1Q12 net profit of US$9m (-27.8% y-o-y) fell short of our US$11.3m forecast. Key variance was weaker than expected gross margin, down 1.3ppts to 16.7%, because of higher tooling works, which were strategically sold at costs to drive future component sales. Strong USD against operational currency (SGD, RMB) also resulted in forex losses vs gains last year. We had expected Sep quarter to be seasonally strongest but 1Q12 earnings only met 20% of original FY12F. Revenue improved 9% y-o-y to US$182m, thanks to growth in all segments except Mass Storage (-1%). For the quarter, Amtek generated US$3.8m of FCF and lowered net gearing to 0.12x from 0.14x last
quarter.

2Q12 is uncertain and negative.
Firstly, Mass Storage (15% of sales) will be dragged by disruption in the HDD supply chain as a result of the floods in Thailand even though Amtek’s plants and customers are not directly affected. Over at Casings & Enclosures, (25% of sales) new products were deferred due to macro uncertainty. Automotive (14% of sales) is equally fluid because growth in China (60% of auto sales) could continue to slow on cooling measures and Europe (40% of auto sales) could be affected by the European debt crisis.

Downgrade to Fully Valued on potential downside to new TP of S$0.51.
Although our original earnings were 13% below consensus, we have cut FY11/12F by another 20% as we impute lower gross margin and weak demand outlook. Consequently, our TP is reduced to S$0.51, still based on –1SD valuation peg at 5.5x FY12 PE. In view of the potential downside, we downgrade to Fully Valued from Hold previously.

3Q earnings impacted by railway industry slowdown, as contract wins dried up. This was due to
(i) gross profit growth was flattish at RMB87m on tepid revenue growth;
(ii) operating expenses were higher due to capacity expansion;
(iii) contribution from associate NPRT was negative on lesser
trains being delivered; and
(iv) finance costs were substantially higher as Midas took on more short-term borrowings to finance higher receivables and inventories.

Forecasts slashed…
Factoring in lower order wins up to 2Q12 and higher finance costs, we cut our FY11 and FY12 net profit forecasts by 34% and 33% to S$40m and S$48m respectively.

… but order flows expected to resume in 2012.
We believe recent developments such as the 50% tax reduction on MoR bonds and the backing of RMB20bn worth of MoR bonds by the State Council as government debt points to the likelihood of high-speed projects resuming soon, with likely equipment order flows from 1H12 onwards. This would be positive for upstream suppliers like Midas.

Stock is bombed out; BUY with S$0.48 TP. The stock is trading at <0.8x FY11 P/B and with industry prospects improving, we believe the worst is over for Midas. Our revised TP of S$0.48 is based on 1x P/B.

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Another solid quarter posted.
STX OSV posted 3Q11 headline PATMI of NOK374m (+144% y-o-y). Excluding exceptional, core PATMI is estimated at NOK405m (+123% y-o-y, +43% q-o-q) – above expectations. For 9M11, core PATMI of NOK992m (+123% y-o-y) forms 88% of our FY11F. Sustained stable operations, solid project execution, improved productivity and on-time deliveries continue to buoy performance, with 3Q11 EBIT margins of 16.6% (-0.5ppt y-o-y, +1.3ppt q-o-q).

FY11F order wins assumptions trimmed.
Despite a robust set of results, order wins continue to disappoint, with FY11 YTD order wins of NOK5.6bn. This is due to ongoing macro uncertainties and tightening liquidity, clouding the visibility of the timing of orders, and increasing the risk of order deferments. As such, we trim our FY11 order wins assumption to NOK9.5bn (prev NOK10.5bn), and would be met once the Transpetro orders and 2 Island Offshore PSV orders are made effective. No change to FY12/13F assumptions of NOK10.0/12.5bn.

FY11F raised 11%; FY13F cut 5%.
We raise FY11F by a further 11% to NOK1.3bn due to a robust 3Q11; FY12 EBIT margin is raised slightly to 11.7% (from 11.3%) as the group continues to execute superbly, offsetting the cut to our FY11 order wins assumption. This, however, reduces FY13F by 5%.

Maintain BUY, TP S$1.54.
Our TP of S$1.54 is maintained, still pegged to 9x recurring FY12 PE. Notwithstanding near term uncertainty, we believe the drivers supporting a recovery remain intact, with healthy enquiry levels and a growing pipeline of potential orders. Maintain BUY on STX OSV for its market dominance in complex and highly customized OSVs, undemanding valuations, solid execution and track record.
How to Make Money in Stocks: A Winning System in Good Times and Bad

Maiden set of results.
Perennial China Retail Trust reported its maiden set of results for 9 June-30 Sept 2011. It achieved distributable income of S$1.1m, which was below its prospectus forecast of cS$5m. Coupled with S$5.2m earn out support, total distribution income was $6.3m. Operating profits were below forecast due to a delay in opening of the Shenyang Shopping Mall from the longer than expected timing to obtain fire safety permit and lower portfolio occupancy of 73.2% as the furniture mall was affected by slowdown in residential purchase and planned AEI works. In view of the delay, the Trustee-Manager has waived its fees of over S$1.03m for the period. In addition, the earn-out deed support is amended and restated such that the S$46.5m (RMB245m) of earn out will apply to the period of 1 July 2011–30 Jun 2013 rather than specific quarterly amounts. This ensures a stable dividend payment.

Leasing operations on track.
In terms of operations, Shenyang shopping mall is currently 70% committed at rents of RMB3.82/day, in line with estimates, and appears on track to meet its target of RMB4.28/day for FY12. At the furniture mall, part of level 7 and basement 1 has been set aside to reposition and remix under Phase 2 leasing, expected to commence operations by 2Q12. The AEI works also include seamless integrating the shopping mall via a pedestrian linkway and increasing more F&B tenants to raise shopper traffic flow. Shenyang office is expected to open only in 4Q12 but this will be partially offset by the Foshan Yicui project, anticipated to complete ahead of schedule in 1Q13 while the Chengdu Qingyang development is starting on site works. Recent agreement to purchase the Chengdu Longemont project will be debt funded and is likely to be earnings and NAV accretive when completed in 2014.

Maintain Buy.
At current share price, investors are essentially valuing the Shenyang portfolio at below replacement cost. Our TP of $0.83 is based on the present value of the initial portfolio when fully operational by FY14 and does not include accretion from the recent Chengdu Longemont acquisition. As the group continues to ramp up its portfolio to income generating assets, we believe share price gap to RNAV should narrow.

3Q11 net profit more than doubled to RMB131.5m mainly due to the absence of dual listing expenses (~RMB52m) and better gross margin of 34.7%, up from 28.6% in 3Q10 and 30% in 2Q11. Despite higher interest expense (RMB26.8m:+33% y-o-y, 6% q-o-q) for more BOT projects, 3Q11 PATMI beat our optimistic forecast of RMB115m. Revenue grew 10% y-o-y, mainly driven by EPC (+41%) and O&M (+63%) as equipment (-86%) fell short of our forecast. SGL exited 3Q11 with RMB1.8bn cash but net cash eased to RMB410.5m as BOT investment continues to rise.

Growth backed by large orderbook and strong contract flows.
We estimate Sound Global Limited orderbook is maintained at about RMB2.4-2.5bn as at end-3Q11. Key projects within this order backlog include the contract in Bangladesh and large amount of rural sewage development projects in China. Sound Global Limited’s new wins YTD have already met our FY11F assumption of RMB1.7bn. We believe SGL can keep up with this level of new wins momentum as the firm seeks out opportunities in
1) upgrade and improve old municipal and industrial sewage
plants to meet higher discharge standards under the 12th Five Year Plan;
2) BOT/O&M services demand arising from urbanization;
3) rapid growth of rural development areas; and
4) overseas expansion in the Middle East and Southeast Asia region.

Reiterate Buy, TP raised to S$0.90, as we roll over our valuation base to FY12F from blended FY11/12F previously and the marginal increase in earnings estimates for FY11/12F. Our TP remains pegged to historical mean of 14.5x PER on fully diluted EPS (potential CB conversion). Reiterate Buy with 66% upside to our TP. More impressive is Sound Global Limited’s track record – the stock has fallen 36% from the peak, but it has not missed a beat on earnings or contracts win this year or in the last five years.

Loss making 3Q11 from weak hotel performance.
3Q11 topline of S$66.2m (-3% y-o-y) was marginally lower due to a decline in hotel investment revenue arising from the divestment of Dusit Thani and Laguna Beach Resort, while Angsana Phuket (formerly Sheraton Grande) remained closed for renovations.

These more than offset an improvement in portfolio-wide RevPAR (S
$189/night, +4%y-o-y on a same store basis). Fee based income was also
lower due to the lack of royalty fees compared to that earned in 3Q10 from the sale of certain property units at Angsana Fuxian Lake. Property sales showed a surprising uptick with 7 units recognized in 3Q11 (3 units in 3Q10) but we do not expect this trend to continue. Group-wide operating expenses were 2% lower due to scaled down operations in Thailand and expected to remain stable.

Outlook muted; forward bookings for Thailand still weak.
As we head into the crucial high season in 4Q, we note that overall forward bookings (OTB) are 5% higher y-o-y. But Thailand, which accounts for a majority of hotel operation income, remains 5% lower due to :
(i) weaker demand from traditional key visitor source markets in Europe; and
(ii) cancellations amounting to 3,200 room nights (US$0.5m) in Bangkok.

In addition, given the economic uncertainties, we expect travel demand from Europe to remain tepid in the near future, and the group could miss our original expectations of a pick-up in hotel performance from 4Q11. As such, we have cut our FY11/12F earnings by 18%/55% on the back of lower RevPAR and property sales assumptions.

HOLD, TP lowered to S$0.93.
Our SOTP-based TP is lowered to S$0.93, on reduced earnings while keeping our 15x multiple on FY12 EBITDA for its hotel business. Catalysts will hinge on a turnaround in operational performance/ property sales.

First loss in 14 years.
Noble reported net loss of US$17.5m in 3Q1 amid extreme commodity and FX volatilities which resulted in mark to market losses in Sugar (devaluation of Brazilian Real) and write down of its portfolio of carbon credits (price falls post European debt issues). These were on top of defaults by farmers and later on credit exposures on consumers eroded cotton margins. Macro volatility during 3Q11 also resulted in delayed purchases of iron ore and aluminum, hitting MMO (Metals, Minerals and Ores) margins.

Record revenue.
Despite disappointing 3Q11 results, strong yoy volume
growth of between 25-49% across all divisions highlighted the underlying demand for Noble’s suite of commodities. Combined with lift in ASP, group revenues rose 40% yoy (+6% qoq) to record US$20.9bn.

FY11-13F earnings cut by 20-33% as we reduce Noble’s FY11-13F group margins from 2.1-2.3% to 2.0-2.1% given tough operating conditions. We expect some earnings recovery in 4Q11 (profit of US$161m); as some of the negative factors in 3Q11 will be reversed. For example, the Brazilian Real has since rebounded; while recovery in commodity prices in 4Q11 should normalize buyer behavior.

Rating is lowered to Hold from Buy as we revise down our TP to S$1.45 from S$1.70 on lowered earnings. Despite strong operating model and ample access to liquidity (cash and RMI of US$5b and credit lines US$16.8b) we are neutral on the counter on valuation grounds. There could be some potential upside from proposed listing of Noble’s agricultural business.Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant

3Q11 results in line with our estimates.
Xinren Aluminum (XAH SP) registered revenues of RMB1,480m (-7.2% y-o-y), gross profits of RM147m (-15.9% y-o-y) and net profits of RMB95m (+18.9% y-o-y), in line with our expectations. The fall in revenues was mainly attributable to a drop in trading revenues, while the lower gross profit was due to downward pressure in LME aluminum prices along with higher raw material input costs (for raw materials purchased in 2Q11). Net profit, on the other hand, grew due to a drop in financial costs and SG&A (due to lower trading revenues), along with a fall in debt. Net debt decreased 9% q-o-q to RMB1,748m. Xinren’s 9M gross and net profit grew 11.5%, 39.9% y-o-y and accounted for 82% and 83% of our FY11 estimates respectively.

A year after its IPO, Xinren is now a proven player.
We believe Xinren’s management have proven themselves in their ability to enhance shareholder value and build the company’s reputation for reliability. Xinren acquired a direct stake in two smelting plants in China in Mar 2011 (after highlighting the risks to investors). In addition, the company completed a buyback of 1.8m shares (RMB3.1m) in Sep FY11 and intends to buy more by the
end of the year. It also announced that it intended to pay a dividend in FY11. More importantly, the company has released a resilient set of results over the last year despite being buffeted by fluctuating aluminum prices. Its investment in carbon anodes and fabrication products should help bring costs down as well as enable the company to tap the growth in demand for aluminium in China.

Retain BUY but lower TP to S$0.65 pegged at 8.5x FY12F PE or a 20% discount to the weighted average valuation of its regional peers. This also assumes a downward revision of FY12F EPS by 6.2% coupled with a 6.9% cut on aluminum price assumptions for FY12. Xinren is extremely undervalued and is trading at FY12 3.8x P/E and 0.8x P/BV.Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown

Results below.
Excluding translational FX loss of US$1.4m, KAGR reported core profit of US$1.9m (+376 yoy, -44% qoq). Results were below our expectations of S$3-3.5m due to higher production costs, dilution from lower margin trading volumes and losses from JV with Louis Dreyfus.

Margin compression.
Kencana Agri 3Q11 revenue grew 147% yoy to US$75.8m on the back of higher ASP to US$909/MT from US$767 in 3Q10. Own FFB production increased 19% yoy to 78k MT with CPO production at 29k MT. Core net margins, however, fell to 2.5% from 3.6% in 2Q11 on higher costs of production (FFB yield fell to 3.4MT/ha from 4MT/ha in 2Q11), increased trading volumes (which have lower margins) and acceleration of losses in JV with Louis Dreyfus (impact of US$81k FX loss, expense of previously capitalized borrowing costs and change in CPO export tax structure) to -US$0.4m from -US$0.1m 2Q11.

FY11-13F earnings cut by 14-15%, on higher processing costs and purchasing costs for third party FFB. We also lower contribution from Louis Dreyfus JV from US$1.3m to US$0.5m given weak performance to date. TP is hence reduced to S$0.29 from S$0.37 on lower earnings projections.

KAGR’s rating is cut to Fully Valued, given 17% downside to revised TP of S$0.29. We see limited catalyst for the stock over coming 12 months and believe the stock has fully priced in the revised 3-year earnings (2010-2013) CAGR of 32%.

Swing Trading with Oliver Velez

3Q11 was 19% below expectations.
Venture reported net profit of S$35.4m (-27% y-o-y, -16% q-o-q) on sales of S$583.6m (-14% y-o-y, -7% q-o-q). Key variance was lower than expected sales due to the weaker USD/SGD and lower margin. In USD terms, sales decline was only 3% y-o-y. Despite lower sales, Venture’s value-added focus has resulted in defensive net margins of 6.1%, within its historical average band of 6-8%. 9M11 earnings met 72% of our original FY11F.

Visibility is low for 4Q11/FY12 but opportunities are abound. Although the near term outlook remains weak and uncertain, we expect Venture to stay the course with superior technical competence and focused execution. There will be some orders diverted to Venture post the floods in Bangkok, which has hit EMS competitors, and potential cross-selling opportunities exist with new owners of Venture’s customers (eg Verifone via Hypercom). However, we believe Venture will be mindful when taking on new contracts businesses as margins are important. Hence, we have kept our net margin assumption at around 6% even as we cut FY11/12F earnings by 10% and 17% respectively to impute the weak 3Q results and muted outlook.

Cashflow generation remains robust, can sustain yields.
With FCF improving to S$90m for the reported quarter, VMS ended 3Q11 with S$233m of net cash. We are confident Venture will be able to sustain dividend payment of S$151m (DPS: 55 Scts), which implies an attractive yield of 8% at current prices and provides downside support to share price. Maintain Hold on TP of S$6.30 (based on 11x FY12; -1sd from mean), down from S$7.50 mainly due to the earnings cut.

Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant