Sembcorp Marine announced contract. Offshore Marine industry looks bright.

Sembcorp Marine has announced a substantial contract worth S$550m. SMOE, SMM’s subsidiary that specialises in topside modules, has secured an estimated S$550m contract from ConocoPhillips to build the Ekofisk accommodation topside to be installed in the North Sea. This sizeable contract reinforces our positive view on SMM and we maintain our price target of S$4.95. Our forecasts still remain conservative as we have not yet factored in a significant amount of rig building and offshore jobs, which we believe will begin to flow in by 2H10. This contract reinforces our optimism for a recovery in the offshore marine sector. Our target price of S$4.95 is pegged to a FY10 PER of 14x. Kim Eng

Singapore Offshore & Marine Sector

Maintain Overweight on O&M sector. We believe both Keppel and Sembmarine share prices could continue to do well in the near term as we expect about S$11bn worth of order wins. Key catalysts for the sector include recovering order momentum and earnings visibility beyond 2011.

Even if we exclude the seven drillships, we believe that Sembmarine and Keppel O&M could still snatch about US$4bn worth of contracts in total from Petrobras.

We believe that it is only a matter of time before oil majors start to spend again. Both Sembmarineand Keppel are seeing heightened genuine enquiries. We upgrade our 2010-11 order wins for Sembmarine from S$3.5bn to S$6.5bn, S$4bn respectively and S$4.5bn, S$4bn for Keppel O&M. We believe that 2009’s order drought will eventually prove to be just a temporary halt in the ongoing O&M cycle.

Sembmarine and the implied Keppel O&M valuations are trading close to their five-year average of 15-16x. We believe that with the accelerated orders, the share prices could potentially trade near to its previous peak of 20-22x (10% upside to our target prices).

Maintain Outperformon SembMarine, target price raised from S$4.54 to S$5.44. CIMB

ML Note:

I continue to like the offshore marine sector in view of firmer oil price on the back of economic recovery globally. While rig contract may not be as robust as before, the above contract demonstrated that the offshore marine business is more than rigs and there are much peripheral support infrastructure that can benefit this sector.

Kepcorp, SembMarine, Ezra are some of the better names that can consider picking up. However, I do note that they have run up recently, so would prefer to wait for a minor correction, to pick them up again.

I also notice that business activities has picked up over the past one month, and was told that container volume has seen a pick-up and this has caused some kind of squeeze of the supply of late. This is likely to result in freight rate increase which will have a positive effect on shipping counter like NOL and the newly listed Golden Ocean (but this one is bulk freight).

God bless!

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework.

ML is a licensed stockbroker with one of Asia Leading Stock Broker firm. To contact him, please email: icewolfmike@gmail.com

CitiGroup says container shipping is “On the Brink of Profitability; Sustainability in Doubt”

CitiGroup says container shipping is “On the Brink of Profitability; Sustainability in Doubt”

Analysts: Rigan Wong, and Ally Ma

Positive guidance and outlook – Recent commentary from major liners suggest a positive 2010 outlook and return to profitability for some, dispelling investor concerns of multi-year, industry-wide losses.

Demand and rate hikes were phenomenal, but increasingly difficult to push up –Recent demand was driven by a strong inventory re-stocking cycle and caught many liners by surprise. Rates climbed by 15-30% in the first 2 months of 2010, but recent March hikes failed to pass on smoothly. Continued volume strength and further hikes in freight rates will hinge on the extent of G3 consumption, the stage of inventory build-out, and liners’ holding power of large idle fleet.

What should investors do? – Within the shipping sector, selected container shipping stocks have outperformed YTD (NOL +19% vs. industry +11%) on expectation of Transpacific rate hikes and undemanding valuations. While 1Q10 results may beat expectations and bring shares higher from current levels, investors may turn cautious thereafter on the sustainability of volume strength and rate hikes, as well as perennial industry oversupply.

ML Note:
Just happen to see this.

Meanwhile, I spoke to a friend from the industry. His take is this: "Yes Vol has increased and carrier also restoring rate esp Euro/us cargo. But fact remain that no. of idle ships still large which will threaten freight level if carrier start pulling back idle ship."

Hence I see freight rate increasing in the near term, but agreed with Citi take that sustainability will be an issue especially if economy does not pick up fast enough. On the other hand, I see short term supply pressure to remain, that will boost freight rate in the near term.
This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework.


ML is a licensed stockbroker with one of Asia Leading Stock Broking firm. To contact him, please email: icewolfmike@gmail.com

Invest in China Energy Sector

 Below is a research on China Energy Sector by Yuanta. Good note.

Note that China energy companies are fast growing (if not the fastest growing) and quickly catching up with their western counterpart. If you wish you are a shareholder of  Shell or Exxon Mobil in its early day...then perhaps China energy stock is something which you would like to take a look at before it become too expensive.
 ML
Industry Initiation: China Gas Industry - The oil contender
Top recommendations·         BUY CNPC HK (135 HK), PetroChina’s (857 HK; not rated) subsidiary, in a position to benefit from explosive growth in gas.
·         BUY China Oil & Gas (603 HK) to gain exposure to coal-bed methane (CBM) in China.

What’s new?
·       We initiate coverage of the China gas sector.
·       We expect unconventional gas sources such as coal-bed methane and shale gas to significantly boost gas reserves in China.

Industry outlook
·         We expect China’s natural gas consumption in 2020 to be six times that of 2008.
·         We believe the soon-to-be-announced China gas reform will boost sector growth.

Initiating coverage: We initiate coverage of the China gas sector with BUY recommendations on CNPC (HK) and China Oil & Gas, and a HOLD call on China Resources Gas (1193 HK).

Gas to help ease China’s reliance on oil: Given that China is short of oil, we believe the country will increase natural gas production aggressively to reduce its reliance on oil. On top of its known natural gas reserves, China has made significant progress in unconventional gas development, in particular coal-bed methane (CBM). The National Development and Reform Commission (NDRC) estimates that economically recoverable CBM reserves in China totals 10 tcm (trillion cubic meters, or 353 trillion cubic feet), which is more than four times the proven natural gas reserves in China as of 2008. As China is the world’s largest coal producer, we believe it will naturally be a leading, if not the largest, CBM producer.

Natural gas is a cheaper and cleaner alternative: CNPC, CNOOC (883 HK; not rated), Sinopec (386 HK; not rated) and city gas distribution companies have been investing heavily in gas pipeline infrastructure. Natural gas is replacing liquefied petroleum gas (LPG) and coal gas in homes and buildings for heating and cooking, it is used in industries as a fuel gas and may also increasingly replace gasoline in cars. It is a perfect substitute for LPG or gasoline as it is cheaper and cleaner.

Stock recommendations: Our top pick in the sector is CNPC (HK). We believe PetroChina will continue to inject assets into its subsidiary and support it with natural gas supplies to grow the company into the number one gas distribution company in China. We like China Oil & Gas too as a mid-cap pure CBM play with significant growth potential. However, we are neutral on China Resources Gas as we are concerned about its potential near-term equity dilution risks

A research note by Yuanta

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework.


ML is a licensed stockbroker with one of Asia Leading Stock Broker firm. To contact him, please email: icewolfmike@gmail.com

Keppel Corp - Establishing new high. Chart and short term views

Keppel corp established new 20 days high this morning. The counter has been bolstered by recent strong result as well as firmer oil price.

For those who had follow my call earlier in February (when it is trading around 8.30 region), it may be a good time to take some profit. Based on chart (attached below), I believe it will try for 8.90-9.00 region before coming back down.

This counter remains on an uptrend, and interestingly, seems to be displaying a flag and pennant pattern. So I will wait for a correction, to buy back the share, while taking profit when it rally.

My last note on kepcorp is on 1 Feb at this link: mlstrategicinvestment.blogspot.com/2010/02/keppel-corp-won-1-billion-contract-from.html

For your reading pleasure.
 

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework.


ML is a licensed stockbroker with one of Asia Leading Stock Broker firm. To contact him, please email: icewolfmike@gmail.com

The Bull market is coming??

"The bull is coming." 2 fellow brokers said this to me this morning, for no apparent reason. Perhaps they can feel something (they been in the market much more than me) or perhaps they are juz bored (the phone is hardly ringing these days).

Anyway, my quick take on the market:

a) The market is moving away from the recent bouts of bad news (since CNY) on Greece, US job and China inflation. These are becoming old news as market start to move away from them. This is the transition period from negative sentiment to not so negative sentiment, and this is seen keeping stock price well supported for now. The lack of bad news, is seen as good news.

b) However, valuation is no longer as cheap as before. I am not expecting the March bull run that we see last year, although I remain overall bullish that the market is on a recovery path.

c) Nonetheless, this remain a volatile market. There will be upswing and downswing as the market seek out clear direction amidst the lack of a market leader (china or US).

d) I do not see a burst in volume just yet, and only when that happen, then we can see the momentum maintain. Despite the recent rise in the US market, the rise is still not broad base enough.

e) Blue Chip will continue to steer the market. Penny stock...forget it for now.

f) This market is for the brave and nimble - meaning: please take your profit (and dun be greedy) and wait for correction and weakness to pick up share. I am not asking you to churn the market, but what i am saying is rally or down trend unlikely to be sustainable. So take your profit!

g) The strategy: Buy when everyone wants to sell, sell when everyone want to buy. Go for the easy money (but u must be brave). Be patience.

My preference:

a) Commodity related play
- Olam and Noble are my preference. Look to buy on weakness.
- Golden Agri, Wilmar are trading play..as they trace the CPO and crude oil price. If crude oil price is going up, these guys will follow suit most likely.
- Straits Asia - another trading play. Hit by bout of weakness lately due to lack of earning visibility and succession issue.

b) Offshore Oil and Gas play
- Sembmarine
- Kepcorp
- Ezra

These have run up quite a fair bit lately. Look out for oil price. If oil price up, this will rekindle interest in E&P activities and thus raise the possibility of new contract.

c) Property Play
- Recent government measures took some wind out of the properties sector.
- However, feedback from the ground is that the demand is still real.
- As long as interest rate remain low, pple will invest in property.
- More government measures ahead...thus will create buying opportunities.

d) Finance
- Banks result is looking up. Re-valuation, lower NPL, higher interest rate income are all positive factors to come.

e) Reits
- Long term dividend play amid some stability. Most reits has successfully raise fund after last year debacle. So they should remain stable and yet give good DPU.
- Suntec Reits
- Capitaland related Reits
- Starhill global Reits

If singapore IR strategy play off, rents will be on the up again. This will benefits reits.

f) Transport
- SMRT
Talk of revision in earning for SMRT. It is a stable play even in downtrend with good stable earning.
Beside rising ridership, SMRT is likely to see better rental yield from its property arm. That should be another injection in the arm.
For those looking for long term investment, this can be one counter for you.

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework.


ML is a licensed stockbroker with one of Asia Leading Stock Broker firm. To contact him, please email: icewolfmike@gmail.com

CapitaLand says boom in China property not a bubble...by bloomberg

CapitaLand, which has Chinese properties valued at more than US$14 billion ($19.6 billion), said demand in China is “strong” and the real-estate boom can’t be called a bubble.

Still, the Singapore-based developer said it was “comforting” that the Chinese government is taking steps to rein in the market, according to a CapitaLand presentation filed to the Singapore Exchange today. CapitaLand, Southeast Asia’s biggest developer, has said it plans to expand its China business to 45% of its operations within five years.

China’s property prices rose at the fastest pace in almost two years in February, adding urgency to the government’s efforts to damp speculation and increase the amount of affordable housing. Residential and commercial real-estate prices in 70 cities climbed 10.7% from a year earlier, the statistics bureau said on its website yesterday, topping a gain of 9.5% in January.

To cool speculation, China is requiring a down payment for land purchases equal to 50% of a plot’s price, the Ministry of Land and Resources said on its website late yesterday. The government in January also re-imposed a tax on homes sold within five years of their purchase, after having cut the taxable period to two years in January 2009 to bolster a then-flagging market.

Bank of China, the nation’s third-largest lender by market value, said Feb. 3 that it had reduced discounts for some mortgages, citing concern about rising property-market risks.

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework.


ML is a licensed stockbroker with one of Asia Leading Stock Broker firm. To contact him, please email: icewolfmike@gmail.com

China NPC - Looking for direction in a listless market

While many await job data from the US this week, I am instead watching the Chinese NPC that is happening over the next 3 days.

With the rest of the world economies in doldrum, how China steers its economy over the next few months will be crucial and will likely have the most direct impact on the market.

Things to look out for:
a) China Monetary stance - we know that china is tightening and the NPC will tell us that. Hopefully the NPC will set the tone of how much tightening will take place.

b) China economy recovery - China economy has remained robust although the recent manufacturing number has slowed down. The NPC will state the government view on the risk and direction of the economy going forward.

c) Yuan - China is being pressured to re-value the RMB. The question is when and how much. NPC is likely to reiterate the Chinese hesitation to re-value the RMB due to the risk on its export sector. If the revaluation of the yuan is limited, then the chinese is back to using monetary policies to address any inflation issue - this will have an impact on chinese banks and property stocks.

Most importantly, China is an important engine for the world economy with US and Europe still struggling to get their footing. Hence I suspect, if there is any good news, the market is going to look out for what is happening in China again.



How and what will China do? -- focus of world's media
by Xinhua writers Dai A''di, Ma Mengli

"How and what will China do?" at its upcoming parliamentary plenary sessions has recently become a focus of world media.

As the annual plenary sessions of China''s National People''s Congress (NPC) and the National Committee of the Chinese People''s Political Consultative Conference (CPPCC) are set to start on March 5 and March 3 respectively, the international community has started to turn its attention to China.

The two meetings will discuss and analyze such topics and issues as China''s role in the global financial crisis, government measures to benefit the people and redivide social wealth, a drafted voting law that allows both urban and rural residents to enjoy equal rights to vote, and the building of China''s democratic politics, among others.

All of the topics and issues, which are of rich, in-depth and far-reaching significance, show that China''s development and progress have caused wide discussion in the world media.

TRANSFORMATION OF CHINA''S ECONOMIC DEVELOPMENT

Last year was the most difficult for China''s economic development since the new century started. But the Chinese people of all nationalities, under the leadership of the Central Committee of the Communist Party of China (CPC), worked hard to manage the country''s economy. That effort led to the achievement of an overall recovering trend while China was still facing the impact of the world financial crisis.

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework.


ML is a licensed stockbroker with one of Asia Leading Stock Broker firm. To contact him, please email: icewolfmike@gmail.com