Excerpts from analysts' reports


OSK-DMG prefers Yongnam and Centurion.....


Analysts:Sarah Wong & Jarick Seet

Seow-Soon-Yong_SIASSeow Soon Yong (right), CEO of Yongnam, receiving SIAS award for Most Transparent Company in Construction & Materials industry last year. NextInsight file photoStructural steel specialist TTJ Holdings reported a strong set of results for 9MFY14, with PATMI growing 58.7% y-o-y to SGD16.1m.

The strong performance was contributed by both its structural steel and dormitory businesses. Given the growing construction activities, we remain positive on rising demand for structural steel and dormitories in Singapore.


We prefer exposure to Yongnam Holdings (YNH SP, BUY, TP SGD0.29), the largest structural steel player in Singapore, as a proxy to growing construction activities.

Trading at 0.95x P/BV, YNH’s valuation seems undemanding. For YNH, catalysts ahead include a potential earnings turnaround in 2HFY14.

Among dormitory players, we prefer exposure to Centurion Corp (CENT SP, BUY, TP SGD0.88), Singapore’s largest dormitory player with 23,400 beds.

CENT is currently trading at 22% discount to our DCF-based fair value estimate of SGD0.88. For CENT, catalysts ahead include the ramp-up of bed capacity in Singapore and Malaysia. 

Recent stories: 

LIAN BENG, CENTURION: Dormitory Boasts Wi-fi, Games Room, Gym, Basketball Court, etc
 
DBS analysts: Stay cautious on Yongnam, Buy Kim Heng Offshore
 



 
CIMB says: Buy Ezra ahead of recovery

limsiewkhee_cimb4.14Analyst: Lim Siew Khee (left)

Ezra’s share price has underperformed the FSSTI by 20% YTD, making it one of the three worst-performing O&M stocks in Singapore.

Given the more stringent offshore maintenance programme under the new management and its vessels’ gradual return to work, we think that Ezra’s offshore division’s earnings troughed in 2Q14. Subsea, on the other hand, turned in positive net profit for three consecutive quarters with no major hiccups due to consistent orders secured. We think that Ezra’s share price is at an inflection point and see limited downside. We upgrade Ezra from Reduce to Add, following our 3-16% increase in FY14-16 EPS, on higher margins.

We forecast a 67% yoy rise in FY15 core EPS but this is still 10% below consensus. Our revised target price of S$1.48 is based on 1x CY14P/BV (4-year average in 2010-13), instead of 11x CY15 P/E. We think that P/BV is a better reflection of Ezra’s valuation due to its volatile earnings in recent years. The potential catalysts are stronger orders and margins.

Offshore margin troughed
 
We believe that Ezra’s offshore division is on track for recovery in 3Q14. Its current utilisation is around 80%, with an average rate of US$1.80-2.00/BHP. We performed a vessel search exercise and estimate that around 4-7 vessels may be undergoing maintenance or in-between jobs. This is lower than 2Q14 when 7-9 vessels were off-hire due to maintenance. 

Subsea is proving itself
 
Given its consistent order wins over the past 18 months, Ezra’s subsea division has chalked up an order backlog of around US$1.5bn. Most of these projects will be executed in 3Q14-2015. In addition, it has delivered a consistent gross margin of 14% since 4Q13, with steady execution. 

Positive risk-reward
 
We see an attractive risk-reward trade-off if there are no hiccups in the next 2-3 quarters. Ezra could re-rate up to 1.4x P/BV (1 s.d. above its 4-year average in 2010-13) or S$2.05, implying 120% upside. Conversely, if Ezra incurs a net loss (unlikely, in our view), its share price could drop to c.S$0.82 (-25%), similar to 3Q13 (core net loss of US$53m). 

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