MARKET PULSE: Oil and Gas, Fortune REIT (30 Mar 2012)

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.27

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.05

MARKET PULSE: Oil and Gas, Fortune REIT

30 Mar 2012

KEY IDEA Oil and Gas sector: Requires more than a release of strategic oil reserves Newswires such as Bloomberg and Reuters have reported that France is in talks with the US and Britain on a possible release of strategic oil reserves to push fuel prices lower. Of note is the fact that 2012 will be an election year for both the US and France, and politicians may have to placate voters' concerns about rising fuel prices. However, a coordinated international effort is required to have an impact on the oil markets, and even if this is achieved, we only expect a temporary downward pressure on oil prices unless a more fundamental driver (e.g. low fuel demand due to poor economic health in major consuming countries) emerges. Meanwhile, we maintain our Overweight rating on the broader sector, with Keppel Corporation [BUY, FV: S$12.27], STX OSV [BUY, FV: S$2.25] and Ezion Holdings [BUY, FV: S$1.05] as our preferred picks. (Low Pei Han) MORE REPORTS Fortune Real Estate Investment Trust: HK retail sales up for Jan, Feb 2012 For the first two months of 2012, HK retail sales climbed by 15.2% YoY to HK$77.0b. Jan sales had been up 14.9% YoY while Feb sales were even more bullish with an increase of 15.7% YoY despite Chinese New Year falling in Jan instead of Feb this year. The continuing growth in sales, coming on the back of a 25% jump in 2011 vs. 2010, should continue to support an increase in average retail rents. We believe that rents will grow given that the economies of HK and mainland China continue to expand. China is also currently maintaining its tariffs on luxury imports into the mainland, thus helping to support prime retail rents in HK and the cascade effect on suburban retail mall owners like Fortune. We maintain our BUY rating and HK$4.88 fair value. (Sarah Ong)

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NEWS HEADLINES - US stocks dipped as mixed local economic data and overseas concerns weighed on the market. S&P said that Greece may need to restructure its debt again. The S&P 500 Index closed 0.3% down at 1,400.78. - Cordlife, which began trading yesterday after its IPO, jumped more than 60% to an intraday high of 79.5 cents from its IPO pricing of 49.5 cents. It ended at 68 cents, 37% higher than the subscription price. - Elektromotive has proposed a rights issue to raise net proceeds of S$5.2m. The issue comes with free warrants which will bring gross proceeds to S$16m if fully exercised. - Nera Telecommunications has received orders totalling ~S$30.9m. - F&N announced yesterday that its subsidiary, HK-listed Frasers Property (China) Ltd., will be privatized. The company will be privatized by wholly-owned subsidiaries of F&N and Ascendas Land International Pte Ltd. - United Envirotech has signed an agreement to acquire a water supply plant and a wastewater treatment plant in Changyi City, Shandong Province, China. The total investment by the company is approximately RMB165m (~S$33m).