shakeup of board and management. The new board line up may impress some - Land & General Bhd founder Tan Sri Wan Azmi Wan Hamzah, IJM Corp Bhd executive deputy chairman Tan Sri Krishnan Tan, Astro Malaysia Holdings Sdn Bhd CEO Datuk Rohana Rozhan and Axiata Bhd director David Lau Nai Pek were appointed independent non-executive directors of MAS while seven directors stepped down.

Tony and Kamaruddin have also joined the board as non-independent non-executive directors.

MAS' targeted business segment, having turned fuzzy in recent years, will be sharpened - from hereon it will focus on becoming a full-service carrier (FSC). Incidentally, that's very much in sync with Tony's long-expressed critical mantra that MAS should focus on being a premium carrier. As for AirAsia and AirAsia X, the stipulated focus under the pact doesn't require much tweaking - the carriers will remain focussed on being a regional low cost carrier and a medium to long haul LCC respectively.

With that, it's hard to shake off the nagging notion that perhaps Tony has come out of this deal getting most of what he has long been voraciously and publicly fighting for.

Misdirected perception

Over at the market place, since the deal was unveiled, AirAsia has suffered a trouncing. The counter has lost 50 sen or 13% in three trading days, closing the week at RM3.45. MAS shares, on the other hand, behaved just as it should - as if it's been thrown a lifejacket;the counter steadily gained 27 sen or 17% to end on Friday at RM1.87.

Put differently Tony's investment in MAS has grown while that of Khazanah's in the LCC, to date, is unfortunately in the red. The deal's backers staunchly dismiss such short-sightedness: “We are talking about loose change here. What's the point of arguing over that when there's so much more money to be made down the road.”

The selling in AirAsia shares, says an analyst is largely led by foreign funds. “Foreign funds love AirAsia because of its beautiful againt-all-odds entrepreneurial story. Most of them want little to do with Government (linked companies). That story is now disrupted, so they are selling the shares,” says the analyst.

Other concerns run deeper.

“AirAsia shareholders perceive the recent deal as one that merely benefits Tony, not them. AirAsia was doing quite well, charting its growth path independent of this tie up. It makes little difference to AirAsia. On the other hand, it's AirAsia X which is the real winner as it can now get its much-fought for routes,” says the analyst.

Nazir lends perspective: “Perhaps one party will gain more than the other but that doesn't matter because both will do better with than without the CCF (comprehensive collaboration framework).

“It is interesting that analysts are divided on who got the better deal which means that it is difficult to tell. After all, the objective was to arrive at a fair deal for both parties,” says Nazir.

Noteworthy, is that AirAsia has a large foreign shareholding, some 53% as at June this year, to be exact.

“In this market environment, news tend to be interpreted negatively. When CIMB merged with Bumiputra Commerce in 2005, the foreign investor reaction was also initially quite negative. Some thought my management team would not be able to cope with the enlarged franchise. In this case, Tony and Kamaruddin are non executives at MAS. So I am sure they will be fine. And the collaboration will benefit AA too,” says Nazir.

There's yet another suspicion. Is this part of Tony's exit plan? Naturally, Tony vehemently denies that.

The big winner

Examined closely, the deal in fact benefits AirAsia most. “MAS was always the stumbling block for AirAsia - in terms of routes, pricing war ... This just eliminates the competition. It can't be anything but good for AirAsia,” says an observer. A foreign research house was more direct: “While positive for the Malaysia aviation sector, benefits look disproportionately larger for AirAsia and Tune Air relative to MAS and Khazanah, reflecting Tune Air's stronger bargaining position.”

That's not lost on all analysts. “We believe the bulk of low hanging fruits in this deal favours AirAsia,” says AmResearch. It expects the “elimination of competition” to push the budget carrier's yield “gap up” , in other words, it will have more room to raise fares. This in turn may result in the ultimate sweet pursuit of listed companies from the analyst fraternity - an earnings upgrade.

AirAsia's ancillary income could also get a boost as it could feed off the national carrier's trunk routes and comprehensive point-to-point regional network.

Then ofcourse, there's always the plus points of having state-owned Khazanah as a shareholder no more lengthy lobbying for routes and cumbersome bureaucratic hurdles.

Even Tony, readily admits to that: “If you think about the amount of politics this airline has taken in to get to where I am ... that amount of time spent on lobbying is freed up now.”

Lifting MAS

Sadly, the collaboration is no magic bullet for MAS which urgently needs to turn around its flagging financials. “Given that the share swap involves the shareholders and not company level, the driving force is more strategic than operational in nature...the much-needed operational improvements at MAS (especially a change in corporate culture) may take longer to crystallize, as shareholders' decisions take longer to distill to the operational level,” says a regional airline analyst.

The root of the national carrier's woes, if not already glaringly obvious, is that it lacks a gameplan to effectively compete with regional carriers, product quality is below par, cost base has gaping room for improvement and the all-important yield factor is paltry compared to regional rivals namely Singapore Airlines, Garuda Indonesia and Thai Airways.

One main culprit for the slipping yields stems from a misdirected strategy to compete with AirAsia. “It is poor financial logic for a full service carrier with a much higher cost and value proposition, to be charging the same fare with a competing LCC. The (previous) management stated that this strategy is to maintain market share and manage the weak travel periods. It has however been proven many times that market share does not translate to bottom line,” said Maybank Investment Research in an earlier report.

The potent combination of predatory pricing against a high cost structure was an unfortunate mistep. Toss in brutal competition from regional peers and rising fuel cost and they make a concoction for a stomach churning hard landing.

“It's about how the airline carries out yield, reveneue and load management. That can be a slippery slop once you lose it ...,” says an observer

MAS' unit cost is also high relative to peers which an analyst attributes to its old fleet which are ineffecient, fuel guzzlers and soak up high maintenance cost. For this reason, the fleet renewal plan which the airline has already undertaken needs to be speeded up.

But here's where the collaboration could prove to be useful. Without AirAsia or AirAsia X on its crosshair, MAS will hopefully, be better focussed on its full-service premium business with improved revenue yield.

Significant cost savings can also be extracted once duplication of routes is (over 50 routes of both carriers are currently overlapping) rationalised and procurement bargining power improves. The alliance will be designed to greater exploit cost-side economies of scale and cost reduction through joint procurement and so forth.

“There's a great deal of duplication, which makes it hard to plan. Now the routes can be better reorganised,” says Azman.

In fact, analysts expects synergistic savings of over RM1 bil from the collaboration. For MAS, this deal done rightly will also allow it to chase more revenues, the lifeblood of an airline.

Quasi or mini monopoly?

Scepticisms and concerns, some more justifiable than others, abound over the potential collaboration. At the heart of it, they revolve around two issues is the coming together of these three carriers creating a monopoly of sorts in the airline industry. If the answer is yes or an iffy “no”, consumer advocates reckon the era of bargain basement air fares, which consumers have long basked in, will be a thing of the past.

Less vigorous competition means price wars among airlines desperately seeking to fill up seats may be curtailed.

Tony firmly stands his ground on this issue that low fares are AirAsia's bread and butter, hence they will not rise. “If you put fares up, less people are going to fly.”

That means AirAsia will have to be judicious. What no one would care to admit though is that the collaboration leaves more wiggle room on how low the fares need to get.

“Higher fares is highly possible,” says the Maybank analyst, adding that this is more likely on domestic routes since the domestic operations of foreign carriers (both LCCs and FSCs namely Tiger Airways, Lion Air, SIA and Silk Air) are somewhat restricted by the Malaysian government.

But rules are rules. In January next year, the Competition Act, which took 15 years to craft, will be enforced in the country. In essence, it prohibits anti-competitive agreements and abuses by dominant players in order to create a business environment that's conducive to healthy competition.

“There are three principles which anti trust laws essentially prohibit - price fixing, carving out of markets and limiting capacity,” says a lawyer.

The alliance between MAS and AirAsia will have to navigate around this somewhat arcane web of anti trust rules and the announcement to Bursa Malaysia by the airline companies well reflect that as they stress that collaboration in any particular area can only be done once a review and analysis of anti trust laws are done.

Interestingly, while most have raised concerns on the three carriers forming a sort of cartel, what has drawn less notice is the fact that the deal effectively creates another kind of “monopoly” (AirAsia and AirAsia X) in the budget travel segment.

Execution dilemmas

The hurdles in fine tuning the collaboration, though not insurmountable, are daunting. While the deal escapes the most feared trappings of a merger - clash in cultures - there exists a wide corporate cultural gulf between the two partnering shareholders who over the next few months will be huddled together in lengthy, gruelling discussions.

Khazanah, led by its chief Azman, largely embodies a GLC culture - suited up, calculated, staid even. That very tone and posture varies greatly from the daring, entrepreneurial spirit of Tony and Kamaruddin. But that could be a good thing. MAS could do with a dash of entrepreneurial spice to get its operational adrenalin up.

Still, it won't be easy to juggle what everyone wants, how much they want it and what they will give up to get it. Bridging these differences ofcourse is one common factor - their respective stakes in the carriers.

But for all you know, it could be as easy as a MAS stewardess trading her batik-inspired feminine kebaya for the stunning fiery red suit of an AirAsia flight hostess and vice versa.

Source/转贴/Extract/Excerpts: The Star Online
Publish date:13/08/11

Gallant Venture: Recovery bodes well (KE)

Gallant Venture
Price $0.315
Target $0.75
Recovery bodes well

 Gallant Venture reported a net profit of $0.2m for 2Q11. Revenue fell by 17.9% due to the absence of land sales recognition, compared to $12.4m in 2Q10. Excluding land sales, revenue grew by 4% on the back of higher utility charges to the existing resorts. We maintain our forecasts and remain confident that land sales of $30‐35m from its current orderbook will be recognised in 2H11. Reiterate BUY.

Our View
 Gallant’s matured businesses continued to deliver strong cash flows in the quarter, keeping our forecast of $50‐60m for the full year intact. This should strengthen the company’s hand to further invest in Lagoi Bay’s infrastructure development and implement its master plan for the area, which is critical to land sales promotion.

 The industrial parks business experienced a recovery with both the occupancy and rental rates returning to pre‐crisis levels of 85% and $4.8‐$5.5 psm pm, respectively. Lower fuel costs helped margins in the utilities business to recover.

 In Shanghai, the construction of the Lao Xi Men project is on track for launch early next year. To be completed in two phases over 2013‐14, we estimate the project will give Gallant a net profit of $350‐$400m. We have assumed an average selling price of RMB75,000 psm and development cost of RMB31,000 psm.

 Gallant’s earnings for this year will be underpinned by its current orderbook of $55m. We therefore keep our FY11 net profit forecast unchanged at $12.3m on the assumption that the utilities and industrial park businesses will not become a drag on earnings in 2H2011.

Action & Recommendation
We reiterate our BUY recommendation and target price of $0.75, based on SOTP valuation.

Source/转贴/Extract/Excerpts: Kim Eng Research
Publish date:12/08/11

Yangzijiang: Steady hand at the helm (KE)

Yangzijiang Shipbuilding
Price $1.135
Target $1.650
Steady hand at the helm

 Yangzijiang Shipbuilding (YZJ) posted a 20.4% YoY increase in 2Q11 net earnings to RMB963.9m, broadly in line with its profit guidance. The increase, however, was boosted by forex gain and interest fees from held‐to‐maturity investments (accounting for 27% of 1H11 pre‐tax profit). We continue to maintain that YZJ’s non‐core investments have helped the group to diversify its income stream, thus providing a buffer for its more cyclical shipbuilding business. Reiterate BUY.

Our View
 Second‐quarter revenue grew by 2.9% YoY to RMB3,161.9m, mainly due to an increased contribution of RMB229.9m from Changbo yard. To date, the group has delivered 29 vessels altogether, with 17 in 1Q11. This means it is on track to meet its vessel delivery target of 65 for the full year (versus 50 in FY10).

 Gross margin narrowed by 2.7ppt YoY and 5.0ppt QoQ to 22.1% in 2Q11 (GPM of 24.6% in 1H11 vs 24.1% a year ago) as fewer higher‐priced vessels secured prior to the financial crisis were delivered. However, with about 50% of its US$5.5b order backlog still consisting of these highly‐profitable contracts, we reckon YZJ will be able to maintain its margins at above‐industry average at least until FY12.

 So far, five out of the seven units of 10,000 TEU containerships with Seaspan have been made effective, with options for another 18 identical vessels likely to be exercised in the next 12 months. While order flow will inevitably slow down amid the global economic uncertainty, YZJ remains optimistic that it can capture a bigger market share as it moves up the value chain to produce larger ships.

Action & Recommendation
Management has taken steps to streamline operations and improve productivity to counter escalating costs. The stock currently trades at less than 7x PER, supported by a dividend yield of about 4%. YZJ Chairman Ren Yuanlin has bought back 500,000 shares each on two occasions, at $1.27 and $1.10 per share, respectively. We maintain our BUY call and SOTP‐based target price of $1.65.

Diversifying customer profile
Management has been forthright in its attempts to assuage market concerns about the impact of Europe’s sovereign debt woes on the group. It clarified that its existing European customers are long‐term clients that have strong financial standing and payment track record. Nevertheless, we have observed a noticeable shift in its orderbook towards Asian shipowners. As illustrated in Figure 1, European customers only account for 39% of the group’s current orderbook. In our view, this proportion, which is far lower than what the market perceives, represents a more accurate measure of its risk exposure going forward.

Diversifying income streams
During its 2Q11 results briefing, management also shed more light on the group’s held‐to‐maturity financial products in a bid to alleviate investor concerns. We understand that these fixed‐rate instruments invested by YZJ are primarily offered by various Chinese banks and trust companies used in the financing of Chinese corporations and entities in various industries, such as real estate, manufacturing and local government projects.

According to management, these products typically yield an average return of about 10‐15% pa and are backed by various securities such as listed shares, land titles and other forms of collateral and guarantees. While the move may not be entirely well‐received by the investment community, most are able to comprehend YZJ’s rationale for optimising the returns from idle cash that was reserved for future capex/M&As and working capital needs. Management added that the board has put in place appropriate risk management and accountability procedures.

Valuation and recommendation
Our SOTP valuation is based on 12x FY12F PER (13x previously) for the shipbuilding business following the de‐rating of sector peers, and the NPV of interest income from FY11F to FY13F. Our new target price of $1.65 implies an undemanding PER of 10x, in line with the stock’s historical average since its listing. Maintain BUY.

Source/转贴/Extract/Excerpts: Kim Eng Research
Publish date:12/08/11

NOL post Q2 losses, may be in the red for full year

NOL post Q2 losses, may be in the red for full year
11:09 PM Aug 12, 2011
SINGAPORE - Neptune Orient Lines (NOL) on Friday reported a second consecutive quarter of losses as a result of declining freight rates and higher fuel costs, and warned it would it post a full year loss if the current weak economic conditions persist.

The company's outlook paints a gloomy picture for the shipping industry, seen as a barometer for the health of the global economy.

"Deteriorating conditions in the global economy are resulting in weakened trade demand and continued pressure on freight rates," the company said in a statement to the Singapore Exchange.

However, the company signalled that rates may have bottomed, and it does expect peak season volumes, which are usually seen in the third quarter, to occur - "but later on in the year."

"The decline in container rates has levelled off and we expect slight gains in the third quarter," Mr Kenneth Glenn, the president of APL, NOL's container arm, said.

APL plans to impose a peak season surcharge on traffic to the US west coast from August 15.

NOL, which is 66 per cent-owned by Singapore investment company Temasek Holdings, posted a net loss of US$57 million (S$68.4 million) for the second quarter ended June 30, compared with US$100 million net profit in the same period a year ago. The result was wider than the net loss of US$10 million in the first quarter of this year. Revenue rose 1 per cent to US$2.15 billion.

Since late 2010, freight rates at APL, which accounts for almost 90 per cent of the group's revenue, have been falling, mainly due to lower rates in the Asia-Europe trade lane due to increased competition on that route.

For the second quarter, revenue per forty-foot equivalent unit declined 9 per cent compared with same period last year. The Europe route saw the biggest decline, with a 19 per cent on-year fall.

"Rate pressure, coupled with a 23 per cent year-on-year fuel price increase in the first half of 2011, negated the benefit of higher volume," said Mr Glenn.

The liner said it will continue to maintain slow steaming across its network, a practice used by shipping firms to reduce fuel costs and lower emissions. - Dow Jones

Source/转贴/Extract/Excerpts: TODAYonline
Publish date:13/08/11

Yangzijiang :Ahead of expectations and management guidance (DMG)

Yangzijiang Shipbuilding: Ahead of expectations and management guidance (BUY,
S$1.155, TP S$1.62)

Record quarterly net profit but outlook remains weak; lower TP. Yangzijiang (YZJ) reported 2Q11 net profit of RMB964m (+20% YoY, +1% QoQ) and this lifted 1H11 net profit to RMB1.92b (+38% YoY), ahead of ours and consensus expectations. 1H11 net profit was 58% of our estimate and 56% of consensus forecasts. Management shared that near term industry outlook has weaken further but YZJ is well positioned to capture opportunities arising from this crisis. Following the results: (1) we raise our FY11 EPS by 8% to include higher forex gain; (2) but cut TP from S$1.98 to S$1.62 on lower target P/E of 10x FY12F EPS (previously 12x FY11F EPS) as we expect sector P/E to de-rate on the weaker outlook. Maintain BUY.

Earnings boosted by forex gains and margins stayed high. 1H11 earnings were ahead of expectation due to RMB220m forex gain and gross margins of 25% was higher than our full-year estimate of 20%. 2Q11 gross margins came in at 22% vs. 27% in 1Q11 and 25% in 2Q10. The forex gain resulted from currency forward contracts and positive mark-to-market variation on outstanding orders in Euro. As of end 2Q11, YZJ has RMB10b invested in held to maturity instruments and financial income from these instruments accounted for 30% of PBT.

Key takeaways from the analyst briefing: (1) near term outlook for shipbuilding is poor due to oversupply condition. YZJ has US$5.5b gross order book to keep its yards busy for the next few years. Seaspan could take up the remaining 18 options in the next 12 months. Management believes that the current crisis will wipe out some of the smaller shipyards. (2) Increased headwinds from appreciation of RMB, increase in raw material costs and labour costs. YZJ is improving its productivity to counter the higher labour costs. (3) Collateral value of financial instruments on its balance sheet remains high at above 2x coverage.

Valuation: Cut TP to S$1.62 on lower target P/E. Sector has de-rated on the weaker shipbuilding outlook. Our new TP is pegged to 10x FY12F EPS. Our target P/E is in-line with YZJ’s average forward P/E since IPO.

Source/转贴/Extract/Excerpts: DMG & Partners Research
Publish date:12/08/11

Friday, August 12, 2011


Source/转贴/Extract/Excerpts: youtube
Publish date:05/08/11


Source/转贴/Extract/Excerpts: youtube
Publish date:12/08/11






 這位80歲的“奧馬哈先知” (Oracle of Omaha),最有名的就是愛撿便宜。

 他上週主動提出以低于賬面價格或32.4億美元(約97.2億令吉)收購大西洋保險,並以史上最低利率在本週賣出波克夏哈薩威(Berkshire Hathaway)20億美元(約60億令吉)優先無擔保公司債券。

Source/转贴/Extract/Excerpts: 中國報
Publish date:12/08/11

只要股市没拖累经济 马股仍存牛势

只要股市没拖累经济 马股仍存牛势
财经新闻 财经
2011-08-12 19:14


















Publish date:12/08/11

Genting’s S’pore casino Q2 EBITDA falls 34% on-quarter

Genting Singapore (GENS.SI) said on Friday that gross earnings from its casino-resort in the second quarter fell 34% from the previous three months, lagging behind rival Marina Bay Sands, as it was hit by lower win percentages in its premium players segment.

Resorts World at Sentosa made $352.5 million in earnings before interest, tax, depreciation and amortisation (EBITDA) in April-June, down 33% from the $524.6 million reported for the year ago period.

This was also 34% lower than the $537.9 million it earned in the first quarter of this year.

Its EBITDA was lower than the US$405.4 million ($491 million) reported by Marina Bay Sands, Singapore’s only other casino owned by Las Vegas Sands (LVS.N), for the same period.

Resorts World’s net revenue for the second quarter was $716 million, 22% lower than the preceding quarter due to unfavourable win percentages for its premium players segment, Genting said.

Singapore legalised casino gaming and allowed the building of two massive casino-resorts in 2005 as part of a plan to boost tourism. Genting’s US$4.8 billion Resorts World on Sentosa island opened its doors in February last year, while the US$5.5 billion Marina Bay Sands started two months later.

The Singapore casinos are the world’s second and third most expensive casino complexes after MGM’s CityCentre in Las Vegas, and their profits and profit margins are among the highest globally.

Las Vegas Sands Corp swung to a net profit of US$367.6 million in the second quarter, bolstered by improved business in Macau and Singapore, the world’s two most lucrative gambling markets.

Publish date:12/08/11

NOL posts quarterly loss as freight rates drop

Neptune Orient Lines, Southeast Asia’s biggest container-shipping line, posted a loss for a second straight quarter as fuel costs increased and weakening consumer spending caused rates to fall.

Net loss was US$57 million ($69 million) in the three months ended July 1, compared with a profit of US$99.7 million a year earlier, the company said in a filing to the Singapore stock exchange today. That was narrower than the loss of about US$80 million according to the median of five analysts’ estimates in a Bloomberg News survey. Sales gained 1.4% to US$2.15 billion.

Average revenue per box dropped 9% in the period, compared with a 11% jump last year, as the introduction of more ships on all trades pushed rates lower. A slowdown in demand for Asian-made goods has hit shipping lines, forcing them to delay the introduction of peak-season surcharges.

“Demand is still weak because the pace of recovery in the U.S. has been slower than what was expected,” said Jee Heon Seok, an analyst at NH Investment & Securities Co. in Seoul. “The two-month delay in the surcharge is a good example of how difficult things are.”

The shipping line gained 3.1% to close at $1.17 in Singapore today before the earnings announcement. It has fallen 46% this year, the worst performer among the 30 stocks in the city-state’s benchmark Straits Times Index.

“Deteriorating conditions in the global economy are resulting in weakened trade demand and continued pressure on freight rates,” the company said in the statement. “Unless these conditions improve, NOL will post a full year loss.”

Hanjin Shipping
APL, Neptune Orient’s container-shipping unit, increased volumes 7% to 692,000 40-foot equivalent containers in the period, according to the statement. Average revenue per box was US$2,539.

Hanjin Shipping Co., South Korea’s largest shipping line, reported a net loss of 274 billion won ($308 million) in the second quarter compared with a profit a year earlier because of higher fuel costs and lower rates. Its container business had an operating loss of 172 billion won in the period, the company said in an e-mailed statement earlier today.

Container lines including Orient Overseas, APL and A.P. Moeller-Maersk A/S, have delayed the introduction of a US$400 per 40-foot box peak-season surcharge on Asia-U.S. routes by two months to Aug. 15 as capacity outpaces demand.

Costs Climb
Orient Overseas (International), Hong Kong’s biggest container line, on Aug. 8 forecast “difficult” trading conditions in the second half. Maersk Chief Executive Officer Nils Smedegaard Andersen said last month the coming months look challenging in most markets.

Costs have also increased. The price of 380 Centistoke marine bunker fuel, used by ships, averaged US$660.46 per metric ton in the second quarter in Singapore trading compared with US$461.54 a year earlier, according to data compiled by Bloomberg. It rose 0.5% to US$647.5 today.

APL operated 147 vessels with a combined capacity of 593,542 20-foot boxes as of March 6, according to Neptune Orient’s website. It is scheduled to receive 10 ships next year, 14 in 2013 and 10 in 2014.

Publish date:12/08/11


Created 08/12/2011 - 13:31












Source/转贴/Extract/Excerpts: 星洲日報
Publish date:12/08/11


Created 08/12/2011 - 19:06


安本資產管理公司(ABERDEEN ASSETMGMT S/B)證券主管阿都拉昔指出,如果近距離窺探,馬股並沒有想像中的糟糕。





















Source/转贴/Extract/Excerpts: 星洲日報
Publish date:12/08/11

Yangzijiang's Q2 profit rises 20%

Business Times - 12 Aug 2011

Yangzijiang's Q2 profit rises 20%

Foreign exchange and interest income gains help boost earnings to $963.9m


YANGZIJIANG Shipbuilding posted a second-quarter net profit rise of 20 per cent to $963.9 million from $800.5 million in the same period last year, boosted by foreign exchange and interest income gains.

It garnered turnover of $3.16 billion, up 3 per cent from $3.07 billion last year.

Q2 earnings per share increased to 25.12 fen from 21.91 fen.

Investors rewarded Yangzijiang's performance initially, with its counters rising to an intra-day high of $1.18 at mid-afternoon yesterday.

Yangzijiang ended the day two cents lower at $1.135 amid a broad-market selldown.

Though Yangzijiang's quarterly reading is positive, there are concerns that plague it, say analysts.

For one, its profit drivers in Q2 came from gains in currency forward contracts and interest income from held-to-maturity financial products.

Yangzijiang has poured 10 billion Chinese yuan (S$1.9 billion) into held-to-maturity financial products. Income from them has increased nearly 17 times to $228.9 million from $13.5 million last year, and made up 30 per cent of profit-before-tax, said DMG & Partners' analyst Jason Saw.

These products are offered by Chinese banks and trust companies to finance Chinese corporates, and typically fetch higher returns. In this case, Yangzijiang's holdings yield an average return of between 10 and 15 per cent a year.

Credit Suisse analyst Gerald Wong said the opacity of information about these financial commitments led to Yangzijiang's share price overhang in recent weeks.

He said in a note on July 27 that there was a 'mismatch between the management and investor perception of associated risks'. Mr Wong added then that investors' concerns would be allayed if Yangzijiang provides more regular disclosure on these investments and ceases to hold these investments once they mature.

Yangzijiang yesterday provided analysts and the media a more thorough breakdown about its investments.

'This time there is more clarity, but it would be better to say what they have invested in,' said Mr Saw.

Yangzijiang's order book year-to-date stands at US$1.2 billion.

Executive chairman Ren Yuanlin told reporters that he expects 'gloom and doom' in bulk carrier orders but is confident of nabbing more boxship orders.

Mr Ren said Yangzijiang's ambition to dwelve into the offshore space remains, despite the ongoing court case over its PPL Shipyard acquisition bid.

'It's essential to have a good partner; we will not go it alone,' added Mr Ren, about Yangzijiang's offshore plans.

Publish date:12/08/11

A masterclass in stock market volatility

Business Times - 12 Aug 2011

A masterclass in stock market volatility

Yesterday's price action offers invaluable lessons in coping with market distress


(SINGAPORE) Investors should brace themselves for a bumpier ride in the near future as see-sawing Asian bourses become fixtures in a climate of unending macroeconomic uncertainty.

Regional markets went hurtling on a roller-coaster ride yesterday, hit first by fears of a sovereign debt downgrade in France before recovering some lost ground, thanks to more positive US equity-futures readings.

In Singapore, selected stock-picking among 'earnings resilient' companies gave the benchmark Straits Times Index (STI) a temporary boost mid-afternoon to breach its Wednesday close of 2,821.09. But it was still chased down 24.87 points to 2,796.22.

Market watchers say that volatility on the Singapore bourse will linger in the foreseeable near-term, given the unrelenting negative news on the United States' bleak economic outlook and a worsening European debt crisis.

'Even if macro news comes in on the positive side, such as a concerted QE3 (from the US and Europe), there might be a swing upwards quickly - but how long it will last, I don't know,' said Kenneth Ng, head of CIMB Research.

European markets kicked off in a similar fashion yesterday. The Paris market index opened 0.35 per cent higher after the three credit rating agencies affirmed France's AAA status, and fluctuated for the rest of the day before ending positively.

US equity-index futures like the Dow Jones Industrial Futures gained until press time last night, signalling a rebound in stock markets there.

Regional Asian bourses tripped sharply at the opening bell yesterday, before gaining slightly when European markets opened their trading sessions higher.

Japan's Nikkei mustered little to overcome its 2.2 per cent plunge at the opening, ending 0.63 per cent lower at 8,981.94.

In Hong Kong, the Hang Seng Index fell 188.5 points to 19,595.1.

Likewise, the STI opened a sharp 100 points lower, when traders turned bearish on oil and gas counters as oil prices weakened on gloomy economic activity.

Rigbuilders Keppel Corporation and Sembcorp Marine continued their downward spiral yesterday, falling 3.7 per cent and 3.9 per cent, respectively.

The mass panic selldown in the morning gave way briefly to a slight gain as the STI reached an intraday high of 2,824.39 in mid-afternoon.

Investors began buying oversold stocks, such as DBS and UOB, which have respectively shed 9.3 per cent and 8.8 per cent since Aug 4.

SIA, on the other hand, experienced an uptick, reversing a seven-day fall. It soared to an intra-day high of $11.28 yesterday before gravity forced a landing at $10.91, nine cents higher than Wednesday's close.

Said DMG & Partners' Leng Seng Choon of the buy-in: 'Stocks with earnings resilience are better supported, so investors should look out for that.'

According to Terence Tan, RBS Coutts' head of market specialists, Asia, investors are now trying to position themselves more in domestic demand sectors - 'and banks and land transport operators in Singapore fit the bill well'.

Najeeb Jarhom, AmFrasers Securities strategist, said the fleeting jolt in the STI came from a select group of day traders and algo traders who are equipped for a 'nimble chase'.

'Today, we saw investors reacting to what was an oversold market, so it had to rebound,' he said. 'But it wasn't as though the rebound was a bottoming of the STI; it was more like investors taking advantage after shorting the market.'

The STI's trade volume has ballooned to average 777 million since Aug 5, compared with about 350 million recorded last week.

As SGX REACH comes online next Monday - which spells more high-frequency trading - some expect volatility to reign supreme in the local market.

'High-frequency trading has totally changed the dynamics of the market,' said Lee Kok Joo, head of research at Phillip Securities in Singapore. 'The program trading operates on very small bid sizes. They try to profit on small beta spreads with high volumes as well. With program trading as part of the equation, it will definitely lead to more volatility.'

Dissenters say a marked increase in volatility from algo trading may happen only some time later.

'The initial impact of REACH won't be a big deal because SGX needs a new breed of participants on board first,' said CIMB's Mr Ng.

RBS Coutts' Mr Tan agrees: 'In the longer run, volumes could increase but we need to see an increase in the market depth of Singapore through the continued attraction and listing of high-quality issuers to the local bourse.'

Analysts and strategists still see no floor to the losses the STI has suffered in the last few days.

It tumbled past its 3,000 support level last Friday, just before credit rating agency Standard & Poor's cut US sovereign debt scores from AAA status to AA+.

Mr Jarhom foresees the STI falling further to 2,650 and 'won't be surprised' if it heads even lower to 2,500.

There is some respite in terms of volatility - at least till the next big shock comes, said Mr Ng.

'Volatility will stay high, but it won't be higher than where it was at the start of the week, when there was a big trigger. Volume will stay high until an unexpected concerted effort to stem haemorrhaging happens,' he said.

Publish date:12/08/11

Genting Singapore: IRs: New Entertainment In Town (DBSV)

Genting Singapore
BUY S$1.70
Price Target : 12-Month S$ 2.90

IRs: New Entertainment In Town
• Singapore gaming market, still in its infancy, could soon surpass Las Vegas as world’s second largest
• GENS to remain market leader, new Western Zone should attract more higher-end VIP patrons
• Maintain Buy and SOP-based TP of S$2.90

Emerging force to be reckoned with. We expect Singapore’s gross gaming revenue (GGR) to expand substantially to US$5.2-US$5.8bn over the next two years (2010: US$3.3bn). RWS is currently the market leader with 60% overall GGR share (VIP: 68%; mass: 51%). RWS should continue to maintain an edge over MBS given its Asian appeal (especially with crowd-puller Universal Studios), Genting Group’s 40-years experience in ASEAN (extensive customer database, proven bus program), and GENS’ strong balance sheet (net cash) and free cashflows.

RWS is still ramping up: a) Gradual opening of new tables (c. 10% spare capacity remaining) & yield management (improving net win/table by raising average bet, length of play, game speed); b) New rides at Universal Studios (world’s first Transformer ride in 4Q11); and c) Phased-completion of Western Zone (Maritime Museum by 4Q11, 173-room Equarius Hotel & 20 villas by 1Q12). The opening of Genting Plantation’s (sister company) premium outlets in Kulai, Johor in Nov 2011 could lead to potential synergies (cross-selling opportunities, spill-over visitors via bus program).

Opportunity to accumulate on weakness. GENS’ share price has retreated by 29% YTD given expectation of relatively weaker 2Q11 results (lower q-o-q and y-o-y with no Chinese New Year & monopoly impact, less favourable luck factor). We remain positive on GENS’ longer-term prospects given Asia’s low gaming penetration rate, robust economy & rising discretionary income, and potential approval of junkets (may come later rather than sooner due to recent change in Singapore Casino Regulatory Authority head, but the positive impact on VIP volume has yet to be factored into our & consensus earnings). Maiden dividend payout will likely be in 2013 post-completion of Western Zone.

Company Background
Genting Singapore (GENS) owns Resorts World at Sentosa (RWS), one of the only two integrated resorts (IRs) in Singapore. RWS was the first to open its doors in Feb 2010, followed by Las Vegas Sands’ Marina Bay Sands (MBS) in Jun 2010. Costing S$6.6bn, RWS comprises a casino (~650 tables & 2,500 slots capacity), 6 hotels (1,800 rooms), Universal Studios themepark (first in ASEAN), Festive Walk (retail), Maritime Museum, Marine Life Park (world’s largest oceanarium), and Espa Wellness Centre.

Industry Overview, Earnings Drivers & Risks
New powerhouse. Singapore could surpass Las Vegas as the world’s second largest gaming hub post-2012. Singapore’s gaming market is still in its infancy, and should continue to grow strongly driven by positive macro factors (robust economy, rising discretionary spending, record tourist arrivals). We expect Singapore’s GGR to expand to US$5.2- US$5.8bn over the next two years (2010: US$3.3bn), with potential upside as we have yet to factor in impact of junkets on VIP volume. The last five quarters have seen sequential GGR growth, as operations ramp-up and with favourable luck factor (VIP constituted ~60% of GGR). Singapore IRs are now the two most profitable CBD-based properties in the world.

Rising tourist arrivals. Following a strong 20% growth in 2010, the Singapore Tourism Board is targeting 12-13m tourist arrivals this year (up 3-12%) and 17m by 2015. 5M11 has already hit 5.3m (+15% y-o-y), and is well on track. This augurs well for the IRs given that foreigners make up 70-75% of visitors (RWS welcomed >15m visitors in 2010).

Regional competition in check. Singapore is a guaranteed duopoly market (up to 2016) with very favourable gaming tax rates ie 12% for VIP & 22% for mass segment (including GST) vs Macau’s 39% and Malaysia’s 25%. There has been little progress in opening up new gaming markets in the region (e.g. Japan, Taiwan, Thailand). Three IRs will open by early- 2013 - two at Manila Bay owned by Bloombury & Belle Corp (delayed from 2012), and MGM Grand Ho Tram in Vietnam. We do not see any credible threats to Macau and Singapore for now due to lack of infrastructure (especially at offshore islands) & proper legal framework, and restrictions on local patronage (e.g. South Korea, Vietnam).

Perched strongly at the top. RWS is currently the market leader in Singapore with 60% overall GGR share (VIP: 68%; mass: 51%). We expect RWS to continue to maintain an edge over MBS (2011F: 56%; 2012F: 53% market share) given:
a) RWS’ Asian appeal - ‘friendlier’ design & layout, Universal Studios is a crowd-puller;

b) Genting Group’s 40-years experience in ASEAN (extensive customer database, proven bus program), and

c) GENS’ strong balance sheet (net cash) and free cashflows which come in handy for credit extension to direct VIPs (while waiting for junkets to be licensed) and future capex.

Potential beneficiary of warming Malaysia-Singapore ties. Malaysia is one of Singapore IRs’ biggest markets, with >100 shuttle buses running daily from Johor. The proposed Johor- Singapore rapid transit link by 2018 and potential bullet train to KL will make travelling even more seamless. As the Singapore government tries to curb local casino patronage, IRs will likely target foreigners with Malaysia being a low hanging fruit. RWS will have an upper hand in attracting Malaysian visitors given parent Genting’s 40-year operating history in its home turf. We see huge cross-selling opportunities among RWS, GENM’s Malaysian casino operations, and GENP’s premium outlets in Kulai.

Financials and Valuation
Undemanding valuation for strong earnings growth. GENS’ share price has retraced by 22% YTD, bringing valuation closer to sector average EV/EBITDA. GENS is the best proxy to Singapore’s strong GGR growth, with expected 3-year EBITDA CAGR of 21%.

While GENS offers a more direct exposure to Singapore gaming market, parent Genting Bhd (Buy/TP: RM15.00) offers a cheaper entry (11.8x 2012F PE, 5x EV/EBITDA vs 18x, 9x respectively for GENS) which also offers a resilient base earnings from its other businesses and potential disposal of non-core assets.

Source/转贴/Extract/Excerpts: DBS Vickers Research
Publish date:11/08/11

CMT: An excellent value-add player (DBSV)

Capitamall Trust
BUY S$1.77
Price Target : 12-Month S$ 2.05

An excellent value-add player
• A leader in asset enhancement initiatives to drive shopper traffic and enhance property yield
• Completion of ongoing AEI works to underpin rental and earnings growth
• Maintain BUY, S$2.05 TP

Market leader in the retail space arena. CMT is the market leader in Singapore’s retail property space backed by a strong sponsor. Portfolio has grown 9x since listing in 2002 and currently comprises 16 shopping malls with at an asset size of S$8.4bn. The group has constantly demonstrated its excellent asset enhancement abilities by driving higher shopper footfall, and at the same time improving its malls’ property yields. We think that the group should continue to enjoy positive rental reversion riding on the strong growth in tourists and favorable economic outlook. FY11 and FY12 DPU of 9.7cts and 10.9cts translate to yields of 5.0 and 5.6% respectively. Our BUY call is premised on stock ability to drive earnings and its pole position in the retail sector. Our DCF based TP of S$2.05 offers 12% total return.

Continuous income growth drivers expected. We expect sustainable income growth going forward, boosted by new contributions from Iluma and completion of AEI works at Raffles City. Redevelopment of JCube and The Atrium AEI coupled with the recent acquisition Jurong Lake white site with CMA and CapitaLand should underpin earnings growth in the longer term. The 30% stake in the Jurong Lakeside site is CMT’s maiden development project and will be another testament to the group’s execution ability. The project is likely to be RNAV accretive but near term earnings may be diluted by 0.5-3% due to increased interest expense during the development period and gearing would rise to c41%.

Pro-active capital management. Only 19.8% or S$87.75m of the outstanding S$444m CBs have been exercised with the remaining only due in 2013. Meanwhile, the group has issued S$350m of 3-year CBs in Mar 2011 and has also secured a new debt facility to refinance its S$346.4m share of Raffles City CMBS due to mature on Sept 2011 at a lower interest rate.

Company Background
CMT is the market leader in Singapore’s retail property space. Portfolio has grown 9x since listing in 2002 and currently comprises 16 shopping malls with at an asset size of S$8.4bn, and S$6bn by market capitalization. The malls include Tampines Mall, Junction 8, Funan DigitaLife Mall, IMM Building, Plaza Singapura, Bugis Junction, Sembawang Shopping Centre, JCube, Hougang Plaza, Raffles City Singapore (40.0% interest), Lot One Shoppers’ Mall, Bukit Panjang Plaza, Rivervale Mall, The Atrium@Orchard, Clarke Quay and Iluma., which are strategically located in the suburban areas and Downtown Core of Singapore. The group has constantly demonstrated its excellent asset enhancement abilities by driving higher shopper footfall, and at the same time improving its malls’ property yields. Tenants are diversified comprising a diverse list of more than 2,400 leases with local and international retailers. CMT also owns 122.7m units in CapitaRetail China Trust.

Industry Overview, Earnings Drivers & Risks
The retail property sector is likely to see another year of relatively strong performance, underpinned by healthy property fundamentals backed by the robust economic and tourism outlook. Supply outlook looks manageable with about 0.9msf p.a. coming onstream over the next 2 years. The group renewed 352,154 sf of NLA (c8.9% of portfolio’s NLA) in 1H with leases contracted at 7.8% growth. This was supported by a 3.6% y-o-y higher shopper footfall and 8.0% higher retail sales. Performance for its malls remained robust supported by healthy leasing demand. JCube achieved precommitment of approximately 80% to date, well ahead of its completion date by end of 2011.

We note that over 90% of CMT leases have step up and gross turnover clauses, which contributes about 3-5% of its revenue. Hence, CMT should be able to enjoy a straight pass through to its bottomline with rising retail sales. 50% of CMT’s portfolio NLA is in the suburban area, which is generally quite resilient due to the non-discretionary consumption patterns. We expect project a 3-5% annual expansion in suburban rents over the next two years supported by healthy GDP growth and unemployment rates.

Going forward, we expect sustainable income growth supported by positive rental reversion, as well as new contributions from the completion of AEI works at Raffles City, which will generate an ROI of 10.1%. While occupancies at Atrium@Orchard and Illuma are likely to see further downside as asset enhancement intensifies/begins, we see gradual completion of redevelopment JCube by end-201, the Atrium by end-2012, as well as the tenant and layout reconfiguration of Illuma to lift earning in the medium term. Construction at the Jurong Gateway is also expected to commence by end of the year and that would also underpin another growth engine in the longer term

Financials and Valuation
The group has recently secured a new debt facility to refinance its S$346.4m share of Raffles City CMBS at a lower interest rate, hence the average debt to maturity is extended from 2.6 to 3.6 years and interest cost down by 10 bps to 3.6%. Gearing has also dipped marginally to 38.2% and the next financing exercise will only be due in Oct 2012, highlighting the trust’s strong financial position.

We like CMT for its pole position in the retail sector, which, in our view, will be a beneficiary of the increase in retail spending from the influx of tourists, as well as healthy economic fundamentals. Our DCF-based TP of S$2.05 offers a total return of 12%, backed by a prospectively yield of c5.0-5.9%.

Source/转贴/Extract/Excerpts: DBS Vickers Research
Publish date:11/08/11
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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