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SPH News

2006-10-05T19:55:00.000-07:00

SINGAPORE (XFN-ASIA) - DBS Vickers Securities says it has raised its
rating for Singapore Press Holdings (SPH) to "buy" from "hold" and
increased its target price to 4.78 sgd from 4.42 because of its
attractive
valuation and the boost to the company's earnings expected from its
development of the Times Industrial Building here.

"The proposal to develop its Times development site should boost
group earnings [in the years] to August 2007-2009, amid a rising mid-
[to]
high-end residential market," DBS Vickers said in a note.

The brokerage has raised its estimate of net profit for the
company
for the year to next August by 16 pct to 440.8 mln sgd to factor-in
earnings from this development, and for the year to August 2008 to
482.7
mln sgd.

DBS Vickers also said it had raised its valuation for SPH's
Paragon
building to 1.65 bln sgd, or 1.05 sgd per share, because it expects
rents
for retail premises here to continue to rise.

At 9.51 am, SPH was up 0.06 sgd or 1.46 pct at 4.18, on volume of
2.46 mln shares.

(1 usd = 1.58

SinPOst

2006-10-02T16:41:00.000-07:00

Singapore Post
Moving into the property transaction business
SingPost and ERA Realty Network of Hersing Corporation have signed an
agreement to offer a new service to customers. Known as PostREALTY, this
one-stop service is a convenient and reliable new channel for customers to buy,
sell and rent public and private residential and commercial properties at post
offices.
This service will initially be offered at three of SingPost’s branches, namely Ang
Mo Kio Central Post Office, Marine Parade Post Office and Toa Payoh Central
Post Office from 16 Oct 06 (SingPost currently has 62 branches). A dedicated
team of service staff from ERA Realty Network will be stationed at these post
offices to assist customers with enquiries and property transactions.
We view this partnership positively, as SingPost has tied up with a leader in
the business. ERA Realty Network currently enjoys leadership position in HDB
resale transactions and private resale market, capturing an estimated 35% of the
market.
More importantly, this partnership reinforces SingPost’s diversification strategy
to leverage its wide retail network to offer more value-added products and
services. We can expect SingPost to announce more of such similar initiatives
in future.
Market concerns are unwarranted. Some market players are concerned that
the impending opening of the low-income unsecured
lending market to commercial banks will mean more competition for SingPost’s
EzyCash. We feel likewise too. However, it should be noted that the retail
segment accounts for only 4.5% of FY06 operating profit, and EzyCash is but
one portion within the retail segment. Hence, we believe the impact on
SingPost’s earnings will not be significant.
The other concern of market players is that the exclusive postal licence will
expire on 31 Mar 07. Our view is that other players are unlikely to enter into a
market which is relatively small, and compete with SingPost which has an
elaborate postal infrastructure setup. Hence, we expect minimal impact on
postal earnings upon expiry of the exclusive licence.
Divestment of non-core assets progressing. Separately, SingPost
announced that it has completed the sale by tender of its HDB shop unit at
Marine Parade Central. The net book value of the property is S$0.83m, and the
sale price is S$5.68m, giving a gain on disposal of S$4.78m.
SingPost remains a BUY. Our DCF valuation gives a fair value of S$1.23 per
share. Based on a dividend payout ratio of 89% (management guided payout
ratio of between 80-90%), we are forecasting FY07 dividend of 6¢, translating
to a dividend yield of 5.9%. This is very attractive when compared against 3-mth of Sibor 3.4%

SingPOst

2006-10-01T18:52:00.000-07:00

Singapore Post

Moving into the property transaction business

SingPost and ERA Realty Network of Hersing Corporation have signed an
agreement to offer a new service to customers. Known as PostREALTY. this
one-stop service is a convenient and reliable new channel for customers to buy,
sell and rent public and private residential and commercial properties at post
offices.

This service will initially be offered at three of SingPost's branches, namely Ang
Mo Kio Central Post Office, Marine Parade Post Office and Toa Payoh Central
Post Office from 16 Oct 06 (SingPost currently has 62 branches). A dedicated
team of service staff from ERA Realty Network will be stationed at these post
offices to assist customers with enquiries and property transactions.

We view this partnership positively, as SingPost has tied up with a leader in
the business. ERA Realty Network currently enjoys leadership position in HDB
resale transactions and private resale market, capturing an estimated 35% of the
market.

More importantly, this partnership reinforces SingPost's diversification strategy
to leverage its wide retail network to offer more value-added products and
services. We can expect SingPost to announce more of such similar initiatives
in future.

Market concerns are unwarranted. Some market players are concerned that
the impending opening of the low-income lending market to commercial banks will mean more competition for SingPost's
EzyCash. We feel likewise too. However. it should be noted that the retail
segment accounts for only 4.5% of FY06 operating profit, and EzyCash is but
one portion within the retail segment. Hence. we believe the impact on
SingPost's earnings will not be significant.

The other concern of market players is that the exclusive postal licence will
expire on 31 Mar 07. Our view is that other players are unlikely to enter into a
market which is relatively small, and compete with SingPost which has an
elaborate postal infrastructure setup. Hence, we expect minimal impact on
postal earnings upon expiry of the exclusive licence.

Divestment of non-core assets progressing. Separately, SingPost
announced that it has completed the sale by tender of its HDB shop unit at
Marine Parade Central. The net book value of the property is S$0.83m, and the
sale price is S$5 68m. giving a gain on disposal of SS4.78m.

SingPost remains a BUY. Our DCF valuation gives a fair value of SS 1.23 per
share. Based on a dividend payout ratio of 89% (management guided payout
ratio of between 80-90°.0), we are forecasting FY07 dividend of 6¢. translating
to a dividend yield of 5.9%. This is very attractive when compared against 3-mth
SIBOR of 3.4%.

Singapore Market

2006-07-03T03:19:00.000-07:00

ST Index- The ST index broke above the sideway consolidation and
rallied
sharply on Friday hitting an intra- day high of 2446. Our earlier
recommendation was to sell into strength as we felt that the odds of a
breakout from the 2380 was less likely. Still, we had highlighted that
the
next eventuality was for a move towards the 2430 level . We saw that
move
unfold within the space of a day as large cap index stocks rallied
sharply.
Interestingly small cap stocks did not make any significant gains and
most
of them continued to trade off their recent highs. It is also
worthwhile
noting that small cap stocks had rallied ahead of the index and this
could
be a situation where large cap stocks are playing catch up. We think
the
risk/ reward ratio for the both small caps and large caps are not
attractive at this juncture and further declines are likely even as
recent
euphoria abates. Immediate resistance for the ST index is at 2446 and
then
at 2470. We continue to view this move up as a bear rally and a trap.

Best Regards

K Ajith

64195411

Singapore Market

2006-05-09T23:07:00.000-07:00

Singapore market- Our initial expectation was for the ST index to top
out
near 2620. We also stated that a drop below 2570 would confirm a
downtrend.
That did not materialise. The index rebounded off the 2578 level and
headed towards 2666 mainly due to sharp gains in banking stocks. Even
so,
there are signs that the index has difficulty hanging on to the gains.
The
high established at 2666 was re tested on Monday but the gains were
quickly
erased the next day. By most accounts, we think the market is
overstretched. RSI indicator is overbought not only on daily and weekly
charts but also on monthly charts outlining price action over 20 years.
Thus from a statistical perspective, there are valid reasons to at
least
expect a correction in the Singapore bourse.We are also not seeing a
broad
based rally in index stock but more sudden sharp movements and these
are
quickly reversed. SIA which reported a weak 4th quarter result could
also
see it's share price coming under pressure. Chart formation shows
strong
resistance near $14.80 and also a potential double top formation.
We see little upside catalyst for the Singapore bourse at current
levels
and would prefer to await opportunities as opposed to chasing the same.
A
drop below 2620 would confirm a near term bearish set-up.

Best Regards

K Ajith

64195411

Singapore Market

2006-04-27T20:36:00.000-07:00

ST Index could have ended a five wave structure from 2190. Regional
markets
show signs of trend deterioration

In our recent mails, we stated that the ST Index was in the terminal
stages
of a wave 5 move and recommended reducing exposure to high beta stocks
and
switching defensive high yielding stocks. Today's price action appears
to
mark a swift reversal. The ST index briefly rallied to 2620 probably
due to
the expiry of Simsci futures and then quicky corrected. On Wednesday,
we
stated that we expected the ST index to rise marginally above 2605 and
then
quickly correct back down. The index has exactly done that. We have
attached 2 charts outlining the wave patterns on the ST index for
readers.

We think that an impulsive 5 wave structure from 2190 has ended at 2620
and
the index could retrce back towards 2430 in the coming weeks. A break
below recent low of 2470 would strengthen the view. We are witnessing
similar signs of trend deteriorationon in regional markets. In Japan,
the
Nikkei shows a double top formation with critical support at 15780
after
failing to retrace past 62% of recent fall. The index has so far
corrected
by 300 odd points and the risk of a break below 15780 is very high. In
HongKong, the HSI has corrected by 300 points breaking below a prior
low.
All in all, we think that regional markets show signs of trend
deterioration and a bear trend could be looming.

(See attached file: stiwave count.jpg)(See attached file: STI60min.jpg)
Best Regards

K Ajith

64195411

Singapore Market

2006-04-26T18:36:00.000-07:00

ST Index- Limited upside, sell into strength.

Singapore market - Last Thursday, we issued a report stating that
small
cap stocks appeared risky and price action suggested an imminent
reversal.
Since then, we have seen a pullback in several China related small
caps,
some of which have corrected more than 10% from their recent highs.
The
broad based pullback in the sector suggests that we are witnessing a
trend
reversal and prices are likely to ease further in the coming weeks. A
similar view cautious view was also extended towards the HSCEI index in
Hong Kong, when we mentioned that a wave 5 price objective for the
index
was near the 7180 level. The actual high turned out to be 7287. The
index
had subsequently corrected to close at 6858 as of yesterday. At this
stage,
it appears that we are witnessing a macro change in sentiment for China
related stocks.

As for the ST index, we also maintained that even as the index rose
past
2580 which was our original upside target, a meaningful correction was
not
too far away. Price action so far supports this view. The index rose
to a
high of 2605 on last Friday and then quickly retraced 50% of it's gains
from 2537. We are now looking for the index to breach the 2605 level
marginally and then correct down below 2570. Such a move would have
heighten the possibility that a medium term top is in place. Our
preferred
strategy would be to reduce exposure on high beta stocks and to look
into
defensive plays.

Best Regards

K Ajith

64195411

On SPH

2006-04-14T17:31:00.000-07:00

SINGAPORE (XFN-ASIA) - Singapore Press Holdings Ltd was lower after
its
net profit in the second quarter to February fell 11.9 pct
year-on-year to
84. 56 mln sgd as gains from investment income declined, dealers said.

Total operating revenue, however, improved slightly to 241.72 mln
sgd
from 236.85 mln in the year earlier term, supported by higher
newspaper
revenue and increased rental income.

At 2.52 pm, SPH was down 0.12 sgd or 2.66 pct at 4.40, off a low
of
4.34, with 14.07 mln shares traded.

The Straits Times index was down 0.62 points or 0.02 pct at
2,545.63.

Despite the lacklustre results, analysts are still positive on
SPH.

Cititgroup said it is keeping its "buy" rating on SPH with fair
value
of 5.62 sgd.

"We see the group as a laggard reflation play with attractive
valuations and supported by a yield of 6 pct," Citigroup said in a
note to
clients.

OCBC Securities said it is also keeping its "buy" rating on SPH
with
fair value of 5.15 sgd per share.

"Earnings growth this year is well supported by healthy economic
growth and robust consumer spending. With first half to Feb 2006
earnings
coming in at 183 mln sgd, our full year (to August 2006) earnings
forecast
of 387 mln sgd should remain on track," it said.

"While the windfall from non-core asset disposals may take some
time
to materialize, SPH remains an attractive yield play with estimated
net
dividend yields of 6 pct," it added.

SPH has identified the Paragon shopping mall on Orchard Road as a
non-core asset that it could divest but it remains reticent about the
timeframe.

Merrill Lynch said it also keeping its "buy" rating and fair
value of
4. 90 sgd for SPH.

"While SPH's near-term share price may be volatile given the
slight
disappointment on its display ad growth trend, we maintain our belief
that
a broader ad market recovery, supported by improved consumption
spending,
would benefit retail, property and finance sectors, as well as SPH in
coming months, " Merrill said.

CIMB-Research said it is also keeping its "outperform" rating for
SPH
with fair value of 5.40 sgd, while Kim Eng Securities rates the stock
a
"buy" with a price target of 5.20 sgd.

But DBS Equity Research was not as optimistic as the others,
rating
SPH a "hold" with fair value of 4.42 sgd from 4.44.

"The results reaffirmed our view that earnings growth for SPH's
core
business will remain lackluster," DBS said.

(1 usd = 1.61 sgd)

Singapore market

2006-04-10T18:47:00.000-07:00

Singapore market- Recent pullback in the ST index came largely on the
back
of weakness in property stocks along with pullback in prior favorites
such
as SGX and SIA. Banking stocks have picked up some of the slack and we
note
that the SGX Finance index is now trading at new highs for the year.
The
sector should very likely lead the index up higher in the coming days.
Small cap stocks have also along with the ST index and market players
are
becoming increasingly selective. Preferred plays remain China related
small
caps. The tendency however is for some of these stocks to rise sharply
and
then consolidate for a lengthy period. This leaves a very narrow window
of
opportunity for traders.Given such a scenario, the best trading
strategy we
advocate readers is to buy on weakness, when a stock consolidates on
low
volume and volatility and then to sell when the volatility expands.
This is
essentially a contrarian trading strategy.

Stocks

A potential theme that could emerge in the coming days could be
speculative
interest in oil and gas related small caps. Brent Crude Oil continues
to
trade near the upper end of the US$70.00-US.60.00 trading range. The
commodity is currently trading at US$68.30. If the commodity breaks
through the US$70.00 barrier, speculative interest could once again in
return towards small cap oil and gas plays. We feature some popular
small
cap oil and gas plays.

China Petrotech- The company essentially provides IT solutions to oil
and
gas companies in China. The stock had rallied sharply from $0.33 to a
high
of $0.74. It has since eased back to $0.68. Immediate support is at
prior
low of $0.67 and next support at 30 day moving average zone of $0.64.
Volume on the current decline is so far relatively low. However we
still
need to watch the important support at $0.67. If this level holds, then
the
stock could rebound to test its prior high of $0.745. Even so, we thnk
that
Sky China Petroleum, offers lower risk at this stage. The stock is
trading
at 15.4x historical earnings.

Sky China Petroleum- The company provides engineering solutions to
oilfields in PRC. The stock has been trending up since early 2006,
however
pace of rally has been more gradual compared to China Petrotech. over
the
past 2 weeks, the stock has corrected from a high of $0.625 to a low of
$0.555 as of yesterday. The stock is close to a trendline support zone
near
$0.545-0.55. Volume has also been relatively low on recent
decline,suggesting a high likelihood of a rebound of the zone. We
recommend
that readers watch the support zone and establish a long position only
if
the stock stabilizes or rebounds off that zone. The stock is currently
trading at 12x historical earnings.

(See attached file: SKY Petrol.jpg)(See attached file: China
petrotech.jpg)
Best Regards

K Ajith

64195411

STI and others

2006-04-06T23:44:00.000-07:00

Singapore market- The ST index along with several China related small
cap
stocks has corrected over the past 2 days. This was the correction that
we
were looking out for and the present pullback is seen as a correction
of
the advance of the move from 2477- 2554 for the ST Index. Additionally,
the
pullback has a corrective wave pattern, implying that this is just a
minor
pullback and a prelude to further gains. A similar pattern was formed
1-2
month ago, when the index drifted sideways between 2518 to 2477. This
correction is expected to be shorter and could very well terminate
today
near 2325-2330 range. As for China related small caps, we do not see
any
evidence of a sector wide trend reversal. We note that similar Hong
Kong
listed China H Share and Shanghai B Share indices are still trending
up
strongly. As such, we think that overall uptrend is still intact for
the ST
index and for China related stocks in general.

Stocks

Ellipsiz- Earlier in the week, we had recommended 62-63.5 range as a
preferred entry level for the stock. The stock had reached the target
range
and we believe this is opportune moment to get into the stock. The big
picture remains positive, which is that the stock has broken out of
triangle pattern and is consolidating in a pennant like formation.
Recommend a buy at $0.62-0.625 on expectation of a retest towards $0.66
and
if that is broken towards $0.71.

DMX- We had recommended accumulating the stock near $0.95 and targeted
a
move towards $1.02. The stock had reached a high of $1.04 and had
pulled
back towards $0.965 over 4 consecutive days. Watch support level near
$0.95-0.96. Resistance remains $1.02-1.03. Trade the range.

(See attached file: Ellipsiz.jpg)(See attached file: DMX.jpg)

Best Regards

K Ajith

64195411

Be very selective on longs

2006-03-08T18:16:00.000-08:00

Singapore bourse: Yesterday's price action on the ST Index was
not
indicative of market mood. Market breadth was extremely low with
2.44
stocks declining for every 1 stock gaining. The ST Index had declined
to a
low of 2473, within our stated support at 2470-2475 but quickly
reversed
its losses in afternoon as a handful of index stocks were pushed
into
positive territory. Sing Tel for example was pushed up form $2.62 to
near
day's high of 2.67. The stock however faces significant
resistance at
$2.70.Likewise DBS and SIA rebounded in afternoon session and were the
main
reason behind the index positive close at 2502. We still remain
cautious of
the Singapore bourse and still maintain our sell into
strength
recommendation as the index approaches 2520. At this stage, investors
need
to be extremely selective. Among index stocks, SIA and SPH are the
two
stocks which are still trending strongly and offer decent upside
potential.
SIA could head up towards $15.50 while SPH which had emerged from a
strong
base at $4.20-4.26 could head up towards $4.65. We do not see
any
significant upside for small caps in general and at best they could
base
build while the index heads higher. Interest could also be
restricted to
new issues.

Best Regards

K Ajith

64195411

United Food's (UFood) -Sign of Recovery

2006-03-07T19:13:00.000-08:00

United Food's (UFood) FY05 results were marginally below our expectation.
Revenue grew 15% yoy to Rmb3.3b, driven by Soybean Processing. But net
profit declined 25% yoy to Rmb196m. 4Q05 net profit also fell 8.6% yoy but
grew 14% qoq. A final dividend of Rmb0.08 was declared, implying a 33% payout
ratio and a respectable 5% yield.
Quarterly recovery from most sectors in 4Q05. Animal Feed grew 40% qoq
while Processed Meat and Healthcare Products each rose over 20%. We believe
this was due to the sufficient pig supply, favourable pig prices and recovery in
pig rearing.
Signs of recovery in FY06. Pig supply continues to be sufficient, which will support
stable pig prices in 1H06. Price of animal feed and its major ingredient, soybean
meal, also had a nice rebound in Jan 06. We feel positive about the contribution
from two potential projects although they are still conceptual.
Valuation. The stock trades at an undemanding 6.3x FY05 PE and 5.6x FY06 PE,
and a 45% discount to its net asset value of Rmb1.94/share. The decent dividend
yield could support the share price. Potential risks include higher-than-expected
pig prices and the avian flu. We cut our FY06 net profit forecast by 8% to reflect
the uncertainties ahead. However, we believe the downside has largely been
factored in and thus raise our target price to $0.28 (7x FY06 PE, slightly lower
than the average PE of China stocks due to the uncertainties). Given the attractive
dividend yield, improving industrial environment, and reasonable PE range,
we upgrade the stock from HOLD to BUY.

Singapore market

2006-03-07T04:53:00.000-08:00

Singapore market- The Singapore bourse has been relatively resilient as
the
index rose past 2500. Small cap stocks have also lost some of their
upward
momentum though most of the top tier china related stocks are still in
focus. We view support for the ST Index at 2470-2467 and then 2450. So
long
as the index manges to hold above the first support zone at 2470-2475,
we
are unlikely to see any significant sell-off. There is interim
resistance
for the ST index near 2520, which is the zone of a prior gap in January
2000.
There are however several signs of bearish divergences. Market volume
and
value for the month of March has been significant;y lower compared to
previous peak levels in February. Yesterday's market volume at 1.329
billion was significantly lower than the 2 billion transacted in
February
when the ST index was at 2450. This suggests that market players are
being
increasingly selective. Stock selection as such is critical at this
stage
and we prefer to look at stocks which appear to be emerging from
consolidation patterns.We still like the oil and gas sector and think
that
they represent low entry risk as most of the stocks in the sector
appear to
be close to breaking out of consolidation phases. Alternatively
investors
can look at high dividend yield stocks.

1. SembCorp Marine- The company announced today that it had secured a
contract worth US$480m from Petromena. Daily chart shows the stock
consolidating within a symmetrical triangle formation. Key resistance
is at
$3.00 has been taken out and the stock looks likely to head towards
next
resistance at $3.20.Recommend accumulating the stock at $3.04.

2. Pearl Energy - Price chart shows an unusually bullish formation as
the
stock is consolidating in a tight range near July- August 2005 highs.
This suggests the potential of a sharp breakout once the stock breaks
out
of the consolidated pattern. Transacted volume however is low and as
such
we would only advice recommend accumulating gradually. On the upside,
the
stock could rise by approximately 30 cents towards $2.30 once the stock
rises above $2.00.

Good Examples of Single Bottom or Cup without handle

2006-03-06T15:02:00.000-08:00

From William J O Neil - How to make Money in Stocks - Investing like a Professional - Page 162

China stocks sizzle again as ST Index crosses 2,500

2006-03-06T05:30:00.000-08:00

Published March 6, 2006
BT
Market Close

By R SIVANITHY
A NEW high for the Straits Times Index thanks to DBS, UOB and Singapore Telecom and continued enthusiasm for China stocks led by China Fishery, China Sun and China Life were the main features of an active but mainly mixed day for the local stock market today.

The session actually got off to a slow start with the ST Index hovering uncertainly below the 2,500 level but once Japan finished convincingly higher and Europe opened firmer, the index took off, eventually closing 19.45 points higher at 2,512.88.

UOB's 40-cent rise to $15.40, DBS's 10-cent rise to $16.30 and SingTel's three-cent rise to $2.68 accounted for about 12 out of the 19 points. The broad market, however, was not as firm as the index's movement suggested - excluding warrants, bonds and debentures, the advance-decline score was 173-168.

The China segment was led by China Fishery, which shot up 29 cents to $3.04. Since listing on Jan 26 at $1.25, the counter has now gained 143 per cent in six weeks, making it the market's best performer.

There were no fresh corporate developments to account for China Fishery's latest rise - in response to a Singapore Exchange query last week, the company said it did not know of any reason for the interest in its shares - and neither were there any new announcements to help propel the other China stocks higher.

As a result, some brokers expressed concern at the inflating of a huge speculative bubble in these counters. As one said: 'We have replaced speculative Malaysian stocks on Clob International with speculative China stocks.'

Sources also pointed out that brokers are now making their rounds of China stocks, trying to find value in those that may not have risen yet.

Turnover in many China stocks was heavy - China Sun, for instance, traded 55 million units while China Dairy traded 25 million shares. Excluding foreign currency issues, overall turnover was 1.32 billion units worth $1.2 billion, in line with recent averages.

SingTel's rise was probably in response to news of the government's Next Generation National Infocomm Infrastructure initiatives, which were announced last week and aim to have every household in Singapore broadband-equipped by 2008.

Citigroup said this would require higher capital expenditure but believes commercial considerations will outweigh these costs. 'Consequently, we see any stock price weakness on these misplaced concerns as a great opportunity to be buying StarHub and SingTel,' said Citigroup.

Among the losers was Parkway Holdings, which dropped five cents to $2.33. Citigroup has a target price of $2.82 for the healthcare provider and today pondered in its daily notes Parkway's new growth initiatives in China, Vietnam and India following a meeting with Parkway's management.

'The board is committed to capital management through good dividends and fund raising to expand, including a Reit if necessary,' said Citigroup. 'In the medium term, management conceded it may retain capital to fund future growth.'

Singapore NOL JV Gets India Rail License

2006-03-04T01:32:00.000-08:00

Friday March 3, 6:49 PM
UPDATE: Singapore NOL JV Gets India Rail License

SINGAPORE (Dow Jones)--Singapore's Neptune Orient Lines Ltd. (N03.SG), the world's sixth biggest container shipping company by volume, Friday said its joint venture has received approval in principle from the Indian government to provide freight rail services there.

The joint venture, called India Infrastructure and Logistics Pvt Ltd, received a "Category 1" license which enables it to run unlimited trains on all India routes, for an initial period of 20 years which is extendable by another 10 years, NOL said.

NOL said IIL expects to invest between US$60 million and US$70 million over the next two years on the Indian rail operations, which it will initially run between the country's main port of Mumbai and the capital, New Delhi.

NOL has "about a three-quarter" stake in ILL, with Hindustan Infrastructure Projects & Engineering Pvt Ltd owning the rest, a NOL spokesman said. Hindustan Infrastructure is controlled by Indian telecom tycoon Rajeev Chandrasekhar.

"We have considerable experience operating freight rail services. Our APL subsidiary pioneered double-stack trains in the U.S. in 1984. Although the U.S. investment was sold in 1999, we retain considerable managerial and IT expertise in this business," NOL Group Deputy President Cedric Foo said in a statement.

"By investing in landside facilities, we will complement and differentiate our liner services in India and at the same time develop a new stream of logistics income for the Group," he said.

NOL said it intends to invest in "chokepoints," or areas where infrastructure is lacking or congested and the movement of cargo slowed, to offer seamless end-to-end transportation.

Operating in India's growing rail freight industry may help NOL partly offset an expected decline in freight rates as more ships ply the key routes in years ahead.

At the fourth-quarter results briefing on Feb. 28, NOL Chief Executive David Lim said the company planned to partly counter the cyclical downturn in shipping by strengthening the links between its main container liner division and its much smaller logistics business.

NOL reported a 54% on-year fall in fourth-quarter net profit to US$164 million from US$355 million, reflecting higher fuel costs and a $103 million tax writeback in the year-earlier period.

In the fourth quarter, the APL, or shipping, business posted a 24% fall in core earnings before interest and tax to $199 million from $262 million a year earlier.

APL's costs per FEU, or 40-feet equivalent unit, rose 7% on year in 2005 due to higher bunker expenses and inland transportation costs in the U.S., NOL said.

EBIT from the logistics business in the fourth quarter, meanwhile, doubled to $14 million from $7 million in the year-ago period, reflecting higher profit margins.

Ferrochina -Strong Results

2006-03-01T18:43:00.000-08:00

03/01/06 02:52 PM Subject: Ferrochina -
Strong results, but the best is yet to be!

FERROCHINA LTD (FRC:
S$0.62)
BUY (Upgrade)
Strong results, but the best is yet to be !

Net profit of RMB 146m is 3.6% below our forecast of RMB 151.6m.
Excluding
the IPO expense, net profit of RMB 159.2m is 5% above our forecast.
The
excellent performance was due to contribution from second production
line
which started in June 2005. Raw material price was volatile,
leading to
lower margins. Outlook is very positive because of acquisition
of
Everbright and potential acquisitions of XingYu and XingHai.
Profit at
existing XingDao operations will balloon after renovation of line
one.
Upgrade to BUY with a revised 12-month price target of S$1.10,
based on
comparative valuation vis-à-vis its Taiwanese competitors.

(I) Strong earnings growth from more efficient second production line
and
favourable price trend

· The 35% growth in net profit to RMB 146.1m in 2005 was due to
increased output of galvanized steel despite lower profit margin per
ton.

· Output increased following the completion of a second line which
started in June 2005. Operational efficiency at the second line was
superior to the first because of more and better machineries.

· Margins declined despite 4% higher average selling price in 2005.
This is because of price volatility in raw material, namely Hot and
Cold
Steel Coils.

· Price of hot rolled coil during 2005 declined from a peak of RMB
6,000 / MT in March to RMB 3500 / MT in September, and RMB 3000 / MT in
December. The finished product, Galvanized Steel declined from a peak
of
RMB 7200 / MT in March to RMB 5350 / MT in September and RMB 4,000 / MT
in
December. This spread between raw material and finished product
increased
from RMB 1000 to RMB 1850, and then fall back to RMB 1000.

· The above situation is in China. In the international market,
prices
of Galvanized Steel have fallen less steeply than that in China, partly
because overseas demand for Galvanized Steel has increased in the
post-hurricane construction boom in US, post earthquake rebuilding in
India
and Pakistan, and post-tsunami recovery in Thailand, Sri Lanka and
Indonesia.

(II) Outlook is superb: clear management strategy for growth is
applauded

(a) Existing business at XingDao

· Management disclosed that order book is filled for 1Q06 at higher
selling prices. Production efficiency has reached 100% for 1Q06, up
from
90% in 4Q05. Orders for 2Q06 are strong, but management is holding out
for
higher prices. This is due to strong overseas interest, particularly in
the
US. 1H06 net profit is expected to be significantly stronger than that
in
1H05. Management is focusing its marketing efforts in the international
market where prices of Galvanized Steel have fallen less than that in
China.

· Ferro China is building a cutting and slitting workshop, new
warehouse and docking berth facilities to complement existing
operations.
Upon completion in 3Q06, savings in transportation costs, and bringing
the
existing cutting service in-house, will add at least RMB 50 per MT of
output to net profit.

· Production line one will be upgraded to produce Galvanized Steel
coils with expanded product applications, including automobile and home
appliance industry. Hitherto, line one supplies only to the
construction
industry, although line two has expanded the product range to include
steel
for the construction of grain-storage silos. Line One will be shut for
three months in 3Q06.

(b) Purchase of Everbright

· We were wrong in our earlier assessment of Everbright. (See
report
dated 18 January 2006).

· We have underestimated the tremendous growth potential of
Everbright.
We have earlier assumed that the 6 Slitting and Cutting Lines, 1
Pickling
Line and 1 Cold Reversing Mill were all that the plant at Changshu
could
offer. Subsequently, we learn that 1 Continual Hot dip Galvanizing Line
would be added in 2Q06, 1 Color-coating Line in 3Q2006, 2 Cold
Reversing
Mills and 2 Continual Hot-dip Galvanizing lines in 2007. The existing
Pickling Line was only completed in Oct 2005 and the Cold Reversing
Mill in
July 2005. Hence, the reported RMB 155m net profit for FY2005 does not
represent the potential from Everbright.

· We have added our earnings projection for Everbright into
forecast
for Ferro China. The latter will have 35% of Everbright's earnings for
the
last 7 months of 2006, and 25% in 2007 and 2008 (20% if Everbright
successfully goes for public listing in Hong Kong in 2007 as proposed
by an
American investment bank). Everbright has secured investment from
Taiwanese
notebook maker Asustek and car-maker YuLong, as well as secured orders
for
at least 30% of its output from these investors. Margins for Everbright
are
projected to be better than that of XingDao, Ferro's existing sole
business.

(c ) XingYu and XingHai

· We HAVE NOT added projections for FerroChina's potential
investment
in two new steel processing plants, XingYu and XingHai. Construction of
these plants has started and production may start in 2007 or 2008 at
the
latest. We expect Ferro China to announce acquisitions of these two
plants
in 2006. Management has given an assurance that no new Ferro China
shares
would be issued for this acquisition.

· Xinghai has a license to manufacture and sell antisepticised
steel
coil and cold rolled steel coils (full hard); Xingyu has a license to
manufacture and sell cold rolled steel coils (soft). The shareholders
of
Xinghai and Xingyu have granted FerroChina a three year option (till 11
April 2008) to purchase the two companies.

(IV) Valuation and Recommendation

· We upgrade our recommendation to BUY with a 12-month revised
price
target of S$1.10. This is based on a target of 5x forward PE. Such
valuation parameter is calculated on the weighted average of its
Taiwanese
competitors and discount for the disparity in market capitalization and
years of establishment. Consideration has also been taken of the
potential
for equity dilution, arising from the forthcoming issue of preferential
shares.

Tan Khow Siong (65)
6232
3890
khow-siong.tan@dmgaps.com.sg

UOB KH on SPH

2006-02-28T22:19:00.000-08:00

28 Feb 2006
Singapore Press Holdings : Jan and Feb 06 Page-Counts Confirm Strong
Advertising Spending : BUY
Strong advertising spending in January and February. Our page-counts of The
Straits Times for January and February (combined to even out the monthly
fluctuations due to Chinese New Year) indicate a strong advertising volume
growth of 9.8% yoy (SPH's reported 1QFY06: +2.2% yoy). Actual advertising
spending growth could be higher than the figure implied by our page-counts as
SPH recently raised the ad rates for four of its newspapers. From Jan 06, the ad
rates for The Sunday Times and the weekend issues of The Straits Times were
raised by 3%. Separately, from Nov 05, the ad rates for Lianhe WanBao and Shin
Min Daily News were raised by 10% for weekday and 3% for weekend issues.
Uptrend to continue. The current advertising spending upturn started in
November last year. We had previously highlighted (our Blue Top dated 23 Jan
06) Saturday issues of The Straits Times were getting thicker with 250+ pages
compared to 220-230 pages previously. This high page-count has continued into
January and February (Figure 1). With the proposed Progress Package in the
recent Budget (with various benefits including the workforce bonus, growth
dividends and the National Service Bonus) and a rise in consumer confidence
(SPH consumer confidence Index: 327 in 1Q06 vs 266 in 4Q05 and 294 in 1Q05),
consumer spending is poised to increase further.
Earnings forecasts raised. We raise our projected advertising revenue (AR)
growth for SPH for FY06 and FY07 from 5% to 7%. Accordingly, we raise our
FY06, FY07 and FY08 net profit forecasts by 3.4%, 5.4% and 5.6% respectively to
S$410.8m, S$446.0m and S$466.0m. SPH had earlier reported an AR growth of
2.2% for 1QFY06 (Sep-Nov 05). This low growth was partially due to the
divestment of Streats in Dec 04, resulting in FY05 and 1QFY06 being compared
against corresponding periods that had a high base. From Jan 06, Streats will no
longer be a distortion factor. Also worth noting, ACNielsen has under-estimated
SPH's AR growth in the last four quarters

Target price raised from S$5.00 to S$5.40 (SOP
valuation: S$5.36). We believe newsflow on SPH will
increasingly become more positive. Traditionally, share
price has a strong relationship to its AR growth (Figure
3). The stock's high dividend yield of 4.5% to 5.2%
projected for FY06 to FY08 provides support to share
price and dividend yield in FY06 could be higher if SPH
is successful in selling the Times Industrial Building.

UOB KH on HLF

2006-02-27T19:05:00.000-08:00

HLF 28 Feb 2006
FY05 Earnings fell 8.8%, but dividend was above expectations
HLF reported FY05 net profit of S$79.1m, down 8.8%. This is close to our
S$79.2m forecast.
Cost of funds rose sharply. Net interest income fell 9.3% to S$171m. This
was due to a sharp rise in interest payable to deposit customers which
outstripped the increases in lending rates.
Loans expanded 10.9% yoy. HDB home loans advanced in 4Q05. In
addition, the SME loan portfolio continued to expand as new relationships were
acquired. HLF is a major player in Factoring and Accounts Receivable
Financing, Trade Finance and Industrial Hire Purchase, which serves the needs
of its SME customers. For the car financing segment, HLF’s focus is
predominantly in the new cars arena. With the improving share market
sentiment, HLF created a dedicated sales team in 2005 to focus on major
potential clients. Consequently, this share lending portfolio grew 14% in 2005.
Dividend of 17¢ declared. HLF declared a final dividend of 12¢ and a second
special dividend of 5¢ per share. Including the 10¢ special dividend paid on 30
Jun 05 and the interim dividend of 6¢ paid on 4 Oct 05, the total dividend is 33¢,
or a yield of 8.7%.
Expect equally good dividends ahead. Regulations allow HLF to disburse up
to 75% of net profit as dividend. We believe HLF will aim to utilise as much of
its Section 44 tax credits as possible. Provisions written back in 1Q05 has given
HLF an opportunity to dish out 36¢ gross dividend – HLF has declared only 15¢
special dividend thus far. Hence, there is another 21¢ of special dividend that
could potentially be declared over the next few quarters. On an ongoing basis,
the 18¢ ordinary dividend pa appears to be sustainable. Hence, we forecast an
equally attractive FY06 dividend of 33¢ per share.
Acquisition prospects remain. HLF’s NTA is S$3.15ps. Our S$5.00 price
target is based on 1.6x P/NTA. We believe HLF is an attractive acquisition
target by QFBs which want to expand their operations in Singapore. As OCBC
paid 1.8x P/NTA for Keppel Capital Holdings and UOB paid 1.6x P/NTA for
OUB, we feel that our price target of 1.6x P/NTA is fair.

UOB KH on C&O Pharm

2006-02-27T18:33:00.000-08:00

Feb 28 2006
C&O Pharmaceutical
Attractive Acquisition at 3.3x PER
C&O entered an agreement to acquire 100% equity interests of a
pharmaceutical distribution company with a consideration of RMB45m, 3.3x its
CY05 profit guarantee of Rmb13.5m.
Respectable acquisition target. Before acquisition, this distribution company
named Lian Cheng was one of the key distributors of C&O, providing import,
logistic and marketing services. Through long-term cooperation, Lian Cheng has
gained sound knowledge about C&O’s products and extensive distribution
network with major hospitals in East and Southeast China.
Gained more control over distribution network. We expect Lian Cheng will
facilitate C&O to penetrate market in these areas by its existing network and
coordinate regional sales resources. Furthermore, C&O could share the lucrative
profits from distribution business. We estimate the deal will be finalized mid-
CY06, and start contribution in FY07.
Attractive valuation of 3.3x earning. The acquisition consideration was
Rmb45m, 3.3x Lian Cheng’s CY05 net profit guarantee Rmb13.5m. In our view,
the deal was attractive given that the average PE for pharmaceutical companies
was around 10x PE multiples. C&O had a strong net cash position of HK$182m
at end-Dec05, thus the acquisition will be funded internally.
Positive prospects for FY06. C&O had reported a good set of interim results
with 31% bottom line growth. We feel positive about the growth momentum in
2H06, given a) intensified marketing activities to promote both third-party
products and self-branded products in areas that were paid little attention before
b) improving brand recognitions of newly launched proprietary products and c)
other potential acquisition deals.
Upgrade earning and new target price S$0.48. We forecast Lian Cheng’s
potential bottomline contribution at Rmb15.5m and 17.8m at FY07-08, assuming
15% growth rate. Our previous target price S$0.43 implies 10.7x FY06 PE and
10x FY07 PE. Therefore, by applying 10x FY07 PE, we upgrade our target price
to S$0.48. Reiterate BUY.

Beauty China

2006-02-27T18:21:00.000-08:00

Beauty China Holdings
FY05: Color Zone Performing Well
Beauty China reported FY05 earnings at HK$109.6m (up 24% yoy), which was
in line with our expectation. Revenue grew 32% yoy to HK$346.6m, 8% above
our forecasts. Color Zone brands continued to be major contributor. A final
dividend of S$0.018 was declared, implying 25% payout ratio and 2% yield.
FY05 revenue grew 32% yoy to HK$347m, mainly driven by Color Zone series
products. Color cosmetic products contributed 65% of revenue, with the
remaining 35% of skin care products. However, EBIT margin dropped from 37%
in FY04 to 32%, because a) Marketing expenses continued to rise to 17% of
total sales, b) other operating expenses increased due to higher product
development cost, allowance for doubtful debts and 1.5m share option
expenses. Net profit grew 24% thanks to a zero tax rate.
Retail outlet expansion on schedule. 900 Color Zone outlets and 60 Charming
Lady outlets have been established end-FY05. Management plans to expand to
1200 and 150 separately by end-FY06. Products are also sold through 42 Sa Sa
stores in Hong Kong and Macau, though sales contribution from Sa Sa was only
1% of total revenue in FY05.
Sales growth momentum expected to maintain, given a) Market is still very
fragmented for mass market cosmetic products. Although foreign brands such
as Maybelline dominate, there’re still 5,000 local manufacturers, 90% of whom
are small scale operators. The market share of Beauty China was merely around
1% out of color cosmetics and skin care sales in China, therefore we believe the
small base will allow it to maintain over 20% sales growth in the next three
years, by grabbing market share of local competitors. b) Color zone has already
gained some brand awareness in its target population, especially compared with
other local brands. Contribution from new retail outlets will ramp up after initial
dilution.
Competition will continue to shoot up expenses, especially marketing
expenses. Percentage of marketing expenses out of revenue had kept rising
from 11% to 17% in the past two year, but still quite low compared with its peers.
Given the fierce competition, we expect marketing expenses will continue to
grow for brand building. Additional depreciation will incur out of HK$20m
investment of R&D center and flagship store plan. Distribution and
Administration expenses are expected to rise in tandem with sales growth.
The stock is currently at 12x FY05 PE. Given the stronger-than-expected sales
growth, we’re reviewing our target price and recommendation with possible upgrade

DBS on STI

2006-02-27T01:43:00.000-08:00

Feb 24 2006
ST Index (2,435.58) – The Straits Times Index regained 7.7 points Trading volume decreased
marginally from 1.19bn to 973m with 236 losers to 284 gainers. We think that the indicators on
our index look weary and over-bought, hence, we expect the index to continue trending south,
correcting over the next few days. The downward glide will likely be slight due to the upward
momentum coming from the bank and telecommunication stocks to support the market from
diving. Our current forecast on the probable downtrend remains intact and it cannot be
terminated unless the index breaks and closes above its previous high of 2,451.90. Hence, we
expect our next support level to be at 2,380. However, for the index to go lower towards its
immediate support level, it needs to penetrate below the 2,400 levels trigger point. In the short to
mid-term view, we still expect our 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
week. For the moment, we advocate investors to stay out of the market for a short-term until the
market provides clearer directions. On the whole, we remain mildly bullish on the index for the
year with our year-end target set at 2,560 levels.

ST Index & others

2006-02-24T23:39:00.000-08:00

ST Index - The index's ability to sustain itself near 2440- 2450 range
now
appears to suggest that it could break up to the upside. If the index
rises
above 2450, it would trigger a flag breakout and the next resistance
would
be the 2500 level. This should result in continued interest in small
cap
stocks. We had already recommended several stocks this morning and
recommend holding on to the same. Traders could also consider some low
risk
entries like Beauty China at $0.82 and Federal(Other
Federal View) at $0.635 or Global
Testing
at $0.325.

Asiapharm- We had featured the stock this morning and stated that a
break
above $0.77 should result in the stock testing it's previous high of
$0.84.
The stock had gapped up on opening and has so far reached a high of
$0.795. The gap up this morning is seen as a breakaway gap and
indicated
high confidence in the stock. Additionally, if the stock closes at
$0.79,
it would be a new closing high for the stock which again is a bullish
indication. Our recommendation as such is to hold on to long postions
and
await next resistance at $0.84.

Federal- We featured this stock in an oil and gas sector write-up and
stated that the stock could head down towards prior high of $0.63. The
stock is currently consolidating near that level as volatility and
volume
has contracted. The volatility and the resultant range contraction is
seen
as a bullish sign and a prelude to volatility expansion. For traders
looking for a low risk trading stock, this represents a trading
opportunity as the stock could potentially rise towards at least
$0.685 .

Other
view Feb 28 2006

Beauty China- The stock had corrected from $0.94 to a low of $0.75 and
is
currently trading at $0.82. The stock has already gained 2.5cents.
Immediate support is at $0.80. Traders could consider accumulating the
stock with at $0.82 or better with a stop at $0.80. Onthe upside, the
stock
could head up towards the recent closing high of $0.88.

(See attached file: ST Index.jpg)(See attached file: Federal.jpg)
Best Regards

K Ajith

64195411

OCBC

2006-02-24T01:00:00.000-08:00

SINGAPORE (XFN-ASIA) - Oversea-Chinese Banking Corp (OCBC) will
probably
report Tuesday that net profit last year rose up to 11 pct compared to
2004, aided by strong lending in Malaysia, analysts said.

Analysts polled by XFN-Asia expect the bank's 2005 net profit to
range between 1.28 bln and 1.29 bln sgd, up from 1.16 bln in the
previous
year.

Three of the five analysts surveyed projected full-year net
profit of
1. 28 bln sgd for OCBC.

"We are looking for a full-year net profit of 1.28 bln sgd, or a
fourth quarter net income of 323 mln," Macquarie Securities regional
banking analyst Ismael Pili said in a research note.

The bank's non-interest income is likely to have grown, partly
due to
the brisk insurance business of unit Great Eastern Holdings.

On the loans side, OCBC's performance was supported by robust
lending
in Malaysia, although operations in Indonesia may be weaker in step
with
the sluggish economy there during the fourth quarter, he said.

"Margins should improve from the third quarter's 1.83 pct. Loan
yields were particularly weak in the third quarter which we attribute
to
increased competition in its Singapore business," Pili said.

CMIB-GK Research analyst Kenneth Ng also pegs OCBC's net profit
at
1.28 bln sgd.

A European brokerage analyst who declined to be identified
estimates
fourth quarter profit of 325 mln sgd and with full-year earnings also
seen
at 1.28 bln.

Daiwa Institute of Research analyst David Lum sees profit coming
in
at a better 1.29 bln sgd.

Credit Suisse analyst Sanjay Jain said his own earnings forecast
for
OCBC will be in the same range, expecting small gains in the bank's
non-interest and net interest income.

"Both should grow a little especially (since) they were very weak
in
Singapore for the past nine months. So Singapore should give them some
relief. There was some positive loan growth in the fourth quarter in
my
assumption."

OCBC is particularly strong in the small and medium enterprise
segment and in bancassurance/wealth management business.

But what draws investor interest in the bank is not its
operational
performance but its capital management potential, according to
analysts.

In a recent note, Credit Suisse picked OCBC as the winner among
the
local banks in capital management terms with a host of initiatives
such as
share buy-backs, stock-split and dividend-cum-rights issue that it has
done.

"OCBC should continue leadership on this front," it said.

Macquarie's Pili said: "As we are less concerned about the
operational performance or the bottomline of OCBC, we are looking for
capital management pronouncement given that we see as the primary
attraction of the bank."

Pili said the market will closely watch OCBC's announcement on a
timetable for the completion of its sale of non-core assets, on the
progress of its share buyback and dividends.

RESEARCH ALERT-Energy shrs fall, Lehman sees weakness

2006-02-22T08:12:00.000-08:00

22/02/2006 (17:03)

(Recasts lead, adds background, updates share prices)

NEW YORK, Feb 22 (Reuters) - Shares in oil and gas production and services company fell broadly on Wednesday, mirroring declines in the prices of crude oil and natural gas, as Lehman Brothers said the shares could be weak in the next few months due to volatility in the gas markets.

Lehman lowered its sector view for large-cap oil and gas producers to "neutral" from "positive," and also downgraded its ratings on Newfield Exploration Co. , Apache Corp.
and EnCana Corp..

The Amex Oil Index was down 1.2 percent at 1045.79 in mid-morning trading. Since hitting a peak for the year on Jan. 31, the index is down 8.4 percent for the month.
Meanwhile, the oil services index was down 1.7 percent and has lost more than 10 percent this month.

Crude oil has come down of late as tensions over Iran's nuclear aspirations calmed and supplies grew in the United States, while the cost of gas has fallen by more than half in the last two months on an unexpectedly warm winter season.

Lehman analyst Thomas Driscoll, in a note to clients, said that while exploration and production companies are a good long-term value, the natural gas market is "severely out of balance" in the short term and that prices through October will be stuck in a $5-$8 range.

"The current natural gas demand weakness should give long-term bulls pause," Driscoll said.

Lehman lowered its forecast 2006 benchmark price for oil to $60 from $65 and cut its 2006 forecast natural gas price to $7.75 from $9.

Crude oil futures on Wednesday were at $61.55 a barrel, while natural gas futures were trading at $7.42 per million British thermal units.

Lehman downgraded both Newfield Exploration and Apache to "equal weight" from "overweight" and cut EnCana to "underweight" from "equal weight."

Newfield Exploration shares were down 3.2 percent at $41.16, while Apache shares were down 2.5 percent at $68.97.
EnCana was down 2.6 percent at $42.52, all in morning New York Stock Exchange trade.

Shipping market will remain robust until at least 2009

2006-02-22T02:16:00.000-08:00

BTPublished February 22, 2006

DNV sees soft landing for shipping industry
It is confident shipping market will remain robust until at least 2009

By DONALD URQUHART

(SINGAPORE) Buoyed by two years of record new building activity and a booming energy sector, maritime and industrial risk management group Det Norske Veritas (DNV) is confident the shipping market will remain robust until at least 2009 as it develops a new focus on knowledge based services.

Mr Svensen: There's more interest among shipping companies to address fuel economy and energy efficiency
'We will see a softening in the container market in the next two years because of deliveries, but in general the market will be OK until 2009 or 2010,' Tor Svensen, chief operating officer of DNV Maritime, said.

'But then we come to a crossroads because the replacement of tankers will have taken place and we are also getting a lot of new capacity coming on stream from China and other countries, so capacity may be very high compared to demand,' he added. Mr Svensen says he is confident that barring any shocks to the world economy and continuing growth of China's economy, it should be a soft landing for the shipping industry.

The Oslo-based executive, who was in Singapore last week to celebrate the 25th anniversary of DNV Petroleum Services (DNVPS), said the group aims to increase its focus on its burgeoning consulting business.

'We have started increasing our efforts to utilise our competence in a more consultative capacity because we have a unique set of competencies in the organisation which we can help to improve the operational performance and try to make the technical processes in shipping companies more efficient,' he said.

In the case of DNVPS this includes a new service called Total Fuel Management Solutions which, according to DNVPS managing director Per Holmvang, takes the focus beyond simply fuel testing to knowledge-based risk management.

Working with other DNV departments, DNVPS is seeking to assist ship operators to optimise their fuel investments, manage the technical risks involved in consuming different types of fuels and comply with environmental regulations.

'This is what will differentiate DNVPS from our other competitors,' said Mr Svensen, adding that 'it's basically organising the knowledge in a more intelligent way and feeding it back to the owners and operators'.

One of the key areas that is generating interest is maximising fuel efficiency, particularly with fuel prices upwards of US$300 a tonne comprising as much as 50 per cent of a shipping line's operating costs.

'We are seeing considerable interest among shipping companies now to really address fuel economy and energy efficiency,' Mr Svensen said. 'If you can save 2, 3 or 4 per cent on fuel, you're saving a lot - it's money in the bank.'

Following the last major energy crisis in the late 1970s, the company did a significant amount of research on fuel economy, but the return of relatively cheap fuel saw that research shelved.

'But now we're taking it out again because it's still relevant even after so many years,' Mr Svensen said.

Currently DNVPS boasts a 70 per cent market share in fuel testing globally.

The maritime business which accounts for 35-40 per cent of DNV's business, and comprises largely of class-related activities, fuel testing and consulting services is expected to remain steady, buoyed by the ongoing surge in new building.

Currently DNV has about a 19 per cent share in new building classification, making it the world's No 2 in terms of gross tonnage - behind Japan's Class NK. Asia is set to remain the focus of the group's expansion plans as it builds up its presence in up-and-coming shipbuilding nations such as China, Vietnam and India. 'In China we have expanded very fast and it will certainly be our biggest base in the future' with nearly 400 employees currently from only a handful less than a decade ago.

The 400 staff cover maritime, oil and gas and industrial certification, with nearly half the number on the maritime side.

Mr Svensen said he expects an explosive growth in shipbuilding capacity once many of the shipyards currently located in cities are shifted out to new greenfield sites, which will increase capacity by a factor as much as 10 times.

Many of these will be on stream within the next five or six years, he added.

'China has the ambition and ability to take over as the major shipbuilding nation, but I'm sure Korea and Japan will fight back,' he said.

SPH -DBS Vickers

2006-02-22T01:40:00.000-08:00

Singapore Press Holdings
January AdEx numbers not encouraging
Nielsen Media released their January advertising expenditure figures, which indicate
that SPH’s display advertising volume in January fell by 7.3% from last year. These
figures also indicate that for the first 5 months of SPH’s fiscal year, display revenue
has declined by 3.3% yoy, which may be due to competition from Today, which has
been growing its market share. We maintain our SPH estimates for now, where we
expect c.4% growth in newspaper revenues, as SPH tends to do a little better than
Nielsen Media’s figures, but point out that core newspaper growth is at best in the
mid-single digit region. Maintain HOLD with a target price of S$4.44.
• Weak January AdEx numbers for SPH. Nielsen Media released their Jan 2006 advertising
expenditure figures, which indicate that SPH’s display advertising volume in January fell by 7.3%
from last year. The figures also indicate that for the first five months of FY06, SPH’s display
advertising volume (Sep 05 to Jan 06) has fallen by 3.3% y-o-y. In contrast, Nielsen Media
numbers indicate that volumes for Today in January rose by 1% yoy and by 12.6% for Sep
05 to Jan 06 over the same period 12 months ago.
• Competition from Today may be hurting SPH’s display AdEx. We believe the weakerthan-
expected AdEx numbers for SPH may be due to competition from Today, as volumes
for Today are performing better than SPH. The decline could also be partly attributable to
the cessation of Streats, which took place in Jan 2005. We maintain our estimates for now
as SPH usually does better than Nielsen Media’s estimates (as in 1Q06). However, we do
believe the numbers indicate that we should not expect more than mid-single digit growth
for the Group’s core newspaper business.
• Maintain HOLD, TP S$4.44. This is based on sum-of-parts valuation: S$3.05 for the core
Newspaper business (12x FY07 EV/EBITDA for Newspaper earnings), S$1.10 for SPH’s
properties and S$0.68 for the Group’s cash and investment holdings, less debt of c. S$0.39. We
maintain HOLD for SPH, which is supported by an attractive net yield of 5.6%

Detail

StarHub - A New World by DBS Vicker

2006-02-22T01:29:00.000-08:00

StarHub’s FY05 results on 23 Feb will announce its first year of profitability since
listing. Momentum continues to be strong, with FY06 EBITDA and EPS projected to
grow by 12% and 26% (net of legal liabilities), respectively. The mobile division
operates in a benign competitive environment, while revenue from the provision of
broadband services continues to grow strongly. The wild card here remains the
cable TV unit, which we believe is still unprofitable. Despite competition from IPTV
operators, we see StarHub’s cable TV’s operating leverage starting to improve as
subscriber growth, although not spectacular, has been steady for the past three
years. With cash flow highly visible, and an underleveraged balance sheet, there is
a possibility of a bumper payout for FY06. Maintain Buy with a 1-year target price of
S$2.48, up from S$2.44 previously.
• Launch of the DVR set top box. StarHub should be announcing the launch of the DVR STB
sometime soon. While a direct purchase method has been suggested, we find it unlikely as this
will mean upfront expensing of the STB, and at US$339 per box, take up rate might be low. With
a rental/subscription scenario, the STB is more likely to be part of the value proposition offered
by StarHub that could potentially result in increased customer loyalty, lowered churn, and
hastened digital conversion.
• Low threat posed by M2B World. M2B’s content focus is markedly different from StarHub’s,
thus we do not see them competing for the same customers. As such, the threat posed by M2B
to StarHub’s current subscriber base seems minimal.
• Share overhang an opportunity to accumulate. We have factored in S$40m for legal
damages in FY06 on top of the provisions StarHub made in FY04, and we do not think the
actual damages will exceed our expectations. The stock has been hit hard the past week as the
moratorium on MediaCorp’s remaining 7.6% stake is due on 9 Apr, and the market played out
the share overhang angle. We believe price weakness could persist in the short term,
representing a good opportunity to accumulate on weakness. Maintain BUY, with 1-year target
price of S$2.48.
For Full Report,
Click here!

Shipping News - Frontline & Cosco

2006-02-21T02:57:00.000-08:00

Published February 21, 2006

Frontline Q4 profit dives as shipping rates slide
(SINGAPORE) Frontline Ltd, the world's second-largest oil-tanker company, said fourth-quarter profit fell the most since 2002 and cut its dividend as an expansion in the global fleet reduced shipping rates.

Frontline's tanker: The next few months are going to be even more challenging
Net income declined 73 per cent to US$133.8 million from US$498.2 million a year earlier, Frontline said in a statement. It was the biggest drop since Q3 2002.

Sales slipped 34 per cent to US$430.4 million. The quarterly dividend was cut to US$1.50 a share, from US$3.50.

Frontline, led by Norwegian billionaire John Fredriksen, accepted lower freight rates as tanker supplies grew faster than oil output.

The shipowner runs most vessels on single-voyage contracts for companies such as Exxon Mobil Corp and BP Plc, making it more sensitive to rate changes than rivals.

'Frontline did pretty well considering the weakness in the tanker market,' said Bjorn Knutsen, an analyst at First Securities ASA in Oslo.

'The next few months are going to be even more challenging because of the seasonal downturn in oil demand as well as geopolitical risks.'

The world fleet of supertankers grew 5 per cent by capacity last year, cutting revenue for transporting oil from the Middle East to Asia by 52 per cent. 'We are very optimistic for rates in 2006 and they maybe close to or even better than in 2005,' Oscar Spieler, Frontline's CEO.

Frontline was expected to report profit of US$130 million, according to the median estimate in a Bloomberg News survey of seven analysts.

The global fleet of very large crude carriers, or VLCCs, totalled 474 tankers of 138.3 million deadweight tons at the end of last year, up 5 per cent by capacity from a year ago, according to London-based shipbroker Simpson, Spence & Young. Revenue for VLCCs operated by companies like Frontline averaged US$84,567 a day in the fourth quarter, compared with US$174,933 a year earlier, according to London-based Drewry Shipping Consultants Ltd.

The figure is for transporting crude from the Middle East to Japan, after shipowners have paid costs like fuel and port fees.

Daily output by the 11 members of the Opec averaged 30.1 million barrels of oil in Q4, according to Bloomberg data.

Frontline operates 42 VLCCs, each able to carry 2 million barrels of oil, and 35 suezmax tankers that can haul one million barrels each. Most of the ships are leased from Ship Finance International Inc, which Frontline spun off as a separate company in 2004.

Income from Frontline's VLCCs fell 41 per cent to US$65,800 a day in Q4, after deducting voyage-related costs. Such vessels need US$28,149 a day to break even.

Q4 net income was 81 per cent higher than the US$73.8 million earned in Q3.

Full-year profit totalled US$606.8 million, down from a record US$1 billion in 2004.

'The board expects to deliver strong results for Q1 as well as strong results and solid dividend payments for the full year,' the company said in the statement. 'The tanker market looks healthy.'

Frontline is diversifying from the tanker market to gain from demand for oil rigs and storage platforms. It will convert at least six of its suezmaxes into vessels that carry rigs and other offshore structures. Two vessels are scheduled for conversion by year-end. - Bloomberg

Published February 21, 2006

Cosco Container seeks US$466m loan for vessels

(HONG KONG/SINGAPORE) Cosco Container Lines Co Ltd, the biggest container shipping company in China, is seeking US$466 million to buy eight vessels, a banker who is involved in the deal said.

Bank of China Ltd, BNP Paribas SA, Bank of Tokyo-Mitsubishi UFJ Ltd, ING Groep NV and Societe Generale SA are arranging the 10-year loan, which will be secured by the ships, said the banker.

The arrangers are asking banks to help underwrite US$386 million of the loan on which Cosco Container will pay interest of 51.5 basis points, or 0.515 percentage point, over the London interbank offered rate.

Banks will be offered all-in pricing including fees of 55.3 basis points, the banker said. The remaining US$80 million will be provided by ING and Societe Generale. Banks are asked to respond with their commitments by March 16.

Shanghai-based Cosco Container owns more than 100 container ships with a total capacity of 250,000 20-foot standard containers, according to its website. The company is boosting its fleet even as container rates are estimated to drop by 6 per cent this year as an increase in shipping capacity outpaces demand, according to Drewry Shipping Consultants Ltd of London.

Cosco Container obtained a US$212 million loan in March last year with an interest margin of 60 basis points, according to data compiled by Bloomberg.

Three-month dollar Libor, an average of rates which is set daily by banks and used as a borrowing benchmark, is 4.77 per cent.

The company is planning a US$1 billion initial public offering of shares in Hong Kong this year. It has hired HSBC Holdings Plc and UBS AG to arrange the sale. - Bloomberg

Japanese women turn to stocks as Nikkei rises

2006-02-20T23:03:00.000-08:00

Published February 21, 2006

Day-trading on the rise in Japan

By MARTIN FACKLER

YUKA Yamamoto dutifully quit work to assume her expected role as suburban homemaker when she married six years ago. But she quickly grew bored at home, and when she saw a television programme about online stock investing, she took US$2,000 in savings and gave it a try.

Downside signal: The rising popularity of online trading has coincided with a rally of almost three years in Japan's stock markets. The true test of day-trading will come when bears outnumber bulls
Today, Ms Yamamoto says, she has turned her initial investment into more than US$1 million as a day-trader, scanning her home computer for price movements in stocks, futures and foreign currencies that could lead to quick profits. And by writing books and holding seminars on trading strategies, she has also become a celebrity among homemakers who are investors. She says that she has met thousands of other married women who now play the stock market online, many without their husbands' full knowledge.

Having overcome the country's sluggishness in embracing cyberspace and deregulating discount brokerage firms, day-trading has taken off in Japan, the world's second-largest financial market, after the United States. The number of accounts at Japan's electronic brokerage firms reached 7.9 million last September, up from 296,941 in 1999, when the first such firm opened, according to the Japan Security Dealers Association. That is an impressive gain, even after considering that some traders hold more than one account.

While Japan's business establishment still frowns on this new, rough-and-tumble style of trading, it has exploded in popularity among many who previously played only minor roles in Japan's corporate-dominated economy, particularly young people and women.

'Day-trading is great because everyone is equal, even housewives,' says Ms Yamamoto, an energetic woman in her late 30s who declined to reveal her exact age or to document her trading profits. 'Success or failure depends entirely on how clever you are, and nothing else.'

Internet factor

Analysts say online investors are driving the soaring volume, and volatility, in Japan's resurgent stock markets. Internet trading, which did not exist before 1999, accounted for almost 29 per cent of equity trades in the six months that ended last September, according to the dealers association.

That more than accounts for all the increased trading during the Japanese market's rally. The leading Japanese stock index, the Nikkei 225, has risen about 40 per cent since August.

While all the short-term money sloshing around has helped Japanese stocks snap out of their decade-long slump, it is also creating new dangers, say analysts. Many recall how a similar fad in the United States in the late 1990s ended with many traders suffering substantial losses when the telecoms and dotcom bubble burst. As the bull market turned, over-leveraged speculators dumped their holdings, accelerating and exaggerating the decline in prices.

Something similar happened here last month, though on a much smaller scale, when prosecutors started an investigation of Livedoor, a Web portal company that had been a darling of Internet investors. The news set off an avalanche of sale orders, most placed online, according to securities companies, that shut down the computers at the Tokyo Stock Exchange, the world's second-largest bourse, after the New York Stock Exchange.

Since the Tokyo exchange reopened, Livedoor's share price has been in free fall, dropping more than 90 per cent in three weeks. The authorities in Tokyo filed charges last week against Livedoor's founder, Takafumi Horie, and three other former executives of his company, accusing them of spreading false information to inflate a subsidiary's stock price.

The exchange is racing to update its computers, but many analysts fear similar waves of panicked selling in the future. They also say that the rising popularity of online trading has coincided with a rally of almost three years in Japan's stock markets. It is easy to make money when prices are rising, they say. But day-trading may lose some of its luster in the next bear market. 'The real test will come when the market goes down,' says Yukihiro Yabuki, a managing director for marketing at Matsui Securities, one of Japan's largest online brokerage firms. 'Will they abandon day-trading as soon as things get tough? Do they really understand the risks?'

Trading goes on

So far, Livedoor's fall has failed to dampen enthusiasm for online trading. That popularity is seen in the appearance of televised day-trading competitions and in books with titles like How a University Student Like Me Made 300 Million Yen in Internet Trading.

Looking to win more clients, online brokerage firms have begun setting up trading sites that offer cell phone access, with price charts shrunk to fit palm-sized screens. Brokerage firms say that these sites have allowed trading even from taxis or restaurants.

The surge in day-trading has even created celebrities, including its own 'stock idol', a young woman named Maiko Asaba who poses in miniskirts for photographs in day-trading and stock investing magazines next to captions describing her fondness for ice cream and index futures.

'In Japan, every true subculture has celebrities,' says Ms Asaba, 28, a financial researcher and part-time day-trader who keeps a giant teddy bear next to her trading terminal in her cramped Tokyo apartment.

The dream of many day-traders, in Japan and in the United States, is to earn enough to make a living by trading full time. Analysts and traders estimate that only a few thousand people have reached that mark. The rise of online traders, as well as their go-it-alone ethic, has its critics. Many business leaders disdain the stock market as an unsavoury money game, for example, while many others dislike stock trading because of a traditional dislike for greed and the bitter memories from the collapse of Japan's equity bubble in the early 1990s. 'The sight of housewives trading stocks on personal computers undermines the education of children,' says Shunzo Morishita, chief executive of NTT West, a phone company. 'Making money without sweating for it undermines the work ethic.'

Against such attitudes, the biggest reason for the success of online trading here has been its anonymity, analysts say. Traditional brokerage firms scared away potential clients because orders had to placed by phone, or face to face. The Internet allows the Japanese - particularly women - to trade in the privacy of their own homes hidden from the possibly disapproving gaze of neighbours and friends. People 'can trade without being embarrassed', says Mr Yabuki of Matsui Securities.

Ms Yamamoto says that her husband, a university professor, has not objected to her trading, but she says she still has to walk a fine line between her desire to trade and her role as wife and mother. To spend more time with her two small daughters, she has started using trading programs to buy or sell shares automatically at certain prices and has hired a secretary to handle her speaking schedule and appointments with publishers. She says she has written or contributed to 17 books on Internet trading.

Despite the public attention she has received, Ms Yamamoto says, she has yet to reveal the full extent of her earnings to her husband, who insists on paying the family's bills from his modest university salary. 'He still thinks he's in charge,' she says. 'He just thinks I'm going to lose all my earnings, or blow it on clothes.'

Analysts say young Japanese, as opposed to many of their elders, are starting to view the stock market in a much more positive light: as a legitimate way to make money.

'This is a real turning point for Japan,' says Yoshiyuki Sayama, a researcher at the Kinzai Research Institute who has studied online trading. 'Japanese are learning how to take care of themselves financially. They are finally getting a real taste of capitalism.' - NYT

__________________
Another Version

TOKYO: Yuka Yamamoto was a housewife who had given up her career after marriage when she took up online trading to earn pocket money.

Knowing nothing about stocks, she did what bargain-hunting housewives normally do: buy when the price looks low.

"I know by heart that a block of tofu normally costs 100 yen at a supermarket. So if the price is 80 yen I would buy, but if it's 150 yen I wouldn't," Yamamoto, a mother of two toddlers, told Reuters in a recent interview.

"I applied that to stock trading."

Six years later, her initial investment of 750,000 yen ($NZ8641.79) swelled to 30 million yen ($NZ350,000).

Leveraging her success, she has published more than a dozen books and DVDs, written for magazines and offered stock-market seminars.

The advent of internet trading has allowed more women to enter the previously male-dominated world of stock trading, and recent five-year highs in Japanese share prices have lured more investors.

No industry-wide figures are available, but E*Trade Securities Co Ltd, Japan's largest online brokerage, said about 30 per cent of new account signups are now women, up from 24 per cent two years ago.

Overall, women represent a quarter of total account holders, up from 23 per cent.

"Women are entering the stock market at a faster speed than before," said E*Trade spokesman Takeru Suzuki.

"Thanks to the internet, housewives can trade between washing and cleaning."

Second-ranked online brokerage Matsui Securities Co Ltd said female investors account for more than 20 per cent of its account holders, up from 16 per cent a year ago.

The ranks of women who trade through investment clubs grew 25 per cent in the past year to more than 500, according to Aprosis, a three-year-old body that promotes such clubs.

Aprosis' first survey of 68 clubs showed that 52 per cent of their club members are women, and it expects the number of female clubs to grow, as more women are studying the market and preparing to dive in.

"Women are trend-sensitive, and once someone takes action, many others follow suit," said Toshiyuki Ogino, an adviser at Aprosis, which is partly backed by the Japan Securities Dealers Association.

With the Nikkei share average hitting against its highest levels since November 2000, retail investors are flocking to the market.

By value, they represent about 40 per cent of all trades on the Tokyo, Osaka and Nagoya stock exchanges, up from about 10 per cent five years ago.

Goldman Sachs said in a report in November that it expects retail investors to shift more of their savings into stocks and investment trusts.

Goldman said such investments now account for 11 per cent of Japan's overall household financial assets, but that figure could rise to 22 per cent, about the same as in Germany, resulting in 153 trillion yen ($NZ1.87 trillion) worth of funds flowing into the market.

Other numbers suggest women are better savers than men. Dai-Ichi Life Research Institute said the average woman in her 40s holds about twice her annual income in savings, while an average man in his 40s has only 1.3 times his income in the bank.

As a result, single women including widows own 140 trillion yen worth of financial assets, 10 per cent of Japan's overall financial assets, Dai-Ichi Life estimates.

Some corporations are looking to capitalise on this power of the purse.

Amuse Inc, shopping centre operator Parco Co Ltd and consumer credit firm Credit Saison Co Ltd held their first female-only investor meetings this year and planned to do more.

Yamamoto said women tend to realise the need for money especially after having children, noting that half of the mothers in her daughter's kindergarten class are engaged in stock trading.

"The mothers now talked about companies' earnings and what stocks they bought," she said.

"Before, they just chatted and gossiped about someone."

OUTLOOK - Singapore's StarHub FY net profit 197-205 mln sgd vs loss 52.4 mln

2006-02-20T22:19:00.000-08:00

SINGAPORE (XFN-ASIA) - StarHub, Singapore's second biggest phone firm, is expected to report Thursday robust earnings for the past year driven by its strong broadband segment, cable TV operations, and increased subscriptions to its prepaid mobile services.

Three analysts surveyed by XFN-Asia forecast net profit at StarHub -- the only company that offers voice, broadband and pay-TV services in the city-state -- to range between 197 and 205 mln sgd in 2005 versus a loss of 52.4 mln in 2004 which was a result of a one-time non-cash tax debit adjustment.

Singapore's mobile phone penetration rate hit 98 pct in December, up from 96.2 pct in November, thanks to brisk demand for prepaid and 3G services, the government said earlier.

Macquarie Securities analyst Ramakrishna Maruvada gave the most bullish profit estimate of 205 mln sgd.

"Among the three listed telcos, we recommend StarHub as the preferred vehicle for exposure to Singapore telecom sector. SingTel is increasingly seen as a proxy to Asian telecoms and our current neutral rating reflects our concerns regarding aggressive competition in Australian mobiles," Maruvada said.

StarHub shares surged 86.4 pct in 2005, outstripping the Straits Times Index's 14 pct gain and dominant Singapore Telecom's 9.7 pct rise.

Maruvada said StarHub stands to benefit from the buoyant operating environment across all its business segments.

"The benign competitive outlook in the mobile segment allows for margin expansion as all three operators pull back on subsidies in the absence of top line growth.

"The broadband industry is growing robustly and the current duopoly market structure provides enough room to grow without resorting to destructive competition," he said, adding that the company is also benefiting from its move to a digital platform in the cable TV segment.

Analysts said StarHub is likely to return excess capital to shareholders this year through a capital management exercise, since the company has no acquisition plans.

"By the end of 2006, StarHub would have had a few solid quarters of experience in assessing the impact of quarterly dividends on its operational cash flow requirements. As such, we expect management to move towards optimising its capital structure as part its commitment to enhancing shareholder value," Maruvada said.

Citigroup analyst Anand Ramachandran pegs full-year net profit at 197 mln sgd while Credit Suisse First Boston sees 2005 earnings at 204.1 mln.

Going forward, analysts expect StarHub to continue its earnings momentum despite worries that its cable TV revenues might be affected when M2B World, a subsidiary of Nasdaq-listed Amaru, begins its broadband TV services in June.

"We believe that the new competitor, M2B World, serves a niche market in Singapore, especially the Chinese heartlanders, with 60-80s Chinese drama serials and B-rated movies. Moreover, the mode of transmission is through the Internet protocol," DBS Vickers Securities said in a recent client note.

"The threat is limited in the medium-term. M2B World does not have any sports or news channels. We believe M2B World's competitor is a free-to-air TV content provider."

StarHub Info

DBS Vickers Securities

2006-02-20T19:41:00.000-08:00

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

Trading in the s'pore market

2006-02-20T02:10:00.000-08:00

BT Published February 20, 2006

IN contrast to options investors who prefer the diversity and liquidity of the US market, a mid-twenties insurance executive, who prefers to be known as John, trades only one type of structured warrants on only one stock listed on the local bourse. John trades CapitaLand call warrants, and has been doing so for the last six months. Again in contrast to other options traders who manage their risk by refusing to commit all their capital on any one trade, John usually sweeps in with all his capital on his trades.

So far, he has not done too badly. Although he lost over $6,000 in the first two months of trading, John has since rebuilt his capital base of accumulated savings and trading profits to about several thousand dollars. He can make several hundred to two thousand dollars in a day and loses on one out of every 10 trades.

John manages his risk by minimising his exposure to the stock price. This means he tries not to hold the warrants overnight or over a weekend, as random events or other traders might move the stock price while he is not watching the markets.

His trading strategy is to remain as liquid as possible, sweeping in with his capital to take advantage of a rise in the stock price. For example, he observes that CapitaLand's stock price rarely goes up by more than eight to ten cents in a single trading day. Thus if he is holding a position, after the price of the stock has risen by a certain amount - thus causing the price of the call warrant that he holds to rise, though not necessarily by the same amount - he takes the profit and exits the position. Even though the stock may continue to rise, John says the remaining upside is limited and is not worth taking the risk that the price might reverse.

'There is a group of people watching and trading the stock - people whom I don't know but can tell what they're feeling. Its like in the army, if you are with a group of people long enough, you become aware of how they behave.'

- John

Conversely, when the price starts to fall, once it falls by a certain amount, he may liquidate his position to prevent the falling price from further reducing his capital. Then when he thinks the price has bottomed out, he re-enters to buys back the warrants and recovers his earlier losses as the stock and warrant price begins to rise.

Quick trades

In this way, John says he has traded up to $100,000 in a single day, simply by rapidly moving his entire capital in and out of the market. Defending his trading method, he says: 'The amount I have is so small anyway, it doesn't matter to me if I lose all of it! But when I make a profit, I want to make the profit with my entire sum.'

As to how he chose CapitaLand, John says he can better understand and predict the health of a property company. In contrast, manufacturing or other companies depend on other variables like consumer demand that he does not dare to predict. He looks out for events like movements in interest rates or energy prices, terrorism, and political instability, in addition to company specific events and price movements. He also uses sites like Bloomberg.com for financial data.

John thinks that trading depends very much on understanding the culture and mindsets of the consumers and fellow traders. For example, he says, in emerging markets in Asia, the first thing people do when they have money is to buy a home, thus providing a base support for property demand. With respect to trading, he says that the stock market would do well after Chinese New Year. This is because traders had done well in January and they would get together to share triumphant war stories over the holiday, and come back to work bullish for more.

He also says the Singapore market is small enough for a trade of a few million dollars to move prices, and in that way is easier to predict. 'There is a group of people watching and trading the stock - people whom I don't know but can tell what they're feeling. Its like in the army, if you are with a group of people long enough, you become aware of how they behave.' John does not use the sophisticated tools of financial engineers or analysts to support his trades. He eschews complicated technical analysis that he says he does not understand and believes does not apply in the Singaporean market.

Instead, using Microsoft Excel, he devises his own simple charts to track prices and transactions. For example, he relies extensively on three charts - one plots the stock price over time, the second plots the volume of buy or sell trades over time, while the third plots the cumulative stocks being bought, the cumulative stocks sold, and the sum of excess demand or supply.

He is also experimenting with a trial version of Internet Macros, a software that will cut his trading time lags by automatically buying and selling his position the moment the stock price moves within the parameters he has set. He currently has to manually key in his trades online or call his broker.

He interned with an investment house where he had a chance to speak with a well-known trader in Asia. 'The encounter was an important learning experience because when you develop your own way of thinking, you are not sure whether you make sense or not,' John says. 'When one of the best traders says he applies similar principles, it gives you confidence. When you lose, you know it is part and parcel of trading.'

SPH - Credit Sussie Report

2006-02-20T01:25:00.000-08:00

SPH Credit Sussie Report

DBS Vickers Singapore Strategy-Budget Response

2006-02-19T22:46:00.000-08:00

Last week, all eyes were on the Budget that was to be delivered on Friday, 17 Feb.
We said the Budget would be more socially focused as the general election is
around the corner, and we were not expecting any new significant business
stimulus. As it turned out, it was what we had predicted. The Budget was
generous to the people but unfortunately, not to corporate Singapore. Prime
Minister, Mr. Lee Hsien Long, announced an astonishing S$2.6bn in special
transfers, which includes growth dividends; bonuses for Workfare, for national
servicemen and ex-servicemen; and various top-ups for individuals. The total of
special transfers will send the overall budget into a budget deficit of S$2.9bn.
On the corporate front, there were no corporate tax cuts, no tax transparencies for business
trusts, and no removal of withholding tax for institutions investing in REITs. There are,
however, some fine-tuning to certain sectors such as the foreign REITs, Islamic banking,
Maritime and logistics sector, and fund management. Relevant to the equity market will be the
announcement of tax exemption on remittances of foreign-sourced interest and trust
distributions received by S-REITS and the allowance of GST recovery by S-REITS for the
setting up of special purpose companies (SPCs) and the acquisition and holding of overseas
non-residential properties by SPCs. Fortune REIT and Mapletree Logistics Trust should
benefit from this. The other direct beneficiary from the Budget announcement would be
Hyflux as we flagged out last week. The government announced a S$5bn R&D Trust Fund
focusing on three sectors of the Biomedical Sciences sector, the Interactive and Digital Media
sector, and the Environmental and Water Technologies sector.
Given the generous ‘People’s Budget’, vicarious beneficiaries should be the mass retail market
and services. Robinsons, Eu Yan Sang, and the three telcos could benefit from the extra pocket
money that the government is granting to the citizens. Among the telcos, we favour Starhub at
current price levels as the market unfairly punished it last Friday on the announcement of a
competitor to its cable TV. We believe that the new competitor, M2B World, serves a niche
market in Singapore, especially the Chinese heartlanders, with 60-80s Chinese drama serials
and B-rated movies. Moreover, the mode of transmission is through the Internet protocol. As
such, the threat is limited in the medium-term as we believe content is king in cable wars. M2B
World does not have any sports or news channels. We believe M2B World’s competitor is a
Free-to-Air TV content provider.
Looking at the week ahead, there should be a neutral reaction in the equity market to the
Budget. The market appears to be running out of ideas and a directionless market favours
defensive plays such as yield stocks and fundamentally sound companies. We are still positive
on the oil and gas sector and we advise clients to accumulate on weakness. Sembcorp Marine
continues to be our top pick in the sector. We are also still positive on the banks, despite the
announcement of a fourth quarter loss by one of the three banks. We continue to believe that
the net interest margins will continue to expand and loans growth continues to edge up. Our
top pick for banks is UOB. Note that we cannot comment on DBS, as it will be a conflict of
interest if we do so. In our large cap top 5 picks, we maintain our tactically defensive selection
of MIIF, and CapitaMall Trust. We have added StarHub in place of SingTel as the latter had
done well in the past three weeks. In the small caps, we maintain our top 5 picks of Pacific
Andes, Inter-Roller, Darco, Electrotech and China Fishery.
Now that the budget is out of the way, we await the election announcement. Hope you have a
profitable week ahead.

Oil Rises in Tokyo After Militant Attacks Cut Nigerian Exports

2006-02-19T18:43:00.000-08:00

2006-02-19 19:44 (New York)
By Will Kennedy
Feb. 20 (Bloomberg) -- Crude oil rose in Tokyo after rebel
attacks in Nigeria cut exports from Africa's largest producer by
about 20 percent and militants threatened further strikes.
Shell said yesterday it had shut down production of 455,000
barrels of oil per day following three attacks on Feb. 18,
including the seizure of nine hostages employed by a U.S.
contractor. Nigeria ships about 2 million barrels of oil a day.
``The situation in Nigeria is likely to remain volatile for
some time,'' said Dariusz Kowalczyk, senior investment
strategist at CFC Seymour Ltd. in Hong Kong. ``Prices should
rise because of disruptions in supply.''
Crude oil for July delivery rose as much as 1.4 percent to
42,650 yen a kiloliter on the Tokyo Commodity Exchange. That's
equal to $57.36 a barrel. It traded at 42,590 yen at 9:33 a.m.
in Tokyo. The contract rose 1.8 percent on Feb. 17 to 42,060 a
kiloliter. The New York Mercantile Exchange, the world's largest
energy market, is closed today.
The militant Movement for Emancipation of the Niger Delta
said it attacked Shell's Forcados export terminal, the 115,000-
barrel per day EA field and a pipeline in the Chanomi Creek area.
Shell can't say when the Forcados terminal will reopen, London-
based spokeswoman Caroline Wittgen said by telephone yesterday.
``Fresh targets will be hit shortly,'' Jomo Gbomo, a self-
described spokesman for the militants said yesterday in an e-
mailed response to questions. ``There is no shortage of things
to destroy.''

U.S. Supplier

Nigeria, which is the fifth-biggest supplier to the U.S.,
produces low-sulfur, or sweet, crude oil, prized by refiners for
the proportion of high-value gasoline it yields. Shell, based in
The Hague and the world's third-biggest oil company, produces
about half of Nigeria's output.
The Niger Delta movement has targeted Shell installations
after alleging the company allowed an airstrip it operates to be
used for a Nigerian Air Force helicopter attack on villagers in
the region. Shell said it could neither confirm nor deny the
field had been used. The Nigerian government said the
helicopters were used to disable barges engaged in oil smuggling.
``The situation in Nigeria is a major setback for the
global oil market,'' said Gal Luft, executive director at the
Institute for the Analysis of Global Security in Washington.
``This is particularly bad since Nigeria is an important source
of light, sweet crude, the most desirable of all the crudes.''

--Editor: Cottle.

Oil Chart

2006-02-19T04:03:00.000-08:00

Typical Waves & Signals

2006-02-19T02:50:00.000-08:00

Business briefs 2/18: Oil prices leap higher on Nigerian unrest

2006-02-19T02:38:00.000-08:00

Saturday, February 18, 2006

VIENNA, Austria — Oil prices jumped more than $1 Friday and settled near $60 a barrel on supply concerns caused by a rebel leader in Nigeria who threatened to wage war on foreign oil interests.

Light sweet crude for March delivery on the New York Mercantile Exchange rose $1.42 to close at $59.88 a barrel.

Nymex gasoline futures surged by 9.02 cents to end at $1.5026 a gallon. Natural gas advanced by 4.8 cents to settle at $7.182 per 1,000 cubic feet.

A rebel leader, Godswill Tamuno, told the British Broadcasting Corp. that his “Movement for the Emancipation of the Niger Delta” had warned oil companies and their employees to leave the delta before midnight Friday.

The militant group recently attacked two pipelines, which led the market to worry about supplies.

Nigeria, with daily exports of 2.5 million barrels, is Africa’s leading oil producer. It is also the fifth-biggest source of U.S. oil imports.

Senate approves nominees to the Fed

WASHINGTON — President Bush’s nominations of Randall Kroszner and Kevin Warsh to terms on the Federal Reserve board of governors won Senate approval on Friday.

Both men were approved by voice vote as was Edward Lazear, nominated by Bush to be the new chairman of the three-member White House Council of Economic Advisers.

The selections of Kroszner, an economics professor at the University of Chicago, and Warsh, an economic assistant to Bush at the White House, will bring the Fed’s seven-member board up to full strength.

The two join Ben Bernanke, who took over on Feb. 1 as the new Fed chairman, succeeding Alan Greenspan, as the most recent additions to the Fed board.

Lazear, a business professor at Stanford University, will take the Council of Economic Advisers post held by Bernanke before he succeeded Greenspan at the Fed.

Icahn reported backing down from Time Warner

NEW YORK — Financier Carl Icahn is scaling back his drive to shake up Time Warner Inc., and apparently abandoning efforts to seek control of the giant media company, The Wall Street Journal reported Thursday.

The newspaper, citing unnamed people familiar with Icahn’s plans, said Icahn would nominate only five directors at Time Warner’s next annual meeting, not enough to ensure control, amid signs that the dissident investor could be near some kind of an agreement with the company.

Icahn is allied with a group of investors who collectively own slightly more than 3 percent of Time Warner’s stock. Last week the investment bank Lazard Ltd. released a report Icahn had commissioned calling for the breakup of Time Warner into four separate entities.

China, Iran near plans to develop oil field

SHANGHAI, China — China and Iran are close to setting plans to develop Iran’s Yadavaran oil field, according to published reports, a multibillion-dollar deal that comes as Tehran faces the prospect of sanctions over its nuclear program.

The deal is thought potentially to be worth about $100 billion.

According to Caijing, a respected financial magazine, a Chinese government delegation is due to visit Iran as early as March to formally sign an agreement allowing China Petrochemical Corp., also known as Sinopec, to develop Yadavaran.

The Wall Street Journal also reported in Friday’s editions that the two sides are trying to conclude the deal in coming weeks before potential sanctions are imposed on Iran for its nuclear ambitions. The report cited unnamed Iranian oil ministry officials familiar with the talks.

In exchange for developing Yadavaran, one of Iran’s largest onshore oil fields, China would agree to buy 10 million tons of liquefied natural gas a year for 25 years beginning in 2009, the Caijing report said, citing Sinopec board member Mou Shuling.

— From news wires

The Edge on Global Voice (Feb 20 -26)

2006-02-19T00:26:00.000-08:00

BUDGET 2006 Incentive

2006-02-18T07:58:00.000-08:00

BT
Published February 18, 2006
By DONALD URQUHART

SINGAPORE'S shipping sector got a boost in yesterday's Budget, with new incentives to attract ship-owning and operating companies, as well as a new move aimed at growing ship financing activities here.

"SMa strongly welcomes initiatives that will boost the export competitiveness of manufacturing SMEs... However, SMa is disappointed that there is no reduction in the present level of corporate taxes. SMa would like more incentives in the area of taxation. For example, an SME could be exempted from paying taxes in the first few years of its start-up.'

While noting that Singapore's business infrastructure and connectivity are key strengths for the maritime and logistics industries here, Prime Minister and Finance Minister Lee Hsien Loong said: 'We must attract more international ship-owning and ship-operating companies to set up operations in Singapore.'

To do this requires support from a range of services that cover the entire maritime and logistics value chain, including financing, he said. To encourage the development of ship financing activities in Singapore, the government is introducing a Maritime Finance Incentive (MFI).

Under this, tax exemption will be granted on qualifying income of ship investment vehicles and a 10 per cent concessionary tax rate will apply to qualifying income of ship investment managers.

MFI status will be granted from March 1, 2006 to Feb 28, 2011 for a period of not more than 10 years. The Maritime & Port Authority of Singapore will announce further details by June 2006.

The existing Approved International Shipping (AIS) incentive has also been given a boost to 'entrench' shipping companies in Singapore, by allowing them to renew their incentives for a third period of 10 years, lengthening the maximum period of incentive from 20 to 30 years.

AIS gives approved shipping firms tax exemption status on certain income.

To lower the compliance cost for traders enjoying the 10 per cent concessionary rate under the Global Trader Programme, the government will remove the need for companies to show that the derivative trades are incidental to physical trades before such income can be considered as qualifying.

Lastly, an automatic GST suspension will be granted for goods removed from zero-GST warehouses by companies qualifying under the Major Exporter Scheme and Approved Third Party Logistics Company Scheme.

More than ever, market in trading mode now

2006-02-18T07:40:00.000-08:00

Published February 18, 2006
BT
By R SIVANITHY
SENIOR CORRESPONDENT

IT would be difficult to avoid cliches when describing the week just past. 'The market ran out of steam', 'traders withdrew to the sidelines', 'stocks alternated between bargain-hunting and profit-taking' and 'investors took their cues from overseas markets' are just some of the awful phrases that could quite easily be trotted out in a weekly summary such as this.

However, we'll avoid venturing into cliched territory and simply say that it was a disappointingly weak five days for the local market, during which the volatility seen strongly suggests that the market has entered trading mode.

As a result, sentiment was easily swayed by sharp movements in other markets, mainly Japan and Hong Kong and, to a lesser extent, Wall Street. Trading was also driven by broking house recommendations and earnings announcements - both positive and negative.

Overall, it was a nervy sort of week that started off soft, turned promising in the middle but relapsed yesterday, probably because late forced selling wrong-footed the hordes of contra players who jumped into the market a week ago. This was confirmed by anecdotal testimony from brokers who admitted that by now, most clients were sitting on net losses for the week.

Still, despite the late pressure that saw the Straits Times Index lose 3.32 points yesterday at 2,431.34 - it had earlier risen as much as 17 points to 2,451 - the gains enjoyed on Tuesday and Thursday were enough to ensure a net rise of 8 points for the week. This performance, however, masks the widespread pain being felt in many areas. Among the stocks worst hit by the sell-off were Hyflux Ltd and the Singapore Exchange (SGX), the former plunging 14 cents to $2.83 and the latter 10 cents to $3.68. Hyflux has now lost 27 cents or 9 per cent in two days. SGX touched $3.92 earlier in the week but has since dropped 6 per cent.

Other favourites to suffer corrections were oil-and-gas play Federal International and commodities firm Olam International. Among the stocks in play were China-based pharmaceuticals while KS Energy's results announcement followed by a proposed bonus issue saw it hold firm yesterday, thus ensuring the oil-and-gas sector had at least one decent performer, the rest having quietly faded from the scene.

Among blue chips, StarHub collapsed 9 cents to $2.04 yesterday - apparently over earnings concerns - while DBS's disappointing results saw it first drop 30 cents to $16.10 before closing at $16.30 for a net loss of 10 cents.

Brokers reported growing unease among clients at the market's inability to respond positively to rises on Wall Street or to extend its Chinese New Year rally. However, because of ample liquidity, downside should be limited.

Brokers' Take

2006-02-18T07:22:00.000-08:00

Published February 18, 2006

BT
DBS Group Holdings
Feb 17 close: $16.30
CAZENOVE, Feb 17

HEADLINE Q4 2005 net profit (before exceptionals and goodwill) of $384 million (-14 per cent quarter on quarter or q-o-q) came in 13.7 per cent below our forecasts. This was largely due to higher expenses and higher provisioning expenses in the quarter.

If we include the goodwill charge of $1,128 million and exceptional gain on sale of building of $303 million, Q4 2005 net profit would have resulted in a nett loss of -$441 million.

Total revenue of $1,114 million is well in line with our expectations ($1,098 million) but operating expenses of $551 million is 8 per cent higher for the quarter (due to higher all round costs, no surprises here). This translated into operating profit which came in 5 per cent lower than our expectations.

Key negative surprise was the provision expense of $55 million in which non-performing loans (NPLs) worsen from 2 per cent to 2.1 per cent, which were driven by both Singapore (76 per cent of Q4 provisions) and Hong Kong (24 per cent).

This contrasts with our expectation of nett write-back (in line with management's bullish guidance during Q3 2005 results briefing).

Goodwill charge was due to its Hong Kong subsidiary; it amounted to $1,128 million whereby the carrying value of Dao Heng was written down from $10.8 billion to $9.6 billion. This strongly suggests that the operating outlook for DBS in Hong Kong may not be as bullish as previously thought.

DBS posted +0.9 per cent gross loans growth q-o-q. For FY2005, loans growth came in +14 per cent. However, the slowing momentum in Q4 is in line with our view that its prior nine months of strong +17 per cent annualised loans growth was unsustainable.

More worrying, its Q4 results showed q-o-q contraction in lending to key segments of housing loans (-1.7 per cent), general commerce (-1.8 per cent) and individuals (-0.6 per cent). Coupled with the above observation that its net interest spreads have barely moved, we think DBS faces a tough FY2006 ahead.

Non-interest income for the quarter (excluding exceptional items) was down 22 per cent year-on-year, largely on the back of lower trading profits.

Overall, we think there is a high chance that consensus is likely to downgrade the stock, especially with the slowing momentum on the lending front as well as the implied slower growth environment for DBS in Hong Kong.

The counter currently trades at 1.4x P/Book FY06 and we reiterate our 'underperform' on DBS.
UNDERPERFORM

CapitaLand
Feb 17 close: $4.10
MERRILL LYNCH, Feb 16

CAPITALAND has reported FY05 earnings with net profit up 146 per cent to $751 million versus $306 million in FY04. The result was distorted from asset write-downs and from the sale of Premas and the Raffles Hotel operations.

Reported earnings before asset write-downs was $830 million versus $348 million in FY04, and reported earnings from continuing operations was $388 million versus $333 million in FY04. A full-year dividend of $0.18 per share has been declared including a special dividend of $0.12 per share (flowing from the special dividend paid by Raffles Holdings).

The anti-speculative measures introduced by the Chinese government during 2005 have resulted in a cooling in market sales and this has become evident in CapitaLand's results. China residential revenue was down 19 per cent in FY05 and earnings before interest and tax was down 31 per cent. The company remains committed to China long term.

We maintain our 'buy' recommendation on CapitaLand and have upgraded our 12-month price objective to $4.53 per share from $3.58 previously.
BUY

Singapore Press Holdings Ltd
Feb 17 close: $4.32
MERRILL LYNCH, Feb 17

REINSTATING coverage of SPH with 'buy' rating: Our sum-of-the-parts price objective of $4.90 would imply a return of 19 per cent in a 12-month period, including a 5.2 per cent dividend yield. We see SPH as a laggard play, as its price has underperformed the Singapore market by 14 per cent in the past year.

Upside surprise of GDP growth fuels stronger ad spending: A broader ad market recovery would be supported by robust nominal GDP growth in 2006 (Merrill Lynch estimate : 8.8 per cent; consensus: 6-7 per cent). We see SPH as the main beneficiary of ad spending increases in finance, property and retail, and project ad revenue growth of 5.7 per cent in FY06 (7 per cent excluding Streats).

Market overly concerned about competition: TV no longer looks excessively cheap versus newspapers, as TV ad rates have reverted to previous levels. During FY02-04, TV rates were depressed because of MediaCorp's pre-emptive pricing strategy.

We do not believe the tabloid Today and the Internet will significantly threaten SPH's print franchise in the near term.

Special returns from divestment of non-core assets: In FY01-05, the group paid back $1.9 billion in cash to shareholders. We see the possibility of further special cash returns from:

its strong free cash flow; divestment of other non-core assets - Times Industrial Building, the 14 per cent M1 stake and Paragon - if carried out, would free up cash equivalent to a 20 per cent dividend yield, by our estimates.

With limited growth prospects domestically, overseas or cross-media investment could present execution risks. Longer term, we also flag the loss of future earnings streams if SPH sells its non-core assets.
BUY

- Compiled by SIOW LI SEN

OCBC on SingTel

2006-02-18T02:01:00.000-08:00

Singapore Telecommunications Ltd: Better profits driven by associates

Singapore Telecommunications Limited (SingTel) released its 3Q06 results with revenue at S$3.36bn, up 4.2% YoY, but operational EBITDA fell 5.4% YoY to S$1.12bn. Cost escalation was to blame, however, at the underlying profit level, SingTel's results were much better at S$778m, +4.1% YoY, and beating market estimate of S$755m by about 3%. The better bottom-line performance was due to SingTel's regional mobile associates' sterling performances, with total contribution of S$412m, up 35% YoY or making up about 40% of Group's pre-tax profit. Telkomsel was the most important contributing member with more than half of the total at about S$230m and Bharti came in at a far second with S$72m. The investment case for SingTel remains its strong cash position and its ability to reward its investors handsomely. We estimate 18 cents dividend is possible. Finally, we see SingTel as a potential laggard play and could re-rate if market continues to rise. We maintain our BUY rating and fair value of S$2.88. (Winston Liew)

NOL joint venture CMA Logistics seeks HK listing

2006-02-17T03:04:00.000-08:00

February 17, 2006, 11.37 am (Singapore time)

BT
SINGAPORE - Neptune Orient Lines Limited (NOL) announced on Friday that its joint venture company in China, CMA Logistics, is seeking a listing on the Growth Enterprise Market (GEM) of the Stock Exchange of Hong Kong.

CMA Logistics proposes to offer by way of placing to professional and institutional investors 55,000,000 shares in the Company, with the offer price expected to be in a range between HK$2.30 and HK$2.70 per share.

CMA Logistics provides logistics services mainly for car manufacturers and car components suppliers in China. Its services range from the provision of supply chain management services relating to car components and parts to the delivery of finished vehicles. -- REUTERS

Japan economy races ahead on broad-based growth

2006-02-16T18:25:00.000-08:00

By David Turner in Tokyo
Published: February 17 2006 01:49 | Last updated: February 17 2006 01:49

Japan’s economy raced ahead at the end of last year according to official figures on Friday, far surpassing the strong growth seen in the US.

The news heightened expectations that the Bank of Japan will end its quantitative easing policy soon – a prelude to raising interest rates. A growing number of economists now believe the central bank will end quantitative easing in April, before pushing for an interest rate increase a few months later. For many, Friday’s growth figures confirmed that view.

Gross domestic product in October to December grew 5.5 per cent in real terms on an annualised basis, and 1.4 per cent quarter on quarter. The US GDP grew by an annualised 1.1 per cent in the same period.

The Cabinet Office also announced at the same time that the economy grew 2.8 per cent in 2005 as a whole – its fastest pace since 2000.

The growth was broad-based. Private sector consumption rose 0.8 per cent, boosted by higher employment and wages. Workers’ total cash earnings, including wages, overtime and bonuses, rose for the first time in five years.

Investment by companies continued to grow rapidly, as companies became more confident about the future. Private-sector capital spending was up 1.7 per cent.

But exports were also strong. External demand – exports minus imports – contributed 0.6 percentage points to the GDP growth figure.

The Japanese government responded in its usual way to continuing strong economic news, by urging BoJ not to change monetary policy too hastily. Sadakazu Tanigaki, finance minister, said mild deflation continued.

Many private-sector economists agree with the government’s cautious stance, arguing that interest rates should not rise before the end of the year to avoid choking off recovery. There is also a popular view that broad-based deflation in the economy has not yet been conquered – another reason not to raise interest rates.

Data suggest foreign retreat from Japan market

2006-02-16T15:05:00.000-08:00

Published: February 16, 2006
Overseas investors were net sellers of Japanese shares last week for the first time since September, hightening fears that foreign interest in the Japanese market may have peaked.

Strong buying by foreign investors was the primary reason for the sharp rise in Japanese stocks last year. But in the week ending February 11 foreigners sold a net Y252.9bn ($2bn) in Japanese shares, the highest amount since early June.

They are also likely to be net sellers this week, as figures of of daily orders placed with large foreign securities houses suggest overseas investors have continued net selling every day so far this week.

Foreigners have not been net sellers of Japanese shares for two consecutive weeks since April, before last year's stock market rally began in earnest.

Fears that foreigners may be leaving the market were sparked when Morgan Stanley declared last week that the Japanese equity market rally had come to an end and advised clients to reduce Japan weightings by a third. The market dropped sharply the next day.

Thursday's data from the Ministry of Finance raise concerns that the market may lack of new driving forces. Nervousness that the valuations of Japanese shares may be too high has made the market jumpy since the beginning of this year.

Japanese shares showed a gentle rise on Thursday. But real estate – a sector pushed up sharply over the past year largely by foreign buying – was down 2 per cent on the day by early afternoon.

The Nikkei 225 closed on Thursday morning at 16,044.11, down 4.2 per cent from the end of December – although it still remained 39.7 per cent higher on the beginning of 2005.

STI

2006-02-16T14:50:00.000-08:00

Thursday, February 16, 2006

Evening
The Singapore market rebounded from yesterday’s selling, aided by the gains in the US markets yesterday and the positive closing in regional markets today. The STI closed 10 points higher to 2434.66, after early gains were chipped away by profit taking. Volume was slightly lower at 1.13b shares worth S$1.07b, with 313 gainers and 258 declines.

Star Pharmaceutical, which was listed yesterday, continued to chalk up gains. The stock closed 6.5 cents higher to $0.52 with 64.5m shares traded. Other top volumes were StatsChipPac ($1.13, +5.0 cents, 24.6m), Celestial NutriFoods ($0.90, +3.5 cents, 23.3m), MediaRing ($0.29, +1.5 cents, 21.1m) and China Essence ($0.555, +1.5 cents, 20.2m).

SIA was the top gainer, benefitting from its strong traffic data for January. The stock added 40 cents to $14.10 and SIA200 rose 40 cents to $14.20. Other top gainers were DBS ($16.60, +40 cents), OCBC 4.5% NCPS ($102.30, +20 cents), F&N ($18.40, +20 cents) and UOB ($14.60, +10 cents).

Singapore Land led the losers, shedding 15 cents to 6.25, followed by Thai Prime Fund (US$5.35, -15 cents), Hyflux ($2.97, -13 cents), Olam ($1.52, -11 cents) and Link Reit BNP5/06CW ($0.86, -11 cents).

OPEC lowers '06 outlook on oil demand

2006-02-16T06:13:00.000-08:00

Cartel may continue to trim forecast due to uncertainty surrounding consumption in Asia, North America.
February 15, 2006: 8:51 AM EST
LONDON (Reuters) - OPEC trimmed its forecast for 2006 oil demand growth Wednesday and said uncertainties over consumption in Asia and North America may trigger more cuts as months of near-record prices make themselves felt.

OPEC, supplier of more than a third of the world's oil, said in its monthly report it expects global demand to increase 1.57 million barrels per day (bpd) to 84.64 million. That compares with a projected 1.62 million bpd increase in OPEC's January report.
"The uncertainties surrounding demand growth, particularly in North America and Asia, could result in a downward revision," it added.

The cartel agreed at its last meeting in January to keep output close to a 25-year high to calm high prices that are threatening to hurt economic growth.

At the same time, the world's biggest producer, Saudi Arabia, and its OPEC partners have argued that prices are being driven by issues beyond the group's control -- such as worries that Iran's exports could fall victim to its nuclear dispute with the West, attacks on Nigeria's oil industry and violence in Iraq.

Supplies of crude oil are ample, OPEC says, and any shortages of refined products like gasoline are due to consumer countries' failure to invest in new refineries.

OPEC's latest forecasts supported that view.

The group pitched demand for its oil at 28.49 million bpd, a cut of 200,000 bpd from last month. OPEC's output limit is currently 28 million bpd, excluding Iraq, which has no official quota.

This week, U.S. crude dipped below $60 a barrel for the first time this year and U.S. gasoline hit its lowest price in a year as fuel stocks increased in the world's biggest consumer.

For the first quarter of the current year, OPEC saw demand for its oil at 30.16 million bpd, falling to 27.62 million bpd in the traditionally weaker second quarter.

OPEC pegged third-quarter demand at 27.87 million bpd and fourth-quarter demand at 28.34 million bpd.

OPEC next meets March 8 to chart production policy through spring.

Last week, the International Energy Agency trimmed overall global demand growth to 1.78 million bpd for 2006 from 1.8 million bpd in the previous month's report and left the call on OPEC crude unchanged at 28.6 million bpd

Singapore Raises 2006 GDP Forcast to 6%

2006-02-16T03:55:00.000-08:00

Singapore Raises 2006 GDP Forecast to as Much as 6% (Update)
Feb. 16 (Bloomberg) -- Singapore's government raised its 2006 growth forecast to as much as 6 percent after the economy expanded faster than economists expected in the fourth quarter on exports of electronics and drugs.

The prediction, released in a trade ministry report today, compares with an October estimate of as much as 5 percent and a revised 6.4 percent rate for last year. The economy expanded at a 12.5 percent annual pace in the fourth quarter, beating the 11.8 percent median forecast of 10 economists in a Bloomberg survey.

Rising demand for digital music players and cell phones is swelling orders for companies such as Stats Chippac Ltd. and supporting Asia's export-driven economies including Singapore, Taiwan and Malaysia. Prime Minister Lee Hsien Loong plans to extend tax breaks and incentives to lure S$8.5 billion ($5.2 billion) of manufacturing investment this year to sustain growth.

``The higher growth forecast for 2006 is definitely achievable,'' said Leslie Khoo, an economist at Forecast Singapore Pte, a unit of London-based economic-research company 4Cast Ltd. ``Global demand for chips and other electronic products will underpin Singapore's growth this year.''

The benchmark Straits Times Index rose 0.4 percent to 2434.66 at the 5:05 p.m. market close in Singapore. The stock market measure has risen 3.7 percent this year, after gaining 13.6 percent in 2005.

Malaysia's economic growth in 2006 may exceed the central bank's forecast of as much as 5.5 percent expansion, Reuters reported Jan. 25 citing Governor Zeti Akhtar Aziz. Taiwan's statistics bureau on Feb. 23 may raise its 2006 growth forecast from 4.08 percent, the Commercial Times reported this month.

Electronics Demand

``The outsourcing trend is continuing unabated,'' said Chief Executive Officer Tan Lay Koon at Stats Chippac, which tests and packages chips for digital music players made by companies including Sony Corp. ``People want everything on the go from handsets to Ipods.''

Singapore's exports rose about 18 percent in December from November, the fastest pace since the government began reporting seasonally adjusted data in January 1999, as pharmaceutical shipments increased almost fivefold and overseas sales of electronics rose. The government forecasts as much as 7 percent export growth this year following an 8.2 percent gain in 2005.

Today's growth figures were revised from the government's Jan. 3 estimates to include December's data and reflect a change in the base year for Singapore's national accounts from 1995 to 2000. The government on Jan. 3 estimated the economy grew at a 9.7 annual pace in the fourth quarter.

After the rebasing, Singapore's 2004 economic growth rate was revised to 8.7 percent from 8.4 percent, the report showed.

Manufacturing

From a year earlier, Singapore's S$193 billion economy expanded a revised 8.7 percent in the fourth quarter, today's report said. That was the fastest pace in six quarters.

``The main reason for the higher fourth-quarter numbers was the manufacturing sector,'' said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore.

Manufacturing, which accounts for a quarter of Singapore's economy, gained a revised 14.2 percent in the fourth quarter from a year earlier, accelerating from 13.1 percent in the third.

Singapore-based Stats Chippac, the world's fourth-largest provider of chip-testing and packaging services, posted its first profit in six quarters in the three months to Dec. 31.

Computer Chips, Drugs

Chartered Semiconductor Manufacturing Ltd. reported its first profit in five quarters on demand for chips used in products such as Microsoft Corp.'s Xbox 360 game system. Sales almost doubled in the fourth quarter, and the Singapore-based company forecasts a profit this quarter.

Manufacturing is also expanding as government tax breaks for drugmakers prompt companies including Novartis AG and GlaxoSmithKline Plc to increase investments.

Switzerland-based Novartis last year started building a S$310 million drug production facility in Singapore. GlaxoSmithKline, Europe's biggest drugmaker, last year unveiled plans to build a S$115 million research and development facility.

Rising employment and consumer spending are also aiding economic growth.

Singapore's jobless rate fell to 2.5 percent in the fourth quarter, the lowest in 4 1/2 years. A total 110,800 jobs were added last year, the highest since 1997.

The city-state has benefited from rising travel demand, helped by a recovery in global tourism and the emergence of discount carriers in Asia.

Tourism

Singapore's visitor arrivals rose 7 percent to a record 8.94 million last year, boosting hotel revenue and retail sales.

Services gained a revised 7.2 percent from a year earlier in the fourth quarter, more than the 7 percent gain estimated on Jan. 3, today's report showed.

Steady economic growth in the U.S. and China, the second- and third-biggest markets for Singapore's exports after the European Union, should augur well for the city-state's economy, economists said.

The U.S. economy expanded 3.5 percent in 2005 and growth may average 3.4 percent this year, according to a Bloomberg survey of economists from Dec. 23 to Jan. 9. China's economy grew 9.9 percent last year. The International Monetary Fund forecasts the world economy to expand 4.3 percent in 2005 and 2006.

``If the U.S., China and the rest of the world continue to grow steadily, then the manufacturing sector should continue to do reasonably well,'' said Song Seng Wun, an economist at CIMB-GK Research Pte in Singapore, who forecasts 7.1 percent growth in Singapore this year.

To contact the reporters on this story:
Shamim Adam in Singapore sadam2@bloomberg.net;
Andrea Tan in Singapore at atan17@bloomberg.net
Last Updated: February 16, 2006 04:26 EST

OCBC declines to confirm talk of stake in Vietnam bank

2006-02-16T03:39:00.000-08:00

By Loh Kim Chin, Channel NewsAsia

SINGAPORE : OCBC has declined to confirm reports it is buying a 10 percent stake in the Vietnam Joint-Stock Commercial Bank for Private Enterprises, or VP Bank.

But Singapore's third largest bank told Channel NewsAsia it will seek international growth by focusing in ASEAN countries outside Singapore and Malaysia.

In line with the strategy, it is constantly looking for growth opportunities in the region.

According to a Dow Jones Newswires report, OCBC will become the second foreign investor in the privately owned VP Bank, after UK-based Dragon Capital.

The Viet bank did not provide financial details or a timetable for the acquisition deal. - CNA /ct

Goldman Sachs Research on NOL

2006-02-16T03:26:00.000-08:00

The Financial Times reported that NOL may apply for a license to operate rail freight in India. NOL has
not commented officially. License holders will get partial/full access to rail routes, which used to be a
monopoly controlled by Container Corp of India (CONCOR) that ended on Jan 6. We would view such
an infrastructure investment positively, especially in a potentially high growth market like India.
Container shipping is about supply chain management: given increased land-side congestion around
the world, liners that control these assets (terminals, rail, trucks, warehouses, etc) will benefit eg gain
access to higher-yielding customers. We believe the associated capex would not be overwhelming. We
are adjusting down our 2006 and 2007 EPS forecasts by 7.6% and 12.9% respectively to US$0.43 and
US$0.30. We also adjust our target px to S$2.75 (1.3X 06 book, 1X 06 adjusted book) from S$3.55 (1X
06 P/B) to reflect the capital reduction exercise. We rate NOL IL. Risk: a severe global recession.
Forecasts and valuation
Net Income EPS EPS Growth P/E EV/EBITDA Div. Yield Fiscal year ended US$ mn US$ % X X %
12/03A 428.8 0.35 226.2 4.4 3.0 --
12/04A 942.7 0.65 83.5 2.4 1.8 468.8
12/05E 811.8 0.57 (12.8) 2.8 2.4 38.6
12/06E New 624.0 0.43 (24.2) 3.7 2.9 5.5
12/06E Old 675.3 0.46 -- -- -- --
12/07E New 428.9 0.30 (31.3) 5.3 4.2 2.8
12/07E Old 492.5 0.34 -- -- -- --
Source: Company data, Goldman Sachs Research estimates
• India: an important growth market where development has been hampered by infrastructure
constraints. Currently, we estimate India accounts for only 2% of global container movements.
India's share of world exports was only 0.9% in 2004. India's cost of moving cargo is among the
highest in the world at 11% of landed cost, versus the global average of 6%, according to a Drewry
report. For instance, Tata Iron & Steel's figures shows that rail cost (tonne/km) in India is 3X those in
China. This is largely a function of underinvestment in infrastructure. Inland transportation is
important in India, since a large part of manufacturing is located far inland, as opposed to China
where the key manufacturing zones are along the coast. Yet there has been insufficient investment
in railtracks, wagons, warehouses, and so forth. CONCOR used to control the movement of all
containers in India, but its monopoly was ended on January 6.
• New policy sets low entry barriers, levels playing field with CONCOR. The salient features of
the new rail policy include: 1) Rs500 mn registration fees for the arterial Mumbai-Delhi route (which
automatically entitles the operator to other routes connecting the port and hinterland); 2) Rs100 mn
for each of the other routes; 3) minimum networth / revenue criterion of Rs1 bn; 4) no limit on number
of trains; 5) market determined end-user pricing; 6) first come first served basis of dispatch of
Neptune Orient Lines (NEPS.SI) February 15, 2006
Goldman Sachs Global Investment Research 2
container trains; 7) compulsory ownership or access to rail-linked inland container depots (ICD); 8) the operator must procure its own
rolling stock (wagons); and 9) 20-year registration period.
NOL's interest in India has been long-known. NOL's interest in Indian infrastructure projects was first reported in a May 2004 interview by
Singapore's Shipping Times with APL CEO Ron Widdows. At that time, he had indicated interest in investing in India's rail network, possibly
working with CONCOR. The license (based on more recent news reports eg Singapore Business Times) costs between US$2-11.5mn
(depending on whether partial or full access). Others reportedly applying for the license include Pipav Rail, Maersk and NYK. If it does get the
license, NOL's key investments would be in inland container depots (ICD) and railcars. We believe NOL currently has sizeable market share
on high-yielding outbound container cargo from India e.g., textiles. Nonetheless, we estimate that India still makes up less than 10% of NOL's
Asia / Middle East total revenue. Hence the Indian growth opportunity is large since: 1) NOL could win more market share; 2) the market or
"total pie" is also growing quickly.
Capex involved not prohibitive. We estimate that a new entrant would need to invest around Rs2.5bn (US$57mn), assuming it targets 11%
IRR and 5% market share. The calculations are detailed in Exhibits 2 and 3.
Changing target price to S$2.75 to reflect capital reduction. Due to NOL's capital reduction and special dividend payment (S$0.92/share)
that was announced in December 2005, we are adjusting our target price from S$3.55 (1.3X 2006E P/B) to S$2.75. This would imply the
stock trades at 1.3X 2006E P/B, which may seem expensive since at the peak of the cycle in 2004 NOL traded around 1.4X forward book
value. The 2006 book multiple has become more expensive because the capital reduction led to a sizeable decline in 2006 book value. If the
2006 base case book value is adjusted to include the capital reduction, then the implied 2006E target P/B multiple would be 1.0X. Our
S$2.75 target price also implies that NOL would trade at 1.1X 2007E P/B. Furthermore, we believe our target price is supported by a 5.9%
dividend yield in 2006 (based on minimum guided 20% payout ratio, ie not factoring in a further special dividend), as well as ROE of 41% in
2006 and 23% in 2007. Arguably the ROE is boosted by the capital reduction (which reduces Equity), but if adjusted the level is still attractive
nonetheless.
EPS reduction due to lower interest income. In addition, we are adjusting down our 2006 and 2007 EPS forecasts by 7.6% and 12.9%
respectively to US$0.43 and US$0.30. This is primarily due to lower interest income: before the capital reduction we had forecast NOL to be
strongly net cash positive. We now forecast its new 2006 and 2007 net debt/equity ratio to be 40% and 20% respectively, which is where the
regional average is.
Goldman Sachs acknowledges the role of Shilpa Krishnan of Kotak Securities in the preparation of this note.
Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is
responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies
and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report: Julie Lim, Jean-Louis Morisot.
Exhibit 1: Indian railways: registration fees structure on various routes
Export-import rights Domestic rights Bonus Reg fees (Rs mn) Reg fees (USD mn)
Cat I All-India
license
JN Port / Mumbai Port to National capital
region and beyond
All domestic traffic between these routes Any other port to any other
destination
500 11.4
Cat II JN Port / Mumbai Port to any route other
than NCR
All domestic traffic other than Cat I 100 2.3
Cat III Pipavav, Mundra, Chennai / Ennore,
Vizag and Kochi - hinterland
All domestic traffic other than Cat I 100 2.3
Cat IV Kandla, New Magalore, Tuticorin, Haldia /
Kolkata, Paradip and Mormugao to
hinterland
All domestic traffic other than Cat I 100 2.3
Note: Assume Rs/USD exchange rate of 44.

We also adjust our target px to S$2.75 (1.3X 06 book, 1X
06 adjusted book) from S$3.55 (1X 06 P/B) to reflect the capital reduction exercise
Source: Rail Ministry Policy document, Goldman Sachs Research.

CHARTING OIL: Nymex Crude May Bounce From Trendline

2006-02-14T23:52:00.000-08:00

Wednesday February 15, 10:43 AM

By Andrew Torchia
A Dow Jones Newswires Column

SINGAPORE (Dow Jones)--Crude oil has plunged nearly 14% in the last couple of weeks as bearish fundamental factors - mainly the approach of a period of low seasonal demand in the northern hemisphere - have outweighed geopolitical tensions. But technical analysis says oil is likely to rebound soon.

Down at $59.40 in Asian trade on Wednesday morning, Nymex March crude oil futures last night broke below important support at $60.87, the 61.8% retracement of the rise from the November low.

But futures are now close to major support on their uptrend line from December 2004, at $59.00 and rising about 6.5 cents per day. This trendline is very strong and well-defined, having been tested half a dozen times in the last 14 months.

So it would be surprising if the trendline broke quickly - especially since 14-day RSI shows crude at its most oversold since end-2004. This implies a good chance of at least a short-term rebound.

There's immediate, minor underlying resistance at $60.00, but the rebound could easily take crude to the $63.00 area (the 38.2% retracement of the fall from the January peak) in coming days. There are no major resistances before that area.

If trendline support breaks, it will be very bearish, targeting the November low of $55.72 in subsequent days or weeks. But while the trendline holds, risk will be weighted to the upside; at some point the market will decide it's factored in the fundamentals, and technical analysis says the trendline is a logical place for this to happen.

In any case, crude will stay long-term bullish while it holds its uptrend line from September 2003, which now comes in at $52.75.

Business trust to pay higher yields than Reit

2006-02-13T05:40:00.000-08:00

Published February 13, 2006
BT

Prospectus of first business trust expected this week

By SIOW LI SEN

ASIA'S first business trust is likely to pay higher yields than a real estate investment trust (Reit) and DBS Bank has confirmed the imminent listing of the new asset class on the Singapore Exchange.

With Singapore as the only Asian country to have the business trust framework, it is likely to be an attractive venue for regional assets to be listed here, said Steve Finch, managing director of debt capital markets at DBS Bank, which is expected to bring the first business trust to the market.

Business trusts are new income instruments which provides direct access to cash flows generated from its assets which could be in any business.

The assets of the business are held in a managed trust that is beneficially owned by unit holders.

Real estate can also opt to be structured into a business trust, in which case, they will adhere to the regulatory framework of a business trust which, among other things, requires a higher standard of independence on the board of directors compared to Reits.

Assets providing stable cash flows which are suited for structuring into a business trust include infrastructure projects, utilities, transportation and natural resources.

The prospectus of the first business trust is expected to be lodged this week, although Mr Finch would only say it is 'imminent'.

The first business trust to be listed is understood to be a global business worth hundreds of millions of dollars, run by a Singapore company, asset-heavy and producing a steady income stream.

On the prospective yield, Mr Finch said investors should look not only at the current yield but also the likely growth of the business.

'The first Reit started with 6 or 7 per cent and then it was much higher because there was capital gain, so you could see a similar situation with a business trust,' he said.

'You need to look at the underlying asset and judge how dependable the income stream is.'

'It (the business trust) might have a higher yield to compensate for a different type of asset class,' he said.

He said investors are quite comfortable with Reits which have become popular, partly because their assets are highly visible buildings.

'I would say that you would probably expect to see a slightly higher yield than Reits and it also depends on the currency. Depending on what the asset is, depending on what the income stream is denominated in, it may not be in Sing dollars,' he said.

Singapore, being the only Asian country with a business trust framework, is an attractive venue for listing of regional assets, he said.

'There is plenty of opportunities to expand this business. I certainly see substantial ongoing demand for an income product, both from retail and institutional.'

Companies with regional assets will also find the structure attractive to raise capital for their infrastructure, transportation and raw material assets, he said.

Japan shipping lines post Q3 profit falls

2006-02-13T05:14:00.000-08:00

Published February 13, 2006
BT
Japan shipping lines post Q3 profit falls; cut annual forecasts
They face rising container shipping capacity, pressure on freight rates, high fuel costs

(TOKYO) Japan's top three shipping firms have said that a fall in freight rates slashed quarterly profit more than 20 per cent, and surprise cuts in annual forecasts at the two largest firms drove the sector's shares sharply lower.

Rough seas ahead: Kawasaki Kisen reported a 26 per cent drop in third quarter profit to 19.08 billion yen but is maintaining its full year forecast of 91 billion yen, down 16 per cent from 2004/05
After a bumper year on a China-led boom, the three companies - Nippon Yusen KK, Mitsui OSK Lines Ltd and Kawasaki Kisen Kaisha Ltd - see tough times ahead, faced with a rise in global container shipping capacity, pressure on their freight rates and high fuel costs.

Nippon Yusen and Mitsui's downward revisions of their full-year profit forecasts took the market by surprise.

'The companies' sentiment on the global market outlook appears to have suddenly turned pessimistic,' said Yoshihisa Miyamoto, an analyst at Okasan Securities.

'A long recovery trend in their share prices continuing since 2002 could now have been snapped.'

On Friday, shares in Nippon Yusen, the world's ninth-biggest container shipper, closed down 8.35 per cent at 790 yen, while Mitsui OSK fell 6.09 per cent to 972 yen. Kawasaki Kisen lost 5.20 per cent to 711 yen.

The sector index tumbled 6.15 per cent, the biggest percentage loser of 33 subindexes on the broad TOPIX

'The fall in freight rates is dragging down their bottom lines. Nonetheless, their stocks' low valuations will somehow attract investors,' said Hajime Yagi, general manager at Meiji Dresdner Asset Management.

The sharp declines in profits come despite efforts by the three companies to break the industry's pattern of boom and bust by diversifying into land and air transport or increasing reliance on stable tanker operations under long-term contracts.

Still, the three firms' price-earnings multiple averages 9, less than half of the Nikkei's top 225 firms' average PE of 23.

Nippon Yusen's operating profit plunged 21 per cent to 39.4 billion yen (S$545 million) in the October-December quarter, despite a 25 per cent jump in sales to 524.2 billion yen.

The company slashed its operating profit target for the year to March by nearly 10 per cent to 140 billion yen, below a consensus projection of 157.8 billion yen in a poll of 13 analysts by Reuters Estimates.

'Competition is intensifying, and fuel costs will stay high. We see a tough business environment for next year,' Yukio Ozawa, chief financial officer at Nippon Yusen, told a news conference.

Mitsui OSK's quarterly profit fell 22 per cent to 42.3 billion yen.

It lowered its full-year outlook by 8 per cent to 174 billion yen, although the new forecast would still represent a small rise from the previous year's actual profit of 171.8 billion yen.

Kawasaki Kisen, which relies relatively heavily on container shipping, reported a 26 per cent drop in profit to 19.08 billion yen and maintained its full year forecast of 91 billion yen, down 16 per cent from 2004/05.

Nippon Yusen and Mitsui said businesses other than container shipping did well, despite a fall in spot rates shippers can charge for transport of iron ore, coal and other materials.

The Baltic Exchange Dry Index, which tracks the freight rates of dry bulk carriers, fell nearly 40 per cent in April-September after Japanese and European steel makers curtailed iron ore imports and Chinese imports remained low. - Reuters

Dividend Info Link

2006-02-12T00:02:00.000-08:00

Dividend
Info Link

DBS's catch

2006-02-11T18:12:00.000-08:00

Pacific Andes
Another good catch in a seasonally weaker quarter
PAH’s 3QFY06 results exceeded our expectations. Net profit rose 90.3% y-o-y to
HK$34.9m, underpinned by 22.1% y-o-y revenue growth to HK$662.4m. Given the
increased scalability of its integrated business model, we are optimistic of the
Group’s growth and earnings momentum. We expect its strongest quarter
(4QFY06) to be stronger than expected, and have raised our FY06-07 earnings
estimates by 2.7% and 3.0% respectively. We also upgrade our recommendation
to Strong Buy, given the increased visibility of a record net profit. PAH has
historically traded at between 8-12x PE; we price it at the median, or 10x FY07
earnings to derive a raised target price of S$1.02. This is further supported by our
DCF valuation of S$1.32.
• 3QFY06 exceed expectations. PAH’s seasonally weak second and third quarter (of its
financial year) had been above expectations. Operationally, Group revenue and net profit were driven by strong demand for frozen fish products, which helped to maintain higher selling prices. Gross and operating margins improved by 1.2ppt and 3.1ppt respectively, reflecting the scalability of PAH’s integrated business model with greater cost efficiencies.
• Making inroads into N. America and W. Europe in 3QFY06. Sales to the North American
market grew 104.8% y-o-y to HK$77.2m, while sales to Western Europe reached HK$49.6m,
growing 154.4% y-o-y.
• Expect record net profit for FY06. We are optimistic of the Group’s growth and earnings
momentum, given the scalability of its integrated business model. With 4QFY06 expected to be very strong, we raised our FY06-07 earnings estimates by 2.7% and 3.0% respectively.
We also upgrade our rating to Strong Buy given the increased visibility of a record net profit.
Given PAH’s historical trading range 8-12x PE, we price it at the median, 10x FY07 earnings to derive a raised target price of S$1.02. This is further supported by our DCF valuation of S$1.32.

US in short

2006-02-11T17:58:00.000-08:00

US market is currently indecisive – Light cruel sweet oil $61.4
Late advance from better budget surplus, oil down and market is waiting for direction in view of Bernanke’s view on inflation.
The Dow Jones industrial average (up 35.70 to 10,919.05,), the broader Standard & Poor's 500 (up 3.21 to 1,266.99,) and the Nasdaq composite (up 6.01 to 2,261.88, ) all added around 0.3 percent.
In sum,DOW 35.7 ^ Nasq 6.01 ^ S&P 3.21 ^ CHRT -0.14 STTS 0.3 ^ CREAF -0.11

Brokers' Take

2006-02-11T09:47:00.000-08:00

Published February 11, 2006
BT
GuocoLand
Feb 10 close: $1.94
UBS INVESTMENT RESEARCH, Feb 9

GUOCOLAND has undertaken a series of balance sheet restructurings in the past five years. It is now well capitalised with a good management team. GuocoLand is 68 per cent controlled by Malaysian tycoon Quek Leng Chan through his 70 per cent interest in Guoco Group, which is listed in Hong Kong.

Guoco Group currently has US$3.1 billion cash in its balance sheet. We believe Quek Leng Chan has ambitions for GuocoLand to be transformed into a major real estate player in Asia, focusing on China, Vietnam, India, Malaysia, Singapore and Japan. With the support of its parent, GuocoLand is set to re-leverage and redeploy capital into Asian real estate.

GuocoLand has accumulated 11 million square feet gross floor area land bank in China. It is intending to double the land bank. GuocoLand has taken advantage of China's austerity measures by boosing its land bank in Shanghai, Beijing and Nanjing.

GuocoLand is planning to divest $370 million worth of non-core investment and redeploy into land banks in China, Vietnam and India. Divestment plans over the next 12 months include divesting a 21 per cent stake in Hotel Properties and a 5 per cent stake in Brierley Investment Holdings.

Its 14.5 times price-earnings ratio reflects a trough earnings cycle. GuocoLand is inexpensive from an asset valuation perspective. Its 4.1 per cent net dividend yield provides solid share price support. We initiate coverage with a price target of $2.50 per share. The price target implies one times price-revalued net asset value.
BUY

Pacific Andes Holdings
Feb 10 close: $0.68
OCBC INVESTMENT RESEARCH, Feb 10

PACIFIC ANDES Holdings delivered a 51 per cent year-on-year rise in Q3 earnings to HK$25.9 million (S$5.4 million). Recently listed China Fishery Group performed well. Demand for frozen fish remains strong in China.

We are keeping our FY06 earnings of HK$199 million as we are expecting Q4 to once again be the peak season.

With the successful launch of China Fishery, we expect management's next initiative to involve the deployment of the proceeds from the initial public offering into China Fishery's vessels as specified in the listing prospectus and also to look into vertical integration plans for its group of listed companies.

We continue to favour Pacific Andes despite the recent gains as we see two legs of growth: from China Fishery and from the core frozen fish trading business. With more certainty to its FY07 earnings and based on the same eight times parameter, we are raising our fair value from 59 cents to 68 cents.
BUY

Genting International
Feb 10 close: $0.37
MERRILL LYNCH, Feb 9

WE initiate coverage on Genting International (GIL) with a 12-month price objective of $0.43 per share. Our price objective is the sum of our net asset value estimate of $0.24 per share and our assessed option value of $0.19 per share.

We see potential short-term catalysts to the share price as largely relating to the legalisation of casinos in Singapore. GIL will submit bids for the Marina Bay and Sentosa sites.

GIL is the international investment arm of the Genting Group. It currently holds strategic investments in the UK market. GIL is the largest shareholder in Stanley Leisure and London Clubs International, which are two of the largest casino operators in the UK.

We believe GIL will focus on both the UK and Asia for new business opportunities due to its existing portfolio, the experience of the Genting Group and opportunities that we believe exist in these regions.

The group has extensive knowledge of the Asian casino market. It is the only casino gaming company in the world to have undergone probity checking by all of the major gaming markets, including the US, Australia, the UK and Malaysia. As to investment risks, the timing and extent of casino legalisation may differ from our forecasts and GIL's growth may be restricted by competition.
BUY

The Hour Glass
Feb 10 close: $0.745
NRA Capital, Feb 9

SWISS watch export data shows strong double-digit growth rates for Singapore (+59 per cent) and Australia (+67 per cent), where Hour Glass has significant retail presence. Japan and Australia confirmed their outstanding situations during the 12 months in 2005.

Growth in Hour Glass's group revenue in 2H of FY ending March 06 is expected to come from Singapore, Japan and Australia. The group's Montblanc distribution business in Australia is also likely to benefit from the extended period of strong economy in Australia with its additional two Montblanc outlets that opened in the H1 of FY06.

We are raising our net profit forecast for FY06 and FY07 by 7 per cent assuming higher revenue growth of 10 per cent for FY06. New target price of $0.88 is based on eight times price-earnings ratio of FY07 earnings.

Assuming the same dividend rate is maintained as previously, with proceeds from the recent sale of an investment property, the stock offers an attractive yield of 6 per cent.
BUY

- Compiled by LESLIE YEE

Overbought STI - Feb 10, 2006

2006-02-10T20:00:00.000-08:00

Singapore Telecom

2006-02-10T06:09:00.000-08:00

Feb 9 close: S$2.60
MERRILL LYNCH, Feb 8

THE stock is trading broadly in line with our $2.62 per share valuation. While we see continued strength in the mobile associates, we are concerned that negative earnings momentum in the core businesses of Optus and Singapore domestic operations may weigh on the stock price in the short term.

SingTel's Q3 pre-abnormal profit after tax of $778 million was broadly in line with our forecast of $783 million.

We have made only slight changes to our forecasts for FY06, but have lowered our FY07 net profit after tax forecast by 2.4 per cent due to an increased forecast tax rate and decreased earnings before interest tax depreciation and amortisation (Ebitda) forecasts for both the Singapore domestic business and Optus.

On a medium to long-term basis, we have lowered our Ebitda forecasts on Optus, given the tough stance being taken by Telstra on wholesale prices and as there are no signs of any easing in competitive pressure in the Australian telecoms market. This has been offset by a lift in valuation of SingTel's 35 per cent stake in Telkomsel from $7 billion to $9 billion, leaving our discounted cash flow valuation of $2.62 per share unchanged.

We expect the company to update the market on its capital management plans at the FY06 results release in May. A 10 cent per share special dividend is not out of the question, in our view.
NEUTRAL

Signs of strain as 'idea fatigue' sets in

2006-02-10T05:57:00.000-08:00

Published February 10, 2006
The dominant and recurrent themes of China and oil stocks
are starting to wear thin
BT
By R SIVANITHY
SENIOR CORRESPONDENT

GO WITH the flow and hope for the best' seems to be the preferred theme these days, judging by the rapid-fire rotational interest and high volume the market is currently enjoying. Such was the case again yesterday, when the actives list was again peppered with new names as traders continued their switching in and out of various second-liners and penny stocks.

It wasn't entirely random though - for many of the new entries that sprang into the picture, there was either some corporate development to stir interest or a fresh broking recommendation.

However, although the overall mood appeared firm, there were signs of strain that emerged as the session wore on, resulting in prices closing off their highs - the Straits Times Index first gained 15 points but closed only a net 3.37 up at 2,431.62.

Turnover excluding foreign currency issues was 1.7 billion units worth $1.3 billion and excluding loans and warrants, there were 210 rises versus 169 falls.

Despite the relatively firm advance-decline score, brokers noted widespread pressure throughout the market. 'Idea fatigue' probably described the session best, the phrase referring to the fact that China and oil have been the dominant themes for all of the year to date, and by now, both are starting to wear thin.

'It might be much harder to make money from here onwards,' noted a dealer. 'Everything that deserves to move has moved.'

In order to keep interest alive, prices moving and business flowing, brokers have gone into overdrive in issuing 'buy' recommendations this week, most with spectacular results. Recent beneficiaries have been K1 Ventures, Utac, China Hongxing and China Sky, and among the latest was Datacraft Asia which yesterday jumped US$0.06 to US$1.21 following an 'outperform' issued by Credit Suisse, which set a target price of US$1.35. 'We value the shares at a PE of 18 times (10 per cent discount to last six month multiple) and a price/book value of 2.5 times (in line with the last two-year average multiple). Based on this, we upgrade the share from neutral to outperform,' said Credit Suisse.

Casino firm Genting International added two cents at 37 cents with 71 million units done, thanks in main part to a 'buy' from Merrill Lynch, which set a 12-month price target of 43 cents. 'Our price objective is the sum of our NAV estimate of 24 cents per share and our assessed option value of 19 cents.'Yet another foreign broker, however, yesterday issued a bearish report on the semiconductor sector. Morgan Stanley said that inventories have been building up over the past few months and this is expected to worsen in the first half. 'We believe this time the inventory build-up has been spread over the entire food chain,' said MS. The US broker recommended 'trimming exposure to Asian semiconductor stocks'.

SmartYInvestor Vistor Traffic

2006-02-08T18:44:00.000-08:00

Singapore REITs: Time for a re-look

2006-02-08T08:04:00.000-08:00

Singapore REITs: Time for a re-look (6 Feb 2006)
By Winston Liew
Mon, 06 Feb 2006, 16:41:54 SGT
OCBC Report

Summary: The main theme for the REIT sector in 2006 is REIT managers' ability to meet growth expectation on the back of fewer acquirable quality properties, fiercer competition for properties and increasing cost of equity. However, on a positive note, REIT managers are able to gear up more and be more debt bias in the financing of acquisitions. To overcome the lack of quality properties, some S-REITs are tying up with sponsors/parents to warehouse properties for future acquisitions, while others are venturing abroad. But investing overseas carries greater risks and as such higher returns must be taken into consideration. We see a property yield premium of 150bps to 200bps to Singapore property yield as the minimum to justify investing overseas. As for market worries of S-REIT's valuation risks with respect to interest rate rises, we see this as being unjustified. This is because the market does not value S-REITs purely as yield stocks, but rather as high growth beta stocks. So, the focus must be on S-REITs' ability to continue to grow. In our selection criteria, our focus is on S-REITs that are least likely to disappoint. In this context, we see Suntec (BUY, fair value S$1.29) and MMP (BUY, fair value S$1.17) with P/B ratio of 1.0 x or less as having the lowest downside risks. As for the high P/B ratio S-REITs, we see MLT (BUY, fair value S$1.12) and AREIT (HOLD, fair value S$2.18) as most likely to meet growth expectations. Finally, we are also upgrading the sector rating to OVERWEIGHT from UNDERWEIGHT.

S-REITs have become popular instrument. Since debuting in the local market in 2002, Singapore REITs (S-REITs) have done well with gains in both unit prices as well as portfolio sizes/values. With the growing awareness and demand for these instruments, these S-REITs have become popular investment instruments. For example, CMT is up 174% from its IPO price to recent high of $2.63 in mid-2005, while AREIT has moved up about 200% from its low in Jan 2003 to a recent high of $2.37 in Aug 2005 for a holding period of slightly more than 2 years.

However, in an environment that has seen several rounds of interest rates hikes, there is market concern over the sustainability of S-REITs' performances in 2006.

Is the bull-run over for S-REITs?

While S-REITs started off trading in a very hesitant manner in the early years, these have now become both yield and growth stocks. In recent years, several S-REITs have gone on to add yield-accretive assets to their portfolios, resulting in a spike in unit prices. For the whole of 2005, we saw several rounds of interest rate hikes, with the US Federal Reserve hiking rates throughout 2005 at every one of the FOMC meetings, with current Fed Fund Rate at 4.5% from early 2005 of 2.2%. Similarly, we have seen Singapore's 3-mth inter-bank rate moving up 1.5% at the beginning of 2005 to 3.36% currently. In this environment, the sceptics are wondering if higher rates will result in the demise of the good run for S-REITs.

We think not. Several of the REITs have outlined in recent months their plans to grow asset by 2-3x to their target asset sizes. We see S-REITs pursuing a two-pronged strategy to grow by acquisitions as well as enhance returns from existing assets.

On average, most of the REITs are currently trading at about 1x to 1.7x price-to-book (P/B) with yields of about 4.5% to 5.8%. While the concern is likely to be on the lack of good quality acquirable yield accretive assets, the sector got a reprieve with the government's recent raising of the gearing level from 35% to 60%. This will enable REIT managers to gear up more for the financing of acquisitions, both in Singapore and overseas.

Our key picks are Suntec, MMP & MLT. Our key picks in the S-REIT segment are Suntec (BUY, fair value S$1.29) and MMP (BUY, fair value S$1.17) with P/B ratio of 1.0 x or less as having the lowest downside risks. As for the high P/B ratio S-REITs, we believe MLT (BUY, fair value S$1.12) and AREIT (HOLD, fair value S$2.18) are most likely to meet growth expectation. We are also upgrading the sector rating to OVERWEIGHT from UNDERWEIGHT.

SingTel Says In "Final Stages" In Sale Of 2 Properties

2006-02-08T07:19:00.000-08:00

Wednesday February 8, 12:07 PM

SINGAPORE (Dow Jones)--Singapore Telecommunications Ltd. (T48.SG) Wednesday said it is close to selling two of its properties in Singapore.

The properties are a cable store on the west coast and a training center at Hillcrest.

"We are at the final stages of concluding the sale of the two properties," Chief Financial Officer Chua Sock Koong said at a quarterly earnings briefing.

Last year, SingTel received provisional approval from the Urban Redevelopment Authority to develop the two plots of land into residential projects.

Market watchers say SingTel would likely sell the properties to developers for about S$105 million to S$120 million.

Also see CitiBank Report

Bouts of profit-taking may affect STI's uptrend

2006-02-08T06:45:00.000-08:00

Published February 8, 2006
BT
Chart Point

THE pre-Chinese New Year rally continued after the holiday as rotational interest spilled into second and third liner stocks.

The Straits Times Index rose to 2,450 while the UOB Sesdaq small-caps proxy touched 98.5 in the previous session.

Singapore's Budget Day will fall on Feb 17 and hopes for the current momentum to extend into an election-led rally should continue to keep markets busy in the weeks ahead.

Rotational interest remains very much alive at present.

STI's rising trend remains intact with support levels identified at 2,435, 2,416 and 2,395. Technical projection shows upside bias to 2,457 followed by 2,480.

Notwithstanding, the charts appear rather overbought if we look at daily stochastics and the 14-day RSI, which are hovering around their respective levels of 80 and 68.

The market breath McClellan Oscillator also reads above 25, which we consider as toppish.

Hence in the near term, STI's uptrend could be interrupted by small bouts of profit-taking.
By YEO KEE YAN, chartist at Kelive Research

Recovery in Asian dry bulk shipping rates

2006-02-08T06:39:00.000-08:00

Published February 8, 2006

BT
(SEOUL/TOKYO) Dry bulk shipping rates have bottomed out, and some traders say rates are showing signs of a recovery.

Spot voyage fixtures for modern panamax rates for the benchmark US Gulf to Japan route were assessed at US$32-33 a tonne yesterday, largely unchanged from the end of January.

The shipping market has been relatively quiet recently as many traders in Asia, including China, were absent from the market last week because of the Chinese New Year holiday.

'I think the market is best described as having bottomed out,' a Japanese shipping broker said.

Other traders said ship owners were likely to ask for a higher freight rate.

'Ship owners do not want to accept rates below US$32 because they think the price falls have been too excessive. Now, they are asking for at least US$33-34,' said an official at a South Korean shipping company.

Asian shipping rates have been declining since last October, as more newly built ships have become available.

The outbreak of the deadly bird flu has also crimped feed demand in Asia, leading to slower shipments of feed grains and depressing freight rates.

Sluggish holiday demand ahead of Chinese Lunar New Year prompted rates in late January to fall to around last year's low of US$31 reached in August - half of the year's peak of US$60-65.

Traders said the firmness of the market for capesize vessels in the Atlantic was spilling over, helping to support the panamax market.

'Capesize vessels rates have been drifting up because of a technical rebound. New ships keep coming into service so we need more time to confirm this is a trend, but rates would not go down further from this level,' the official said.

A panamax-class vessel carries 55,000-80,000 tonnes of dry bulk commodities, usually grain, while a capesize vessel carries more than 100,000 tonnes and is predominantly used to carry iron ore and coal.

New crops from South America, such as soya beans from Brazil, begin to head out to global markets in large quantities in March, at times helping to support the freight market.

But traders said it was still too early in the year for new crop shipments to have a significant impact on shipping.

'Markets are expecting shipping activities for South American grain to start to pick up around March and Chinese demand for vessels will recover soon,' another broker said.

In the period market, timecharter rates for the US Gulf to Japan route were assessed around US$16,000 a day to a little higher, against US$15,000-16,000 at the end of January. - Reuters

Stocks headed for moderate growth: S&P

2006-02-08T06:29:00.000-08:00

Published February 8, 2006

Market has priced in upside from integrated resorts
BT
By MICHELLE QUAH

AFTER a reasonably strong 2005, Singapore stocks are likely to experience more moderate growth in 2006, with upside from the development of two integrated resorts already priced in by the market, says ratings agency Standard & Poor's.

S&P says Singapore stands to become a world leader in wealth management this year

In terms of credit quality, S&P reckons the strong market positions and solid financial profiles of rated companies means they will continue on a path of steady improvement this year.

In its 2006 Asia-Pacific Financial Markets Outlook released yesterday, the ratings agency says that valuations for the market in general - and the banking sector in particular - have already discounted much of the anticipated improvement in the general business environment.

It expects moderate growth in banking-sector earnings, with improved net interest income and margins partly offset by rising cost pressure, as well as the tapering-off of loan recoveries and provision write-backs.

'The development of two casinos in the city-state continues to be a sentiment driver,' says S&P equity research director Sharon Wong. 'However, the full impact of the casino developments will only be seen in the medium term.'

According to S&P, local property stocks have already largely priced-in the positive news related to the integrated resorts - namely, a stronger take-up of residential units, a rental recovery in the retail and office sub-sectors and development opportunities.

What could provide a real kicker to the property sector this year is if there is a strong recovery in the mass residential market - over and above the expected healthy interest in new project launches in prime areas.

Otherwise, interest in the Singapore property sector will have to stem from more real estate investment trust (Reit) listings, S&P says. It notes that Reits outperformed last year, driven by a slew of domestic acquisitions.

But with limited surplus assets to acquire in Singapore, additional acquisitions will have to come from overseas, and this could be met with mixed reviews, S&P says, causing it to take a more cautious stance on the sector.
In terms of credit markets, S&P believes the outlook for Singapore companies is likely to be one of modest growth this year, affected by how they respond to the challenges of an increasingly competitive and saturated market.

The banking industry, in particular - while sound and stable - must continue to look overseas for opportunities, S&P believes.

'The pressure to expand into the region is strong for Singapore's homegrown banks,' says S&P ratings services credit analyst Adrian Chee. 'It is in this area that they may face risks, depending on how aggressively they pursue strategic acquisitions.'

But there is potential for strong domestic growth in wealth management - an area Singapore banks are already focusing on. A recent BT report said the wealth management headcount at leading private banks here surged 15-50 per cent last year, with further growth in the mid-teens expected this year.

The report said Singapore is growing in importance as an international wealth management hub - buoyed by a wealth explosion in the region where, increasingly, Asians are comfortable with having their assets managed in their own backyard rather than in Europe.

S&P agrees with this view, saying Singapore stands to become a world leader in wealth management this year - which should provide additional income for banks.

Banks aside, corporations pursuing wider growth opportunities in the region face additional risk, S&P warns. 'Corporates that generate substantial cash flow from trades and investments across Asia often finance that expansion with significant bank financing,' says another credit analyst at S&P ratings services, Greg Pau.

SingTel reports higher Q3 profit

2006-02-08T06:21:00.000-08:00

February 8, 2006, 8.30 am (Singapore time)

BT

SINGAPORE - Singapore Telecommunications (SingTel), Asia's fifth-largest phone company, posted better-than-expected 4 per cent quarterly earnings growth as strong regional mobile services growth outweighed severe competition facing its Australian unit.

Optus is SingTel's top earner, but subscriber growth is slowing as its market matures.
SingTel affirmed its earlier guidance for the fiscal year ending March 2006 of higher operating revenue but lower earnings before interest, tax, depreciation and amortisation.

The company reported underlying net profit before exceptionals of $778 million (US$478 million) in its third quarter ended Dec 31, up from $747 million a year ago. Attributable net profit was up 16 per cent to $885 million in the quarter, boosted partly by a gain of $90 million from the sale of a 5 per cent stake in Singapore Post. Group operating revenue rose 4.2 per cent to $3.36 billion. Pre-tax profits from associates jumped 35 per cent to $432 million, thanks largely to Bharti and Telkomsel.

It derives about 75 per cent of revenues and two thirds of pre-tax earnings from operations outside Singapore. Australia's second-largest mobile operator Optus is SingTel's top earnings centre, but subscriber growth is slowing as its market matures

Earning Reports

2006-02-07T18:42:00.000-08:00

Kim Eng On SingTel

2006-02-07T18:36:00.001-08:00

SingTel – 3QFY06 results (Stephanie Wong)
- Results in line with our expectation but ahead of consensus.
- Underlying net profit (before exceptionals) grew 4.1%yoy to $778m slightly ahead of
our forecast of $770m but exceeded market expectation of $755.4m by 3%.
- PBT from associates grew by a strong 35%yoy to $432m, underpinning the
respectable performance of the group. They now account for 42% of group PBT.
- Optus net profit fell 4.7%yoy to S$201m due to margin erosion.
- Free cash flow for the period totalled $514m of which 68% came from Singapore and
associates.
- With free cash flow for the 9-mth ended Dec 05 at a strong of $1.86b and healthy
balance sheet, the group has the capacity to pay a bumper special dividend or engage
in another capital reduction to reduce its cash pile, which is expected to increase to
$5b by FY Mar 06 ($0.30/share).
- Maintain BUY wilt 6-month price target of $2.80.

Fresh investor confidence may lift China stock markets in '06

2006-02-07T17:33:00.000-08:00

BT
Strong growth raises hopes for long-awaited turnaround

(SHANGHAI) Renewed confidence in stocks and an expected influx of new capital from institutional buyers will boost China's markets in 2006, building on a rally that has seen shares rise 13 per cent in the past two months, analysts say.

Retail investors are also expected to return to the market as worries fade over a plan begun last year to float US$250 billion worth of non-traded state shares in China's listed companies.

But those factors could be offset by any weakening in global demand for Chinese goods, and a resumption of initial public offerings, which were suspended in May to keep new shares off the market as the state share reform plan was rolled out.

'If the economy is reasonably good, the (stock) market should look quite interesting, particularly if IPOs could restart quicker, with better companies listing,' said Credit Suisse China strategist Vincent Chan.

China has been home to Asia's worst-performing stock market since 2002, with shares losing 24 per cent of their value over the four years even after factoring in the recent rally.

But with the economy chugging ahead at 10 per cent growth last year and 9-plus per cent expected in 2006, hopes are now high for a long-awaited turnaround in the Lunar New Year, the Year of the Dog, which began on Sunday.

'For the last three years we've been debating the whole share sell-off reform,' said senior economist Stephen Green at Standard Chartered. 'Now people are a lot more bullish. There is a sense that the worst is over.'

Last year, China's shares fell 8 per cent after Beijing unveiled its share reform programme and banned domestic IPOs. Some 339 listed firms joined the plan in its first seven months, accounting for a third of market capitalisation, media reports said.

Investors initially dumped shares but have begun returning to the market, lured by compensation packages and bargains.

Up until 2005, China's stocks were valued as high as 40 times earnings compared with Hong Kong's 15 times, but their sharp fall has wiped out the gap and they now hover at Hong Kong's levels. The benchmark Shanghai composite index is up more than 8 per cent so far this year.

The market will also get a boost from a large influx of new institutional money, from a growing pool of foreign investors, Chinese banks, insurance companies and pension funds that are getting broader access to the market.

Under its qualified foreign institutional investor scheme, China has permitted 27 firms, including Deutsche Bank and HSBC, to enter the market to date, with four more preparing to enter. The group has received approval to invest US$5.6 billion in China's stock and bond markets, but Beijing has said it is prepared to grant foreigners up to US$10 billion in quotas.

A growing number of Chinese institutional investors are also looking for ways to diversify investments and win bigger returns.

With the share reform programme well under way and a rally taking hold, talk has started to swirl that regulators could soon lift the freeze on IPOs. - Reuters

Kim Eng on Global Voice

2006-02-07T08:00:00.000-08:00

GV will possess a comprehensive fiber optic network
Global Voice Group (GV) has announced that it is buying a long-haul
intercity fibre network across Europe from Viatel, in order to interconnect
its existing metropolitan networks. This will give GV one of the largest
and most technically advanced fiber optic Metropolitan and Inter-city
networks in Europe. The acquisition will enable GV to generate
additional revenues arising from the additional business products and
reduced costs through the operational synergies from the combined
networks.
Long-haul interconnectivity further enhances GV’s growth
This additional long haul network capacity enhances the total value
proposition that GV can offer to clients. This applies across all of GV’s
existing business solutions i.e. Network Services, Business Continuity
Services and infrastructure. The enhanced network also fits in very well
and will accelerate GV’s expected revenue growth from bandwidthhogging
services such as broadband adoption, corporate VoIP, WIMAX,
3G applications and remote realtime data backup. Pro-forma forecast
indicates a 38% upward adjustment to our FY2007 net profit forecast
based solely on this deal.
Asset backing further enhanced, and supports share price
Similar to GV’s own network, Viatel’s long-haul network was acquired at
fire sale prices following the dotcom bust. As a result, GV was similarly
able to secure attractive pricing on this asset as well. Using comparable
peers as a benchmark, we estimate GV’s new NAV could potentially be
worth Euro 577m, or $0.479 per share, on the back of this deal. This
compares to our metropolitan network’s standalone valuation of S$0.365
per share.
Fair value S$0.27/share; Buy recommended
We are not changing our forecasts and price target of S$0.27 at the present
moment, as the deal will be completed only at end-March. We had previously
valued GV’s share price at S$0.27 from an operational viewpoint, with
valuation of about Euro 350m using a sum-of-parts approach. However, we
believe there is a strong potential for this target to be raised as we, and the
market, digest the full advantages of this acquisition. We maintain our Buy
recommendation with target price of S$0.27.

SingTel's mobile subscribers in Asia top 78 million

2006-02-07T04:47:00.000-08:00

February 7, 2006, 5.47 pm (Singapore time)
BT
SINGAPORE - Southeast Asia's largest phone operator, Singapore Telecommunications (SingTel), said on Tuesday its aggregate mobile subscriber base in Asia totalled almost 78 million at the end of December, up 26 per cent from a year ago.

The mobile subscriber base, which includes cellphone users from SingTel's wholly-owned Australian unit Optus and its other Asian associates, is the largest outside of China, the Singapore company said in a statement.

SingTel's five regional mobile associates -- India's Bharti, Pacific Bangladesh Telecom, Telkomsel in Indonesia, Globe Telecom in the Philippines and Thailand's Advanced Info Service -- collectively had 69.87 million users at the end of December, up almost 30 per cent from a year earlier.

Despite tough domestic conditions, its Australian subsidiary Optus managed to expand its user base to 6.3 million as of the end of December, up 1.6 per cent from the same period in 2004, SingTel said.

At home, SingTel's mobile users totalled 1.62 million at the end of December against 1.54 million a year ago. -- AFP

Positive signs for Singapore to be regional Reit hub

2006-02-06T03:28:00.000-08:00

Published February 6, 2006
BT
NEWS ANALYSIS

Market players believe HK is shaping up as key challenger to Singapore's position

By LESLIE YEE

(SINGAPORE) In July 2002, CapitaMall Trust became the first real estate investment trust (Reit) to successfully list in Singapore.

Experts believe Singapore's continued leadership in Reits in Asia ex-Japan will depend on its ability to innovate and to attract more Reits owning properties in multiple countries.

The Hong Kong market had to wait until November last year - at which point Singapore already had seven Reits listed - to see its first Reit successfully listed, namely Link Reit. However, Link Reit's size dwarfs that of Singapore's Reits. Its successful listing was quickly followed by listings of Prosperity Reit and GZI Reit.

Experts believe there may be as many as 10 Reit initial public offerings in Hong Kong this year. Hong Kong property giants like Henderson Land and Sun Hung Kai Properties are tipped to join the Reit bandwagon.

Market players believe Hong Kong is quickly shaping up as a key challenger to Singapore's position as the Asia ex-Japan market leader in Reits. Opinion though is divided as to whether the development of Hong Kong's Reit market will help or hurt Singapore.

Optimists think a larger Reit sector in Asia ex-Japan will draw more global investors to invest in Asia ex-Japan Reits. Others take the view that funds dedicated to yield plays may choose one market over the other.

The later part of last year marked the end of the easy money phase for Reit investors. Rising interest rates in Singapore caused prices of Reits to slide. Concerns were raised over the ability of some Reits to grow via acquisitions.

But Singapore's Reit market is not standing still and investor support is intact. Last month, Mapletree Logistics Trust (MLT) raised $130 million in equity from a placement of new units to institutional investors that was close to four times subscribed and an ATM offering that was fully taken up within eight minutes of the opening of the offering.

About two weeks back, CapitaLand's subsidiary, the Ascott Group, announced its intention to establish a new pan-Asian service residence Reit to be called Ascott Residence Trust (ART). ART will have an initial portfolio of 12 properties and will be listed on the Singapore Exchange.

Citigroup Research said 'ART will be a more capital efficient vehicle to hold Ascott's properties' and 'CapitaLand is a beneficiary of the expanding Reit market in Asia given its strong track record in Singapore and its ability to offer a complete range of real estate services'.

Certainly, CapitaLand continues to set the pace in the Reit sector in Asia ex-Japan. Of more significance for the Singapore Reit market is that ART represents a broadening of the type of Reits in Singapore and the increasing importance of foreign properties in Singapore Reits.

Experts believe Singapore's continued leadership in Reits in Asia ex-Japan will depend on its ability to innovate by broadening the type of Reits in the Singapore market and to attract more Reits owning properties in multiple countries.

With ART, the Singapore market moves beyond having Reits owning retail, office and industrial properties. A successful listing of ART could pave the way for Millennium & Copthorne Hotels to launch a hotel Reit here.

Bankers would say any property type that generates strong enough cash flow could find its way into a Reit. Perhaps it would not be beyond the imagination and ability of bankers and other practitioners here to create hospital, airport and prison Reits.

ART holds $856 million worth of properties, with Singapore accounting for 33 per cent of total property values. The rest comprises properties from China, Vietnam, Indonesia and the Philippines. With ART, there are challenges such as whether investors like to own a Reit with properties in various jurisdictions and whether investors are comfortable with around 45 per cent of total apartment rental income backed by length of stay of less than six months.

How popular ART proves with investors, time will tell. MLT's successful equity raising, which was to help fund among others, acquisitions of properties in China and Hong Kong, though shows there is appetite from both institutional and retail investors to back Singapore Reits in making overseas acquisitions.

Reits have been the bright spot in the Singapore capital markets and a major driver in growth of market capitalisation on the SGX. By being early in this game, experts believe Singapore's market players and regulators have an edge over other emerging Reit markets.

There will be competition from other jurisdictions but the signs are positive for Singapore to be the Reit hub for the region.

KIm Eng iew on Singtel

2006-02-05T21:58:00.000-08:00

SingTel ($2.54)

 Stock turned up gradually after recent correction at 2.68 found support at 2.46. Near-term support 2.52 with bias for 2.58. Further upside to 2.63~2.65 in the week ahead is possible.

 Trade long on any minor pullback to near-term support. The CA eCW060616 at 0.145~0.15 could offer a viable alternative.

Positive outlook for tech sector in '06

2006-02-05T16:40:00.000-08:00

Published February 4, 2006
Business Times
Semiconductor and Internet are likely to be the best-performing areas this year
By STUART O'GORMAN and GEOFF PATON
Looking high: There is potential for further growth in 2006 in the Internet sector, which is expected to perform particularly well this year
WE BELIEVE the outlook for the technology sector in 2006 is positive. In our opinion, a number of factors will drive the sector over the coming months, notably a potentially benign macro-economic environment, emerging market demand, and compelling product cycles. We expect the best-performing areas to be semiconductors and the Internet, while increasing competition may cause the telecommunications equipment space to lag.

The global economy is performing well. Growth in the United States and emerging markets is strong, while inflation in most countries and long-term interest rates are low.
IT spending
The global economy is performing well. Growth in the United States and emerging markets is strong, while inflation in most countries and long-term interest rates are low.

We believe that this healthy macro-economic backdrop should encourage corporate information technology (IT) spending to return to historical norms.

However, we are aware of the major structural imbalances that continue to worsen in the global economy and present the greatest risk to our positive outlook for the technology sector and equity marketing in general.

In 2006, we view product cycles as the key driver of increased IT spending, and we would highlight Vista, Microsoft's new operating system, 3G handsets, flat-screen TVs, Fibre to the Home telecom deployments and the Xbox360/PS3 gaming systems as some of the more significant ones. In our view, the success of Vista, in particular, will be central to the performance of the sector as it has the potential to stimulate PC hardware and software upgrades.

One area that we expect to perform particularly well in 2006 is the Internet sector. Internet stocks have continued their disruptive disintermediation of old economy business models at a rapid pace, particularly within advertising. We feel there is potential for further growth in the industry and have a significant position in our technology portfolios, including holdings of Google and NHN of South Korea
The semiconductor and semiconductor production equipment sector ended 2005 strongly, and we expect more positive trends to continue into 2006. We increased our position in the sector considerably on weakness in November, and we are comfortable maintaining this position thanks to low inventories and strong order expectations.

Off-shoring remains a key theme in the portfolio and we have significant exposure to the IT services sector as a result. We believe that the movement of skilled labour to lower-cost geographies like India and China is a multi-year trend and that we are only in the embryonic stages. Having worked hard to gain the acceptance of Western businesses, locally-based firms are now best positioned to benefit from the development, as are global majors with a credible off-shoring strategy.

Potentially weak area

We feel communications equipment is an area of potential weakness in 2006. However, while we are concerned about capital spending trends on legacy wireline and wireless networks, we do believe that a number of investment opportunities are emerging as operators finally move towards next-generation networks. Our preferred plays here are in the optical and routing spaces.

To summarise, provided that the macro-economic environment remains supportive, we expect the convergence of cheap relative valuations, increasing capital expenditure, compelling product cycles, and low inventories to provide a significant tail wind for the technology sector in 2006.

The writers are co-heads, Henderson Technology Team, Henderson Global Investors (Singapore)

2006-02-05T01:28:00.000-08:00

Macquarie MEAG Prime REIT Undervalued

2006-02-02T01:17:00.000-08:00

Macquarie MEAG Prime REIT
Undervalued REIT
Macquarie MEAG Prime REIT (MMP REIT) announced FY05 DPU of 1.58 Scts, which
was 12.1% above its IPO forecast. FY05 distributable income of S$14.9m was
above forecast of S$13.3m due to better than expected office occupancy levels
and retail lease renewals. Looking ahead, MMP REIT’s organic growth prospects
are likely stable and consistent but unspectacular. However, significant DPU growth
is likely possible through sizable acquisitions to its S$1.3bn asset portfolio, which
management is actively pursuing in Japan, Malaysia and Singapore. Given the high
quality of current property portfolio, we believe the stock is currently undervalued at
6.2% FY06 distribution yield. We have a BUY based on target price of S$1.10.
• FY05 results. FY05 DPU for 20 Sep-31 Dec 2005 was 1.58 Scts, or 5.60 Scts annualized.
Portfolio occupancy climbed to 97.2% as at 31 Dec 2005 (up from 92.1% as at end-Jan 2005)
with both retail and office occupancies at both properties exceeding forecasts. Distribution exdate
is on 9 Feb 2006 and distributions will be paid on 28 Feb 2006.
• Possible upside catalysts. With significant asset enhancement opportunities, future
DPU growth spurts are likely to come only from acquisitions. Management is actively
pursuing acquisition opportunities in Japan, Malaysia and Singapore. While MMP REIT
could potentially raise its gearing to 60% by obtaining a credit rating, management indicated
its optimal gearing level is at 50%. With current gearing at 29%, MMP REIT could acquire
up to S$567m in property-related assets if it increases up to the 50% gearing level, without
needing to raise new equity.
• Valuation. Target price of S$1.10 per unit is from our yield-spread model, which is
based on FY07 earnings and an implied 5.3% yield, derived from an assumed risk-free
rate of 3.3% and a 200 bps spread. The implied spread is undemanding compared to its
S-REIT and regional peers (see comparables below). This is supported by our DCF
valuation of S$1.33 per unit. We have not included any acquisition assumptions.
Forecasts and Valuation General Data
Issued Capital (m shrs) 94

Oil and gas plays jump into focus

2006-02-01T08:40:00.000-08:00

Published February 1, 2006

Midday Market Report

By R SIVANITHY

SINGAPORE - Oil and gas stocks such as Federal International and KS Energy were the main plays this morning following news that Pearl Energy is a takeover target. Semiconductor counters and China stocks were also active. Thanks to gain in the banks and Keppel Corp, the Straits Times Index gained 13.91 points at 2,425.99. -- BT

Credit Suisse picks MMI, HLA as winners

2006-02-01T05:53:00.000-08:00

Published February 1, 2006

MMI to ride on HDD growth, HLA on green pallet growth

By OH BOON PING

STRIKING a contrarian note, analysts at Credit Suisse have recommended mainboard-listed MMI Holdings as one of its favourite stocks that could exhibit significant upside potential given the right business environment this year.

In a Jan 25 report, Credit Suisse said that the electro-mechanical contract manufacturer will be a beneficiary of strong growth in the hard-disk drive (HDD) industry and the trend of rising equipment outsourcing to Asia.

Moreover, the report pointed out that MMI is also a likely gainer from the recent merger between Seagate Technology - MMI's major customer - and Maxtor Corp. Both firms operate hard disk drive factories here. Indeed, shares of Seagate suppliers MMI and Seksun rose soon after the Seagate-Maxtor announcement last month, while shares of Maxtor suppliers such as Jurong Tech and Brilliant took a hit. In the report, the analysts noted that MMI's counter currently trades at just six times its expected earnings per share (EPS) this year and yields four per cent. Furthermore, the company also has a return on equity of over 20 per cent, thereby making it 'a high return on equity company with strong company and industry fundamentals and is a ripe candidate for a re-rating, in our view,' the report concluded.

Last year, MMI reported an 89 per cent surge in its net profit to a record $38.5 million, fuelled by strong global demand for HDDs. Similarly, its annual revenue grew 23 per cent to reach an all-time high of $691.8 million.

Likewise, Credit Suisse also carries an 'outperform' rating on Hong Leong Asia (HLA), with a 12-month target price of $2.52, thanks to its environmentally-friendly pallet business, a recovery in other operations, and the recent divestment of its metal container and closure business. In particular, the report said that HLA's green-pallet business could earn $47 million in FY08. 'Even so, HLA's global pallet market share would be only about one per cent,' the report added. This comes even as that business segment could grow 'from commercial launch in 2005 to the largest contributor of earnings in three years' time'. HLA has interests in the green-pallet business through its subsidiary GPac Technology.

'Diesel engines are expected to recover from a deep cyclical downturn in FY05, and building materials are rebounding nicely too.'

- Credit Suisse on Hong Leong Asia

Credit Suisse said that even with GPac stripped out of this year's earnings, HLA's earnings is still expected to grow by over 80 per cent from its existing operations in FY06.

The report added: 'Diesel engines are expected to recover from a deep cyclical downturn in FY05, and building materials are rebounding nicely too. Xinfei (Chinese white goods) should benefit from organic growth and an increased stake from 51 per cent to 90 per cent.' Furthermore,'HLA trades at just 8.6 times our FY06 forecast, versus 13.6 times for the Singapore market and 12.1 times for Singapore mid-caps. Unlike its peers, HLA is projected to register a 36 per cent CAGR (compounded annual growth rate) for FY07-08E'.

Prime Reit beats income forecast by 12%

2006-02-01T05:47:00.000-08:00

February 1, 2006, 6.07 pm (Singapore time)
Business Times
Prime Reit beats income forecast by 12%
SINGAPORE - Macquarie Meag Prime Reit said on Wednesday that its distributable income for the period Aug 8, 2005 to Dec 31, 2005 beat its own forecast by 12 per cent.

The mall-based property trust said in a statement it would pay unit holders S$14.9 million (US$9.2 million), or 1.58 Singapore cents per unit, for the period.

Listed in September, Macquarie Meag is one of Singapore's seven property trusts and competes against mall-based Suntec Reit and CapitaMall Trust . -- REUTERS

UBS Investment Research on Singapore Banks

2006-02-01T03:56:00.000-08:00

UBS Investment Research
Singapore Banks
Expect better loan growth
! 2005 loan growth at 2.2%
The month of December ended with loan growth of 2.2% (YoY), compared with
0.9% in November. The stronger number was primarily due to the turnaround in
the manufacturing sector, which saw credit expand by 3.2% versus flat to
negative growth in preceding months.
! Strong economy to underpin loan growth
Economic growth in the past several months has surprised on the upside
underpinned by exports and domestic demand. We remain sanguine on the 2006
outlook and we expect this to translate into 6% loan growth while the interest rate
cycle should support better margins.
! Lower growth in immediate months
While we expect 2006 to end with the strongest loan growth we have seen in the
last six years, in the immediate months growth is likely to be flat or negative
because of mortgages. We look for mortgages, which make up 34% of total loans,
to moderate further because of fewer property transactions in 2003 and early 2004.
! Our picks
DBS in our view is in a strong position to benefit from the reflating economy
while OCBC with a high level of Tier 1 capital is a leading candidate for capital management exercises.
1 February 2006

UBS Investment Research - Chartered Semi on Track

2006-02-01T03:50:00.000-08:00

UBS Investment Research
Chartered Semi
Business momentum on track

! Positive Q405 results and Q106 guidance
Chartered reported Q405 results on 27 Jan. Margins came in above our
expectations at 24% and 9%, with net profits reaching US$26.5m, ahead of our
US$17.2m. Looking into Q106, Chartered guided for sales decline of 2-4% QoQ,
slightly better than our 5% QoQ decline, with net profit of US$10-15m.
! New customers for 90nm - progressing as planned
To diversify single product risk on 90nm, we believe Chartered remains on track
to secure new customer orders on 90nm. We expect the customer on baseband ICs
to start placing orders late-Q2, while wafer production from AMD could begin
from July 06. Chartered also expects new 90nm customers in graphics and storage
in 2H06.
! Adjustments to earnings forecast
We raised our 05/06E/07E earning estimates from –
US$183m/US$97.5m/US$125m to –US$173m (actual)/US$101.7m/US$131.7m,
to partly reflect better Q405 results, less-than-expected seasonal sales decline in
Q106, as well as new capacity additions in its Fab 7, from 15K to 19K wpm in
06E.
! Valuation: Maintain Buy 2, upped PT to S$1.70
With Chartered's business momentum intact, we maintain Buy 2 on Chartered. We
also lift our PT to S$1.70 to reflect our increased earnings forecast for 06E/07E,
based on 06E EV/CE of 1.4x (prev 1.3x), assuming ROCE of 10.1% (prev 9.8%),
WACC of 8.8% and growth of 5.5%, translating to 06E P/B of 1.8x.

Market & Economy (1 Feb 2006)

2006-02-01T02:22:00.000-08:00

SG-AM: Market & Economy (1 Feb 2006)
By Carmen Lee
Wed, 01 Feb 2006, 08:57:20 SGT

FOCUS

MARKETS

Farewell to Greenspan. While the Singapore market was closed for the Chinese New Year break, the US Federal Reserve met and raised interest rates once more by another 25bp, bringing it to 4.5%, and starting off 2006. Apart from raising US interest rate to 4.5% under Chairman Alan Greenspan for the final time, US Federal Reserve policy makers also indicated that interest rate hike is not over though there is less certainty now. There was no use of the usual "measured" pace, instead the FOMC said that some "further policy firming may be needed" to curb inflation. During the past few days, the US markets fell, while most Asian markets were closed (Taiwan, Hong Kong, Malaysia and Singapore) for the Chinese New Year holiday. The Nikkei remained traded during this period and clocked up its sixth straight day of gains.

STI benefited from gains for oil-related stocks. Since our last Strategy report in Dec 2005, the Singapore market has seen several interesting developments. Of key interest is that the Straits Times Index (STI) started off the year on a positive note and touched a closing high of 2425.99 on 9 Jan 2006, up 3.4% for the year. Since the early heady gains, the STI has been on a downtrend before recent gains for oil-related stocks managed to give the STI another boost, lifting the STI to last Friday's closing level of 2412.18, up 2.8% for the year.

With four consecutive days of gains before we closed off the year of the Rooster, what can the market expect for the first trading day of the year of the Dog?

Interest rate is moving higher. With the US Federal Reserve indicating possibly more rate hikes ahead and with oil prices up 10% for the year (based on crude oil for March delivery, which hit a recent high of US$68.35 per barrel on Monday), we expect further oil price increases to be limited, pending no major worldwide catastrophes that could potentially cripple oil supplies. If oil prices stay within 10% of last year's levels, we expect the upside for Singapore oil-related stocks to be fairly limited as the key oil stocks have already moved up significantly and even the second-tier oil-related stocks have similarly surged in recent days. While rotational interest could move to some of the other sectors, we expect interest to remain fairly muted pending the Singapore Budget on 17 Feb 2006. Once again, the corporate wishlist is likely to include more corporate incentives and of course, lower corporate tax rate. However, with property incentives announced in 2005, we expect any corporate incentives to target other industries, especially growth segments like Biomedical, pharmaceuticals, etc. The much talked-about Singapore general election has, we believe, been factored into the market and potential government initiatives are likely to be more family-oriented with mass appeal.

STI is starting to show some signs of lethargy. Based on our Strategy report, our STI target was 2465, and the STI at current level is showing limited upside potential. However, mitigating this is that yield is still good at about 4.3%. However, PER for the STI is edging higher. It is currently at about 15.2x 2006 earnings and based on this, it is edging closer towards the 13-year average of 19.5x, and higher than the recent range of only 10-14x. While the STI is facing some resistance, the broader market is still fairly undemanding. Valuation for the broader market is lower at about 12.3x 2006 earnings with 9% EPS growth. In recent days, we have seen the other segments doing some catching up. For example, the UOB Sesdaq Index hit a high of 92.73 on 16 Jan 2006, up 5.3% for the year - a creditable performance after having been lacklustre for a long time (with a puny gain of only 1.3% in 2005 versus 13.6% for the STI). Overall, we expect the STI to demonstrate limited gains as market watchers await the Singapore Budget, but for value investors, ex-STI, oil and property stocks, the rest of the Singapore stocks are still fairly undemanding at current prices. (Carmen Lee)

Economy: As widely expected, the US Federal Reserve yesterday raised its key overnight Fed funds rate by 25bps to 4.50%. This is the 14th consecutive rate hike and one of the most extended gradual tightening cycles in recent history. Yesterday's FOMC meeting was also Alan Greenspan's last, with a new chairman Ben Bernanke taking over from today. The post-meeting statement was essentially the same as the last one on 13 Dec 05, underscoring the Fed's confidence on economic outlook and inflation expectations. However, the phrase "some further measured policy firming is likely to be needed..." was altered slightly to "some further policy firming may be needed...", with the words "gradual" dropped (in use since May 2004), and "likely to" changed to "may".

With the minor change in wording, the risk of further rate hikes appears to be less visible than before, especially taking into account last week's slower-than-expected US 4Q05 GDP report (1.1% annualized vs. 2.8% consensus). This also leaves open the room for the next chairman to spell out his policy direction, who has an opportunity on 15th February to deliver the semi-annual monetary policy report to Congress. In terms of the "neutral policy zone" that we mentioned earlier, the current rate of 4.50% is closing on to our 4.7% to 5.6% range. This means at least another 25bps hike to go, although our 5% target appears to be lofty now depending on data going forward, after taking into account the new incoming US Fed Chairman, less-than-certain post-meeting statement, and weak 4Q05 GDP. This suggests limited headroom for domestic interest rates, as we had mentioned before. We continue to reiterate our end-2006 target of 3.50% for the 3-month interbank rate (SIBOR) from current 3.25%. The US Fed will next meet next month, on 28 Mar 06. (Suan Teck Kin)

DBS Vickers Securities has downgraded its call on Pearl Energy

2006-02-01T02:17:00.000-08:00

SINGAPORE (XFN-ASIA) - DBS Vickers Securities has downgraded its call
on
PEARL Energy to a "hold" from "buy" given that the oil and gas
exploration
firm's share price is trading close to the brokerage's fair value
estimate.

"As the counter is now trading near our fair valuation, we
downgrade
our recommendation to "hold"," said DBS, which has a target price of
1.95
sgd for PEARL Energy.

The company's share price surged today on news that United Arab
Emirates-based Aabar has agreed to buy a 48.29 pct stake in the firm
for
1.95 sgd per share, or about 418 mln sgd, from Indonesia-based
Austindo
Group.

At 2.49 pm, PEARL Energy was up 0.19 sgd, or 10.98 pct at 1.92 on
volume of 12.62 mln shares.

Hongbao rally for market ahead of Chinese New Year

2006-01-29T10:37:00.000-08:00

Published January 28, 2006

Business Times

By VEN SREENIVASAN
SENIOR CORRESPONDENT

A POSITIVE overnight close on Wall Street followed by strong sessions in other key Asian bourses - especially Tokyo - sent the Singapore market to one of its highest ever levels ahead of the Chinese New Year long weekend. 'It's a hongbao rally,' quipped a broker here.

Indeed, there was a palpable surge in the market undertone after the recent jitters on Tokyo and Wall Street. The Straits Times index gained 23.06 points to 2412.08, boosted by the likes of Singapore Airlines (SIA), DBS Group, Jardine Matheson and Fraser & Neave (F&N).

Overall market volume was strong, with some 1.5 billion units worth some $1.4 billion changing hands as rises led falls by almost four to one.

The strong uptick comes at the heels of the Dow Jones' 100 points overnight gain to 10,809. The Nasdaq Composite climbed more than 22 points to 2,283 on Thursday, while the Standard & Poor's 500 Index gained 9.6 points to 1,274 points.

It also helped that in Tokyo, the Nikkei seems to be recovering nicely from the Livedoor scare, and posted a 569.66 points gain to 16,460.68 points on the back of banking and consumer stocks.

And though blue chips lead the benchmark index higher yesterday, the gains were broadly based and supported by a noticeably upbeat market undertone.

Technology and China plays were among the day's volume leaders. The heavyweight risers were led by SIA, whose stock gained 40 cents to a new high at $14.20. Several brokerages have recently upgraded SIA in recent weeks, citing its strong market position, buoyant industry conditions and the potential cash from the sale of subsidiaries. DBS Bank was up 20 cents to $16.40, while F&N gained 70 cents to a new high at $18.80.

Chartered Semiconductor Manufacturing, which posted a higher-than-expected 4Q05 net income of US$26.5 million on the back of US$367.2 million turnover, was the most actively traded counter. The stock was up six cents to $1.40 on some 74 million shares as analysts upgraded the company's full year earnings forecast.

Meanwhile, Utac, which surprised with 4Q05 net profit of US$20 million, was up 3.5 cents to 92.5 cents. Heart stent-maker Bionsensors hit a high at $1.09 before pulling back to close with a net two cent decline for the session at $1.05, amid speculation that it was a potential takeover target for global giant Johnson & Johnson, which lost its bid to buy Guidant Corporation to rival Boston Scientific.

One sector which seems to be particularly favoured, but did not feature much in the day's bullish session, was the anchor handling and tugs supply sector (AHTS).

In a report issued this week, BNP Paribas says the sector was a late beneficiary of the upturn in the offshore oil and gas industry. 'Lagging South-east Asian AHTS rates are now just starting to track North Sea rates up and Singapore-listed AHTS players look cheap on a global basis,' it notes. 'Our top picks are Ezra and Labroy, both offering 65 per cent upside.'

But the stock of shipbuilder and marine equipment repairer ASL Marine rose 5.5 cents to 70.5 cents after it reported a doubling of interim earnings to $12.3 million.

Market insiders see generally bullish undertones continuing to support the Singapore market during the next few months - barring unforeseen shocks of course.

I Like My Home during CNY - Clean & Span

2006-01-29T07:15:00.000-08:00

Raffles Holdings should have ended the short-term downtrend

2006-01-28T17:23:00.000-08:00

SG Technical Comments: Raffles Holdings (27 Jan 2006)
By Ken Tai
Fri, 27 Jan 2006, 09:10:32 SGT

Raffles Holdings - The short-term downtrend of Raffles Holdings should have ended after a series of higher highs. A breakout has occurred yesterday. The traded volume rose sharply and suggested that the breakout was valid, further upside can be anticipated. As Wave 2 never corrects below the low of Wave 1, we estimate that we are currently in the Wave 3 mode. As Wave 3 is never the shortest, an analytical target of $0.69 has emerged if Wave 3 equals to 1.618x of Wave 1 based on Fibonacci Ratio.

SG Technical Comments: STI (27 Jan 2006)

2006-01-28T17:20:00.000-08:00

SG Technical Comments: STI (27 Jan 2006)
By Ken Tai
Fri, 27 Jan 2006, 09:10:32 SGT

Straits Times Index - The STI formed a triangle in the hourly chart, pending for a breakout within the next few days. As the closing price, STI has started to approach the top of the Bollinger Bands. This action increased the odds for the STI to break above the triangle in the near term. A break above the resistance of 2395 may send the STI to 2420 level. If such an event occurs, we suggest a sell into strength to pare down long positions. The Stochastic Oscillator remains mildly overbought despite the recent correction, a sell on strength approach is more applicable at this juncture

Singapore Press Holdings -BUY

2006-01-28T16:48:00.000-08:00

Thursday, January 26, 2006
Advertising Revenue - Positive Trend in Page-Count Figures

Current Price : S$4.28
Target (12-mth) : S$5.00

Positive trend in page-count figures. In early-Dec 05, we highlighted a positive sign in November's advertising spending. Saturday issues of The Straits Times, the dominant newspaper in Singapore, were getting thicker with 250+ pages. This was a high page-count compared to the usual 220-230 pages. The high page-count has continued into December and January. If this trend continues, advertising revenue (AR) growth could be as high as 10% instead of the weak 2% reported in SPH's 1QFY06 or our forecast of 5% for FY06, FY07 and FY08. At this juncture, we are maintaining our earnings forecasts until we see a longer positive trend.

ACNielsen has under-estimated SPH's advertising revenue growth. Most analysts track ACNielsen data as a guide to SPH's AR growth. ACNielsen data has been understating SPH's growth. ACNielsen data had implied a contraction of 4.6% in 4QFY05 and 3.8% in 1QFY06. SPH's AR actually grew by 1.5% and 2.2% respectively. ACNielsen does not capture SPH's complete AR as certain ads are not included in its counts.

Growth momentum will be more obvious from 2QFY06 onwards. Apart from rising advertising spending, SPH's AR will be compared to a base without Streats (from Jan 05 onwards). Hence, actual AR growth will be higher. We believe newsflow on SPH will increasingly become more positive. Traditionally, SPH's share price has a strong relationship to its AR growth.
Current share price weakness presents a good buying opportunity, as it is at the bottom of its last one-year trading range of S$4.20-5.00 The stock also offers a high net dividend yield of 4.7% to 5.0%. Dividend yield in FY06 could be higher if SPH is successful in selling the Times Industrial Building which management said has received offers and are currently being evaluated. Maintain BUY

SINGAPORE (XFN-ASIA) - Global Voice Group Ltd

2006-01-28T10:44:00.000-08:00

SINGAPORE (XFN-ASIA) - Global Voice Group Ltd, which owns and operates
a
fiber optic network in 14 European countries, was sharply higher in
the
afternoon session on an expected recovery in its fundamentals, an
analyst
said.

At 3.05 pm, Global Voice was up 0.015 sgd or 9.1 pct at 0.18 sgd,
its
highest level in a month.

"We believe Global Voice's fundamentals are recovering," Kelive
said
in a client note and gave a "buy" recommendation to the stock.

"Global Voice's revenue recovery will be underpinned by demand
growth
from bandwidth hogging services such as broadband adoption, corporate
VoIP, WIMAX, 3G applications and remote realtime data backup. Based on
the
company's internal projections, Global Voice aims to increase
bandwidth
utilization to 50 pct over the next 5 years."

With an average utilization rate of 5 pct currently, Kelive said
there is room for growth without need for additional capex
investments.

Business Times - Broker's Take - SPC

2006-01-28T10:39:00.000-08:00

Singapore Petroleum Company
Jan 27 close: S$5.55
BNP PARIBAS EQUITIES, Jan 26
SINGAPORE Petroleum Co's (SPC) profit after tax and minority interest rose 60.1 per cent to $403.6 million in 2005, underpinned by a turnover increase of 51 per cent to S$7.5 billion. The record profit was driven by continuing tight global refining capacity and strong demand for refined products from China and India. It was aided further by the hurricanes that hit the US Gulf Coast in 2H05. The group was able to realise refining margins averaging more than US$4 per barrel for the year.

Refining capacity expanded 50 per cent from the acquisition of additional capacity after SPC bought into BP's stake in Singapore Refining Co (SRC). Indeed, SPC went from producing 95,000 barrels a day in 1H04 to 142,500 barrels a day in 2005. The BP retail network acquisition was completed in 4Q04, and the network has since been expanded to cover 39 service stations from 30 previously. The group's liquefied petroleum gas (LPG) market share also benefited from its 50 per cent interest in the SPC-Wearnes LPG joint venture. Given the stronger earnings momentum, we have upgraded our estimates for 2006 by $56 million to $419 million.

SPC's upstream moves into production-sharing contracts will enable it to benefit from the current high oil price environment. SPC has a 40 per cent working interest in the Sampang production-sharing contract, located off the shores of East Java, and a 20 per cent participating interest in production sharing contracts for Blocks 102 and 106 in the Gulf of Tonkin, Vietnam.

The upbeat macro outlook continues to bode well for SPC. Following the Asian financial crisis, refining margins remained in the doldrums before a recovery in 2003 turned margins positive again. China's enormous appetite drove product demand, while capacity shutdowns of refineries in the Philippines, Japan and Australia in recent years have helped reduce the surplus. The next four to five years could prove challenging with more refining capacity expected to be added in China and India.

We expect SPC's earnings to be driven by its larger stake in SRC, sustained operating margins and contributions from its recent acquisition of the BP retail network.

The stock is trading at earnings multiples of 6.5 times for 2005 and 6.7 times for 2006. Against comparable peers trading at a sector average of 8.8 times 2006 PE, SPC's valuations do not look demanding. We believe a slight discount to the sector average is fair and that the stock warrants a rating of about 8.0 times 2006 PE, which translates into a target price of $6.50.
BUY

- Compiled by MATTHEW PHAN

Bleak forecasts from China- related stocks

2006-01-28T10:35:00.000-08:00

Published January 28, 2006
Business Times

Bumper crop of profit warnings issued to SGX ahead of CNY holidays

CHINA-RELATED stocks are issuing a bumper crop of profit warnings - as seen by the number of statements issued to the Singapore Exchange (SGX) yesterday, just before the Chinese New Year holidays kick in.

China-based Zhongguo Jilong Ltd warned that its performance for the fourth quarter ended Dec 31, 2005 will decline vis-a-vis the third quarter ended Sept 30, 2005 and fourth quarter ended Dec 31, 2004. This is due to the underperformance of certain subsidiaries in China.

Similarly, China Food Industries placed investors on alert for 'substantially lower' earnings for the fiscal year 2005 compared with 2004. It attributes the weaker preformance to falling pig prices and import suspension imposed by the Agri-Food and Veterinary Authority of Singapore which affected its meat processing and food distribution segments.

Another company, New Lakeside Holdings Ltd, which has reported a loss of 66.17 million yuan (S$13.3 million) H1 2005, is now warning of further losses of about 10 million yuan in H2 2005 due to higher cost of production as a result of raw material shortage. The fall in apple supply due to poor weather conditions, it said, has seen annual total supply of apples in China fall by about 35 per cent.

Also sounding the alarm, Sinobest Technology Holdings Ltd said that its net profit for the year ended Dec 31, 2005 is expected to be lower than the previous year due to intense competition and slower progress made in some of its projects.

However, the group expects to remain profitable. The group intends to continue focusing on securing more software development and technical services projects to improve profit margin, to raise efficiency, and reduce cost.

Continuing in the same bleak tone, Fu Yu Corporation Ltd said its full-year results for 2005 are expected to be dented by provisions for obsolete stocks and doubtful debts of around $14 million. The provisions were made following a preliminary assessment of the financial results of its subsidiaries in China. However, the group expects to remain profitable for the full year.

Completing the downbeat note is Metal Component Engineering's profit warning on its H2 2005 results. Although the group's H2 2005 results turnover had improved over H1 2005, the company said its results before tax are expected to be a loss.

It attributes the weaker results to lower-than-forecast orders from major customers in China, initial investment and overhead cost incurred in the newly acquired plant in Thailand, and the setting-up of a new plant in Qingpu, China, and the loss from the disposal of its subsidiary, MCE Seimitsu Indonesia. The net loss from the disposal is about $0.3 million.

Business Times Extract - 28 Jan 2006

2006-01-28T10:21:00.000-08:00

Mr Lee, giving his Chinese New Year message yesterday, said that the economy - despite a slow start - grew strongly in the second half of 2005.

'Businesses across the board have done well. Wages increased and many workers received larger bonuses. Most importantly, we created many new jobs and brought our unemployment rate down significantly,' Mr Lee said.

And the year of the dog looks just as promising. Mr Lee said: 'The global outlook is positive: the US, China, India and Japan are all doing well . The investments we have brought in will generate more new jobs. I expect our economy to continue prospering.'

The Prime Minister added that the general feeling in the market is that things are looking up. 'Hotels and restaurants were fully booked in the festive season ,' he said. 'Retail sales have picked up as Singaporeans are in a more confident mood, and spending more than last year.'

DBS View on STI 27 Jan 2006

2006-01-27T21:55:00.000-08:00

ST Index (2,388.22) – The Straits Times Index gained 9.38 points with 1,12bn volume traded yesterday. Our fast Stochastic for the index has flipped and turned up indicating a likely change in its direction, therefore, we expect a gradual upward swing till the end of next week. In the meantime, our earlier anticipation of a weaker Index may still eventuate given that it penetrates below its current support level of 2,345, competing its 3rd and final corrective wave down.
However, looking at the current market sentiment, our Index might clear above its recent high of 2,395 and head towards our target of 2,450 over the next 3 weeks. This positive momentum is likely to be driven by a mixed of sectors from Technology, Telecommunication and Consumer. In the short-term, we would advise investors to buy into selective Technology, Telecommunication and Consumer stocks on weakness because there is still upside momentum in these stocks. Our year-end target for the Index stays at 2,560 levels.

Macquarie on Local Market

2006-01-26T15:35:00.000-08:00

SINGAPORE (XFN-ASIA) - Macquarie said it is rating the loca stockmarket as "slightly overweight" with the benchmark Straits Times index (STI) seen rising to around
the 2,600 points mark by end-2006, a 9 pct gain from
last year. Macquarie expects five major themes to dominate the market in 2006.
"The first is expectation of GDP upgrades for Singapore on the back of accelerating
global growth. Better-than-expected GDP growth has historically led to the STI
beating expectations. We advise investors to overweight
technology and offshore marine stocks in the first quarter of 2006," it
said. "Our second theme is dividend surprises and capital
restructuring. Whilst this is more of an ongoing theme, we
would look to position in Singapore REITs with high yields in the second quarter
ahead of the anticipated peaking of Fed tightening in May 2006," it said.
Besides Singapore REITs, companies with high free cashflow generation are likely
to consider special dividends or capital reductions. Within the telecom sector,
MobileOne has already announced a special dividend, and Macquarie expects that
StarHub will do the same. "We also anticipate more merger and acquisition activities.
Here, companies will use their balance sheets for expansion to fuel longer-term
growth. ST Engineering is the most likely candidate along with Parkway given its
regional healthcare ambitions," Macquarie said. "Reflation is our fourth theme.
This was our main theme in 2005 and it will spill over into 2006 given that residential
prices and office rents will continue their upward spiral," it said. "The expected
general election this year is our final theme. Usually elections are non events
but this is Prime Minister Lee Hsien Loong's first election campaign and we
expect (upbeat) market sentiment on the back of friendly policy announcements,"
it said. The first such policy announcement may be made
on Feb 17 when the government unveils its budget for the fiscal year
to March 2007, it added. The STI ended the morning session up 15.09 points or
0.64 pct at 2,383.41.

STATS ChipPAC returned to profit --in 4th Qtr

2006-01-25T19:00:00.000-08:00

SINGAPORE (XFN-ASIA) - STATS ChipPAC returned to profit in the fourth
quarter to December, with a net profit of 16.88 mln usd, compared to a
469 mln usd net loss a year before, as margins improved on the back of
robust semiconductor demand.

The strong fourth-quarter performance helped to narrow its 2005
net loss to 26.31 mln usd from 467.72 mln usd a year before, which
included a 453 mln usd goodwill write-down related to the merger of STATS and ChipPAC.

STATS ChipPAC's fourth-quarter net profit beat the 8.77-10.50 mln
usd
range of estimates of net profit by analysts polled by XFN-Asia. The
full-year net loss was also narrower than the 32.69-34.42 range of
forecasts of net loss by the analysts.

"This was another record quarter for us. We achieved continued
strong
revenue growth that exceeded the high end of our guidance," said STATS
ChipPAC president and chief executive Tan Lay Koon.

"Our net profit came in above the high end of our prior guidance
due
to higher sales combined with a favorable product mix and increased
operating synergies resulting from our merger," he said.

"We expect that positive momentum in our business will continue
into
the first quarter and full year of 2006, with revenues improving
faster
than the semiconductor industry as a whole," he said.

STATS ChipPAC expects sales in the first quarter to be 3-8 pct
greater than in the fourth quarter.

Based on US generally accepted accounting principles (GAAP),
diluted
earnings are expected at 0.03-0.06 usd per American Depositary Share
(ADS). Based on non-US GAAP, earnings per ADS could reach 0.10-0.13
usd.

Singapore Today - NetResearch

2006-01-25T18:52:00.000-08:00

In Singapore, rotational interest after recent price falls helped prop up selected stocks. The STI index closed 10.32 points higher at 2378.64 points but was off its 2387.78 points high due to profit taking. Investors were also more selective ahead of the abbreviated trading week ahead, due to the Chinese New Year holidays. Market breadth was good on 1.5 advances for every stock that fell while 660 issues were unchanged. Turnover was 1.3bil shares with a value of $1bil traded.

Interest and volume continued to be on the smaller cap penny stocks and selected China plays. Oil services stocks were in play with China Petro-tech adding 5 cents at 46 cents on 9.3mil shares. Advanced Holdings rose 3 cents at $1.08, helped by institutional buying while Tech Oil and Gas rose 7 cents at 45.5 cents on 18mil shares on hopes of further contract wins.

On the earnings front, Creative results announced this morning disappointed in that earnings were below what one would have expected from a seasonally peak quarter.
STATS results were better than the company’s guidance but
the company is still negative cash flow

STATS ChipPAC is expected to report tomorrow morning

2006-01-25T13:01:00.000-08:00

SINGAPORE (XFN-ASIA) - Chip testing and packaging company STATS
ChipPAC is
expected to report tomorrow morning its first quarterly net profit in
six
quarters in the three months to December, as burgeoning demand for
consumer electronics products has helped boost orders for chips,
analysts
said.

STATS ChipPAC also likely benefited from improved margins given
tight
industry capacity, they added.

Analysts polled by XFN-Asia said STATS ChipPAC is likely to post
net
profit of 8.77-10.5 mln usd in the fourth quarter to December.

For the full year, the company will likely post a net loss of
between
32. 69-34.42 mln usd, compared to the net loss of 467.72 mln loss it
posted a year ago, which included a 453 mln usd goodwill writedown
related
to the merger of STATS and ChipPAC.

The company posted a net loss of 43.19 mln usd in the nine months
to
September.

In October, STATS ChipPAC said sales should improve by another
14-18
pct in the fourth quarter compared to the third, allowing the company
to
return to profit.

Kim Eng Securities analyst Dharmo Soejanto forecasts STATS
ChipPAC's
fourth-quarter net profit at 10.50 mln usd on sales of 356 mln, driven
by
strong demand for chips used in consumer electronics and communication
products.

"Capacity tightness in the outsourced test and assembly sector
has
likely provided a further lift," Soejanto said.

Merrill Lynch, which sees STATS ChipPAC's fourth quarter net
profit
at 8. 77 mln usd, said the firm's operating margin is likely to have
increased in the last quarter compared to Q3 as uitilization rates
improved.

"We estimate assembly (packaging) and test utilization rates
(percentage) will reach 82 pct and 75 pct, respectively, in the fourth
quarter 2005, from 79 pct and 66 pct in the third quarter of 2005,
respectively," Merrill Lynch said.

"Therefore the operating margin may improve slightly to 6.3 pct
in
the fourth quarter 2005 from 3.5 pct in third quarter of 2005," it
said.

Morgan Stanley, which pegs the firm's full-year loss at 33 mln
usd,
translating to a fourth-quarter net profit of 10.19 mln, said it
expects
STATS ChipPAC to enjoy strong sales growth ahead given its exposure to
the
"high-growth consumer and communications segment and potential
overflow
business due to extremely tight capacity utilization at its Taiwanese
peers".

Additionally, margins should also improve as it benefits from
"stable
to firm" average selling prices, Morgan Stanley said.

Credit Suisse First Boston analyst Lim Keng Hock forecasts STATS
ChipPAC fourth quarter net profit at 9.6 mln usd and a full-year net
loss
of 33.59 mln, while Daiwa Institute of Research analyst Pranab Sarmah
forecasts STATS ChipPAC fourth quarter net profit at 9.2 mln usd, with
a
full-year net loss seen at 34 mln.

While Kim Eng's Soejanto also sees further earnings growth for
STATS
ChipPAC this year, earnings in the current quarter to March are
expected
to slow due to fewer working days.

Merrill Lynch said it expects the company to guide a "mid
single-digit sales decline" in the first quarter.

"Our channel checks suggest 3G handset chips could remain strong
during the first quarterof 2006 while PC, wireline and consumer could
experience a seasonal correction," Merrill Lynch said.

Three brokerages forecasts STATS ChipPAC to report a net profit
of
between 38-71 mln usd this year.