Singapore listed Chinese Companies - S Chips

Some of my friends asked me what i think of Singapore listed Chinese Stocks know as S chips, I shall do a brief writeup about my personal views :

Many of the S chips listed in Singapore are now trading at low PE (share price to EPS ratio) or near cash per share because :
1. Despite some signs that the global financial crisis may be over, recent reported financial results remain weak (eg profit continue to decline or margins have not recovered)

2. Confidence were badly shaken due to the accounting scandals or corporate governance issues affecting some S chips

Let’s look at the above 2 points separately.

Point 1 - this is a more general reason which can affect all companies, not just S-chips, so all we have to do is do more homework and analyze the financial results of the companies, and look for signs of recovery. One of the early signals which I use sometimes is look for “sequential” earnings recovery, rather than year-on-year recovery. Sequential means comparing the latest net profit (eg 3Q09) to that 3 months ago (eg 2Q09) and if you see the company profit improving due to better operating performance (rather than forex gains or unusual items like writebacks) than this is the first thing that will get my attention.

Point 2 - i personally think that the entire S-chips sector have been “over-punished” by the actions of a few bad apples. Bear in mind that be it accounting scandals or frauds or corporate governance issues, all these happen to all stock markets, even in Hong Kong and US stock markets. But the interesting part is how the people “react” to it when it happens.

In Hong Kong, when you see certain negative news about the market, the press will just report it (usually in smaller column) and move on. Hong Kong press seldom devote a large section of the newspaper to play up the issue. In Singapore, I saw the press devoting half a page to highlight certain things and continue to highlight these issues for many days. Doing it and over-doing it is a fine line…….. to me hong kong press just do it but singapore press may have over-done it.

If the press over-report certain negative aspects, then it will hit the core of investor confidence, that they will think ALL S-chips are bad and this will bring down the valuations of ALL S-chips.

In Hong Kong and even US, we have seen the press reporting certain fraud cases but they do not over-report it and quickly move on to other matters. Investors take these incidence as part and parcel of the stock market, fraud are things that have happened and will continue to happen in the financial markets. One should not react as though it is incomprehensible that fraud can happen to listed companies in Singapore. This is one of the possible reasons why the PE of china companies in hong kong has recovered much “faster” compared to those China companies PE in Singapore. I use the word “faster” because HK listed china companies PE are usually higher than S-chips.

What’s done is done, so what to expect next for Singapore S-chips…..

If you look at the PE S-chips are at now ie trading 3 to 5x pe, these valuations to me are pre-ipo valuations and we know that pre-ipo valuations means High risk High returns.

These means “some” of the s-chips may yet blow up due to the high risk associated with but “some” who survive will give high returns later from the low valuation they are at now. One good example would be an S-chip called Sinotel. The lowest price was around 7c (when EPS was about 10c) this means the stock was trading below 1x PE haha, we can laugh now in hind-sight. But when smart money realize the rediculous under-valuation, the stock price start to recover and recently went to as high as 70c (10 bagger is the high return some pre-ipo projects may give).

So when we look at S-chips now, we should adopt they way PE (private equity) fund invest in pre-ipo project…..they expect high risks and high returns, so they DIVERSIFY.

PE fund usually try to go in at 2-4x pe before ipo and wait to make few baggers when the ipo goes through.

But if the ipo is stucked or failed, their money may go up in smoke.

So they usually try to spread their money evenly in a few projects such that as long as some make it, they will still make money at the end of the day.

In summary, look at s-chips as pre-ipo projects (high risk high return), and learn to diversify when you put money in s-chips with the expectation that some may still blow up in your face ;)

Before I sign off, let’s not forget the quietly growing number of I-chips (Singapore listed Indonesia Owned) listed in Singapore share market and the “thrill” that they are giving us now………hmm sounds familiar eh

Happy Trading

Rooney

Singapore stock market update : Recent Profit Guidance List

The following is a list of singapore listed companies which recently issued profit warning or profit guidance, i have not confirmed the accuracy of the list but i believe the source is from SGX announcements by the respective companies.

Here is the list :
Westech electronics
Asia water
PCI
Giant wireless
Hosen
Sitra
AA Group
Liheng
Pacific Healthcare
China Dairy
Kinergy
Magnus
Chuan Hup
Yeo Hiap Seng
Engro
GK Goh
Lottvision
Jurongtech
Sino-Environment
Ramba (Richland)
Enviro-hub
Samko
Abterra
Novena
Yongxin
SM Summit
Luzhou
Tai Sin
Huan Hsin
Guangzhou Industrial
ChungHong
Sinobest
Oriental Food
Multistar
TPV
HLN Tech
New Lakeside
China Sun
A Sonic Aerospace
Jiutian
Adventus
KXD
Tat Hong
Uni-Asia
Inno-Pacific
Gates Elec
Tuan Sin
Superbowl
C&G
FDS Networks
Memtech
AEI
Sky China Petroleum
TTL
Japan Land
Asia Silk
Delong
Multichem
Sunshine
Cosco
Cortina
Unionmet
Asia-Pacific Strategic Investments
China Great Land
Nobel Design
Junma Tyre
Tan Chong International

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

Singapore stock market news :

UOB Research upgrades ST Engineering to BUY with target price set at S$2.83 based on the following reasons :

1. ST Engineering (STE) announces that its aerospace division has secured
a 20-year engine maintenance programme with GE Aviation.

2. US airlines load factor improves in December and the number of aircraft
in storage tops out in October.

We have not adjusted our 2010 numbers but have accorded a higher PE
rating to the stock. The agreement with GE Aviation will provide long-term
earnings continuity and cements STE’s position as a key MRO player with
strong OEM links. Meanwhile, signs of improved load factor in the US along
with a fall in the number of airlines under storage suggest that operational risk
has eased. The company's orderbook now stands at $10.5b, the highest
level in 10 years, but the stock is trading at a mere 0.72x price to orderbook,
implying severe margin compression. This is unlikely to be the case as
material costs have declined and MRO rates will stabilise given improving
load factors. We believe a higher PE rating is justified and accord the stock a
16.5x rating, a slightly higher band than the historical low of 14.5x. We raise
our 12-month price target to $2.83 from $2.40.

Singapore share market update :

SINOTEL CLINCHES NEW ORDER FROM CHINA UNICOM TO DEVELOP NETWORK OPTIMIZATION & BUSINESS ANALYSIS SYSTEM WORTH RMB32.8 MILLION

Singapore, 16 January, 2009 - Singapore Exchange (SGX) mainboard-listed Sinotel Technologies Limited ("Sinotel" or the "Group"), an innovator in the provision of wireless telecommunications infrastructure and solutions in the PRC, is pleased to announce that it has won the bidding for the development of a Network Optimization & Business Analysis System for China Unicom in 6 major locations, i.e. Beijing(北京), Jiangsu(江苏), Chongqing(重庆), Guangxi(广西), Hebei(河北) and Shanxi(陕西). The contract is worth a total of RMB32.8million.

The technology is a proprietary solution offered by Sinotel that will enable China Unicom to record and monitor signal strengths emitted by individual base stations. The advancement is intended to assist China Unicom to monitor and improve network coverage so that users will enjoy higher signal strength, area coverage and more consistent data transfer speeds.

Said Mr Jia Yue Ting ("贾跃亭"), Executive Chairman of Sinotel, "The Group is pleased to have won the bidding to develop this proprietary software for our partner China Unicom.

In China, the reliability and availability of network signal has always been a mobile user's top consideration when deciding on their carrier of choice. In the dawn of preparing for a 3G roll out, we are likely to see a lot more emphasis made by the telcos to enhance their networks and develop similar tools to monitor and optimize signal strengths.

The recent release of 3G licenses to telcos marked the beginning of China's 3G era and the Network Optimization & Business Analysis System will further strengthen their competitiveness in this new environment."

China officially issued 3G licenses to state run carriers China Mobile, China Telecom and China Unicom on 7 January, 2009, igniting a race between the telcos to speed up 3G upgrading works and be first to secure market dominance in the world's largest population of mobile users.

Singapore share market update :

DBS downgrades singapore listed S-chip China XLX to FULLY VALUED (Bloomberg Code: CXLX SP) Price Target : 12-Month S$ 0.33

DBS comments :
DBS expects China XLX to report weak 4Q08 earnings, plunging 50% qoq and 33% yoy to c. RMB50m. This comes on the back of 30%-40% fall in ASP, which affects the profitability of compound fertilizer and methanol segments. Looking into 2009, the consolidation phase is likely to be accelerated and margin contraction is expected in the transition. The share price has performed well and is now trading above our valuation. Downgrade to Fully Valued.

Outlook in 2009 = Consolidation + Margin Contraction
The urea sector in China is expected to accelerate its consolidation and increase industry concentration in 2009. Given most of the small players are operating at losses currently, many of them are likely to be phased out in the next 6-12months. Meanwhile, margins for urea producers will be compressed in the transition. We expect big players to garner 15%-25% of gross margins vs 30%-40% in 1Q06 to 2Q08, assuming urea prices hover around RMB1600-1650/ton and coal prices about RMb900-1000/ton.

Valuation appears relatively rich
Our TP is maintained at S$0.33. We have cut FY09 and FY10 earnings by 23% each year but have raised valuation peg to 7.0x (vs 5.0x previously) FY09 PEs. This is in line with a 30% discount to global peers average valuation. We also believe that CXLX would benefit from the accelerated consolidation in the longer term. However, current valuation appears stretched at 8.2x 09PE, relative to its global peers as well as other S chips. With the lacking of near term catalyst, we downgrade the stock to Fully Valued.

Singapore stock market update

Macquarie remains Bearish on Singapore listed Cosco :

Event
Order cancellation and deferrals over the past month will result in delayed
profit recognition, affecting COSCO’s DCF-derived valuation. We are also
concerned about the possibility of balance sheet write-downs, which we
suspect is behind the company’s profit warning. We therefore lower our target
price from S$0.69 to S$0.65, while retaining our Underperform rating.

Impact
Order cancellations and deferrals have begun: Two orders have been
cancelled and a further ten have been deferred; incidentally this is equivalent
to the sum-total of all shipbuilding orders won by COSCO in 2008. That the
affected orders were all won in mid-2007 is all the more alarming given that
orders placed in 2008 would be less expensive to cancel for COSCO’s clients.
We expect further cancellations and/or deferrals through the remainder of
2009.

Balance sheet write-downs expected: As steel plate and ship engine prices
have come off over the past two quarters, COSCO will be forced to mark to
market its inventory. Given prices have dropped 30–40%, we estimate a writedown
of S$118m, which would lead to a 27% drop in net profits vs. 2007. We
suspect this is the main reason behind COSCO’s profit warning on 30
December 2008.

Valuation not compelling yet: Assuming the write-down, the stock is trading
at 8.6x FY08, with marginal growth in FY09; this suggests the stock is still
expensive. Even without any write-down, the stock is trading at 6.7x FY08,
with negative earnings growth likely over the next year, not to mention a
significant drop in newbuilding order wins.

Earnings revision
FY08E and FY09E EPS have been reduced by 18.7% and 8.2%, respectively,
while FY10 EPS has been raised by 29.9% to reflect deferred profit
recognition.

12-month price target: S$0.65 based on a DCF methodology.

Singapore share market update : Sinotel Positive on impending rollout of 3G technologies in China

Singapore mainboard listed Sinotel stock price recently rebounded from a low of 7c to close at 17.5c, a four month high, likely due to the latest news flow about the Chinese government FINALLY announced the release of 3G license in China and the potential orders that may be associate with the implementation of the 3G technology. It has been mentioned that Chinese telcos are expected to spend up to a mind boggling RMB280 billions dollars to upgrade existing equipments over the next 2 years.

Sinotel also made the following announcement to indicate that the company is excited about the latest development :

CHINA ANNOUNCES THE RELEASE OF 3G MOBILE LICENCES TO ALL THREE TELCOS

Singapore, 7 January, 2009 – Singapore Exchange (SGX) mainboard-listed Sinotel Technologies Limited (“Sinotel” or the “Group”), an innovator in the provision of wireless telecommunications infrastructure and solutions in the PRC, is pleased to announce that China has officially released third-generation(3G) mobile phone licences to the nations 3 main carriers, New China Mobile, New China Telecom and New China Unicom.

Seen as potential growth driver to the Telecoms sector, Premier Wen Jia Bao said at the end of a parliamentary meeting on Wednesday, 31 December 2008, that the Government formally agreed to give its blessing to the 3 newly restructured telecommunications companies to rollout their 3G implementation plans. A week after the announcement, China’s Ministry of Industry and Information Technology officially released the licences to the 3 telcos this afternoon.

The ministry said the official implementation will see the 3 telecoms giant spend up to RMB280 billion over the next 2 years on equipment upgrading. The new technology handles faster data transfers and avail mobile users to a host of new value added services such as video streaming and making video calls.

In light of the announcement, Mr Jia Yue Ting, Executive Chairman of Sinotel commented, “Now that the Government has finally given its official endorsement, we can expect the restructured telcos to expedite their 3G upgrading works. To woo customers over, the telcos are likely to compete intensely to have the widest coverage in the shortest time possible. This is a golden opportunity for Sinotel, who has over the years positioned itself as a network expansion specialist and market leader in system integrations.”

Being the world’s largest population for mobile phone users, the telecommunications sector in China is a rapidly growing industry that recently underwent a major restructuring exercise. Upon completion, the 3 telecom giants will offer all rounded services encompassing Fixed Line, Internet Broadband and Wireless Mobile.

The 3 telcos have decided to adopt different 3G platforms with the largest carrier New China Mobile taking a lead to develop the nation’s highly acclaimed proprietary TD-SCDMA system. Respectively, New China Telecom and New China Unicom will adopt the more established CDMA2000 and WCDMA platforms which are being used globally.

Irregardless of their differences, industry experts agree that the new technology is likely drive spending and stimulate growth for associated businesses.
Looking ahead, Mr Jia adds that “2009 will be an exciting year for the China telecommunications industry and we believe there are good prospects for our business with the release of 3G mobile licences.”

If Sinotel starts to secure some of the 3G related orders, the recent low at 7c may be the last we see of it at this level for a long time………

Singapore stock market update

UOB top picks for 2009 :
Ascendas Reit
Ascott Residence Trust
Capitaland
Capitalmall trust
City development
ComfortDelgro
Frasers Centrepoint Trust
OCBC
SIA Engineering
SPH
Singtel

Singapore share market update - 15oct08

Listed Companies Results Release Date as announced on SGX MASNET

Date of Release Company Remarks

16-Oct Nera Telecommunications 3Q; After 5pm
17-Oct Ascendas REIT 2Q; After 5pm
17-Oct MobileOne 3Q; After 5pm
20-Oct Qian Hu Corp 3Q; After 5pm
21-Oct Aztech Systems 3Q; After 5pm
21-Oct CapitaMall Trust 3Q; Before 7.30am
21-Oct First Ship Lease Trust 3Q
21-Oct United International Securities 3Q
22-Oct Ascott Residence Trust 3Q; Before 7.30am
22-Oct Mapletree Logistics Trust 3Q; Before 8.30am
22-Oct Osim Int'l 3Q
23-Oct CapitaCommercial Trust 3Q
23-Oct Mercator Lines 1H; Before 7.30am
23-Oct Pharmesis Int'l 3Q
24-Oct Miyoshi Precision 3Q
28-Oct United Overseas Insurance 3Q
29-Oct CapitaRetail China Trust 3Q; Before 7.30am
29-Oct CDL Hospitality Trust 3Q
29-Oct NOL 3Q; Tentative
30-Oct Cambridge Industrial Trust 3Q
31-Oct Capitaland 3Q
31-Oct Rickmers Maritime 3Q
31-Oct UOB 3Q
3-Nov HTL Int'l Hldgs 3Q
4-Nov IFS Capital 3Q; After 5pm
4-Nov ST Engg 3Q; After 5pm
5-Nov Hi-P Int'l 3Q; Before 7.30am
5-Nov Starhub 3Q; After 5pm
10-Nov Memtech Int'l 3Q
11-Nov CitySpring Infrastructure 3Q
11-Nov Lee Kim Tah 3Q; After 5pm
12-Nov MFS Technology 3Q
13-Nov Ho Bee Investment 3Q
13-Nov WBL Corporation 3Q
14-Nov Armstrong Industrial Corp 3Q
By 14-Nov QAF 3Q; Profit Warning
By 14-Nov Sino Tech Fibre 3Q
By 14-Nov United Food Hldgs 3Q; Profit Warning

SINGAPORE STOCK MARKET NEWS :
Upcoming Results Reporting Period as announced on SGX MASNET

Date of Release Company

15-Oct MAP Technology Hldgs 3Q; After 5pm
17-Oct Ascendas REIT 2Q; After 5pm
17-Oct MobileOne 3Q; After 5pm
20-Oct Qian Hu Corp 3Q; After 5pm
21-Oct Aztech Systems 3Q; After 5pm
21-Oct CapitaMall Trust 3Q; Before 7.30am
22-Oct Ascott Residence Trust 3Q; Before 7.30am
22-Oct Mapletree Logistics Trust 3Q; Before 8.30am
22-Oct Osim Int'l 3Q
23-Oct CapitaCommercial Trust 3Q
29-Oct NOL 3Q; Tentative
30-Oct Cambridge Industrial Trust 3Q
5-Nov Starhub 3Q; After 5pm
11-Nov CitySpring Infrastructure 3Q
14-Nov Armstrong Industrial Corp 3Q
By 14-Nov QAF 3Q; Profit Warning
By 14-Nov United Food Hldgs 3Q; Profit Warning

SINGAPORE SHARE MARKET NEWS : Straits Asia Resources
OCBC Investment Research, Oct 8

STILL a 'buy' despite bear-case assumptions: Shares of Straits Asia Resources (SAR) have plunged by 49 per cent over the past two weeks, starkly underperforming the Straits Times Index's (STI) 14 per cent fall.
We spoke to management and gathered that other than the recent cancellation of its restructuring plans, the fundamentals have not changed.

A substantial portion of SAR's shareholding spread comprises US funds, several of which have been trimming their positions. We suspect that this could have triggered the price fall, and weakness could persist if global funds continue to face high redemptions.

Restructure cancellation renders SAR a pure Indonesian coal play: SAR recently called off restructuring plans, citing volatile market conditions and lack of shareholders' support. To recap, the restructuring would have involved SAR acquiring coal interests in Madagascar and Brunei for US$100.3 million and taking up a secondary listing in Australia.

We were positive on the acquisition as it would have transformed SAR, which currently derives all its coal from Indonesia, into a global player with geographically diversified coal assets and larger reserves. The cancellation of the acquisition has eliminated what we view as a key catalyst for SAR's growth. Nevertheless, management remains positive on its organic growth and reiterates that it is on track to raise production levels at its Indonesian mines.

Pressure off its balance sheet: On the bright side, the restructure cancellation takes some pressure off SAR's balance sheet. We were expecting the US$100.3 million acquisition cost to be funded by debt, which would have been challenging in light of today's tight credit market and could have strained the company's gearing levels.

With the restructuring exercise out of its way, SAR can now focus on refinancing its US$230 million bridge facility (for the acquisition of
Jembayan) that matures in December 2008.

We understand that SAR is close to securing a US$300 million loan. Finance costs, however, are expected to rise in line with London Interbank Offered Rate (Libor) and widening spreads.

Changing our assumptions to factor in bear-case scenario: We have lowered our earnings and fair value estimates to reflect the following bear-case
assumptions:
lower production from FY2009, assuming that SAR fails to obtain
relevant permits to extend its Sebuku Mine boundary;
lower ASP on softening global demand for energy and commodities; and
higher borrowing costs.

In addition, we change our valuation methodology to the free cash flow to the firm model, bringing our fair value estimate to S$2.25 (from S$4.66).
Nevertheless, we maintain our 'buy' rating on SAR.