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HOTEL PROPERTIES, CWT, EZRA: What Analysts Now Say...

Friday, 13 July 2012 14:00

Excerpts from latest analyst reports...

HOTEL PROPERTIES LIMITED – A Gold Mine under the Orchard

Concorde Hotel Singapore is one of 12 hotels and resorts in Asia Pacific and the Indian ocean managed by HPL Hotels & Resorts

Maybank Kim Eng has a ‘Buy’ call on Hotel Properties Limited (HPL) with a target price of S$2.75.

Analyst: Alison Fok

HPL holds a prime portfolio of hotels, investment and residential properties globally. Based on the current market values of just its Singapore hotel assets, which include the Hilton, Four Seasons and Concorde hotels, as well as its investment properties, HPL is worth SGD4.58/share or more than twice its current share price.

With the latest valuation of the Orchard Parade Hotel at close to SGD1.1m/key, we estimate that similar valuations for the Hilton Singapore and Four Seasons would mean these assets are worth SGD1.47/share. We believe HPL should explore a similar restructuring exercise in order to unlock its deep value.

Redevelopment of its landbank will provide even greater upside
HPL has a combined landbank (site area only) along Orchard Road of close to 20,000 sqm. The URA has provided incentives such as higher plot ratios and extensions to boundaries to encourage redevelopment. HPL could enjoy a boost in its plot ratios for these sites along Orchard Road if it were to embark on a redevelopment program.

BUY ahead of concrete news
We reiterate our BUY call on the stock with a target price of SGD2.75, pegged to a 40% discount to RNAV of SGD4.58/share.

CWT - Net profit to break through S$100m

Maybank Kim Eng has a ‘Buy’ call on CWT, raising target price to S$1.90.

Analyst: James Koh

CWT CEO Loi Pok Yen

SGD100m net profit excluding divestments
With its commodity trading business gathering steam, we now believe net profit may well break through the SGD100m mark this year. This is excluding a SGD22.5m gain from the sale-leaseback of Pandan Logistics Hub which was recently completed. This will mark a breakthrough year for CWT.

Driven by commodity trading contribution
Profitability is largely driven by its new commodity trading arm – MRI, which we estimate will contribute in excess of SGD50m this year, in its first full year of consolidation. As part of the original purchase agreement, CWT’s effective interest recently increased to 82%. Through further share buy-backs over the next three years, MRI will eventually be 100% owned.

Ramp-up warehouse in demand
Our channel checks suggest that ramp-up warehouses in Singapore continue to be in high demand from MNCs, with CWT-operated warehouses at full occupancy. We would like to highlight that demand tend to be anti-cyclical, as inventory moves at a slower pace during periods of weak demand. With a SGD500m MTN program recently established, we expect asset-recycling to continue. CWT has booked-in “one-off” divestment gains for 6 of the last 7 years.

Maintain BUY

In the current risk environment, we find even more favor in CWT’s structural growth story, which is not macro/ volume-driven, but rather a deployment of latent capital into new businesses. Maintain BUY with a SOTP target price of SGD1.90, adjusted for asset values and earnings.

Related story: GENTING, CWT, ARA: What Analysts Now Say…

EZRA - 3Q2012 net profit up 244%

Ezra’s Offshore Support division manages and operates a diversified range of vessels including medium and large-sized AHTS vessels, anchor handling tugs and fast crew utility vessels.

OCBC maintains ‘Buy’ call after offshore player posts 244% surge in 3Q profit. Fair value S$1.35.

Analyst: Loh Pei Han

Decent 3QFY12 results
Ezra Holdings (Ezra) reported a 61% YoY rise in 3QFY12 revenue to US$265.6m and a 244% increase in net profit to US$22.4m.

Revenue increased in both the offshore support services and subsea services divisions in 3QFY12, due to contributions from an expanded vessel fleet and commencement of new projects awarded after the acquisition of AMC.

Marine services, however, saw a decline of US$25.7m in turnover due to lower revenue recognized for engineering projects in Vietnam compared to 3QFY11.

Keep an eye on admin expenses
Gross margin was 17% in the last quarter compared to 16% in 2QFY12 and 18% in 3QFY11. However, administrative expenses continued to rise to US$34.0m in 3QFY12 vs US$31.7m in 2QFY12 and US$26.6m in 1QFY12. We would monitor this figure to see if the group is able to rein in costs after the acquisition of AMC.

Continues to secure contracts; outlook still positive
The group announced that it has won six contracts worth about US$87m for the charter of PSVs and AHTS vessels. The contracts have an average tenure of two years (including options) and the units will be deployed in Asia and Africa.

Meanwhile, Ezra’s engineering, ship construction and fabrication services arm also clinched a US$77m contract to build a specialized offshore unit.

The group remains cautiously optimistic about the outlook of the oil and gas industry, and we believe the focus going forward should be on the smooth execution of subsea projects. We have a fair value estimate of S$1.35, and maintain our BUY rating on the stock.