MARKET PULSE: Cache Log, Midas, DBS, KSH, Lian Beng & Tiger Airways (11 April 2012)

MARKET PULSE: Cache Log, Midas, DBS, KSH, Lian Beng & Tiger Airways

11 April 2012

KEY IDEA Cache Logistics Trust: Gearing up for growth Cache Logistics Trust (CACHE) had recently announced the close of its private placement of 60m new units at an issue price of S$0.985 apiece. We estimate CACHE's aggregate leverage to drop to ~26% following the placement. This provides the REIT with additional debt headroom of ~S$120m, which is strong enough to capitalize on any attractive growth opportunities as they arise. In relation to the placement, CACHE also announced an advanced distribution of its distributable income for the period from 1 Jan to 29 Mar 2012. The quantum was initially guided at ~2 S cents, and is in line with the DPU of 1.95 S cents and 2.10 S cents seen in 1Q11 and 4Q11 respectively. Assuming that CACHE distributes 100% of its income for the quarter, this is consistent with our expectation that the REIT is likely to showcase another set of stable performance in 1Q12. We maintain our BUY rating with a revised fair value of S$1.11 on CACHE, after adjusting for the private placement. (Kevin Tan) MORE REPORTS Midas Holdings: More positive signals, but near term outlook still hazy In our opinion, Midas Holdings (Midas) could report a lacklustre set of results during the upcoming 1Q12 reporting season, given the challenging conditions still present in China's railway sector. While near term uncertainties remain, there are once again positive signals from the Chinese government on the longer-term sustainability of China's railway sector. We lower our FY12 and FY13 PATMI projections by 4.7% and 2.5%, respectively, on higher financial costs and operating expenses assumptions. Consequently, our fair value estimate declines from S$0.39 to S$0.375, still based on 11x FY12F EPS. Maintain HOLD. (Wong Teck Ching Andy) DBS: Injecting more funds into China DBS announced this morning that it is planning to inject RMB2.3b (about S$460m) into its China operation, DBS China. The funds will mainly be deployed into its network expansion, headcount growth, infrastructure upgrades, consumer and corporate internet banking platform enhancements, and other technology developments. At the current moment, DBS China has 10 branches and 15 sub-branches in China and is mainly engaged in wealth management, institutional banking, cash management and treasury and markets. We deem this as a positive move to strengthen its longer term presence and operations in China. As a recap, DBS China generated RMB500m of net profit in 2011. As expected, DBS's share price has come off since the announcement of its acquisition of Bank Danamon, down some 92 cents or 6.5% to S$13.26 yesterday. We have a BUY rating on DBS with fair value estimate of S$15.40. (Carmen Lee) Lian Beng Group and KSH Holdings: JV to redevelop King Albert Park Lian Beng Group (LBG) and KSH Holdings (KSH) last night announced they would form part of the consortium, Oxley Sanctuary Pte. Ltd., that acquired 11 King Albert Park for S$150m. LBG and KSH are expected to have effective stakes of 15% and 12.6% in Oxley Sanctuary, respectively. Assuming development charges of S$66m and a potential GFA of 16,604 sqm, this translates to a total land cost of S$1,207 psf for the site. We expect the freehold site, which has a land area of 5,535 sqm zoned for residential and commercial use, to be redeveloped. Both LBG and KSH indicated that they would finance this project by internal funds and/or bank borrowings and does not expect any material impact on their financial performances for the current financial year. We maintain our BUY rating and fair value estimate of LBG at S$0.51/share. Similarly, we maintain HOLD on KSH with a fair value estimate of S$0.25/share. (Eric Teo, Eli Lee) Tiger Airways: Capacity fell significantly again Tiger Airways (TGR) last night reported that it recorded a passenger load factor (PLF) of 84% in Mar 2012. This is the second month in a row that TGR has reported a PLF higher than 80%. However, similar to a month ago, the seemingly decent PLF can be attributed to a big reduction of seat capacity. TGR's seat capacity in Mar 2012 dipped 20% YoY to 542k while the number of passengers it served fell slightly more at 21% YoY to 455k. A real improvement in TGR's operating statistics should only happen later this year when Tiger Airways Australia ramps up its capacity to 64 sectors/day. Meanwhile, we maintain our SELLrating and fair value estimate of S$0.60/share on TGR. (Eric Teo)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks suffered their biggest loss of the year on Tuesday as a surge in Spanish and Italian bond yields fuelled worries that the European debt crisis is worsening. The DJIA and S&P 500 Index both dropped 1.7%. - CSC Holdings has been awarded another foundation contract for a MRT station under the Tuas West Extension project. As at 9 Apr 2012, CSC's order book stands at S$270m. - Metax Engineering Corp. has been awarded a ~S$12.7m contract for a water treatment plant in Melaka, Malaysia. - Asia-Pacific Strategic Investments' subsidiary has entered into an agreement to sells its entire equity interest in U&U Memorial Corporation (M) Sdn Bhd for an expected gain of MYR1.6m. - KLW Holdings said that it is unable to issue an opinion on the adequacy of its internal controls in its FY11 annual report. The in-house internal auditor had resigned in the second half of FY11.