Money Talk: Hyflux, Singapore Airlines, Nam Cheong

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.

1. Hyflux

Broker: OCBC

Hyflux made a poor start to FY2014, with revenue tumbling 29 per cent year-on-year to $88.3 million, meeting just 14 per cent of our full-year forecast.

Reported net profit came in at $37.9 million, boosted by a one-off divestment gain of $54.1 million; excluding that and other exceptional items, Hyflux would have reported a net loss of $7.2 million (versus a core net profit of $7.5 million in Q1 last year).

With the financial close of the Dahej project in India being delayed further from the first half of this year to before end-2014, Hyflux could be looking at a pretty slow FY2014 indeed. While the company continues to be actively bidding for new projects in MENA, India and Singapore, we note that the risk of delays to financial close remains.

As such, we maintain our Sell rating with a lower $0.83 fair value (versus $1.00 previously).

2. Singapore Airlines (SIA)

Broker: CIMB

SIA's core FY2014 net profit came in at $464 million, 20 per cent below our forecast for the year, as yields remained under pressure.

Commentary from management suggests that the yield pressures have continued into FY2015.

We cut our FY2015-2016 estimates by 8 per cent to 12 per cent and lower our target price to $9.85 (from $10.50 previously), with an unchanged Hold rating.

The distribution of a special dividend of $0.25 (full year dividend of $0.46) is unlikely to satisfy shareholders, in our view, as this pales in comparison with historical payouts.

3. Nam Cheong

Broker: OSK-DMG

Nam Cheong will be releasing its Q1 results on May 15 before the market opens. We forecast net profit to surge 48 per cent year-on-year to 53 million ringgit, on 405 million ringgit of shipbuilding revenue.

We see FY2016 revenue rising to 2.7 billion ringgit and a bottomline of 361 million ringgit, representing a 14 per cent year-on-year growth over our FY2015 forecast. This follows the 22 per cent growth we see for FY2015.

Clearly, consensus believes that Nam Cheong will hit peak earnings in FY2015, whereas we believe that it should continue to increase the value of its vessels built, and potentially also increase the number of vessels to be delivered in FY2016. This forms the upside potential to our estimate.

Nam Cheong's valuations are undemanding. We see steady dividend growth and a healthy 3.4 per cent forecast yield. Maintain Buy, with a $0.48 target price.