The Star Online: Business
The Star Online: Business |
- Jump in profit seen for Perisai
- Maersk to shift away from shipping operations
- SAS fights to stay afloat
| Jump in profit seen for Perisai Posted: 19 Nov 2012 06:36 PM PST Outperform Target Price: RM11.00 GOOD growth prospects for investment banking (IB) business and Maybank's Indonesian operations underpin our unchanged outperform rating, along with its attractive dividend yields. Also unchanged is our dividend discounted model-based target price of RM11. Maybank Investment Bank (IB) is ranked second in the Southeast Asian league table year-to-date (YTD) for equity raising with a market share of 10.3%. However, its ranking for mergers & acquisition (M&A) is lower at 11th YTD with a share of 10.3%. Although its ranking for M&A is not high in 2012, we view it as commendable considering that it has been just over a year since it acquired Kim Eng, and that there is keen competition from international players (such as Citi, UBS and JP Morgan) and other rivals including CIMB and DBS). We are positive on Maybank's goal to be ranked first in broking for all its main markets and in the top five in all categories in the region by 2015. However, we think that these goals are challenging given the competition from international players and other regional rivals. Maybank is the adviser for several mega M&A deals in Malaysia including the sale of tycoon T Ananda Krishnan's power assets to 1Malaysia Development (1MDB) for RM8.5bil and the RM12bil merger of SapuraCrest Petroleum and Kencana Petroleum. Maybank IB is one of the biggest investment banks in Malaysia, Thailand and the Philippines but it needs to beef up its presence in Singapore and Indonesia. It sees better growth prospects in both countries next year, based on its existing deal pipelines. We think that it would easier to register faster growth in Indonesia which is an underpenetrated market compared to Singapore which remains competitive. The transformation drive will continue next year with a focus on regionalisation of its business. For instance, the investment bank will appoint regional heads who will be driven by products, not geographical locations. The working teams will also be divided by sector, rather than country. The group will be evolving into a model like Citigroup's, which will enable it to tap both retail and wholesale businesses. It also plans to integrate the broking business with retail banking to capitalise on cross-selling opportunities. The positive impact of the group's transformation is reflected in its strong financial performance. Pretax profits more than doubled to RM218mil in the first nine months of financial year 2012 from RM121mil a year ago on the back of a 57.6% year-on year jump in revenue to RM1bil. Stay invested in Maybank, our top pick for the sector, for its attractive dividend yields and good growth prospects. Apart from the push for regional expansion of its IB business, other potential catalysts are swift growth in Indonesia and benefits from economic transformation projects. PERISAI PETROLEUM TEKNOLOGI BHD Outperform (initiating coverage) Target price: RM1.48 PERISAI is an oil and gas service provider with assets that cater to the exploration, development and production segments of the upstream oil and gas sector. Its current fleet consists of a derricklay barge, eight offshore support vessels (OSVs) and a mobile offshore production unit (MOPU). It is also awaiting the delivery of a jack-up drilling rig by mid-2014 and is negotiating for an equity stake in a floating production storage and offloading (FPSO) owned by EOC Ltd. We are projecting a three-year net profit compounded annual growth rate (CAGR) of 75.5% from financial year 2011 largely due to its new assets. We like the stock for its fairly diversified asset mix, which allows it to capture opportunities from different segments of the upstream oil and gas sector. Its link to Ezra will also give Perisai access to technological know-how and specialised assets. Perisai asset fleet allows it to capture the relative opportunities from a majority of the upstream value chain, and minimises the risks that come with just a segment concentration. Moreover, we believe that once Perisai achieves a certain asset scale, there will be potential for it to control resource allocations, optimise its operating costs and cross-sell its service range, much like the strategy adopted by SapuraKencana Petroleum Bhd. This will be a significant plus point f as we understand that oil and gas majors are increasingly looking to award contracts on a turnkey basis. Singapore-listed Ezra is a major shareholder with a 16% stake. It also has several operational involvements with the company such as Intan Offshore and charter of the Lewek Arunothai FPSO. Perisai's management has expressed the intention to leverage on its relationship with Ezra as and when it foresees the opportunities. We believe that further collaborations with Ezra may see the injections of specialised assets into Perisai's local operations. We highlight that a member of Ezra's board of directors, Captain Adarash Kumar Lai Amarnath, is also currently the executive director of Perisai. Contract replenishment risk mitigated by sizeable clientele and young fleet. Perisai's clients (SapuraKencana, Ezra, Petronas,etc.) are market leaders and have significant order backlogs. This is an advantage for Perisai. Perisai's fleet is also relatively young (average age of six years), which is an edge when it comes to securing contracts. We are forecasting FY12 to FY14 net profits of RM93.2mil, RM97.3mil and RM115mil respectively. The significant 400% earnings jump from FY11 will be mainly due to new earnings from Intan Offshore and the Rubicone MOPU while the incremental jump, in calendar year 2014, will be from the start-up of the jack-up rig operations (which we assume would be able to secure a contract once delivered). Potential catalysts for FY13 to FY14 earnings could come from t a stake in Lewek Arunothai FPSO currently owned by EOC Ltd. The risks to its optimistic outlook include a downturn in the oil and gas sector, which will significantly affect its earnings growth. The target price of RM1.48 based on a target price-to-earning ratio of 13 times on calendar year 2013 earnings per share of 11.4 sen Reduce (downgrade) Target price: RM4.84 Last Friday, Parkson Holdings Bhd's (PHB) 51.5%-owned unit Parkson Retail Group (PRG) reported a disappointing nine-month FY12 financial results. The marginal year-to-date same-store-sales (SSS) growth of 1.7% fell short of our and management's expectations due to China's weaker-than-expected operating environment. PRG's nine-month earnings before interest, tax, depreciation and amortisation (EBITDA) margin fell sharply by 8.8% points to 32.4% following its aggressive expansion plans which resulted in higher staff costs (+26% y-o-y), rental expenses (+30% y-o-y) and other operating expenses (+22.3% y-o-y). PRG's gross merchandise margin also declined by 0.8% points to 18.3% mainly due to lower margins from the nine new stores opened in first half of FY12, and poor sales contribution from the higher margin flagship stores (Shanghai and Beijing) owing to renovation and refurbishment activities. As a result, despite gross sales proceeds (GSP) and topline revenue growing 6.4% and 4.6% year-on-year respectively, net profit slid by 20% year-on-year to RMB672mil. Results accounted for only 64% and 62% of our and consensus full year estimates, respectively. Third quarter for FY12 core net profit fell by 30% quarter-on-quarter, and 42% year-on-year. On a sequential basis, EBITDA margin slipped 6.3% points to 28.5% and core net profit fell 30% to RMB149mil. On a year-on-year basis, core net profit plunged by 42%, due to widening new stores losses and effects from the rental hikes on three of its lease properties for about RMB27mil. Note that PRG had on Sept 2012 managed to extend the lease agreement until year 2024 for its Nanning, Tianjin and Harbin flagship stores. Given the sharply weaker-than-expected year-to-date SSS growth, we are lowering our SSS growth assumption to between 2% and 4% from between 6% and 8% previously for FY12 to FY14. This is also consistent with management's lowered guidance on its full year SSS growth to a low-to-mid single digit range, compared to previous guidance of a mid-to-high single digit range. In addition, our rental expenses growth assumption appears to be untenably low. As such, we are tweaking up our rental cost growth assumption by 2% for FY12 to FY14. Taken together, our revenue and net profit forecast for FY12 to FY14 are cut by 6% to 8% and 7% to 9% respectively. With PRG accounting for less than 85% of PHB's earnings before interest and tax (EBIT), the cut in PRG's earnings per share (EPS) has resulted in a 11% to 13% reduction in PHB's FY12 to FY14 net profit forecast. In tandem with the downward earnings revision, we are downgrading our rating for PHB to "reduce", with a lower revised net asset value (RNAV)-based target price of RM4.84. |
| Maersk to shift away from shipping operations Posted: 19 Nov 2012 06:30 PM PST COPENHAGEN: Danish conglomerate A.P. Moeller-Maersk will no longer invest heavily in Maersk Line, the world's biggest container ship operator, and will instead focus on its oil, drilling rigs and ports units, it said. "We will move away from the shipping side of things and go towards the higher profit generators and more stable businesses," chief executive Nils Andersen told the Financial Times as he announced a major shift in strategy for Maersk. Last year, Maersk Line posted a net loss of US$540mil, while the oil division reported a profit of US$2.1bil, the drilling unit earned US$495mil and ports made US$649mil. Maersk's container business has been affected by a slowdown in routes between Europe and Asia, where it has cut capacity this year amid a volatile outlook for the industry. The group said earlier this month it expected global demand for seaborne containers to rise by 3% this year, which was lower than the 4% stated in the second quarter. Maersk Line is the group's main subsidiary, which holds 16% of the global market share. It said it expected a "modest positive result" this year after freight rates rose in the second half of the year. A.P. Moeller-Maersk more than tripled its net profit to 5.15 billion kroner (US$880mil) in the third quarter, somewhat lower than what analysts had expected. AFP |
| Posted: 19 Nov 2012 06:30 PM PST COPENHAGEN: Scandinavian airline SAS has reached agreements with most unions on wage cuts and pensions, and was pushing hard in talks with two remaining labour groups as it sought to ensure the group's survival. The airline, hit by competition from lower-price rivals, last week announced plans to cut some salaries by up to 17% , lower overall headcount to about 9,000 from 15,000 and reduce costs. The airline had said a deal with unions, which also included changes to work hours, must be reached by Sunday but talks carried over into yesterday with a gruelling all night session. Agreements were reached with unions representing pilots from Norway, Denmark and Sweden plus unions for cabin staff in Sweden and a smaller cabin staff group from Norway. But talks were still going on with the main cabin staff unions from Norway and Denmark. "It is very, very positive (progress so far), but we are still missing two of them. First when we have everything in place can we go further," said SAS spokeswoman Elisabeth Manzi. Analysts have questioned whether the measures would secure the independence of the airline in the long-term as its structure was designed more to secure jobs and Nordic solidarity than generate profits. It has struggled to compete with discount carriers like Ryanair and regional rival Norwegian Air Shuttle. SAS management has said that if the cost cuts are carried out, the airline has a sound base for the future. Amid fears aired widely in Scandinavian media that lack of a deal might lead to an immediate bankruptcy application, Manzi said the airline had told crews to ensure airplanes were fully fuelled so as to be able to return home if necessary. The airline was also giving cash to flying staff to ensure they could get access to hotels if there was a bankruptcy. However, she declined to say how long SAS's cash would last if loans with the banks were not agreed to. The governments and six banks have said they will lend SAS about 3.5 billion Swedish crowns (US$515mil) if the airline can secure a deal with the unions to slash costs. SAS expected cost cuts to improve earnings by three billion crowns while asset sales would strengthen the company's balance sheet another by three billion crowns. Reuters |
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