MARKET PULSE: First REIT, Ezion, Tiger Airways and Micro-Mechanics (30 Jan 2012)

Stock Name: First REIT
Company Name: FIRST REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target Price: 0.89

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.97

Stock Name: Micro-Mech
Company Name: MICRO-MECHANICS (HOLDINGS) LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.305

Stock Name: TigerAir
Company Name: TIGER AIRWAYS HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.65

MARKET PULSE: First REIT, Ezion, Tiger Airways and Micro-Mechanics

30 Jan 2012

KEY IDEA First REIT: Undaunted by volatile macroeconomic environment Summary: First REIT (FREIT) reported its 4Q11 results which were within our expectations. For FY11, gross revenue increased 78.4% to S$54.0m and was just 0.2% higher than our full-year projection. Distributable income to unitholders rose 105.8% to S$43.9m, in line with our forecast of S$41.9m if we exclude a special S$2.2m distribution in 4Q11. DPU for FY11 was 7.01 S cents, versus 6.63 S cents in FY10, and translates into an attractive yield of 9.1%. We believe that FREIT could acquire new hospitals in FY12. This would likely be debt funded given its ample debt headroom. Maintain BUY with a revised RNAV-derived fair value estimate of S$0.89 (previously S$0.84) as we roll forward our valuations and update our terminal capitalisation rates and Indonesian asset discount rates assumptions. (Wong Teck Ching Andy) MORE REPORTS Ezion Holdings: Growing the service rig business Summary: Ezion Holdings (Ezion) recently announced that it has clinched a charter contract worth about US$93.5m to provide a service rig for a period of 4.5 years. This is the third service rig contract that Ezion has clinched, and its ability to leverage on its network to clinch contracts from major oil companies has been impressive, along with the decent forecasted returns on equity. We are positive on this development due to the decent forecasted ROE, management's previous working relationship with the customer, as well as the project's ability to generate a steady stream of earnings within a short period of time, barring any hiccups. Maintain BUY with S$0.97 fair value estimate. (Low Pei Han) Micro-Mechanics: Lacklustre 2QFY12 results Summary: Micro-Mechanics (MMH) reported a lacklustre set of 2QFY12 results. Although we had already factored in the tepid industry conditions and impact from the suspension of its Thailand operations in our assumptions, MMH's performance still came in below our expectations. Net profit dipped 58.5% YoY and 39.9% QoQ to S$0.7m on the back of a 23.6% YoY and 15.9% QoQ decline in revenue to S$8.7m. For 1HFY12, revenue of S$19.1m (-17.3%) formed 46.9% of our full-year forecast while net profit of S$2.0m (-47.5%) constituted 42.2% of our FY12 estimates. Both MMH's Semiconductor Tooling (SET) and Custom Machining & Assembly (CMA) segments fared badly, with YoY declines in sales and gross margins. The increase in operating expenses as a percentage of revenue also culminated in a 7.2 ppt YoY fall in its net margin to 8.6% for 2QFY12. A cash dividend of 1 S cent was declared, in line with our expectations and payable on 23 Feb 2012. We will provide more details after the analyst briefing. For now, our Hold rating and S$0.305 fair value estimate is under review. (Wong Teck Ching Andy) Page 1 of 1 TIGER AIRWAYS: 33% STAKE IN MANDALA AIRLINES Summary: Tiger Airways Holdings Limited (TGR) announced today it has completed the share subscription agreement with PT Mandala Airlines ("Mandala") for 22,618,594 new Class C shares in the issued share capital of Mandala, representing approximately 33% of the enlarged issued capital. The terms of this agreement was previously announced on 23 Sep 2011 - TGR is subscribing for shares amounting to 33% of Mandala Airlines (Mandala) at a cost of US$1 cash and the provision of technical know-how. As we have previously mentioned, this is a positive development to TGR since such joint-ventures should help to absorb TGR's expected new aircraft deliveries for the rest of FY12. We have a HOLDrating on TGR, with a fair value estimate of S$0.65/share. (Eric Teo)

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NEWS HEADLINES - US economy grew at 2.8% annualized rate in the three months through Dec, lower than the forecast of a 3% increase. This dims the earnings outlook for Asian exporters and sent Japanese stock futures and Australian equities down. - A disorderly Greek default appears less likely as Greece and private investors in their bonds have reached a tentative deal to reduce the country's debt and enable it to receive a €130b bailout. - Fragrance Group and Aspial Corporation started the preview of Parc Rosewood in Woodlands on Saturday. The price range for Parc Rosewood has been adjusted downwards 8-10% to S$925-998 psf, to offset any impact on sales from the additional buyers' stamp duty. - Catalist-listed SBI Offshore has secured US$30m of new orders less than a month into 2012 from major rig builders in Asia and leading international drilling contractors to bring its total order book to US$36.1m, ~6x its US$6.1m order book a year ago. - Bemax Resources has agreed to purchase a number of heavy mineral tenements from Simto Resources for AUD$25m. The acquisition should significantly add to the company's resources base and mining operations in Western Australian's South West.