DBS lowers dividend forecast for capex-intensive SMRT
Expect just 2 Scts for FY14F.
"On the back of its continued capex needs, we now expect a lower dividend of just 2 Singapore cents for FY14F, down 20% from a year ago," said DBS, comparing it to the FY13 dividend of 2.5 Singapore cents.
DBS also warned investors that SMRT may not come out of its operational slump in the near future.
SMRT reported a 57% yoy plunge in its net profit for its latest 2Q14 results due to higher operating costs.
"We maintain our cautious stance on this counter and do not see turnaround in operations as yet," said DBS. The continued rise of operating costs even led the research firm to cut its FY14F/15F forecasts by 28%/25%, "largely on the back of a higher staff costs, and higher repair and maintenance costs."
DBS reports that Hi-P International posted stagnant profits despite strong sales growth in 3Q13.
Hi-P reported PATMI of S$3.1m in 3Q13, flat versus the same period the year before, despite a strong 34.5% jump in sales to S$365.2m.
On a qoq comparison, net profit plunged 71.2% although revenue still grew 28%.
Gross margins fell to 6.5% from 8.8% in 3Q12 and 10% in 2Q13 due to higher cost of materials as a result of more high level assembly work, as well as increased labour costs and higher inventory provisions, according to DBS.
Looking forward, Hi-P said it is expecting lower 4Q13 and 2H13 earnings even amid growing sales.
"Although smartphones and tablet volumes are expected to continue to increase, Hi-P may not enjoy the full benefits yet as the company remains focused on customer diversifications and continued streamlining of cost structure and production capacities," reckoned DBS.
"Near term, earnings would inevitably be impacted by costs of rising automation which is necessary to combat China’s long term trend of rising labour costs," it added.
Osim International set to clinch higher FY14-FY15F earnings
TWG helped bump up forecasted profits.
According to DBS, Osim International is on track to meet the research firm's FY13F earnings estimate.
DBS even increased its forecasted earnings for the manufacturer given rosier contribution outlooks from its TWG stake. "We increase FY14F/FY15F earnings by 4% each to account for slight earnings accretion resulting from the higher shareholding in TWG," said DBS.
Osim had increased its stake in TWG Tea from 45% to 53.7%.for S$7.2m in October.
TWG reveuew and earnings for the previous financial year amounted to S$42m and S$6m, respectively. Post consolidation with the TWG financials, DBS expects these numbers to provide a slight earnings accretion (+4%) to Osim International's FY14F/FY15F earnings.
Sky One Holdings Limited (SGX: 5MM) has fallen 78.7% so far this week to become our “Falling Knife of the Week”. The shares closed at $0.10 on Thursday. To some of its shareholders, it was a scary Halloween.
Sky One is in the freights and logistics business and is based in China and Hong Kong. Its primary business focus is in providing turn-key import customs clearance, express land transport, international airfreight and household/exhibition removal & packaging services. The company made a loss of S$56.8 million for its latest financial year that ended March 2013, as compared to a profit of S$151.7 million the previous year.
On Monday, 28th of October, the stock plunged as much as 91% in the morning and this prompted the market regulator, Singapore Exchange (SGX), to issue a trading query. SGX questioned if the company was aware of any information not previously announced that may have caused the erratic price movement. In its reply, Sky One said that “all known information has been duly announced in accordance with the listing rules of the SGX-ST and the Company and its Directors are not aware of any information not previously announced concerning the Company and its subsidiaries which, if known, might explain the trading on 28 October 2013.”
The company also went on to say that with regards to the proposed acquisition of Energy Prima Pte Ltd as announced on 28 September 2012, 10 October 2012 and 25 September 2013, the due diligence work with regards to the acquisition is still ongoing. It added that there has been no material change in the Sky One’s existing businesses of Express Land Transport, Airfreight and Coal Logistics since 31 March 2013, which is the latest full financial year of the company.
The plunge in Sky One’s price brought about the dark memories of the freefall of Asiasons Capital Limited (SGX: 5ET), Blumont Group Limited (SGX: A33) and LionGold Corp Limited (SGX: A78) that happened on 4th of October 2013. On that fateful Friday morning, around $5.2 billion was wiped off the three companies. The shares were then suspended and they were assigned as designated securities by SGX. Trading has resumed back to normal for the three companies.
The differences in regulatory actions by SGX on the trio but not on Sky One puzzled some traders. To clear the air, SGX released an announcement on 30th October 2013, stating that, “not all sharp price movements, whether up or down, warrant a suspension of the stock” and that “each occurrence has to be evaluated on its own merit in the context of circumstances of the case.”
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