Company result update 15 Nov 07

Today, there are really lots of company result update. Took quite a while to digest all the news.

Sino Env

Note from UBS. We derived our price target using a DCF valuation, assuming 9.1% COE and 3% terminal growth rate. Our price target implies 16.9x 2008E earnings. We value the core business at S$2.25 and the option on desulphurisation at S$0.35.

>> Desulphurisation get delayed. Generally, project always get delayed. When you have factored in the future earning into price, and it doesn't come, that's the part it is going to be a little bit nasty. With hindsight, I didn't chase the high above 3.2. With the crash, it is still not safe enough to enter. Look at it below 2.

MIDAS

Note from Lim & Tan. At forward PE of 29x against growth rate of 40-50% and closest peer Hong Kong listed Zhuzhou CSR's 40x PE, we maintain BUY.

Note from OCBC. Resume with BUY. We resume coverage with a BUY rating using a PE based methodology as we believe that earnings will be the key share price driver in the future. Pegged at 30x FY08 PER, our fair value is S$1.85 cross checked with an undemanding 0.5x PEG ratio. Midas offers investors an opportunity to ride on the ongoing rail transport boom in China, and we project 52% net profit CAGR in our FY07-09 forecast period.

Note from DBS. We maintain our BUY call and target price of S$1.84, which is based on 24x FY08 earnings, translating to 0.4x PEG on EPS CAGR of 50% over FY06-FY09F. We continue to like Midas as a play on China’s booming railway sector.

>> I always think that its business is "safer" compared to others. The government already laid out the infrastructure spending plan. It is only a matter of time on when they would get the share. The rumour is unfound and the business profile still good. Buy if drift lower.

Ching Hongxing

Note from CIMB. Target price nudged up to S$1.48, maintain Outperform. We see continued demand for sporting goods in China, particularly from locals in 2nd and 3rd tier cities. Although the stock has done well recently, we believe there is room for more upside. Execution remains as a major risk. Maintain Outperform with our new target price of S$1.48 (previous $1.47) based on 24x CY09 earnings, which translates into 27x FD CY09 earnings.

Note from Kim Eng. Downgrade to HOLD, prefer China Sports
At S$1.25, CHHS is valued at 31x 2008F fully diluted EPS or 0.63x 3-year PEG, still below the valuations of Anta (36x 2008F EPS, 0.5x PEG) and Li Ning (44x 2008F EPS, 1.1x PEG). It has been a great run but we are not comfortable with the rising risk profile. We also believe CHHS’s growing funding need, in-line with its aggressive market expansion, could lead to EPS dilution. A 20% dilution, the maximum allowed under the share issue mandate, will push 2008F fully diluted PER to 36x (33x basic EPS) – fairly valued in our view. With less than 10% upside to our new target price of S$1.35 (33x 2008F EPS), we are downgrading to a HOLD until we are comfortable that future growth will be balanced, risks-wise. We prefer China Sports.

>> Different people have different view. Generally, given so high the PE, I would be reluctant to put the money in. Usually, the idea case is business performed as expected, then the valuation keep roll over. However, one quarter of surprise is enough to pull it back to ground.

Olam

Note from CIMB. Target price raised from S$3.83 to S$3.72; maintain Outperform. We maintain our earnings estimates but raise our target price to S$3.83 as we roll forward our DCF (WACC 9.4%, 2% terminal growth rate) target price from end-CY07 to end CY-08. The group’s fundamentals remain strong with management having the track record and clear strategy to deliver organic and inorganic growth. Maintain Outperform.

>> Although not cheap, Olam is one of the few which has a stable earning profile. They earn a cut from the whole supply chain and is one of the largest supply chain manager. If a sudden crash occurred, it is worth to pick up some.

Boustead

Note from Philip. BUY on Boustead. Our fair value of S$2.69 represents a 13.2% upside and we reiterate our positive recommendation on Boustead. We change our method of valuation1 so as to reflect better the earning streams coming from Boustead’s diverse businesses – the 4 core business segments

>> I started notice the company, when one of the fund manager start buying it. However, at that time, I am not so sure what it does(even now), didn't consider buying. The business is doing really well, Philip has a strong call on the company. Worth study during free time.

Swiber

Note from CIMB. Maintain Outperform; higher target price of S$5.05 from S$3.95, as we roll forward our 15x P/E to CY09. Swiber is trading at undemanding valuations for its 117% 3-year CAGR in earnings. Our valuation excludes earnings contributions from the drilling barge. Short-term catalysts could include a stronger 4Q07, contract wins and margin enhancement. Key risks are delays in fleet deliveries, loss of key management and a sudden collapse in offshore E&P spending.

>> Another set of excellent result. However, the target price is a bit unrealistic. The risk is still high as they are wondering into unchartered water. I hope they would be a bit more correction to bring the valuation down to attractive level. If you got deep pocket, can consider it for long term.

Wilmar

Note from DBS. We have adjusted our forecasts to take into account higher merchandising and processing segment profits, other operating income as well as higher minority interests, resulting in EPS upgrade of 26.7% for FY07, 25.3% for FY08 and 29.0% for FY09. Our valuation on the company has consequently been raised to S$5.55/share – based on 10-year DCF (using WACC of 7.4% and terminal growth of 3%), implying 22.9x FY08 EPS. At the current price, the stock still offers upside potential in excess of 15%, excluding dividends. Maintain Buy.

>> Sometime people say big is beautiful. In this case, most would argue it certainly is. Caveat! The earning outlook is linked to CPO price. CPO is also correlated to oil price. At the current dizzy level, the room to go higher has narrowed. I expect a pull back for oil and the CPO.