Money Talk: OCBC Bank, Ezion Holdings, QT Vascular

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. OCBC Bank

Broker: Maybank Kim Eng

In an interview by Bloomberg, CEO Samuel Tsien was quoted as saying: "We'll just proceed according to the general offer document and if we cannot get 90 per cent, we'll keep the company listed... We'll continue with the strategy because the value will still be realized as long as we own more than 50 per cent."

He also said: "OCBC isn't planning to sell insurance unit Great Eastern (GE) to shore up capital ratios. GE is an integral part of OCBC group."

This is a positive move as OCBC management had stayed uncharacteristically silent all this while. This may make (hedge fund firm) Elliott Management reconsider its plan to block the deal. While the messages are positive, we think OCBC's ability to extract value from the merger may be hampered somewhat if the latter remains a listed entity.

It is a step in a right direction that CEO has finally quashed market talks that GE is up for grabs. The sale of GE would have been in sharp contrast to the decisions made by the previous board of directors.

Notwithstanding, this development does not change our negative stance on the stock or our $9.63 target price.

2. Ezion Holdings

Broker: OSK-DMG

Ezion has announced two contract wins worth a total of US$268.6 milion. The first is for a service rig to be chartered to a Southeast Asian National Oil Company (NOC), worth US$146 million over five years plus options. The unit will be deployed in Southeast Asia from Q3 2016.

The second is for a service rig chartered to an East European NOC, to be deployed in the North Sea from Q2 2015. This contract is worth US$122.6 million.

We believe that Ezion has sufficient equity capital for at least another four to six service rigs depending on the configuration. We have a Buy recommendation on the company with a target price of $3.00.

3. QT Vascular (QTV)

Broker: CIMB

We accompanied QTV on a non-deal roadshow last week in Singapore. Q&As from investors suggest that the audience now has a greater understanding of its value proposition.

Its partnership with Cordis has lifted its revenue growth significantly. QTV wants to step up in Southeast Asia in a big way and is exploring ways of enhancing its distributorship in Asia with Cordis, especially in Southeast Asia, where many new hospitals are springing up. A more direct sales approach might be in the making.

Its Chocolate (PTCA) coronary catheter rollout next month should aid its H2 2014 performance, while some 30 per cent component cost-savings could emanate from its engagement of a local supplier in Singapore.

Its product pipeline stays strong. Investors are now more familiar with the value proposition of QTV's flagship Chocolate products, while management spelt out its intention to research and develop DCC in Singapore with the help of government grants, instead of doing that in the US. We believe that this would significantly reduce its research and development expenses.

On mergers and acquisitions, management has certain criteria for its target companies. Our sense is that QTV could be close to concluding an acquisition that: i) can fit its organic-growth strategy and support the group's profitability; and ii) should not be equity-dilutive and should be bite-sized for QTV.

Our estimates and target price of $0.73, based on blended valuations, are intact. We retain our Add rating, continuing to expect catalysts from positive earnings surprises.