DBS Vickers Securities

Morning Call
China Fishery Group: S$1.90: Maintain Strong Buy
The Group made an announcement to spend US$82m for a ten-year vessel operating
agreement with a new partner Alatir to operate 7 new super trawlers fishing vessels and double
its fishing quotas in the North Pacific Ocean, namely the Russian waters. The Group’s total
quota in the Russian waters should increase from 5% to 10% of the Total Allowable Catch
(TAC). This could potentially double the Group’s earnings in FY06F. We believe that the Group’s
earnings are set to grow exponentially and are raising our earnings estimates by 34.5% and
35.1% for FY06–07, respectively. With two-thirds of the Group’s earnings coming in the 1H06,
CFG’s earnings visibility remains strong and should continue to its strong growth earnings
momentum. We have changed our core valuation to a PE metric based on a discount to its
peers at 10x FY07 earnings, derives us a target price of S$3.28. This is backed up by our DCF
valuation of S$3.36. Maintain Strong Buy.
Hongguo Int’l Hldgs: S$0.285: Maintain Buy
Hongguo (HGUO) presented its FY05 results that were inline with our expectations with net
profit rising 33.8% y-o-y to RMB70.9m underpinned by a revenue increase of 44.2% y-o-y to
RMB424.5m. We expect the Group to continue its strong growth momentum underpinned by the
increase in production capacity coming on stream in the 2H05 and the expansion of retail outlets
to 730 from 615 by the end of the year. We are however disappointed by the Group’s action to
not payout a dividend payment and should expect some near term price weakness. Meanwhile,
we are keeping our Buy recommendation and our target price of S$0.43 based on 10x FY06
earnings estimates a discount to its Hong Kong and Singapore listed peers.
Venture Corp: S$12.80: Maintain Hold
VMS reported in line 4Q05/ FY05 results. Sales for the quarter are the strongest within the year,
rising 7% sequentially. The relatively volatile P&I segment registered a 20% sequential sales
growth which was above our expectations. Testing & measurement segment also registered
strong growth. Margins were maintained at similar level as 3Q05. While VMS has moulded a
more defensive business model, we believe growth prospects are unlikely to be unexciting and it
will continue to depend on its key customers in the P&I, PC storage/ peripherals and
communications segment. It declared dividend of S$0.50 should support stock price at current
levels, offering a yield of about 3.8%. Maintain HOLD.
Source: Bloomberg, Business Times, CNN MONEY, Reuters, Straits Times, Quotes
Technical View on the STI
ST Index (2,431.77) – The Straits Times Index inched 0.43 points yesterday, finished flat.
Trading volume fell from 1.18bn to 1.01bn. The indicators on our index look fatigue, hence, we
anticipate the index to trend south, correcting over the next few days. This downside will not be a
huge correction with the bank and telecommunication stocks supporting our market. The market
correction mentioned last Friday has not been disestablished because our index failed to close
above its previous high of 2,450.36. Therefore, we expect our next support level to be at 2,380 if
the index penetrates below its 2,400 trigger. In the mid-term, we expect the index to move
gradually towards its immediate resistance level of 2,450 followed by a likely breakout towards
its next resistance level of 2,475 over the next 2-3 weeks as the bull trend remains intact. For
short to mid-term investments, we would advocate investors to focus on the bank as we foresee
a probable uptrend in this sector. On the whole, we remain mildly bullish on the index for the
year with our year-end target set at 2,560 levels.
* Please refer to the weekly article “From the Chartroom” for STI and Market Updates
Source: Bloomberg, Business Times, CNN MONEY, Reuters, Straits Times, Quotes