Top Picks - DBSVickers 12-Jul

Industrial Sector Top Picks by DBS Vickers dated 12-Jul,

Top Picks	Price S$	Target S$	FY05F PE	FY06F PE	EV/EBITDA	P/BV	Div Yield %
CSE Global	0.79	0.95	11.7	9.1	10.5	3.0	2.5
SembCorp Marine	2.77	3.27	29.8	18.5	23.9	3.8	2.5
Inter-Roller Engineering	1.25	1.61	9.1	8.4	8.4	2.5	6.6
Singapore Petroleum	5.20	6.08	7.4	6.3	7.4	2.2	4.7
Tat Hong Holdings	0.57	0.79	9.3	7.8	5.8	1.3	4.4

CSE Global: High oil prices and shortage of refining capacities have led the increase in demand for new production platforms and oil refineries. This should translate to new jobs for CSE. The company’s orderbook currently stands at an estimated S$200m, and is expected to grow with the buoyant oil and gas environment. As such, we are projecting earnings CAGR of 26% for the next two years. At 8x FY06 PE, valuation remains attractive. BUY, TP S$0.95.

SembCorp Marine: SMM has won contracts worth S$3.1bn so far this year. Order book stands at a record S$5.4bn. We believe order flow momentum should remain strong and expect further contract wins of S$6.5bn over the next 18 months. In addition, SMM’s 30% stake in Cosco Shipyard Group gives it exposure to the booming Chinese ship repair sector. We expect earnings growth of 34% and 62% over FY05-06 underpinned by stronger margins and rising
number of project completions. BUY, TP S$3.27.

Inter-Roller Engineering: 1Q05 results were above expectations, as earnings grew 51% y-o-y on revenue growth of 20%. The Group’s S$158m order book provides firm earnings visibility over the next 2 years, with good prospects of winning more airport contracts to sustain its growth. The stock remains attractive at 8x FY06 PER whilst offering more than 7% yield. BUY, TP S$1.61.

Tat Hong Holdings: A beneficiary of spending on oil and gas, and infrastructure projects in the Asia-Pacific. The Group should see 40% earnings growth that is driven by a) organic growth, b) business extension and c) M&A activity. The Group reported a strong set of FY05 results, with earnings up 48% y-o-y to S$20.6m. We expect earnings growth to continue to exceed 25% p.a. and the stock is trading at only 8.5x FYE Mar 06 earnings versus its peers, which are trading at around 11x current earnings. BUY, TP S$0.79.

SPC: Outlook for the refining sector remains very favourable with product demand growth outpacing new refining capacities in the Asia Pacific region. Refining margins are likely to be stronger in 2H05, which should have a positive impact on profits and stock price performance. New developments on SPC's exploration prospects in Vietnam and Indonesia would also be a potential price catalyst. Given strong SPC’s earnings outlook, we expect the company to maintain a healthy dividend payout. BUY, TP S$6.08.

Disclaimer : Above Materials are Meant to be used for Reference ONLY. It does not represent a recommendation from any of us