Inphyy Corner

Singapore Exchange says no trading curbs needed on Sky One

Written by Reuters
Wednesday, 30 October 2013 19:09

Singapore Exchange, under scrutiny for its market controls after a penny stock crash this month, said on Wednesday a plunge in the share price of small-cap company Sky One Holdings was not due to disorderly trading.

Shares in Sky One, valued at $149 million on Friday, fell as much 91.5% on Monday before trading was halted. SGX had queried the company on the price fall and Sky One said it was not aware of any "possible explanation" behind the price move.

The plunge in Sky One's shares prompted many brokers to set trading curbs on it this week, The Business Times reported on Wednesday. The newspaper also asked why SGX had not curbed trading in Sky One as it had done in three other stocks after steep price falls.

"In the case of Sky One, SGX's review of the circumstances revealed no threat to fair, orderly and transparent trading. Hence, no suspension occurred," the exchange said in a statement on Wednesday.

SGX's ability to regulate the market came under scrutiny this month after sudden price declines in Blumont Group, LionGold, and Asiasons Capital following huge run-ups earlier in the year.

"In the case of Blumont, Asiasons and LionGold, SGX's review showed disorderliness in the market, and lack of transparency which could also threaten the fairness of trading," SGX said.

Sky One's shares declined on Tuesday and Wednesday. Through a reverse takeover announced over a year ago, Sky One aims to transform itself into an Indonesia-focused coal mining company from a logistics firm.

Dismal Quarter For Indofood Agri Resources

By Ser Jing Chong - October 30, 2013

Integrated agribusiness group Indofood Agri Resources (SGX: 5JS) reported its third quarter earnings this morning and saw some pretty poor numbers.

The company cultivates crops such as rubber, sugar cane, cocoa, and tea, with a focus on oil palm. Indofood’s principal business operations on the oil palm crop include: research and development; breeding and cultivation; and milling and refining of crude palm oil (CPO). In addition, the company also does marketing and distribution of cooking oil, margarine, shortening and other derivative products.

Significant proportions (more than 80% in 2012) of Indofood’s sales are derived in Indonesia.

Some basic numbers

For the three months ended 30 Sep, Indofood’s revenue declined 13% year-on-year to Rp3,076b while net profits got slashed by more than half – 52% to be exact – to Rp123b. The company’s earnings per share for the quarter fell by 52% as well to Rp86.

Revenue had dropped due to falling average selling prices for its key plantation crops, and lower product sales for bulk oil and copra-based products.

Profits suffered a worse fate due to rise in expenses. In the quarter, the company faced rising wages, higher production costs (due to lower production yield from newly matured plantations), lower commodity prices, and foreign exchange losses.

There was a bright spot though, as Indofood’s joint venture in Brazil, CMAA, brought in maiden profit contributions of Rp50b during the quarter, which helped to offset some of the rise in expenses that the company faced.

Operational highlights and the balance sheet

The company’s total planted area stands at 312,356 hectares (ha) as of 30 Sep 2013, a 19.7% increase from 260,619 ha a year ago.

In Indonesia, Indofood’s planted area had grown from 260,619 ha a year ago to 270,509 ha. Meanwhile, Indofood’s planted area in Brazil had increased from 34,000 ha on 31 Dec 2012 to 41,847 ha currently. The table below breaks down the details for the planted areas:



The total planted area for the company would affect its future production and so it’s something that’s worth keeping note of.

The maturity of Indofood’s plantations is also important, as mature areas generally have better production yields. On that front, Indofood’s mature oil palm planted area increased slightly from 175,688 ha a year ago to 176,141 ha.

For the quarter, sales volume for most plantation crops came in lower: CPO’s volume fell 10% year-on-year to 195,000 metric tonnes (mt); palm kernel’s decline was 17% to 46,000 mt; sugar fared slightly better with an 8% drop to 24,000 mt; oil palm seeds fared the worst with a 49% slide to 3,000 mt.

Rubber was the only crop with an increase in sales volume of 2% year-on-year to 4,500 mt

Moving on to Indofood’s balance sheet, it has actually weakened compared to a year ago. Cash on hand decreased from Rp5,210b to Rp3,787b while total debt increased from Rp6,529b to Rp8,431b. Total debt to equity has also ballooned from 29% to 37%, putting the company on a less-stable financial footing.

What’s next for Indofood Agri Resources

Going forward, the company’s focusing on organic expansion of new plantings of oil palm and sugar plantations.

In addition, it’ll also be expanding its CPO production capacity and enhance its supply chain: four oil palm mills are currently under construction in anticipation of higher production in future from its immature plantations.

Indofood’s also stepping up the promotion of its branded products to both modern trade and international markets with new packaging and brand positioning.

The company commented that it’s seeing “sustain[ed] domestic demand growth for palm oil products” in Indonesia. In addition, it also has an “upbeat” long-term outlook for rubber, “supported by healthy demand from tyre-makers, automotive industries and rubber goods manufacturers in developing markets.”

So, what we’re seeing here are some growth initiatives by the company and secular trends in its key products which can hopefully help drive sales going forward.

But it’s not as simple as that. Indofood can scarcely control the prices of its products so its profitability going forward will be intimately tied to the market prices of its key crops.

When CPO prices fall, Indofood’s results will invariably suffer as the crop accounts for a large chunk of its business. That’s what has happened to its industry peer Golden Agri Resources (SGX: E5H) in recent times.

Falling CPO prices since the start of 2011 hasn’t been kind to both Indofood and Golden Agri’s share prices. The former has fallen by close to 70% while the latter’s dropped around 30% or so from 3 Jan 2011 to 29 Oct 2013.

Those are dismal returns for investors, considering the fact that the Straits Times Index (SGX: ^STI) remained flat through that period.

So even if the long-term secular trends for the commodities that Indofood deals with are promising, there’s still the chance of painful shorter-term losses should these commodity prices decline. It’s something that investors in commodity-related companies such as Indofood have to be comfortable with.

Valuation

Indofood opened at S$0.89 a share today. At that price, shares of the agribusiness group are valued at around 25 times trailing earnings and carry a dividend yield of 1% based on its pay-out last year.


Courtesy of The Motley Fool

CapitaMalls Asia Sees Growth In Profits

By Ser Jing Chong - October 30, 2013

Asia’s leading retail mall developer, owner, and manager CapitaMalls Asia (SGX: JS8) announced third quarter earnings this morning and delivered some mixed results.

The company, a majority-owned subsidiary of real-estate group CapitaLand (SGX: C31), has a portfolio of 83 operational properties in total in Singapore, China, Malaysia, Japan, and India. The bulk of its properties are concentrated in the first two countries, with 17 in Singapore, and 51 in China.

In addition, there are 20 malls in the pipeline that’s expected to be operational by 2015. This brings CapitaMalls Asia’s total portfolio to 103 malls, with a value of around S$34.4b.

Some basic numbers

During the third quarter, CapitaMalls Asia brought in revenue of S$91.8m, representing a 10% year-on-year fall. Profits, on the other hand, had increased by 4% to S$64.8m.

The company’s top-line had dipped due to lower property management fee from China, as there were fewer malls that opened there this year compared to 2012.

Profits had grown largely due to a 39% year-on-year increase to S$60.7m in share of results from associates and joint-ventures. Some bright spots there included CapitaMall Trust’s (SGX: C38U) 9.7% growth in quarterly distributable income to S$89m in its recent third quarter results; CapitaMalls Asia owns slightly more than a quarter of the trust.

Operational Highlights and the balance sheet

The company’s malls in its key markets of Singapore and China saw healthy growth in important operating metrics for the nine months ended Sep 2013.

Tenants’ sales in Singapore grew 3.2% per square metre year-on-year, while shopper traffic increased by 3.6%. Same mall net property income – rental income less property operating expenses – also saw a 3.8% uptick.

It was basically the same story in China as tenants’ sales increased 9.8% per square metre, shopper traffic inched up 1.5%, and same mall net property income ballooned by 12%.

To summarise, the company’s retail malls had more shoppers visiting, leading to increased sales, which in turn led to higher rental income.

The changes in a company’s balance sheet are very important for investors to note as ballooning debt might mean trouble ahead. On that front, CapitaMalls Asia’s investors can rest easy as its balance sheet had improved compared to a year ago.

Cash on hand had grown from S$599m to S$1.2b; borrowings decreased from S$3.3b to S$2.6b; and total debt to equity had gone down from 56% to 37%.

It’s probably a good move by CapitaMalls Asia to strengthen its balance sheet in light of the uncertain interest-rate environment in the years ahead, where raising rates are a distinct possibility.

What’s next for CapitaMalls Asia

In Singapore, shoppers can look forward to the future openings of the Bedok Mall and Westgate which are “on track” to open in the next quarter. Occupancy figures for new malls are important as that can affect shopper traffic and ultimately rental income.

On that front, the company has some good news as the former already has 100% committed occupancy, while the corresponding figure is at 85% for the latter.

Back in July this year, CapitaMalls Asia’s subsidiary CapitaRetail China Trust (SGX: AU8U) was chosen as the investment vehicle to acquire the Grand Canyon Mall in Beijing, China. To handle the acquisition, CRCT launched a S$59m fund-raising exercise on 23 Oct, of which the company will be taking up its pro-rata entitlement in addition to applying for excess units within allowable limits.

CapitaMalls Asia’s management is cautiously optimistic about the economic outlook in Singapore and sees “continued resilience from [its] quality portfolio of strategically located malls, which will provide a stable underlying income stream.”

In China, management is of the view that “economic and financial reforms are expected to continue, with priority to grow domestic consumption.”

To capture some of that growth – bearing in mind that China has a huge domestic-consumption-capability with more than 1 billion citizens – the company is focusing on deepening its presence in key gateway cities to grow its scale and improve financial returns.

CapitaMalls Asia was first listed on the Mainboard stock exchange back in Nov 2009 at an offering price of S$2.12. Since then, its shares have declined by 3.3% as of yesterday’s close at S$2.05.

Early investors in the company from its listing date have not fared well as even the broader market, represented by the Straits Times Index (SGX: ^STI), grew by around 15% in the same time.

Going forward, the company’s long-term corporate results (and hence its share price) rides heavily on both Singapore and China’s future economic growth. Investors ought to keep an eye on that.

Valuation

At yesterday’s closing price of S$2.05, CapitaMalls Asia is valued at 1.15 times book value and 14 times trailing earnings. The company’s shares also carry a dividend yield of 1.6% based on its pay-out last year.


Courtesy of The Motley Fool

NOL Navigating Through Choppy Waters

By James Yeo - October 31, 2013

Neptune Orient Lines Ltd. (SGX: N03), NOL for short, yesterday released its 3Q 2013 results yesterday after the market closed.

Neptune Orient Lines (NOL) is the largest global container shipping and logistics company listed on the Singapore Exchange. With over 11,000 employees, NOL covers all aspects of global container transportation and logistics through its two core businesses: APL and APL Logistics. Each year, NOL handles over 3 million forty-foot equivalent units (FEU) across 115 countries.

Basic Figures

Revenue for 3Q2013 was down 10% to US$2.063 billion from US$2.302 last year, the lowest in approximately four years on lower freight rates and volume. Net profit attributable to shareholders slumped 60% to US$20 million with lower miscellaneous gains and higher operating expenses.

In the 9 months of FY2013, the revenue fell 7% from US$7.013 billion to US$6.497 billion on a year-to-year basis. While there was a decrease in revenue, net profits for 9M2013 had a huge jump from a loss of US$321 million to a positive US$61 million.

It should be noted that the primary reason behind the jump in profits is because of a one-time gain from the disposal of the NOL headquarters building in Singapore earlier in the year, further assisted by higher operational efficiency and cost management.

As at 20 September 2013, the Group has a net debt (Taking away cash balances from Gross debt) of US$3.665 billion, equivalent to a net gearing ratio of 1.65 times. A poor debt position adds on to the woes of the firm which has yet to turn in a profit if the sale from the main HQ is excluded.

“This is one of the weakest peak seasons we have seen in recent years, characterised by depressed freight rates and industry over-capacity,” said NOL Group CEO Ng Yat Chung. He continued, “Nevertheless, our business units delivered encouraging results. We improved our operational performance significantly from last year. Our focus on operational efficiencies is putting us in good stead for the long term.”

Outlook

As a result of the constant poor performance, it is not surprising that the languishing stock price has underperformed the Strait Times Index (SGX: ^STI) for these past few years. Unfortunately, sliding freight rates and over-capacity are still expected to impact the bottom-line in the near term. On the other hand, there may be better times ahead for the container shipping industry as industry oversupply may ease from FY2014 as vessel deliveries slow.

Valuation

Shares of Neptune Orient Lines closed at S$1.06 on Wednesday. Net asset value per share was marginally up at S$1.04 as compared to S$1.01 on 28 Dec 2012. No dividends were declared for this quarter.


Courtesy of The Motley Fool

Profits Dip At CapitaLand

By Ser Jing Chong - October 31, 2013

Real estate group CapitaLand Limited (SGX: C31), or CapLand for short, released its third quarter earnings this morning and saw quarterly profits stumble.

The company has four main businesses after a reorganisation in January this year: CapitaLand Singapore; CapitaLand China; CapitaMalls Asia Limited (SGX: JS8); and The Ascott Limited, represented partially by CapLand’s near-50% ownership of Ascott Residence Trust (SGX: A68U).

Most of the company’s real estate businesses in Singapore and China involving residential, commercial, and industrial properties are handled by CapitaLand Singapore and CapitaLand China respectively. Meanwhile, retail malls across the entire geographical reach of CapLand are overseen by CapitaMalls Asia, likewise with serviced residences and The Ascott Limited.

Some basic numbers

For the three months ended 30 Sep 2013, CapLand’s revenue increased by 53% year-on-year to S$1.05b. Unfortunately, profits couldn’t keep up and slipped 9% to S$136m.

The company’s overall revenue growth was led by top-line improvements from CapitaLand Singapore, CapitaLand China, CapitaMalls Asia, and higher sales from development projects in Australia and Vietnam.

CapitaLand Singapore’s revenue grew 4.1% year-on-year to S$252m mainly due to revenue recognition from projects such as Urban Resort Condominium, Sky Habitat and Bedok Residences.

CapitaLand China recognises revenue on a completion basis and so, when more apartment units were delivered to buyers in the quarter, the business unit saw its revenue triple to S$306m compared to a year ago.

The listed entity CapitaMalls Asia Limited saw its revenue drop 10% to S$91.8m in the third quarter. But as a business unit with CapLand, it saw revenue grow 21% to S$121m on the back of revenue recognition from the Bedok Residences project and contributions from retail malls Olinas Mall and The Star Vista.

CapLand’s other business unit, The Ascott Limited, saw its revenue drop 5.2% year-on-year to S$106.5m due to the absence of one-off fee income and revenue from property divestments.

So, while most of CapLand’s businesses clocked in higher revenue, the company’s expenses had rose dramatically. Its cost of sales grew 93% to S$774m, accounting for a 4.1% dip in gross profits from S$285m to S$274m.

Lower portfolio gains, along with the ballooning of cost of sales, resulted in CapLand’s dip in profits.

Operational highlights and the balance sheet

In Singapore’s residential market, CapitaLand Singapore saw strong year-on-year growth in unit-sales for the quarter; 468 units were sold compared to 70 in the previous year, representing a 569% increase.

In China, the number of units sold had decreased, though “[year-on-year] sales remains healthy.” CapitaLand China sold 707 units in the quarter, a decline of 22% from a year ago.

Some key operational metrics for CapitaMalls Asia can be found here and lastly, The Ascott Limited reported a slight increase in revenue per available unit (RevPAU) to S$124 for the third quarter this year compared to the corresponding figure of S$123 a year ago.

Real estate companies operate in a cyclical and capital intensive industry. The capital intensive nature of their business requires such companies to leverage themselves. The cyclicality of real estate, on the other hand, can put over-leveraged companies into trouble if their managers aren’t alert enough to the industry’s ebb-and-flow.

Thus, the onus is on investors to keep an eye out for changes in the balance sheets of real estate companies and determine for themselves, if they’re comfortable with the amount of leverage being heaped on.

On that front, CapLand’s balance sheet has improved slightly from a year ago using the total-debt-to-equity metric as a basis for comparison; it has fallen from 73.8% to 71.7%.

Despite the small improvement, it’ll also be good for investors to know that total debt has increased from S$14.2b to S$14.5b while cash on hand has inched up from S$5.37b to S$5.61b.

What’s next for CapitaLand

In Singapore, the company “believes that the demand for new homes and offices will remain positive” due to a “resilient Singapore economy and policies to support population growth.” To capitalise on that demand, CapLand will continue to invest in well-located sites to build up a pipeline of residential and commercial developments.

Over in China, the company is “positive about the property market” there as the country’s economy stabilises. According to CapLand, structural changes in China’s economy aimed at delivering sustainable growth are still intact and will provide growth opportunities for the company in the future.

In addition, CapitaMalls Asia’s long-term growth is likely to be supported by a secular trend of healthy consumer demand and economic growth in countries like Singapore, China, and Malaysia. CapLand’s retail-mall business unit has 20 new malls slated to begin operations by 2015 in those countries and more, further strengthening its presence in the regions where it has business interests.

Not forgetting The Ascott Limited, it would continue improving its portfolio through both asset enhancement initiatives and new investment opportunities Asia and Europe.

In short, much of CapLand’s future rides on the real estate market and economy of Singapore and China. It might serve investors well to keep abreast of developments in those areas.

Valuation

The market doesn’t seem too impressed with CapLand’s results as it opened at S$3.12 for a 1.3% decline from Wednesday’s close while Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI), saw a dip of only 0.4%.

At CapLand’s opening price, its shares are valued at 0.8 times book value and 14 times trailing earnings, and carry a dividend yield of 2.2% based on its pay-out last year.



Courtesy of The Motley Fool

Singapore Post - Still delivering on rainy days

OCBC Investment Research

www.ocbcresearch.com/pdf_reports/company/SPOST-131031-OIR.pdf