Coal Mining - Lack of price visibility

With no signs of a supply-demand turnaround, coal prices could remain weak for another 2-3 months. While valuations have discounted low coal prices, a lack of price visibility suggests investors should not yet position themselves for a sustainable rebound.

We cut our 2012-14 coal-price forecasts and earnings estimates for our coal companies by 5-13%. We lower our price targets to 8.5-12.1x CY13 P/Es (-1.5 to -1.7 SD to their 3-year means) from 8.6-12.0x to reflect the coal‟s low price visibility. We remain Neutral on the sector, with HRUM as our top pick. 

Negative market forces 

We cut our 2013-14 coal prices to US$110-115/tonne (from US$120-125) as still-weak demand in China and Europe, combined with supply from traditional and non-traditional sources (US, Colombia), continues to pressurise prices. High inventories in China and Europe, still-volatile imports by India and the continued flooding of Asian markets by US supply have been outpacing production cuts. Compounding the pain is lower domestic demand in key markets, from the availability of cheaper gas.

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Oil & Gas - 1Q12 recap and outlook

1Q12 results wrap – mainly in line with expectations 

During the recent results season, companies under our sector coverage reported earnings that were mostly in line with our expectations, with the exception of Keppel Corporation and ASL Marine (Left) and Sembcorp Marine, PEC and Rotary Engineering (below). Higher revenue recognition in the O&M segment and lumpy contributions from the property division led to a strong set of results at Keppel, while ASL’s better-than-expected results were mainly due to better margins in the shipbuilding segment.

Companies in focus – STX OSV & Keppel Corp 

STX OSV was on the radar screen for many investors as talks of a potential sale of STX Corp’s entire 50.75% stake in the former intensified, given that the parent has been eager to raise cash to strengthen its balance sheet. Meanwhile there are news reports that Italian shipbuilder Fincantieri and private equity firm Carlyle Group are the winning bidders. Keppel was also in focus after it clinched a letter of intent from Sete Brasil to build five semi-submersible rigs worth US$4.12b in total, and we are expecting that a final agreement may be reached in the next few months.

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Facebook - Flash In The Pan Or A Real Money Maker?

Market buzz versus the hard numbers - CMC Markets provides an analysis 

Facebook is finally going public and, on Friday 18 May (as widely expected), and retail investors will at last be able to trade the company’s shares. However, we have yet to see if anyone will be able to make money from the landmark IPO, or if it is purely a chance for the private shareholders to cash in. 

Having looked back at some of the highest profile IPOs of the last decade, Colin Cieszynski (pictured left) Senior Market Analyst at CMC Markets, sees definite opportunities to make money - if traders know the rules and are prepared to trade on both sides of the market. 

Commenting on the findings of his analysis, Cieszynski said, “Companies around the world go public all the time, but only a few capture the imagination of the street, the media and the general public. There are usually only so many shares available for sale in an IPO and, if demand outstrips supply, traders are ready and waiting to purchase shares when they debut in the open market. This unfilled demand tends to drive the initial trading spikes, but while this may be great for those lucky enough to get IPO shares, the question remains as to whether there will be any room for anyone else to make money.” 

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