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Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
The information contained in this presentation has been obtained from public sources which Phillip Securities Research Pte Ltd (“PSR”) has no reason to believe are
unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this presentation are based on such
information and are expressions of belief only. PSR has not verified this information and no representation or warranty, express or implied, is made that such
information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in this presentation is
subject to change, and PSR shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or
releases in connection therewith. In no event will PSR be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of
the information or Research made available, even if it has been advised of the possibility of such damages.
This presentation is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of
any particular person.
You should seek advice from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial
situation or particular needs, before making a commitment to invest in such products.
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Penguin International LtdThis Penguin can flex and fly
Initiate coverage with a BUY and TP of S$0.61.
Paul Chew
29 April 2019
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Listed in 1997; 2 yards - Tuas (Singapore) and Batam (Indonesia).
2011: Dispose their passenger ferry ticket business
2016: Won contracts from Ministry of Home Affairs together with ST Marine for
2018: Secured patrol boat contract from Australia and offshore wind farm support vessel
Business Model
~80% revenue from shipbuilding: build for stock programme
~20% revenue from chartering: 15 crewboats in Malaysia and several specialised vessels in Singapore
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1. Offshore crewboats: ferry crew from onshore to offshore
rigs or platforms; branded under the Flex series.
2. Armoured security boats: sold to oil companies for
patrolling their offshore oil facilities in Nigeria
Source: Company, PSR
Latest crewboat Flex 42X
Armoured security boats
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3. Passenger ferries: ferry passengers in the leisure
industry; sold 1 unit to a African customer.
4. Patrol boats: 7 patrol boat order from Australia
5. Wind farm support vessel: 2 vessel orders from Taiwan
6. Fire and rescue vessel: 3 vessels together with ST
Marine, announced in December 2016. For the SCDF.
Passenger ferry
Patrol boatFire and rescue vessel Windfarm support vessel
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15 crewboats in Malaysia and several special vessels in Singapore
Rental is around US$4,000-5000 per day
Other income
Another significant source of income: around S$3-4mn per year
Dispose and convert crewboats into security vessels
Business model
2 types of shipbuiding revenue: build to order or build to stock15
crewboats
Build to stock: build to inventory + margins are better and buyers can
charter out earlier + works if demand is continuous and not too
specialised the vehicle + risk of inventory overhang
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1. Improving oil price and revival in offshore activity.
2. Larger market share as competition declined; market share
from 35% to 60% for aluminium boat 30-50m in length
3. Order momentum outside core vessel; 2018 secured patrol
boats and wind farm support vessel
Investment thesis
1. Expanded outside core
2. Rising charter income
3. Healthy balance sheet and attractive valuations
Rebound in global offshore
Malaysia and Nigeria improving too
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shipbuilding cycle was in a steady state cycle. During the
normalised shipbuilding cycle of 2012-15
Triyards and Nam Cheong traded at an average 5-8x PE.
Although, they build different vessels and have more
geared balance sheet profiles, both can be considered
Used the lower PE average of 5x to value the business and
added back the net cash from FY19e.
We initiate Penguin with a BUY and a target price of
S$0.61. We value Penguin at 5x PE, excluding its net cash.
Triyards average valuation was 5x PE
Nam Cheong valuations averaged 7.6x PE
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• 3rd consecutive quarter of record revenue: offsetting the decline in equities and fixed income revenue.
• Volume grew 12% YoY: key equity derivatives (+8% YoY) + record FX futures volume (+48% YoY) + iron ore derivatives (+30% YoY).
• Average fee per contract rose 5% from $1.06 to $1.11 due to the pulling back of rebates for China A50 index futures and 30% higher volume for the higher-priced iron ore derivatives.
• Derivatives contributed 52% to total revenue in 3Q19.
• We forecast a higher FY20e DDAV of 1,107k, 15% above 9M18’s DDAV of 963k.
Results at a glance
(SGD mn) 3Q19 3Q18 YoY 2Q19 QoQ Comments
Securities 43.3 61.7 -30% 45.2 -4%SDAV decreased 30% from a high base in 3Q18. Average
clearing fees contracted 2% at 2.80 bps (3Q18: 2.87 bps).
Derivatives 119.0 90.5 32% 112.9 5%
Derivatives volume grew 12% YoY (3rd quarter of record
volume) due to China A50 futures and iron ore derivative
contracts.
Others 66.4 70.0 -5% 66.1 0%Issuer Services and Post Trade Services declined 22% YoY
and 17% YoY respectively.
Total Revenue 228.8 222.2 3% 224.2 2%
Opex 110.6 104.4 6% 110.5 0%Due to higher staff costs as head count rose 4% YoY and a
$4m increase in legal and consultancy fees.
Net Profit 99.7 100.5 -1% 96.5 3%
Net Profit Margin 43.0% 44.7% -4% 42.4% 1%
SDAV 1,024.3 1,460.3 -30% 974.0 5% Underperformance in line with global equities market.
DDAV ('000 units) 1,039.1 921.9 13% 984.5 6%
Source: Company, PSR
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• Revenue fell 30% YoY, the slowest in five years.
• The significant fall in SDAV was partly due to a high SDAV of $1.45bn in 3Q18, the highest since 4Q13.
• Average clearing fees declined from 2.72 bps to 2.67.
• Our 9M19e SDAV of 1.08bn was 5% above the actual 9M19 SDAV of $1.02bn, hence we lower our FY19e SDAV estimate from S$1.08bn to S$1.02bn.
• We pen in a more conservative SDAV for FY20e of S$1.02bn, 5% lower than the previous SDAV of S$1.07bn.
Results at a glance
(SGD mn) 3Q19 3Q18 YoY 2Q19 QoQ Comments
Securities 43.3 61.7 -30% 45.2 -4%SDAV decreased 30% from a high base in 3Q18. Average
clearing fees contracted 2% at 2.80 bps (3Q18: 2.87 bps).
Derivatives 119.0 90.5 32% 112.9 5%
Derivatives volume grew 12% YoY (3rd quarter of record
volume) due to China A50 futures and iron ore derivative
contracts.
Others 66.4 70.0 -5% 66.1 0%Issuer Services and Post Trade Services declined 22% YoY
and 17% YoY respectively.
Total Revenue 228.8 222.2 3% 224.2 2%
Opex 110.6 104.4 6% 110.5 0%Due to higher staff costs as head count rose 4% YoY and a
$4m increase in legal and consultancy fees.
Net Profit 99.7 100.5 -1% 96.5 3%
Net Profit Margin 43.0% 44.7% -4% 42.4% 1%
SDAV 1,024.3 1,460.3 -30% 974.0 5% Underperformance in line with global equities market.
DDAV ('000 units) 1,039.1 921.9 13% 984.5 6%
Source: Company, PSR
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Both NSE and SGX have agreed on a proposition and submitted a joint proposal to their respective authorities. No additional details were announced at this point and we await further announcement from SGX.
2) Competition from Hong Kong Exchange:
SGX does not expect absolute volume for China A50 to be impacted although market share may decrease as Hong Kong Exchange joins in as a competitor.
A vast majority of SGX’s clients trade a range of products and SGX offers margin offsets across various derivatives products with a good track record.
Liberalization of the Chinese market: higher onshore activity usually creates higher offshore activity as well, creating a larger market for both exchanges.
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We maintain Accumulate at a lower TP of S$8.09 (previously S$8.17) as we peg our TP to 21.4x P/E, 1 SD below SGX’s 5-year mean.
The lower TP is due to higher DDAV partly offset by lower SDAV.
• We believe that continued stock-market volatility should support derivatives volume growth.
• The boost in derivatives business volume and product offerings will be more than sufficient in supporting earnings growth.
• SGX is a defensive stock with consistent and diversified earnings, valuation and dividend support for resilience in an uncertain environment.
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Stable portfolio occupancy and higher tenant retention rate.
Funan pre-leased at 90% occupancy (4Q18: 80%), expected to contribute to CMT from 2H19 onwards.
- The Negatives
Still-weak rental reversions, lagging behind that of its peers. Tenant sales slid 0.4% YoY, dragged down by a wider mix of trade categories.Outlook
IMM (second biggest contributor by GRI) had its lease renewed for another 30 years – Jurong Lake District shaping up, will benefit IMM + Westgate reversions and valuations.
Re-commencement of Funan operations expected to progressively improve portfolio operational metrics.
Maintain NEUTRAL with higher TP of S$2.21 (prev S$2.09)
We adjust our target price to reflect a lower cost of equity.
Our target price translates to a 5.4% distribution yield and a P/NAV of 1.06x.
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Frasers Centrepoint TrustGrowth catalysts in sight
Tara Wong
Research Analyst
Phillip Securities Research Pte Ltd
29 April 2019
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Weighted average debt maturity extended beyond 2 years.
- The Negatives
Occupancy levels took a hit. CWP reported the lowest occupancy level (of 97.4%) in 25 quarters, mainly due to the exit of three tenants related to Newstead Technologies.
Replacement tenants already secured, occupancy to normalise in 3Q19.What else was new during the reporting quarter?
Stake in PGIM Real Estate AsiaRetail Fund Limited (PGIM ARF)• FCT had in April 2019 acquired a 17.13% stake in PGIM ARF, Singapore’s largest non-listed retail
mall fund (which holds assets such as Liang Court and White Sands), for S$342.5mn.• Fully funded by a bridge, which will be converted to a combination of term loan and/or equity.
Expected DPU accretion of 0.31%/1.89%/3.56% with a LTV ratio of 60%/80%/100%, respectively.• Its Sponsor, Frasers Property Limited (FPL), had also acquired a 17.8% stake in PGIM ARF, with
plans to increase its stake to 47.82%.
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FCT’s stake in PGIM AFR further entrenches FCT’s presence in the suburban retail space and dangles a possible DPU accretion of up to 3.56% (assuming 100% LTV ratio).
FCT’s biggest asset, CWP, stands to gain tremendously from the transformation of Woodlands Regional Centre, which will anchoritself as the largest economic hub in the North region.
Maintain NEUTRAL with higher TP of S$2.31 (prev S$2.21)
We raise our target price to reflect a lower cost of equity as well as to adjust for the acquisition of stake in PGIM AFR.
We believe there is further upside to FCT’s valuation, with growth catalysts stemming from its ROFR pipeline (particularly, the 33.3% stake in Waterway Point), heightened positioning of CWP, and the renewed strength in fringe retail rents.
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Singapore Coal MonthlyNo sign of unwinding China’s import restriction
Chen Guangzhi
Research Analyst
Phillip Securities Research Pte Ltd
29 April 2019
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• Approval of the resumption of work for 29 mines (Total capacity: 177mntonnes; New capacities: 144mn tonnes).
• Mainly produce thermal coal
Expecting 30% growth of domestic coal transport capacity by rail
• Coal transportation capacity by railway: increase 650mn tonnes to 2.8bn tonnes (75% of the national production), or have a 30% growth by 2020
Indonesia
Firmer approach to ensure domestic obligation is met
• The DMO requirement for 2019 could be higher than 25% which was the quota for 2018
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China boosted domestic coal supply, associating with import restriction
• The restriction on Australian seaborne coal remains.
• Clearance for Indonesian coal at northeastern China ports was delayed in Apr-19
• The tactical increase in supply and transportation capacity is to supplement the shortfall due to the reduction of coal import and narrow the price gap between land-borne and seaborne coal respectively
• The strategic clampdown on coal production and consumption will carry on domestically
The mitigation of price headwinds throughout the Indonesian approach is limited
• Coal selling price is more critical for business operation and performance
• DMO has little help on reliving pressures from operational difficulties
Singapore Coal Monthly
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Phillip Coal Tracker: Our snapshot of coal marketsFigure 1: Monthly coal production in PRC grew slightly Figure 2: Growing coal import from Indonesia to China Figure 3: China hydro power supply spiked YoY in Mar-19
Source: National Bureau Statistics of PRC, PSR Source: Bloomberg, PSR Source: National Bureau Statistics of PRC, PSR
Figure 4: HBA dropped to a 20-month low Figure 5: Qinhuangdao 5,500 GAR weekly FOB spot price Figure 6: Total port coal inventory declined recently
Source: Coalspot.com, PSR Source: Bloomberg, PSR, NDRC price zones (red/blue/green) *Source: Bloomberg, PSR*The total port coal inventory includes coal stockpile at Qinghuangdao Port, Tianjin Port, Caofeidian Port, Guangzhou Port, Jingzhou Port, Lianyungang Port, Dandong Port, Jingtang Port, Yinkou Port, Qingdao Port, and Huanghuagang Port.
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