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OCBC Reports June 2013
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PostPosted: Tue Jun 04, 2013 9:07 am    Post subject: OCBC Reports June 2013 Reply with quote

Singapore REITs: Capitalize on over-reaction
We see two key factors driving the S-REITs price correction over the last two weeks. First, increased expectations that the Federal Reserve could taper its bond purchases as early as 2H13; and secondly, opportunistic profit-taking on the back of a strong performance over 2012-13. At this juncture, however, we see the selling to be overdone. In our view, the odds of the Fed tapering bond purchases in 2H13 are roughly 50-50 and we see fundamental valuations for the S-REITs sector (370bp against the 10Y government bonds) to be undemanding currently. In addition, S-REITs sector would likely continue to deliver, in 2013, firm earnings from asset enhancement initiatives/development projects, yield-accretive acquisitions and active leasing efforts. Maintain our OVERWEIGHT rating on the S-REITs sector. Starhill Global REIT [BUY, S$1.05 FV] is our top pick in the sector due to its growth potential, strong fundamentals and compelling valuations. We also like CapitaCommercial Trust [BUY, S$1.80 FV] and Fortune REIT [BUY, HK$8.64 FV] for the quality of their portfolio assets, positive rental reversion profiles and low gearing. (S-REITs Team)

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Nam Cheong: Ride the upcycle!
Nam Cheong Limited recently announced that its Executive Director, Mr. Leong Seng Keat, has been re-designated as the CEO. Mr. Leong, also the son-in-law of ex-CEO Datuk Tiong Su Kouk, has been with the group since 2005. We expect the leadership transition to be smooth. Meanwhile, we continue to like Nam Cheong for its market leadership in the increasingly active Malaysia oil & gas industry. Having seen a healthy pick-up in order wins, Nam Cheong recently expanded its shipbuilding programme to 28 vessels for FY14F (FY13: 19 vessels). Its large order-book of MYR1.3b, for 26 vessels delivered over FY13-15F, helps to mitigate its risk by providing a base level of earnings. Maintain BUY with a higher FV of S$0.35 (previously S$0.30). (Chia Jiunyang)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- Datapluse Technology posted a 23.2% increase in net profit to S$2.19m for its 3QFY13 ended 30 Apr.

- NH Ceramics entered into a purchase agreement to buy BlackGold Asia Resources Pte Ltd and BlackGold Energy Limited for US$150m. The two BlackGold firms control about 53,000 hectares of coal concessions in Indonesia.

- Asian Micro Holdings is planning to acquire Oxley Global Limited in a proposed RTO deal.

- Halcyon Agri announced that it would acquire Malaysian rubber processor Chip Lam Seng for RM63m (S$25.7m).

- According to the latest purchasing managers' index, Singapore's industrial activity grew at a faster pace in May, also signalling a fourth consecutive month of growth for the electronics sector.
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PostPosted: Wed Jun 05, 2013 10:50 am    Post subject: Reply with quote

Goodpack Limited: A buying opportunity
With the official opening of Lanxess’s synthetic rubber plant in Singapore, we expect production to commence in 1QFY14, and Goodpack will be able benefit corresponding given the additional IBCs that it had procured earlier. In addition, the plant will only reach full capacity utilization by 2015, so that means Goodpack will be able to enjoy incremental earnings until the plant reaches a steady state of production. With another deal in the pipeline (Asahi Kasei), its prospects look positive in the coming quarters. That said, as its share price fell by as much as 4.4% since our last update, we deem that a buying opportunity has emerged for the stock. Therefore, we are upgrading Goodpack to BUY with an unchanged fair value estimate of S$1.80. (Lim Siyi)

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Petra Foods: Time to cool off for summer
A potential inflection point may be emerging for Petra Foods as a result of a possible slowdown in consumer demand growth in Indonesia and a larger-than-expected loss from its cocoa ingredients segment in 2Q13. For the former, the suggested removal of fuel subsidies could adversely affect consumer spending due to the higher level of dependency by the lower-income groups, which make a larger proportion of the population. In addition, Petra could experience greater cost pressures related to distribution, etc. For the latter, a larger-than-expected loss could materialize as other cocoa processors in the industry have issued profit warnings recently, and this could lead to a bigger drag for Petra in terms of its FY13 performance. Therefore, we downgrade Petra to SELL with an unchanged fair value estimate of S$3.88. (Lim Siyi)

Keppel Corporation: Secures US$800m semi-sub rig for the Caspian Sea
Keppel Corporation (KEP), through its subsidiaries, has secured a US$800m contract from Caspian Drilling Company, a unit of the State Oil Company of Azerbaijan Republic (SOCAR), to build a semi-submersible drilling rig which includes owner furnished equipment. Scheduled for delivery in 4Q 2016, the rig will be built to Keppel FELS’ proprietary DSSTM 38M design, which has been customised for the harsh environment in the Caspian Sea. Having operated in Azerbaijan since 1997, KEP has built a strong relationship with SOCAR, and understand the requirements of rigs for the Caspian region. With this win, KEP has secured orders worth about S$3.1b YTD, accounting for 63% of our full year estimate. Maintain BUY with S$12.68 fair value estimate. (Low Pei Han)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- PEC Ltd has won new contracts in Singapore and Malaysia, adding S$64m to its order book.

- Cacola Furniture International has inked two separate non-legally binding MOUs, each for a possible acquisition of a goldmine in China.

- Healthway Medical Corporation has completed a S$10 million placement exercise to fund its expansion plans in China and its obligations in an associate company that is looking to list.

- Mobile phone distributor MDR said that its partner, Golden Myanmar Sea Company Ltd, has been appointed by Nokia Sales International as a distributor of Nokia's products in Myanmar.

- Almost 1,600 applications were put in for the 147 units at Afiniti Residences in Medini, within the Iskandar region in Johor, notwithstanding a tax-rate hike on foreign property owners that the state plans to unveil by the end of the year.

- The IMF halved its growth forecast for Germany to 0.3% as the eurozone recession takes its toll on the bloc's largest economy.
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PostPosted: Thu Jun 06, 2013 8:48 am    Post subject: Reply with quote

Genting Singapore: Upgrade to HOLD on valuation
Genting Singapore (GS) recently saw a pretty sharp tumble in share price, falling some 14% to a recent low of S$1.41, after we downgraded our call from Hold to Sell; this on the company posting slightly softer-than-expected 1Q13 results on 2 May. We have already pared our estimates after its 1Q13 results and we see no need for any revision for now. But we upgrade our rating from Sell to HOLD as the current share price is hovering around our unchanged DCF-based fair value of S$1.41. (Carey Wong)

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Marco Polo Marine: Ceasing coverage
After BBR’s listing on the Indonesia Stock Exchange early this year, Marco Polo Marine (MPM) has been increasingly branding itself as an entity for investors to gain exposure to Indonesia’s growing offshore sector. Demand for larger sized AHTS vessels in Indonesia is expected to increase, benefitting owners such as MPM. Meanwhile, the ship repair business has seen a slow-down, which management thinks is seasonal. The ship chartering business, on the other hand, provides a steady base load of earnings. The long-term future of MPM looks bright, but time would be needed for significant earnings growth and a re-rating of the stock. We last rated MPM a HOLD with a fair value estimate of S$0.51. Due to a re-allocation of internal resources, we are ceasing coverage on this counter. (Low Pei Han)

Midas Holdings: JV NPRT and consortium partners clinches CNY1.1b metro contract
Midas Holdings (Midas) announced that its 32.5%-owned JV company Nanjing SR Puzhen Rail Transport (NPRT) has, together with its consortium partners Shanghai ALSTOM Transport Electrical Equipment and ALSTOM Transport S.A., clinched a CNY1.1b metro contract. This is for the supply of 29 train sets (or 174 train cars) for the Nanjing Metro Line 4 Phase 1 project. Delivery is scheduled from 2014 to 2016. Although NPRT’s percentage share of the contract was not disclosed, we believe that it may be around the 70-75% range, after taking reference from previous contract wins by NPRT and its consortium partners. This would equate to a contract amount of ~CNY770-825m for NPRT, which is a sizeable win, in our opinion. Maintain BUY on Midas, with an unchanged fair value estimate of S$0.54, pegged to 1.1x FY13F P/B. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES

- US stocks tumbled on Wednesday for a second session as data on US private-sector job growth darkened views of the monthly nonfarm-payrolls report to be released in two days.

- United Fiber System is starting afresh its bid to acquire Jakarta-listed coal miner PT Golden Energy Mines through a reverse takeover deal.

- A tight labour market continued to raise workers' salaries last year, although the 2012 growth rate was lower compared to 2011 due to weaker economic conditions, says a new Ministry of Manpower report.

- Singapore's future competitiveness will be enough to keep it as the most competitive city in Asia and the third most competitive city globally in 2025, according to a projection by the Economist Intelligence Unit.

- Tiong Woon Corporation has entered into a MOU to sell its oil & gas services subsidiary to Metech Energy Corp for S$18m.

- Two companies in the overseas real estate business, Dolphin Capital Asia and Shenton Wealth Holdings, have recently been put on MAS Investor Alert List.
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PostPosted: Fri Jun 07, 2013 9:40 am    Post subject: Reply with quote

Healthcare Sector: Growth traction still healthy
Companies within the healthcare sector posted relatively decent results during the recently concluded 1QCY13 reporting period. Under our coverage, Biosensors International Group’s (BIG) core earnings growth of 4.1% YoY beat our forecasts, while that of Raffles Medical Group came in within our expectations (+16.0% YoY). Looking ahead, healthcare companies have largely embarked on expansionary plans to capitalise on the still robust industry fundamentals. In our opinion, these plans augur well for the medium-to-long term, but there will likely be some initial start-up costs which may impact near-term margins. We maintain our OVERWEIGHTrating on the healthcare sector. BIG [BUY; FV: S$1.60] remains our top pick, given its strong product pipeline, attractive valuations (FY14F PER of 13.6x is slightly more than 0.5 SD below its 3-year average forward PER) and decision to enhance shareholder value by recently declaring its first ever dividend since IPO. (Wong Teck Ching Andy)


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Frasers Commercial Trust: Development opportunity resurfaced
Frasers Commercial Trust (FCOT) announced that it has successfully exercised its right of redemption in respect of 2.2m Series A Convertible Perpetual Preferred Units (CPPUs). This, together with the redemption of 157.1m CPPUs in Apr, is likely to provide FCOT with further DPU uplift going forward. We also understand that FCOT has been granted a provisional permission (PP) by URA for the proposed additions and alterations to the existing commercial development at China Square Central and erection of a new hotel block on 18 Cross Street, Singapore earlier this week. While FCOT highlighted that it is still in the preliminary stage of exploring all options with regard to the property, we believe FCOT may possibly divest the hotel space or capitalize on its sponsor’s capabilities to develop the hotel. Either way, we are positive on the news as FCOT could use the proceeds from a sale to pare down its aggregate leverage or enhance its growth profile through the development. We continue to like FCOT for its growth potential, proactive management approach and compelling P/B of 0.97x. We are keeping our forecasts unchanged but we now tweak our CAPM assumptions to reflect a higher risk-free rate. Maintain BUY with revised fair value of S$1.60 (S$1.66 previously) on FCOT. (Kevin Tan)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks ended higher on Thursday, snapping a two-session losing streak, as investors eagerly awaited Friday’s May employment report for clues about monetary policy.

- Moody's Investors Service said that Singapore's Aaa sovereign rating and stable outlook reflect the country's very high economic, institutional, and government financial strengths, and its low susceptibility to risks from financial, economic, and political events.

- Singapore is the ninth most expensive city in Asia for expatriates, according to the latest cost of living survey by ECA International.

- AIMS AMP Capital Industrial REIT will further develop a property at 20 Gul Way at a cost of about S$77.2m to increase its value and boost returns to unitholders.

- Ramba Energy's major shareholder Edward Seky Soeryadjaya has been approached by a potential buyer keen on a 51% stake in Ramba.
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PostPosted: Tue Jun 11, 2013 9:31 am    Post subject: Reply with quote

CapitaLand Limited: Expanding serviced residence presence

Summary: CapitaLand (CAPL) announced yesterday that it has secured a contract to manage a serviced residence in Manila, Philippines. We note this is the sixth contract acquired over the last month by its serviced residence unit, the Ascott Ltd (Ascott). We note Ascott has been actively expanding its presence (an impressive 13% CAGR of units owned/managed since 2000) and is the world’s largest international owner-operator with 31,770 units in 78 cities as at end 1Q13. We see this continued growth extending its competitive edge in terms of scale and branding and, with about S$0.9b of assets under development (on an effective stake basis), it enjoys a good pipeline for capital recycling ahead. We continue to favor CAPL for its diversified real estate portfolio across asset classes, its strong balance sheet and management focus on improving shareholder ROE. Maintain BUY with an unchanged fair value estimate of S$4.29 (20% discount to RNAV). (Eli Lee)


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Karin Technology: Dropping coverage

Summary: Our recent conversation with Karin Technology’s (Karin) management revealed that its Components Distribution business has continued to pick up momentum. This is due to the proliferation of lower-end smartphones in China, resulting in stronger distribution volume of connectors used in these smartphones for Karin. Management is also focusing on growing its higher-margin IT Infrastructure segment. This has been boosted by robust demand for network security solutions and enterprise software products. Meanwhile, we expect Karin’s Consumer Electronics Products segment to remain as its largest revenue contributor, as Apple is still one of the most dominant players within the mobile devices space despite growing concerns over slowing iPhone sales. While we like Karin’s solid dividends payout track record as a means of rewarding its shareholders, we are CEASING COVERAGE on the stock due to a reallocation of resources and a lack of trading liquidity in its shares. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- JP Morgan buys 5.5m shares of Asian Pay Television Trust at S$0.895-S$0.91 in stabilizing action. The stock has fallen 7.22% since its IPO.

- OKH Global Ltd. announces that it has been awarded the tender by JTC Corporation for a 30-year land parcel located at Loyang Way, having an approximate site area of 20,633 sqm at a tender price of S$61.6m

- Xpress Holdings wins Master Service Contract to supply General Electric (GE) (China) with full design and printing-related services for all its business units in the Greater China region.

- AusGroup Ltd. announces that it has been awarded an insulation contract with CUEL Limited for the INPEX Ichthys LNG project in Darwin, Australia worth THB 304m (A$10.5m).

- Interra Resources to start drilling of the CHK 1169 well. Interra estimates that the results of the drilling and completion should be available in approximately six weeks.
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PostPosted: Wed Jun 12, 2013 9:10 am    Post subject: Reply with quote

Starhill Global REIT: Another positive development

Summary: Starhill Global REIT (SGREIT) announced that the rent review for the Toshin master lease has been concluded, and that a renewal rent at 6.7% higher than the prevailing rate has been secured. This is consistent with our 29 Apr report that SGREIT may again benefit from rental upside following the completion of the review process. We now factor in the increased rents in our forecasts but lower our fair value marginally to S$1.00 on higher risk-free rate (S$1.05 previously). However, we continue to like SGREIT for its growth potential, strong financial position and compelling valuations. For FY13, SGREIT looks set to gain from continued strength from its Singapore portfolio, incremental income from its newly-acquired Plaza Arcade and a 7.2% rental escalation from its Malaysia master leases in Jun. We maintain BUY on SGREIT. Key risks include weaker JPY/AUD and negative impact from a potential CPU conversion. (Kevin Tan)

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Tiger Airways: Time for a tiger

Summary: In light of its more than 6% price correction, we are reiterating our BUY rating on Tiger Airways (TGR) with an unchanged fair value estimate of S$0.79 as we believe prospects remain positive for the counter. Its recent May operating statistics revealed its eighth consecutive month of passenger traffic growth for TGR SG, and passenger load factors during the period have also remained fairly resilient, which demonstrates its effective capacity management. In addition, we are hopeful for a better showing from its associate airlines given the propensity for travel in the coming months for Indonesia and the Philippines. On a broader scale, the industry dynamics, namely growth in the Asia-Pacific region, remains conducive for budget carriers as consumers become more affluent and appetite for air travel increases. (Lim Siyi)

Midas Holdings: JV NPRT secures CNY1.26b metro contract

Summary: Midas Holdings (Midas) announced that its 32.5%-owned JV Nanjing SR Puzhen Rail Transport (NPRT) has clinched a CNY1.26b metro contract. This is for the supply of 33 train sets (or 198 train cars) for the Shenzhen Metro Line 3 project. However, delivery is scheduled only from 2015 to 2016. Given that this is the third contract secured by NPRT in two weeks, we believe this highlights the growing momentum of China’s metro industry. In our view, this may also lead to future contract wins for Midas given that it is a supplier of aluminium extrusion profiles for NPRT. Maintain BUY on Midas, with an unchanged fair value estimate of S$0.54, pegged at 1.1x FY13F P/B. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES

- US stocks fell, sending the S&P 500 Index lower for a second day, after Bank of Japan Governor Haruhiko Kuroda said he sees no need to expand monetary stimulus immediately.

- DBS would still want to buy Temasek’s entire stake in Danamon, Business Times reports, citing an interview with Peter Seah, chairman of DBS Group Holdings Ltd.

- Aussino expects that it will not be able to exit the SGX watch list by the 3 Sep deadline and intends to apply to SGX for extension of time to apply for removal from watch list.

- T T J Holdings wins new contracts for structural steelworks and civil defence shelter doors in Singapore and Malaysia, bringing its order book to S$164m as at 11 Jun.

- Tsit Wing’s Chairman and CEO Peter Wong seeks to privatize the company and has acquired an aggregate of 20m ordinary shares at a price of $0.3075 each, valuing it at S$65.5m

- Del Monte Pacific says shareholder Nutriasia Pacific to enter a placement agreement for the sale of 150m shares of the Company which will be listed and traded on the PSE, marking first dual listing between the SGX and the PSE.
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PostPosted: Thu Jun 13, 2013 9:11 am    Post subject: Reply with quote

Midas Holdings: Metro industry gaining momentum

Summary: Midas Holdings’ JV company NPRT recently secured three metro contracts amounting to ~CNY2.45b (assuming a 70% stake for one of the contracts won together with its consortium partners) within a span of two weeks. We believe this highlights the fast growing momentum of China’s metro industry. As Midas is also a key supplier to NPRT, we expect it to benefit positively from this. Despite the share of loss of NPRT to Midas’ FY12 and 1Q13 financials, we believe that the situation would improve from 2H13. Meanwhile, Midas’ management has also set its sights on growing its exports business, such as to the Russian railway market. We maintain our BUY rating and S$0.54 fair value estimate on Midas as we are still sanguine on its long-term outlook, but believe that the major re-rating catalyst would have to come from the resumption of new high-speed train car tenders from China. (Wong Teck Ching Andy)

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Astro – Higher dividend for 1QFY14

Summary: Astro Malaysia Holdings Berhad (Astro) reported 1QFY14 revenue of MYR1125.8m, +14.2% YoY, and met 23.2% of our full-year forecast. However, due to higher depreciation, net profit fell 6.7% to MYR114.1m, but still met around 24.7% of our FY14 forecast. It is also declaring a quarterly dividend of 2.0 sen per share (versus 1.5 sen in the previous two quarters). Going forward, management remains relatively upbeat about its prospects, where it should be able to sustain the first quarter revenue growth for the rest of the year, encouraged by the strong demand for its comprehensive suite of value-added products and services. As 1QFY14 results were mostly in line, we opt to keep our full-year estimates unchanged. But we are raising free cashflow estimates slightly and it results in our DCF-based fair value improving from MYR3.00 to MYR3.26. Coupled with a higher expected dividend forecast for this year, we maintain our BUY rating. (Carey Wong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks fell, with the Dow Jones Industrial Average posting its first three-day losing streak this year, as overhangs over prospects for economic growth and the pace of Federal Reserve stimulus measures remain.

- Singapore’s central bank plans to reprimand banks as early as Friday following an 11-month review into how benchmark interest rates are set, according to people with knowledge of the matter.

- Singapore Exchange says it is consulting the public on proposed circuit breakers for securities market; circuit breaker comprises a price band of +/-10% of the price of an instrument, according to a statement.

- Compact Metal Industries announces that its subsidiary has accepted the letter of offer from Jurong Town Corporation (JTC) for a 30 year lease of an industrial land site.

- ARH Petrogas makes oil discovery in Kepala Burung PSC, Indonesia.
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PostPosted: Fri Jun 14, 2013 11:30 am    Post subject: Reply with quote

Singapore Post: Good stock to hold in current environment
Since our last report on Singapore Post (SingPost) on 6 May 2013, its share price rose about 8.5% to reach S$1.40 in mid May, but fell by an even greater amount (~10%) subsequently to its current price, which is a level that is supported by fundamentals. With increasing labour-related expenses and administrative expenses, operating costs of the group have been steadily increasing. Along with the changing profile of mail, the group is diversifying its businesses. Even during the midst of its transformation, SingPost is a good stock to hold in the current volatile environment. However, we see limited upside potential unless earnings growth from its acquisitions proves to be better than expected. Maintain HOLD with S$1.23 fair value estimate. (Low Pei Han)

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CDL Hospitality Trusts: Lowering FV to S$1.79
STB data shows that RevPAR for Upscale and Mid-tier Singapore hotels for Apr fell 12.8% YoY and 4.7% to S$229 and S$160 respectively. We understand from sources that Singapore hotel bookings have generally been weak through 2Q13. Just to recap, CDLHT’s hotels registered a RevPAR fall of 7.9% YoY to S$191 in 1Q13, contributing to income available for distribution falling 2.8% to S$29.0m. Concerned with an oversupply situation building up in the hospitality market, we are lowering our FY13 RevPAR growth assumption for CDLHT's Singapore hotels from 0% to -5%. We update our model for these weaker RevPAR assumptions and a lower LT gross gearing target, which reduces our FV to S$1.79 from S$2.05. We maintain a HOLD rating on CDLHT. (Sarah Ong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US equities rose and the S&P 500 Index posted its second-biggest advance of the year, climbing 1.5% to 1,636.36 with yesterday’s better-than-forecast U.S. economic data and speculation that the Fed will look to maintain low interest rates.

- Singapore’s April retail sales index is estimated to fall 3% from a year earlier, according to the median estimate in a Bloomberg survey of nine economists. Actual data is due 1pm local time.

- Singapore Exchange intends to keep the STI 30 constituents status quo after a June quarterly review; 3 new IPOs gain entry to FTSE ST indexes.

- Swee Hong has secured a contract from LTA worth approximately S$14m for the proposed sewer diversion at Springleaf station.

- CFM Holdings expects to report losses for the financial year as a result of lower revenues due to the disposal of assets in its Thailand operations.

- Low Keng Huat reports 1Q net profit of S$15.3m vs S$13.1m a year ago.
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PostPosted: Mon Jun 17, 2013 10:11 am    Post subject: Reply with quote

Consumer sector – Sector under pressure

Summary: We downgrade the consumer sector to UNDERWEIGHT in light of the weaker SG retail sales figures for Apr and the potential threats to regional consumer spending (i.e macro-overhang, government policy changes and greater foreign competition). With sales figures likely to showcase unimpressive results for May, 2QCY13 could well shape out to be a muted quarter in terms of top-line growth for consumer companies. Furthermore, operating cost pressures resulting from higher wage costs and advertising and promotional spending still remain so operating margins are likely to stay depressed. Within the sector, we favour counters with defensive qualities such as Sheng Siong [BUY; FV: S$0.82] or counters with potential M&A activity Viz Branz [BUY; FV: S$0.74]. (Lim Siyi)
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Cache Logistics Trust: Valuation looks undemanding

Summary: We are reiterating our prognosis that Cache Logistics Trust (CACHE) is likely to continue to deliver sustainable growth for FY13. CACHE has a portfolio of quality assets which has a 100% occupancy rate and strong weighted average lease to expiry of 3.7 years. Together with the recent acquisition of Precise Two, CACHE is likely to meet our growth projection for 2013. Since 22 May, the S-REITs sector, including CACHE, has recently experienced a sell-down on fears that the US Federal Reserve may reduce the pace of its bond purchase programme and raise the interest rates in the coming months. However, we believe that the market reaction on CACHE is overdone, given its strong financial position and active capital management. At current price, CACHE offers a FY13-14F DPU yield of 6.8-7.1%, which represents an attractive spread of 471-500 bps to Singapore’s 10-year bond yield. While we now revise our fair value to S$1.40 from S$1.45 on higher risk-free rate assumption, we still see good upside potential on CACHE. Maintain BUY. (Kevin Tan)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- Asian stock futures fell, signaling a possible extension of declines amongst Asian equities after the International Monetary Fund cut its US growth forecast and ahead of the Federal Reserve meeting this week.

- Singapore may gain from its first-mover position for business trusts in the region, market watchers say, even if historical performance is mixed and amid a recent dip in sentiment for yield plays.

- Singapore’s monetary authority censured banks for trying to rig benchmark interest rates and orders the setting aside of as much as S$12b at zero interest pending steps to improve internal controls.

- Far East Orchard has been awarded a tender for a residential land parcel with FCL Topaz Pte. Ltd., a member of Frasers Centrepoint and Sekisui House, Ltd. The total tender price for the land was S$256.9m.

- First Ship Lease Trust demands the redelivery of its two crude oil tankers, after lessees default on their lease payments.

- Freight Links Express expands the scope of its logistics business by entering the commodity logistics segment.
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PostPosted: Tue Jun 18, 2013 9:21 am    Post subject: Reply with quote

Raffles Medical Group: Upgrade to BUY premised on re-emergence of value

Summary: Raffles Medical Group (RMG) is targeting the sale of its freehold seven-storey commercial podium which is located near Orchard Road. This is because it has failed to secure regulatory approval for the change of use of the property to a medical centre. The podium is independently valued at S$98m (as at end 2012), a 6.4% premium to its purchase price in Apr 2011. Meanwhile, management is aiming to improve its operating efficiencies by implementing a new Hospital Information System and Electronics Medical Records System. We believe that value has re-emerged for RMG following its drastic 16.5% share price decline from its recent peak. RMG remains on track to achieve a core EPS CAGR of 12.7% from FY12-14F, while offering FY13F ROE of 14.9%. Rolling forward our valuations to 29x blended FY13/14F EPS, we derive a higher fair value estimate of S$3.42 (previously S$3.22). Upgrade RMG from Hold to BUY. (Wong Teck Ching Andy)


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Singapore Residential Property: Stabilizing sales environment

Summary URA reported that a headline total of 1,912 new private homes (including 457 EC units) were sold in May 13, which was up 2.4% MoM and down 7.0% YoY. The majority of sales (49.8% of total) continues to fall in the mass-market segment (OCR). In the mid-tier (RCR) space, there was a significant 28.1% MoM uptick in sales. Key RCR launches include Corals at Keppel Bay (366 total units, Keppel Bay Drive) 132 units sold at S$2,150 psf, and KAP Residences (142 total units, King Albert Park) 105 units sold at S$1,839 psf. We see FY13 primary sales slowing down to a rate of 16k-18k versus 22k units in FY12, pointing at a less frothy albeit still healthy environment. In view of this, the risks of incremental property curbs going forward appear more diminished, in our view. We have a NEUTRAL rating on the residential property sector and prefer developers with strong balance sheets and diversified exposure. Our top picks are CapitaLand [BUY, S$4.29], Keppel Land [BUY, S$4.53] and CapitaMalls Asia [BUY, S$2.55]. (Eli Lee)
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PostPosted: Wed Jun 19, 2013 9:03 am    Post subject: Reply with quote

Ezion Holdings: Resilience in the stock price

Summary: The recent market sell-down has highlighted the resilience of the stock of Ezion Holdings. YTD, the STI has given up its gains this year, while the FTSE Oil and Gas Index is down about 1.2%. However, investors of Ezion are still sitting on gains of about 35.5%. Possible reasons behind this good performance include 1) good earnings visibility from its secured contracts, 2) limited risk of contract cancellations with its well-diversified and established customer profile, and 3) upside risk as Ezion leverages on its scalable model to continue to expand its presence in various parts of the world. Our fair value estimate of S$2.62 is based on Ezion’s existing contracts; contracts secured in the future that impact FY13F and FY14F earnings may be further price catalysts. Maintain BUY. (Low Pei Han)

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United Envirotech: Establishes US$300m MTN programme

Summary: United Envirotech Ltd (UEL) has recently announced the establishment of a US$300m MTN (medium-term note) programme, where it intends to use the proceeds to either refinance existing borrowings, make investments/acquisitions, and for general working capital and corporate purposes. According to management, the main rationale for the MTN programme is to get ready its funding to cater for the still-buoyant waste-water treatment industry in China. Note that UEL still has about S$88m of un-utilized proceeds from its convertible bond issue and share placement to KKR. Since we had recently revised our estimates after its FY13 results, we opt not to change anything for now. Hence our fair value remains unchanged at S$1.03 (still based on 13x FY14F EPS). But we do see potential catalyst coming from project wins. Maintain BUY. (Carey Wong)

CapitaLand Limited: Acquires mixed Shanghai site

Summary: CapitaLand (CAPL) announced yesterday that it has paid RMB1.95b (S$397.5m) for a 70% stake in Shanghai Guang Chuan Property Co. Ltd, which owns a prime site in Hanzhonglu, Zhabei District, Shanghai. The 25.4k sqm site has a total GFA of 110k sqm (105k sqm GFA above ground comprising 75k of office and retail space and 30k sqm residential) and is located within a 15-min drive from the Shanghai CBD. The project is expected to begin construction in 2015 and complete by 2017. The price paid translates to an acquisition cost of RMB25.3k per sqm which we see as a fairly reasonable level for this site. The completion of the acquisition is subject to the approval from PRC authorities and is expected to take place by 2Q14. Maintain BUY on CAPL with an unchanged fair value estimate of S$4.29 (20% discount to RNAV). (Eli Lee)

Keppel Land: Secures residential landed site in Shanghai

Summary: Keppel Land’s (KPLD) announced that it has acquired a 17.5ha residential site in Shanghai’s Seshan area for RMB1.33b (S$266m) on which it would develop ~200 landed homes with 250-350 sqm GFA. The site is 20km away from Shanghai Hongqiao International Airport and 32km from the city centre and is KPLD’s ninth project in the city of Shanghai. Owners of landed homes on the site would enjoy views of the Sheshan National Forest Park. We take a positive view on this acquisition and estimate that it would accrete 3.5 to 5.2 S-cents to KPLD’s RNAV. We would speak further with management later today and, in the meantime, maintain BUY with our fair value estimate unchanged at S$4.53 (25% discount to RNAV). (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks rallied on Tuesday, with a two-day advance wiping out last week’s losses, as Wall Street gave an advance thumbs up to the upcoming Federal Reserve monetary-policy announcement.

- Intraco Limited has extended its mandatory cash offer for its listed associated company Dynamic Colours Limited by two weeks.

- ST Aerospace, a unit of ST Engineering, announced a string of contract wins yesterday, including a US$28m maintenance deal with Spring Airlines Japan and a 20-year repair license agreement to provide MRO services for US-based UTC Aerospace Systems.

- Hengyang Petrochemical Logistics has found a strategic investor in MEGCIF Investments 5 Ltd, which is investing 271.25m yuan (S$54.25m) for a 35% stake in its new subsidiary, Hengyang Holding.

- Singapore has contacted Indonesia to express "serious concerns" over the worsening haze crisis, urging Jakarta to name the errant companies involved in illegal forest burning.

- Business travel is projected to grow modestly in the coming months, as improved financial market sentiment and moderate expansion in the global economy balance out weak trade growth, a report said.
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PostPosted: Thu Jun 20, 2013 8:56 am    Post subject: Reply with quote

ComfortDelGro: Good entry point

Summary: We are upgrading ComfortDelgro to BUY as its share price has shown signs of stabilising since the partial stake sale by the SLF about a month ago. In our view, the group remains a high-quality counter with unchanged fundamentals and positive growth drivers from its overseas operations. Furthermore, while the group continues to face domestic challenges in the absence of a fare increase, we view the recent fare review delay as an indication of a more sustained and beneficial fare review structure in the long-run. We leave our fair value estimate of S$1.95 unchanged. (Lim Siyi)


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Keppel Land: Secures residential site in Shanghai

Summary: KPLD announced that it has acquired a 17.5ha residential site in Shanghai’s Seshan area for RMB1.33b (S$266m) on which it would develop ~200 landed homes with 250-350 sqm GFA each. The site is 20km away from Shanghai Hongqiao International Airport and 32km from the city centre and is KPLD’s ninth project in the city of Shanghai. Assuming a total net saleable area of 60k sqm and construction costs of RMB6k psm, we estimate an RNAV accretion of 3.5 S-cents per share. We update our model for this acquisition and latest assumptions and our fair value estimate increases marginally to S$4.59 (25% discount to RNAV) from S$4.53 previously. Maintain BUY. (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks fell sharply and Treasury yields surged on Wednesday after Federal Reserve Chairman Ben Bernanke said the central bank may scale back its bond purchases this year, depending on the economic outlook.

- The Singapore government will make another 22 plots of industrial land available in 2H13, to moderate land prices and provide sufficient space for industrial end-users.

- Companies in Singapore are more upbeat now about business prospects for the next six months than they were in the first quarter of the year.

- Fitch Ratings has affirmed Genting Singapore's long- term foreign and local currency debt rating at A- and its SGD denominated perpetual capital securities at BBB.

- Investment sales of property, which cover big-ticket deals of S$10m and above, continued to drop in 2Q13.

- Iskandar Malaysia's appeal remains intact for investors optimistic about its long-term prospects, but some are turning cautious on the sustainability of the skyrocketing property prices in light of ample supply in the coming couple of years.

- Tat Hong Holdings has established a S$500m multicurrency medium term note (MTN) programme.

- Smog levels in Singapore from Indonesian forest fires hit the highest level on record as the air pollutant index breached the "hazardous" level.
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PostPosted: Fri Jun 21, 2013 9:40 am    Post subject: Reply with quote

Hospitality Sector: Hazy days
While visitor arrivals increased by 6.4% in 1Q13, gross lettings for 1Q13 grew by only ~2.8% to 2.8m room nights. This means that on a per capita basis, visitor arrivals are converting into fewer room nights, continuing a trend we note for 2012. With regard to the haze, we understand from an industry source that hotel bookings are not being negatively affected just yet. However, we think a blip in hotel performance through 3Q13 is likely given that the haze could last at least several weeks. Keeping in mind the mild oversupply situation for hotels we see building up, we remain NEUTRAL on the hospitality sector. We prefer Global Premium Hotels[BUY, FV: S$0.33], a longer-term asset value play in the Economy and Mid-tier space.
(Sarah Ong)


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Mapletree Logistics Trust: Scaling up presence in Korea
Mapletree Logistics Trust (MLT) has entered into a sale and purchase agreement with supply chain management company, Oakline Co. Ltd, for the acquisition of The Box Centre in South Korea. Oakline will lease back the property for a period of six years with built-in rental escalation from second year onwards. At a purchase consideration of KRW28.75b (~S$32.0m), the property is expected to provide an initial NPI yield of 8.4%. Management expects to fund the acquisition fully by debt, which is expected to increase its aggregate leverage marginally from 34.1% as at 31 Mar to 34.6%. This is likely to add ~0.03 S cents to FY14 DPU, based on our projections. We now factor in the acquisition into our forecasts, with the assumption that it will be completed in Jul. However, we reduce our fair value from S$1.34 to S$1.15 on higher cost of equity to reflect a higher risk-free rate, higher beta and reduced market risk appetite for interest-rate sensitive stocks. We maintain HOLD on MLT due to valuation grounds. (Kevin Tan)

CapitaLand Limited: Top bid for Coronation site
Yesterday evening, CapitaLand (CAPL) put in the top bid of S$366 million for a 99-year leasehold landed residential site at Coronation Road. The 37,441 sqm site is located within an established landed housing estate and enjoys good accessibility to Bukit Timah Rd and Pan Island Expressway. The GLS tender attracted 12 bids and CAPL’s top bid was 17% higher than the second highest bidder – signaling the group’s confidence in this project. We understand CAPL intends to develop a landed project comprising semi-detached and bungalows. We expect selling prices in the range of S$1.6k – S$1.8k psf and the project to accrete 1.3 – 2.2 S-cents to CAPL’s RNAV. Pending the award of the site, we would keep our fair value estimate unchanged at S$4.29 (20% discount to RNAV). Maintain BUY. (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks tumbled on Thurs, with the S&P 500 suffering its worst session since Nov 2011, hit by fear that the Federal Reserve will scale back its bond buying later this year.

- South Korea's Lotte Shopping Co Ltd is looking to raise US$800m to US$1b by listing a REIT in Singapore as early as this year, according to IFR, a Thomson Reuters publication.

- China's flash HSBC Purchasing Managers' Index for June dropped to a nine-month low yesterday, pointing to continuing weakness in local and external demand.

- Armstrong Industrial Corporation Limited said that it has received a proposal from a consortium involving its major shareholder that may result in the delisting of the company.

- Former Novena Holdings CEO Toh Soon Huat is leading a group of 17 investors, including a unit of mainboard-listed Serial System, to pump a total of S$15.04m into Jubilee Industries Holdings.

- ISDN Holdings Limited plans to raise up to S$111.6m in gross proceeds from the issue and exercise of warrants.

- Stamford Tyres Corporation posted an 18.5% rise in earnings for its full fiscal year ended April 30, boosted by a one-time gain from the sale of its stake in an associate.
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PostPosted: Mon Jun 24, 2013 9:03 am    Post subject: Reply with quote

Wilmar: Expect more volatility ahead
Wilmar international Limited (WIL), with its large exposure to China via its oilseeds crushing and consumer pack businesses, is certainly feeling the impact from the recent slew of sluggish economic data out of the mainland. As such, stock price has been particularly volatile over the past week or so, rising by as much as 7.1% to a recent S$3.31 high before retreating by 6.3%. Going forward, we continue to expect more volatility in share price, especially if market adopts a less “risk on” approach. In view of this, we reduce our valuation peg from 15x to 12.5x, which in turn reduces our fair value from S$3.90 to S$3.25. Downgrade to HOLD for now. (Carey Wong)


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Venture Corp: Good company, uncertain times
Our conversation with Venture Corp (VMS) highlighted that sentiment among its customers has largely remained cautious given the still uncertain macroeconomic conditions. This is in line with tepid macro data points which were released recently. We now expect VMS’s 2H13 recovery strength to be weaker than our previous expectations. Hence, we pare our FY13/14F revenue forecasts by 5.4/1.6%, even as we take into account the recent appreciation of the USD vis-à-vis the SGD. Our FY13/14F PATMI estimates are lowered by 7.8/6.6%, respectively. While we like VMS’s strategy of continuing its acquisition drive for new customers and growing its market share with existing customers by leveraging on its strong design and engineering capabilities, we prefer to wait for clearer signs of a rebound in the global economic conditions before turning more positive on the stock. Maintain HOLD with a lower fair value estimate of S$7.37 (previously S$8.00) due to our reduced forecasts. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks eked out modest gains on Friday, but posted losses for the week, which was dominated by fears that the Federal Reserve may begin pulling back stimulus later this year.

- The strata office market could see prices rise by 5% to 8% as the buying momentum continues into this year, according to CBRE.

- Olam International has won a bid to supply 50,000 tons of wheat to Bangladesh.

- United SM Holdings Pte. Ltd. has made a voluntary unconditional cash offer for Guthrie
GTS at S$0.88 per offer share.

- CCM Group has completed the placement of 44m new shares.

- First Resources announces that reports of haze contribution are inaccurate.

- MTQ Corp has received approval for the listing of 25m bonus shares.
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PostPosted: Tue Jun 25, 2013 11:52 am    Post subject: Reply with quote

CapitaLand Limited: Uncertainties creeping into macro picture

Summary: We believe recent PMI and interbank liquidity datapoints from China point to increasing macro uncertainties as authorities attempt to engineer a more sustainable albeit slower tempo of growth. This being so, we see heightened downside risks for CAPL’s Chinese residential sales and rental outlooks. In Singapore, increasing visibility of a QE exit scenario have moved bond yields to recent highs and a trend of rising mortgage rates would likely ensue from here, in our view. Our judgment is that while rising rates alone are unlikely to trigger dramatic residential price downside, it would likely weigh on primary sales volumes ahead. We lower our fair value estimate to S$3.77 but maintain a BUY rating as we consider CAPL shares to be likely oversold at this juncture at a 45% discount to RNAV. Note that 36% of CAPL’s value is constituted by its stake in listed CapitaMalls Asia (CMA) which has dipped only 8.2% YTD versus CAPL’s whopping 19.5% correction. Moreover, we highlight that CAPL continues to hold a strong balance sheet (S$5.4b cash, 44% net gearing) which would buttress its businesses through potential headwinds. (Eli Lee)

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Neptune Orient Lines – Lowering the sails

Summary: We downgrade Neptune Orient Lines’s (NOL) to HOLD in light of weaker than expected freight rates and poorer industry-wide action on capacity management. According to the SCFI, average freight rates have declined by more than 13% QoQ as compared to an increase over the same period last year. This downward trend could reduce the impact of the upcoming general rate hike on 1 Jul – enacted by the Transpacific Stabilisation Agreement – unless greater effort on reducing capacity is undertaken by carriers ahead of the peak-season. While the low-fuel cost environment and ongoing cost-saving initiatives will benefit NOL, we lower our forecasts in anticipation of a slightly disappointing peak season. Lowering our P/B peg to 1.1x (1.3x previously), our fair value estimate falls to S$1.17 (S$1.38 previously). (Lim Siyi)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks fell, sending the S&P 500 Index to a nine-week low after Chinese equities entered a bear market amidst concerns of a cash crunch in addition to concerns of QE tapering.

- Keong Hong has been awarded a S$161.9m contract for the building of two blocks of condominium at Boon Lay Way/Gateway Drive (Jurong East Planning Area).

- PUB has awarded OKP Holdings Limited with a S$15.0m contract to improve drainage in Lucky Heights Estate.

- Oxley Holdings acquired a 99-year lease over a 17,280 sqm commercial and hotel development land zone in Johor, Malaysia.

- Lian Beng secured two projects worth approximately S$200m, bringing the order book to a record S$1.4 billion.
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