Federal International (2000) Limited: Valuation hit by weak market sentiment

Summary: Federal International (2000) Limited (Federal) announced last week that it would be expanding its geographical focus to the Middle East market in its distribution and trading business division. There has been a shift towards a recurring and sustainable income stream over the past two years. This included the chartering of the FSO contract to PetroChina and the BOO CoGen facility projects both locally and regionally. This strategy towards attaining a recurring income stream was further augmented through the divestment of HP&T Products Inc last November. In view of present lower market and sector valuations, we are adjusting our valuation parameter from 15x to 12x, while keeping our FY07 and FY08 forecasted earnings estimates. Our fair value estimate has been revised to S$0.81 (from S$1.02 previously). Maintain BUY. (Serene Lim)

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NEWS HEADLINES

- K-Reit Asia, which posted a 62.6% YoY gain in 4Q07 distributable income to S$6.9m and annualized DPU of S$0.0882, has proposed a rights issue to raise up to S$700m.

- Mapletree Logistics Trust, which posted a 77.9% YoY jump in FY07 distributable income to S$71.8m and a 29.8% gain in DPU to S$0.0657, has deferred its proposed S$500m rights issue.

- Ascott Residence Trust reported a 54% YoY rise in 4Q07 distributable income to S$12.8m and a 28% gain in DPU to S$0.0212, on the back of new acquisitions and strong operating performance.

- Ascendas India Trust posted 3Q08 distributable income of $11.3m, net property income of S$15.7m (+57% YoY) and a DPU of S$0.015, due to continued high portfolio occupancy of 99%, rising average rental rate and constant focus on cost efficiency.

- Cosco Corporation (S) Ltd has won conversion and tanker building contracts totaling US$422m.

- Sino-Environment Tech has secured two desulphurization contracts in China totaling S$35.9m.

- A unit of Keppel Offshore and Marine has won an S$145m contract for the integration and completion of a 'Bully' rig design drill-ship.

- Parkway Holdings Ltd, which already owns 60% of World Link, has signed a deal to purchase the remaining stake for US$28m.