Stockwatch: Spindex (Singapore) $0.18
Spindex is the listed comparable of Innovalues Precision (Singapore).
It has plants in Singapore, Johor (Malaysia), Shanghai, Suzhou (China) and Hanoi (Vietnam). Hanoi plant
- commenced operations in December 2005
Suzhou plant
- started operations in October 2004, will focus on new projects with existing customers in MAT sector
- turned profitable in 2H FY2006
Major shareholders
- Choo Heng Thong, Founding Shareholder & MD
- Tan Choo Pie @ Tan Chang Chai, Exec Chairman, also
Non-Exec Chairman of MMI
Key customers:
Imaging & Printing
- HP, Brother, Canon
Machinery, Automotive systems & telecommunications
- Robert Bosch, Makita, Black & Decker, Texas Instruments, Delphi, Motorola
Domestic Appliances, Consumer Electronics & Others
- Phillips, General Electric
Data Storage
- Maxtor, Quantum, Jabil
Extracted from its 2006 Annual Report:
The business environment is expected to remain competitive in FY2007. Volatile raw material prices will add an element of uncertainty to input costs and high oil prices continue to be an area of concern. Nevertheless, the Group will continue to monitor and manage its operating costs closely so as to minimise any negative impact on its profit margin.
Business expansion and new product launches by customers will underpin strong demand for the Group’s products in the current financial year. Better performance at the Malaysian plant is expected with the commencement of new projects to support existing IP and automotive customers.
In Hanoi, we expect to breakeven in FY2007 as the new plant benefits from greater economies of scale with increased production from existing customers and new business generated from new foreign investments in the IP sector.
The Suzhou facility turned profitable in 2HFY2006. Our exit from the telecommunications segment has allowed us to focus resources on our key customers and market sectors.
Stockwatch: Sunway City sees better FY07
29-11-2006: SunCity sees better FY07 By Isabelle Francis
Sunway City Bhd (SunCity) expects to perform better in its year ending June 30, 2007 (FY07) driven by hefty unbilled sales and property projects with up to RM1 billion slated for launch, said its senior managing director Datuk Wong Choon Kee.
“Last year (FY06), we did launches of about RM650 million. This year it is RM1 billion. We will work towards that target of better profitability,” he said at a media briefing on SunCity's roadmap in Petaling Jaya on Nov 29.
For the 18-months to June 30, 2006, SunCity posted a net profit of RM166.72 million on the back of RM1.57 billion revenue. It has changed its year-end to June 30 from Dec 31.
Wong said that as of Sept 30, 2006 SunCity had unbilled sales of RM726 million, mainly from Kiara Hills and Sunway Damansara projects, which would be realised in FY07 and FY08.
He said that of the RM1 billion property launches, about RM800 million or 80% would be from its four major projects - Sunway South Quay, Sunway SPK Damansara, Sunway Damansara and Sunway Hartamas.
He said its 50ha integrated-resort, Sunway South Quay, was slated for launch in the first quarter of next year, starting with a few units of high-end bungalows.
SunCity holds 60% of Sunway South Quay, which has a gross development value (GDV) of RM3.6 billion, and is mainly targeted at Middle Eastern property investors.
The Employees Provident Fund and Kuwait Finance House (Malaysia) Bhd each holds a 20% stake in the project, which is scheduled for completion in the next eight to 10 years.
With regards to the heads of agreement with Fawanis Sdn Bhd on a joint venture for a RM1.5 billion commercial development in Jalan Cheras, Wong said it hoped to finalise the deal and start construction by the end of next year.
On another matter, he said SunCity was keen on launching a real estate investment trust (REIT), and was evaluating assets to be injected into the REIT.
He added that SunCity was looking at a REIT with a value of between RM1 billion and RM2 billion, which could emerge as the largest REIT in the country.
“We plan (to launch the REIT) not far from 2008. Sunway Pyramid (shopping mall), when extended and tenanted, will be a major asset in that REIT,” he said adding that the Sunway Pyramid expansion was on track to be completed by September next year.
Stockwatch- Rotary Engineering (S'pore) Kim Eng Initiate Coverage 5 December 2006, Buy Target Price $1.10
- Rotary well positioned to ride the coming wave Rotary ranks as one of Singapore’s most established home grown engineering companies – with a track record of more than 30 years. Over the years, it has evolved from a sub-contractor into a multi discipline, regional turnkey, Engineering, Procurement & Construction (EPC) player in the oil & gas industry with 3000 employees under its wing. It is also a preferred engineer on the panel of leading refinery players like Shell and Exxon Mobil and looks set to benefit from the impending increase in downstream and oil terminal capital expenditures in Singapore and the region.
- Expected increase in downstream spending augurs well for Rotary In Singapore, Shell is building a US$3b petrochemical cracker with the start up of the new facilities expected by 2009/2010. ExxonMobil is also looking to increase capacity and is planning to add a second comparable cracker unit to the current one. Investment is expected to be confirmed probably in FY07. A total of US6-8b in capex could be added to the Singapore oil refinery sector over the next few years. International Energy Agency (IEA) estimates that new-build cracking refinery cost has risen from around US$3.0bn to approximately US$4.0bn for a 200 kb/d refinery and that the refinery construction firms have full order books for the next three years. Although a total of some 15.1 mb/d (equivalent of US$302b) of new capacity has been announced for completion before 2011, there is risk of delays. Refinery capacity growth is centred on Asia (4.6 mb/d), the Middle East, (2.6 mb/d) and North America, (1.4 mb/d). Rotary is poised to benefit from these flows.
- Operating leverage will expand margin Rotary’s operations offer good scalability and affords the group strong operating leverage. Implication is that orders and revenue can be scaled up rapidly while keeping overheads fairly constant. We are forecasting pretax margins to expand from 6.5% in FY05 to 10.1% in FY06.
- An affordably priced O&G play; initiate with BUY Rotary remains a relatively under researched stock and one of the better proxies to the region and Singapore’s increasing refinery/oil terminal capex cycle. We believe Rotary deserves a minimum ex-cash multiple of 10.9x 2007 PE, (low end of peers) which translates to a target price of S$1.10. We initiate coverage with a BUY recommendation.
Stockwatch- Media Prima buying UPD, The Right Channel
The Edge Malaysia
30-11-2006: Media Prima buying UPD, The Right Channel By Alfean Hardy
Media Prima Bhd is expanding its outdoor advertising segment by acquiring a company each from Utusan Melayu (Malaysia) Bhd and The New Straits Times Press (Malaysia) Bhd (NSTP).
Media Prima announced on Nov 30 it was acquiring UPD Sdn Bhd from Utusan and The Right Channel (TRC) from its associate company, NSTP, for RM1 each. UPD recorded a net loss of RM2.52 million and had net liabilities of RM14.8 million as at Dec 31, 2005. TRC recorded a net loss of RM1.94 million and had net liabilities of RM4.42 million as at Dec 31, 2005.
UPD owns 2,400 active outdoor advertising panels mainly in the Klang Valley and has a long-term concession on the STAR light rail transport system. TRC manages, sells and maintains outdoor advertisements from billboards to transit advertising.
“Both acquisitions are to be undertaken at nominal value but with the vendors of the two companies being assured of certain level of repayment for previous advances made to the companies,” it said.
Media Prima managing director and chief executive officer Abdul Rahman Ahmad said: “We believe UPD and TRC have many strategic assets that can be unlocked and represent a considerable opportunity to generate significant value going forward.”
Media Prima had earlier announced it was acquiring outdoor media advertising company Big Tree Outdoor Sdn Bhd (BTO).
“Using Big Tree Outdoor as the anchor entity for our outdoor operations, Media Prima will have the opportunity to enjoy economies of scale through streamlining the backroom functions and operations of Big Tree Outdoor, UPD and TRC,” he said.
In a separate statement, Utusan said Media Prima would ensure advances amounting to RM9.2 million as at June 30, 2006 — which Utusan had advanced to UPD — would be paid back by UPD over two years.
Stockwatch- Rotary Engineering (S'pore) Smart Investor December 2006 magazine article: Rosy Future for Rotary
Key highlights:
1. About 2 mths ago, Prime Minister Lee Hsien Loong said that Singapore would reinforce its position as one of the world's top 10 petrochemical hubs with Shell's largest investment here to date- a multi-billion-dollar petrochemicals complex spanning Pulau Bukom and Jurong Island. Shell has announced the expansion of its current facilities to include a new world-scale ethylene cracker, modifications and additions to the Pulau Bukom refinery and a mono-ethylene glycol plant.
2. Other multinational oil companies have also announced several major projects. ExxonMobil is planning for its second ethylene cracker, which will be comparable or slightly larger in capacity than its existing 900,000-tonne cracker on Jurong Island.
3. Rotary Engineering Limited through its wholly owned subsidiary Rotary IMC Pte Ltd, has secured 2 contracts from Shell Eastern Petroleum (Pte) Ltd. One is worth $15.5 million and the other $10.3 million for a part of works at its Bukom Shell Houdini Project.
4. Rotary is poised to capitalise on the abundance of opportunities in the Middle East.
Stockwatch- Rotary Engineering (S'pore) OCBC 1 Dec 2006 Maintain BUY Mega Project running on schedule
Rotary Engineering Ltd
Mega project running on schedule1 December 2006
Positive feedback on recent site visit. We brought institutional investors along for a site visit to Rotary's S$535m Universal Terminal project on Jurong Island yesterday. Investors' feedback is generally positive, especially on the demonstration of Rotary's capability to handle its first mega-sized engineering, procurement and construction (EPC) project. All the 73 custom built storage tanks are concurrently being constructed using automated machineries and a smaller than usual site workforce, and the project is on target for completion by end 2007.
Rush of investment activities on Jurong Island. We estimate that the Bukom Shell Houdini project carries an average annual investment value of about S$1.6b in the 2007-09 periods, while ExxonMobil's planned second petrochemical complex may contribute another S$1.0b per annum in the 2008- 10 periods if its ongoing feasibility study is favourable. Together with other announced investments like Iran's participation in an S$465m refinery project, the recent developments on Jurong Island has dwarfed the S$1.5b to S$2.0b total investment commitments per annum in Singapore's Chemicals Industry Cluster in the 2002-05 periods. Rotary's hit rate for contracts that it tendered for on Jurong Island has historically been 60-70%.
Getting ready to pounce on contracts in the Middle East. Rotary's current geographical focus for EPC projects is in Singapore, Middle East, and Thailand. Rotary's two new joint ventures in Saudi Arabia have already begun to bid for contracts, and will be supported by the expected commissioning of its fabrication facility in the Kingdom in 2007.
Our new contract wins assumption is not aggressive. Our earnings model assumes the absence of mega EPC contract win in the 2007-08 period, while the total value for staggered new bread-and-butter EPC deals (typically
S$300m per annum. Maintain BUY.
Stockwatch- E&O Property (Malaysia) Citigroup Maintain BUY, 2Q In Line, Raising FY08-09E Forecasts and Target Price from RM1.80 to RM2.00
E & O Property Development Bhd (EOPD.KL)29 November 2006
Buy: 2Q In Line. Raising FY08-09E Forecasts and Target Price
2Q in line, stronger performance ahead — 2Q net profit of RM21m lifted net profit to RM41m (+97% YoY), helped by earnings recognition from high-margin projects (EBIT margins expanded 2.8pp to 17.5%) such as Dua Residency, Idamansara & Seri Tanjung Pinang. 1H07E net profit accounted for 44% of our full-year estimates but we expect stronger 2H, boosted by gains from its land disposal at Seri Tanjung Pinang (estimated at RM15m).
Raising forecast and target price — We have raised FY08-09E net profit by up to 10% to factor in higher margins and sales volume. Hence, we raised our P/Ebased target price 11% to RM2.00, offering an attractive 21% ETR. FY08E P/E of 8x looks attractive against 26% 3-year EPS CAGR, backed by RM299m in unbilled sales.
Leading position in growth markets — The group’s strategy is to focus on welllocated landbank and leveraging on its strong branding and track record. ENOP is well-regarded for its innovative designs and lifestyle products that complement the excellent location of its projects in Klang Valley and Penang.
Prime developments — ENOP has a residual landbank of 1,701 acres in prime locations around Klang Valley and Penang. This would easily sustain its development efforts over the next 10-15 years.
Catalysts — Possible catalysts to drive the share price closer to our target price include: (1) more land transactions at higher prices in Penang, (2) strong demand for new launches in Penang and Klang Valley, (3) better-than-expected earnings.
Investment thesisWe have a Buy/Medium Risk (1/M) rating on ENOP, a well-regarded Malaysian developer that focuses on developments in prime locations in the Klang Valley and Penang. The group's strong branding, through its association with the E&O Hotel and a good track record with innovative projects, positions it well for firm demand for premium residential development.
ValuationBased on a target PE of 10x, we arrive at a target price of RM2.00/share. Our P/E benchmark values ENOP on a similar basis to Mah Sing (MAHS.KL - RM3.44; 1L). We believe the comparable valuations are reasonable since these are two small cap companies that strong growth profiles and manageable debt.
Our secondary valuation is based on a 10% discount to RNAV of RM2.23/share. This suggests a fair value of RM2.00/share. We believe a small 10% discount is justified since: 1) We expect property prices in Penang to appreciate. Penang properties account for 71% of its RNAV, 2) The group's landbank in Klang Valley is strategically located allowing management to develop these properties quickly, 3) We believe demand risk, particularly for its Klang Valley projects, is contained given its strategy of focusing on urban areas (15km radius from city centre) where demand is resilient. In addition, these projects would benefit from spillover demand from the established developments.
Risk
We have a Medium Risk rating on the stock based on our quantitative risk rating system, which tracks 260-day historical share price volatility. In our view, some of the key risks that could prevent the share price from reaching our RM2.00 target price include:
1) An unfavorable macro economic environment, which would affect upgrading demand and sales of premium housing project, a segment to which ENOP has significant exposure
2) Regulatory risk as longterm demand for its Penang project is contingent on favorable regulations for foreign buyers
3) Corporate restructuring risk. Being part of a conglomerate (E&O Berhad) (ENOB.KL - RM1.39; NR), there is always risk of possible changes and restructuring of its holding company, which might have implications for ENOP 4) Delays in securing approvals for landbank.
