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16 November 2012 g

Morning Matters
Figure of the Day

While You Were Sleeping US markets: Negative Dow futures: -4 (as at 8am Singapore Time) US Wrap: The major U.S. stock averages continued this week's losing streak after the latest data on the employment picture and manufacturing activitiy disappointed investors. The Dow Jones Industrial Average fell more than 28 points, or 0.23%, to close at 12,542 in a choppy day of action. The blue-chip index has now fallen in four straight sessions and in six of the past seven days. The S&P 500 was off more than 2 points, or 0.16%, to close at 1353, while the Nasdaq slid nearly 10 points, or 0.35%, to finish at 2837. Gold for December delivery settled down $16.30 at $1,713.80 an ounce at the Comex division of the New York Mercantile Exchange, while January crude oil contracts lost 97 cents to close at $85.87. The Day Ahead Scoop of the Day: Armstrongs 3Q12 results came in largely in line with our forecasts with PATMI of S$2.8m (+27% YoY) on the back of S$56.8m in sales (+1.3% YoY), as business rebounded from the impact of the Thai floods a year ago. Excluding one-off items such as forex gain and insurance claims, 9MFY12 core PATMI came in at approximately S$4.8m, accounting for only 48% of our forecasts. Therefore, we lowered our FY12 core PATMI estimates by 32% to S$6.9m. Going forward, the possible strong rebound in 4Q is not likely to happen with its HDD business expected to remain subdued over the next two quarters. Nonetheless, the group has transformed into a diversified foam and rubber component supplier with 1732 customers across different industries. We are also positive towards Armstrongs automotive business in China following the recent Sino-Japan tension as the group mainly services the European, US and local auto OEMs there. Reiterate NEUTRAL with a new TP of S$0.27, based on 11.5x blended FY12/FY13 core earnings (5-yr forward P/E historical average). (Edison Chen) WHATS INSIDE? On The Platter HLA: Incurred 3Q12 losses as volumes decline(SELL, S$1.66, TP: S$1.28) Silverlake Axis: Approaching our fair value(NEUTRAL, S$0.475, TP: S$0.50)


Armstrong: 3Q12 results in line with our forecasts. See 'Scoop of the Day'.

Market Indices Value

Dow Jones S&P 500 Nasdaq FTSE 100 Nikkei Hang Seng Shanghai KOSPI STI KLCI 12,542.4 1,353.3 2,836.9 5,677.8 8,829.7 21,108.9 2,030.3 1,870.7 2,945.9 1,631.7

-28.57 -2.16 -9.87 -44.26 +164.99 -333.06 -25.13 -23.32 -32.11 -

% Chg
-0.23 -0.16 -0.35 -0.77 +1.90 -1.55 -1.22 -1.23 -1.08 -

Key Indicators Value

Oil Price* (US$/bbl) Gold Price** (US$/oz) US$/S$ 85.45 1715.8 1.2237

-0.87 -10.55 +0.00

% Chg
-1.01 -0.61 +0.04

* WTI Crude Future ** Gold Spot

Insider Trade Highlights 15 Nov 12 DIARY OF EVENTS

Disclaimer: DMG & Partners Securities Pte Ltd may have received compensation from the companies covered in this report for its corporate finance or its dealing activities; this report is therefore classified as a non-independent report. Please refer to important disclosures at the end of this publication.

16 November 2012

On the Platter HLA: Incurred 3Q12 losses as volumes decline (SELL, S$1.66, TP: S$1.28) Leng Seng Choon, CFA (+65 6232 3890, HLA reported 3Q12 net loss of S$1m, versus 3Q11s S$27.9m net profit. This came on the back of a 3% YoY decline in revenue and 36% collapse in profit from continuing operations. The Chinese economy slowdown has led to weaker diesel engine unit sales and lower white goods sales. 9M12 net profit of S$17.9m is only 59% of our previous 2012F net profit. Given the poor outlook, we cut our 2012 and 2013 net profit forecasts by 35% and 29% respectively. We maintain SELL on HLA with a lower target price of S$1.28. Fewer diesel engines sold. China Yuchai International (CYI) sold 97k units of diesel engines, down 8.5% YoY. There was weaker demand in the commercial truck market, especially in the heavy-duty truck segment. Whilst CYI recorded a 45% YoY rise in profit, this was largely due to foreign exchange revaluation gains, which are non-quality in nature. Excluding this, CYIs net profit would have fallen ~10% YoY. Xinfei recorded losses. Xinfei sales volume contracted due to the slowing Chinese economy, keen competition and overcapacity. Gross margin at Xinfei were affected by lower ASP. Management indicated that there may be a tax exposure of up to S$8m as a result of Chinese tax authority disagreeing with Xinfei on the high tech incentive status granted for FY2009. However, the building materials unit recorded improved gross profit as a result of better sales volume.

DMG Research See important disclosures at the end of this publication 2

16 November 2012

Silverlake Axis: Approaching our fair value (NEUTRAL, S$0.475, TP: S$0.50) Edison Chen (+65 6232 3892, Terence Wong, CFA (+65 6232 3890, Silverlake Axis (SLA)s 1QFY13 results came in largely in line with our estimates. Despite revenue falling 15% YoY to RM80.1m, PATMI rose 42% YoY to RM39.5m with more revenue contribution from the software licensing and maintenance and enhancement services segments which yield better margins. Most notably, the recurring maintenance revenue stream continues to strengthen with better margins. Though the current order backlog remains healthy, it has been depleting over time since the group last won a major contract from CIMB. The stock had a good run, rising 56% since our initiation, and is now approaching our target price. Downgrade to NEUTRAL as we wait for major contract win in order to ensure profitability growth going forward. Our new TP of S$0.50 is based on 14.9x FY13 P/E, in line with its peers' average. Maintenance segment is the highlight. While revenue from software licensing fluctuates from time to time depending on project milestone, the 38% YoY jump in maintenance revenue is sustainable. As expected, upon installing many new SIBS systems in the past year, the group automatically secure many new product-life-long maintenance contracts, generating attractive cash flow for the years to come. Moreover, the gross margin for maintenance business has been enhanced from about 50% a year ago to 60% now as a result of maintenance fees hike and economies of scale. Need for order backlog boost. We noticed that the order backlog has been depleting since SLA won the major CIMB contract more than two years ago. We estimate that the group currently has an outstanding project backlog of approximately RM360m, which is about 1.8x of FY12s project related revenue. Though this remains healthy, it is time for the group to secure new contracts if it were to grow its profits. We believe that SLA is currently in the process of pursuing four new customers with two of them being financial institutions in Southeast Asia.

DMG Research See important disclosures at the end of this publication 3

16 November 2012


# Exercise of Rights issue / Share Options / Convertibles / Warrants / Share Issuance. ## Married deal.


No. of Shares

Share Price (S$) na na 0.325 1.089 1.510 0.149 0.187 4.849 Share Price (S$)

% Stake before transaction 28.630 21.293 37.594 na na na na na % Stake before transaction

% Stake after transaction 28.680 21.406 37.781 0.362 0.910 2.070 2.069 0.076 % Stake after transaction

Anyang Longyu (HK) Development Co Ltd Noble Holdings Wee Kok Wah Share Buy-Back Share Buy-Back Share Buy-Back Share Buy-Back Share Buy-Back Insider

800,000 7,337,000 440,000 1,159,000 1,417,000 1,658,000 912,000 100,000 No. of Shares

DMG Research See important disclosures at the end of this publication 4

16 November 2012


DMG Research See important disclosures at the end of this publication 5

16 November 2012
DMG & Partners Research 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 DISCLAIMERS This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report. The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change without notice. This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. DMG & Partners Research Pte Ltd is a wholly owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank Berhad and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effect transactions in the securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporations whose securities are covered in the report. As of the day before 16 November 2012, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the subject companies, except for: a) Armstrong Ind Corp Ltd. b) Nil As of the day before 16 November 2012, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: Analyst Company a) Nil b) Nil DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N) Kuala Lumpur
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DMG Research See important disclosures at the end of this publication 6