King Wan (S$0.280) Wins $28.4m deals

King Wan Corporation announced that its subsidiary King Wan Construction Pte Ltd has won six contracts worth $28.4mil between February and May. The mechanical and electrical (M&E) contracts will start this year and are scheduled for completion by 2016. With these, the group's M&E order book stands at $183.6mil that will last till 2016.

Source: The Business Times / Bloomberg / Straits Times

Yanlord Land Group (S$1.475) RMB2 Billion 5.375% Senior Notes Due 2016

Yanlord Land Group announced RMB2,000,000,000 Notes will bear interest at a rate of 5.375% per annum. The Maturity Date is 23 May 2016. The estimated net proceeds from the offering of the Notes are approximately RMB1,970mil, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

Source: The Business Times / Bloomberg / Straits Times

Eu Yan Sang (S$0.745) Seals TCM joint venture in China

Eu Yan Sang International (EYS) will be forming a joint venture to set up a TCM decoction pieces (processed herbs) plant in China. The 50:50 joint venture is expected to improve Eu Yan Sang's margins through lower costs of raw materials and strengthening the upward integration of the group's supply chain. The group will also benefit from a  timely, trusted source of herbs and ingredients for its products. The joint venture will incur 40mil yuan (S$8.1mil) for Phase One, which involves the setting up of the TCM decoction pieces plant.

Source: The Business Times / Bloomberg / Straits Times

Intraco (S$0.525) & Tat Hong Holdings (S$1.455) In Myanmar venture

Intraco has teamed up with two other parties to form a joint‐venture company in Singapore to go into the crane leasing and distribution business in Myanmar. Intraco and Tat Hong will each own 40% of the company, while Myanmar businessman Aung Moe Kyaw will hold the remaining 20%. Intraco said itsshare
of capital of US$1.2mil will come from internally generated funds. Intraco will incubate and operate the joint venture, while Tat Hong will provide the know how to the business and operations from its own experience in the crane industry.

Source: The Business Times / Bloomberg / Straits Times

SIA IN THE BLACK FOR Q4, BUT OPERATING LOSS WIDENS

Group posts net profit of $68.3m and operating loss of $44.2min Q4. Yesterday, even as the airline group announced that it was in the black for the fiscal fourth quarter, its operating loss widened as Middle Eastern carriers and low‐cost players encroached on its airspace.

For the quarter ended March 31, 2013, the group reported a net profit of $68.3 million, against a net loss of $38.2 million in the preceding financial year's fourth quarter. This  time around, its bottom line was boosted by a $54.7 million gain on the disposal of aircraft,spares and spare engines.

Even so, the red ink deepened in shade on the operating front, increasing from a loss of $5.2 million a year ago to $44.2 million during the quarter.

The group's operations were hemmed in by revenue, which dipped one per centto $3.67 billion, as well as expenditure, which inched up $500,000 to $3.71 billion.

For the full year, the group posted a net profit of $378.9 million, up 12.8 per cent from $335.9 million a year ago, boosted by non‐operating items which included a higher net interest income. Revenue stood at about $15.1 billion, up from$14.86 billion, close to the expected $15.178 billion based on Bloomberg consensus
estimates. In turn, operating profit for the year came under pressure, falling 19.8 per cent to $229.2 million, which the group attributed to high fuel prices and lower yields.

During the year, passenger yields fell even as passenger carriage grew, driven lower by promotional activities prompted by intense competition and the depreciation of revenue‐generating currencies againstthe Singapore dollar,the group said.

A final dividend of 17 cents per share has been proposed, up from the 10 cents declared a year earlier.

Source: AmFraser

Insurance - Key Points In BNM, IMF Reports

The insurance and takaful industry saw a boost in profitability in 2012, spurred by improving premiums growth and healthier combined ratios in the general insurance/takaful sectors. Despite notable increases in equity exposure and concerns on interest rate risk, insurers’ risk exposure remains reasonable. BNM intends to tighten scrutiny of the insurance/takaful industry, as recommended by the IMF Country Report. We remain NEUTRAL on the sector.

Better 2012. The life insurance and family takaful sector reported a 38.2% increase in net income or excess income over outgo, backed by premiums/contributions growth of 11.2%. Meanwhile, the general insurance and takaful segment’s operating profits surged by 72.6% to RM2.9bn on the back of premiums/contributions growth of 11.1%. The general insurance and takaful industry also benefited from a low combined ratio of 96.9% (vs 104.7% in 2011).

Regulations tighten their grip. The industry’s capital adequacy ratios (CAR) leveled at 222.3% (vs 222.5% in 2011), well above Bank Negara Malaysia (BNM)'s supervisory target capital level (STCL) requirement of 130%. The IMF Country Report acknowledges the strength and comprehensiveness of the local insurance regulatory measures versus the international framework. Meanwhile, the country’s cross-border operations are still small relative to the industry, which we believe may have prompted BNM to relax cross-border financial activities for resident insurers and takaful operators. The central bank intends to enhance the existing prudential requirements with the Financial Services Act (FSA), as well as other measures which may include containment of systemic risks and cross-border risks. This should boost the sustainability of the industry, which being liberalised.

NEUTRAL. We retain NEUTRAL on the sector, with our Top Picks being Syarikat Takaful for its exposure to the takaful industry, and LPI Capital for its robust business model and solid underwriting strength.

Source: RHB

SapuraKencana Petroleum - Positive Outlook

We reiterate our Buy call on SapuraKencana. Our fair value is upgraded to RM3.96 (from RM3.76 previously) based on 21x FY01/14 EPS. Similar sized peers such as Bumi Armada are currently trading at 19-20x forward earnings. While it currently has the orderbook to sustain revenues for the next 2.5 years, its enlarged asset base and solid balance sheet allow it to bid for larger and more complex projects moving forward.

Seadrill acquisition to be completed by end-April 2013. Based on our discussions with management during the analyst briefing, we understand that the Seadrill acquisition is on track to be completed by end-April 2013. The EGM is slated to be on the 23rd of April, after which the pricing of the market placement would be determined. We thus expect Seadrill’s tender rig business to contribute to the remaining 9M of FY01/14.

Orderbook of RM18.2bn. With an RM18.2bn orderbook, SapuraKencana’s earnings visibility remains clear as the current orders are enough to sustain revenues for the next 2.5 years. Currently, the bulk of SapuraKencana’s orders are from Malaysia which accounts for 36%, followed by Brazil (29%), SEA (15%) and Australia (10%).

Berantai first gas achieved, targeting more RSCs. SapuraKencana’s marginal field RSC, Berantai, has produced first gas and started contribution in 4QFY13. We expect full-year revenue and earnings contributions from the RSC in FY01/14 onwards. When queried, management highlighted that they are interested to bid for more RSCs in the future.

Forecasts. Our FY01/14-15 net profit estimates have been raised by 53-56% as we have imputed the contribution from Seadrill’s tender rig business. Investment case. We maintain our Buy call on the stock with a new fair value of RM3.96 (from RM3.76) based on unchanged 21x FY01/14 EPS.

Source: RHB