Upgrade to HOLD after the recent price weakness and see improvement in earnings. Noble is now trading below its book value of US$0.81/share (or S$1.02/share) as at 31 Mar 13 and is at its historical low. But further upgrades will have to depend on the sustainability of its earnings improvement. Target price of S$0.92 is based on a 30% discount to its long-term mean PE of 15.3x. Entry price: S$0.83.
Maintain UW. Overall, we believe this is a weak result. Pressure on margins is unlikely to see a material turnaround in the medium term. Our DCF-based (WACC of 8.6%, 3%
terminal) target price of SGD3.25 implies 2.8% potential return. Maintain UW under HSBC’s ratings model.
Risks: Improvements in soybean crushing margins, rising CPO
prices and increasing downstream prices are upside risks.
Margins, earnings set to decline
• 1Q14 results below expectations on revenue and margin declines
• Margins to decline further on China price cuts, lower licensing revenue
• Cut FY14F/FY15F earnings by 33%17%
• Downgrade to HOLD with TP cut to S$1.09
Below expectations on lower sales to China distributors, gross margin decline. 1Q14 net earnings of S$12m were below our expectations. Revenue fell 11% y-o-y and 14% q-o-q to US$77m, lower than expected, as China distributors purchased less ahead of product price cuts across more provinces in China. Gross margins were 4.8ppts lower sequentially as BIG entered Japan as a distributor for Terumo’s NOBORI stent. Interest expense was higher at US$3.4m, impacted by the 4-year 4.875% S$300m fixed rate notes raised in 4Q13. 1Q14 earnings accounted for 11% of our earlier full year estimate.
Margins will fall. Price cuts in various provinces in China are underway and we expect a greater impact on margins to be felt going forward.
Cut FY14F/FY15F earnings by 33%/17%. We forecast revenue to grow 14% in FY14, but earnings are expected to decline by 35.5% on margin pressure. Although management has maintained revenue guidance of 15%, our revenue is slightly lower at 14%, supported by product revenue growth in EMEA, APAC regions and inventory restocking in China. With margins not expected to recover, we have cut FY14/15F earnings by 33%/17%.
TP slashed to S$1.09, downgrade to Hold . With the earnings cut, our SOTP-based TP was lowered to S$1.09, whch implies 20x FY14F PE, in line with peer average. Downgrade to HOLD in view of limited upside.
KSH’s 1QFY14 PATMI increased 165% YoY to S$11.4m due to stronger contributions from both the property development and construction business segments.
1QFY14 PATMI now constitutes 24% of our full year forecast and, this being so, we judge this set of results to be in line with expectations. The group’s order book stands at S$402.0m as at end Jun 2013 which we view to be a relatively healthy level.
We continue to look forward to KSH’s 45% Beijing condo project beginning sales this year which could be significant for KSH’s earnings profile into FY15.
In Singapore, new launches at NeWest and KAP Residences have shown firm performances to date; 85 out of a total of 136 units at NeWest have been sold at a median price of S$1,399 psf and at KAP Residences, 140 out of 142 units sold for a median price of S$1,789 psf.
Maintain BUY with an unchanged fair value estimate of S$0.73. (Eli Lee)
CSE Global reported in-line results with revenue of S$116m (-20% YoY) and core net profit of S$12m (+12%). Gross margin improved to 34% from 25% in the year-ago period, mainly due to lower level of zero-margin work in Middle East and more profitable offshore work in the Americas.
Separately, the CSE disclosed that its UK subsidiary, CSE (UK), is currently pursuing a separate listing on the London Stock Exchange. The listing will provide financial independence to both CSE and CSE (UK) to facilitate future access into capital markets to pursue growth opportunities.
We will follow up with more updates after its briefing later. In the meantime, we keep our BUY rating but put our S$0.96 FV under review. (Chia Jiunyang)
• 2Q earnings of Rmb14.9m largely in line; 1H13 earnings declined 41% to Rmb10m; 0.25Scts DPS declared
• Core earnings remain weak as utilisation rate is still less than 50% but associate NPRT has turned around
• Midas to remain profitable but the strength of its recovery will depend on how soon China’s high speed railway program restarts
• Maintain BUY and S$0.60 TP (1.2x P/BV)
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