Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD
Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED
Market Pulse: ST Engineering and CapitaMalls Asia (29 Sep 2011)
FOCUS
Singapore Technologies Engineering Ltd: Right on track
Summary: Since our last report on 9 Sep 2011, the FTSE Straits Times Index has fallen 5.5% to 2,701 points, while Singapore Technologies Engineering Ltd (STE) displayed its defensive nature as its share price only fell slightly by 0.3%. We retain our fair value estimate of S$3.37 per share, which represents 14.6% upside, and we hence maintain our BUY call. Also, there have been three new recent developments. 1) STE said its American subsidiary will wholly acquire DRB Aviation Consultants, Inc. for US$1.45m (~S$1.75m), strengthening its aviation cabin interior engineering capability. 2) STE won a S$68m contract from Singapore's Ministry of Defence to supply its new generation of Spider Light Strike Vehicles, illustrating its ability to continue developing new products. 3) The CFO of STE's American business interests, Vision Technologies Systems, Inc., was arrested by Corrupt Practices Investigation Bureau (CPIB). He was not charged and has been released on bail. Management believes this incident will not have a material impact on the group's operations. (Research Team)
CapitaMalls Asia: Buying a 50% stake in Suzhou mall
Summary: CMA announced that it would acquire 50% of a shopping mall, slated to complete after 2013, in the Suzhou city center. Given a development cost of ~RMB 22k per sqm GFA and the overall macro outlook, we believe the market would be neutral on this acquisition. Based on its 50% share, CMA is expected to invest ~RMB 3.37b (S$637m) in the mall with 310k sqm GFA (250k retail; 60k office). On a "look-through" basis, this transaction would increase CMA's retail mall exposure in China beyond that in Singapore when the mall completes construction. This is in line with management's growth strategy and we view this acquisition favorably given its strong location and reasonable pricing. We reiterate our thesis that possible capital recycling lies ahead and that the market has overly discounted CMA's price for a crisis scenario. Maintain BUYwith a fair value estimate of S$1.67. (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
NEWS HEADLINES
- MDA said it is getting out of the venture capital business, will scrap its co-funding investment schemes for media projects and replace it with grants instead.
- GLP said yesterday it had completed the refinancing of a JPY 47b (S$790m) debt one year ahead of maturity and at a lower interest cost at 1.42% compared with the previous 1.94%
- TTJ Holdings' net profit more than doubled to S$14m for the year ended Jul 31, 2011, attributable mainly to robust growth in structural steel and dormitory businesses.
- Marco Polo Marine has secured a ship-upgrading contract worth S$8.5m from existing third-party customer; company expects it to contribute positively to its FY12 earnings ending 30 Sep 2012.
- Gold miner LionGold Corp, formerly known as The Think Environmental Co Ltd, produced its first bar of gold, which it describes as 'an important milestone'.
- Parkson Retail Asia Pte, a unit of Malaysia's Parkson Holdings Bhd, will be selling shares in an IPO in Singapore next month, said two people with knowledge of the matter.
- Royal Dutch Shell shut down some units and evacuated non-essential staff at its Singapore refinery after a fire broke out in a pump room yesterday. The fire was contained and no one was seriously hurt.
- According to latest numbers from NUS' Institute of Real Estate Studies, prices of completed private apartments and condos (excluding small units) in the Central Region may well have peaked in May this year.
Company Name: SINGAPORE TECH ENGINEERING LTD
| Research House: OCBC | Price Call: BUY | Target Price: 3.37 |
Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED
| Research House: OCBC | Price Call: BUY | Target Price: 1.67 |
Market Pulse: ST Engineering and CapitaMalls Asia (29 Sep 2011)
FOCUS
Singapore Technologies Engineering Ltd: Right on track
Summary: Since our last report on 9 Sep 2011, the FTSE Straits Times Index has fallen 5.5% to 2,701 points, while Singapore Technologies Engineering Ltd (STE) displayed its defensive nature as its share price only fell slightly by 0.3%. We retain our fair value estimate of S$3.37 per share, which represents 14.6% upside, and we hence maintain our BUY call. Also, there have been three new recent developments. 1) STE said its American subsidiary will wholly acquire DRB Aviation Consultants, Inc. for US$1.45m (~S$1.75m), strengthening its aviation cabin interior engineering capability. 2) STE won a S$68m contract from Singapore's Ministry of Defence to supply its new generation of Spider Light Strike Vehicles, illustrating its ability to continue developing new products. 3) The CFO of STE's American business interests, Vision Technologies Systems, Inc., was arrested by Corrupt Practices Investigation Bureau (CPIB). He was not charged and has been released on bail. Management believes this incident will not have a material impact on the group's operations. (Research Team)
CapitaMalls Asia: Buying a 50% stake in Suzhou mall
Summary: CMA announced that it would acquire 50% of a shopping mall, slated to complete after 2013, in the Suzhou city center. Given a development cost of ~RMB 22k per sqm GFA and the overall macro outlook, we believe the market would be neutral on this acquisition. Based on its 50% share, CMA is expected to invest ~RMB 3.37b (S$637m) in the mall with 310k sqm GFA (250k retail; 60k office). On a "look-through" basis, this transaction would increase CMA's retail mall exposure in China beyond that in Singapore when the mall completes construction. This is in line with management's growth strategy and we view this acquisition favorably given its strong location and reasonable pricing. We reiterate our thesis that possible capital recycling lies ahead and that the market has overly discounted CMA's price for a crisis scenario. Maintain BUYwith a fair value estimate of S$1.67. (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
NEWS HEADLINES
- MDA said it is getting out of the venture capital business, will scrap its co-funding investment schemes for media projects and replace it with grants instead.
- GLP said yesterday it had completed the refinancing of a JPY 47b (S$790m) debt one year ahead of maturity and at a lower interest cost at 1.42% compared with the previous 1.94%
- TTJ Holdings' net profit more than doubled to S$14m for the year ended Jul 31, 2011, attributable mainly to robust growth in structural steel and dormitory businesses.
- Marco Polo Marine has secured a ship-upgrading contract worth S$8.5m from existing third-party customer; company expects it to contribute positively to its FY12 earnings ending 30 Sep 2012.
- Gold miner LionGold Corp, formerly known as The Think Environmental Co Ltd, produced its first bar of gold, which it describes as 'an important milestone'.
- Parkson Retail Asia Pte, a unit of Malaysia's Parkson Holdings Bhd, will be selling shares in an IPO in Singapore next month, said two people with knowledge of the matter.
- Royal Dutch Shell shut down some units and evacuated non-essential staff at its Singapore refinery after a fire broke out in a pump room yesterday. The fire was contained and no one was seriously hurt.
- According to latest numbers from NUS' Institute of Real Estate Studies, prices of completed private apartments and condos (excluding small units) in the Central Region may well have peaked in May this year.
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