Singapore stock market news :
Tat Hong issues profit warning, DBS downgrades call, CIMB and CSFB maintains Outperform calls :
DBS downgrades to fully-valued with target price S$0.62 :
Tat Hong alerts investors that its 3QFY09 earnings would be lower yoy, blames on forex losses and lower equipment sales. We have already imputed the weak earnings in our FY09-10 forecast, which are 16%-32% below consensus. Our TP is revised down to S$0.62, based on lower multiple of 0.8x P/NTA. This implies a 10% downside from current share price. The stock has appreciated 20% since our upgrade in November. We advise investors to take profit now. Downgrade to FULLY VALUED.
CIMB maintains Outperform with lower target price of $0.90 :
To account for the adverse currency impact as well as slower demand,
we have cut our forecasts by 14-22% for FY09-11, mainly for its trading business,
which includes spare parts. We also reduce our forecasts for its rental segment by about 7%, to be conservative. Despite the above, we believe TAT’s longer-term fundamentals remain good, as management has been proactive in increasing its business resilience by developing its rental business, while taking measures to reduce trading inventory during this downturn. Management and the Ng family have also been purchasing TAT shares in past months, underscoring their confidence in the business. We maintain Outperform, albeit with a reduced target price of S$0.90 (previously S$0.93) following our earnings reductions. Our target is still based on 0.8x CY09 P/BV.
CSFB maintains Outperfom with target price S$0.95 :
These events were anticipated, and have in aggregate, driven our recent earnings downgrade. We have factored in a weaker 2H09, both on a HoH and YoY basis, as we expect equipment sales, contributing an estimated 30% of total revenue in 2H09, and 24% of total profit, would fall 54% YoY and 57% HoH. This suggests that downside risks to our FY09E forecasts, as well as that of consensus, are limited. We therefore believe that management has been conservative in issuing the profit guidance announcement, and also note the fervent insider buying activities since Aug. 2008. Near term, however, we believe that Tat Hong’s shares could see weakness from profit-taking, given the strong 73% rally since Oct. 2008. We continue to view Tat Hong as well-leveraged into construction sector demand across Asia, which is expected to remain strong over the medium term, given its operational scale, a clear growth strategy, and strong balance sheet. Tat Hong currently trades on 0.8x P/B, at a-fifth of its historical high of S$3.42 in Nov. 2007, about 35% to its historical lows (of 0.5x P/B), and with a 10.5% dividend yield support.
rooney
Monday, January 19, 2009
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