MARKET PULSE: SingPost, Tiger Airways, Olam, Cache Log, NOL, Starhill Global (31 Jan 2012)

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.14

Stock Name: TigerAir
Company Name: TIGER AIRWAYS HOLDINGS LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.60

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 2.63

Stock Name: CACHE
Company Name: CACHE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.19

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 1.02

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.70

MARKET PULSE: SingPost, Tiger Airways, Olam, Cache Log, NOL, Starhill Global

31 Jan 2012

KEY IDEA Singapore Post: Steady delivery in 3QFY12 Singapore Post (SingPost) reported a 0.6% YoY rise in revenue to S$149.4m but a 5.2% fall in net profit to S$41.6m in 3QFY12. 9MFY12 revenue and net profit were in line with our expectations, both accounting about 75% of our full-year estimates. However, 9MFY12 net profit made up 81.0% of the street's estimate. Logistics and retail posted improved revenues in 3QFY12, while mail saw lower contributions. Meanwhile, there is still room for additional increase in the group's net gearing ratio and the amount of share buyback that it can do. In line with its usual practice, SingPost has declared an interim dividend of 1.25 S cents/share. Maintain BUY with S$1.14 fair value estimate. (Low Pei Han) MORE REPORTS Tiger Airways: Still mired in losses Tiger Airways (TGR) last night reported a 1% YoY decline in its 3QFY12 revenue to S$168.4m and a net loss of S$17.4m. Management attributed the net loss to high fuel prices and restrictions on its Australia operations imposed by the Australian aviation authorities. In QoQ comparison, revenue grew 53% while net loss narrowed by 65% - a marked improvement from the suspension ravaged 2QFY12. Both TGR's Australia and Singapore operations also reported improved numbers, albeit still incurring operating losses. Consensus' estimate of TGR's FY12 losses will likely have to increase, causing downward pressures on TGR's share price. We lower our fair value estimate of TGR to S$0.60/share, derived from a P/B multiple of 1.9x, and downgrade it to SELL. (Eric Teo) Olam: Invests S$75m in RUSMOLCO Olam International has just announced a partnership with the Russian Dairy Company (RUSMOLCO) for the large-scale development of dairy and grains farming in the Penza region in Russia. Olam will make an initial investment of up to US$75m for a 75% stake in RUSMOLCO, effectively pricing its enterprise value of up to US$130m. Olam will further invest up to US$400m over the next four to five years in a phased manner to expand the area under grains cultivation from 52k hectares (ha) currently to 106k ha; RUSMOLCO will also increase its milking cow population from the current 3.6k heads to 20k. We view the move positively as it marks an important step towards implementing Olam's dairy and grains strategy. As before, we believe that demand for soft commodities, especially the essential food items, will continue to be supported by population growth in China and other developing countries. However, in view of the recent share-price run-up, we maintain our HOLD rating and S$2.63 fair value; we would be buyers close to S$2.35 or better. (Carey Wong) Cache Logistics Trust: Acquisition of Changi North warehouse Cache Logistics Trust (CACHE) announced last evening that it is acquiring a warehouse facility in Changi North International LogisPark from Pan Asia Logistics Singapore Pte Ltd via an acquisition and leaseback arrangement for S$35.2m. The building is a purpose-built 4-storey ramp-up warehouse with ancillary office space which was completed in 2011 and measures 196,988 sq ft in GFA (making up 2.9% of its existing portfolio GFA of 4.3m sq ft). Management guided that the starting NPI yield of the property is ~7.7%, in line with its existing portfolio average. We expect the acquisition to be fully funded by debt, which is likely to raise CACHE's aggregate leverage to 32.6% from 29.6% previously. We are maintaining our BUY rating and S$1.19 fair value on CACHE. (Kevin Tan) NOL: Dec 2011 operating performance Neptune Orient Lines (NOL) last night announced its container shipping operating performance for Period 12, six weeks from 19 Nov 2011 to 30 Dec 2011. Period 12 volume fell 9% YoY to 357,909 forty-foot equivalent units while average revenue per FEU fell 14% YoY to US$2,265/FEU. Adjusting for the longer Period 12 in 2010, container shipping volumes actually increased 6% YoY. Separately, the freight rate increases in recent weeks have provided some optimism to the container shipping sector. This increase can be attributed to the surge in shipping demand before the factories in China close for the Chinese New Year holidays, especially after the Journal of Commerce reported on 26 Jan 2012 that average spot rates on the Asia-Europe trade lane fell 2.6% after five consecutive weeks of increases. Meanwhile, bunker fuel prices (BUNKSI38 Index) have been increasing. The BUNKSI38 Index increased by 2% QoQ in 4Q11. And thus far in 1Q12, it has increased another 8%. While it is still uncertain if freight rates can hold up post the Chinese New Year holidays, bunker fuel prices have already increased significantly. Thus, we maintain our SELL rating on NOL, with a fair value estimate of S$1.02/share. (Eric Teo) Starhill Global REIT: Consistent set of 4QFY11 results Starhill Global REIT (SGREIT) reported 4Q11 NPI of S$36.5m and distributable income of S$22.2m, down 0.6% and 4.7% YoY respectively. The slight decline in earnings was mainly due to lower contribution from Singapore properties and higher expenses at Chengdu and Japan properties. 4Q DPU came in at 1.01 S cents (-2.9% YoY), bringing the full-year DPU to 4.12 S cents. This is roughly in line with both our and consensus DPU forecast of 4.2 S cents. Management guided that the asset redevelopment at Wisma Atria is on track for completion by 3Q12, but vacancy periods till lease commencement may continue to impact the property's performance over the next two quarters. We note that SGREIT is in a comfortable financial position, with aggregate leverage at 30.8% and no major debt refinancing until 2013. We are placing our Buy rating and S$0.70 fair value UNDER REVIEW pending the analyst briefing later in the day. (Kevin Tan)

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NEWS HEADLINES - The euro weakened 0.7% as Greece's discussions with the EU for a second aid package could not be finalized yesterday. The S&P 500 fell 0.3% and copper retreated 1.6%, the most in three weeks. - US stock losses were trimmed as the Fed said that demand for business loans increased in the forth quarter as economic growth accelerated. Demand from small US businesses for loans increased by the most in any quarter since 2005. - Fortune REIT, which has a portfolio of 14 retail properties in HK, announced its FY11 results ended 31 Dec. Total revenue increased 6.5% and income available for distribution increased 9.0%. - Cerebos Pacific announced that net profit fell 20% to S$34.1m for its 4Q11 as sales in its top market Thailand were hit by flooding. For the full year, Cerebos reported sales S$977m and a net profit of S$100.1m. - Centurion Corporation announced today that it has successfully been awarded a bid to acquire an 85% equity interest in Dormitory Investments Pte Ltd, which owns a foreign workers' dormitory in Tuas.