Money Talk: Noble Group, SingTel, Yongnam 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. Noble Group

Broker: OCBC

Noble reported its Q1 results last evening, with revenue slipping 7.2 per cent year-on-year to US$17.9 billion, mainly dragged down by its metals, minerals and ores business.

Nevertheless, the continued focus on profitability saw operating income from supply chains improve 30 per cent to US$497.5 million; margins also improved from 1.98 per cent in Q1 last year to 2.77 per cent in Q1 this year.

Profit from continuing operations climbed 5.8 per cent to US$232.3 million, while net profit jumped 268.7 per cent to US$152.3 million, meeting 32.4 per cent of our full-year forecast.

At the moment, we hold off making any major revisions to our estimates until we get a better sense of its continuing business reporting format. Nevertheless, our fair value improves from $1.26 to $1.31. Maintain Hold.

2. SingTel

Broker: CIMB

Following SingTel's FY2013/2014 results conference call, we think that growth will be driven by Singapore and its associates. (Contributions from associates) should improve on stabilising currencies and improving fundamentals.

Optus's earnings before interest, tax, depreciation and amortisation should decline in FY2015 due to its network gap with Telstra while Digital Life should continue to be earnings dilutive. As a result, we lower our FY2015-2017 earnings per share forecasts by 3 to 7 per cent but raise our target price by five cents to $4.10 on higher valuations for Globe and Bharti.

We continue to like SingTel and retain its Add recommendation even after the stock has re-rated 7 per cent since our upgrade in 13 Feb. The currencies of its key associates have stabilised and the fundamentals of its associates are generally improving.

A likely re-rating catalyst is the continued turnaround in its earnings. Key risks are competition in Australia from Telstra's and Optus' execution of its network rollout.

3. Yongnam Holdings

Broker: OSK-DMG

Yongnam's narrowing losses of $1.9 million for Q1 are a positive sign. Net losses for the first half of the year have been guided for by management, and thus come as no surprise. The first half was expected to be operationally weaker as (Yongnam) would book in running projects with weaker margins due to a rising cost environment and unexpected delays, for example Singapore Sports Hub.

As these projects are phased out and Yongnam undertakes new projects in the second half of the year, gross margins will likely recover. Yongnam's pipeline of potential projects remains healthy and includes Jewel at Changi Airport, Changi International Airport T5, Singapore MRT Thomson Line and Hong Kong MTR Extension. Its orderbook stands at $316 million as at the end of March.

We favour Yongnam for its valuations, as its current share price still suggests low earnings expectations for the company - Yongnam still trades below its book value per share even though its structural steel assets can be utilised over a few decades.

Maintain Buy with target price of $0.29.

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