Money Talk: Singapore Exchange, Lian Beng, Swissco Holdings

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. Singapore Exchange (SGX)

Broker: OCBC

SGX has just announced lower clearing fees, which will take effect from June 1, to boost trading activity. Clearing fees will come off from 0.04 per cent to 0.0325 per cent of contract value and the cap of $600 for contracts of $1.5m and above will be removed.

However, this development is likely to be over-shadowed by Thursday's announcement by China's Premier Li Keqiang of mutual market access between the stock markets at Shanghai and Hong Kong.

SGX is releasing its Q3 results on Apr 23 and we expect a rather flat quarter. We are projecting net earnings growth of 2.5 per cent to $74.3 million for Q3, anticipating a better Q4 to generate our full year earnings projection of $336.1 million. While the latest announcement is positive, we believe that trading activity will still be largely dictated by global market developments, and on this front, the outlook is fairly muted.

At current yield of 4 per cent, we are maintaining our Hold rating and fair value estimate of $7.22.

2. Lian Beng

Broker: OSK-DMG

Lian Beng delivered a strong set of Q3 results... mainly attributable to the recognition of Lian Beng's fully-sold 55 per cent-owned industrial property development, M-Space, which received its temporary occupancy permit in January.

On a segmental basis, construction continues to comprise the bulk of Lian Beng's revenue, contributing $310 million or 52 per cent to its first nine months' revenue of $586m.

Revenue from the ready-mixed concrete came in at $86 million, while its 55 per cent-owned Westlite Mandai Dormitory contributed another $13m.

We like Lian Beng as a key proxy to the domestic construction up-cycle, along with its diversification into cash-generative and high-growth businesses such as dormitory, ready-mixed concrete and asphalt.

We currently have a Buy rating on Lian Beng with our target price under review.

3. Swissco Holdings

Broker: CIMB

Swissco's market cap could double by Sep 14, in our estimation, after the injection of Kim Seng Holdings' Scott & English business, worth $285 million, into its fleet-chartering business.

Scott & English owns and operates four service rigs via a 50:50 JV with Ezion. These operations are backed by long-term bareboat charters of 4-7 years from 2013, with a total annual profit of about $20 million and strong free cash flow to equity of $14 million to $16 million.

Incorporating Scott & English, Swissco is trading at 7.6 times price/earnings for 2014 projected earnings, cheaper than the 10.4 times average for its Singapore offshore support vessel peers. It is also trading below its 3-year average of 9 times.

Completion of the deal or contract wins should catalyse the stock, in our view.