Brokers' take

Offshore and Marine SectorSector - OverweightCIMB Research | Aug 22 |A RECENT raft of rig orders placed with Chinese yards has sent chills among investors of Singapore yard stocks.新蒲崗迷你倉We note that these may not translate into real deliveries; we are also starting to see cracks in Chinese yards with two jack-up rigs ordered from Rongsheng recently cancelled due to credit crunch and going concerns.Only Dalian Shipyard currently has the execution ability to deliver rigs (four delivered to a Tier-1 operator, Noble, in 2007-09). However, there have been no repeat orders from Noble since.Maintain Overweight on Singapore yards with Keppel Corp as our preferred pick. We still believe strong order wins and steady margins can provide powerful sector catalysts.Swissco Holdings recently terminated its agreement with Rongsheng to build two jack-up rigs, citing China's credit crunch.We believe the going concern of Rongsheng (which had sought financial aid from the Chinese government in July) had jeopardised the ability of Swissco's Chinese partner, Golden Arch (owned by energy private investor Zhang Jiping), to obtain bank financing. We believe this could just be the start of the fall for Chinese rig aspirants as the financing system in China gets tighter.Seadrill is Dalian's single largest rig customer with ten units on order. We think there are sufficient orders to go around as Seadrill only accounts for 3 per cent of the global rig fleet.Dalian's other Tier-1 customer, Noble Drilling, had not returned to the yard for more orders after taking delivery of three rigs in 2007-09. All of Noble's orders from 2010 to 2013 have been placed with Sembcorp Marine and Hyundai Heavy Industries.Keppel Corp ("Outperform", target price $12.10) and Sembcorp Marine ("Outperform", target price $4.80) are no sitting ducks, having expanded their order books by 20-30 per cent per annum in the past 10 years. We expect continuous order book growth of 5-10 per cent into 2015 to sustain investors' interest in Singapore's Big 2.United Overseas BankNeutralCiti Research | Aug 22 |Aug 23 close: $20.88 |CONSISTENT double-digit fee growth post-2009 differentiated UOB from peers as net mini storagenterest margins (NIMs) stayed soft, helping to drive recent price performance.But with NIMs near-bottom, the next six months may focus on rising Asean risks: Thailand (4 per cent of 1H13 PBT), Indonesia (5 per cent) and Malaysia (15 per cent) look vulnerable to slowing GDP, funding pressures, asset quality surprises or currency weakness.UOB's loans over the last three years were more driven by mortgages/consumer loans vs peers, and its deposit (CASA) franchise looks the weakest. Target price $21.25 (roll to mid-2014 base, minor estimate changes) implies 2014E PE ratio of 11.8 times, P/B 1.3 times vs ROE 11.3 per cent.While 1H13 results were in line, expect slower 2H loan volumes on mortgages/consumer. We are unlikely to see Singapore NIM upside despite higher 10-year yields as banks have stayed short on duration.We will monitor funding pressures in Asean markets; UOB typically has lower CASA, higher loan-deposit ratios in the region. Core fees should be resilient, aside from loan fees from the regional corporate bank which may soften.UOB has been proactive on building provisions, but isolated, chunky non-performing loans are a risk. We assume no short-term SGD rate rises until mid-2015, capping NIM upside.Outside Singapore, top regional drivers have been Malaysia (bias to consumer loans) and Greater China (increased lending to HK blue chips in USD and HKD). Thailand/Indonesia profits have arguably been below potential on historic operational issues, but the countries themselves have now run into material macro headwinds: Thailand a rapid slowdown in GDP growth, Indonesia a rapid tightening of system funding as the country's 2Q13 current account deficit rose to 4.4 per cent of GDP. Compiled by Andrea SohDisclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.Brokers who wish to send in their reports can email us at btnews@sph.com.sgself storage