MARKET PULSE: FCT, Suntec REIT, CMA (25 Apr 2012)

Stock Name: SuntecReit
Company Name: SUNTEC REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.20

Stock Name: FrasersCT
Company Name: FRASERS CENTREPOINT TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.74

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.79

MARKET PULSE: FCT, Suntec REIT, CMA

25 April 2012

KEY IDEA Frasers Centrepoint Trust: Laudable set of 2Q results Frasers Centrepoint Trust (FCT) delivered a strong set of 2QFY12 results that exceeded our expectations. While the portfolio occupancy dipped 4.0ppt QoQ to 93.5% during the quarter, the fall was temporary and is expected to improve going forward. For 2HFY12, FCT anticipates its positive performance to be sustained, as it continues to benefit from positive rental reversions and stronger performance at its malls. Management also reveals that the injection of Changi City Point may not happen in the near future, but it is exploring other ways to optimize yields, such as AEIs and joint developments with its sponsor. We note that FCT's aggregate leverage is at a strong 30.9%. This positions the REIT well to pursue its growth plans. Maintain BUY with a revised fair value of S$1.74 (S$1.68 previously) after factoring in the 2Q results. (Kevin Tan) MORE REPORTS Suntec REIT: Holding up well Suntec REIT reported 1Q12 DPU of 2.453 S cents, forming 26.8% of our full-year projection. For 2012, management guided that only 7.5% of its office leases are due to expire and that the renewals achieved to-date were strong. As such, it is confident that its office portfolio would surpass its performance in previous year. Suntec also shed more light on Suntec City's impending asset enhancement initiative in Jun, saying that ~193,000 sqft of retail NLA will be closed progressively in phases for Phase 1 works. Upon completion in 2Q13, the NLA is likely to increase to 380,000 sqft. According to management, the projected rental enhancement of 25% and ROI of 10.1% also appear to be on track. We now revise our NLA and rental assumptions for FY12-15. This raises our fair value from S$1.10 to S$1.20. Maintain HOLD. (Kevin Tan) CapitaMalls Asia: Mall acquisition in South Beijing CapitaMalls Asia (CMA) reported 1Q12 PATMI of S$66.8m (1.7 S-cents per share) which is 36.1% higher YoY mainly due to revaluation gains (S$30.7m) from three malls in Japan and contributions from Queensbay Mall, partially offset by the absence of contributions from The Orchard Residences and retail bonds issuance costs. Accounting for revaluation gains, we judge 1Q12 results to be somewhat below consensus and our expectations, making up only 16% of our FY12 forecast. 1Q12 topline came in at S$70.9m - 41.2% higher YoY and more broadly in line with expectations. Management also announced that it would acquire from Poly Xing Real Estate Development a site for a shopping mall in Daxing District in the south of Beijing. The total development cost is expected to be RMB2,343m (S$469.2m) or ~RMB19,190 psm GFA. We will discuss these developments further with management this morning and, in the meantime, put our BUY rating and fair value of S$1.79 UNDER REVIEW. (Eli Lee)

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NEWS HEADLINES - US stocks climbed as new home sales exceeded forecasts and 3M and AT&T Inc. recorded better-than-expected earnings. Apple's 2Q12 earnings jumped 94% YoY. - Construction contractor Ryobi Kiso Holdings and its partner have secured a ~S$10.2m contract in Ho Chih Minh, Vietnam. Ryobi Kiso now has S$79.7m worth of contracts secured YTD. - Liang Huat Aluminium expects to report a loss for 1Q12 due to a drop in revenue, cost overrun in certain aluminium projects and seasonal factors in the vehicle traction system segment. - First Ship Lease posted a 1Q12 net loss of US$4.17m, more than the US$2m loss last year. DPU was cut to 10 US-cents from 95 US-cents a year ago. - Offshore oil and gas contractor IEV Holdings has won a two-year, US$5m contract from PT Unilever Indonesia.