Singapore Stock Watch

CORPORATE RESULTS

SINGAPORE
Banking / Finance - Related
DBS 4Q to Dec ‘08 Feb 13
Great Eastern Hldgs 4Q to Dec ‘08 Feb 17
OCBC 4Q to Dec ‘08 Feb 18
IFS 4Q to Dec ‘08 Feb 26
Properties / Reit / Hotels
CapitaLand 4Q to Dec ‘08 Feb 10
Ho Bee 4Q to Dec ‘08 Feb 25
City Developments 4Q to Dec ‘08 Feb 26
Hotel Royal 4Q to Dec ‘08 Feb 26
Lee Kim Tah 4Q to Dec ‘08 Feb 26
Marine-Related / Conglomerates
Rickers Maritime 4Q to Dec ‘08 Feb 9
NOL 4Q to Dec ‘08 Feb 10
ASL Marine 2Q to Dec ‘08 Feb 11
Cosco 4Q to Dec ‘08 Feb 23
Telco
SingTel 3Q to Dec ‘08 Feb 10
Starhub 4Q to Dec ‘08 Feb 10
Transport & Transport - Related
SATS 3Q to Dec ‘08 Feb 5
SIA 3Q to Dec ‘08 Feb 10
Vicom 4Q to Dec ‘08 Feb 11
ComfortDelgro 4Q to Dec ‘08 Feb 12
SBS Transit 4Q to Dec ‘08 Feb 12
IT / Manufacturing
Ellipsiz 2Q to Dec ‘08 Feb 11
Karin Tech 1H to Dec ‘08 Feb 11
Surfact Mount 3Q to Dec ‘08 Feb 13
Map Tech 4Q to Dec ‘08 Feb 16
Challenger 2H to Dec ‘08 Feb 17
Huan Hsin 4Q to Dec ‘08 Feb 23
Aztech 4Q to Dec ‘08 Feb 25
Chartered Mid-Quarter Guidance for 1Q ‘09 Mar 13
China
C & O Pharmaceutical 2Q to Dec ‘08 Feb 12
China Aviation Oil 4Q to Dec ‘08 Feb 25
Jiutian Chemical 4Q to Dec ‘08 Feb 25
Guangzhao Industrial Forest 4Q to Dec ‘08 Feb 26
China Sun 4Q to Dec ‘08 Feb 27
Sino-Environment 4Q to Dec ‘08 Feb 27
China Flexible 1Q to Jan ‘09 Mar 13
Agri-Related
Olam 2Q to Dec ‘08 Feb 12
Noble Group 4Q to Dec ‘08 Feb 26
Indofood Agri 4Q to Dec ‘08 Feb 27
Others
Tuan Sing 4Q to Dec ‘08 Feb 5
LMA 4Q to Dec ‘08 Feb 9
Gems TV 2Q to Dec ‘08 Feb 10
Biosensors 3Q to Dec ‘08 Feb 11
Eu Yan Sang 2Q to Dec ‘08 Feb 12
Kian Ann 2H to Dec ‘08 Feb 12
Singapore Food 4Q to Dec ‘08 Feb 12
Wearnes 1Q to Dec ‘08 Feb 12
Yellow Pages 3Q to Dec ‘08 Feb 12
CitySpring 3Q to Dec ‘08 Feb 13
ST Engineering 4Q to Dec ‘08 Feb 17
Straits Trading 4Q to Dec ‘08 Feb 24
CSE Global 4Q to Dec ‘08 Feb 25
Breadtalk 4Q to Dec ‘08 Feb 26
Hiap Hoe 4Q to Dec ‘08 Feb 26
HTL 4Q to Dec ‘08 Feb 26
Petra Foods 4Q to Dec ‘08 Feb 26
UK
Barclays 4Q to Dec ‘08 Feb 9#

The 25.4% profit decline reported by SATS for Q3
ended Dec ’08 is not “new”; in fact “better” than
the 33.5% decline in Q2 and 27.7% drop in Q1.
�� The key point to note is that cash, totaling $553.8
mln at end Dec ’08 (down by $42.6 mln from the
preceding quarter and by $67 mln from end Mar
’08), would have declined sharply as a result of the
Singapore Food takeover, now in progress. The
stake from Temasek alone has already set it back
by $344.5 mln (transaction completed after the Jan
20th EGM). If 100% accepted by minority
shareholders of SFI, it would almost wipe out the
cash trove.
(SATS’ share price hit a new recent low of
$1.33, the day after the Jan 20th EGM that
approved the SFI acquisition. It weakened
further to $1.31 yesterday.)
�� However, it is likely because of the SFI acquisition
that SATS would probably maintain the 10-cent final
dividend, as it did at half time, which was 4 cents.
(But, the special payout of 37 cents per share,
achieve optimal capital structure, in FY Mar
’04, and 5 cents special in FY Mar ’07 have
become distant memory.)
�� While this may justify a HOLD, note that SIA,
SATS’ key customer and controlling
shareholder, has only begun to cut flight
frequencies, ie in-flight catering and other
services provided by SATS would be more
significantly impacted going forward.

1. City Dev’s weakness yesterday, and indeed,
CapitaLand in recent weeks (a whopping 34%
from $3.59 on Jan 5th to the low of $2.36 on
Jan 23rd, 2 days after its masnet statement)
suggests the Singapore market remains
extremely sensitive to talk of rights issues /
capital raisings.

2. Indeed, our expectation of several rights issues /
capital raisings, and how the market reacts, is a prerequisite
before one could have reasonable
confidence the market has bottomed.

3. It differs from earlier statements by C-Land:
- on Jan 7th: it said it “regularly receives and reviews
various business / financing proposals”, but “will
not comment on market rumor or speculation”;
- on Jan 21st, it said that it “has received and
continuing to receive capital raising proposals
including a rights issue”.

4. Furthermore, City Dev’s financial position is strong:
it had total borrowings of $4,167.99 mln or
$3,354.66 mln net after cash, against Shareholders
Funds, which reflect book cost, ie before revaluation,
of investment properties, of $5,395.71 mln. And,
not having spun off rental income - generating
investment properties, as its 2 big peers have done,
such income will help offset declining contributions
from development properties. (Other property
companies here revalue their investment properties
annually.)

CITIBANK analysts view 2009 as a year of two halves for financial markets: with the first half characterised by continued volatility and the second half offering opportunities.

Giving their investment outlook for 2009, the analysts said that the near term is likely to see investment returns still being driven by economic contraction, policy easing and de-leveraging. The result is high market volatility. At some point in the year, the extreme valuations seen currently in equity and credit markets should provide attractive opportunities, as downside risks to economic growth dissipate and de-leveraging pressures ease.

While economic growth is likely to remain below trend for now, global equities should find a base in 2009 ahead of expected economic stabilisation. A further boost may come from a pick-up in corporate earnings in 2010 as economic recovery, albeit moderate, takes hold. The Citi analysts believe that the bottoming of equities is likely to be a process. They encourage long-term investors to use the bottoming process to begin a series of rebalancing in portfolios back to their long-term allocations, or enter the accumulation phase for long-term equity exposure.

Citi analysts are keeping their overweight recommendation to stocks over a 12-month period. Regionally, they still favour the US and emerging markets. For bonds, they prefer investment-grade corporate bonds to developed-country sovereign debt. While high yield bonds are enticing, Citi analysts caution against increasing exposure too early.

'Investors can expect significant volatility in the first half (of 2009),' said Salman Haider, Citibank Singapore's managing director and head of wealth management. 'Provided we see economic headwinds receding in the latter half, we could be settling the base for the market to recover.

Citi also recommends that while retail investors structure 55-60 per cent of their portfolios around global equities and fixed income, they could also consider tactical investments in distressed assets and global infrastructure. Mr Haider stressed, however, that these areas would be more for high net worth investors, and advised retail investors to thoroughly understand and figure out how much risk they can take before venturing in.

On the Singapore economy, Citi forecasts an unfavourable outlook as the recession deepens, with overall negative growth of 2.8 per cent for 2009.

view 2009 as a year of two halves for financial markets: with the first half characterised by continued volatility and the second half offering opportunities.

Giving their investment outlook for 2009, the analysts said that the near term is likely to see investment returns still being driven by economic contraction, policy easing and de-leveraging. The result is high market volatility. At some point in the year, the extreme valuations seen currently in equity and credit markets should provide attractive opportunities, as downside risks to economic growth dissipate and de-leveraging pressures ease.

While economic growth is likely to remain below trend for now, global equities should find a base in 2009 ahead of expected economic stabilisation. A further boost may come from a pick-up in corporate earnings in 2010 as economic recovery, albeit moderate, takes hold. The Citi analysts believe that the bottoming of equities is likely to be a process. They encourage long-term investors to use the bottoming process to begin a series of rebalancing in portfolios back to their long-term allocations, or enter the accumulation phase for long-term equity exposure.

Citi analysts are keeping their overweight recommendation to stocks over a 12-month period. Regionally, they still favour the US and emerging markets. For bonds, they prefer investment-grade corporate bonds to developed-country sovereign debt. While high yield bonds are enticing, Citi analysts caution against increasing exposure too early.

'Investors can expect significant volatility in the first half (of 2009),' said Salman Haider, Citibank Singapore's managing director and head of wealth management. 'Provided we see economic headwinds receding in the latter half, we could be settling the base for the market to recover.

Citi also recommends that while retail investors structure 55-60 per cent of their portfolios around global equities and fixed income, they could also consider tactical investments in distressed assets and global infrastructure. Mr Haider stressed, however, that these areas would be more for high net worth investors, and advised retail investors to thoroughly understand and figure out how much risk they can take before venturing in.

On the Singapore economy, Citi forecasts an unfavourable outlook as the recession deepens, with overall negative growth of 2.8 per cent for 2009.

MORE companies issued profit warnings yesterday, for the quarter or financial year ended December 2008.

The list includes Asia-Pacific Strategic Investments, China Dairy Group, Jadason Enterprises, Kinergy, Kyodo-Allied Industries, Pacific Healthcare Holdings and Sinostar PEC Holdings.

Similar to other companies which have issued profit warnings earlier this year, the global economic downturn was cited as a leading reason for the losses or weaker earnings.

Three companies said that they saw a drop in demand for their products and services due to the financial crisis and resulting recession.

Kinergy warned of a loss for the full year ended Dec 31, 2008. The credit crunch caused a significant drop in demand for its electronic manufacturing services and proprietary equipment business division. The slowdown also led to over-capacity in its newly expanded factory.

Sinostar warned of lower sales and profits for FY2008 due to a fall in demand. The group said that the uncertain global economic climate caused a slowdown, which affected demand for its products and also their selling prices.

Also affected by soft demand is Jadason Enterprises, which expects a loss for fourth quarter 2008 mainly due to weak demand for its printed circuit board (PC drilling and PCB mass lamination services.

Two companies saw lower profit margins due to higher costs.

Asia-Pacific Strategic Investments expects a loss for its second quarter ended Dec 31, 2008, due to a decrease in revenue and lower gross profit margin as a result of higher costs from the construction of infrastructure, as well as the slowdown in sales. Also, higher operating expenses were incurred in its effort to secure deeper market penetration.

Kyodo-Allied Industries warned of a loss for the half year ended December. The group attributed this to lower profit margins due to high material costs and intense market competition. Kyodo-Allied also said that a significant decline in fair value of available-for-sale financial assets resulted in an impairment loss of $230,000.

Pacific Healthcare is expecting a full-year loss for FY2008, as the results for the second half will be affected by a material provision for the impairment of its investment in a subsidiary and its related operations in China, it said.

China Dairy Group also expects to record a loss for its full-year and fourth quarter ended Dec 31, 2008, but did not give reasons.

SINGAPORE Airlines (SIA) will report a huge $2.1 billion hedging loss equivalent to a loss per share of $1.70, says a local analyst.

K Ajith of UOB-Kay Hian calculates that with jet fuel having slumped from US$119 a barrel in October 2008 to US$54 by year-end, SIA will suffer a hedging loss that will depress its book value from $12.25 a share to $10.55.

The estimate is based on SIA's mark-to-market accounting of its outlay on fuel, which UOB-Kay Hian estimates to be hedged at an average of about US$110 a barrel.

'At present, SIA is trading at 0.9 times P/B. And if it remains at 0.9 times with book value dropped, it should trade at a reduced target price of $9.70,' says UOB-Kay Hian.

SIA, which will report its third-quarter earnings on Feb 10, slid 32 cents to close at $10.74 yesterday.

The impact of the hedging loss is not new - SIA chief executive Chew Choon Seng said at the Q2 results briefing three months ago that fuel was hedged around $115 a barrel. But this is the first time an analyst has worked out the potential loss, albeit that this is a paper loss at present.

Some analysts, such as Vincent Ng of S&P Equity Research, warn against reading too much into paper losses on fuel hedging. 'Hedge accounting generally goes straight to the reserves in the balance sheet, rather than the profit-and-loss account,' he explained. 'Meanwhile, SIA also pays spot prices for half of its fuel needs.'

Also, SIA's hedge contracts go forward some 18 months from the contract date, by which time the actual fuel price could climb back closer to the hedged price.

Nevertheless, few have reason to be upbeat on SIA's immediate prospects - or those of the aviation sector as a whole.

The industry is in a tailspin thanks to the global economic slowdown and the financial meltdown. Passenger and cargo traffic have dived, and combined with excess capacity, this has put pressure on yields.

Analysts expect SIA to have suffered a 10-15 per cent drop in passenger yield in the October-December 2008 quarter due to falling premium seat sales and falls in the key Australian and British currencies against the Sing dollar. Meanwhile, air cargo operations have been racking up losses since the first half of the current financial year, prompting SIA to start grounding planes and to ask pilots to take no-pay leave.

SIA has cut capacity about 3 per cent system-wide over the past two months, including scrapping of several of its relatively recent all-business class non-stop services to New York and Los Angeles.

One of the more upbeat forecasts for SIA is from CIMB's Raymond Yap, who sees a Q3 net profit of $385.6 million, down 35 per cent year-on-year. But Mr Yap expects SIA to post a net profit of only $55.8 million for the January-March quarter, which is traditionally slow.

'If we are correct, SIA could achieve a full-year net profit of $1.253.8 billion, about 10 per cent higher than our official forecast of $1.137 billion, but down almost 40 per cent from a year ago,' he said in a paper yesterday.

UOB-Kay Hian's Mr Ajith expects operating profit to decline to $118 million in Q3 2009. He is forecasting an FY 2009 net profit of $915.3 million, below the consensus estimate of $1.1 billion.

Citigroup Global Markets is also downbeat on SIA and has a medium-term price target of $9. Besides the tough operating environment, contributions from subsidiaries and associates will be under pressure, Citigroup said.

'SIA would be earning an ROE well below its cost of capital, which suggests that its share price could trade below book value during this stage of the economic downturn,' Citi analyst Robert Kong noted this week. 'With earnings and price performance volatile, it is difficult to have a long-run fair value for an airline stock.'

Citi forecasts SIA's FY 2010 return on equity will fall to 6.7 per cent, from 9.6 per cent in FY 2009.

Going forward, the issue for SIA is how it manages capacity and costs amid deteriorating demand, analysts say.

A big reason why the Dow appears resilient around the 8,000 mark (exactly where it ended after Friday's plunge) is that the index guardians have not removed the stocks which have dropped below US$10, unlike what they did in the past.

For the record, as of Friday, there were four such counters - Citigroup at US$3.55, Bank of America at US$6.58, General Motors at US$3.01 and Alcoa at US$7.79.

Readers would note that these are among the stocks most likely to react to bad news from the banking and auto industries but because they have already crashed to rock-bottom levels, their influence on the Dow is severely limited since the index is price-weighted and all price movements are treated equally, regardless of market capitalisation.

To see how distorted a picture the Dow transmits, take this for example: On Friday, a US$3.72 slide to US$54.50 by the stock of Proctor & Gamble (P&G), which has a market cap of US$163 billion, removed 29.6 points from the Dow, while 3M, with a market cap of just US$37 billion (one-quarter of P&G's), exerted almost the same effect of cutting 22 points off the index because its almost-identically-priced shares fell by almost the same amount - US$2.76 to US$53.79.

Meanwhile, the four sub-US$10 stocks mentioned above all fell, but only contributed a combined total of 11 points to the Dow's final loss of 148 points to 8,000, despite having a total market value of US$86 billion.

Even if one accepts that price-weights are one way to construct an index, the failure to replace the low-priced stocks with higher-priced stocks in the Dow have created the mistaken impression that the index is more resilient to bad news than it actually is.

Speaking of resilience - or rather the lack of it - traders might have noted that Wall Street's January performance was a 7-9 per cent loss for its major indices, not a particularly auspicious portent for those who believe in the old market adage 'as goes January, so goes the rest of the year'.

It might simply be yet another bit of superstitious market folklore with no fundamental grounding, but if Wall Street had posted a January gain, you can bet your last dollar that opportunistic brokers and analysts would have used it to offer hope to the investing public and to urge clients to buy.

The smart money, however, would stick to the two central tenets of investing in this new age of high volatility, low returns and bankrupt US investment banks - 'sell into strength' and/or 'buy in anticipation, sell on news'.

Both have proven effective throughout 2008 and again so far in 2009.

Last week's gains before US President Barack Obama presented his stimulus bill to the House of Representatives, followed by an immediate collapse when the bill was passed, leads us to believe there's no reason to expect any different in the weeks ahead, especially when the news from the US could be mostly negative.

In its report over the weekend, research outfit Ideaglobal noted that the US Conference Board has said the US jobless rate may reach at least 9 per cent by end-2009 and that Q4 inventory buildup does not bode well for current and coming quarters.

'The 'Bad Bank Plan' may be delayed. . .The White House says GDP data shows the crisis in the housing and financial sectors has spread to all areas of the economy', noted Ideaglobal. On Monday, the Commerce Department will release its December personal income and spending report, which is not expected to be encouraging given rising job losses and deepening anxiety associated with the housing crisis. There are also a slew of earnings reports due, which are expected to add to a volatile week ahead.

The trading pattern in the five days to come will follow a by-now familiar pattern, in which the Straits Times Index's direction is set by the Hong Kong market as well as so-called advance programme trades from the US - the word 'advance' suggesting that these trades are to buy or sell STI components before the expected move on Wall Street, not after.

Is the STI's resilience around the 1,700 mark related to traders' belief that the Dow will hold at 8,000? If the latter is based on a distortion that might one day be corrected, where would this leave the STI?

Credit Suisse cuts the target prices for property developers in Singapore, warning that a falling population on the back of the economic downturn will dent demand for homes. Credit Suisse expects Singapore's economy to contract 2.8% in 2009 (Official forecast is a contraction of 2%-5%) and 200,000 foreigners and permanent residents to leave Singapore in 2009 to 2010. Credit Suisse believes that Singapore private properties could see a record high 15% vacancy rate. Credit Suisse predicts that high-end private residential property prices will plunger 60%, middle-end 40% and low-end 20%. Credit Suisse cuts the target price for Capitaland from $2.78 to $2.21, City Developments from $6.40 to $4.78, and Keppel Land from $2.48 to $1.55. Credit Sussie maintains its UNDERPERFORM rating for the three stocks.

Trust exploring options to refinance $876.2m of debt

CAPITAMALL Trust (CMT), Singapore's biggest property trust, said that distributable income for the fourth quarter fell 2.1 per cent as it faced higher finance costs.

Distributable income for the three months ended Dec 31, 2008, was $61 million, down from $62.3 million in 2007. Distribution per unit (DPU) fell to 3.65 cents, from 3.82 cents in 2007.

The trust is a unit of Singapore's largest property group, CapitaLand. Q4 net property income rose 11.1 per cent to $85.9 million, from $77.3 million in Q4 2007.

Turnover was boosted by Atrium@Orchard, which CMT bought in August 2008, as well as higher revenue from new and renewed leases and from the completion of asset enhancement works.

But finance costs rose 61.4 per cent to $30 million, causing a year-on- year drop in Q4 net income. The increased finance costs were partly due to the convertible bonds CMT issued to fund the Atrium acquisition.

For the full 2008 financial year, distributable income rose 12.9 per cent to $238.4 million, up from $211.2 million in 2007. DPU rose to 14.29 cents from 13.34 cents.

'The majority of the retail trades across CMT's portfolio of malls are still faring well for full year 2008, although there were some signs of weakening in discretionary spending towards end-2008,' said Lim Beng Chee, chief executive of the trust's manager.

Last year, CMT signed 363 new and renewed leases at average rents 9.3 per cent higher than preceding rentals, which were typically committed some three years ago.

Gross rental revenue locked-in for 2009 already exceeds 87 per cent of 2008's total gross revenue. 'This will underpin the net property income for 2009,' said the trust.

Mr Lim remains confident that CMT's tenants will continue to stay on in its malls, even as retail sales are expected to drop this year.

The trust will take a pro-active approach to engage its tenants and meet up with them more often, he said.

Mr Lim also pointed out that turnover rent (where CMT takes a cut of tenants' sales) contributed just 2-4 per cent of CMT's total gross revenue in 2008.

The trust is also exploring options to refinance $876.2 million of debt before it matures in the second half of 2009.

CMT hopes to refinance all debt in one go and is already in talks with banks. Analysts said that refinancing should not be a problem as another one of CapitaLand's Reits, CapitaCommercial Trust, was able to refinance at attractive rates recently.

CMT, which owns 14 retail malls in Singapore, last quarter said that it will put some upgrading plans for its properties on hold. The trust in May 2008 also raised its target asset size to $9 billion by 2010 from an earlier forecast of $8 billion.

Yesterday, CMT said that total assets rose 1.9 per cent to $7.2 billion on the latest revaluation.

'CMT remains one of our top picks in the S-Reit (Singapore real estate investment trust) space,' said Macquarie Research analysts Tuck Yin Soong and Elaine Cheong yesterday as they issued an 'outperform' call on the stock. CMT shares lost two cents to close at $1.48 yesterday.

BT 23 Jan 2009

Net earnings fall 2.9% to about $1.1b but rises 18% at operating level

KEPPEL Corp saw a 2.9 per cent dip in full-year 2008 net profit to about $1.1 billion - from about $1.13 billion in 2007.

Including minority interests, net profit dropped 20 per cent to $1.32 billion from 2007's $1.65 billion. 2007 recorded exceptional gains of $565 million, contributed by fair value gains on investment properties. The attributable exceptional gain was $105 million after taxation and minority interests.

Before exceptionals and minority interests, net profit rose 6.9 per cent to $1.096 billion.

At the operating level, net profit rose 17.9 per cent to $1.24 billion. Full-year revenue remained strong, growing 13.2 per cent to $11.81 billion and fourth-quarter revenue rose 11 per cent year-on-year to $3.73 billion. Earnings per share for 2008 were 69 cents and the group proposed a final dividend of 21 cents per share. The group also took prudent steps to ensure a net cash position of 0.04 times. Free cash flow for the year came up to $1.88 billion.

'We are very busy in 2009, we have 14 rigs to be delivered so the yards will be very busy,' said CEO Choo Chiau Beng. He warned, however, that further order cancellations and payment rescheduling negotiations will happen but the key would be to ensure that Keppel comes out of the situation better off than its customers.

'We have contracts in place (and) . . . such negotiations will carry on all the time and I think so far we have strong positions to negotiate,' said Mr Choo.

By segment, the offshore and marine division still accounted for the bulk of 2008 revenue and its contribution to overall revenue rose 18 per cent to $8.57 billion.

Net profit attributable to shareholders from the division rose to $698.5 million from $441.3 million, making up more than half of overall earnings. Looking ahead, new rig orders are expected to slow down, said Mr Choo but he expects some conversion and repair jobs to come in.

'The potential E&P activities in the deepwater and arctic regions will present opportunities for our yards in the construction of rigs and specialised vessels,' said group finance director Teo Soon Hoe.

Property continued to weigh on full-year revenue, coming in 48 per cent lower at $950 million.

The most significant improvement came from the infrastructure division where revenue nearly doubled to $2.23 billion mainly due to revenue from Keppel Energy on higher electricity prices.

Net profit from investments fell to $162.4 million from $269 million, with lower contribution from associate Singapore Petroleum Company and fair value losses of securities cited as factors.

Keppel shares closed unchanged at $4.04 yesterday.

BT 23 Jan 2009