1. business and industrial
2. company
3. earnings

Regional Daily, 15 October 2014
5
Regional Daily
Ideas Troika
Top Stories
Trek 2000 (TREK SP)
Technology
BUY SGD0.41 TP: SGD0.61
Mkt Cap : USD96.0m
Pg2
Initiate Trek with BUY and a SGD0.61 TP, based on a 16x FY15F P/E
representing a 49% upside. With the Mattel deal, we expect orders to surge
in FY15, which could lead to revenue and NPAT rising by 40% and 267%
CAGRs from FY13 to FY16F.
Analyst:Jarick Seet ([email protected])
OldTown (OTB MK)
Consumer Cyclical - Retail
BUY MYR1.71 TP: MYR2.15
Mkt Cap : USD234m
Pg3
Although we expect growth to remain muted for the remaining three
quarters after its weak 1QFY15 performance, we believe its growth
momentum will gain pace thereafter.Maintain BUY with a revised TP of
MYR2.15 (from MYR2.30), implying a 25.7% upside.
Analyst: Fong Kah Yan ([email protected])
Trinity (891 HK)
Consumer Cyclical - Retail
SELL HKD2.01 TP: HKD1.61
Mkt Cap : USD451m
Pg4
We spoke with Trinity mgmt and learned that SSSG for September relapsed
into negative territory, after turning positive in Jul/Aug, while sales in Golden
Week were poor. We cut FY14-16 EPS by 29-48%, TP to HKD1.61 (from
HKD2.00), downgrade to SELL.
Analyst: Robin Yuen, CFA ([email protected])
Pg5
Takeaways From Jakarta’s Vice Governor Meeting
Other Key Stories
Indonesia
Indonesia Strategy
Analyst: Agus Pramono, CFA ([email protected])
Malaysia
Top Glove (TOPG MK)
Consumer Non-cyclical - Rubber Products
BUY MYR4.88 TP: MYR5.06
CARiNG Pharmacy (CARING MK)
Healthcare
BUY MYR1.63 TP: MYR1.70
Singapore
Ezion Holdings (EZI SP)
Oil & Gas Services
BUY SGD1.61 TP: SGD2.45
Pg6
Analyst: Jerry Lee ([email protected])
Pg7
Taking a New Prescription
Analyst: Alexander Chia ([email protected])
Pg8
Oil Prices Hold No Fear For Ezion
Analyst: Lee Yue Jer ([email protected])
Lian Beng (LBG SP)
Construction
BUY SGD0.63 TP: SGD1.17
Pg9
Sembcorp Marine (SMM SP)
Oil & Gas Services
BUY SGD3.66 TP: SGD4.50
Pg10
See important disclosures at the end of this report
Nitrile Glove Production To Keep Increasing
Kicking Off FY15 With On a Strong Note
Analyst: Sarah Wong ([email protected])
Largest Contract YTD Worth USD696m
Analyst: Lee Yue Jer ([email protected])
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1
Initiating Coverage, 14 October 2014
Trek 2000 (TREK SP)
Buy (Maintained)
Technology
Market Cap: USD96.0m
Target Price:
Price:
SGD0.61
SGD0.41
Macro
Risks
Trek’s Toy Story
Growth
Value
Trek 2000 International (TREK SP)
Price Close
Relative to Straits Times Index (RHS)
0.46
0.41
165
0.36
145
0.31
125
0.26
105
0.21
85
0.16
3
65

2
2

Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
Oct-13
Vol m
1
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
0.18m/0.14m
48.8
48.8
0.19 - 0.41
55
298
Henn Tan
Toshiba Finance
Creative Technology
35.2
17.7
9.2
Share Performance (%)

Educational toy, the key game changer. Trek 2000 International Ltd
(Trek) secured an initial USD25m deal to provide wireless Flucard
modules for Mattel’s (MAT US, NR) educational doll toy, which has been
a big hit in China. Mattel plans to introduce the same toy into the US
market by the end of 2014. We expect substantially more orders for
Trek’s Flucard worth approximately USD50m in 2H14 and USD100m in
FY15. We believe that more of Trek’s products like the Ai-Ball can be
incorporated into the toy, allowing parents to monitor their babies
wirelessly via smartphones. This may create another potentially
significant revenue stream for Trek. Lastly, medical devices are another
potential area for Trek to incorporate its wireless Flucard modules.
Cloud Stringers – the “eBay” for journalists. We expect the ramping
up of Cloud Stringers, a digital (cloud-based) marketplace that transmits
and transacts online content globally, to commence by the end of the
year. Furthermore, its partnership with Panasonic (6752 JP, NR) as well
as multiple news agencies and freelance journalists could boost the
content and number of users of this site. We are positive on this new
platform which might be a potential revenue stream and an asset for
Trek from 2015 onwards.
Initiate coverage with BUY and a SGD0.61 TP. We see many positives
in place for Trek on the back of the surge in Flucard orders from the
Mattel deal. We initiate coverage with a BUY and a SGD0.61 TP, based
on a 16x FY15F P/E. We use the expected earnings in 2015 in order to
better capture the impact of the Mattel deal. Its regional-listed peers are
trading at an average of 20x FY14F P/E; we ascribe a 20% discount to
its peer average, taking into consideration the liquidity of the stock and
the relatively smaller scale of the company compared with peers. With a
library of 600 patents and a strong and successful research and
development (R&D) team, Trek could also be considered a potentially
favourable acquisition target by its larger peers.
YTD
1m
3m
6m
12m
Absolute
105.0
20.6
86.4
105.0
70.8
Forecasts and Valuations
Relative
103.2
24.2
88.5
104.2
69.4
Total turnover (USDm)
Shariah compliant
Dec-13
Dec-14F
Dec-15F
Dec-16F
74
100
151
203
233
Reported net profit (USDm)
0.3
2.1
9.2
14.1
17.3
Recurring net profit (USDm)
0.3
2.1
9.2
14.1
17.3
Recurring net profit growth (%)
0.0
632.7
339.1
54.0
22.4
0.00
0.01
0.03
0.05
0.06
0.002
0.008
0.008
0.008
0.008
Jarick Seet +65 6232 3891
Recurring EPS (USD)
[email protected]
DPS (USD)
Recurring P/E (x)
Terence Wong CFA +65 6232 3896
[email protected]
Dec-17F
336
46
10
7
6
P/B (x)
2.42
2.43
2.07
1.65
1.31
P/CF (x)
45.8
23.3
8.7
5.8
4.8
0.6
2.3
2.3
2.3
2.3
26.7
18.8
7.8
5.2
3.8
0.0
5.3
21.4
27.0
26.3
net cash
2.1
4.4
0.0
0.0
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


2

.
2
0
.
3
0
0
.
2
0
0
We initiate coverage on Trek with BUY and a SGD0.61 TP, based on a .
0
16x FY15F P/E which results in a 49% upside. Trek has managed to 0
boost its wireless Flucard sales on a big scale given its partnership 0
with Mattel China. We expect orders to surge in FY15, which could lead
to revenue and NPAT rising by 40% and 267% CAGRs from FY13 to
FY16F. We believe this has been a long time coming for Trek, on top of
positive drivers like consumer SSDs and its e-platform Cloud Stringers.
3
1




Source: Company data, RHB
net cash net cash
0.0
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0.0
2
Company Update, 14 October 2014
OldTown (OTB MK)
Buy (Maintained)
Consumer Cyclical - Retail
Market Cap: USD234m
Target Price:
Price:
MYR2.15
MYR1.71
Macro
Risks
Sowing The Seeds Of Long-Term Growth
Growth
Value
OldTown (OTB MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
2.30
108
2.20
104
2.10
99
2.00
95
1.90
91
1.80
87
1.70
82
1.60
4
4
3
3
2
2
1
1
78
0
0
.
2
0
0
OldTown’s share price has corrected >20% from its high of MYR2.22 in .
0
the past three months. Although we expect growth to remain muted for 0
the remaining three quarters after its weak 1QFY15 performance, we 0
believe its growth momentum will gain pace thereafter. Maintain BUY
with a revised TP of MYR2.15 (from MYR2.30), implying a 25.7% upside.
The stock is currently trading at an undemanding FY16 P/E of 12.8x.

Aug-14
Jun-14
Apr-14
Feb-14
Dec-13

Oct-13
Vol m
Price Close
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Oldtown International
Franklin Resources
Mawer Investment
Management
1.28m/0.40m
29.2
25.7
1.71 - 2.26
49
447
42.8
6.4
6.7


Recent share price retracement. OldTown’s share price has corrected
by >20% from its high of MYR2.22 in the past three months. We believe
the retracement was due to a combination of: i) weak 1QFY15 (Mar)
results, ii) the weak performance of its food and beverage (F&B) arm,
which reflects the current challenging operating environment, and ii)
slower-than-expected growth in its key earnings catalyst, ie its fastmoving consumer goods (FMCG) arm.
Counting on its FMCG arm. Moving forward, we expect growth from its
F&B arm to remain soft amid stiff competition and consumers’ cautious
discretionary spending. Its FMCG arm, on the other hand, should
recover and underpin growth ahead. The weak performance of its FMCG
arm in 1QFY15 was due to seasonal factors as well as higher-thanexpected selling and distribution spending. We note that sales have
picked up in the subsequent quarters after the delay in promotions of its
FMCG products in China in 1QFY15. Hence, we expect earnings from its
FMCG arm to normalise in the second half. In the medium to long term,
we expect earnings for its FMCG arm to grow by double digits, driven by:
i) growth in local sales from improving consumer sentiment, and ii)
growth in its export markets, particularly in Asean.
Risks. Key risks include: i) weaker-than-expected consumer sentiment,
ii) a change in consumer preference, and iii) rising raw material prices.
Maintain BUY with a revised TP of MYR2.15. We trim our TP to
MYR2.15 (from MYR2.30), based on a revised FY16 P/E of 16x (from
18x) to reflect the challenging operating environment for its F&B division.
However, we remain optimistic that its FMCG arm should start to reap
the fruits from an expanding regional distribution network next year. The
stock is currently trading at an undemanding FY16 P/E of 12.8x relative
to its peer target valuations of 19-22x.
Forecasts and Valuations
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(17.8)
(11.4)
(21.2)
(14.1)
(16.8)
Relative
(14.7)
(8.9)
(17.2)
(11.7)
(18.1)
Shariah compliant
Fong Kah Yan +603 9207 7668
[email protected]


2

.
2
0
.
2




Mar-12
Mar-13
Mar-14
Mar-15F
299
337
382
417
484
Reported net profit (MYRm)
41.4
44.4
49.0
49.2
59.9
Recurring net profit (MYRm)
34.5
44.4
49.0
49.2
59.9
Recurring net profit growth (%)
23.2
28.8
10.2
0.5
21.7
Recurring EPS (MYR)
0.10
0.12
0.11
0.11
0.13
DPS (MYR)
0.06
0.07
0.06
0.06
0.07
Recurring P/E (x)
16.9
14.0
15.8
15.5
12.8
P/B (x)
2.46
2.04
2.36
2.24
2.06
P/CF (x)
12.7
11.0
11.6
9.6
8.7
3.7
4.2
3.5
3.2
3.9
7.72
5.86
8.27
7.19
5.57
24.8
17.0
15.4
14.7
16.8
Total turnover (MYRm)
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
Mar-16F
net cash net cash net cash net cash net cash
(7.5)
1.5
Source: Company data, RHB
See important disclosures at the end of this report
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3
Company Update, 14 October 2014
Trinity (891 HK)
Sell (from Neutral)
Consumer Cyclical - Retail
Market Cap: USD451m
Target Price:
Price:
HKD1.61
HKD2.01
Macro
Risks
Pinning Hopes On New CEO
Growth
Value
Trinity Ltd (891 HK)
Price Close
Relative to Hang Seng Index (RHS)
3.30
113
3.10
106
2.90
100
2.70
93
2.50
86
2.30
80
2.10
73
1.90
66
1.70
60
1.50
35
53

25
20
10

Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
Oct-13
Vol m
15
Source: Bloomberg
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)
9.52m/1.24m
5.0
-19.7
1.65 - 3.03
55
1,742
Li & Fung
JP Morgan Chase & Co.
T. Rowe Price Associates
38.5
7.0
5.2

Disappointing Sep-Oct sales. We recently spoke with Trinity’s
management on 10 Oct for an update. The group’s sales in September
declined y-o-y, and Golden Week “no longer helps” numbers as before.
This suggests that its same-store sales growth (SSSG) is flat or even
negative for both China and Hong Kong (which contribute c.80% of
sales). Its sales teams have observed that wealthy tourists from
Mainland China have stopped coming to Hong Kong in response to
Occupy Central. Still, casual shoppers are still visiting Hong Kong –
which may explain why mass-market brands have outperformed during
the period of protest.
High expectations still priced in. Trinity shares have risen 5% since it
held an analyst meeting to discuss its results, when new CEO Mr
Richard Cohen shared his turnaround plan and disclosed that SSSG for
its Hong Kong and China operations rebounded into positive territory in
July and August. However, the bounce was likely a result of the
company giving retail discounts to reduce inventory levels and bringing
forward sales of new season products into stores – which could have led
to the reversal of its SSSG to negative in September.
Downgrade to SELL with a lower TP of HKD1.61. This report marks
the transfer of coverage to Robin Yuen. We cut recurring EPS by
48%/36%/29% for FY14F-16F which is 30%/19%/13% below consensus.
The market may be too optimistic on Trinity’s rebound as the macroenvironment has further deteriorated in HK and China, in our view. We
expect its 2H14 results to disappoint the market. Our target P/E is set at
13x FY15F, about 2.5SD below its historical 3-year forward P/E mean, to
reflect slower recovery prospects.
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(22.7)
(17.3)
(1.5)
(7.4)
(27.7)
Relative
(23.7)
(13.0)
(2.8)
(9.7)
(29.1)
Shariah compliant
Forecasts and Valuations
Dec-12
Dec-13
2,801
2,696
2,644
2,805
3,038
Reported net profit (HKDm)
540
308
169
215
279
Recurring net profit (HKDm)
490
286
151
215
279
Recurring net profit growth (%)
(1.4)
(41.6)
(47.2)
42.4
29.7
Recurring EPS (HKD)
0.29
0.17
0.09
0.12
0.16
DPS (HKD)
0.24
0.13
0.07
0.09
0.12
7.0
12.2
23.1
16.2
12.5
Total turnover (HKDm)
Dec-14F Dec-15F Dec-16F
Robin Yuen, CFA +852 2103 9202
Recurring P/E (x)
[email protected]
P/B (x)
0.80
0.86
0.85
0.84
0.83
P/CF (x)
10.5
12.6
12.6
8.1
7.5
Dividend Yield (%)
11.9
6.5
3.6
4.6
6.0
EV/EBITDA (x)
4.35
6.62
9.68
8.00
6.63
13.4
7.4
4.2
5.2
2.2
3.1
1.1
net cash
(30.3)
(18.9)
(12.5)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash
6.7
Source: Company data, RHB
See important disclosures at the end of this report


3

.
3
0
.
1
0
0
.
1
0
0
We recently spoke with Trinity’s management for an update. Sales .
0
during the Golden Week were poor while its SSSG fell again in 0
September after turning positive in Jul/Aug. We believe a recovery is 0
elusive in the short term, given the various headwinds. We cut our
FY14-16 EPS forecasts by 29-48%. We also pare our TP to HKD1.61
(from HKD2.00), set at a new 13x FY15F P/E and implying a 20%
downside. Downgrade to SELL.
30
5




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4
Strategy, 14 October 2014
Indonesia Strategy
Underweight
Macro
Takeaways From Jakarta’s Vice Governor Meeting
Risks
Growth
Value


1

1

1




We met informally with Jakarta’s Vice Governor Basuki Tjahaya
Purnama (Ahok) recently where he spoke of the administration’s
readiness to fight corruption, increase transparency and improve
infrastructure for a better capital city. Ahok is widely anticipated to
become the city’s Governor soon. We hope he and President-Elect Joko
Widodo (Jokowi) will be role models for future Indonesian leaders.

Protecting Jakarta’s interests. The first discussion during the meeting
revealed that Indonesia’s problems, while simple, were complicated by
multiple parties’ vested interests. For example, the Islam Defenders
Front’s (FPI) resorting to violence to protest his pending appointment as
Jakarta’s Governor. Local media have reported that the alleged motor of
the demonstration was not the FPI (and that it is supported and funded
by other parties), but Ahok has become the first government official to
request that the police ban the group for its violent acts. He is also
tasked with protecting the city’s interests. Examples of these include the
stopping of a garbage collection outsourcer, given instances of not
delivering the waste to the right location and other issues, as well as the
tussle with a business that is trying to occupy 2ha of land in Ancol
despite the contract having ended.

Budget absorption could improve. Ahok said that the city’s low budget
absorption was a consequence of it implementing a new e-catalogue
platform that could deter public officials from having a hand in profiting
from governmental projects. The bureaucratic reform that he has
implemented has resulted in some officers slowing down the execution
of public projects. Thus far, Ahok finds the situation still controllable as
he can ask Jakarta Province-owned companies to handle some of the
jobs. We came off impressed by his clear-cut strategy to clean up the
bureaucratic issues and restructure the city’s administration. We believe
that the usage of the city budget will likely improve going forward as new
administrative officers take over.

Mixed feelings about Jakarta’s sea wall. We asked about the current
status of the construction of the giant sea wall. Ahok expressed
scepticism as to Stage B of the project, which includes a giant sea wall
in the shape of a mythical garuda bird. His concerns also involved the
feasibility of this plan, which includes the construction of 17 artificial
islands and required the availability of electricity from the state-owned
power plant company. It also involves getting agreements from 9,000
resident fishermen to be relocated to one of the islands. Ahok believes
this will be a long-term project, with completion expected in 20-30 years.
Agus Pramono, CFA +6221 2598 6765
[email protected]
Yualdo T. Yudoprawiro +6221 2598 6888
[email protected]

Luthfi Ridho +6221 2598 6888
[email protected]
See important disclosures at the end of this report
Jakarta light rail transit (LRT) project may be delayed. We also
discussed the status of Jakarta’s LRT project – Ahok doubted it could be
finished within its stipulated deadline. He expressed his doubts as to
whether concession owner PT Jakarta Monorail has the ability and will to
finish the project. Instead, Ahok believes the company is trying to build
elevated LRT stations that will also house several retail stores within
them. His concerns are that, if the stations are huge, they will impact the
layout of the foundation construction. This can change or even obstruct
city planning. To clarify, this is not the same project that will be handled
by Adhi Karya (ADHI IJ, BUY, TP: IDR3,745).
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5
1
Results Review, 15 October 2014
Top Glove (TOPG MK)
Neutral (Maintained)
Consumer Non-cyclical - Rubber Products
Market Cap: USD929m
Target Price:
Price:
MYR5.06
MYR4.88
Macro
Risks
Nitrile Glove Production To Keep Increasing
Growth
Value
Top Glove (TOPG MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
6.30
106
6.10
102
5.90
98
5.70
94
5.50
90
5.30
86
5.10
82
4.90
78
4.70
74
4.50
70
4.30
25
66
0
0
.
2
0
0
We maintain our NEUTRAL stance on and MYR5.06 FV (17x FY15F P/E, .
0
3.7% upside) for Top Glove. Its FY14 earnings were within expectations, 0
but revenue and earnings declined from lower ASPs, intensified 0
competition and higher operating costs. It will continue to ramp up its
nitrile glove production capacity as demand remains strong. The
company declared a 16 sen/share dividend (55% payout ratio) for FY14.

20
15

Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
5
Oct-13
Vol m
10
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Tan Sri Dato Sri Lim Wee Chai
KWAP
EPF
2.61m/0.81m
5.5
3.7
4.50 - 6.03
47
621
28.9
9.0
6.4


2

.
2
0
.
2






Results in line. Top Glove’s FY14 (Aug) net profit of MYR180.1m (8.3% YoY) met 98% and 97% of our and street estimates respectively,
while revenue and pre-tax profit eased 1.6% YoY and 11.3% YoY
respectively. Its total sales volume for nitrile and latex gloves (excluding
vinyl gloves) increased by 4.2% YoY in FY14, but revenue declined on
lower average selling prices (ASPs). Note that the latter was due to the
lower raw material prices (natural latex: -7.3% YoY, nitrile latex: -83%
YoY) as well as intense competition, which compelled any cost savings
gained to be passed on to customers. Higher electricity costs and a hike
in the price of natural gas, which came into effect this year, also exerted
more downward pressure on its profit margin.
Healthy cash flow to support dividend policy. Top Glove maintained
its dividend payout policy of 16 sen (55% of FY14 net profit), which
translates to a dividend yield of 3.3%. The group was able to maintain
the same dividend payout ratio as the preceding year, as its cash flow is
healthy and balance sheet remains robust.
Ramp-up for nitrile gloves. Top Glove is ramping up its nitrile glove
production and sales. Nitrile glove sales contributed 24% of its FY14
total sales (vs 20% in FY13), following the increase in capacity from its
new factory. Going forward, Top Glove aims to increase its production to
44.6bn pieces per annum by Jan 2015 (from 42bn), in which all the new
lines will be to produce nitrile gloves.
Maintain NEUTRAL. We keep our NEUTRAL stance on Top Glove and
Our unchanged FV of MYR5.06 is pegged to a 17x FY15F P/E, which is
the historical average P/E of the stock’s trading band.
Share Performance (%)
Aug-12
Aug-13
Aug-14
Aug-15F
Aug-16F
2,314
2,313
2,276
2,549
2,715
Reported net profit (MYRm)
203
197
180
193
188
Recurring net profit (MYRm)
202
186
180
193
188
Recurring net profit growth (%)
78.5
(8.0)
(3.0)
7.3
(2.6)
Recurring EPS (MYR)
0.33
0.30
0.29
0.31
0.30
DPS (MYR)
0.16
0.16
0.16
0.16
0.15
Jerry Lee 603 9207 7622
Recurring P/E (x)
15.0
16.3
16.8
15.7
16.1
[email protected]
P/B (x)
2.41
2.27
2.17
1.99
1.88
P/CF (x)
11.4
12.4
10.0
10.5
10.2
3.3
3.3
3.3
3.2
3.1
9.80
9.93
9.62
8.25
8.01
17.1
15.2
13.2
YTD
1m
3m
6m
12m
Absolute
(13.3)
(2.4)
3.8
0.0
(20.7)
Relative
(10.2)
0.1
7.8
2.4
(22.0)
Shariah compliant
Forecasts and Valuations
Total turnover (MYRm)
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash net cash net cash
13.3
12.0
net cash
net cash
(3.8)
(15.7)
Source: Company data, RHB
See important disclosures at the end of this report
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6
Company Update, 15 October 2014
CARiNG Pharmacy (CARING MK)
Neutral (Maintained)
Consumer Non-cyclical - Healthcare
Market Cap: USD109m
Target Price:
Price:
MYR1.70
MYR1.63
Macro
Risks
Taking a New Prescription
Growth
Value
Caring Pharmacy (CARING MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
2.30
182
2.10
167
1.90
152
1.70
137
1.50
122
1.30
107
1.10
40
35
30
25
20
15
10
5
92
0
0
.
2
0
0
Our recent meeting with management shed some light on Caring’s .
0
outlook. Maintain NEUTRAL with a lower MYR1.70 TP (from MYR1.95), a 0
4.3% upside. After the disappointing FY14 (May) performance, 0
management is taking a step back and re-strategising expansion plans.
We expect 1HFY15 performance to be rather muted, in view of growing
competition and low contribution from new outlets.

Aug-14
Jun-14
May-14
Mar-14
Jan-14

Nov-13
Vol m
Price Close
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Motivasi Optima SB
Jitumaju SB
0.24m/0.08m
47.2
4.1
1.25 - 2.23
31
218
50.4
17.1
Share Performance (%)
YTD
1m
3m
6m
Absolute
(17.3)
(6.3)
(25.9)
(16.4)
Relative
(14.2)
(3.8)
(21.9)
(14.0)
12m


2

.
1
0
.
3







Making the necessary changes. Management said it was reviewing its
expansion strategy in light of the recent FY14 earnings disappointment.
Caring admitted to being too aggressive with its expansion plan post IPO
and, therefore, expected to be more selective in opening its future new
outlets, taking into account important criteria like: i) good customer flow,
ii) affluent and educated population catchment, and iii) matured
townships with a considerable aged community. Caring’s disappointing
FY14 earnings were mainly attributed to underperforming new outlets,
which led to an increase in operating costs on a rise in marketing and
promotional activities undertaken to boost customer flow.
FY15 expectations. While we expect FY15 revenue to continue growing
by 12.7% on increasing contributions from existing and stable new
outlets, we expect 1HFY15 to be a rather muted period for Caring as it
gradually tries to get back on track and take control of its spiralling
operating costs. We believe full-year margins will be squeezed on the
back of intensifying competition from independent retail pharmacies and
its continuing expansion plans. However, we expect conditions to
improve in 2HFY15 onwards on the aforementioned positives.
Risks. These include: i) scarcity of good locations, ii) lagging business
processes, iii) increasing number of independent retail pharmacies, and
iv) longer-than-expected gestation period for new outlets.
Forecasts. We slash our FY15/FY16 earnings forecasts by 11% and
15% in view of Caring’s increasingly challenging operating environment.
Stay NEUTRAL. After revising our earnings forecasts, our new MYR1.70
TP (vs MYR1.95) is pegged to 18x CY15F P/E. Our target P/E is a
discount to bigger healthcare stocks like KPJ Healthcare (KPJ MK,
NEUTRAL, TP: MYR3.67) at 26x FY15F P/E. As we expect Caring’s
earnings growth to be capped by its expansion plans and operating cost
pressures, we maintain our NEUTRAL call.
Forecasts and Valuations
May-13
May-14
321
338
381
415
428
Reported net profit (MYRm)
20.6
16.1
19.2
21.9
24.2
Recurring net profit (MYRm)
20.6
16.1
19.2
21.9
24.2
Recurring net profit growth (%)
12.5
(21.8)
19.3
14.1
10.4
Recurring EPS (MYR)
0.09
0.07
0.09
0.10
0.11
Recurring P/E (x)
17.3
22.1
18.5
16.2
14.7
The Research Team +603 9207 7663
P/B (x)
3.56
3.15
2.75
2.41
2.10
[email protected]
P/CF (x)
34.5
12.3
13.6
11.9
Shariah compliant
Alexander Chia +603 9207 7621
[email protected]
Total turnover (MYRm)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report
Source: Company data, RHB
May-15F May-16F May-17F
na
10
105
11
9
8
41.2
15.1
15.9
15.9
15.3
net cash net cash
net cash
net cash
net cash
(19.9)
(16.3)
(14.6)
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7
Company Update, 14 October 2014
Ezion Holdings (EZI SP)
Buy (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD2,000m
Target Price:
Price:
SGD2.45
SGD1.61
Macro
Risks
Oil Prices Hold No Fear For Ezion
Growth
Value
Ezion Holdings (EZI SP)
Relative to Straits Times Index (RHS)
134
1.90
127
1.80
121
1.70
114
1.60
108
1.50
101
1.40
40
35
30
25
20
15
10
5
95
Jun-14
Feb-14
Aug-14
2.00
Apr-14
140
Dec-13
2.10
Oct-13
Vol m
Price Close



13.4m/10.7m
80.7
52.2
1.52 - 2.03
70
1,578
14.2
7.6
7.0
Share Performance (%)

Sold off on oil price jitters. Ezion’s share price has underperformed the
market by 15% YTD (12% last month), with one of its biggest 1-day falls
last Friday when Brent fell below USD90/barrel (bbl). We note a
significant sell-off in oil and gas-related names in the last month,
generally in the 15-25% range for shallow-water players and ~30-45%
for deepwater plays.
Better execution on rig deliveries would ease investor concerns.
Ezion’s shares have been flat for most of the year, even though it has
delivered on earnings growth and new charter contracts. We believe a
key investor concern is the recurrence of rig delivery delays, which has
overshadowed the growth angle. Thus, we trim FY14/FY15 earnings
estimates by 7%/5% respectively to remain conservative.
Moving into time charters with 42% ROE. Ezion’s latest service rig
contract (Unit #38) was fixed at c.USD25.3m/year at a capital cost of
USD90m. We calculate the ROE on this unit at 41.6%, far superior to the
typical bareboat charter ROE of c.30%. We expect Ezion’s move into
time charters to create more shareholder value. It also presents future
valuation upside, should future contract renewals on existing assets
include a switch from the current bareboat to time charters.
Delays have limited impact on growth. As highlighted in our Shallow
Water Is The New Onshore sector note, we think investors should own
high-growth, low-P/E shallow-water plays like Nam Cheong (NCL SP,
BUY, TP: SGD0.58) and Ezion while eschewing deepwater ones like
Vard (VARD SP, NEUTRAL, TP: SGD0.80). This theme remains valid
today, with lower oil prices putting deepwater activity at risk. We believe
Ezion’s rig delay issues should not prevent it from delivering c.41%/58%
earnings growth in FY14F/FY15F, which are best-in-class growth rates
for this sector. Maintain BUY with slightly lower SGD2.45 TP (from
SGD2.50), which is based on 12x blended FY14/15F P/E.
YTD
1m
3m
6m
12m
Absolute
(13.0)
(12.3)
(3.9)
(7.6)
3.0
Forecasts and Valuations
Relative
(14.8)
(8.7)
(1.8)
(8.4)
1.6
Total turnover (USDm)
Shariah compliant
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
159
282
465
688
759
Reported net profit (USDm)
79
160
253
308
348
Recurring net profit (USDm)
65
141
198
308
348
38.4
115.0
40.8
55.5
13.0
Recurring net profit growth (%)
Lee Yue Jer, CFA +65 6232 3898
[email protected]
Recurring EPS (USD)
0.08
0.11
0.13
0.20
0.22
0.001
0.001
0.001
0.001
0.001
Recurring P/E (x)
16.7
11.2
9.7
6.5
5.7
P/B (x)
3.65
2.14
1.68
1.33
1.08
P/CF (x)
12.6
11.0
5.7
4.8
4.2
0.1
0.1
0.1
0.1
0.1
EV/EBITDA (x)
17.4
14.0
9.6
6.3
4.7
Return on average equity (%)
21.8
27.7
26.8
22.9
20.7
Net debt to equity (%)
75.5
115.0
90.5
68.6
31.7
(4.3)
7.1
2.0
DPS (USD)
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


2

.
2
0
.
3
0
0
.
3
0
0
While Ezion’s share price retreated 12% last month on oil price-related .
0
jitters, we maintain BUY with a SGD2.45 TP (from SGD2.50), still a 52.2% 0
upside. We reiterate that operations, backed by long-term contracts and 0
oil majors’ opex, are well-insulated from oil price fluctuations. With a
larger operational fleet today, rig delays have had a smaller impact too.
We think the market is not pricing in its 41-58% growth over FY14F-15F.
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Chew Thiam Keng
GuoLine Capital
Franklin Resources




Source: Company data, RHB
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8
Results Review, 15 October 2014
Lian Beng (LBG SP)
Buy (Maintained)
Construction & Engineering - Construction
Market Cap: USD263m
Target Price:
Price:
SGD1.17
SGD0.63
Macro
Risks
Kicking Off FY15 With On a Strong Note
Growth
Value
Lian Beng (LBG SP)
Price Close
Relative to Straits Times Index (RHS)
0.80
142
0.75
136
0.70
130
0.65
123
0.60
117
0.55
111
0.50
105
0.45
98
0.40
25
92

15
Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
5
Oct-13
Vol m
10

Source: Bloomberg
0.97m/0.77m
7.9
85.5
0.52 - 0.75
64
530
Ong family
34.6

A strong start to FY15. Lian Beng’s revenue grew 10.8% y-o-y to
SGD167.6m for the quarter, while PATMI surged 58.5% y-o-y to
SGD12.0m. Its construction segment and workers' dormitory business
continued to book a robust performance, leading the growth in revenues
and offsetting the revenue dip from the ready-mixed concrete segment.
The surge in PATMI is largely attributable to the recognition of profits
from property development projects such as NEWest, KAP and The
Midtown – which amount to SGD5.1m under its share of results from
associates and JVs. Going forward, we expect the continued recognition
of profits from these property development projects to drive earnings for
the group. A steady orderbook of c.SGD1.0bn would also provide
earnings visibility for the company until FY17F.
Fresh starts and sweeteners in the form of near-term earnings
catalysts: i) Lian Beng's 32% stake in the 92.8% aggregate strata area
of Prudential Tower, acquired from a REIT. We expect Lian Beng's stake
to yield SGD23.3m in earnings from the sale of all strata-titled units in
Prudential Tower, assuming full sales at an average selling price of
SGD2,600 psf. We have yet to factor this into our earnings estimates –
until the company receives approval for the conversion of the property
into strata-titled units, ii) its upcoming granite supply business in Ipoh,
Malaysia, which we expect to potentially start contributing to group
numbers in early 2015.
Maintain BUY, with a SOP-derived TP of SGD1.17. Lian Beng
currently has a strong cash position of SGD150.9m. We do expect nearterm earnings catalysts to unlock value for the group. Maintain BUY, with
our SOP-based TP still at SGD1.17.
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
16.7
(11.3)
(10.6)
(3.1)
20.0
Relative
14.9
(7.7)
(8.5)
(3.9)
18.6
Forecasts and Valuations
Total turnover (SGDm)
Reported net profit (SGDm)
Recurring net profit (SGDm)
May-11
May-12
May-13
May-14
507
445
506
754
May-15F
653
48.2
52.1
39.4
87.1
60.5
48.2
52.1
39.4
53.7
60.5
100.5
8.1
(24.3)
36.2
12.7
Recurring EPS (SGD)
0.09
0.10
0.07
0.10
0.11
DPS (SGD)
0.02
0.02
0.01
0.02
0.02
Sarah Wong +65 6232 3883
Recurring P/E (x)
6.93
6.41
8.46
6.21
5.52
[email protected]
P/B (x)
1.78
1.44
1.28
0.85
0.74
P/CF (x)
4.1
4.9
3.5
10.9
Terence Wong CFA +65 6232 3896
Dividend Yield (%)
2.5
3.2
2.0
3.6
3.2
[email protected]
EV/EBITDA (x)
3.52
2.16
4.55
2.16
2.56
24.8
16.0
26.6
14.3
38.0
39.4
Recurring net profit growth (%)
Shariah compliant
Return on average equity (%)
Net debt to equity (%)
29.1
net cash
net cash
na
Our vs consensus EPS (adjusted) (%)
27.5
(4.8)
Source: Company data, RHB
See important disclosures at the end of this report


3

.
2
0
.
3
0
0
.
3
0
0
Lian Beng reported a strong set of 1QFY15 (May) results, with revenue .
0
growing 10.8% y-o-y to SGD167.6m and PATMI surging 58.5% y-o-y to 0
SGD12.0m. The surge in profits is largely attributable to the recognition 0
of profits from property development projects amounting to SGD5.1m.
Its construction orderbook remains strong at c.SGD1.0bn, providing
visibility. We expect near-term catalysts to aid in unlocking its value.
Maintain BUY, with a SOP-based TP of SGD1.17 (85.5% upside).
20
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)




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9
Company Update, 14 October 2014
Sembcorp Marine (SMM SP)
Buy (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD6,000m
Target Price:
Price:
SGD4.50
SGD3.66
Macro
Risks
Largest Contract YTD Worth USD696m
Growth
Value
Sembcorp Marine (SMM SP)
Relative to Straits Times Index (RHS)
4.80
103
4.60
99
4.40
94
4.20
90
4.00
86
3.80
82
3.60
77
3.40
16
14
12
10
8
6
4
2
73
0
0
.
2
0
0
SembMarine has secured a USD696m contract to convert a shuttle .
0
tanker into an FPSO for OOGTK Libra GmbH & Co KG, bringing YTD 0
order wins to SGD3.66bn. Maintain BUY and SGD4.50 TP, implying a 0
23% upside, as we believe positive surprises could arise from the repair
segment as well as rebounding operating margins. At 6-8x EV/EBITDAs
and 11-13x P/Es for FY14F-16F, valuations are undemanding.

Aug-14
Jun-14
Apr-14
Feb-14
Dec-13

Oct-13
Vol m
Price Close
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Sembcorp Industries
11.8m/9.39m
32.2
23.0
3.58 - 4.62
39
2,089
60.6


2

.
1
0
.
2






Contract worth USD696m. Sembcorp Marine (SembMarine) secured a
contract worth USD696m to convert a shuttle tanker into a floating,
production and storage offloading (FPSO) vessel for OOGTK Libra
GmbH & Co KG, a joint-venture (JV) between Odebrecht Oil & Gas and
Teekay Offshore Partners LP. This vessel, with the capacity to produce
50,000 barrels of oil/day and 4m cu m of natural gas/day, is slated for
completion in 3Q16 and will be chartered to Petrobras for work on the
Libra field.
Lumpier order trend than Keppel Corp (Keppel) (KEP SP, BUY, TP:
SGD12.50). SembMarine’s order win trend this year has been for fewer
but larger projects. Four of its major contract wins out of seven are
above SGD500m in value vs Keppel’s three of 10 announced wins of a
similar size. The scale of this contract comes as a positive surprise,
prompting us to raise our FY14 order win forecast to SGD4.5bn
(SGD4.0bn previously).
FPSO conversion orders remain strong. SembMarine has won three
FPSO conversion contracts this year, vis-à-vis Keppel’s two. We expect
fixed/floating production platforms to make up for a near-term slowdown
in drilling rig orders as the market absorbs the incoming supply.
Valuations undemanding, yield looks attractive. SembMarine is now
trading at 6-8x EV/EBITDAs and 11-13x P/Es for FY14F-16F. On the P/E
front, SembMarine is now trading at nearly 1SD below its average
forward P/E of the last 10 years. Forecast dividend yields are now
topping 4%, which we believe will attract income-driven investors.
Maintain BUY and SGD4.50 TP, implying a 23% upside.
Share Performance (%)
YTD
Absolute
Relative
(17.8)
(20.7)
1m
(5.4)
(3.0)
3m
(9.2)
(8.9)
6m
(10.7)
(12.4)
12m
(19.2)
(22.0)
Shariah compliant
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
4,430
5,526
6,148
6,801
6,766
Reported net profit (SGDm)
538
556
574
631
671
Recurring net profit (SGDm)
541
553
574
631
671
(28.3)
2.3
3.7
9.9
6.4
Recurring EPS (SGD)
0.26
0.27
0.27
0.30
0.32
Total turnover (SGDm)
Recurring net profit growth (%)
DPS (SGD)
0.13
0.13
0.14
0.15
0.16
Lee Yue Jer, CFA +65 6232 3898
Recurring P/E (x)
14.1
13.8
13.3
12.1
11.4
[email protected]
P/B (x)
3.13
2.85
2.57
2.32
2.09
P/CF (x)
36.6
8.1
17.2
9.1
9.2
3.6
3.6
3.8
4.1
4.4
7.61
7.25
7.76
6.84
6.09
22.2
21.7
20.3
20.1
19.3
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash net cash net cash net cash net cash
(6.4)
(5.1)
0.9
Source: Company data, RHB
See important disclosures at the end of this report
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10
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Disclosure & Disclaimer
All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or
warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer
to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for
information purposes only. It is intended for circulation to the clients of RHB and its related companies. Any recommendation contained in this report does
not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is for the
information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate legal or
financial advice to independently evaluate the particular investments and strategies.
This report may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been prepared by RHB’s
strategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to the accuracy or completeness of such
information and accordingly investors should make their own informed decisions before relying on the same.
RHB, its affiliates and related companies, their respective directors, associates, connected parties and/or employees may own or have positions in
securities of the company(ies) covered in this research report or any securities related thereto, and may from time to time add to, or dispose off, or may be
materially interested in any such securities. Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) covered
in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies),
may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or
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