Brokers' Call: Straco Corporation


Broker: CIMB

Call: Hold

Target Price: $1.03

With its first-half core net profit of $20 million, tourism industry-related developer and operator Straco did not spring any surprises.

Its second-quarter 2015 net profit grew 26 per cent year-on-year to $10.5 million on the back of contributions from the Singapore Flyer to the tune of $8.9 million in revenue and $2.6 million in profit before tax.

The earnings per share for financial year 2015-2017 has been tweaked to factor in the price hike in tickets at Underwater World Xiamen , partially offset by a higher tax rate and share dilution.

Shanghai Ocean Aquarium continued to be the driving force, with total visitation still growing in the single-digit range, even after recording less than 20 per cent year on year visitation growth in financial year 2013-14.

Maintain hold.


Broker: DBS Group Research

Call: Buy

Target Price: $1

Ezion has been hit by unexpected loss of income and cost. Second-quarter results this year fell a disappointing

30 per cent year-on-year and 29 per cent quarter-on-quarter to US$29million (S$41 million).

The first-half 2015 profit after tax and minor interests was US$70 million, making up only 34 per cent of consensus estimate. Performance was dragged down by loss of income for a large vessel taken off the fleet for repairs.

This unit was contributing US$10million a quarter and this had offset the additional income stream from new deliveries.

In addition, there were higher-than-expected expenses incurred from employing Australian crew for the newly commenced Australian timecharter unit.

The unit was initially planned to be operated by an international crew which would have incurred lower costs. Making things worse, the vessel suffered mechanical damage in its first month of operation.

Earnings for financial years 2015 and 2016 have been cut by 31 per cent and 17 per cent respectively to account for the above-mentioned unexpected events and adjustment made to delivery schedule.

Some recovery is expected in the third quarter. Ezion remains one of the more resilient oil and gas players.


Broker: CIMB

Call: Buy

Target Price: 22 cents

Mermaid's subsea performance was impressive in the second quarter, with 77 per cent year-on-year jump in net profit to US$11.7 million. A profitable second half looks achievable with the firm's key vessels securing short-term jobs.

The company broke even in the first half of this year with a marginal core net loss of US$1.2 million, slightly ahead of expectations.

Given its successful navigation of stormy waters and stronger revenues, the earnings per share for financial years 2015-2017 has been lifted to 2 to 6 per cent.


Broker: DBS Group Research

Call: Buy

Target Price: $9

Forecasts are not fully factoring in the impact of a

15 per cent decline of the Malaysian ringgit against the Singapore dollar over the last one year. Almost 60 per cent of Venture's staff costs are denominated in ringgit, so each 2 per cent decline in ringgit would have a 1.5 per cent positive impact on Venture's profits.

With 100 per cent of Venture sales denominated in US dollar, a 12 per cent appreciation of the exchange rate between the US dollar and Singapore dollar means for every 1 per cent rise in the greenback, 1 per cent positive impact is expected on its Singapore counterpart.

Venture is expected to register 4 to 5 per cent earnings growth in financial year 2016. A potentially weak US dollar or stronger ringgit would be the key risk to forecasts.

A severe deterioration in US and Europe's economy could affect corporate spending, which will in turn adversely impact Venture's results.

A version of this article appeared in the print edition of The Straits Times on August 24, 2015, with the headline 'Brokers' Call'. Print Edition | Subscribe