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OCBC Reports April 2013
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PostPosted: Mon Apr 01, 2013 12:06 pm    Post subject: OCBC Reports April 2013 Reply with quote

KEY IDEA


KSH Holdings: Acquiring stake in 160 Changi Road redevelopment

Summary: KSH would acquire a 30% stake in 160 Changi Rd, located at the corner of Changi Rd and Lorong 105 Changi, for S$20.4m. Assuming a 50:50 retail and office breakdown and selling prices of S$2.8k and S$1.8k for retail and office, respectively, we estimate a 1.5 S-cents accretion to KSH’s RNAV. We like that KSH has re-deployed capital expendiently into new projects after raising S$13.9m in mid-Mar 2013, and believe this points to a well thought-out plan for capital management and growth. Maintain BUY with an increased fair value estimate of S$0.62 versus S$0.61 previously. Our SOTP methodology conservatively values KSH’s construction segment at 4x FY13E earnings and its property segment at a 40% RNAV discount. This being so, its fair value estimate could re-rate signficantly if construction order book replenishment continues unabated and/or upcoming launches perform well. (Eli Lee)

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Nam Cheong Ltd: US$72m contract for six vessels

Summary: Nam Cheong Ltd announced that it has sold six vessels worth a total of US$72.1m to two of its existing customers. Two 5,150 bhps Anchor Handing Towing Supply (AHTS) vessels were sold to Icon Offshore Berhad, one of Malaysia’s largest OSV group, while four Emergency Response and Rescue Vessels (ERRVs) were sold to a Singapore-based company that provides ship management and chartering services. The six vessels will be built in one of its sub-contracted yards in China with expected deliveries between 2Q13 and 4Q14. We continue to like Nam Cheong for its exposure to the buoyant offshore market in Malaysia and its close ties with Petronas-licensed companies. Its build-to-stock shipbuilding programme enables it to capture the strong domestic vessel demand, while its build-to-order business model helps lower its overall risk profile. Maintain BUY with unchanged fair value estimate of S$0.30. (Chia Jiunyang)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Tue Apr 02, 2013 9:24 am    Post subject: Reply with quote

KEY IDEA

SMRT Corporation: More impairments?
We view the recent goodwill impairment announcement as a way for SMRT’s new management to turn the page on its past overseas ventures although the timing did take us by surprise. While the Shenzhen ZONA venture failed to yield the desired results, its performance only turned negative over the past two quarters. Nonetheless, we feel that management review of existing operations is still ongoing, and we could see further impairments – particularly on the SG bus business – down the line. In the interim, we expect to see a net loss in excess of S$4.3m for 4QCY13, and a possible halving of FY12’s final dividend. As we roll our valuations forward to include FY15, our fair value declines to S$1.51 from S$1.62 previously with higher operating expenses and a lack of growth opportunities to blame. We maintain HOLD on SMRT and reiterate our view that an inflection point is unlikely anytime soon. (Lim Siyi)

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United Envirotech: Inks another project in Jiangsu
United Envirotech Ltd (UEL) has recently inked an agreement worth RMB200m (S$40m) with the local government of Siyang County, Jiangsu Province, China for TOT (Transfer-Operate-Transfer) and BOT (Built-Operate-Transfer) projects in an industrial park for the textile industry. Management intends to finance its latest investment using proceeds from the previous convertible bond issue to KRR and bank financing. Based on its usual 40% equity/60% debt financing model, UEL would need around S$5.6m for Phase 1 of the TOT project, which should not be an issue as it is currently sitting on ~S$63.2m of cash (as at 31 Dec 2012). In light of the latest investment, we bump up our FY14 estimates for revenue by 1.5% and earnings by 4.9%; this in turn raises our fair value from S$0.88 to S$0.90, still based on 13x FY14F EPS. Maintain BUY. (Carey Wong)

Singapore Press Holdings: Acquires vehicle online classifieds site
SPH announced that it has entered into a sale and purchase agreement to purchase SGCM Pte. Ltd. which owns and operates vehicle online classified sites (including the popular sgcarmart.com), a car auction platform, and performs online marketing. In addition, it is also a service provider for car loans, insurance and settlement services. The maximum aggregate consideration payable is S$60m and would be made in cash. We see this acqusition to be a logical one and part of SPH’s continued expansion into online media advertising. We would speak further with management regarding this acquisition and, in the meantime, maintain BUY with an unchanged fair value estimate of S$4.94. (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Wed Apr 03, 2013 8:56 am    Post subject: Reply with quote

KEY IDEA

Sembcorp Marine: More prudent on margins
Sembcorp Marine (SMM) is currently building a 82.5ha yard in Brazil to undertake drillship construction, amongst others. Should inflation in Brazil continue to be unrelenting, SMM may face further margin pressures from labour costs, especially since there is already a shortage of skilled labour in the country. Over the longer term, however, we believe that SMM’s foray into the drillship business puts it in good stead to secure more drillship orders, diversifying its product range. In the shorter term, however, we prefer to be more prudent on the group’s operating margin assumptions, and lower these to 12.1% and 12.3% for FY13F and FY14, respectively (2012: 12.5%). As such, our SOTP-based fair value estimate slips from S$5.84 to S$5.64. Maintain BUY. (Low Pei Han)

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Frasers Centrepoint Trust: Downgrade to HOLD - fair value hit
Frasers Centrepoint Trust (FCT) has enjoyed a good run-up in its unit price, clocking a 7.0% return YTD and 40.8% return YoY. This compares significantly to the 5.7% YTD and 31.4% YoY increase seen by the FTSE ST REIT Index. Now trading near its historical high and our fair value, FCT is the most expensive (P/B of 1.40x) when compared to its local retail peers (1.18x) and the S-REITs sector average (1.17x). As such, we believe that most of the good news has been priced in. While the asset injection of Changi City Point into FCT’s portfolio may possibly be a catalyst to its unit price and DPU growth, the timeline is uncertain as the regulatory procedures for the strata division into its retail, business park and hospitality components is a lengthy process. In view of the limited upside potential in the near term, we now downgrade FCT from Buy to HOLDon valuation grounds. We recommend switching FCT to CapitaMall Trust [BUY, S$2.32 FV] as a cheaper alternative to blue-chip local retail play with exposure to equally resilient suburban portfolio assets. (Kevin Tan)

KSH Holdings: Awarded S$60m JTC construction contract
KSH announced yesterday that it was awarded a S$60m construction contract by Jurong Town Corporation (“JTC”) for a district cooling system plant at Ayer Rajah Ave. We understand management wanted to diversify their condominium-heavy construction book with a public project, and gross margins continue to exceed a 10% hurdle rate. In 2013 to date, order book replenishment now cumulates to S$202m – tracking somewhat above forecast and exceeding the S$161m total last year. The order book now stands at S$489m. Given its momentum, we are reviewing our valuation of KSH’s construction segment – currently pegged at 4 times FY13E earnings versus 5-7 times seen at peers. We also see upcoming launches at key property projects (Hong Leong Gardens, Seletar Gardens and King Albert Park) to be potential catalysts ahead. We will speak further with management later today and, in the meantime, reiterate BUY while our fair value of S$0.62 is under review. (Eli Lee)

TEE International: Joint bid for Myanmar airport project
TEE International, Yongnam Holdings and Samwoh Corp have joined forces to participate in a consortium with JGC Corp and a unit of Changi Airport International to tender for the construction and operation of Myanmar’s new international airport. TEE and Samwoh will each take a 25% stake in a special purpose vehicle (SPV) that will in turn supply up to 60% of the project consortium’s equity. Yongnam will own 50% of the SPV and represent it in all negotiations involving the project. We are neutral on the announcement, pending further updates, and we maintain our fair value estimate of S$0.30 and HOLD rating for TEE. (Conrad Tan)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Thu Apr 04, 2013 8:59 am    Post subject: Reply with quote

KEY IDEA

First REIT: Enhancing its portfolio value
First REIT (FREIT) recently announced its proposal to acquire two Indonesian hospitals from its sponsor Lippo Karawaci (Lippo) for a total purchase consideration of S$190.4m. This would be funded largely by debt and the issuance of new units to a smaller extent to Lippo. We are positive on the acquisitions as it offers DPU accretion of 6-13% for FY13-14F, according to our estimates, while also providing stability and visibility to unitholders. We now adopt a DDM model (cost of equity: 7.7%; terminal growth rate: 1.0%) as our new valuation matrix (previously RNAV). Coupled with our higher DPU forecasts, we bump up our fair value estimate from S$1.00 to S$1.31. But we maintain our HOLD rating as we believe that the market has largely priced in the positives from these acquisitions and FREIT’s continued transition to a sizeable healthcare REIT in the region. (Wong Teck Ching Andy)

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Golden Agri-Resources Ltd: Near-term outlook remains weak
Golden Agri-Resources (GAR), after reporting a disappointing set of FY12 results at end Feb, has languished below S$0.60 in recent weeks; and may continue to do so in lieu of the still-weak near-term outlook. The main reason for the expected near-term underperformance comes from the uninspiring CPO (crude price oil) prices, which has again fallen below MYR2,400/ton. The other reason is probably the still-high stockpiles seen at several planters in both Malaysia and Indonesia. Despite the near-term headwinds, management remains relatively upbeat about its prospects, as it still sees robust demand growth for CPO as an edible oil from emerging and development countries. For now, we intend to maintain our HOLDrating and S$0.63 fair value (based on 12.5x FY13F EPS); and we see value emerging at S$0.55 or better. (Carey Wong)

Lian Beng Group – Awarded two contracts worth $201m
Lian Beng announced that it has secured two construction projects which would boost its order book to a record S$1.085b. The first contract is worth S$112m and is awarded by Oxley Holdings to design and construct a multiple-user light industrial development at Sunview Road, Jalan Buroh and Pioneer Rd. It will commence in Apr-13 and take 24 months to complete. The second contract, also awarded by Oxley Holdings, is worth S$89m and involves the design and construction of a three-storey and seven-storey building forming a multiple-user industrial development at Tampines Industrial Crescent, Tampines Ave 10 and Tampines Expressway. It will also commence in Apr-13 and take 24 months for completion. We are keeping our rating on Lian Beng UNDER REVIEW pending a change in analyst. (Research Team)

Yoma Strategic Holdings: JV with Dragages Singapore
Yoma announced that its wholly-owned subsidiary SPA Project Management Pte. Ltd. has formed a JV with Dragages Singapore Pte Ltd to construct 1,043 apartment units at Thanlyin Star City in Myanmar. The development would cost ~US$94m and construction would commence in Apr-13 and last for 33 months. The JV would be 60% owned by Dragages Singapore and the remaining by SPA Project Management Pte Ltd. While we are positive on the company entering into a JV with an established name in the sector and giving added visibility on the construction timeline for Star City, there is limited impact on our RNAV estimate at this juncture. Maintain a SELL based on a 12-month fair value estimate of S$0.71 (20% premium to RNAV). (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Fri Apr 05, 2013 9:40 am    Post subject: Reply with quote

KEY IDEA

Conviction Idea: Pair trade - Long SPH / Short STH
We recommend a long SPH/short STH pair trade. Investors would pick up a 63 bps dividend yield spread (to offset transactions costs) and gain significant upside exposure to the scenario that SPH lists its REIT. Two bases for our trade: first, we believe SPH’s 63 bps spread over STH is attractive. Newspapers are generally perceived to have weaker prospects than telcos but SPH has a virtual monopoly in its market while STH perennially competes against the much larger SingTel and has been losing market share in both its mobile and Pay TV segments. Second, from our calculations, we believe a SPH REIT listing scenario is realistic given the current yield/valuation dynamics of its assets and the size of its portfolio. Assuming SPH retains a 51% stake in the REIT, we see potential divestment gains of S$625m to S$744m or 39 to 46 S-cents per share. This could consequently lead to a special dividend and/or distribution in specie of REIT units for SPH shareholders. (Eli Lee)


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CapitaMall Trust: Deep value at current price
CapitaMall Trust (CMT) has been a clear laggard within the S-REITs space, staying flat YTD versus an average of 11.0% increase in unit prices for its local retail peers. We believe this is unjustified given its portfolio of 15 quality retail malls and its relentless efforts in optimizing its yield via asset enhancement initiatives. The operating landscape in the retail space also appears sanguine thus far. According to CBRE, the average rents in prime Orchard Road rose for the first time in 1Q13 after staying flat since 3Q11. While the suburban retail will see a substantial amount of space coming online in 2013, CBRE notes that retailers are still upbeat about the suburban market. This is consistent with our view that both the Orchard Road and suburban rents may possibly remain firm in 2013. We are keeping our S$2.32 fair value unchanged and maintaining BUY on CMT as we expect the valuation gap to narrow between CMT and its peers. (Kevin Tan)

Yoma Strategic Holdings: Forming consortium to bid for mobile license
Yoma announced that it has formed a consortium with FMI, its affiliate in Myanmar, and Digicel Group and Quantum Strategic Partners to bid for one of the two mobile licenses expected to be awarded by the Myanmar Government later this year. The consortium has submitted its pre-qualification bid in Nay Pyi Taw yesterday as the first part of the mobile license process. We understand that Yoma and FMI has joined the consortium through a newly created 80:20 joint venture YSH Finance Ltd, but Yoma’s eventual effective stake in the consortium is yet unclear. Also, we expect fierce competition for the mobile licenses from a host of contenders, including a Vodafone-China Mobile tie-up and other major telco players such as SingTel, Telekomunikasi Indonesia, Malaysia's Axiata Group Bhd, Norway's Telenor ASA and India's Bharti Airtel Ltd. Since we have downgraded Yoma to a SELL on 1 Feb 2013 with a fair value estimate of S$0.71, the share price has corrected 17.2% from S$0.90 to S$0.745. We now put our rating and fair value estimate UNDER REVIEW. (Eli Lee)

ST Engineering: ST Electronics won S$151m of contracts in 1Q13
ST Engineering (STE) announced that its electronics arm, ST Electronics, has secured about S$151m of contracts. This is in line with our expectations. The contracts include S$65m in the rail electronics market with projects for mass rapid transit (MRT) projects in Malaysia, Taiwan and North America. S$78m in contracts was secured under the satcom and sensor business segment and S$8m was under smart utilities solutions. We maintain our fair value estimate of S$4.12 and HOLDrating on STE. (Sarah Ong)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Mon Apr 08, 2013 9:39 am    Post subject: Reply with quote

KEY IDEA


BreadTalk Group: Not fully baked yet

Summary: The 12% correction in BreadTalk’s share price over the past two days has helped to temper the sudden spike from late-Mar, and we take this opportunity to caution investors against getting too carried away. In our view, a takeover by Minor International is remote at this juncture. Despite impressive yearly double-digit revenue growth, BreadTalk has yet to translate the success to its operating margins. Although its ongoing expansion plans are partly to blame, the pace of the margin declines does create some concerns over its operational efficiencies in the long-run. In addition, with FY13 PATMI and dividend growth unlikely to differ much from recent performances, we deem BreadTalk expensive at current price levels. Keeping our fair value estimate of S$0.77, we downgrade BreadTalk to SELL and urge investors to take profit. (Lim Siyi)


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Chinese shipyards: Industry profitability remains under pressure

Summary: The share price performances of COSCO Corp (Singapore) and Yangzijiang Shipbuilding (YZJ) have been uninspiring in recent history. COSCO’s share price has fallen by about 21% in the past one year, while YZJ’s has decreased by about 25%. We believe this is mainly due to a lack of positive catalysts amidst the difficult operating environment in China. In terms of offshore projects, Chinese yards still lack the established track records of their Asian competitors, but their organization, efficiency and sophistication are on the rise. To compete, the Chinese yards are going after orders at lower margins and back-end loaded payment terms. This inevitably leads to lower profitability and higher working capital requirements. Over the near- to medium- term horizon, we believe that the industry dynamics is unlikely to change significantly. Maintain HOLD ratings for both COSCO (FV: S$0.90) and YZJ (FV: S$0.95). (Chia Jiunyang)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Tue Apr 09, 2013 8:52 am    Post subject: Reply with quote

Biosensors International Group: Challenges apparent, but seeking market share gains
Biosensors International Group’s (BIG) regional peers have faced headwinds in the Chinese drug-eluting stent market, as highlighted in their recent results announcement. We believe that these factors, such as a slowdown in growth of PCI surgeries, would also have an adverse impact on BIG. However, we expect BIG to continue its market share gains in other key markets such as the EMEA region. BIG is also stepping up its collaboration with its licensee Terumo Corp to address the recent decline in licensing revenue from Japan. Nevertheless, we believe that a further depreciation of the Japanese Yen due to stimulus measures by the Bank of Japan could exacerbate this problem. We thus trim our FY14F revenue and core PATMI forecasts by 0.6% and 1.6%, respectively. However, we maintain our BUY rating although our FCFE-derived fair value estimate declines marginally from S$1.63 to S$1.60. (Wong Teck Ching Andy)

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Fortune REIT: Strong fundamentals
The growth in HK’s retail sales has picked up significantly since 4Q12. Combining the first two months of 2013 to eliminate distortions from the timing of Chinese New Year, retail sales climbed up 15.8% in value. Robust retail sales will continue to underpin the growth in retail rents throughout HK. The media has reported that a group has called for the boycott of Park’N Shop supermarket chain, which is part of Li Ka-shing’s Hutchison Whampoa Ltd, in support of dock workers who are striking for better work conditions. Park’N Shop is FRT’s top tenant, accounting for 8.0% of the REIT’s total gross rental income in Dec 2012. According to FRT management, businesses are running as usual and impact to the Park’n Shop outlets in FRT’s malls has not been seen. Management has indicated that 2013's rental reversions are likely to be in the mid-teen percentages. FRT has a low gearing of 23.4% and no refinancing needs till 2015. We are maintaining our fair value of HK$7.28 and BUYrating on FRT. (Sarah Ong)

Keppel Corporation: Market for premium jackups is strong
Keppel Corporation (KEP) announced that its O&M arm has secured a contract to construct a KFELS B Class jackup rig from Ensco. The construction cost, together with the commissioning, systems integration testing and project management is expected to be US$225m. When completed in 1Q15, this will be the fourth KFELS B Class Bigfoot unit in Ensco’s fleet. With this latest order, KEP has won about S$1.85b of new orders YTD, accounting for 37% of our full year estimate. Looking ahead, we expect order flows for such premium jackups to continue. Indeed, Ensco’s Chairman, President and CEO also commented that the market for premium jackups is “very strong”, and “customer demand is broad-based for high-specification jackup rigs”. Maintain BUY with S$12.68 fair value estimate on KEP. (Low Pei Han)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Wed Apr 10, 2013 9:01 am    Post subject: Reply with quote

Hyflux: China back on radar screen
Summary: Hyflux recently announced that its subsidiary – Hyflux Investment Consultancy and Management Service (Tianjin) Co – has signed two memoranda of understanding (MOUs) with the prefectural governments of Chuxiong and Qujing in Yunnan province to develop water and environmental projects in these two cities. Management estimates the project in Chuxiong to be less than RMB2b and Qujing to be ~RMB1.2b. While it is still early days yet, we view the MOUs as a positive development as it suggests that China is back on the radar screen. For now, we will maintain our HOLD rating and S$1.44 fair value on the stock; but we do see room for re-rating should these MOUs translate into actual contracts. (Carey Wong)

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ComfortDelGro: Now joint-second in London
ComfortDelGro’s acquisition of a portion of FirstGroup plc’s London bus business for approximately S$109m will increase its London bus fleet significantly by 494 to 1,700, and bring its market position to joint-second alongside Arriva London with a market share of around 19% (previously 12%). In addition, its UK bus revenue and operating profit should increase by ~37% as a result (assuming FY12 figures). With the outlook for ComfortDelgro’s overseas ventures in FY13 remaining positive, our focus shifts domestically where we expect a fare increase to materialise by mid-2Q13, which we feel much of the street has already priced in. Pending its upcoming 1Q13 results, we maintain our HOLDrating on ComfortDelgro with an unchanged fair value estimate of S$1.95. (Lim Siyi)

Midas Holdings: Secures S$17.3m in orders for Singapore MRT train parts
Midas Holdings announced last evening that it has secured S$17.3m (~CNY86.5m) worth of orders from longstanding customer Alstom Transport S.A. This entails the supply of train car body parts for 18 train sets (or 108 train cars) for Singapore’s North East Line and 24 train sets (or 72 train cars) for the Circle Line. Delivery is scheduled to take place from 2013 to 2015.This is Midas’ second international contract win of the year and helps to boost its total orders won YTD to ~CNY379m, already higher than the CNY325m in orders won for the whole of 2012. Given that the Singapore government has committed to spending ~S$1.75b from 2013 to 2019 to upgrade and purchase assets for its rail system, we believe that future contract wins for similar projects are possible for Midas. We retain our forecasts as we have already assumed such contract wins in our assumptions. Maintain BUY and S$0.595 fair value estimate on Midas, based on 1.2x FY13F P/B. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Thu Apr 11, 2013 9:31 am    Post subject: Reply with quote

KSH Holdings: More earnings growth momentum likely
We recently met with KSH management and keep intact our FY13E and FY14E forecasts at S$30.7m (up 68% YoY) and S$53.0m (up 72% YoY), respectively, which are underpinned by progress billings for already-sold projects in Singapore. Beyond FY14, we see earnings growth momentum likely continuing due to the upcoming launch of its Beijing condo project this year (Liang Jing Ming Ju Phase 4) which would contribute an estimated S$23m net earnings upon TOP. We also understand management is also focused on launching Phase 1 of its 533-hectare Gaobeidian township project (GBD), located 30 mins away from Beijing city via high-speed rail. For upcoming FY13E results, we expect final dividends in the range of 0.5 – 1.5 S-cents and possibly a bonus share issue as well. Maintain BUYwith an increased fair value estimate of S$0.73, versus S$0.62 previously, as we now incorporate accretion from Liang Jing Ming Ju into our SOTP valuation model and raise our PE multiple for the construction segment from 4x to 5x, in line with peers trading at 5-7 times. (Eli Lee)

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Rotary Engineering Ltd: Ceasing coverage
Rotary Engineering Ltd (Rotary) had a difficult year in 2012, as it battled escalating cost over-runs on its US$745m SATORP mega-project and repeated delays on its S$260m Fujairah Oil Terminal project. In 4Q12, the group appeared to be making progress on its SATORP project, although the non-controlling deficit is still a thorny issue. The group recently secured S$42m of project work in Singapore’s Jurong Island, and S$300m of EPC work in Pulau Busing. However, the tighter foreign labour market in Singapore could mean lower project margins over the medium term horizon. Coupled with the uncertainty at its SATORP JV, it may still be too early for investors to buy its shares, which are currently trading at 1.4x PBR. Meanwhile due to a reallocation of resources, we have decided to CEASE COVERAGE. (Chia Jiunyang)

ST Engineering: ST Aerospace won S$480m of contracts in 1Q13
ST Engineering (STE) announced that its aerospace arm, Singapore Technologies Aerospace Ltd (ST Aerospace) has secured new contracts worth about $480m in 1Q13. The contracts are for airframe, component and engine maintenance, as well as engineering and development, which will be carried out through its global maintenance, repair and overhaul (MRO) network. As this is in line with our expectations, we maintain our fair value estimate of S$4.12 and HOLD rating on STE. (Sarah Ong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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PostPosted: Fri Apr 12, 2013 9:19 am    Post subject: Reply with quote

KEY IDEA

Triyards Holdings: Results in line; bright prospects
Summary: Triyards Holdings (Triyards) reported a 23% YoY rise in revenue to US$79.4m and a 157% increase in net profit to US$7.1m in 2QFY13, such that results were in line with our expectations. Revenue increased due to two self-elevating units (SEUs) which started construction, as well as completion of variation order on an offshore support vessel. Gross profit margin in 1HFY13 was stable compared to 1HFY12. Management is receiving healthy enquiries for the construction of SEUs as well as customized supply vessels. The group has also completed the design of the third generation SEU. Unlike the first and second generation SEU, this latest one has drilling capabilities, and management is optimistic about its prospects. Maintain BUY with S$1.07 fair value estimate, based on 8x FY13/14F earnings. (Low Pei Han)


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Mapletree Logistics Trust: Valuation looks fair now
Summary: We believe investors are finally acknowledging Mapletree Logistics Trust’s (MLT) attractiveness, as evidenced by its recent strong unit price performance. At a P/B ratio of 1.45x, however, we believe MLT is now fairly priced. While ~55% of its revenue is derived from overseas assets, we are mindful that a substantial 658k sqm of supply in warehouse space is expected to be delivered to the Singapore warehouse market in 2013. This is likely to exert pressure on warehouse occupancy rates as well as cap the rise in rentals and the rate of positive rental reversions achieved by MLT in the near term. In addition, the introduction of the cooling measures in the industrial market and upfront land premium by JTC has inevitably made investors more cautious as it may now be more onerous for industrial landlords to acquire properties. Given the market conditions, we believe that any upside in MLT’s units is limited at the current juncture. Downgrade MLT from Buy to HOLD on valuation grounds. Our fair value is now raised from S$1.25 to S$1.34 as we tweak our RNAV assumptions and roll over our valuation to FY14. (Kevin Tan)

Ezra Holdings: Expect delays in award of projects
Summary: Ezra Holdings (Ezra) reported a 17% YoY increase in revenue to US$247.1m and a 34% rise in net profit to US$29.7m in 2QFY13, such that 1HFY13 revenue and net profit met 42% and 71% of our full year estimates, respectively. However, we note that net profit was bumped up by a US$30m disposal gain on fixed assets; excluding that, core net profit was minimal. Uncertainty in the Eurozone has weighed on sentiments, and project execution and awards have been delayed relative to industry participants’ expectations in 2012. Pending an analyst briefing later, we put our HOLD rating and fair value estimate of S$1.30 under review. (Low Pei Han)

Lian Beng: Uninspiring 9M13 performance
Lian Beng’s 9M13 PATMI decreased 25.7% YoY to S$30.1m despite revenue increasing 5.1% YoY to S$350.7m on higher revenue recognition from construction projects. The decline in profit was attributable to lower gross margin, higher operating expenses and a one-off gain of S$7.9m on the sale of an investment property in 9M12. Lian Beng’s construction order book, including recent contract wins of Bartley Ridge, and projects at Sunview and Tampines Crescent, totals S$986m. Our fair value estimate and ratings are UNDER REVIEW pending a change in analyst. (Research Team)

TEE International: Weak 3Q13 results
Summary: TEE International’s 3Q13 net profit fell 22% YoY to S$1.4m, taking its 9M13 net profit to S$6.7m (down 13% YoY, forming just 41% of our full-year earnings forecast for FY13). Its revenue rose 109% YoY to S$53.0m in 3Q13, but gross profit fell 14% to S$5.7m as cost of sales soared 152% to S$47.3m. The latest results are disappointing and we expect TEE’s share price to weaken in the short term. We put our fair value estimate of S$0.30 and Hold rating for TEE UNDER REVIEW pending a change in analyst. (Research Team)

UOL Group: Top bid for Sengkang West Way
Summary. Yesterday evening, UOL put in the top bid of S$262.1m for the GLS site at Sengkang West Way. The tender attracted eight bids and UOL’s was 3.4% above the second higher bidder’s. The 99-year site has a land area of 178.7k sq ft and is located near the future Seletar Mall and Sengkang Riverside Park. The maximum GFA allowed is 536.2k sq ft, which can yield around 550 homes. UOL’s bid translates to a psf price of S$489 psf, which we believe is reasonable. We expect breakeven and selling ASPs at S$900 psf and S$1,000 psf, respectively, which translates to an estimated RNAV accretion of 5.5 S-cents per share. Pending the award of the site and more details regarding the site plans, we maintain our HOLD rating with an unchanged fair value of S$6.01 (20% discount to RNAV). (Eli Lee)

Singapore Economy: Contraction in 1Q13
Summary: According to advance estimates from the MTI, the Singapore economy contracted by 0.6% YoY in 1Q13, lower than the street’s expectations of zero growth and also worse than the 1.5% growth seen in 4Q12. On a seasonally adjusted, annualised basis, the economy contracted by 1.4% QoQ, compared to the 3.3% growth in 4Q12. Manufacturing contracted by 11.3% QoQ, vs a 3.1% growth in 4Q12, largely due to lower output in the biomedical manufacturing cluster. Construction grew by 15.1%, compared to 4Q12’s 3.9% negative growth. Services continued to expand by 1.8% after 4Q12’s 2.5% rise. Meanwhile, MAS has announced no change to the slope and width of the S$NEER policy band, as well as the level at which it is centred. This is assessed to be appropriate for containing inflationary pressures. (Low Pei Han)

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PostPosted: Wed Apr 17, 2013 9:10 am    Post subject: Reply with quote

CWT: Growth from warehouse assets and Commodity SCM
CWT is a leading provider of logistics solutions for worldwide customers in the commodities, chemical, petrochemical, marine, oil & gas, defense and industrial sectors. A competitive edge is its global logistics network which connects customers to around 200 direct ports and 1,500 inland destinations. The group is currently developing two large warehouses, estimated to add another 50% to its owned warehouse space in Singapore. In total, we estimate its entire warehouse portfolio to be worth about S$800m. Meanwhile, the recently acquired Commodity SCM business is also expected to scale up quickly, taking advantage of the group’s strong global logistics network and reputation as an established commodity collateral manager. Our SOTP fair value estimate for CWT is S$2.08 per share. Given the ample upside, we initiate coverage with BUY.(Chia Jiunyang)

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Singapore Exchange: Strong 3Q, but likely QoQ slowdown in 4Q
Singapore Exchange (SGX) generated above market expectation 3QFY13 net earnings of S$97.7m, up 25.6% YoY. The strong performance came from several units, especially its core Securities and Derivatives businesses. A 3Q dividend of 4 cents has been declared and is payable on 2 May 2013. The final quarter is likely to see some slowdown, largely due to prevailing macro economic uncertainties, and we expect volatility to come back again as sentiment is likely to turn more cautious especially after the good gains for the key equity indices since the start of the year. We have raised our fair value estimate slightly from S$6.80 to S$7.16 based on the same 23x blended earnings. With an estimated dividend yield of 3.5%, total return is -3.5% and we are buyers only at S$6.80 or lower. Maintain HOLD. (Carmen Lee)

M1: 1Q13 results in line; downgrade to HOLD
M1 Ltd reported its 1Q13 revenue of S$243.0m (-7.4% YoY, -25.8% QoQ) which met just 21.3% of our full-year forecast, mainly due to lower handset sales and also the mix of handsets (Android now makes up >50% of its postpaid subscriber base). Nevertheless, net profit grew 1.7% YoY and 8.2% QoQ to S$41.0m, meeting 26.5% of our FY13 forecast. It may have also gotten a one-off boost from recognizing the unused credit in expired pre-paid cards that were periodically terminated. While we are not making any chances to our FY13 estimates as 1Q13 results were largely in line, our DCF-based fair value improves to S$3.10 (from S$2.89) as we tweak our interest rate expectations slightly lower in view of the still sluggish global economic performance. But as there is now <10% total return from here, we downgrade the stock to HOLD. (Carey Wong)

Rigbuilders: Who has been ordering from the Chinese yards?
There have been recent reports on Chinese yards surpassing Singapore yards in terms of jack-up rig orders YTD. Indeed, we find that jack-up orders for the former have totaled ~US$2.3b so far, compared to ~US$2.1b for the latter. However, we note that many of the contracts that Chinese yards have won so far are mostly from newcomers in the offshore industry, including speculators who sell the rigs later for a profit. Meanwhile, Keppel Corp (KEP) and Sembcorp Marine (SMM) have been diversifying their product range and innovating to stay ahead in certain niche areas. Maintain BUY on both KEP [FV: S$12.68] and SMM [FV: S$5.64]; we note that markets may be increasingly volatile ahead, providing an opportune time to enter such quality stocks. (Low Pei Han)

Frasers Centrepoint Trust: 2QFY13 results broadly in line
Frasers Centrepoint Trust (FCT) announced its 2QFY13 results this morning. NPI and distributable income grew by 9.7% YoY and 10.4% YoY to S$28.7m and S$23.5m respectively. DPU for the quarter came in at 2.7 S cents, up by a slightly slower 8.0% YoY due to retention of S$1.2m in distributable income. For 1HFY13, DPU rose by 8.5% YoY to 5.1 S cents. This is broadly in line with both ours and consensus expectation, with 1HFY13 DPU forming ~47% of our full-year DPU forecasts. FCT’s portfolio assets continued to exhibit resilience. Average occupancy improved to 98.2% as at 31 Mar from 97.2% in the prior quarter, and positive rental reversion of 6.6% was achieved for 1HFY13. We will be speaking to management during the analyst briefing scheduled later in the morning. For now, we keep our S$2.13 fair value and HOLD rating on FCT unchanged. (Kevin Tan)

Keppel Land: Diversifying stake in Tanah Merah site
Keppel Land (KPLD) announced yesterday that it would join China Vanke (Vanke) in a strategic alliance to develop property in China and Singapore. In addition, Vanke would take a 30% interest in a KPLD’s Tanah Merah GLS site for S$135.5m. Recall that KPLD had won this site with a S$434.6m bid last Oct and Vanke’s entry price is only marginally above that of KPLD’s cost. We believe this price is reasonable and, all considered, expect a neutral market reaction to this transaction. In our view, the potential loss of accretion to KPLD’s RNAV from this divestment is limited and mostly offset by the benefits of diversification in an increasingly uncertain domestic residential space. Maintain BUYwith an unchanged fair value estimate of S$4.53. (Eli Lee)

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PostPosted: Thu Apr 18, 2013 9:09 am    Post subject: Reply with quote

Keppel Land: Strategic alliance with Vanke
Keppel Land’s (KPLD) 1Q13 PATMI came in at S$96.6m – down 32% YoY mostly due to the absence of contributions from Reflections at Keppel Bay. KPLD also reported that it would join China Vanke (Vanke) in a strategic alliance to develop property in China and Singapore. As a start, Vanke would take a 30% interest in KPLD’s Tanah Merah GLS site for S$135.5m. All considered, we believe this price is reasonable and see the limited loss of accretion to KPLD’s RNAV mostly offset by the potential synergies from this alliance and further asset diversification in an increasingly uncertain domestic residential space. Maintain BUYwith an unchanged fair value estimate of S$4.53 (25% discount to RNAV). (Eli Lee)

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Frasers Centrepoint Trust: No surprises in 2QFY13
Frasers Centrepoint Trust’s (FCT) 1HFY13 DPU climbed 8.5% to reach 5.1 S cents, forming ~47% of ours and consensus full-year DPU forecasts. This is broadly in line with expectations, given that the income retained in 1H is likely to be distributed in 2H. On the whole, we note that positive rental reversion of 6.6% was achieved in 1H (1Q: 5.2%, 2Q: 10.1%). Portfolio occupancy also improved to 98.2% as at 31 Mar from 87.2% in prior quarter, boosted by start of tenant operations following the fitting out at CWP and Bedok Point. This more than offset the temporary dip in occupancy rates at YewTee Point and Anchorpoint. Looking ahead, management expects CWP and Northpoint to continue to uphold the growth momentum of FCT, while the rest of the malls to remain stable. FCT also updated that the sub-division of the strata titles of the components at One@Changi City is still ongoing, and completion of the process remains uncertain. We like FCT for its strong execution, strong financial position (30.5% gearing) and suburban mall exposure, but at current price, we deem the valuation (1.45x P/B) as fair, not compelling. As such, we maintain HOLD and S$2.13 fair value on FCT. (Kevin Tan)

Mapletree Logistics Trust: Firm 4Q results as expected
Mapletree Logistics Trust (MLT) reported 4QFY13 NPI of S$65.5m and total amount distributable of S$46.7m, up 6.7% and 11.2% YoY respectively. The growth was mainly attributable to an enlarged portfolio and improved performance from existing assets. DPU for the quarter was up 1.8% YoY to 1.73 S cents after accounting for S$4.6m due to its perpetual securities holders. For FY13, DPU increased by 2.5% to 6.86 S cents from 6.69 S cents achieved in the four quarters ending 31 Mar 2012. This is relatively in line with our/consensus full-year DPU forecasts of 6.93/7.0 S cents. Operationally, portfolio occupancy has stayed healthy at 98.5% (99.2% in 3Q), while positive rental reversions of 14% were achieved (17% in 3Q). In addition, aggregate leverage improved from 35.9% in previous quarter to 34.1%, due mainly to lower translated JPY borrowings. We will be attending MLT’s results briefing later in the morning to get more details on its outlook and direction. For now, we keep our HOLD rating but place our S$1.34 fair value under review. (Kevin Tan)

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PostPosted: Fri Apr 19, 2013 9:08 am    Post subject: Reply with quote

Keppel Corporation: Results in line; firm operating margins
Keppel Corporation (KEP) reported a 35.3% YoY decrease in revenue to S$2.76b and a 52.5% drop in net profit to S$357.0m in 1QFY13. However, net profit in 1QFY12 was bumped up by lumpy contributions from Reflections at Keppel Bay. Excluding Reflections, we estimate revenue fell by about 7% YoY while net profit slipped 16%. Results were within our expectations. The O&M division turned in a good operating margin of 14.1%, and management is pleased with the performance. Encouragingly, management “does not necessarily expect” margins to fall when the profit recognition of its Sete Brasil semi-subs kicks in. Meanwhile, the group is still seeing “strong market interest” in its core products. YTD, new order flow of about S$2.2b is also in line with our expectations. MaintainBUY with S$12.68 fair value estimate. (Low Pei Han)


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Technology Sector: Macro jitters still present
Recent economic data points such as the 1Q13 YoY GDP contraction of Singapore and economic slowdown in China have illustrated that the macroeconomic environment remains uncertain and fraught with fragilities. Nevertheless, bellwether tech company Intel Corp is anticipating a stronger 2H, while the MAS has forecasted for gradual improvement in Singapore’s economic growth for the rest of the year. We believe that 2013 would remain as a backend loaded year for the cyclical tech sector, which is in line with the recovery in the global economy. We maintain NEUTRALon the tech sector and prefer companies with strong balance sheets, sustainable dividend yields and healthy operating cashflows. Our top pick is Venture Corporation [BUY; FV: S$9.08]. (Wong Teck Ching Andy)

CapitaCommercial Trust: 1Q13 DPU up 3.2% YoY
CapitaCommercial Trust (CCT) reported 1Q13 distributable income of S$55.7m – up 3.3% YoY. This translates to a 1Q13 DPU of 1.96 S-cents, which is 3.2% above the 1.90 S-cents paid in 1Q12. We see this to be in line with expectations and 1Q13 distributable income now makes up 24% of our full year forecast. The growth in distributable income was mainly due to a full contribution from 20 Anson (acquired in Mar-12) and higher rentals at HSBC Building. CCT’s portfolio occupancy remained fairly stable at 95.3% in 1Q13, down marginally from 97.2% in 4Q12, mainly due to Cisco’s relocation from Capital Tower. We continue to see positive rental reversion in the portfolio – average monthly portfolio rents increased from $7.64 psf in 4Q12 to $7.83 psf in 1Q13. In addition, CapitaGreen remains on track for completion in 4Q14. We would speak further with management regarding these results and, in the meantime, maintain BUY with a fair value estimate of S$1.80. (Eli Lee)

Keppel Land: Top bid at Kim Tian Rd GLS tender
Yesterday evening, Keppel Land (KPLD) put in the top bid of S$550.3m (S$1163 psf GFA) for a 99-year GLS residential site at Kim Tian Rd near Tiong Bahru MRT station. The tender attracted 11 bidders and KPLD’s bid was 7.2% above the second highest. The site has a land area of 118.3k sq ft and a maximum allowable GFA of 473.2k sq ft, which should yield a condominium development of ~500 units. We estimate breakeven and selling prices at S$1,750 psf and S$1,950 psf, respectively, and see this transaction accreting 4.4 S-cents to KPLD’s RNAV. In addition, we note that recent transactions at nearby Twin Regency are averaging ~S$1,750 psf. Maintain BUY on KPLD. Pending the award of the site, our fair value stands unchanged at S$4.53 (25% discount to RNAV).(Eli Lee)

KSH Holdings: Wins construction contract for its Beijing condominium
KSH announced that its 50%-owned JV based in China (KSHEC Beiing) has won a RMB157m (S$31.4m) construction contract for Liang Jing Ming Ju Phase 4 (LJMJ), which is its 45%-owned condominium development project in Beijing. For this contract, KSHEC Beijing would construct three blocks of 11-13 storey residential buildings with office and commercial units as well as two levels of basements. The construction would commence immediately with a duration of ~25 months. We note that it is KSH’s first construction contract in China. Maintain BUY with a fair value estimate of S$0.73; our SOTP valuation values KSH with a 5x PE multiple for the construction segment and a 40% discount to RNAV for its property segment. (Eli Lee)

Triyards Holdings: Acquires logistics and supply base for A$6.75m
Triyards Holdings (Triyards) announced that it has purchased a well-sited logistics and supply base within the shipbuilding and marine-related belt of Western Australia (WA) for A$6.75m. The base serves as a critical construction materials and equipment supply base to the offshore oil and gas developments operating off the coast of WA. The waterfront site is also located near the port of Fremantle, WA’s largest and busiest general cargo port. The base is already income generating, and Triyards will benefit from the growing and logistics business. Triyards’s ship repair business will also benefit from the volume of port and LNG activities in the area. Meanwhile, the acquisition will be funded via cash and issuance of new shares to the seller, Henderson Supply Base Pty Ltd. Pending details from management, we maintain our BUY rating and S$1.07 fair value estimate on the stock. (Low Pei Han)
Yoma Strategic Holdings: Agreement with The Hongkong and Shanghai Hotels
Yoma announced that it has entered into a non-legally binding heads of agreement with the Hongkong and Shanghai Hotels (HSH) for the proposed hotel development (the former Burma Railway Company building) on the site of the Landmark Development, subject to Yoma completing the acquisition of the site. Under the agreement, HSH would subscribe for a 70% majority interest in the JV for proposed hotel. We understand that the financial commitments of the respective parties, with respect to the purchase of the land development rights and redevelopment costs, are still being worked out. Maintain SELL with a 12-month fair value estimate of S$0.71 (20% premium to RNAV); while we believe the company holds meaningful franchise value as a leading developer in Myanmar, current shares are pricing in most positives at these levels. (Eli Lee)


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PostPosted: Mon Apr 22, 2013 9:11 am    Post subject: Reply with quote

CapitaMall Trust: Results from AEIs now apparent

Summary: CapitaMall Trust (CMT) turned in a strong set of 1Q13 results last Friday. DPU increased by 7.0% YoY to 2.46 S cents, despite a retention of S$8.4m in income for the quarter. This is slightly ahead of our expectations, as S$6.6m in taxable income may be distributed in FY13 (1Q DPU already formed 25.2% of our FY13F DPU). Operationally, we note that CMT continued to deliver on various fronts. CMT also updated that the repositioning of IMM Building has been gaining traction, while the space vacated by Carrefour in 4Q12 at Plaza Singapore has been leased to Cold Storage and John Little and British retailer George. As previously guided, CMT announced a new AEI at Bugis Junction, which is expected to last from 2Q13 to 3Q14. We remain positive on CMT’s performance going forward, in view of these positive developments. We maintain BUYon CMT with a higher fair value of S$2.43 (previously S$2.32). (Kevin Tan)

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CapitaCommercial Trust: 1Q13 DPU up 3.2% YoY

Summary: CapitaCommercial Trust (CCT) reported 1Q13 distributable income of S$55.7m – up 3.3% YoY. This translates to a 1Q13 DPU of 1.96 S-cents, which is 3.2% above the 1.90 S-cents paid in 1Q12. We see this to be in line with expectations and 1Q13 distributable income now makes up 24% of our full year forecast. The growth in distributable income was mainly due to a full contribution from 20 Anson (acquired in Mar-12) and higher rentals at HSBC Building. CCT’s portfolio occupancy remained fairly stable at 95.3% in 1Q13, down marginally from 97.2% in 4Q12, mainly due to Cisco’s relocation from Capital Tower. We continue to see positive rental reversion in the portfolio – average monthly portfolio rents increased from $7.64 psf in 4Q12 to $7.83 psf in 1Q13. In addition, CapitaGreen remains on track for completion in 4Q14. Maintain BUY with a fair value estimate of S$1.80. (Eli Lee)

CapitaRetail China Trust: 1Q13 in-line

Summary: CRCT's 1Q13 results were generally in line with ours and the street's expectations. Gross revenue climbed 3.7% YoY to S$39.3m and net property income rose 1.8% YoY to S$25.9m. On a QoQ basis, NPI at CapitaMall Minzhongleyuan (MZLY) fell 32% to RMB4.7m. We expect NPI from MZLY to dip further in the coming quarters since the AEI there is being fast-tracked, with temporary closure of the mall from Jul 2013 to 2Q14. According to management, CRCT has secured offers at favorable terms to refinance S$150.5m due in Jun 2013. Adjusting our estimates slightly, we increase our fair value from S$1.72 to S$1.76 but we maintain our HOLDrating on CRCT on valuation grounds. (Sarah Ong)
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PostPosted: Tue Apr 23, 2013 8:50 am    Post subject: Reply with quote

Wilmar: Acquires 27.5% stake in Cosumar SA

Summary: Wilmar International Limited (WIL) has acquired a strategic 27.5% stake in Cosumar SA – a Morocco-based sugar producer – for MAD2.3b (US$263m), funded by internal funds and bank borrowings. WIL believes that Cosumar provides the group with the opportunity to service a large and growing structural deficit in sugar in Morocco and the surrounding regions of Southern Europe, Northern and Western Africa. While we see the latest acquisition dovetailing nicely with WIL’s strategy of becoming a global sugar player, the near-term impact is likely going to be muted by still-weak sugar prices. Weaker sugar prices notwithstanding, we believe that WIL’s large distribution network in China puts the group in a good position to capitalize on the expected increase in sugar consumption there. Maintain BUY with an unchanged S$3.90 fair value (based on 15x FY13F EPS). (Carey Wong)

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Hospitality Sector: Wary about 2013

Summary: We have analyzed the relationship between the YoY change in average RevPAR and YoY change in average tourism receipts per visitor arrival. In general, the signs of both are the same for the same year, with change in RevPAR being of larger magnitude than the change in average tourism receipts. 2012 was an exception, where average tourism receipts per visitor fell ~5.5% YoY while RevPAR grew 5.7% YoY. STB’s targets imply that average tourism receipts per visitor may fall by 1% YoY. This further supports our cautious view regarding RevPAR performance in 2013. STB preliminary data supports what we have been saying since Dec: 1Q13 performance for the sector will be weak. 2M13 RevPAR fell 3.1% YoY to S$215.00. Economy hotels were the best performers. We remain NEUTRALon the hospitality sector. Our top pick is Global Premium Hotels [BUY, FV: S$0.33], which is a longer-term asset value play in the Economy space. (Sarah Ong)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES

- DBS Bank is increasingly popping up in major bond deals in the region, going beyond its home market. Last week, it was one of the banks which handled San Miguel Corp's US$800m issue, the largest corporate bond out of the Philippines.

- BBR Holdings has secured two new contracts worth RM286m (S$116.4m) to build two bridges in Terengganu and Sarawak in Malaysia.

- Dukang Distillers Holdings revealed yesterday that it has joined the ranks of five or six other white liquor brands endorsed by China's Ministry of Foreign Affairs to serve foreign dignitaries.

- China Bearing (Singapore) Ltd plans to place up to 46m new shares, about 20% of total issued shares, at 2.97 cents a share to raise net proceeds of S$1.3m.

- Hedge funds increased bets on gold rallying after prices plunged the most in 33 years, underscoring billionaire fund manager John Paulson's view that bullion will rebound.
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