MARKET PULSE: Lian Beng & Fortune REIT (12 April 2012)

Stock Name: Fortune Reit HK$
Company Name: FORTUNE REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target Price: 4.88

MARKET PULSE: Lian Beng & Fortune REIT

12 April 2012

KEY IDEA Lian Beng Group: Lower revenue and earnings Lian Beng Group (LBG) reported that both its revenue and PATMI in 3QFY12 fell 27% YoY to S$96.0m and S$10.4m respectively. Despite its operating profit margin improving by 2ppt to 12%, LBG's 3QFY12 PATMI fell in tandem with revenue due to lower one-off gains. The street, including ourselves, had previously not expected LBG's execution of construction projects to slow. Consequently, we lowered our estimates of LBG's FY12 revenue and PATMI by 16% and 10%. Though management remains cautiously optimistic of order flow in both public and private projects over the next 12 months, we reduce our fair value estimate of LBG to S$0.47/share, from S$0.51/share previously, but maintain our BUY rating. (Eric Teo) MORE REPORTS Fortune Real Estate Investment Trust: HK retail rent and price indexes at new highs Data released on Tuesday showed that the HK private retail rent and price indexes reached new highs in Feb. The retail rent index was 0.8% higher than the previous record in Nov 2011. The retail price index, which could be interpreted as a leading indicator for rents, was 1.5% greater than the previous high in Dec 2011. New Territories, where the majority of Fortune's malls are located, saw an increase of 15% in rent from Jan to Feb. The Dragon baby boom this year in mainland China and HK is a positive factor for retail sales in suburban malls like those owned by Fortune. Hence we maintain our BUY rating and HK$4.88 fair value. (Sarah Ong)

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NEWS HEADLINES - US stocks rebounded, ending a five-day slide as the corporate earnings season got off to a strong start and Spanish and Italian bond rates dropped. The S&P 500 Index rose 0.74%. - The gap between the yields on the 10-year bonds of China's biggest lenders to public works projects rose to 81.5bp on 10 Apr, the largest since Nov. Higher borrowing costs may make it more expensive to finance such projects. - Technics Oil & Gas Ltd registered revenue of S$49.8m for 2QFY12, a 42% YoY increase; while PATMI increased by 11% to S$6.0m. - IEV Holdings announced that it will receive a final cash dividend of ~US$0.94m from its associate company, CNG Vietnam. - AEM Holdings announced that the SGX has given in-principle approval to remove it from the watch-list with effect from today.