Lower scores all around

Written By Stock Fanatic on Tuesday, November 20, 2012 | 20.11.12

Earnings downgrades continued for all the countries in our coverage. Thailand proved to be more resilient and was least affected. In Singapore, downgrades outnumbered upgrades by almost two to one as there were 16 earnings cuts and just nine upgrades.

Note that the big-small P/E gap has closed in Singapore. Based on our coverage, small caps are now trading at a 14.1% premium over big caps on CY12 earnings and a small discount of 7.1% to big caps on CY13 earnings. We advocate stock-picking here.

Must-read pieces
Armstrong was raised from Underperform to Neutral as we upped our target price to S$0.29. Core net profit improved 55% qoq in 3Q12 but was still 13% below consensus. Its share price will be supported by its solid dividend yield of 6% and earnings recovery.

STX OSV was downgraded to Neutral due to risk of a stake sale by its major shareholder. We also lowered our target price to S$1.47.

Asia Aviation’s 3Q results undershot our expectations by a wide margin because of weaker-than-expected base fares and ancillary revenue. We cut it from Outperform to Underperform as the share price has done well since its IPO at THB3.70. Derating is expected from lower fare yields and high fuel costs.

We also initiate coverage on Silverlake with an Outperform. A leader in core banking software in ASEAN, high switching costs makes for resilient earnings.

The offer to take Harry’s Holdings private provides a benchmark valuation for SGX-listed small-cap F&B stocks (details inside).

Say “I do”to our high-conviction picks
This week, we highlight stocks that get the “high conviction” stamp of approval from our analysts across the region. These can be found in Figure 16. Details are available in their respective write-ups.

December – holiday time
Going for a holiday soon? Would you like to have it under the banyan tree? More are doing so, leading to earnings resurgence at The BanyanTree. The group is on track to stage a full-year earnings recovery (9M12: S$9.9m) after racking up S$1.6m profit in FY11. Based on forward bookings, 4Q12 is ahead by 20% yoy.

Coal sector may have bottomed
After touching a low of US$78/t in mid-Oct, the Newcastle spot coal price index continued to tick up to close at US$80.3/t. While excess supply, particularly from Indonesian producers, remains the key overhang for coal price, the recent price uptick suggests stability in the market in the short term. 

Signs of a bottoming coal price, combined with the investor interest that we noted during our UK/US marketing trip, suggest that it may be worth investors’ while to have a Neutral weighting on the sector. We could see interest in newly listed Geo Energy, the only coal play listed on the SGX once the Indonesian coal plays are rerated.

Myanmar
Yoma Strategic and Interra Resources could draw investor interest ahead of President Obama’s visit to Myanmar on 19 November. Myanmar has just passed its foreign investment law that allows full foreign ownership and offers tax breaks and long land leases. (Read Report)

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- CIMB Research

Source : CIMB Research


Posted on Tuesday, November 20, 2012 | 20.11.12


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