Near term STI

The Straits Times Index (STI) closed on Friday at 3,135 points, which is about a 3.5% decline on a year-to-date basis. My portfolio comprising mainly small caps have done worse, at down 10%. Using the two as a comparison, equity investors have been largely cautious, preferring to hold on to blue-chips for their dividend yields, as the usual macroeconomic issues repeat themselves. These issues include the unwinding of the US Fed stimulus, Eurozone debt issues (Spain this time) as well as a slowdown of China's economic growth.

My own outlook or feeling are as follows.

One-Month : The STI will be range bound between 3,000 to 3,200 with close to no volumes. June has typically been a quiet month for investors too.

Three-Month : Watch out for the 3,200 level as it might signal the bull run.

Through the end of 2011 : The STI should slog its way till the end of the year at about 5-10% higher than it was in 2010, based on the median expectations of readers here.

I know I sound like the horoscope. My personal view is that I will accumulate stocks at 2,900 to 3,000 levels for the long run just to play safe. I am a long term investor because my time frame is very long, at least 20 years. The stock market is not in a supercharged bull run but it will have legs for 5 more years. The economic troubles in the developed nation will mean that everyone is looking at bonds, causing the fixed income instruments to get pricier. Right now, we are in the process where bonds are getting more air time than stocks, for the same reason. These make stocks a contrarian investment.

Biosensors International Announces Continued Sales And Earnings Growth for the Fourth Quarter And Fiscal Year Ended 31 March 2011

Singapore, 26 May 2011 ‐ Biosensors International Group, Ltd. (“Biosensors” or the “Company”, Bloomberg: BIG SP) today announced continued strong sales and earnings growth for its fourth fiscal quarter (“Q4 FY11”) and fiscal year ended 31 March 2011 (“FY11”).

Total product sales in the fourth quarter were US$39.7 million, a 33% increase over the same quarter of fiscal year 2010 (“Q4 FY10”), driven largely by continued growth in sales of the BioMatrix™ family of drug‐eluting stents (“DES”). Total Interventional Cardiology revenues increased to US$36.5 million in Q4 FY11, a 35% increase over the US$27 million reported in Q4 FY10, with higher DES sales offset by lower component sales. Sales of critical care products (“CCP”) for Q4 FY11 increased to US$3.3 million as compared to US$2.9 million for Q4 FY10. Including licensing revenue and royalties, total revenue for Q4 FY11 was US$44.5 million versus US$32.8 million for Q4 FY10, an increase of 36%.

Product revenue for FY11 was US$139.4 million, compared to US$107.1 million for FY10, a 30% increase. Interventional Cardiology revenues in FY11 were US$126.4 million, a 34% increase over the US$94.6 million reported in FY10. Sales of CCP increased slightly to US$13.0 million in FY11 as compared to US$12.5 million in FY10.

Gross margins on total product sales improved to 75% in FY11 from 70% in FY10, driven by a shift in product mix toward the Company’s higher margin DES products, combined with increased economies of scale in manufacturing.

“Our overall product sales achieved another quarter of positive growth, thanks to strong growth in our DES business”, commented Co-CEO Jeffrey B. Jump. “Our results reflect the continuing market penetration and acceptance of our technology, the safety and efficacy of which are backed by a robust and growing body of clinical evidence”.

Sales and marketing expenses were US$12.2 million in Q4 FY11 compared to US$8.7 million in Q4 FY10, and US$44.0 million for FY11 compared to US$31.4 million for FY10. The increase was mainly due to higher expenses for headcount, warehousing, trade shows and brand building as the Group continued to expand its sales force and global marketing activities.

General and administrative expenses were consistent at US$5.1 million in Q4 FY11, compared to US$5.0 million in Q4 FY10, and US$17.7 million for FY11, compared to US$19.1 million for FY10. The decrease was mainly due to lower share-based expenses as well as decreased payroll-related expenses resulting from the Company’s recent US restructuring.

Research and development (“R&D”) expenses, which include costs for new product development and testing, pre-approval clinical trials, and regulatory approval costs, were US$4.7 million in Q4 FY11 compared to US$3.0 million in Q4 FY10. For FY11, R&D expenses were US$16.1 million compared to US$13.1 million for FY10. This increase was mainly due to higher clinical trials expenses and additional investment in research and development.

Included in the Q4 FY11 results is the equity method of accounting for the Company’s 50% ownership interest in JW Medical Systems Ltd (“JWMS”), which resulted in net income of US$5.0 million.

In Q4 FY11, the Group reported net profit of US$18.2 million, or basic earnings per share (“basic EPS”) of 1.65 US cents and diluted earnings per share (“diluted EPS”) of 1.60 US cents, compared to a net profit in Q4FY10 of US$9.1 million, or basic EPS of 0.85 US cents and diluted EPS of 0.82 US cents.

For FY11, the Group reported net profit of US$43.3 million (basic EPS of 3.99 US cents and diluted EPS of 3.88 US cents) compared to net profit in FY10 of US$32.1 million (basic EPS of 3.02 US cents and diluted EPS of 2.96 US cents).

Excluding the fair value adjustments for the warrants and the restructuring charges related to the closure of the US operations, net profit in Q4 FY11 would have been US$16.7 million (basic EPS of 1.51 US cents and diluted EPS of 1.46 US cents). For FY11, excluding the fair value adjustments for the warrants and US restructuring charges, net profit would have been US$52.6 million (basic EPS of 4.85 US cents and diluted EPS of 4.72 US cents).

“We closed the fiscal year on a strong note, having successfully achieved our revenue and profitability targets through the effective execution of our growth strategies. The credit for the positive results goes to our entire team”, concluded Co-CEO Jack Wang. “Our total product revenues met the mid-range of our previous guidance. We were also able to lower our operating expenses through our various cost-reduction measures and restructuring efforts, and we will continue to manage our operating costs carefully as we continue our strong growth. In FY12 we will continue to leverage our global sales network driving increased coverage within existing markets and increased penetration within existing accounts. In addition, we will aggressively pursue expansion opportunities in high-growth markets such as China, India and Latin America”.

Financial Guidance

For the fiscal year ending 31 March 2012 (“FY12”), management anticipates that total revenue will grow by 20% to 30% compared to FY11. The increase in total revenue will continue to be driven by our drug-eluting stent business and increased licensing royalties. The Company expects FY12 profitability to increase over FY11 on an overall basis, with the effect of higher revenues being offset by increased expenses required to support revenue growth and development of future products.

The revenue and profitability estimates provided by Company’s management do not include the potential effects of foreign exchange gains and losses or any additional exceptional events or unforeseen circumstances which may occur.

sgxstockpicker says:  I have got only 3 lots of Biosensors at around 60 cents. I couldn't be happier!

KS Energy commissions the construction of two drilling rigs worth USD 388 million

The two rigs are based on LeTourneau WORKHORSE®Class design. The addition of the two new rigs will increase the fleet-size to 12 rigs. Cost of rigs to be funded through internal sources and borrowings. LeTourneau will be supporting COSCO Shipyard on this project

SINGAPORE, 26 May 2011 – Mainboard listed KS Energy Ltd (“KS Energy” or the “Group”) announced that it has contracted COSCO Nantong Shipyard Co. Limited (“COSCO Shipyard”) to build two new jackup rigs. The total project cost is estimated at US$388 million (approx S$483 million), which includes project management, drilling and handling tools, spares and capitalized interest.

The construction will build two drilling rigs based on the LeTourneau Technologies, Inc. (“LeTourneau”) WORKHORSE® Class design with expected delivery date of 27 months and 32 months respectively, from the contract effective dates.

When completed, both rigs will be capable of operating in water depth of up to 400 feet and a rated drilling depth of 35,000 feet. Each rig can also accommodate 150 personnel on board.

“To be a global player in the drilling business, we have to have a large fleet to cater to different market needs. The addition of these two rigs will increase our fleet to 12 rigs, which includes 4 jack-up rigs,” said Mr. Kris Wiluan, Chairman and CEO of KS Energy.

Presently KS Energy has 6 land rigs, a lift boat, 2 jack-up rigs and an accommodation rig. Two of its jack-up rigs – the KS MedStar and the KS Endeavor are drilling in Egypt and West Africa.

This latest move is part of the Group’ strategy aimed at growing and expanding its drilling operations. Following the consolidation of its distribution business last year, the Group is now moving towards consolidating its drilling business.

sgxstockpicker says: The new orders are of good specifications and are good for KS Energy's drilling business. However, from Keppel Corp's announcement, there are other players who have taken the opportunity to upgrade or expand their jackup rig fleet. Since it takes about 2-4 years to complete the rig, the material impact will also take just as long to be reflected in KS Energy's financial performance.

CSC POSTS $333.4M IN REVENUE FOR FY11

SINGAPORE, 18 May 2011 – Mainboard-listed CSC Holdings Limited (“CSC” or the “Group”) has recorded a 17.0% increase in year-on-year revenue to $333.4 million for the financial year ended 31 March 2011 (“FY11”) despite a slow fourth quarter (“4Q11”). Other Income for FY11 was significantly higher at $4.4 million compared to $1.0 million in FY10, largely due to higher equipment rental activities, higher recorded gains from the sale of old equipment, and other miscellaneous construction related income.

However, this was offset by a 20.1% increase in Other Operating Expenses to $22.9 million from $19.1 million incurred in FY10. The increase in Other Operating Expenses was largely attributable to higher costs associated with increased revenue from the Group's equipment distribution arm and the hiring of additional technical staff to cater for the increase in volume of work during the financial year.

The Group also had to contend with an increasingly intense level of competition within the industry and price hikes in key construction materials, especially ready mixed concrete, resulting in lower margins from the projects secured in FY11 than in FY10. The Group registered a decline in net profit to $7.9 million in FY11 from $26.0 million in FY10.

The net profit for FY11 was also largely affected by the provision for doubtful debts of $7.9 million arising from the Changi MotorSports Hub project. In consideration of the Group’s profitable performance, the Directors of CSC have recommended a tax exempt one tier final ordinary dividend of 0.10 Singapore cents. This is in addition to the interim dividend of 0.40 Singapore cents paid out in December 2010. The total dividend to be paid out for FY11 would amount to 0.50 Singapore cents.

sgxstockpicker says: This is a small cap construction stock. Upside in earnings looks quite limited and I think that it should be in the downtrend. The slump in infrastructure spending as well as the hike in foreign workers' levy means pressure on both top and bottom line. 

Biosensors announces plans for largest ever DES randomized clinical trial

Paris, France, 18 May 2011 – Plans for Global LEADERS (“LEADERS II”), the largest ever randomized clinical trial involving a head-to-head comparison between two drug-eluting stents (DES), were announced yesterday during the opening session of EuroPCR by Co-Principal Investigator Professor Patrick W. Serruys. The trial will enroll more than 10,000 patients from an “all-comers” population eligible for PCI, allocated to  receive either BioMatrix Flex™ (Biosensors’ Biolimus A9™-eluting stent system with abluminal biodegradable polymer), or the market-leading DES system with a durable polymer. Recruitment into the study, involving over 100 sites around the globe, is due to start in early 2012, with data being collected for up to two years following stent implantation.

The protocol of the study is currently under development, and is likely to involve a “2x2 factorial” design, with the second randomization being to either a short or long duration of anti-platelet therapy. The primary endpoint will be a true clinical evaluation, assessing patient safety. Global LEADERS will be independently designed, implemented and analyzed by the study investigators, who in addition to Prof. Serruys (Erasmus Medical Center, Rotterdam, Netherlands) will include Co-Principal Investigator Professor Stephan Windecker (University Hospital, Bern, Switzerland). The study will also have regional Principal Investigators in Europe, South America and Asia. Dr. Marco Valgimigli (University of Ferrara, Italy) will act as Principal Investigator for the anti-platelet therapy portion of the study.

Global LEADERS aims to build on the concept of the landmark LEADERS study, which was the first head-to-head randomized trial between two limus DES in an “all-comers” patient population using clinical outcomes as its endpoint. LEADERS results suggested that a DES with biodegradable polymer could be safer in the long term than a DES with durable polymer – especially in high-risk patient populations – under conditions which resemble those of routine clinical practice.

sgxstockpicker says:  The randomized trials will only make Biosensor's DES more acceptable over the world, provided the clinical trials are successful. The trials themselves are likely to increase expenses. But if the trials show that Biosensor's DES has an edge over its rival (J&J probably), the sales team will be in a better position to market and hence increase revenue.

Sinotel 1Q11 Profit falls 3.5 percent to RMB 27.7 million

Sinotel revenue for 1Q11 increased by RMB47.7 million (40.3%) compared to 1Q10. The increase was due

mainly to increase in revenue from indoor & outdoor of RMB39.5 million, sales of equipment of RMB18.1 million and system integration of RMB19.9 million. The increase was mainly due to increase in sales to China Mobile in Shanxi Province. The increase was offset by the decrease in revenue from emergency mobile communication station (EMCS) of RMB31.2 million.

Gross profit for 1Q11 decreased by RMB4.0 million (8.8%) compared to 1Q10. The decrease was mainly due to decrease in gross profit margin from 38.2% in 1Q10 to 24.8% in 1Q11. The decrease was mainly due to higher contribution from sales of equipment and system integration which have a lower gross profit margin. The percentage of contribution from sales of equipment and system integration increased from 15.9% in 1Q10 to 22.3% in 1Q11 and from 5.4% in 1Q10 to 15.9% in 1Q11 respectively.

Also, decrease in gross profit margin due to the pressure on the selling price since the Telco implemented the central procurement policy. In view of this, the Group has mitigated this downward trend by focusing on higher margin products and services as well as expanding its recurring income business.

As a result of the above, our net profit for 1Q11 decreased by RMB1.0 million (3.5%) compared to1Q10.

sgxstockpicker says:  It is an S-chip! What more should I say?

SATS full-year net profit grew 5.6 percent to SGD 191.4m

Proposes final dividend of 6 cents per share and special dividend of 6 cents per share


4Q2010-11 vs 4Q2009-10

SATS’ operating revenue increased 29.3% to $504.9 million on the back of higher level of activities and the consolidation of TFK Corporation (TFK). TFK contributed a revenue of $72.6 million. Excluding TFK, the Group’s operating revenue improved 10.7% to $432.3 million. Aviation revenue grew 14.5% to $246.7 million while non-aviation revenue rose 6.6% to $183.3 million. Operating expenses were up 29.8% to $454.7 million, in line with the increase in activity levels and the inclusion of TFK. As a result, SATS earned an operating profit of $50.2 million, 24.6% higher than a year ago. Excluding exceptional items of $2.7 million in M&A costs in 4Q2010-11 and $1.5 million jobs credit received in 4Q2009-10, SATS’ underlying operating profit would be $52.9 million, up 36.3% year-on-year.

Share of profits of associated/JV companies grew 17.7% to $15.3 million due mainly to the maiden contribution of $6.4 million by Air India SATS Airport Services (AISATS). Consequently, SATS’ pre-tax profit rose 23.5% to $65.2 million and its profit attributable to equity holders was 9% higher at $50.7 million. Excluding the exceptional items, SATS’ underlying net profit would have increased 18.7% to $53.4 million.

sgxstockpicker says: SATS is a good company but at present levels of 16x PE and 2x book value, upside is capped to the market. There are no catalyst for share price appreciation in the short term. Long term, look to hold on to SATS for its dividend yield.

Reflecting on GE2011

For those who have followed my GE2011 posts, you will realize that the median prediction of between 55 and 60 percent exclusive was fairly accurate. This was considering that the final local vote count averaged 60.1 percent for the PAP.

I do not know the background of the voters, I can safely assume that almost all are Singaporeans and of the Internet savvy group. I used the median because several studies have shown that a large and diverse group of individuals can be used to gauge the outcome of an event, hence the use of poll research by the Australian company. Wisdom of the masses as they call it.

It is therefore likely that the Singapore stock market will perform slightly outside as predicted by my earliest poll. I did a quick check on my stocks and many of them have now started sinking into the red. This could be because the US stimulus is running its course. However, if the masses are to be believed, it is likely that there will be slight upside from hereon.

PAP to get between 55 and 60 percent of votes cast

I have closed the poll on the right to coincide with the actual end of polling day. 44 people have responded and based on the categories I have gave them, the results are:

Median (the middle): The PAP will win between 55 and 60 percent exclusive of the average votes cast

Mode (the most frequent): The PAP will win an average of between 50 and 55 percent exclusive of the average votes cast

Mean (or the simple average. please ask for methodology): The PAP will win about 57.7 percent of the average votes cast.

Based on my poll, I can conclude that the respondents of this poll generally believe that the PAP will not perform as well as the previous General Election in 2006. Then, there were fewer seats contested and the PAP won an average of 66.6 percent of the total votes cast. The reason I did not disclose that figure when I first started this poll was that I wanted to prevent readers from anchoring their opinion.

We will know the results over the course of the next 5-6 hours and if this poll is indicative of the sentiment on the ground, there will be some too close to call situations. I will do a review of the poll results against the actual election results. What I think at the moment is that the average votes secured by the PAP will be closest to the median of my poll - between 55 and 60 percent exclusive.

General Election 2011 forecast

From Straits Times, April 30, 2011

This table was part of the article on the Straits Times April 30, 2011. This is a very good table because it shows what the results may be, if there is a swing against the PAP.

The writer uses the results from 2006 where possible and uses 66.6% if there was a walkover, which I feel is fair enough.

What is interesting about this table is that with the exception of Bukit Panjang Single Member Constituency (SMC), a 5% swing against the PAP will mean them winning about 56.7% of the vote for most of the SMCs. For the Group Representation Constituencies (GRCs), such a scenario of swing votes means only East Coast  (57.9%) and Aljunied (50.1%) falling below the 60% mark.

My take is that once the elections are over, how the SMCs perform will determine whether again they will be spliced, and how GRCs perform will determine how  boundaries will be redrawn. Side note, this table will be a good companion as the votes are counted after polling day.

Midway through election campaigning

We are about midway through the election campaigning period. There will still be rallies up till Thursday night as Friday will be the cooling off period before you actually cast your votes. Please cast your vote in my latest poll if you have not, so that I can analyze it once the dust is settled.