Analyst calls for May 11

May 11, 2012

KUALA LUMPUR, May 11 — This is a selection of morning calls by local research houses for the day.

From HwangDBS Vickers

Dialog Group

3QFY12 result in line. Earnings came in at RM41.4 million (flat q-o-q, +8 per cent y-o-y) on stronger revenue of RM420 million (+17 per cent q-o-q, +39 per cent y-o-y) with contribution from New Zealand-based Fitzroy Engineering Group Limited (acquisition completed in Apr11). 3QFY12 EBIT was also stronger at RM43.3 million (+9 per cent q-o-q, +1 per cent y-o-y) as it sold more specialist products and services, as well as fabrication works in Malaysia. However, EBIT margin edged down to 10.3 per cent (vs 11 per cent in 2QFY12) due to slower activity in Singapore.

Steady income. Tank terminal operation continued to drive earnings with RM13.9 million profit (+6 per cent q-o-q, +50 per cent y-o-y), contributing 34 per cent of 3QFY12 earnings. The improved performance was likely due to the ramp-up of tank capacity at Tanjung Langsat. Its balance sheet remains healthy with RM360 million net cash position.

Better results ahead. We expect profit to improve in the next two quarters, as we understand Dialog has not recognised profits from the RM1.9 billionn Pengerang phase 1 construction project. Also, capacity utilisation will continue to rise at Tanjung Langsat as phase 2 (171k m3) was only operational early this year.

Look at long-term horizon. Pengerang project — which will stretch over seven years — is a major transformation for Dialog and will be its key earnings driver for the next decade. Dialog is poised to be the largest beneficiary of Petronas’ RM60 billion Refinery & Petrochemical Integrated Development (RAPID) project as the preferred technical service provider, and it will see resilient income from its stake in Pengerang tank terminal.

Maintain Buy. We continue to like Dialog for its resilient tank terminal business, which generates recurring income. Its tank capacity will almost triple to 2.8m m3 within three years. It is 1m m3 currently.

From RHB Equity Focus

Genting Singapore

—1QFY12 core net profit of S$217.2 million (ex-EI loss of S$11.7 million) made up 19-20 per cent of our and consensus’ FY12 forecasts. We view this as below expectations, given that the 1Q of the year should be one of the stronger quarters of the year, due to the Chinese New Year season. The main variance was the lower-than-expected EBITDA margin of 47.8 per cent achieved in 1Q12 (versus our projected 50 per cent), caused by higher costs related to the opening of new attractions in USS, the Maritime Experential Museum as well as Equarius Hotel and Beach Villas.

— In 1QFY12, revenue from RWS fell 14.4 per cent y-o-y, while EBITDA fell by 28 per cent. VIP market share rose to 49 per cent (from 47 per cent in 4Q11), while mass market share was maintained at 47 per cent in 1Q12 (no change q-o-q). Gross gaming revenue (GGR) per day works out to be about S$7.2 million in 1Q12 (down 2.7 per cent from 4Q11’s S$7.4 million), significantly below MBS’ S$9.7 million (or US$7.7 million) per day.

— Conference call highlights: (1) Better VIP market share, but flat mass market share; (2) Clarification on junkets’ (international marketing agents) operations; and (3) S$2.3 billion cash likely to find a home within the next 12 months. 

— We have revised our margin assumptions downwards to reflect higher operating costs for the new attractions, resulting in a revision of -5.1 per cent for FY12 and -1.7 per cent for FY13-14. Post-earnings revision, our fair value has been reduced to S$1.75 (from S$1.80), based on unchanged average of 11x FY12 EV/EBITDA and DCF. We maintain our Market Perform call on the stock.

Century Logistics

— Century 1QFY12 net profit came in below expectations. We believe this was mainly due to: (1) start-up losses from the operation of its double hull product tanker; (2) Lower-than-expected contribution from the ship-to-ship (STS) segment; and (3) The ongoing strike by container haulage drivers had indirectly hampered its total logistics segment.

— Century believes its weak 1Q12 earnings was the trough and management is optimistic of better earnings ahead as: (1) Oil transport business to turn profit (from losses currently) in the coming quarters as it increases its frequency; and (2) To reinstate 3-4 additional floating storage units (FSUs) in PTP.

— We have reduced our FY12-14 net profit forecast by 10.5-26.1 per cent respectively after imputing lower contribution from the STS segment.

— Fair value is reduced to RM1.63 based on 8x FY12 FD EPS. Downgrade to Underperform.

Super Group

— Super Group’s (Super) 1QFY12 net profit of S$17.7 million was in line with expectations, accounting for 26 per cent of our full-year FY12 earnings forecast. In the 1QFY12, Super’s revenue grew by 22.7 per cent y-o-y to S$121.6 million, driven by both its branded consumer (BC) segment (+12 per cent y-o-y) and its ingredients segment (IS) (+78 per cent y-o-y).

— Super’s BC segment sales grew by 12 per cent y-o-y in the 1QFY12, on the back of a 15-25 per cent growth in its key Southeast Asian (SEA) markets such as Myanmar and Malaysia and sales recovery in Thailand, post-flood.

— Our fair value for Super is increased to S$2.00 based on a revised target of 17x FY12 PER (from 16x previously), which is still below Super’s regional peer valuations of 18.8x FY12 EPS. We reiterate our Market Perform call on the stock.

From OSK Research

Century Logistics

CLH’s 1QFY12’s earnings of RM4 million were below our and consensus, representing only 14 per cent and 13 per cent of FY12 forecast respectively. We attribute this mainly to the disruptions on one of its key segments — Oil & Gas Logistics, which usually fetch lucrative margins. In view of the poor results, we are trimming our top and bottom line forecasts by 2 per cent and 4 per cent respectively for FY12, but are maintaining our earnings projection for FY13 as we believe the group’s O&G logistics division will fully recover by then. Hence, we downgrade our FV from RM1.94 to RM1.79 based on an unchanged 6x FY12 PER and maintained our Neutral call on CLH.


We maintain our Neutral rating on Singtel as the stock lacks meaningful re-rating catalysts. The competitive headwinds at Optus and start-up losses for its new next generation/digital services will continue to skim revenue potential and crimp EBITDA growth. Our SOP valuation is revised to SGD3.12 after rolling over to FY13 and incorporating the marked- to- market valuations of the OpCos.

Genting Singapore

The group reported annualized 1Q12 earnings that were 17 per cent and 18 per cent below consensus and our full year forecast despite above average win rates and seasonally stronger 1Q CNY festive season. Following our downward earnings revision, we are revising downwards our fair value from SGD1.84 to SGD1.71. Possible share price catalysts in the form of additional IMA approvals and overseas expansion drive may only materialize over the next 12-to-24 months, while earnings may continue to disappoint given the group’s cautious and strategic pull back VIP credit. Maintain Neutral FV: SGD1.71 (12x FY12 EV/EBITDA).

* These recommendations are solely the opinion of the respective research firms and not endorsed by The Malaysian Insider. The Malaysian Insider shall not be liable for any loss arising from any investment based on any recommendation, forecast or other information contained here.

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