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City Developments
Aug 13 close: $10.02
CIMB-GK RESEARCH, Aug
13
Q2 2009 core net profit of $128 million forms 27 per cent and 26 per cent of our FY2009 forecast and consensus respectively. H1 2009 core net profit of $211 million forms 44 per cent of our full-year number.
While property pre-sales were strong, we believe accretion from recent pre-sold projects such as Volari and the Gale have yet to be booked. Q2 2009 revenue inched up one per cent y-o-y to $787 million.
Property pre-sales continued to drive the topline with The Arte (98 per cent sold) and Livia (more than 80 per cent sold) released in H1 2009. This segment's revenue grew 56 per cent y-o-y to $343 million in Q2 2009.
The momentum is likely to be sustained by Volari, The Gale and potential new launches in the Hong Leong Gardens site, The Quayside isle and the former Albany site at Thomson in H2 2009.
A blemish was the hotel segment - Millennium and Copthorne Hotels (M&C). Revenue and pre-tax profit fell 25 per cent and 60 per cent y-o-y to $365 million and $25 million respectively in the quarter, as revenue per available room (RevPAR) fell globally and the sterling pound weakened.
We believe the results could have been worse if not for cost-saving measures. However, management is starting to see stability in Singapore, New York and London. The decline in the sterling pound is also starting to ease. M&C continues to trade at a trough P/B of 0.5x.
Net gearing remained relatively low at 0.45x, still based on cost accounting of its investment properties. Operating cash flow stayed in positive territory and is expected to remain so on impending pre-sales.
In Q2, CityDev paid out $190 million for its share of convertible notes subscription to finance the development of South Beach. Management remains positive on the project. No impairments were made for development in the quarter.
We retain our FY2009-11 EPS and RNAV estimates for now. Our target price, still based on a 20 per cent premium to RNAV, is kept at $11.76.
This set of results
continues to highlight the group's balance-sheet strength even as other
developers aggressively mark down their asset values this season. We maintain
our 'outperform' rating.
OUTPERFORM
Sembcorp Marine
Aug 13 close: $3.36
DMG & PARTNERS SECURITIES, Aug 13
WE continue to like Sembcorp Marine (SMM) and believe that order momentum in H2 2009 may surprise on the upside. While the market seems excited about the plentiful orders from Petrobras, we believe investors have yet to factor in other potential non-Petrobras contracts in the offing.
We tweak our earnings model and raise our operating margin assumptions following Q2 2009 results. Our new earnings estimates show that, unlike what the street thinks, 2009 may not be the peak earnings year.
We raise our target price to $3.74 (from $3.04 previously) as we remove the discount factor in our sum-of-the-parts valuation methodology, given less occurrence of customers defaulting in an improved credit environment. Maintain 'buy'.
We are equally excited about other non-Petrobras contracts. Our industry checks indicated that SMM is currently bidding for jack-up newbuilds from national oil companies in places such as Saudi Arabia, Vietnam and even China.
Other piecemeal contracts include floating production, storage and offloading (FPSO) vessel conversions - potentially in Indonesia and Vietnam.
SMM's Q2 2009 results were strong. Its revenue rose 8 per cent y-o-y and 10 per cent q-o-q to $1.5 billion, while operating profit was $167 million, an improvement of 50 per cent y-o-y and 24 per cent q-o-q.
SMM's outperformance for the fourth consecutive quarter was due to its strong operating margin of 11.1 per cent, up 210 basis points (bp) y-o-y. We have raised our estimates for 2009-10 operating margins by 20 bp.
We push further revenue recognition on PetroRig II and PetroRig III, and cut back earnings from PetroProd's CJ jack-up rig on the back of prudency measures. Our 2009 and 2010 recurring net profit forecasts are changed marginally by -2 per cent and +5 per cent respectively.
We think there could be a possible upward revision to consensus
estimates on the back of stronger margins and higher-than-expected orders.
Hence, 2009 may not be the peak earnings year, in our view.
BUY
- Compiled by CONRAD TAN
Glossary:
Ebit - earnings before interest and tax
Ebitda -
earnings before interest, tax, depreciation and amortisation
EPS - earnings
per share
FY - fiscal/financial year
H1, H2 - first or second half
NAV - net asset value
9M - nine months
P/B - price/book value
(ratio)
PE - price/earnings (ratio)
Q1, Q2, Q3 - first, second, or
third quarter
q-o-q - quarter-on-quarter
RNAV - revised net asset value
ROE - return on equity
TP - target price
y-o-y -
year-on-year
Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
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