MORNING BUZZ 10 March 2015 Market Indicators 5‐Mar 6‐Mar 9‐Mar Mkt. T/O (S$ mil) 1,216.1 Market Colour 938.3 1,130.7 Stock Advances 189 237 164 The STI continued its downward momentum yesterday to reach 3404.6, down 12.9 Stock Declines 282 248 338 points. Post ex‐dividends of 0.7c, Noble (S$1.00; ‐5.2%) surrendered last Friday’s gains to close at a dollar. Other notable losers included blue‐chip stocks such as Major Indices DJ Ind Avg 18,135.7 S & P 500 2,101.0 Nasdaq Comp 4,982.8 Hang Seng 24,193.0 17,856.8 17,995.7 2,071.3 2,079.4 4,927.4 4,942.4 24,164.0 24,123.1 CapitaLand (S$3.46; ‐2.3%) and SingTel (S$4.11; ‐1.7%), though Genting (S$0.960; +3.8%) recovered some of its losses after several sessions of selling. As we had anticipated post the strong US data, the REIT space saw profit taking and retreated ‐1.2% on average across the board. As the closing date of Keppel Corp’s offer for Keppel Land (S$4.52; unch) draws near, the potential downside may outweigh the STI Index upside if Keppel Land does not manage to get privatized at S$4.60. 3,404.57 (‐0.38%) On the US equity market front, the markets pared some of last Friday’s losses to edge up slightly. Demand for gold continued to slide as each ounce traded at US$1167, down 5.4% for the month. We note that the currencies of several emerging markets have been declining as the dollar marches on, and we will Source: Bloomberg continue to keep watch on the stocks with such exposure. Commodities Coverage Updates Current % Chge from Price Close Gold (SPOT) US$ / OZ Oil (NYMEX CWTI|) US$ / bbl Baltic Dry Index 1,167.10 ‐0.61% 49.95 0.24% 568.00 0.53% Serrano (SERR SP; NOT RATED): An interior fit‐out specialist – Page 3 Stocks to Watch Exchange Rates GSH Corporation: Consortium launch sale of strata office units Triyards Holdings: Grows orderbook with deals worth US$100 million Yongnam Holdings: Win S$159 million tender for JTC Food Hub @ Senoko USD : SGD 1.3811 / MYR : SGD 0.3755 Source: Bloomberg Interest Rates 3‐mth Sibor 0.836% SGS (10 yr) 2.395% KGI Fraser Research Team KGI Fraser Securities Pte. Ltd. Please see important disclosures at the end of this publication MORNING BUZZ GSH Corporation (GSH SP): Consortium launch sale of strata office units GSH Corporation‐led consortium, which includes TYJ Group Pte Ltd (an investment vehicle of the Group’s Executive Chairman Mr. Sam Goi), and Vibrant DB2 Pte Ltd (an investment vehicle of Vibrant Group Limited and DB2 Group), to launch sale of more than 100 strata office units at GSH Plaza. It available for sale from end of March 2015 for between S$2,850 to S$3,500 per square foot. Triyards Holdings (ETL SP): Grows orderbook with deals worth US$100 million Triyards Holdings said it has secured deals for two ice‐class Multi‐Purpose Support Vessels (MPSVs) as well as a turret fabrication job worth over US$100mil ($138mil). Contract wins extend Group's earnings visibility beyond FY16. KGI’s take: This orders to provide upside catalyst to the stock. We note that Triyards’ stock price Yongnam Engineering & Construction Pte. Ltd., a wholly‐owned subsidiary of order win will help visibility for its yards but we are looking at more liftboat has been closely correlated to Ezion’s over the past few weeks. Yongnam Holdings (YNH SP): Win S$159 million tender for JTC Food Hub @ Senoko Yongnam Holdings Ltd, has formed a 51%:49% joint venture with Jian Huang Construction Co. Pte Ltd, and the joint venture has secured a S$159mil contract for the JTC Food Hub @ Senoko. This project will see the JV undertake the building and development of a new seven‐storey ramp‐up development in the Senoko Food Zone. Source: The Business Times / Bloomberg / Straits Times KGI Fraser Securities Pte. Ltd. 2 COMPANY UPDATE Serrano Limited Singapore Monday, 24 October 2011 ( SERR SP; SERR.SI ) Not Rated Pri ce a s of 2 Ma r 2015 0.210 12M ta rget pri ce (S$) ‐ Previ ous ta rget pri ce (S$) ‐ Ups i de (%) ‐ Trading data Ma rket Ca p (S$m) 31.5 Is s ued Sha res (m) 150.0 Ave Da i l y Tra ded (3‐Month) Vol / Va l 0.0m / S$0.0m 52 week l o / hi S$0.20 / S$0.25 Free Fl oa t 30.9% Major Shareholders Wa h Heng Des i gn Corp 37.1% Wi ns ton Chi a 13.1% 12‐Mth SERR SP (Blue) vs. FSSTI 3,500 0.28 3,400 0.26 Source: Bloomberg Renfred TAY [email protected] +65 6236 2557 Feb‐15 0.18 Jan‐15 0.20 3,000 Dec‐14 0.22 3,100 Nov‐14 0.24 3,200 Oct‐14 3,300 An interior fit‐out specialist We met up with the management of Serrano (listed on the catalist board in October 2014) recently to gain further understanding about its business and its growth plans. Serrano is one of Singapore’s leading provider of interior fit‐out solu ons for the residen al, hospitality, retail and commercial sectors in Singapore and across Southeast Asia. They also make and supply a range of furnishings including modular kitchen systems and oﬃce systems under its “Wholesale and Retail Furnishings” business. Landmark projects around the region. Serrano has a solid interior fit‐out delivery track record throughout the region. The interior fit‐out business focuses on manufacturing and installing home furnishing solu ons such as doors and doorframes, kitchen cabinets, wardrobes and vanity cabinets. Some of its landmark fit‐out projects in Singapore include, D’leedon, The Interlace, Reflec ons at Keppel Bay, ICON @ Tanjong Pagar, Ritz Carlton Residences, Somerset Serviced Residence, and the Youth Olympic Village at NTU. Notable projects overseas also include, Traders Hotel and the Star City Thanlyin township development (phase 1) in Yangon, The River and The Met condominiums in Bangkok and the Estella condominium in Ho Chi Minh City. Modular design of paneling products. One of the key advantage Serrano has, for its interior fit‐out business, is its ability to break down the design of the final paneling products into modular parts. These parts can be economically and eﬃciently produced in large quan es at its Vietnam factory and be flat‐packed and shipped to project sites to be installed. Such a system should augment Serrano’s capabili es in terms of turnaround me, economies of scale and cost savings, which should allow them to undertake large scale fit‐out projects and make compe ve bids. Growth plans. Serrano’s new lis ng status should help increase its ability to win big projects. As of 1 Dec 2014, Serrano has an outstanding order book of S$93.4m (see figure 4) that extends to 2018. Serrano is also looking to increase its overseas revenue streams in countries such as Myanmar, Thailand, Cambodia and Vietnam by leveraging on its track record in Singapore. It is also ready to explore M&A op ons that could add synergies to its exis ng business. Financials and current trading valua on. Serrano’s revenue has been growing at a CAGR of 10% between FY11‐FY14. Revenue for FY14 was S$85.2m (+3% yoy). Excluding IPO and restructuring expenses (~S$2m), FY14 net profit was S$3.4m (+4.5% yoy). Of its announced order book of S$93.4m marked on 31 Dec 2014, 19 out of 26 projects are expected to be handed over in 2015. Based on a simplis c back‐of‐the‐envelope calcula on, we es mate that Serrano could see revenue of S$70.6m from its interior fit‐out business in 2015 (see figure 5 for calcula ons). Serrano is currently trading at 2014 P/E of 9.4x and 2014 EV/EBITDA of 9.8x, excluding IPO and restructuring expenses. Please see important disclosures at the end of this publica on MORNING BUZZ Apendix 1: Corporate Action Dividends Company Results Period Ann Date DPS Ex‐Date Book Close Payable Share Price Yield 9‐Mar‐15 (%) Ri ckmers Ma ri ti me 26‐Feb‐15 FY14 USD 0.006000 10‐Mar‐15 12‐Ma r‐15 27‐Ma r‐15 SGD 0.290 2.9 As i an Pa y Tel evi s i on Trus t 24‐Feb‐15 FY14 SGD 0.021300 18‐Mar‐15 20‐Ma r‐15 27‐Ma r‐15 SGD 0.935 2.3 Da i ry Fa rm Int'l Hl dgs 5‐Ma r‐15 FY14 USD 0.165000 18‐Mar‐15 20‐Ma r‐15 13‐May‐15 USD 9.530 1.7 Hongkong La nd Hl dgs 5‐Ma r‐15 FY14 USD 0.130000 18‐Mar‐15 20‐Ma r‐15 13‐Ma y‐15 USD 7.830 1.7 Ja rdi ne Ma thes on Hl dgs 5‐Ma r‐15 FY14 USD 1.070000 18‐Mar‐15 20‐Ma r‐15 13‐Ma y‐15 USD 65.820 1.6 Ja rdi ne Stra tegi c Hl dgs 5‐Ma r‐15 FY14 USD 0.190000 18‐Mar‐15 20‐Ma r‐15 13‐Ma y‐15 USD 35.400 0.5 Ma nda ri n Ori enta l Int'l 6‐Ma r‐15 FY14 USD 0.050000 18‐Mar‐15 20‐Ma r‐15 13‐Ma y‐15 USD 1.665 3.0 M1 19‐Ja n‐15 FY14 SGD 0.119000 17‐Apr‐15 21‐Apr‐15 30‐Apr‐15 SGD 3.920 3.0 Grea t Ea s tern Hl dgs 6‐Feb‐15 FY14 SGD 0.400000 21‐Apr‐15 23‐Apr‐15 7‐Ma y‐15 SGD 25.000 1.6 Grea t Ea s tern Hl dgs ‐ Speci a l 6‐Feb‐15 FY14 SGD 0.050000 21‐Apr‐15 23‐Apr‐15 7‐Ma y‐15 SGD 25.000 0.2 Keppel Corp 23‐Ja n‐15 FY14 SGD 0.360000 22‐Apr‐15 24‐Apr‐15 6‐Ma y‐15 SGD 8.750 4.1 Keppel Tel ecoms & Tpt 20‐Ja n‐15 FY14 SGD 0.035000 22‐Apr‐15 24‐Apr‐15 5‐Ma y‐15 SGD 1.775 2.0 Keppel Tel ecoms & Tpt ‐ Speci a l 20‐Ja n‐15 FY14 SGD 0.115000 22‐Apr‐15 24‐Apr‐15 5‐Ma y‐15 SGD 1.775 6.5 Ex‐Date Book Close Rights & Bonus Issues Company Rights Issue Chi na Fi s hery Group 4 Rts Sha res @ S$0.173 ea ch Rts s ha re for every 5 exi s ti ng s ha res hel d 31‐Mar‐15 La s s eters Interna ti ona l Hl dgs 1 Ri ghts Sha re @ S$0.06 ea ch Ri ghts Sha re for every 1 exi s ti ng Sha res hel d 23‐Feb‐15 Rights Trading Period From To 2‐Apr‐15 8‐Apr‐15 16‐Apr‐15 25‐Feb‐15 2‐Mar‐15 10‐Mar‐15 Source: SGX Annoucement Buyout Company Offer Price Remarks Closing Date Offeror euNetworks Group SGD 1.16 Ca s h 5.30 p.m. on 13 Ma r 2015 EUN Hol di ngs , LLP Keppel Land * SGD 4.38 Ca s h 5.30 p.m. on 12 Ma r 2015 Keppel Corpora ti on LCD Gl oba l Inves tments Ltd SGD 0.33 Ca s h 5.30 p.m. on 12 Ma r 2015 AF Gl oba l Pte. Ltd. Popul a r Hl dgs SGD 0.32 Ca s h 5.30 p.m. on 18 Ma r 2015 Gra nd Apex Hol di ngs Pte. Ltd. Source: SGX Annoucement Keppel Land: A Base Offer Price of SGD 4.38 in cash for each Offer Share. A higher Offer Price of SGD 4.60 in cash, if KCL is able to reach the Compulsory Acquisition Threshold. KGI Fraser Securities Pte. Ltd. MORNING BUZZ Apendix 2: Financial Calendar Monday Tuesday Wednesday 9‐Mar Thursday 10‐Mar 11‐Mar Friday 12‐Mar 13‐Mar *Q3: Novo Grp Q3: Del Monte Pacific *Q4: Sound Global (Released on Sun, 15‐ Mar) 16‐Mar 17‐Mar 18‐Mar SG: Prices of Private Residential Units Sold by Developers 19‐Mar *Q4: Lung Kee Bermuda *Q4: TPV Technology 23‐Mar 24‐Mar 25‐Mar 20‐Mar 26‐Mar 27‐Mar SG (Feb 2015): Index of Industrial Production SG (Feb 2015): CPI 30‐Mar Q2: Second Chance Properties 1‐Apr‐15 31‐Mar 2‐Apr 3‐Apr Q4: China Sky Chemical Good Friday 6‐Apr 7‐Apr 8‐Apr *Q2: EMAS Offshore * Tentative Source: Company; Bloomberg KGI Fraser Securities Pte. 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