Ezra - Additional charters reinforce strength in core operations

Ezra announced that it has secured new and renewal charter contracts worth US$152 mn for three Anchor Handling, Towing and Supply Vessels (AHTS). Under the agreements, the vessels will be chartered out for operations in Southeast Asia for periods ranging from 5½ to six years, inclusive of extension options. We believe the group's young deepwater fleet (about 78% of Ezra's fleet is deepwater capable) places them in a strong position for further new contract wins. The AHTS vessels are basic workhorses of the offshore oil & gas support services industry that are deployed throughout the entire oil field life cycle. Ezra has an existing modern fleet of 25 AHTS and 3 crew boats within the Offshore Support Services division (original core business of the group).

With recent signs of recovery from the financial turmoil, the group foresees upward revisions in capital expenditures by global oil majors, driving strong demand for offshore support services. This is in line with our positive view on the O&M/offshore services sector, especially in the subsea space.

Ezra's recent new growth strategy announcement on the subsea market marks a strategic and transformational move to focus on one of the fastest growing segments of the O&M sector. Global subsea spending in the next five years should rise >70% over the previous five years. Subsea spending should total about US$160bn from 2009 to 2013, and 3,222 subsea trees are due to be installed during this period. With its upcoming high specification vessels, enhanced know-how and expertise, and good execution track record, Ezra should be in a strong position to benefit in our view. We maintain our Buy on Ezra for its attractive valuations, strong execution track record, and its move into the high growth subsea market.

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CH Offshore: Deeply undervalued cash

AHTS fleet with deepwater focus. CH Offshore (CHO) owns and operates eight small AHTS (<8,000>12,000 bhp) as of end FY09 (FYE June). CHO will increase its fleet of large AHTS to seven by end FY10.

Strong free cash flows amidst steady earnings growth. We project CHO’s free cash flow per share to rise to 8.5 US cents in FY11 (or equivalent to c. 22% of current share price), vs. 2.5 US cents in FY09 and an estimated 1.1 US cents in FY10. This is due to: 1) Non-existence of committed capex after FY10, and 2) our forecast of 7% net profit CAGR in the FY10-11 forecast periods.

6.5% current FY10 dividend yield. We expect CHO to have 40% dividend payout, vs. recurring net profits, in the FY10-11 forecast periods. The 22% dividend payout in FY09 amidst uncertain economic condition is an anomaly.

Sustained undervaluation could trigger M&A interest. CHO now trades at 6x recurring FY10 PE (FYE June), vs. 9x average PE for the small-mid cap offshore service providers in our coverage. CHO is also not seen as a core holding for Chuan Hup, its second largest shareholder. Hence, in our opinion, an undervalued CHO may be an attractive M&A target for global AHTS owners, including John Fredriksen’s Deep Sea Supply (which has close to 5% stake in CHO).

Initiate coverage with BUY. Our fair value for CHO is S$0.89, based on 9x blended recurring FY10/11 PE (FYE June). This gives around 58% potential upside from current price. We initiate coverage on CHO with a BUY rating.

Rickmers Maritime - 2Q09: Retaining cash to weather challenges ahead

RMT reduces distribution policy from 46% to 13% for financial flexibility and declares DPU of 0.6 US cents. While fair price of S$0.76 is 30% above current price, we maintain HOLD in view of the US$712m unfunded capex.

Rickmers Martime (RMT) posted a net profit of US$5.2m for 2Q09 (-43% yoy; -53% qoq). The fall in earnings was mainly due to the provision of US$7.5m for asset impairment charged for a vessel (Maersk Djibouti) as the charterer, Maersk Line, may exercise an early termination option. The impairment also takes into account the likelihood of a fall in charter rates in 2010. Excluding the provision for impairment, 2Q09 earnings would be US$12.7m (+38% yoy; +15% qoq). According to management, this is the only vessel in RMT’s fleet that has an early termination option.

The trust’s income available for distribution amounts to US$19.6m (+42% yoy). RMT is paying DPU of 0.6 US cents, or 13% of distributable cash flow (1Q09: 46%). A reduction in its payout ratio is mainly to conserve cash for financial flexibility amid uncertainties in the container shipping market.

To date, RMT has a fleet of 16 containerships time chartered out for periods of between seven and 10 years. Three more 4,250-TEU newbuilds, contracted to Hanjin Shipping, are expected to join its fleet. Of these, two are scheduled for delivery in 2H09 and one in 1Q10. RMT is evaluating options for the funding of four 13,100-TEU container vessels worth US$712m to be chartered out to Maersk in 2H10. These vessels have secured 10-year charter contracts at a daily time charter rate of US$56,941. The trust is also seeking to re-finance a US$130m loan facility due in Apr 10.

While our fair price of S$0.76 is 30% above its current share price, we maintain our HOLD recommendation in view of RMT’s unfunded US$712m capex due in 2010. Our fair price is based on 2010 P/B of 0.4x, similar to US peer Danaos’ P/B of 0.4x as RMT would have a similarly very high gearing of 4.0x, assuming debt financing for US$712m capex.

FSL Trust: LTV covenant clouds dissipate

Secures covenant waiver. FSL Trust has secured a two-year waiver for the loan-to-market value covenant in its credit facility. The waiver, subject to documentation, will extend until the end of 2Q11. During this period, the minimum coverage ratio of the charter-free fair market value of the trust's portfolio over its outstanding indebtedness will be reduced from 145% to 100%. In return, FSLT must repay US$8m per quarter during the two-year period (or US$64m in total). The trust has already prepaid US$12m voluntarily. Margins over US$ LIBOR also increase by between 50 and 70 basis points (bps) during the period. The margin increase is reduced to a 25-bp hike after the waiver period.

Re-affirms DPU guidance. The manager estimates that the additional interest expense during the waiver period averages US$0.7m per quarter. The manager re-affirmed its DPU guidance of 1.5 US cents per quarter. We estimate this works out to a payout of less than 50% of cash earnings. We note there might be some one-off expenses (both cash and non-cash in nature) in 3Q09 as FSLT is likely to re-align its interest hedges to reflect the new amortization schedule.

T&Cs as expected with some positives. The conditions and pricing were in line with our expectations. We were expecting US$35m annual payment (versus US$32m actual). We were off by about 5 bps in our cost of debt assumptions. The positive surprise was the lower margin increase postwaiver period (we were not so optimistic). The new minimum coverage ratio is fair in our view, especially with outstanding indebtedness falling as quarterly loan repayments are made. The 'official' current fair market value of the portfolio was not disclosed.

Remains our top sector pick. A major overhang has eased, taking pressure off the manager and the stock. Industry concerns remain but we like the new, more sustainable payout model and FSLT's diversified vessel mix. We reiterate that unitholders should constrain their expectations regarding DPU growth; with the new payout model, a significant DPU increase would require acquisitions (and fresh equity) in our view. Note this is a revolving credit facility, so FSLT has the option to tap into the undrawn amount as it grows with each periodic repayment. Our discounted FCFE value is up from S$0.84 to S$0.86, incorporating actual waiver terms. Our fair value estimate edges up a cent to S$0.77, reflecting an "industry uncertainty" discount of 10%. Maintain BUY.

Value Mercator at S$0.42

Mercator mentioned in its results briefing that there was expiration of long term contracts and the contracts were renewed at lower rates. This was a concern as up to 70% of its revenue was from long term contracts. Moreover, spot market rates had declined sharply from last year that affected up to 30% of its revenue. Despite the difficult operating conditions, Mercator was able to report a profit compared to most of its peers that incurred losses.

Due to the fall in dry bulk shipping rates, net profit is expected to decrease to US$45.4m in FY2010F. After that, rates are anticipated to gain slightly with the increase in demand for shipping. This is likely to cause the profit to rise to the same amount of US$48.1m for FY2011F and FY2012F.

Recommendation. We value Mercator at S$0.42, which is 1.0 time book value for FY2010F. We expect Mercator to report a profit for the next three years despite the tough conditions in the dry bulk shipping industry. This is attributed to its ability to maintain long term contracts with its customers. Given the recent correction in the share price, we upgrade the stock from hold to buy as there is upside of 23.5% to its fair value.

First Ship Lease Trust - Placement to fund acquisitions

FSLT proposed a placement of up to 100m shares (19.3% of existing share capital) at an issue price of between S$0.525 and S$0.575/share to fund its vessel acquisitions. Maintain HOLD. Yields are intact but bullet payments are not too far away.

First Ship lease Trust (FSLT) has proposed a share placement of up to 100m new units at an issue price of between S$0.525 and S$0.575 each, or not more than a 20% discount to S$0.59. Assuming 100m units (19.3% of existing share capital) are issued at S$0.59 each, the proceeds of S$59m will be used for vessel acquisitions.

FSLT has recently reaffirmed a quarterly DPU of 1.5 US cents from 3Q09 onwards. Based on a placement price of S$0.59, we estimate cost of equity at 14.6%, which seems high. While it is difficult to estimate the effect of FSLT’s proposed vessel acquisitions, shipping trusts generally do not undertake acquisitions that are not accretive. However, the management is targeting for a gross asset yield of 15% p.a.

While FSLT’s lessees have been making lease rental payments promptly, we do not rule out the risk of default by its charterers.
Although FSLT did not apply the distribution reinvestment scheme (DRS) for 2Q09, the scheme has a dilutive effect on its DPU and yields. No change to our earnings forecast as the placement price and the number of new units to be issued have not been determined.

Reiterate HOLD and maintain our fair price of S$0.64 based on 0.8x 2010F P/B of the container shipping sector. We suggest entering at S$0.52. Reasons for maintaining HOLD.

Mercator Lines to report a profit for the next three years

Mercator mentioned in its results briefing that there was expiration of long term contracts and the contracts were renewed at lower rates. This was a concern as up to 70% of its revenue was from long term contracts. Moreover, spot market rates had declined sharply from last year that affected up to 30% of its revenue. Despite the difficult operating conditions, Mercator is able to report a profit compared to most of its peers that incurred losses.

Due to the fall in dry bulk shipping rates, net profit is expected to decrease to US$45.4m in FY2010F. After that, rates are anticipated to gain slightly with the increase in demand for shipping. This is likely to cause the profit to rise to the same amount of US$48.1m for FY2011F and FY2012F.

Recommendation. We value Mercator at S$0.42, which is 1.0 time book value for FY2010F. We expect Mercator to report a profit for the next three years despite the tough conditions in the dry bulk shipping. This is attributed to its ability to maintain long term contracts with its customers. Given the recent correction in the share price, we upgrade the stock from hold to buy as there is upside of 23.5% to its fair value.

ASL Marine - Strong enquiry of offshore orders

We recently hosted a postresults briefing for ASL. Investors’ concerns centred on declining shipbuilding orderbook, competition arising from other repair yards and whether shipchartering activities could be sustainable. Management reassured that it is receiving a healthy level of newbuild and repair enquiries, driven by increased offshore activities. While we do not anticipate sudden pick-up in newbuild orders for this year, we believe this has been priced in. With the expansion of Batam yard to be fully completed by Mar 10, we believe ASL will be one of the key beneficiaries for repair work of an enlarged fleet globally. Ascribing P/E of 6x to FY11 EPS, we derive our target price of S$1.41. Maintain BUY.

Management is receiving healthy enquiries for newbuilding of high capacity tugs and offshore construction vessels. We understand that these offshore vessels are in demand, given the increased offshore drilling activities in Australia (Western Australia’s Gorgon Gas project) and Indonesia (Timor Sea, Sumatra). Hence, we believe this will be positive for ASL. However, management acknowledges that due to fewer orders and tighter competition, the margins of new orders may be compromised, going forward.

Batam’s yard capacity to increase by 70% in deadweight tonnage in Mar 10. ASL’s Batam yard is currently adding two drydocks and a graving dock as well as lengthening its finger pier. When the upgrading work is completed in Mar 10, ASL’s yard capacity would increase by 70% dwt and be able to accommodate the repair and conversion works of larger vessels. Management is optimistic on the long-term outlook, underpinned by an increasing global fleet and regulatory requirements.

Shipchartering. ASL has a current fleet of 189 vessels with an average age of six years. ASL is currently building 11 vessels internally and a vessel externally to add to its chartering fleet, which will increase to a fleet of 201 vessels by FY10.

Ezra - Attractive deal not requiring incremental capex

Ezra has announced a profit sharing agreement to operate four new anchor handling, towing & supply (AHTS) vessels without incurring any major capital outlay. Under the vessel operating agreement, Ezra will manage these vessels for an offshore specialist fund in return for a half-share of the profit earned, after deducting direct operating expenses from the charter revenue. The vessels are still under construction, with the first AHTS slated for delivery in 1Q 2010. The AHTS vessels are basic workhorses of the offshore oil & gas support services industry that are deployed throughout the entire oil field life cycle and will complement the group's existing fleet of 25 AHTS and 3 crew boats within the Offshore Support Services division (original core business of the group).

We view this deal positively as it does not involve additional capex, yet the group will still be able to recognise half the profits. We think the assets were ordered in the past on specualtion by the specialist fund; but as they do not have the expertise in running these vessels, they now require the services of players like Ezra. On a steady state, assuming all four vessels are operating for a year, we estimate earnings contribution to Ezra per annum could range from US$2-3mn. While the amount is not large compared to overall group earnings, this deal could be a prelude to further of such arrangements, which appears attractive considering the minimal capital outlay.

We maintain our Buy on Ezra for its attractive valuations, strong execution track record, and its move into the high growth subsea market.

FSLT raises S$41m via private placement at S$0.525 per unit

Pursuant to the placement, First Ship Lease Trust (FSLT) will issue 80m new units (15% of existing issued Units) at S$0.525/share.

The net procceds of about S$40.9m, after the placement fee and estimated offering expenses, will be utilised to fund vessel acquisitions.

FSLT has not identified any specific assets to be acquired with the net proceeds.

FSLT has recently reaffirmed a quarterly DPU of 1.5 US cents from 3Q09 onwards which implies an annualised yield of 14%.

While it is difficult to estimate the effect of FSLT's proposed vessel acquisitions, shipping trusts generally do not undertake acquisitions that are not accretive. However, the management is targeting for a gross asset yield of 15% p.a.

Reiterate HOLD and maintain our fair price of S$0.64 based on 0.8x 2010F P/B of the container shipping sector. We suggest entering at S$0.52.

Reasons for maintaining HOLD:
a) EBITDA yield of 36% p.a. is still intact.
b) Accretive acquisitions will boost its distributable cash.
c) However, although FSLT has begun repaying part of its loans on a quarterly basis, it still has outstanding loans of US$400m due for balloon payments in 2012 and 2014. It will either have to refinance or raise equity. The latter would likely lead to a yield dilution. If FSLT were to raise US$400m at the current share price of S$0.61, this would imply a mere yield of 5.6% p.a. (before accretive acquisitions).

ASL Marine and Yangzijiang among 12 constituents to form new Maritime Index

ASL Marine and Yangzijiang are among the 12 constituents of the new FTSE ST Maritime Index launched by Singapore Press Holdings (SPH), Singapore Exchange Limited (SGX) and FTSE Group (FTSE).

FTSE ST Maritime Index – ASL Marine Holdings, Cosco Corp, Courage Marine Group, First Ship Lease Trust, Jaya Holdings, JES International Holdings, Mercator Lines, Neptune Orient Lines, Rickmers Maritime, STX Pan Ocean, Swissco International, Yangzijiang Shipbuilding Holdings.

The index reflects the strength of the maritime component of companies in the energy, offshore and shipping industries listed on SGX; underlines the Exchange’s efforts in enhancing this sector.

The FTSE ST Maritime Index comprises 12 companies that have at least 55% of their revenue derived from maritime related activities including the manufacturing, ownership, operation and repairing of commercial and/or cargo vessels.

The new index provides investors and analysts a benchmark tool to track and measure the performance of SGX listed companies in the maritime industry that meet the indexing standards required by international investors.

Yangzijiang Shipbuilding - Holding up well in a tough environment

Established shipbuilder in the PRC. Yangzijiang Shipbuilding (Holdings) Ltd (Yangzijiang) is an established shipbuilder in the PRC with operations dating back to the 1950s.The group operates two yards in Jiangsu province, one in Jiangyin city and the other in Jingjiang City. Yangzijiang has delivered more than 100 vessels including bulk carriers and containerships and is looking to expand its product range as well. In 2Q09, group revenue rose 41% YoY to RMB2.5bm while net profit rose 80% to RMB607.4m, aided by higher gross margins and other gains.

Large order book with no order cancellations so far. Yangzijiang has a strong order book of 139 vessels worth a total of US$6.1b as at 30 Jun 09. This comprises 66 containerships worth US$3.8b and 73 bulk carriers worth US$2.3b. More noteworthy is the fact that management said that the group has not received any order cancellations so far while peers such as Cosco Corp have been hit. We do not discount the possibility of order cancellations, but order delays are more likely, given the group's determination to preserve orders.

Gross margins have held up. Despite tougher business conditions, the group's gross margins have held up with the construction of higher margin vessels (24% in 2Q09 and 20% in 1Q09). This compares with 1% shipbuilding margin for Cosco in 2Q09, which was affected by longer-thanexpected delivery delays and higher-priced raw materials. However the shipbuilding industry is now out of the boom period and normalised margins are expected to fall in the long run.

Looking at new areas amid weak orders. The last time that Yangzijiang received new orders was in 2Q08, and management expects minimal new orders given low demand and customers' difficulties in securing financing. Hence, the group is proactively looking into new areas such as the vessel scrapping market which is relatively buoyant now. We view this possible development positively, given the resulting business model.

Initiate with BUY. We initiate coverage on Yangzijiang with a BUY rating with fair value estimate of S$1.20 based on 11x blended FY09/10F earnings, in line with peers. Project execution has been good with relatively strong margins compared to peers. Its strong order book of US$6.1b which extends to 2012 also lends earnings visibility though we note that new order flow may be minimal going forward. We have not factored in possible contributions from the vessel scrapping business.

Ezion - More upside to our target price of S$0.99

Ezion’s key strength is to identify opportunities within the offshore industry, and then to finance, design, procure and modify specialised vessels which it then charters out, at premium margins.

Currently, Ezion derives the bulk of its earnings from ballastable vessels, which serve as support vessels for offshore projects. Going forward, earnings will be boosted significantly by the addition of 4 self-propelled jack-up support rigs (aka liftboats) to its fleet of vessels.

Ezion also recently won an A$350m contract for early-stage work in the development of Western Australia’s massive Gorgon natural gas project. We anticipate more jobs to come from this project, which has an estimated capex of at least US$28bn.

Ezion’s share price has moved up sharply on the back of positive news flow such as the Gorgon contract win. However, we believe its prospects have not yet been fully reflected in its share price. Despite FY09 valuations of 35.9x, PE to Growth is still just at 0.33x. We expect further 28% upside to our target of S$0.99, which is based on 15x FY10 earnings.

ASL Marine: Creditable FY09 results. Maintain BUY

Results largely in line with expectations. ASL Marine Holdings (ASL) turned in a good set of results amid a slowing industry. Although results were lower sequentially on the back of lower revenue growth and impairment loss on vessels of S$3.2m, revenue rose 8.7% YoY to S$435.4m and net profit rose 17.9% to S$71.1m for FY09. Shiprepair and shipchartering revenue were in line with our expectations for 4Q09, but shipbuilding revenue was lower than expected due to lower revenue recognition as certain work-inprogress had yet to reach the 10% recognition threshold during the period. Revenue and net profit met 96% and 94% of our full-year estimates respectively.

Minimal new orders, but ASL is diversified. As mentioned in our earlier reports, new order flows were minimal and this is evident from the group's lower order book of about S$523m compared to S$582m in 3QFY09. However, this order book figure does not include eleven vessels (worth S$58m) that the group is building internally to expand its ship chartering fleet. It is encouraging that demand for shiprepair and chartering are still holding up, which is good news for the relatively diversified group (shipbuilding, repair and chartering accounted for 33.8%, 27.5% and 38.7% of FY09 gross profit respectively).

Cautiously optimistic outlook. We are cautiously optimistic on the shiprepair and chartering sectors, and believe that the medium to longer term outlook is bright. Management revealed that value per contract for the ship repair segment fell this quarter but the group repaired more vessels, hence the healthy results for this segment. The group is also expanding Batam facilities to cater to more ship repair activities and this will be completed in 3QFY10. Ship chartering, though affected by lower charter rates, still has a positive outlook due to demand from domestic infrastructure, construction and land reclamation projects and offshore oil and gas activities, amongst others.

Fair value raised to S$1.18. As guided by management, we are expecting lower but still healthy earnings for FY10, barring unforeseen circumstances. The stock has risen about 30% since our last report, and though the spread between ASL and its comparable peers has narrowed, it is still trading at about 5x FY10F earnings compared to its peers' average of 11x. Based on 7x FY10F core earnings (prev. 6x), we are raising our fair value estimate to S$1.18 (prev. S$1.03) for ASL Marine and our BUY rating remains.

Sembcorp Marine has terminated one contract with Petroprod

Sembcorp Marine has terminated its contract with Petroprod D&P I Ltd for the construction of a jack-up rig, as milestone payments due under the contract have not been received. The jack-up rig is a harsh environment drilling rig and is one of the world’s largest jack-up rigs. SMM says that there are alternative buyers who are interested in this rig, and they are confident that it will be able to receive all amounts it should have earned with the sale of this rig.

The rig was contracted in 2007, is expected to be completed in mid-2010, and has a value of US$442m. Petroprod is a member of Norway’s Larsen Group, and we understand that it is being put in liquidation. We also understand that Petroprod has one other order with SMM, for the conversion of a tanker to an FPSO.

On June 8, SMM had announced that it had sold the semisubmersible PetroRig I to Diamond Offshore in order to recover monies due to them following the non-payment by the customer, Petromena. Petromena similarly has ties to the Larsen Group. Petromena also has two more semi-submersibles under construction with SMM.

This latest development is indicative of our ongoing concerns for potential cancellations and defaults that SMM faces. Although SMM has so far been protected via progress payments and still-buoyant pricing for rigs, the elevated risk is one of the reasons for our muted outlook on the stock. We are keeping tabs on more potential cancellations, and maintain our Hold recommendation to target price of S$2.91.

SembCorp Marine - The tide is rising

Investors appear impressed by the strong operating margin (10.5% for 1H09). SMM feels confident it will be able to maintain this level of margin and pointed out that profit contribution from orders negotiated at better pricing could even see margins inch up. We forecast 10.6% for FY09 and 11.2% for FY10 and note upside risk to our forecast as it is still a builders’ market.

Not surprisingly, Petrobras’ plans for 28 drilling rigs and 8 FPSO units merited lots of attention. While agreeing that Petrobras would indeed be one of the larger potential customers, the company took pains to point out that current oil prices will likely result in orders from the Middle East (Saudi Aramco, Iran NOC) & North Africa (Egypt), China as well as Mexico (Pemex). High levels of drilling activity in West Africa will also generate incremental demand for deepwater rigs and production units.

Asked about their plans for the S$1.8bn net cash balance (S$600m excluding S$1.2bn customer advances) and low gearing, SMM hinted at a “near customer” strategy, which we believe points towards asset acquisition/equity partnership in Brazil. In the medium to longer term, consolidation of the yard network is likely, with a focus on efficiency gains and streamlining of operations.

Our target price of S$3.25 would increase to S$3.43 if we took Cosco Corp’s current share price into account, pointing to 11.2% upside. At 8.9x FY10 PER, the stock is trading below its 5-year average PER of 13.5x despite continued strength in execution and strong balance sheet. Further, we expect 2010 to offer more promise as regards order wins. Maintain OUTPERFORM.

ASL Marine - No new shipbuilding orders since October

ASL Marine posted a robust set of FY09 results – excluding a doubtful debt provision and impairment loss totalling S$7.6m, the numbers were bang in line. FY09 net earnings were S$71.0m, up 17.9% over FY08. Without disposal gains, however, earnings were flat at around S$41.0m. ASL proposed a final dividend of 3cts per share, unchanged from FY08.

Revenue for the group grew by 8.7% to S$435.4m, boosted mainly by its shipbuilding segment, which grew 10.5%. Shiprepair remained steady, while shipchartering grew by 9.4%. Overall margins have also been sustained, which is especially pertinent for shiprepair, which is facing difficult operating conditions in the current weak market environment.

ASL has managed to sustain its shiprepair revenues especially in the final quarter. However, while the number of ships repaired has increased, the average contract size has declined. Going forward, management says it needs to work harder in order to secure customers, but we believe that erosion in revenues and margins is inevitable.

ASL has also not secured any new shipbuilding orders since October 2008, but is currently working on its existing orderbook of S$523m. Management’s reading of the market is that it does not expect to receive new orders until the credit situation improves. Under these conditions, we are conservatively not expecting any new shipbuilding orders and therefore factoring in a 60% decline in the segment’s revenue from FY12.

Ship chartering revenues will be propped up by the addition of 12 vessels, and better rates on timecharters, but these can be volatile. We are leaving our FY10 core net profit forecast unchanged at S$45m, for a YoY pick-up of 10%. ASL is still trading at compelling valuations of 6.8x FY10 earnings. We maintain our BUY recommendation, to our target price of $1.62, in line with peer average of 10x PER.