August 3, 2012 / 4:45 AM / in 7 years

STOCKS NEWS SINGAPORE-DBS downgrades Hyflux to hold

DBS Vickers downgraded water treatment firm Hyflux Ltd to hold from buy and cut its target price to S$1.45 from S$1.66, citing less-than-expected second quarter earnings due to weak margins for Singapore.

Shares of Hyflux were up 1.1 percent at S$1.425, and have gained 18.3 percent so far this year, compared to the FT ST Mid Cap Index’s 18.9 percent rise.

Hyflux said its second quarter net profit rose 21 percent from a year earlier to S$17.5 million, but DBS noted that gross margin shrank to 35 percent from 50 percent, due to higher staff and financing costs.

DBS noted that Hyflux’s management was optimistic about opportunities in the Middle East, especially in Algeria, Saudi Arabia, Oman, Qatar and Kuwait.

The Arab Spring caused a drought in water contracts over the last 2-3 years, resulting in pent-up demand, DBS said, adding it believes Hyflus was bidding for two major projects in Saudi Arabia and Oman.

However, the brokerage noted that margins for contracts in the Middle East may fall due to competition.

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1226 (0426 GMT)

(Reporting by Charmian Kok in Singapore;


12:32 STOCKS NEWS SINGAPORE-DBS upgrades NOL to hold; target S$1.23

DBS Vickers upgraded container shipping firm Neptune Orient Lines (NOL) to hold from fully valued and raised its target price to S$1.23 from S$1.00, citing a stabilising outlook.

NOL shares were down 2.1 percent at S$1.15 on Friday. The stock has gained around 2 percent so far this year versus the nearly 15 percent gain in the broader Straits Times Index .

NOL results are set to improve in the second quarter, driven by higher freight rates, lower bunker fuel prices and cost-saving initiatives, DBS said, though it warned that the risk of a gradual decline in rates remains amid benign demand currently.

“The unfavourable containership demand-supply mismatch continues to pressure rates, but we are looking for a gradual slide downwards in 2H12 (the second half of 2012) at worst, unlike the sharp fall last year,” DBS said.

1216 (0416 GMT)

(Reporting by Eveline Danubrata in Singapore;


11:13 STOCKS NEWS SINGAPORE-CIMB, DMG cut Sembcorp Marine target

CIMB Research and DMG & Partners Securities cut their target prices on Singapore’s Sembcorp Marine Ltd after the world’s second-largest rig builder reported a 4.6 percent fall in second-quarter net profit to S$142.8 million ($114.3 million).

Sembcorp Marine shares were down 0.6 percent at S$4.85 on Friday. The stock has risen about 27 percent so far this year versus the nearly 15 percent gain in the broader Straits Times Index.

CIMB cut its target price to S$5.85 from S$6.50, after reducing its earnings per share (EPS) estimates by 6-11 percent for Sembcorp’s 2012-2014 fiscal years.

CIMB said Sembcorp’s first-half core net profit was weaker than expected as the company executed lower-margin projects secured during the 2009-2010 order drought. The weakening U.S. dollar and euro also dragged margins down, it added.

But sustained high oil price, stronger pick-up in the second half of 2012 and order flows could be the stock’s catalyst, said CIMB, which has an outperform rating on Sembcorp.

DMG lowered its target price to S$5.70 from S$5.80, after cutting its EPS estimates by 5 percent for the 2012 fiscal year and by 10 percent for 2013 on lower margin assumptions, and kept its buy rating.

Sembcorp maintained its operating margin target of 14-15 percent for 2012 as it expects margins to improve once the higher-priced jack-up rig orders are executed, the broker noted.

Reporting by Eveline Danubrata in Singapore; $1 = 1.2495 Singapore dollars

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