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DBSVickers Reports June 2013
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PostPosted: Mon Jun 03, 2013 9:42 am    Post subject: DBSVickers Reports June 2013 Reply with quote

Today’s Focus
• STI – Support at 3270, range bound 3270-3390 in
coming weeks
We believe that STIs’ precipitous decline that started from
3465 should find support soon at 3270 or slightly above.
STI’s current short-term downtrend is likely to turn
sideways from c.3270-3390 in coming weeks.
The current sell-down of S-REITS opens up bargain
hunting opportunities. Our S-REITs picks are Cambridge,
Mapletree Greater China Commercial Trust and Frasers
Commercial Trust. Separately, Ascendas REIT suffered
worst among the S-REITs, down 16% since May 10.
Technically near-term support is at about $2.30 with
rebound resistance at $2.43 and $2.50.
With talk of stimulus cut-back and with that hopes of a
pick-up in economic recovery, we see room for selective
interest among ‘risk-on’ stocks. One area that we have
highlighted is the O&G stocks as the jack-up market has
stayed tight. Our picks are Keppel Corp for large cap,
Nam Cheong and CSE Global for small caps.
SembCorp Industries announced that the Vietnamese
government has approved its 1200 MW coal-fired power
project in central Vietnam to be included in the country's
national power development plan for the 2011-2020
period. SCI will be the owner and developer of this project
under a BOT arrangement. This coal-fired plant in the
Dung Quat Economic Zone will be located in central
Vietnam's Quang Ngai province where SCI is already
developing a 6000 hectares industrial park. Financial
details and contributions are preliminary at this juncture as
SCI is still conducting feasibility studies. Development is
positive but no change to TP of S$4.80 and Hold
recommendation.
Biosensors has entered into a licensing agreement with
Eurocor GmbH, a group company of Opto Circuits (India)
for their Drug Eluting Balloon (DEB) technology and
related intellectual property (IP) rights in relation to the
treatment of both coronary and peripheral artery disease.
As a first step in this process, an Original Equipment
Manufacturer (OEM) arrangement is being implemented,
whereby Biosensors will market and sell, under its own
brand, DEBs manufactured by Eurocor.
Swiber Holdings announced that the Group is exploring
options to establish Islamic Trust Certificates Programme
to broaden and deepen its investors’ pool.
US Indices Last Close Pts Chg % Chg
Dow Jones �� 15,115.6 (209.0) (1.4)
S&P �� 1,630.7 (23.7) (1.4)
NASDAQ �� 3,455.9 (35.4) (1.0)
Regional Indices
ST Index �� 3,311.4 (24.6) (0.7)
ST Small Cap �� 594.2 3.0 0.5
Hang Seng �� 22,392.2 (92.2) (0.4)
HSCEI �� 10,599.2 (90.Cool (0.Cool
HSCCI �� 4,365.4 6.6 0.2
KLCI �� 1,769.2 (5.7) (0.3)
SET �� 1,562.1 (19.3) (1.2)
JCI �� 5,068.6 (61.0) (1.2)
PCOMP �� 7,022.0 68.6 1.0
KOSPI �� 2,001.1 1.0 0.0
TWSE �� 8,254.8 11.5 0.1
Nikkei �� 13,774.5 185.5 1.4
STI Index Performance
Singapore
Total Market cap (US$bn) 619
Total Daily Vol (m shrs) 3,586
12m ST Index High 3,454
12m ST Index Low 2,699
Source: Bloomberg Finance L.P
Stock Picks – Large Cap
Rec’n Price ($)
31 May
Target Price
($)
Mapletree Greater China
Commercial Trust
Buy 1.015 1.22
OUE Trading Buy 3.000 3.52 *
UOL Buy 6.69 8.21
Thai Beverage Public Buy 0.655 0.80
Mapletree Greater China Buy 1.015 1.22
Stock Picks – Small /Mid Cap
Rec’n Price ($)
31 May
Target Price
($)
Perennial China Retail Trust Buy 0.585 0.84
Pan-United Corp Buy 0.980 1.16
Tat Hong Holdings Buy 1.490 1.80
China Merchants Buy 0.895 1.07
Kreuz Holdings Buy 0.735 0.78
* Technical Target
Source: Bloomberg Finance L.P, DBS Vickers
Singapore
Wired Daily
Page 3
Global Yellow Pages is undertaking an $88m capital
reduction. It is seeking shareholder approval to reduce its
share capital to $68.05m, from $155.8m, in order to
write off an $87.7m impairment of intangible assets
taken in the quarter ended Dec 31, 2012. Those
intangible assets specifically refer to goodwill that Global
Yellow Pages incurred in 2003 as it acquired the SingTel
Yellow Pages business as part of the initial public offering
process.
ISDN Holdings has entered into an agreement to acquire
80% stake in PT Potensia Tomini Energi (PT PTE) for IDR8
bn (approximately S$1,04m). PT PTE is a company
incorporated in Indonesia that will be engaging in the
business of constructing, operating and maintaining
hydropower plants and the production of electric power
in Central Sulawesi, Indonesia. PT PTE has an exclusive
concession to develop a hydropower plant with a capacity
of up to 20 megawatts.
JB Foods expects to report a net loss for the Group for
2Q2013 and 1H2013. The expected loss is mainly
attributable to the continued unusual cocoa market
consolidation that was previously highlighted in the
Group’s 1Q2013 results announcement. The unusual
market consolidation has further lowered the average
selling price of the Group’s cocoa powder. The cocoa
powder industry is dominated by a few major players and
any consolidation in the industry would have an impact
on cocoa powder prices.
Healthway Medical Corp announced that its Investee
company, International Healthway Corporation (IHC) has
lodged a preliminary offer document on the Catalist of
the Singapore Exchange Securities Trading. IHC, a Pan-
Asian integrated healthcare services and facilities provider,
is primarily focused on the resilient and high growth
healthcare sector by providing healthcare services through
the development, investment and management of
medical real estate, healthcare-related assets and
integrated mixed-use developments.
Bank loans in April grew at a rapid clip though growth
continued to slow on a month-on-month basis, amid
concerns over debt servicing. Total loans in April rose
20% y-o-y to $522.3 bn, accelerating for a fourth straight
month. In March, they were 19.7% y-o-y. On a monthon-
month basis, credit seemed to be slowing though - it
rose 0.9% over March which was 1.5% higher than
February. Credit growth in February gained 2.1% from
January. The strong credit growth was driven by business
loans while consumer loans continued to show healthy
gains. Business loans rose 23.7% y-o-y and one per cent
from the previous month. Gains were led by building and
construction, general commerce, financial institutions and
business services. Manufacturing loans were flat on a
month-on-month basis after surging in March. Bank
lending to manufacturers in March shot up 65.7% y-o-y
to $34.6 bn and up 15.5% over February. Consumer
lending gained 15% y-o-y and 0.7% from a month ago,
with housing loans up 16% y-o-y and 0.8% from a
month ago.
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PostPosted: Tue Jun 04, 2013 9:44 am    Post subject: Reply with quote

Today’s Focus
• Singapore May PMI - Surprised on the upside;
electronics PMI expands 4th straight month
Singapore's PMI advanced higher into growth territory
with a reading of 51.1 in May, up from 50.3 in April. The
electronics sector also signalled a fourth consecutive
month of growth with a reading of 51.4 in May versus
51.2 in April. New orders and new export orders both
grew more strongly in May than in April, as did the
imports and employment sub-indices. Furthermore,
restocking is still in progress within the industry, judging
from the decline in stocks of finished goods as well as the
persistent increase in electronics imports and inventory.
Nonetheless, the key risk to note for the manufacturing
sector in the coming quarters is that the decline in overall
competitiveness due to the rapid increases in business and
labour costs will continue to hamper the performance of
this sector.
Regional PMIs, including the HSBC-Markit PMIs for China,
Taiwan and Korea, however, all deteriorated, flagging a
loss of momentum in Asian manufacturing. China's PMI
fell to 49.2, suggesting that factory activity shrank for the
first time in seven months as new orders fell. Even though
the official PMI, said to poll larger firms, showed a slight
rise, the drop in the HSBC PMI which covers more privatesector
SMEs, fanned fears that the world's second largest
economy is losing steam. Taiwan's PMI fell to 47.1 too -
the first deterioration in six months - as new orders and
export orders tumbled. And Korea's PMI signalled slower
growth with a lower reading of 51.1 in May, down from
52.6 in April.
SingTel and its partners - KBZ Group and Myanmar
Telephone Company - have submitted a bid for a telco
licence in Myanmar. This makes it one of 11 applicants
competing for the two available telco licences in
Myanmar.
The Digicel consortium has also submitted its tender
application for a nationwide mobile phone licence to the
Government of the Republic of the Union of Myanmar.
The Digicel consortium comprising of YSH Finance (a joint
venture between First Myanmar Investment Co. and Yoma
Strategic Holdings, ‘FMI/Yoma’), Digicel Group and
US Indices Last Close Pts Chg % Chg
Dow Jones �� 15,254.0 138.5 0.9
S&P �� 1,640.4 9.7 0.6
NASDAQ �� 3,465.4 9.5 0.3
Regional Indices
ST Index �� 3,291.1 (20.3) (0.6)
ST Small Cap �� 593.5 (0.7) (0.1)
Hang Seng �� 22,282.2 (110.0) (0.5)
HSCEI �� 10,548.1 (51.1) (0.5)
HSCCI �� 4,342.3 (23.2) (0.5)
KLCI �� 1,766.3 (2.9) (0.2)
SET �� 1,539.3 (22.Cool (1.5)
JCI �� 4,971.4 (97.3) (1.9)
PCOMP �� 6,763.4 (258.6) (3.7)
KOSPI �� 1,989.6 (11.5) (0.6)
TWSE �� 8,201.0 (53.Cool (0.7)
Nikkei �� 13,261.8 (512.7) (3.7)
STI Index Performance
Singapore
Total Market cap (US$bn) 619
Total Daily Vol (m shrs) 3,222
12m ST Index High 3,454
12m ST Index Low 2,699
Source: Bloomberg Finance L.P
Stock Picks – Large Cap
Rec’n Price ($)
3 Jun
Target Price
($)
Mapletree Greater China
Commercial Trust
Buy 1.015 1.22
Ascendas REIT Trading Buy 2.360 2.50 *
UOL Buy 6.85 8.21
Thai Beverage Public Buy 0.655 0.80
Stock Picks – Small /Mid Cap
Rec’n Price ($)
3 Jun
Target Price
($)
Perennial China Retail Trust Buy 0.595 0.84
Pan-United Corp Buy 0.975 1.16
Tat Hong Holdings Buy 1.470 1.80
China Merchants Buy 0.895 1.07
Nam Cheong Buy 0.275 0.36
* Technical Target
Source: Bloomberg Finance L.P, DBS Vickers
Singapore
Wired Daily
Page 2
Quantum Strategic Partners, features three of the world’s
most recognisable businessmen – Serge Pun, Denis
O’Brien and George Soros.
Improved performance and softening fuel prices are
expected to help the airline industry net a profit of
US$12.7 bn this year, making it the third strongest year
for the industry since 2001, the International Air
Transport Association (Iata) said as it upgraded its forecast
from an earlier projection of US$10.6 bn in March. The
20% boost to the bottom line is against an anticipated
revenue of US$711 bn, even as margins remain razorthin.
This year, net profit margin is expected to be an
anaemic 1.8%, nearly half the 3.3% chalked up in 2010.
Asian Micro Holdings is planning to acquire Oxley Global
in a proposed reverse takeover (RTO) deal. Oxley Global is
the holding company of the Oxley Group of companies, a
fund management, private equity and multi-family office
firm, focusing on sectors such as real estate, power
generation, natural resources and infrastructure across
the Asia-Pacific region and other jurisdictions. In
Singapore, the Oxley Group jointly manages the listed
Cambridge Industrial Trust. Under indicative terms, Asian
Micro will issue new shares for the acquisition, resulting in
the vendors of Oxley holding about 90% of the enlarged
share capital of Asian Micro.
NH Ceramics has entered into an agreement with five
parties to buy BlackGold Asia Resources and BlackGold
Energy for US$150m. The proposed acquisition will
enable the company to gain entry into the growing
Indonesian coal mining industry. The acquisition, first
announced on March 28, will be funded entirely by the
issuance of 3.18 billion shares at 5.9 cents each.
Natural rubber producer Halcyon Agri Corp, has agreed to
acquire assets of Malaysian natural rubber producer Chip
Lam Seng group for MYR63m. This will lift Halcyon Agri
potential annual production capacity by 180,000 tonnes
to over 300,000 tonnes.
Roxy-Pacific has entered into an agreement to acquire a
freehold residential site situate at Telok Kurau, also
known as Sunnyvale Apartments at the purchase price of
S$25m. The freehold residential site has a total land area
of 23,160 sq ft and an existing plot ratio of 1.4 for
residential apartment development.
US stocks rose after a FED official said the FED remains
committed to record stimulus. Separately, the weak May
PMI that sank into contraction (actual 49, consensus 51)
may suggest that the US economy is not strong enough
for the central bank to pare down on stimulus. The data
trend continues with the ADP employment change
(consensus 165k) and ISM non-manufacturing (consensus
53.5) for the month of May scheduled for released
tomorrow.
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PostPosted: Wed Jun 05, 2013 8:57 am    Post subject: Reply with quote

Interra Resources Ltd: NOT RATED; S$0.51; ITRR SP
Largest onshore oil producer in Myanmar
Return *: 2
Risk: Moderate
Potential Target * : 12-Month S$ 0.57 (12% upside)

by: LING Lee Keng +65 6398 7970
and Suvro SARKAR +65 6398 7973

• Oil & gas proxy in Myanmar and Indonesia with assets mainly in production phase
• Significant production ramp up to drive near- term growth; potential further upside from exploration assets and bids for new licences
• Fair value implies 12% potential upside and moderate risk return

The Business

Largest onshore oil producer in Myanmar with 40% market share. Interra Resources (ITRR) is an oil & gas exploration and production company with two producing fields in central Myanmar and two producing fields and one exploration site in Indonesia. The company currently has about 24.6m barrels of 2P (proven + probable) reserves and its wells produced close to 1m barrels of oil last year. Myanmar is the key earnings contributor at 86% of FY12 EBITDA. ITRR has been in Myanmar since 1996.

Near term growth from higher production, further upside from exploration. Based on ITRR’s expanded drilling program, oil production will accelerate over the next five years to drive 24% earnings CAGR over FY12-14. In the medium term, we see upside potential from ongoing exploration in Indonesia, extension of existing contracts, and bidding for new licences. There is also preliminary discovery of gas in Myanmar which could be an earnings wildcard if proven material.

The Stock

What is fair value for the stock? We value ITRR at 10% discount to global comparables’ EV/ reserves multiple of about 18x to derive a fair value of S$0.57 (details in report).

Dependent on oil prices, ability to renew Indonesia contracts. Besides changes in oil prices and inherent execution risks in E&P projects, ITRR’s inability to renew its contracts in Indonesia would adversely affect earnings and valuation.
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PostPosted: Wed Jun 05, 2013 10:46 am    Post subject: Reply with quote

Today’s Focus
• Interra Resources - Oil & gas proxy in Myanmar and
Indonesia; fair value $0.57
DBSV Research issues an Equity Explorer report on Interra
Resources with fair value $0.57 and moderate risk return.
Interra is an oil & gas proxy in Myanmar and Indonesia,
with two producing fields in central Myanmar as well as
two producing fields and one exploration site in
Indonesia. Its wells produced close to 1m barrels of oil last
year, and it currently has about 24.6m of 2P (proven +
probable) reserves. Myanmar is the key earnings
contributor, accounting for 86% of FY12 EBITDA. ITRR
has been in Myanmar since 1996, and is currently the
largest onshore oil producer in Myanmar, commanding
c.40% market share. Growth is expected to come from
production ramp up, potential further upside from
exploration assets and bids for new licences.
Keppel Corp has secured a contract from Caspian Drilling,
a subsidiary of the State Oil Company of Azerbaijan
Republic (SOCAR), to build a semisubmersible drilling rig
worth about US$800m. The contract value is slightly
higher than expectations of US$700-750m. This contract
will lift Keppel’s YTD wins to S$2.47bn, forming 41% of
our full year assumption of S$6bn. Maintain BUY, TP:
S$13.00.
PEC has won new contract, adding $64m to its order
book. The group secured a contract to provide mechanical
construction works for a mid-scale process plant in an
LNG complex in Sarawak, East Malaysia.
KS Energy has entered into an agreement for the supply
and construction of a jack-up drilling rig for US$165.5m.
The delivery of the rig is expected to be in Q1 2014.
Mobile phone distributor MDR announced that its
Myanmar partner, Golden Myanmar Sea Company (GMS),
has been appointed by Nokia Sales International as a
distributor of Nokia's products in Myanmar. MDR's
Myanmar associate, MDR Myanmar Co Ltd, will be
providing consultancy and retail franchisee procurement
services to GMS.
US Indices Last Close Pts Chg % Chg
Dow Jones �� 15,177.5 (76.5) (0.5)
S&P �� 1,631.4 (9.0) (0.6)
NASDAQ �� 3,445.3 (20.1) (0.6)
Regional Indices
ST Index �� 3,291.4 0.3 0.0
ST Small Cap �� 603.3 9.7 1.6
Hang Seng �� 22,285.5 3.3 0.0
HSCEI �� 10,537.5 (10.6) (0.1)
HSCCI �� 4,330.0 (12.2) (0.3)
KLCI �� 1,776.7 10.4 0.6
SET �� 1,555.6 16.3 1.1
JCI �� 5,021.6 50.3 1.0
PCOMP �� 6,673.5 (89.9) (1.3)
KOSPI �� 1,989.5 (0.1) (0.0)
TWSE �� 8,191.2 (9.Cool (0.1)
Nikkei �� 13,533.8 271.9 2.1
STI Index Performance
Singapore
Total Market cap (US$bn) 621
Total Daily Vol (m shrs) 4,203
12m ST Index High 3,454
12m ST Index Low 2,699
Source: Bloomberg Finance L.P
Stock Picks – Large Cap
Rec’n Price ($)
4 Jun
Target Price
($)
Mapletree Greater China
Commercial Trust
Buy 1.025 1.22
Ascendas REIT Trading Buy 2.440 2.50 *
UOL Buy 6.80 8.21
Thai Beverage Public Buy 0.665 0.80
Mapletree Greater China Buy 1.025 1.22
Stock Picks – Small /Mid Cap
Rec’n Price ($)
4 Jun
Target Price
($)
Perennial China Retail Trust Buy 0.590 0.84
Pan-United Corp Buy 0.985 1.16
Tat Hong Holdings Buy 1.470 1.80
China Merchants Buy 0.900 1.07
Nam Cheong Buy 0.285 0.36
* Technical Target
Source: Bloomberg Finance L.P, DBS Vickers
Singapore
Wired Daily
Page 2
Cacola Furniture has inked two separate non-legally
binding memoranda of understanding (MOUs), each for a
possible acquisition of a goldmine in China. The proposed
deals, if either one proceeds to completion, will result in a
change of control and constitute a reverse takeover (RTO)
transaction. Under the first MOU, Cacola is looking to
wholly acquire Gold Depot Investments - which has an
indirect interest in a goldmine located at Jingping county,
Guizhou province - from Gold Tycoon for $250m. The
second MOU is for the acquisition of 100 per cent of
Shanxi Han Yin Huanglong Gold, which has an indirect
interest in a goldmine located at Yellow Dragon Village,
Long Ya Town, Hanyin county, Shanxi province for
$130m.
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PostPosted: Thu Jun 06, 2013 9:23 am    Post subject: Reply with quote

Ezion: BUY; S$2.25; EZI SP
Sky's the limit
Price Target : 12-Month S$ 3.00 (Prev S$ 2.52)

by: HO Pei Hwa

• Raising FY14/15F earnings by 3/15% after imputing an additional 4/8 vessels to fleet
• Poised to ride on the rising demand for liftboat/service rigs in Asia and robust activities in GOM
• High earnings visibility with impressive EPS CAGR of 56% in FY12-15F
• Maintain BUY, TP raised to S$3.00


Ample room for growth. We revisited our earnings model for Ezion in an attempt to estimate its growth potential beyond its existing fleet and FY14. In our base case scenario, Ezion could add a further 4 vessels to its fleet during the rest of FY13 and another 8 in FY14 if it gears up to 1.3x, resulting in a 3/15% increase in our FY14/15F core earnings . Our recurring 3-year EPS CAGR will rise from 49% to 56%. There is room for further upside to our revised numbers from JV projects, sales & leaseback and equity raising exercises, which we have not factored in yet.

Fast growing international footprint. As a relatively young player that started off in 2007, Ezion has made a significant breakthrough by securing liftboat/service rig contracts from national and independent oil companies for offshore Malaysia, Indonesia, Brunei, Myanmar, Vietnam, India, Middle East, and even as far as Denmark and Mexico. Given the low penetration rate of liftboats in Southeast Asia, Ezion is well positioned to ride the potential rising substitution for liftboats and service rigs over workboats in the region. In addition, its strengthening ties with Pemex would allow Ezion to tap into the robust offshore activities in GOM.

BUY with a higher TP of S$3.00. We like Ezion’s unique business model that offers fascinating growth and high earnings visibility supported by long term contracts of 3-5 years. Ezion deserves to trade above the average of its small-mid-cap O&G service provider peers (10x PE) and closer to its 5-year peak of 19x. Hence, we are lifting our valuation peg from 12x to 14x, on revised blended FY13/14F recurring EPS, to arrive at a higher TP of S$3.00. Maintain BUY.
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PostPosted: Thu Jun 06, 2013 10:41 am    Post subject: Reply with quote

Today’s Focus
• ST Index – To rebound from c.3200 (200- Day EMA)
• Ezion – Offers growth + visibility; maintain BUY, TP
raised to S$3.00
STI fell below our stated near-term support at 3270
yesterday to end at 3243. With that, it’s now at the
average 12-mth forward PE level; any weakness from here
would start bringing it below. Thus, valuation is no longer
expensive. Technically, further weakness from here should
find support @ just a tat above 3200, which is where the
200-day exponential moving average is.
Our analyst has raised FY14/15F earnings for Ezion by
3/15% after imputing an additional 4/8 vessels to fleet.
The group is poised to ride on the rising demand for
liftboat/service rigs in Asia and robust activities in United
States Gulf of Mexico (GOM). Ezion offers growth +
visibility. It has a unique business proposition that offers
fascinating growth and high earnings visibility, with about
90% of its revenue derived from long-term contracts,
coupled with an impressive EPS CAGR of 56% in FY12-
15F. Maintain BUY, TP raised to S$3.00 (Prev S$ 2.52).
OUE has received the "eligibility to list" for its proposed
hospitality and retail real estate investment trust (Reit) IPO.
It has not confirmed the size of the listing, though media
reports have previously put it at US$600m to US$800m.
Midas announced that its 32.5% owned JV company
Nanjing Puzhen (NPRT) and its consortium partners has
won a RMB1.1bn metro train contract to supply 174 train
cars to Nanjing Metro Line 4 Phase 1 Project, for delivery
between 2014 and 2016. This follows a recent win
announced on 29 May that NPRT had also won a 56-train
car supply project to Shenzhen Line 4 worth RMB420m,
for delivery in 2013 and 14. We estimate that these wins
would push NPRT's order book to c. RMB9.5bn, which
should lead to strong earnings for the JV from this year
onwards. At the same time, these recent wins of over 200
train cars for NPRT should also lead to supply contracts for
Midas' core business, which we estimate at RMB100m, to
add to its current c. RMB700m order book, leading the
way for an expected earnings recovery for Midas in 2H13.
Maintain BUY, TP S$0.60.
US Indices Last Close Pts Chg % Chg
Dow Jones �� 14,960.6 (217.0) (1.4)
S&P �� 1,608.9 (22.5) (1.4)
NASDAQ �� 3,401.5 (43.Cool (1.3)
Regional Indices
ST Index �� 3,243.4 (47.9) (1.5)
ST Small Cap �� 601.5 (1.Cool (0.3)
Hang Seng �� 22,069.2 (216.3) (1.0)
HSCEI �� 10,473.2 (64.3) (0.6)
HSCCI �� 4,299.6 (30.5) (0.7)
KLCI �� 1,774.4 (2.3) (0.1)
SET �� 1,522.7 (32.9) (2.1)
JCI �� 5,001.2 (20.4) (0.4)
PCOMP �� 6,557.9 (115.6) (1.7)
KOSPI �� 1,959.2 (30.3) (1.5)
TWSE �� 8,181.9 (9.3) (0.1)
Nikkei �� 13,014.9 (518.9) (3.Cool
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013
100-Day MA
Index
STI
Total Market cap (US$bn) 621
Total Daily Vol (m shrs) 3,826
12m ST Index High 3,454
12m ST Index Low 2,712
Source: Bloomberg Finance L.P
Stock Picks – Large Cap
Rec’n Price ($)
5 Jun
Target Price
($)
Mapletree Greater China
Commercial Trust
Buy 1.020 1.22
Ascendas REIT Trading Buy 2.360 2.50 *
UOL Buy 6.76 8.21
Thai Beverage Public Buy 0.655 0.80
Stock Picks – Small /Mid Cap
Rec’n Price ($)
4 Jun
Target Price
($)
Perennial China Retail Trust Buy 0.585 0.84
Pan-United Corp Buy 0.950 1.16
Tat Hong Holdings Buy 1.475 1.80
China Merchants Buy 0.900 1.07
Nam Cheong Buy 0.280 0.36
* Technical Target
Source: Bloomberg Finance L.P, DBS Vickers
Singapore
Wired Daily
Page 2
UE E&C has been awarded a sub-contract for electrical
services installation and sanitary, plumbing & gas services
installation. The total contract sum is about S$21.0m. The
contract period is for 30 months and the project is
expected to be completed by September 2015.
United Fiber System (UFS) is starting afresh its bid to
acquire Jakarta-listed coal miner PT Golden Energy Mines
(Gems) through a reverse takeover deal. This follows the
termination on May 31 of the original share purchase
agreement for UFS to acquire stakes of about 67% and
30% in Gems from PT Dian Swastatika Sentosa Tbk (DSS)
and GMR Coal Resources (GMR) respectively. UFS group's
financial and operational state of affairs have "materially
altered" since the deal was first announced last July; UFS
was hit by losses from its construction unit, Poh Lian
Construction, which has since been placed under judicial
management.
CCM Group is proposing to place 44m new shares at
S$0.092 per share, a discount of approximately 9.3% to
the last volume weighted average price, to raise gross
proceeds of S$4.05m for general working capital
purposes.
Hiap Tong is proposing to place up to 50m new shares at
S$0.217per share, a discount of approximately 6.4% to
the last volume weighted average price. The net proceeds
of S$10.6m will be used to fund its capital expenditure
and marketing expenses and for general working capital
purposes.
US markets fell as uncertainties about when the FED will
cut bond purchases continued to weigh on investors’
sentiment heading to Friday’s job numbers. Last night’s
ADP employment change was lower-than-expected
(actual 135k, consensus 165k) but ISM services came in
better (actual 53.7, consensus 53.5). Still our economist
notes that the labour sub-component fell 2 full points.
This, coupled with the weak ADP employment figure
could mean a weaker-than-expected non-farm payroll
figure this Friday versus the 162k consensus.
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PostPosted: Fri Jun 07, 2013 8:47 am    Post subject: Reply with quote

Amara Holdings: NOT RATED; S$0.62; AMA SP
Spreading its wings in Asia
Return *: 1
Risk: Low
Potential Target * : 12-Month S$ 0.75 (19% upside)

• Household brand name with regional ambitions
• MOU to develop hotel business in Myanmar, significant potential upside in the longer term
• Fair value of S$0.75


by; Derek TAN CPA
and Aiteng TAN

The Business
Household hotel brand in Singapore. Amara Holdings Ltd (Amara) is an Asian integrated lifestyle group with three key business areas: hotel investment and management, property investment and development, and specialty restaurants and food services. The completion of 100AM (formerly Amara Corporate Tower) will contribute positively to cashflows in 2013 while its regional hotel investments in Shanghai and Bangkok will display a steady growth profile when operational in 2014/2015.
MOU in Myanmar to grow its hospitality footprint. Further to its regional ambitions, the group intends to grow its hotel business in Myanmar through a JV with Youth Force Hotel Co. Ltd and Youth Force Construction Co. Ltd (established in Myanmar) to develop and operate a hotel in Dagon Township, Yangon, with capital of US$50m. While discussions are still preliminary, the group has set its sights to establish its brand in Myanmar, where there is a dearth of quality, well managed hotels.
The Stock
Fair Value of S$0.75. Our fair value of S$0.75 is based on a 30% discount to its RNAV, implying an EV/EBITDA of 18x, in line with hospitality peers.
Further clarity on MOU a potential re-rating catalyst. Further clarity on the MOU in Myanmar, which we view as a significant investment by Amara could spark interest in the stock.
Downturn in outlook for hotels is a risk. Most of Amara’s income is from Singapore. Thus a decline in the hospitality outlook will likely have a negative impact on stock price.
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PostPosted: Fri Jun 07, 2013 9:50 am    Post subject: Reply with quote

Today’s Focus
• Amara Holdings - Spreading its wings in Asia; fair value
S$ 0.75
With yesterday’s decline to 3193, STI is now trading
below the 13.9x (average) blended FY13/14F PE level at
c.3287. At these levels, PE valuation for the Singapore
market is no longer at an elevated level. STI has also
corrected to and even dipped slightly below its 200-day
EMA, which is a demonstration of the correction depth of
280pts. We continue to seek a short-term low level as the
current forward PE level is becoming attractive and the
oversold nature of the technical indicators with 14-day RSI
at 21.3, daily stochastics at 5 and weekly stochastics at
20.
DBSV Research issues an Equity Explorer on Amara
Holdings with fair value of S$ 0.75 which offers 19%
potential upside to current price. Amara is an Asian
integrated lifestyle group with three key business areas:
hotel investment and management, property investment
and development, and specialty restaurants and food
services. Further to its regional ambitions, the group
intends to grow its hotel business in Myanmar through a
JV to develop and operate a hotel in Dagon Township,
Yangon, with capital of US$50m.
SembCorp is preparing for an initial public offering of the
independent water and power project’s (IWPP) JV
company on the Muscat Securities Market. The Sembcorp
Salalah Power and Water Company, in which Sembcorp
Utilities holds a majority 60% stake, will see its stake
diluted by 35% after the IPO, reports said. Other
stakeholders are Oman Investment Corporation with a
35% stake, and Bahrain-based Instrata Capital with 5%.
Jaya Holdings has signed contracts for three of its four
new build platform supply vessels (PSVs) well ahead of
their delivery dates from the shipyard. The total value of
these three contracts is more than US$60m, including
optional extension periods.
Ramba Energy's major shareholder Edward Seky
Soeryadjaya has been approached by a potential buyer
keen on a 51% stake in Ramba. The possible offer would
be via a voluntary conditional cash partial offer at an
indicative price of between 60 cents and 70 cents a share.
US Indices Last Close Pts Chg % Chg
Dow Jones �� 15,040.6 80.0 0.5
S&P �� 1,622.6 13.7 0.8
NASDAQ �� 3,424.1 22.6 0.7
Regional Indices
ST Index �� 3,193.5 (49.9) (1.5)
ST Small Cap �� 597.8 (3.7) (0.6)
Hang Seng �� 21,838.4 (230.Cool (1.0)
HSCEI �� 10,361.2 (112.0) (1.1)
HSCCI �� 4,220.8 (78.Cool (1.Cool
KLCI �� 1,769.6 (4.Cool (0.3)
SET �� 1,490.2 (32.5) (2.1)
JCI �� 5,001.2 (20.4) (0.4)
PCOMP �� 6,609.0 51.1 0.8
KOSPI �� 1,959.2 (30.3) (1.5)
TWSE �� 8,096.1 (85.Cool (1.0)
Nikkei �� 12,904.0 (110.9) (0.9)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013
100-Day MA
Index
STI
Total Market cap (US$bn) 615
Total Daily Vol (m shrs) 2,865
12m ST Index High 3,454
12m ST Index Low 2,738
Source: Bloomberg Finance L.P
Stock Picks – Large Cap
Rec’n Price ($)
6 Jun
Target Price
($)
Mapletree Greater China
Commercial Trust
Buy 1.015 1.22
Ascendas REIT Trading Buy 2.300 2.50 *
UOL Buy 6.59 8.21
Thai Beverage Public Buy 0.640 0.80
Stock Picks – Small /Mid Cap
Rec’n Price ($)
6 Jun
Target Price
($)
Perennial China Retail Trust Buy 0.585 0.84
Pan-United Corp Buy 0.940 1.16
Tat Hong Holdings Buy 1.460 1.80
China Merchants Buy 0.895 1.07
Nam Cheong Buy 0.280 0.36
* Technical Target
Source: Bloomberg Finance L.P, DBS Vickers
Singapore
Wired Daily
Page 2
CNA Group has won projects totaling up to S$13.8m
across Asia. One of which includes a contract from Laos
Airport Authority for a Common Use Terminal Equipment
solution in Luang Prabang Airport for a 15 year term from
June 2013 onwards. Others include the India Metro
Railway project for Bangalore Metro Rail Corporation,
third Down Town Line contract - 16 underground MRT
stations to be fitted with CNA’s Local Sequential
Controller System and securing more Vietnam projects.
ECS Holdings has signed an agreement to distribute
Lenovo smartphones in Malaysia and Thailand. Lenovo is
the world’s second-largest PC maker and has risen rapidly
to become China’s second-largest smartphone
manufacturer.
In property news, Hewlett-Packard has put its freehold
office and manufacturing premises on Alexandra Road up
for sale. The property could fetch around $370-390m,
according to market estimates. Just eight months ago,
Neptune Orient Lines sold its 26-storey headquarters
office tower next door, NOL Building, for $380m.
US markets rebounded from early session losses to finish
firmer ahead of tonight’s May job numbers. Yield on the
10-year Treasury note fell to the lowest level in 2 weeks
ahead of the data release tonight as investors seek the
safety of bonds.
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PostPosted: Mon Jun 10, 2013 9:48 am    Post subject: Reply with quote

Apologies, still no report received. Will post ASAP.
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PostPosted: Mon Jun 10, 2013 10:14 am    Post subject: Reply with quote

Today’s Focus
• STI – Correction ended at 3184, expect a rebound to
3300 with immediate resistance at 3225. Defensive, yield
and interest rate sensitive index component stocks to
lead rebound
• Noble Group – Technically weak with immediate
resistance at $1.05 and eventual downside risk towards
$0.80
We believe that STI’s correction that started from May 22 has
ended at 3184 last Friday after US’s May job data alleviate
concerns about an imminent cut back in FED stimulus. At the
same time, STI’s forward PE valuation has now fallen below
the 13.9x (average) 12-mth forward PE level at c.3287 and is
a ‘mere’ 80pts away from touching the 13.1x (-0.5SD) 12-
mth forward PE level at c.3100, which makes local blue chips
attractive. . The rebound has the potential to reach about
3300 eventually with immediate resistance at 3225.
Defensive, yield and interest rate sensitive stocks that rocked
the STI lower in the past 2-3 weeks are likely to lead the index
rebound. SingTel, OCBC, DBS, UOB, Jardine Matheson, HK
Land, Capitaland and GLP are the 8 component stocks that
each had at least a 10pt negative impact on the STI in the
current sell-down.
OUE’s plans for a hospitality trust IPO will take the form of
OUE Hospitality Trust that is expected to be listed on the SGX
mainboard in 3Q this year. Assets are the Mandarin Orchard
Hotel and Mandarin Gallery Mall while future pipeline assets
include Crowne Plaza Changi Airport, Meritus Mandarin
Haikou in China and Meritus Shantou China.
DBS Research issues a thematic report on Myanmar. Despite
scepticisms and multiple challenges, Myanmar’s sweeping
reforms have resulted in drawing new aids, more visitors and
higher interest to trade and investment in the country.
Foreign direct investments (FDIs) have reportedly jumped
>40% to US$1.4bn in FY2013 while tourist arrivals have
surged 54% to 1m. ADB projected that Myanmar GDP
expanded >6% in FY13 and could grow 7-8% p.a. over the
decade. Beneficiaries are Yoma, Interra Resources, Ezion and
Amara while potential beneficiaries are Yoma, Tiong Seng
and SingTel.
US markets rallied after May’s non-farm payrolls of 175k
(consensus 165k) was seen by investors that the economy
was growing at a modest pace but yet not strong enough for
the FED to alter its USD85bil/month bond purchase. The
unemployment rate edged higher to 7.6% from 7.5% as
more workers entered the workforce.
US Indices Last Close Pts Chg % Chg
Dow Jones �� 15,248.1 207.5 1.4
S&P �� 1,643.4 20.8 1.3
NASDAQ �� 3,469.2 45.2 1.3
Regional Indices
ST Index �� 3,184.7 (8.Cool (0.3)
ST Small Cap �� 596.5 (1.3) (0.2)
Hang Seng �� 21,575.3 (263.2) (1.2)
HSCEI �� 10,187.3 (173.9) (1.7)
HSCCI �� 4,199.1 (21.7) (0.5)
KLCI �� 1,775.6 6.0 0.3
SET �� 1,516.2 26.0 1.7
JCI �� 4,865.3 (135.9) (2.7)
PCOMP �� 6,702.0 92.9 1.4
KOSPI �� 1,923.9 (35.3) (1.Cool
TWSE �� 8,095.2 (0.9) (0.0)
Nikkei �� 12,877.5 (26.5) (0.2)
STI Index Performance
Singapore
Total Market cap (US$bn) 605
Total Daily Vol (m shrs) 2,911
12m ST Index High 3,454
12m ST Index Low 2,738
Source: Bloomberg Finance L.P
Stock Picks – Large Cap
Rec’n Price ($)
7 Jun
Target Price
($)
Mapletree Greater China
Commercial Trust
Buy 1.010 1.22
Ascendas REIT Trading Buy 2.300 2.50 *
UOL Buy 6.46 8.21
Thai Beverage Public Buy 0.640 0.80
Mapletree Greater China Buy 1.010 1.22
Stock Picks – Small /Mid Cap
Rec’n Price ($)
7 Jun
Target Price
($)
Perennial China Retail Trust Buy 0.585 0.84
Pan-United Corp Buy 0.940 1.16
Tat Hong Holdings Buy 1.440 1.80
China Merchants Buy 0.900 1.07
Nam Cheong Buy 0.280 0.36
* Technical Target
Source: Bloomberg Finance L.P, DBS Vickers
Singapore
Wired Daily
Page 3
US markets rallied after May’s non-farm payrolls of 175k
(consensus 165k) was seen by investors that the economy
was growing at a modest pace but yet not strong enough
for the FED to alter its USD85bil/month bond purchase.
The unemployment rate edged higher to 7.6% from
7.5% as more workers entered the workforce.
Meanwhile, several data releases from China over the
weekend disappointed. May industrial production rose
less than expected at 9.2% (consensus 9.4%) y-o-y.
May’s export gained just 1% y-o-y (consensus 7.4%) from
14.7% in April while imports dropped 0.3% y-o-y
(consensus 6.6%). At the same time, inflation numbers
were lower than expected. May’s CPI rose 2.1%
(consensus 2.5%) while PPI fell 2.9%, the biggest decline
since September last year.
Commodity related names such as Noble Group are likely
to underperform on concerns about demand slowdown
from China and easing commodity prices. Technically, the
stock is appears to have just broken down from a bearish
multi-month descending triangle consolidation. The
immediate resistance is at $1.05 and there is downside
risk towards $0.80 before bottoming .
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PostPosted: Tue Jun 11, 2013 9:32 am    Post subject: Reply with quote

Singapore REITs
As the dust settles, value emerges
Analysts
Derek TAN CPA +65 6398 7966
LOCK Mun Yee +65 6398 7972   
Singapore Research Team +65 6327 2288

S-REITs’ ability to grow distributions to compensate for rising bond yields/interest costs a key consideration. We believe that fears of the impact of rising bond yields on S-REITs are an over-reaction at this point as our economists do not expect QE to taper off anytime soon. Over the medium term, a rise in long bond yields is likely to be more gradual than abrupt and S-REITs’ continued ability to grow distributions (estimated at 4.0% y-o-y) is a compensating factor. Thus, we believe that the knee-jerk reaction seen in the S-REITs’ share prices (FSTREI index was down 10% YTD vs STI 5% dip in the past few weeks) is unwarranted.

Impact of rising bond yields “more expected than real”. We have assessed the impact of rising bond yields on our target prices, and the conclusions are: (i) Our analysis indicates that S-REIT yield spread of 3.9% based on current share prices have factored long bonds of >2.5%. Prior experience shows that S-REITs trade at a 350-390 bps spread when long bonds were above 2%. (ii) Impact from higher interest costs is managable at <3%. Active capital management has resulted in most S-REITs locking in >50% of their debt costs for the next 1 - 2 years. We estimate a 0.5% increase in interest rates to have a <3% impact on distributions, which we see as managable. (iii) NAVs appear safe for now. Worries of cap rate expansion impacting S-REITs’ book values negatively are valid but we do not see it as a concern at this point. Other than for office, we note that higher valuations for S-REIT portfolios (retail, industrial sub-sectors) are underpinned by higher income, which we believe make S-REITs’ NAVs more resilient.

Translation losses a potential risk. The INR, AUD and JPY weakened 2%, 7% and 27% against the S$ respectively since the start of 2013. Thus, S-REITs with exposures in these currencies might see earnings downside and NAV declines from translation losses. From the earnings front, we note that most S-REITs have taken hedges to minimize impact.
S-REITs sell-off is over-done, Selective BUYs. We have been advocating a selective stance, and limit our picks to REITs which offer growth that is achievable and visible. We like Magic (BUY, TP S$1.22), MCT (BUY, TP S$1.53), FCOT (BUY TP $1.69) and Cache (BUY, TP S$1.47) for their better than peers’ growth prospects. We have also upgraded A-REIT (BUY, TP S$2.60) and MINT (BUY, TP S$1.63) from HOLD to BUYs on valuation grounds.
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PostPosted: Wed Jun 12, 2013 10:36 am    Post subject: Reply with quote

Today’s Focus
 Genting HK – TP raised to US$0.61, RWM IPO implies
GENHK’s other businesses thrown in ‘free’
 STI – Expect correction to end above 3100, likely c.3150
US markets fell in reaction to BOJ maintaining its monetary
policy. Asian bourses are currently lower in reaction. This
negative headline news aside, note the following: (1) the
Dow remains about 280pts above last week’s low; (2) The
Nikkei 225 currently gives back about 250pts but still remains
500pts above last week’s low after rising 1000pts in total
from recent sessions; (3) US 10-year bond yields rose to as
high as 2.29% intra-day but ended lower to 2.185%
yesterday. A dip in bond yield tends to underpin equities in
the current scenario; and (4) SGD firmed against the USD,
currently at about 1.255 from a high of 1.263 yesterday. A
firmer SGD tends to underpin SGD assets. Point is, don’t just
read the headline news, look a little closer and things start to
appear a little different.
STI was affected by the sell-down in developing Asian
economies of Indonesia, Thailand and Philippines that
dragged down the Jardine Group of index component stocks
yesterday. There is still a little weakness from the region that
can weigh on the STI but not much in the short-term.
Firstly, China market resumes trading tomorrow, which is
likely to be a down day given the weaker-than-expected data
releases over the weekend. Secondly, the Hang Seng Index
still has a little more downside but should find good support
and has a better rebound at about 21000, which is less than
400pts from yesterday’s close. 400pts pale in comparison to
the 2155pts decline since May 20th.
For the STI, while the downtrend resumes with yesterday’s
move below last Friday’s low, we maintain our view that it
should hold above 13.1x (-0.5SD) 12-mth forward PE at
3100, likely around 3150.
Our analyst raises Genting HK TP to US$0.61 from US$0.55.
Slated for listing in 3Q13, Travellers is valued at US$8.3bil.
Travellers is proposing to raise US$416mil to fund RWM
Phase 3 expansion and Manila Bayshore development by
2017. Based on GENHK's diluted stake of 44.3%, Travellers’
implied valuation alone will dwarf GENHK’s market cap,
which means its other businesses (NCL, SCL) are thrown in for
‘free’.
US Indices Last Close Pts Chg % Chg
Dow Jones  15,122.0 (116.6) (0.Cool
S&P  1,626.1 (16.7) (1.0)
NASDAQ  3,436.9 (36.Cool (1.1)
Regional Indices
ST Index  3,170.4 (30.1) (0.9)
ST Small Cap  579.1 (11.0) (1.9)
Hang Seng  21,354.7 (260.4) (1.2)
HSCEI  9,959.7 (167.2) (1.7)
HSCCI  4,130.2 (62.2) (1.5)
KLCI  1,779.6 (8.2) (0.5)
SET  1,452.6 (75.9) (5.0)
JCI  4,609.9 (167.4) (3.5)
PCOMP  6,556.7 (319.0) (4.6)
KOSPI  1,920.7 (12.0) (0.6)
TWSE  8,116.2 (44.4) (0.5)
Nikkei  13,317.6 (196.6) (1.5)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013
100-Day MA
Index
STI
Total Market cap (US$bn) 603
Total Daily Vol (m shrs) 3,063
12m ST Index High 3,454
12m ST Index Low 2,774
Source: Bloomberg Finance L.P
Stock Picks – Large Cap
Rec’n Price ($)
11 Jun
Target Price
($)
Mapletree Greater China
Commercial Trust
Buy 0.99 1.22
Ascendas REIT Trading Buy 2.29 2.50 *
UOL Buy 6.27 8.21
Thai Beverage Public Buy 0.615 0.80
Stock Picks – Small /Mid Cap
Rec’n Price ($)
11 Jun
Target Price
($)
Perennial China Retail Trust Buy 0.570 0.84
Pan-United Corp Buy 0.910 1.16
Tat Hong Holdings Buy 1.405 1.80
China Merchants Buy 0.895 1.07
Nam Cheong Buy 0.275 0.36
* Technical Target
Source: Bloomberg Finance L.P, DBS Vickers
Singapore
Wired Daily
Page 2
United Engineers is targeting to raise up to about
$480.3mil net proceeds from a proposed rights issue to
reduce its debt load following the acquisition of WBL
Corporation. The offering price is at a 46.6 per cent
discount to UE's last traded share price of $2.81
yesterday.
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PostPosted: Thu Jun 13, 2013 11:21 am    Post subject: Reply with quote

Today’s Focus
 Price action indicates AREIT may show more resilience
compared other S-REITs
US stocks ended lower and treasuries yield inched higher as
concerns about QE3 continued to weigh. Investors will closely
monitor the FED statement at the outcome of the FOMC
meeting next Wednesday night. With triple witching
(expiration of stock index futures, stock index options & stock
options) next Friday, US equity indices will be rocky, either
way, over the next one week. China and HK markets re-open
today.
S-REITs have been one of the worst affected in recent weeks
as investors sold down yield names on concerns about QE
drawdown. Recall that QE3 was announced in Sept last year.
A check back on the price action shows that in line with STI’s
U-turn up, many S-REITs started to further their climb from
last November as they benefited from the liquidity inflows.
S-REITs that have declined back to their respective Nov12
lows in the current correction would have effectively reversed
and wiped out all the positive price action from the liquidity
inflow prior to their decline. Chances are these would be
more resilient going forward compared to those that have yet
to decline to their respective Nov12 levels. One SREIT that has
fallen back to Nov12 level is AREIT. The stock’s Nov12 low is
at $2.28. The stock undershoot that level yesterday to $2.22
but in an indication of bargain hunting, returned back to
$2.30 by day’s end. Our analyst upgraded the stock to Buy
earlier this week. We expect shares of AREIT to show more
resilience going forward compared to other S-REITs. One
example of a S-REIT that has yet to fall to its Nov 12 low level,
and thus more vulnerable to weakness, is Cambridge. The
stock’s Nov12 month low was around $0.64.
Tiong Seng’s wholly-owned subsidiary Robin Village
Development has been given the go ahead by the Malaysian
authorities to construct a precast plant in the Iskandar region.
The plant will increase Tiong Seng’s capacity for the
production of precast components by 60% to 160,000m3 by
2015. Approximately S$15.6mil will be invested that will be
funded by internal resources and bank borrowings.
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PostPosted: Fri Jun 14, 2013 10:50 am    Post subject: Reply with quote

Today’s Focus
 STI found short-term low at 3100, scope for an initial
rebound to 3200.
We believe that STI’s correction has touched a short-term low
off the 3100 level that coincided with the 13.1x (-0.5SD) 12-
mth forward PE level. The Singapore McClellan short-term
market breadth indicator fell to -58 yesterday, which is the
lowest reading since August 2011 and near to the extreme
oversold reading of -70. This adds to the list of oversold
technical indicators that includes the stochastic and RSIs.
Scope for an initial rise to c.3200.
The decline in SREITs should also stabilize heading into next
week’s FOMC meeting and as more of them have fallen
closer to their respective Nov12 lows that opens up trading
Buy opportunities. Our analyst’s picks are MCT, MGCCT,
FCOT, Cache, AREIT and MIT.
Our regional strategist expects US bond yields to fall and
trigger a rebound in equities in the near-term as equity
valuations are more attractive now. QE tapering is unlikely to
start until December, but regardless, QE exit should be
positive for equities as bond funds shift to equities.
US markets rebounded after May retail sales (actually 0.6%,
consensus 0.4%) and weekly initial jobless claims (actual
334k, consensus 346k) came in better-than-expected and on
the hope that FED will maintain low interest rates. May’s PPI
scheduled for release today is expected to read a tame 0.1%
rise m-o-m.
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PostPosted: Mon Jun 17, 2013 9:14 am    Post subject: Reply with quote

Small Mid Caps: Shifting focus to growth
By: TAN Ai Teng +65 6398 7967 / YEO Kee Yan +65 6398 7955

• SMCs can continue to outperform, supported by stronger growth and lower valuations
• Selloff in SREITs overdone, bargain hunt growth stocks
• Macro recovery still modest, stick to high conviction growth and value stocks

SMCs offer stronger growth at lower valuations. The FTSE Small Cap Index (+7.7%) and DBSV’s SMC Index (-1.7%) outperformed the STI (-1.8%) and FTSE Mid Cap Index (-2.7%) YTD even as concerns of stimulus reduction led to a big selloff in equities recently. At a time when the hunt for high yields and dividends becomes less critical, the combination of higher earnings growth and lower PE valuations would enable SMCs to hold out better going forward.
Bargain hunt SREITs for yield and growth. We believe the recent sell-off of S-REITs on rising bond yields is overdone. As values emerge, we pick SREITs with identifiable and achievable growth like Magic (TP: S$1.22), MCT (TP: S$1.53), Cache (TP: S$1.47) and MINT (TP S$1.63). Besides the S-REITs, we see bargain hunting opportunity for Religare (TP: S$1.05) as yield improves to 9.7%.
Go for high conviction growth and value stocks. As macro recovery remains modest, pick stocks where earnings growth is highly visible and sustainable: Ezion (TP S$3.00) will continue to outperform on secured contracts and its unique market positioning; Tat Hong (TP: S$1.80) is positioned to benefit from the regional infrastructure boom; Del Monte (TP: S$0.97) is a proxy to Philippines, SEA’s 2nd largest consumer market. Kreuz (TP: S$0.7Cool is our top pick in the O&G services sector for its proven execution track record while Midas (TP: S$0.60) is poised for earnings recovery backed by its growing order book. For value, Vard (TP: S$1.46) is a bargain at 6.3x FY14PE vs normalized 10x PE.
Situational plays. Myanmar is a unique theme which has been running independent of world economics for some time now. We believe the Myanmar theme will continue as reforms continue to attract FDIs. Results of telecom license and Yangon Airport development contracts are imminent events. Picks are Yoma (TP: S$1.0Cool and Yongnam (TP: S$0.41).
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