MobileOne: S$1.52 NEUTRAL (TP: S$1.52) - Prospects largely priced in

source:DMG

Below expectations. In the year to 31 Dec 08, M1 saw net profit fall 12.6% to S$150.1m on the back of a 0.3% dip in revenue to S$800.6m. The telco was hit with higher acquisition and retention costs as competition intensified in response to mobile number portability (MNP). FY07 also benefited from tax adjustments and excluding which, net profit fell a slimmer 4.5%. The results were below our expectations.

Pressures lifting. EBITDA marginimproved to 44.0% in 4Q08, up from 40.9% in 4Q07 and 41.6% in 3Q08, as competitive pressures tailed off. However, due to compressed margins over the first three quarters, EBITDA margin came in at 42.9% for FY08 - 1.2ppt lower YoY. Other signs that competition is easing –lower churn rate as well as falling acquisition and retention costs per customer.

Balance sheet strengthens. Gearing has been reduced from 130% in FY07 to 104% in FY08. It has a net debt/EBITDA of 0.7x, with a healthy EBITDA/Interestof 41.8x. This ensures that that pay outs will continue to be healthy. In FY08, it dished out dividends of 13.4 S¢ per share, equivalent to an 80% payout.

Little key updates. Management kept plans very close to their chests. Theyindicated that the market is going to be a lot more rational this year, a point which has already been factored by the market. What investors were more interested in was the hunt for the new CEO, but little was said about that.

Earnings and target price lowered. We have lowered our earnings estimates for FY09 by 5% to S$141.6m (-5.6% YoY). In FY10, we expect earnings to grow 4.6% to S$148.1m. Payout, assuming that it is maintained at 80%, works out to a prospective yield of 8.3%. Based on DDM, we attain a target price of S$1.52, down from S$1.58 previously. We believe that the prospects have already been priced in. Downgrade to NEUTRAL.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Sinotel Technologies: S$0.18 BUY (TP: S$0.32) - New order from China Unicom

source: DMG

New order worth RMB32.8m from China Unicom. Sinotel announced that it won the bid for the development of a Network Optimization & Business Analysis System for China Unicom in six major locations, namely Beijing, Jiangsu, Chongqing, Guangxi, Hebei and Shanxi.

Proprietary software. The technology is a proprietary solution offered by Sinotel. This would allow China Unicom to record and monitor signal strengths emitted by individual base stations. This would also allow China Unicom to monitor and improve its network coverage, so that subscribers can enjoy better coverage and mobile services (higher signal strength, greater area coverage and more consistent data transfer speeds).

Expects more contracts as telcos move to upgrade quickly. The race is on for the telcos to speed up 3G upgrading works and to be the first to secure market dominance. Management expects more contracts to be up for bids.

Both China Unicom and China Mobile have been Sinotel’s customers before the restructuring of the telecommunications industry. Following the restructuring, China Unicom sold off its CDMA network (which was developed by Sinotel) to China Telecom. Therefore, when China Telecom upgrades the CDMA network, it is likely that it will engage Sinotel to do the job. Management also indicated that China Unicom needs to boost up its central system first, before it can commence on any upgrading works. Hence, we believe that Sinotel is in a good position to secure 3G network upgrading contracts from all three telcos.

Maintain BUY. Sinotel is expected to release its FY08 results in mid-February. We estimate earnings of RMB109.4m (EPS: 39.1 RMB¢) for FY08 and RMB133.4m (EPS: 47.6 RMB¢) for FY09. Sinotel is trading at 1.7x forward P/E or 0.8x P/B. We maintain our target price of S$0.32, based on 3.0x FY09 earnings. Maintain BUY.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

source:DMG

CapitaCommercial Trust: S$0.875 NEUTRAL (TP: S$1.00) - Unencumbered Assets, But Economy Encumbers

source:DMG
CCT notched a 16.3% YoY jump (-12.5% QoQ) in 4Q08 DPU to 2.71¢, which was within expectations. For FY08, DPU came in at 11.00¢, matching the Street’s (11.10¢) and exceeding DMG’s (10.38¢) estimates. CCT’s portfolio of assets devalued by 3.0% HoH to S$6.7b, attributable to valuers’ usage of higher cap rates (4.5 to 4.75%), premised on a weakened macroeconomic outlook, lower rents and occupancies. As such, NAV dipped 5.7% QoQ to S$2.97 per share. While gearing remain at a decent 37.6%, we believe this is prone to further upside pressures upon CCT’s subsequent semi-annual revaluation exercises this year and 2010. Given banks’ current comfortable LTV ratios of 30 to 40%, fresh refinancing concerns could surface when CCT’s S$850m worth of loans expire in 2010, from our view. From current levels, we estimate that CCT’s assets would need to drop by 7.0% (-S$467m) and 38.8% (-S$2.6b) to hit gearing of 40% and 60% respectively. Remain NEUTRAL at lower S$1.00. Earnings visibility for this year should be rather stable for CCT, having locked in 79% of FY09 gross rental income, helped by full year contribution from 1 George Street and Wilkie Studio. While financial institutions’ confidence in CCT’s quality of assets has been affirmed with the respectable terms pertaining to its recent S$580m loan (a single securitized asset and spread of ~ 250bps), we believe the counter, similar to other landlords, would continue to be in the eye of the office re-rating storm, which should continue to stretch into 1H11. In light of the above, coupled with a continued deteriorating economic environment, we are lowering our occupancy levels and average rentals for CCT for FY10 and FY11 (portfolio occupancy: 85 – 90%, prime Grade A rentals: S$8 - 10 psf per mth, down from S$10 – 12, Rest of Central Area: S$6 – 8 psf per mth, down from S$8 - 10), but keeping our assumptions for FY09 intact as majority of the leases have been locked in. As such, FY09 DPU remains at 10.86¢ and FY10 DPU falls by 8.3% to 10.16 ¢. Maintain NEUTRAL at lower fair value of S$1.00. The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned
Source:DMG

Indofood Agri Resources: S$0.54 NEUTRAL (TP: S$0.51) - Cooking Oil Selling Price Dropped 10-15%, Lowering Earnings Estimates

Source:DMG

Cooking oil selling prices easing. An update with management uncovers that IFAR’s selling prices of cooking oil and fats in Indonesia has been revised downwards by 10-15% on average, due to the steep decline of CPO price since its highs in mid July. We have adjusted our FY09 valuations to take into account a 10% decline in margarine’s and a 15% decline in cooking oil’s selling prices, from 9M08 average selling prices.

Capex plans under review. During the update, management has said that they are maintaining their target to expand oil palm planted area to 250,000 ha by end 2010. Assuming no new plantings were carried out in 4Q08, this works out to approximately 38,000 ha of new plantings per year in 2009 and 2010. However, in view of the current credit tightening environment, management has also indicated that they are reviewing non-essential capital expenditure currently.

Downgrade to neutral, new fair value of S$0.51. We are maintaining our CPO price assumption of RM1,500/tonne for FY09 (CPO futures for Jan 09 delivery is RM1,675/tonne) and a 10% YoY CPO production growth per management’s guidance. However, taking into account the reduction in selling prices for cooking oil and margarine, FY09 earnings has been revised downwards by 48% to IDR802b. Factoring in a P/E of 7x our FY09F earnings (7x being the average of 10-year historical low P/E valuation for Indonesian and Singapore listed plantation companies), we derive a new target price of S$0.51 (S$1.12 previously) and downgrade our call on the stock to neutral.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned