MARKET PULSE: NOL, SingPost, LMIRT, Raffles Med, MMH (30 Apr 2012)

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.14

Stock Name: LippoMalls
Company Name: LIPPO MALLS INDO RETAIL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 0.45

Stock Name: Micro-Mech
Company Name: MICRO-MECHANICS (HOLDINGS) LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.29

MARKET PULSE: NOL, SingPost, LMIRT, Raffles Med, MMH

30 Apr 2012

KEY IDEA Neptune Orient Lines: Shanghai-Europe rates up again; upgrade to BUY Summary: The Shanghai (Export) Containerised Freight Index (SCFI) climbed 4% WoW in the week ended 27 Apr 2012. Shanghai to Europe freight rates gained 11% WoW, while Shanghai to Mediterranean rose 13% WoW, ahead of major shipping liners' announced general rate increase in Asia-Europe freight rates on 1 May 2012. Neptune Orient Lines' (NOL) share price has fallen 17% from its recent high of S$1.45/share on 3 Apr 2012 but the correction does not seem warranted. The SCFI is currently 43% higher than this time last year and shipping liners, including NOL, are profitable at current freight rates. Although there are concerns over increasing container shipping capacity, shipping liners seem to have learnt their lesson and are now using slow steaming to manage shipping capacity and refraining from price wars. We upgrade our rating on NOL to BUYand maintain our fair value estimate of S$1.38/share. (Eric Teo) MORE REPORTS Singapore Post: Dividends likely to remain intact despite transformation Summary: Singapore Post (SingPost) reported a 2.2% rise in revenue to S$578.5m but a 11.8% fall in net profit to S$142.0m in FY12, which were within our expectations. The logistics and retail divisions posted improved revenues in 4QFY12, while mail turnover remained steady. The group is pursuing a transformation programme for its future but we do not see this impacting the group's dividend payouts. Similar to last year, SingPost has declared a final dividend of 2.5 S cents per share, bringing the total dividend for the year to 6.25 S cents. The stock price has risen by about 9.0% since we upgraded it from Hold on 5 Jan, but we still see an upside potential of 17.3% (includes forecasted dividend yield of 6.1%) based on our DDM-derived fair value estimate of S$1.14. Maintain BUY. (Low Pei Han) Lippo Malls Indo Retail Trust: NPI boosted by acquisitions Summary: Lippo Malls Indonesia Retail Trust (LMIRT) reported 1Q12 NPI of S$30.9m and distributable income of S$15.0m, up 38.0% and 18.5% YoY. The strong performance was due primarily to a full-quarter contribution from the acquisition of two retail malls in 4Q11. DPU for the quarter was at 0.69 S cents (18.6% of our full-year forecast), lower than the DPU of 1.17 S cents registered a year ago due to a 1-for-1 rights issue in 4Q11. However, on a QoQ basis, it represents a significant improvement of 30.2%. As at 31 Mar, LMIRT's portfolio occupancy stood at 94.5% (94.1% in prior quarter), well above Indonesia's retail industry average occupancy rate of ~87.6%. In addition, its aggregate leverage was also healthy at 9.2%, with no refinancing requirements until Jun 2014. We are putting our BUY rating and fair value of S$0.45 under reviewas we adjust our estimates to incorporate the results. (Kevin Tan) Raffles Medical Group: 1Q12 earnings slightly below expectations Summary: Raffles Medical Group (RMG) reported its 1Q12 results this morning. Revenue was within our expectations but PATMI was slightly below. Revenue increased 13.2% YoY and 0.9% QoQ to S$72.9m, forming 23.2% of our full-year estimates. EBIT improved 11.0% YoY but fell 20.6% QoQ to S$14.2m, while PATMI was up 10.9% YoY but declined 29.6% QoQ to S$11.6m, meeting 19.6% of our FY12 forecasts. 1Q is typically RMG's weakest quarter, which explains the significant sequential drop in its earnings. We note also that approximately 15,000 sf of 'newly created' medical space at its Raffles Hospital would begin contributing from 2Q12, and hence we are expecting a stronger 2H (versus 1H). Both its Hospital Services and Healthcare Services divisions contributed positively, with revenue growth of 15.3% and 7.4%, respectively. This was driven largely by a higher patient load and acuity. We will provide more details on the outlook of RMG after the analyst briefing today. Until then, we place our BUY rating and S$2.66 fair value estimate (24x FY12F EPS) under review. (Wong Teck Ching Andy) Micro-Mechanics: 3QFY12 results within expectations Summary: Micro-Mechanics Holdings (MMH) reported its 3QFY12 results which were in line with our expectations. Revenue declined 15.8% YoY to S$9.4m, or 2.9% higher than our forecast. Net profit slumped 47.8% YoY to S$0.9m and was just 0.4% above our projections due largely to higher-than-estimated effective tax rate. Sequentially, revenue and net profit rose 7.2% and 16.7%, respectively, despite 3Q being a seasonally weaker quarter. We believe this provides a positive signal that MMH could experience gradual improvement moving forward, in line with the recovery in the semiconductor industry. For 9MFY12, topline fell 16.8% to S$28.4m, while bottomline dipped 47.6% to S$2.9m. On a segmental basis, sales for MMH's Semiconductor Tooling (SET) and Custom Machining & Assembly (CMA) divisions decreased 13.8% YoY (+5.1% QoQ) and 24.1% YoY (+18.4% QoQ), respectively. Nevertheless, MMH managed to maintain its gross margin for its SET segment at 53.1%. Although gross margin for its CMA segment slid from 12.8% in 3QFY11 to 12.0% in 3QFY12, there was an encouraging improvement of 11.9ppt on a sequential basis. We will provide more details after the analyst briefing. Meanwhile, our HOLD rating and S$0.29 fair value estimate is under review. (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks climbed on Friday and posted their best weekly gains in a month after better-than-expected earnings from Amazon.com and Expedia Inc boosted confidence in corporate performance. - Ho Bee's 1Q12 revenue fell 51% YoY to S$38.7m, while PATMI declined 71% to S$15.8m. - Sino Grandness posted 1Q12 revenue of RMB285.5m, up 61% YoY. PATMI increased by 81% to RMB56.7m. - Treasury China Trust reported 1Q12 revenue of S$26.0m, up 33.5% YoY. Earnings per unit increased 11% YoY to 3.0 S-cents. - Serial System's sales for 1Q12 declined 4% YoY to S$182m. PATMI declined by 43% YoY to S$1.8m.