Excerpts from recent analyst reports ...
Neptune Orient Lines: Economic indicators up
Analyst: Lim Siyi, OCBC Investment Research
At S$1.21, NOL’s stock price is up 9% since Dec, boosted by improvements in economic indicators:
>> The HSBC Purchasing Managers' Survey in Nov was 50.5, the first time it crossed the 50-mark since Oct 2011 (above 50 indicates improvement in economic fundamentals).
>> According to the Shanghai Containerized Freight Index (SCFI), overall rates have held up well as demand grows heading into Chinese Lunar New Year. The China-Europe trade route in particular has experienced an uptick in spot freight rates following an increase in imports into China. This is welcome relief following the persistent weaknesses over the past year.
>> Bunker fuel prices remain low and close to average prices back in 4QCY12, which is 4.5% lower than 3QCY12.
A few of the major container shipping lines continue to announce further general rate increases (GRIs) to add on to those implemented previously. For example, Hapag-Lloyd – the sixth largest liner in the world – announced further rate hikes for Asia-South America and AsiaEurope / Mediterranean routes effective 1 Feb.
”Overhang from newbuildings ordered prior to the great financial crisis continue to haunt the industry with fleet growth likely to continue in CY2013. However, capacity management in CY2012 had been encouraging with collective efforts by liners to adjust deployed capacity.”
”Maintain BUY on NOL with an unchanged fair value of S$1.38.”
AusGroup: Contracts to start flowing in
Analyst: Lee Yue Jer, OSK-DMG
AusGroup announced on 8 January a A$13 million contract for fabrication work with Fugro-TSM for Woodside’s Greater Western Flank (GWF) project.
The project is for the fabrication of post metrology subsea spools for the first phase of the project, and commences immediately for a period of 12 months.
This is expected to create work for 30 new staff based at the Australian Marine Complex. The A$2.5 billion GWF Phase 1 project is an extension of the North West Shelf project, and will develop the Goodwyn GH and Tidepole fields.
The analyst expects this contract to grow in dollar value when initial work done is proven satisfactory.
“Ausgroup has A$271.1 million of outstanding order book, equivalent to about 4.4 months of work by our FY13F revenue forecast. Though slightly low, we understand this to be the period where contracts start flowing in. Case in point: At end-FY11 AusGroup had a A$264 million order book, and went on to deliver A$632 million of revenue in FY12.
“Maintain Buy with target price 75.5 cents. Our target price is based on 9x FY13F EPS, which we believe to be a conservative multiple for the 33% EPS growth we are projecting on top of last year’s record A$23.3 million profit.”
AusGroup trades at a historical P/E of about 10 times, compared to Civmec, which trades at about 20 times.
Related story: AUSGROUP, DMX TECHNOLOGIES, CHASEN: Latest Happenings
Nam Cheong - On track for strong growth
Analyst: Suvro Sarkar, DBS Vickers
Nam Cheong is the largest builder of offshore support vessels (OSVs) for Malaysian waters, and remains in a sweet spot with Petronas committed to its offshore capex plans over the next five years.
It has also extended its geographical reach to new markets like West Africa, which offer good potential in for the future.
In FY2012, the shipyard sold a record high of 21 vessels, backed by healthy recurrent demand for OSVs in Malaysia and overseas.
It has now also sold more than half of its 19 vessel build-to-stock models for FY2013. Its order book was close to the record level of RM1.5 billion in end-2012, and should drive healthy earnings growth in FY13/14.
Expectations for robust earnings ahead should help re-rate stock.
The analyst expects the following:
>> More order flows from Petronas-linked projects in Malaysia in 1H FY2013, as activity on the ground picks up steam.
>> FY2014 newbuild programme will be larger than in FY13, in line with the still robust outlook for oil & gas exploration & production activities
>> The S$110 million raised through its recent medium-term notes issuance will also help support growth.
“We remain comfortable with our projection of close to 30% earnings CAGR over FY11-13. Maintain BUY with target price of 30 cents, pegged to 9x FY13 earnings.”
Related story: FOOD EMPIRE, NAM CHEONG: Latest Happenings...