MARKET PULSE: CMT, KepLand, Cache Log, NOL, United Envirotech (19 Apr 2012)

Stock Name: CapitaMall
Company Name: CAPITAMALL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 2.02

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.32

Stock Name: CACHE
Company Name: CACHE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.11

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.38

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.50

MARKET PULSE: CMT, KepLand, Cache Log, NOL, United Envirotech

19 April 2012

KEY IDEA CapitaMall Trust: Enhancement works coming along smoothly CapitaMall Trust (CMT) reported 1Q12 distributable income of S$76.6m (DPU: 2.30 S-cents) which is 4.6% higher YoY. This is broadly in line with our expectations and make up 23% of our FY12 forecast. Topline came in at S$155.2m, up 0.4% YoY. 1Q performances across CMT's portfolio stayed firm; occupancy improved to 96% with pressure coming mostly from the Atrium due to enhancement works. Management also reported that JCube opened on 2 Apr 12, with 99% of NLA committed, and would contribute to earnings from 2Q12 onwards. We continue to like CMT for its AEI execution and believe that valuations remain attractive at current levels. Maintain BUY with an unchanged S$2.02 fair value estimate. (Eli Lee) MORE REPORTS Keppel Land: Chinese residential market still difficult Keppel Land (KPLD) reported 1Q12 PATMI of S$141.9m, up 70% YoY, mostly due to a bumper contribution from Reflections at Keppel after the handover of DPS units. 1Q12 topline was S$170m, down 52% YoY as property trading revenues fell. We judge 1Q12 PATMI (making up 38% of our annual forecast) to be mostly within expectations, given "lumpier" earnings post adoption of INT FRS 115. Grade A office rents fell 3.6% to S$10.60 in 1Q12. Given residual macro risks, we believe it is too early to call a bottom for the domestic office sector - a key driver for KPLD's share price. This risk is balanced out, however, by potential RNAV accretion given ample capital (16% net gearing) and sufficiently attractive valuations. Maintain HOLD with an unchanged fair value estimate of S$3.32 (35% discount to RNAV). (Eli Lee) Cache Logistics Trust: Positive start to FY12 Cache Logistics Trust's (CACHE) 1Q12 DPU of 2.086 S cents was in line with our expectations, forming 25.0% of our full-year estimate. As at 31 Mar, CACHE's portfolio properties remained 100% occupied with a combination of triple-net master leases and multi-tenanted lease structures. Management reiterated that there will be no lease renewal in 2012. This provides a significant amount of earnings visibility and stability. Following the recent private placement, we note that CACHE's aggregate leverage improved from 29.6% as at 31 Dec 2011 to 27.7%. This gives the REIT an estimated S$110m of additional debt headroom for future investment opportunities. Going forward, we believe CACHE will actively seek growth avenues to improve its DPU payout now that it is well capitalized. In the meantime, we understand that the acquisition of Pan Asia Logistics Centre at 21 Changi North Way is due to complete by end Apr. This is likely to provide marginal lift to its income. We make no changes to our forecasts as results were in line. Maintain BUY and S$1.11 fair value. (Kevin Tan) Neptune Orient Lines: Prices 5-year MTN issue at 4.25% Subsequent to Neptune Orient Lines' (NOL) announcement to issue S$-denominated senior notes under its US$1.5b Euro medium term note (MTN) programme, NOL has successfully priced S$400m worth of senior notes at an interest rate of 4.25% per annum. The notes are expected to be issued on 26 Apr 2012 and mature on 26 Apr 2017. NOL said proceeds from this issue will be used for general corporate funding purposes and investments. We maintain our fair value estimate of S$1.38/share and HOLDrating on NOL. (Eric Teo) United Envirotech: Bags two more China projects United Envirotech Ltd (UEL) has won two new projects in China. The first is a Transfer-Operate-Transfer (TOT) project in Shangzhi, Harbin city, Heilongjiang Province; UEL is investing RMB70m (S$14m) for the 30-year concession to operate the 40k m3/day treatment plant, which is expected to operate at full capacity in Jul 2012. UEL plans to fund the investment using proceeds from the KKR convertible bond issue as well as project financing. Separately, UEL won a RMB216m (S$43m) EPC contract to build a 100k m3/day drinking water plant in Yantai City, Shandong Province; the project will commence immediately and is expected to be done by end 2013. We will be speaking with management to get more details. For now, we maintain our BUY rating and we remain positive on UEL winning more contracts; we are placing our S$0.50 fair value under review. (Carey Wong)

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NEWS HEADLINES - US stocks fell as Intel and IBM reported slow sales growth and bad loans surged in Spain. The DJIA fell 0.6% and the S&P 500 Index fell 0.4%. Treasuries gained while oil dropped. - Qian Hu registered 1Q12 net profit of S$523k, down 48% YoY due to an oversupply of fish in Malaysia. At S$20.6m, revenue was ~15% lower than the previous year. - Renewable Energy Asia Group has secured approval from the Gansu government for the construction of a 9 MW solar farm. - China Auto Corp's associate, Neftech Pte Ltd, has secured a deal to install a fuel-saving system in the fleet of Pacific International Lines, the 19th largest container ship operator worldwide. - Qingmei Group Holdings expects to post lower 3Q12 sales due to a slowdown in domestic market demand. While 3Q12 profitability may be affected, it is likely to stay in the black for FY12.