MARKET PULSE: CDL Hosp, FCOT, Roxy, SMM, SIAEC, SATS (17 Feb 2012)

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: BUY

Target Price: 2.00

Stock Name: Frasers Comm
Company Name: FRASERS COMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 0.94

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.63

Stock Name: Roxy-Pacific
Company Name: ROXY-PACIFIC HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.45

Stock Name: SIA Engg
Company Name: SIA ENGINEERING CO LTD

Research House: OCBC

Price Call: BUY

Target Price: 3.88

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 2.43

MARKET PULSE: CDL Hosp, FCOT, Roxy, SMM, SIAEC, SATS

17 Feb 2012

KEY IDEA CDL Hospitality Trusts: Riding multiyear hotel industry growth We project that hotel room demand in Singapore will grow at 6.4% p.a. for 2012-2015, while high-end hotel room supply will increase by only 3.0% p.a. With ~80% of its revenue from high-end Singapore hotels, CDLHT is well-poised to benefit from multiyear growth in the local hotel industry, and we note few other liquid alternatives to play the high-end hotel subsector. CDLHT consists of a REIT and a dormant business trust. We project dividend yields of 7.2% and 7.6% for 2012 and 2013. The balance sheet is healthy with high interest coverage of 8.9x. With current gearing at 25%, the REIT has ~S$520m in debt headroom to finance yield-accretive acquisitions this year and next, which would serve as positive price catalysts. We initiate with a BUY rating and S$2.00 fair value.(Sarah Ong) MORE REPORTS Frasers Commercial Trust: Acquires 50% interest in Caroline Chisholm Centre Frasers Commercial Trust (FCOT) yesterday announced the proposed acquisition of the remaining 50% interest in Caroline Chisholm Centre (CTL) for AUD83.0m (S$112.6m). We are positive on the investment as it is likely enhance FCOT's portfolio lease expiry profile and provide stability in income growth. Assuming the acquisition was financed by bank borrowings and internal funds, management guided that it is expected to add 0.32 S cents or 5.6% to its DPU. Our DDM based fair value is now lifted to S$0.94 from S$0.87 previously, after factoring in the acquisition. Maintain BUY on FCOT. (Kevin Tan) Roxy-Pacific Holdings: 4Q11 results within expectations ROXY announced 4Q11 PATMI of S$11.4m - down 5% YoY. Full year PATMI cumulated to S$49.7m (up 16% YoY), which was 8.5% above our FY11 forecast mostly due to fair value gains. Adjusting for one time gains, FY11 PATMI would be in line with our forecast. A final cash dividend of 2.0 S-cents was proposed, versus 1.5 S-cents last year. We saw positive figures at new launches over 4Q11 - 68% and 66% sold at Centropod@Changi and Treescape (Telok Kurau) respectively. ROXY currently sits on progress billings of S$598.6m which would support earnings from FY12-FY15. The challenge ahead, in our view, lies in acquiring land-bank prudently in an uncertain environment to support further sales and that, in addition to sales at major launches in 1H11, would drive the share price ahead. Maintain HOLD but raise our fair value to S$0.45 (40% RNAV discount) from S$0.41 previously to reflect a stronger valuation of GMRH (S$0.4m per key). (Eli Lee) Sembcorp Marine: Secures US$213m jack-up rig Sembcorp Marine (SMM) announced that its subsidiary, PPL Shipyard, has secured a US$213m contract to build a Pacific Class 400 jack-up drilling rig, which is a proprietary design of PPL. The customer is Safin Gulf, and this rig will be part of its new rig fleet as part of its strategic expansion into the offshore business. We look at SMM's last three orders of the Pacific Class 400 jack-up (in late 2010 and early 2011) and note that the average price then was about US$185m. Besides higher equipment costs, the 15% higher price tag for this latest rig could be mainly due to the shorter-than-usual delivery time (the rig is likely to be currently under construction). SMM's stock has done well in the past two months, as its price has risen about 38% YTD. However, as potential Petrobras' orders may materialize soon, we maintain our BUYrating with fair value estimate of S$5.63 for now. (Low Pei Han) SIA Engineering: Secures VietJet Air's contract SIA Engineering Co Ltd (SIAEC) announced another contract win last night. The latest is an Inventory Technical Management (ITM) services agreement with VietJet Air, a low-cost airline based in Hanoi. The five-year contract will cover VietJet's fleet of six A320 aircraft. SIAEC will provide ITM services such as spares pooling and support, as well as component repair and overhaul. SIAEC said the transaction is not expected to have a material impact on its financial performance in FY12. With an estimated dividend yield of 4.5%, we currently have a fair value estimate of S$3.88 per share and BUY rating on SIAEC. (Eric Teo) SATS Ltd: New partners in Beijing JVs SATS Ltd (SATS) announced that China Eastern Airlines and China Southern Airlines will enter as new shareholders in its two joint ventures with Capital Airports Holding Company. The two joint ventures are Beijing Aviation Ground Services (BGS) and Beijing Airport Inflight Kitchen (BAIK), which have operating rights at Beijing Capital International Airport till 2014 and 2013 respectively. The introduction of these two new shareholders will see SATS' stakes in the two JVs diluted from 40% to 28% each. Subject to regulatory approval, this new agreement will serve to renew the respective operating tenures of BGS and BAIK. Neither transaction is expected to have any material impact on SATS' NTA or EPS in the current financial year. We maintain our fair value estimate of SATS at S$2.43 per share and HOLD rating on SATS. (Eric Teo)

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NEWS HEADLINES - US stocks advanced, sending the S&P 500 Index up 1.1% to 1,358.04, near the highest level in three years, after better-than-expected data on jobless claims, housing starts and manufacturing bolstered confidence in the economy. - The euro rose 0.6% to US$1.3141 as European governments consider cutting rates on emergency loans to Greece and using contributions from the ECB to fill the financing gap in the second bailout of Greece. - Creative Technologies soared 71.5% yesterday to a year-high close of S$4.15 after it had announced a tablet platform named the HanZpad, a new media processor called ZMS-40 and a Chinese operating system.. - Kingsmen Creative, a Mainboard listed communications design and production group, announced yesterday that it has been awarded a Universal Studios Singapore contract worth S$18.0m, which should contribute positively to EPS and NTA for FY12.