terenceport9.13IT WAS A great week for stocks in general last week, but my investments didn't quite match up with the market.

The less-than-inspiring weekly return of 0.9% (compared to STI's 3.8%!) was due to a let-down in performances by Eu Yan Sang, Lian Beng and Midas.

There are no fresh leads on the decliners, and I continue to be bullish on their prospects.
 
Among my investments, only Nam Cheong made news with a tie-up with Indonesia-based Niaga Internasional to own and and operate OSVs in the lucrative Indonesian market.

This will boost its high-margin recurring charter income, thus providing a new source of orders and shipbuilding profits. Nam Cheong remains one of our top picks in the O&G sector.

125terencewongTerence Wong, CFA, head of research at OSK-DMGAfter languishing in NEUTRAL territory for the past ten months, we upgraded the Singapore-based rig builders to OVERWEIGHT last week.

We turned positive on the sector given:

i) the potential recovery in shipbuilding orders and tightening credit may ease competition for offshore orders,
ii) the risk of EPS downgrades declines,and
iii) valuations look appealing as we roll forward to FY14 earnings.

We prefer Sembcorp Marine (BUY, TP SGD5.60) over Keppel Corp (BUY, TP SGD12.24) and Sembcorp Industries (BUY, TP SGD5.90), as we believe the former is a more leveraged play to the positive outlook.

We also continue to like the small cap plays:
 
>> Marco Polo Marine (BUY, TP SGD0.61): Valuations are compelling - P/E of 5.2x/4.5x for FY13F/14F.
 
ROE is 15%, yet the stock unjustifiably trades at 0.74x P/BV, providing a large margin of safety for investors in an asset-driven business.

EV/EBITDA is 4.7x/4.4x for FY13F/14F. We have a BUY recommendation with a TP of SGD0.61 based on 8x FY14F EPS.

>> Nam Cheong (BUY, TP SGD0.37): Nam Cheong's profitability is high, returning 24% ROE and 16% ROIC, and is set to deliver 32% net profit growth this year.

However, it trades at only 8.0x FY13F EPS, unjustifiably low for a world leading position. We have a BUY call on Nam Cheong with a TP of SGD0.37 based on 10x FY13F/FY14F blended EPS.

>> Kreuz (BUY, TP SGD1.14): The market has discounted Kreuz too severely, with a FY13 P/E of 7.5x and EV/EBITDA of 5.1x.

This fails to properly price Kreuz' operations today, and assigns zero value to the growth potential. We have a BUY recommendation with a TP of SGD1.14 based on a conservative 10x blended FY13F/FY14F EPS. 



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