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. Keppel Corp
Kepepl O&M has signed a management services agreement with Titan Petrochemicals Group (Titan) to manage the Titan Quanzhou Shipyard (TQS) for a 30-year period. Titan is controlled by commodities conglomerate Guangdong Zhenrong Energy.
Keppel will second a management team to operate and manage the yard. TQS will only build rigs and offshore vessels to Keppel's proprietary designs. Commercial biddings, licensing and engineering designs will be managed by Keppel.
In return, Keppel will get 1) fixed management fee, 2) reimbursement of expenses and 3) subcontract work (if any) for jobs to be done within the Keppel group.
The partnership with Titan and Guangdong Zhenrong Energy allows Keppel to make inroads into the otherwise "closed" offshore market, usually exclusive to state-owned enterprises. This helps Keppel to pre-empt competition and allows the group tap into the readily financing available to the local players. Our target price for Keppel is $13.20.
2. ST Engineering
ST Engineering announced that its aerospace arm has bagged $460m worth of new orders during Q1 2014.
Although the amount is marginally lower than the amount won a year ago, we are positive on the traction gained by its aerospace arm as the group made a significant breakthrough by winning the heavy maintenance contract of 20 Embraer E-190 aircrafts at the San Antonio facility as well as adding Aircalin as a new customer.
Reiterate Buy with target price unchanged at $4.66.
3. Ezion Holdings
Broker: Maybank Kim Eng
Ezion took a 6.9 per cent stake in AusGroup and subsequently entered into an MOU with the latter to explore opportunities for collaboration in Australia. Ezion would also acquire 110m share options, which when fully exercised could lift its stake in AusGroup to 18.9 per cent.
In totality, Ezion may need to fork out $54.6m and will nominate two new directors to AusGroup's board.
We see strong mutual benefits in the potential collaboration due to the synergies between the businesses of both parties. AusGroup fabricates modules and structures for the oil and gas and resources sector, while Ezion provides offshore logistic support services for oil and gas projects in Australia.
In our view, there is an inherent longer term strategy, especially in the development of Port Melville. With Ezion now the single largest shareholder of AusGroup, the latter could be roped in to help develop the port, so that Ezion could concentrate on growing its core liftboat business.
We continue to like Ezion for its lucrative liftboat business. The potential from its Australia business could serve as a long term catalyst. Maintain Buy, target price $2.90.