MARKET PULSE: First REIT, Tiger Airways (29 Jun 2012)

Stock Name: First REIT
Company Name: FIRST REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target Price: 0.96

Stock Name: TigerAir
Company Name: TIGER AIRWAYS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.76

MARKET PULSE: First REIT, Tiger Airways

29 Jun 2012

KEY IDEA First REIT: In anticipation of DPU accretive acquisitions We conduct a scenario analysis on possible acquisition targets by First REIT (FREIT) from its sponsor Lippo Karawaci (Lippo). This works out to an estimated DPU accretion ranging from 9-13% in FY13, assuming that two hospitals are acquired for ~S$88.9m and fully-debt funded. Meanwhile, FREIT has also secured a fresh 4-year S$168m transferable term loan facility, thus allowing the group to refinance its maturing debt and to fund its future acquisitions. FREIT's next refinancing requirement would only come in Jan 2015 (~S$49.4m). Given the ongoing macroeconomic uncertainties, we opine that investors can find investment merits offered by FREIT's defensive income and stability from its long-term master leases. We upgrade FREIT from hold to BUY, with a higher RNAV-derived fair value estimate of S$0.96 (previously S$0.935) as we incorporate our base case assumptions for new acquisitions in our model. (Wong Teck Ching Andy) MORE REPORTS Tiger Airways: Lower fuel prices aid recovery; upgrade to BUY The SGD-adjusted jet fuel price (JETKSIFC Index) is currently trading at 10% below the average of jet fuel prices in the current quarter, which is in turn 7% QoQ lower. Since fuel cost contributes to more than 40% of Tiger Airways' (TGR) operating costs, it should be able to achieve ~S$5m of savings in fuel cost in 1QFY13. Tiger Australia will begin operations in Sydney as its second base in 2QFY13 and Tiger Singapore will be moderating its capacity expansion in FY13. With Tiger Australia flying more sectors and lowering its unit fixed cost and Tiger Singapore more focused on improving yields and load factors, TGR's profitability is poised to considerably improve in FY13. Factoring in lower jet fuel prices and the expected improvement in TGR's operations, we upgrade TGR's rating to BUY and increase our fair value estimate of TGR from S$0.67/share to S$0.76/share. (Eric Teo)

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

NEWS HEADLINES - US stocks closed down slightly as a late-session recovery was driven by speculation of a breakthrough in Europe's efforts to solve its debt crisis. The S&P 500 Index and the Dow both closed down 0.2%. - LionGold Corp is acquiring a strategic stake of 11.2% in Citigold Corp Ltd, making it the largest single shareholder in the gold mining company. Listed on ASX, Citigold owns Australia's highest-grade gold field at Charters Towers. - Keppel Offshore & Marine's yards in the US and Azerbaijan have won contracts worth about US$70m. - CNA Group has won a S$9.1m contract to upgrade 48 MRT stations in Singapore with the new local sequential controller system. The company's order book is S$71.4m. - IPCO International registered a net profit of S$33.5m for FY12, down 45%. Revenue was 10% lower at S$50.2m. - Keppel Land has broken ground for the International Financial Centre Jakarta Tower 2, Indonesia's first BCA Green Mark GoldPLUS office tower.

Maybank raises target on NOL

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: Maybank Kim Eng

Price Call: SELL

Target Price: 0.95

Maybank Kim Eng raised its target price on container shipping firm Neptune Orient Lines to $0.95 from $0.85, but kept its ’sell’ rating.

NOL shares were down 0.9% at $1.09 on Thursday and have fallen around 3% so far this year, underperforming the broader Straits Times Index.

Maybank Kim Eng said freight rates and fuel costs have shown signs of improvement and if this continues, they would help to stabilise NOL’s prospects in the near term.

The broker added that NOL might even break even for the remaining three quarters of the year after a poor first quarter. NOL reported January-March net loss of US$254 million ($324 million), much wider than a loss of US$10 million a year ago.

But overcapacity in the industry looks set to last until the end of 2013 and the global economy is still uncertain, Maybank said, adding that it is sceptical about the sector’s ability to continue relying on liner cooperation to sustain a freight rate recovery.

SPH a top defensive play: Macquarie

Stock Name: SPH
Company Name: SINGAPORE PRESS HLDGS LTD

Research House: MacQuarie

Price Call: BUY

Target Price: 4.24

Macquarie Equities Research said Singapore Press Holdings (SPH) is one of the best picks in the Singapore market because of its low valuation and expected dividend yield of 6.6%.

Macquarie, which has an outperform rating on SPH and a 12-month price target of $4.24, said that after stripping out the firm’s mall business, its monopoly media business is valued at an “unjustifiably low” 8.6 times price-earnings.

It added SPH’s dividend is sustainable because of low debt-to-equity ratio of 0.3 and robust cash flows of $328 million.

SPH shares were last traded at $3.80, an increase of 0.26%. The stock has been range-bound between $3.50 and $4.20 since 2009, Macquarie said.

OCBC raises Sembcorp Marine target

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.71

OCBC Investment Research raised its target price on Singapore’s Sembcorp Marine, the world’s second-largest rig builder, to $5.71 from $5.13 and maintained its buy rating.

Sembcorp shares closed at $4.40 on Tuesday and had risen 15% so far this year, compared to a 6% gain in the broader Straits Times Index.

Sembcorp’s share price has underperformed its rival Keppel Corp since late February, dropping by about 13.9% versus Keppel’s 8.7% fall, OCBC said.

OCBC cited Sembcorp’s disappointing first-quarter earnings, risk aversion which affected the higher-beta stock, and a recovery in sentiment for property stocks that bolstered Keppel which has property arm Keppel Land.

OCBC said this may reverse in the coming months as it still holds a positive view on the premium offshore rig market, Sembcorp is likely to catch up in orders and the company’s earnings are expected to pick up in the second half of 2012.

“Enquiries for newbuild rigs remain healthy as major oil companies take a long-term view on oil prices in their capital expenditure plans and hence are much less affected by short-term fluctuations in oil prices,” OCBC said.

It added that Sembcorp’s net order book of $7.4 billion provides good earnings visibility and defensiveness during an uncertain global economy.

UOB sees dip in SPH Q3 net profit

Stock Name: SPH
Company Name: SINGAPORE PRESS HLDGS LTD

Research House: UOB KayHian

Price Call: BUY

Target Price: 4.60

UOB Kay Hian said it expects Singapore Press Holdings to report a net profit of about $105 million for its third quarter, down 9% from a year earlier, mainly due to lower net investment income.

SPH is expected to report its results for the three months ended May on July 13.

SPH shares were up 0.3% at $3.79 on Tuesday and have risen nearly 3% so far this year versus the 6% gain in the broader Straits Times Index.

For the third quarter of its 2011 fiscal year, SPH reported a relatively high net investment income of $23.7 million, boosted by fair value gains, UOB said. It noted that SPH's net investment income is usually around $5-10 million a quarter.

UOB said it forecast advertising revenue to fall 1-3% from a year earlier, while SPH’s newsprint prices have peaked and are expected to be flat going forward.

But the broker said SPH offers relatively resilient earnings and an attractive annual dividend yield of 5.8%.

“Defensive stocks are back in vogue amid stock-market volatility,” UOB said, maintaining its 'buy' rating and target price of $4.60 on SPH stock.

OCBC upgrades residential sector

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 11.53

OCBC Investment Research has upgraded Singapore residential sector to overweight as it expects mass market prices to stay buoyant and sees value in shares of high-end developers.

OCBC forecasts mass market price to grow by up to 5% this year, as there is ample liquidity still, with interest rates expected to stay low until 2013.

The brokerage said it favours City Developments for its mass market exposure and upgraded it to ’buy’ from ’sell’ and raised its target price toS$11.53 from $8.92.

CityDev shares were 0.1% up at $10.57, and have risen about 19% since the start of the year, versus the Straits Times Index’s 6% gain.

High-end home prices are expected to fall 10-20% this year, but OCBC said it sees value in shares of high-end property developers. SC Global, Wing Tai and Ho Bee together are valued at 0.54 times their book value, below average levels seen in 2008’s global financial crisis.

 

DBS Vickers maintains 'buy' on Sembcorp

Stock Name: Semb Corp
Company Name: SEMBCORP INDUSTRIES LTD

Research House: DBS Vickers

Price Call: BUY

Target Price: 6.00

DBS Vickers has reiterated its buy recommendation on Sembcorp Industries and increased its target price to $6 per share, from $5.80.

DBS Vickers said Sembcorp’s utilities division should post decent growth with next year's performance even outpacing its regional utilities peers.

Furthermore, the utilities stock offers exposure to potential upsides in the oil and gas market yet is more resilient than an oil and gas pure play.

MARKET PULSE: CMT, Olam, Micro-Mechanics (22 Jun 2012)

Stock Name: CapitaMall
Company Name: CAPITAMALL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 2.02

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.86

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

Research House: OCBC

Price Call: HOLD

Target Price: 0.325

MARKET PULSE: CMT, Olam, Micro-Mechanics

22 Jun 2012

KEY IDEA CapitaMall Trust: Execution remains spot on CapitaMall Trust (CMT) recently announced that it would issue HKD1.15b 3.76% Fixed Rate Notes due 2022 under its USD2.0b Euro-Medium Term Note Program. The proceeds would be swapped into SGD190.1m at a fixed 3.45% rate and used to partially refinance the S$783m secured term loan maturing in Oct 2012. We note that CMT's refinancing is going smoothly with interest costs mostly in line with its current average of 3.3% (end 1Q12), which would consolidate its balance sheet position and lengthen the average term to maturity of its debt structure. In addition, with the strategic divestment of Hougang Plaza and enhancement works at Bugis+ on track to complete in Jul 2012, we believe that management is executing well on strengthening CMT's balance sheet and optimizing its asset portfolio. Maintain BUY with a fair value estimate of S$2.02.(Eli Lee) MORE REPORTS Olam Int'l: No material impact from CFO's resignation Olam International Limited (Olam) has announced that its CFO Krishnan Ravi Kumar has resigned to pursue a new career outside the Agri-commodity sector. Shekhar Anantharaman will be moving into a new and enhanced role as Executive Director - Finance and Business, where he will lead the group's overall strategy and new business development activities and also oversee the corporate finance & accounts, and investor relations. We do not see the resignation as having a material impact on its daily operations as Shekhar is also a veteran in Olam, having spent 20 years there. Meanwhile, we continue to believe that the fundamental picture remains unchanged - the share price could continue to remain volatile in view of the ongoing issues in Europe and also sluggish economic growth in China. Maintain HOLD with S$1.86 fair value. (Carey Wong) Micro-Mechanics: Secures maiden orders for its 24/7 Machining Line Micro-Mechanics Holdings (MMH) announced last evening that it has secured an order of almost S$1m for parts used in lasers manufactured by NASDAQ-listed Newport Corporation (Newport). This represents MMH's first commercial production order for its new 24/7 Machining Line, which has been undergoing commissioning for some time now. During our last report (dated 3 May 2012), we highlighted that its new 24/7 manufacturing system could help to spur a revival in its Custom Machining & Assembly (CMA) segment's fortunes. We believe this order win is an encouraging start and more orders could follow from Newport and other customers in the future. This partly underlies our forecast for a 15% revenue growth for its CMA division in FY13. Maintain HOLD and S$0.325 fair value estimate, based on 9x FY13F EPS. (Wong Teck Ching Andy)

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

NEWS HEADLINES - Christine Lagarde, the head of the IMF, warned of acute stress in Europe and called for more relaxed monetary policy by the ECB and for Europe to issue bonds backed by all countries. - Moody's Investors Service has cut the credit rating of 15 of the world's largest banks, which includes Bank of America, JPMorgan Chase, Citigroup and Goldman Sachs. - In a circular to shareholders, Orchard Parade Hotel revealed that it plans to sell leasehold interests of at least S$702m as part of a move towards the planned listing of Far East Hospitality Trust. - The undersea cable unit of India's Reliance Communications Ltd may offer a dividend yield of over 10% for its US$1b Singapore IPO, which is expected to be launched over the next two weeks, sources said yesterday. - Temasek Holdings expects smaller returns for the asset management industry on anticipation that the outlook would be difficult for years, said Gregory Curl, president and head of Latin America.

CIMB cuts OCBC to neutral

Stock Name: OCBC Bk
Company Name: OVERSEA-CHINESE BANKING CORP

Research House: CIMB

Price Call: HOLD

Target Price: 9.51

CIMB Research downgraded Oversea-Chinese Banking Corp to neutral from outperform and cut its target price to $9.51 from $10.35, citing lower insurance and trading contributions.

By 9:06 a.m., OCBC shares were 0.9% lower at $8.70. The shares have gained 11% since the start of the year, compared to the Straits Times Index’s 6% rise.

OCBC’s wealth management and insurance businesses may suffer amid volatile markets and sustained low interest rates, CIMB said in a report.

“With the lowest provision coverage, least aggressive general provisioning in the last three years plus a nascent rising non-performing loan trend, we think that OCBC’s earnings has the most headwinds from credit costs,” CIMB said in the report.

The brokerage also highlighted that OCBC has the highest price-to-book and price-to-earnings valuations in the sector, which may be unjustified as outlook dims.

OCBC cuts Yangzijiang target price

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.08

OCBC Investment Research lowered its target price on shipbuilder Yangzijiang Shipbuilding (Holdings) to $1.08 from $1.23 while keeping its hold rating, citing a dim outlook for the industry.

Shares of Yangzijiang were down nearly 1% at 9:58 a.m. at $1.025 but have risen 12.7% so far this year, outperforming the benchmark Straits Times Index.

Yangzijiang has cancelled a contract with Greek shipowner FreeSeas after it failed to make payments.

Although the contract termination has no significant financial impact on Yangzijiang, it could be a signal of further changes in the shipbuilding industry, OCBC said.

The brokerage noted that Chinese state-owned banks have distributed only US$1 billion ($1.3 billion) in loans to Greek shipowners, which was lower than expected.

STX OSV shares up 3% on order wins

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: CIMB

Price Call: BUY

Target Price: 2.09

Shares of Singapore-listed shipbuilder STX OSV Holdings rose as much as 3% after it won two contracts worth 700 million Norwegian crowns ($149 million) to build two platform supply vessels.

Shares of STX were up about 2% at $1.55 at 11:01 a.m. and have risen 34% so far this year.

“We believe that order momentum in the North Sea underscores robust sector dynamics, despite ongoing Euro concerns,” CIMB Research said.

The contracts bring the shipbuilder’s order wins so far this year to 6.7 billion Norwegian crowns, two-thirds of the broker’s total order target for fiscal 2012.

CIMB Research kept its target price of $2.09 on STX OSV and maintained its ‘outperform’ rating, saying it liked the company for its high-end capabilities, market leadership and entrenchment in Brazil.

MARKET PULSE: High Yield Plays, STX OSV (20 Jun 2012)

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.00

MARKET PULSE: High Yield Plays, STX OSV

20 Jun 2012

KEY IDEA Strategy: High dividend yield picks Summary: The win of the pro-bailout parties in Greece has been overshadowed by concerns about Spain and Italy. Despite the EUR100b bank bailout, Spain's 10-year bonds reached record highs on Monday, rising above 7%. Investors are still cautious and a risk-off environment is likely to persist. We believe that high yield stocks like REITs and Telcos will continue to outperform as they have so far this quarter. In particular, stocks with strong financial positions and high earnings quality will be better positioned. We have ranked all the stocks under our coverage by expected FY1 dividend yield. Our high dividend yield plays are Cache, CDLHT, CMT, M1 and SingPost. (Sarah Ong & Research Team) MORE REPORTS STX OSV: Torrent of contract wins Summary: Following our report "Market Rumours - Caveat Lector" issued last week, in which we argued that the market has overreacted to market rumours involving a supposed Fincantieri/Carlyle deal, STX OSV has announced three contracts worth an estimated NOK2.5b. This underscores the buoyancy of the offshore market and validates our investment thesis that investors should take the opportunity to gain exposure into the premium offshore builder at a reasonable valuation. Year-to-date, we estimate STX OSV has secured about NOK6.7b of contracts. This forms about 60% of our FY12F estimate (NOK11b). As such, we are keeping our forward estimates unchanged. Maintain BUY with S$2.00 fair value estimate. (Chia Jiunyang)

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

NEWS HEADLINES - Speculation that the US Fed is set to announce additional stimulus measures lifted the S&P 500 Index for the fourth session in a row. The S&P 500 Index rose 1% while the Dow rose 0.8%. - Olam International and Bloomer Chocolate Company, the largest cocoa processor and ingredient chocolate supplier in North America, have formed a 50:50 JV headquartered in the US. - Yangzijiang Shipbuilding's wholly-owned subsidiary will dispose of its entire 31.5% equity stake in the share capital of Wuxi Runyuan Technology Microfinance Co. for RMB104m. - Addvalue Technologies has jointly developed Thuraya Telecommunications Company's new maritime satellite voice terminal, which was unveiled yesterday. - AsiaMedic has signed two agreements with an unrelated third party to set up a post-natal confinement centre and a medical centre in Shanghai, China. - Yuexiu Property Company has acquired a parcel of land located at the Guangzhou, Guangdong Province at an open tender through its 95%-owned subsidiary for RMB164.3m.

DMG downgrades Super Group to neutral

Stock Name: SuperGroup
Company Name: SUPER GROUP LTD.

Research House: DMG

Price Call: HOLD

Target Price: 2.12

DMG & Partners Securities downgraded its rating on instant beverage maker Super Group to neutral from buy and lowered its target price to $2.12 from $2.18, citing a recent spike in the prices of coffee beans, a major raw material for Super.

Shares of Super Group were down 0.45% at $2.20 on Wednesday. This year, Super shares have surged around 67%, outperforming the 12.6% gain in the FT ST Mid Cap index.

DMG cut its earnings estimate for Super’s 2012 fiscal year by 4% to $68 million. The broker said it saw some headwinds from higher robusta coffee bean prices that averaged $2,125 per tonne in May.

DMG said upside potential to Super’s stock will come from better margins due to an improved product mix as well as higher dividend payout ratios. Downside risks include a spike in input prices such as for robusta coffee beans, palm oil and sugar.

 

SG: Wilmar - Inexpensive valuations but no catalyst

Wilmar | HOLD 19 Jun 2012

Inexpensive valuations but no catalyst -Valuations are inexpensive - But outlook remains cautious - No immediate catalyst Wilmar International Limited (WIL) recently saw its share price hit a new 52-week low of S$3.41 on 14 Jun 2012, down 32% from 30 Dec 2011. At its 52-week low, the stock is down 27% since the release of its disappointing 1Q12 results on 10 May; it is also 43% off its 52-week high of S$5.99. while WIL may have been a tad oversold after its 1Q12 results, with current valuations looking pretty inexpensive, we do not see any immediate price catalyst. This as crush margins are likely to remain depressed for the next few quarters. As such, we continue to maintain our HOLD rating and S$3.87 fair value.

Brokers say tax savings to benefit two REITs (RTRS)

Stock Name: K-REIT
Company Name: K-REIT ASIA

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.21

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

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.58

Brokers including DBS Vickers raised their price targets on Suntec Real Estate Investment Trust and K-REIT Asia after a restructuring that will result in tax savings for both property trusts.

Both trusts said last week the company that holds assets in the Marina Bay Financial Centre in Singapore had been
converted to a limited liability partnership. Income from the properties will not be subject to corporate tax as a result of the new structure, they said.

Suntec and K-REIT each owns a one-third stake in BFC Development LLP, which holds two office towers and an underground retail mall at MBFC.

On Tuesday, Suntec units were up 0.4% at $1.33, while K-REIT was flat at $1.01. So far this year, Suntec has gained nearly 24% while K-REIT has advanced almost 22%.

OCBC Investment Research said Suntec’s distribution per unit for 2012-2013 fiscal years may get a boost of 0.11 to 0.17 cents, which translates to a rise of 1.2 to 1.9%. It raised its target on Suntec REIT to S$1.23 from
$1.20, but held its hold rating.

“This is positive for unitholders as the distributable income is likely to be higher now that the income generated will
no longer be subject to corporate tax,” OCBC said.

DBS Vickers expects K-REIT and Suntec to reap tax savings of close to $2.2 million in 2012 fiscal year and $4.5 million in 2013, resulting in a DPU increase of 1-2% in 2012 and 4-5% in 2013.

It upgraded K-REIT Asia to buy from hold and raised its price target to $1.21 from $1.12. It also raised the target on Suntec REIT by 8.6% to S$1.58 and maintained its buy rating.

CIMB says SPH a 'pseudo retail REIT'

Stock Name: SPH
Company Name: SINGAPORE PRESS HLDGS LTD

Research House: CIMB

Price Call: BUY

Target Price: 4.19

Singapore Press Holdings is becoming increasingly like a retail real estate investment trust (REIT), CIMB Research said, noting its growing retail property arm and stable media business, as well as typical payouts of more than 90%.

While SPH’s newspaper and magazine segment is expected to remain dominant and underpin cash flows, CIMB said growth is likely to come increasingly from the firm’s retail malls.

“With a growing property arm, we do not dismiss the possibility of a spin-off or sale of assets to a REIT over the longer term,” CIMB said, adding that SPH has a strong balance sheet and limited cash-call risks.

The broker also said SPH is a cheaper alternative for investors seeking exposure to retail Singapore REITS after the stock’s underperformance, offering yields of 6.4% versus an average of 6.1% for retail Singapore REITs.

SPH shares were up 0.3% at $3.79 on Tuesday, while the Straits Times Index was 0.7% higher. So far this year, SPH has risen nearly 3 %, underperforming the 7.5% gain in the index.

CIMB said revenue compound annual growth rate for SPH’s “gem asset”, Paragon shopping mall in Singapore, stood at 8.3% over 2006-2011, outstripping growth for comparable assets under retail Singapore REITs.

It expected similar success for SPH’s Clementi Mall during its first renewal cycle and for Sengkang Mall on completion. It upgraded its rating on SPH to outperform from neutral and raised its price target to $4.19 from $4.13.

MARKET PULSE: Suntec REIT, Wilmar (19 Jun 2012)

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

Research House: OCBC

Price Call: HOLD

Target Price: 1.23

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.87

MARKET PULSE: Suntec REIT, Wilmar

19 Jun 2012

KEY IDEA Suntec REIT: Higher DPU from tax transparency status Summary: Suntec REIT announced last Friday that BFC Development Pte Ltd, which owns MBFC Properties, had been successfully converted from a private limited company to a limited liability partnership. As a limited liability partnership is tax transparent for Singapore tax purposes, Suntec REIT will enjoy tax transparency on its share of income from MBFC Properties going forward. This is positive for unitholders as the distributable income is likely to be higher now that the income generated will no longer be subject to corporate tax. We now factor in the DPU uplift from higher contribution from MBFC Properties following the conversion. This in turn raises our DDM-based fair value to S$1.23 from S$1.20 previously. However, as Suntec REIT appears to be fairly priced at current level, we retain our HOLD rating. (Kevin Tan) MORE REPORTS Wilmar: Inexpensive valuations but no catalyst Summary: Wilmar International Limited (WIL) recently saw its share price hit a new 52-week low of S$3.41 on 14 Jun 2012, down 32% from 30 Dec 2011. At its 52-week low, the stock is down 27% since the release of its disappointing 1Q12 results on 10 May; it is also 43% off its 52-week high of S$5.99. while WIL may have been a tad oversold after its 1Q12 results, with current valuations looking pretty inexpensive, we do not see any immediate price catalyst. This as crush margins are likely to remain depressed for the next few quarters. As such, we continue to maintain our HOLD rating and S$3.87 fair value. (Carey Wong)

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

NEWS HEADLINES - US stocks ended mixed on Monday after Spanish borrowing costs rose to a record high and Greek political leaders sought to form a pro-bailout coalition following Sunday's election. The S&P 500 Index rose 0.1% while the Dow lost 0.2%. - Genting Hong Kong has bought a 2.8% stake in Echo, an Australian-listed casino company, for A$82.56m (S$106m). This may increase the likelihood of a battle for control of the US$3b company with billionaire James Packer, who holds a 10% stake. - China South City Holdings' has successfully bid for the land use rights of a 263k sqm site in Harbin for ~S$47.8m. The land will be used for develop properties, some of which will be sold and others will be retained for rent. - Sunpower Group has won a RMB39.9m (S$8m) contract to supply high efficiency heat exchangers to one of China's largest utilisation projects of propane and mixed C4. This brings the value of total contracts signed in a month to RMB112m. - ST Engineering has injected ~S$3.1m into Lee Boy India Construction Pte Ltd, in which it has a 97.9% stake that remains unchanged. The cash injection is for capital expenditure purposes.

Maybank says hotel room glut looms

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: Maybank Kim Eng

Price Call: HOLD

Target Price: 1.94

Maybank Kim Eng expects 14.2 million tourist arrivals in Singapore this year, up 8% from 2011, but hotel room supply is forecast to grow at a compound annual growth rate of 6.3% from 2011 to 2015, outstripping demand growth of 5.9%.

Overall, 11,441 new rooms from known projects will be added to the market between the second quarter of 2012 and 2015, Maybank said, adding that the additional supply of hotel rooms could dampen occupancy rates.

Property consultancy CBRE said in a report last week that Singapore hotel room rates were at a record high with revenue per available room (RevPAR) soaring.

In the first quarter of 2012, average daily rates of gazetted hotels grew 11.4% to $259 from a year
earlier and RevPAR increased 14.7% year-on-year to $224, CBRE said.

Maybank expects Singapore hotels to register a CAGR of 3.2% for average room rate over 2011-2015 fiscal years. This is likely to cap the share price of CDL Hospitality Trusts, which derived most of its revenue from the
city-state, the broker said.

Maybank maintained its hold rating and $1.94 target price on CDL. CDL shares were up 1.1% at $1.915 on Monday. The stock has risen 24% this year, outperforming the 12.5% gain in the FT ST Midcap Index.

MARKET PULSE: Swiber, Suntec REIT (18 Jun 2012)

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

Research House: OCBC

Price Call: HOLD

Target Price: 1.20

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.63

MARKET PULSE: Swiber, Suntec REIT

18 Jun 2012

KEY IDEA Swiber Holdings: Likely contract win of US$200m Summary: According to Upstream, Swiber's Indonesian unit, PT Rajawali Swiber Cakrawala (PTRSC), has won a contract worth close to US$200m linked to ConocoPhillips' South Belut subsea development in Indonesia. However, we estimate the parent's share of the contract to be much lower, as Swiber recently divested a 23% stake in PTRSC. The group has been successful in clinching contracts, which have generally provided short-term support on the share price but have yet to reverse its longer-term decline. However, we estimate Swiber's order book has exceeded US$1.7b which provides greater earnings visibility. We have tweaked our estimates to incorporate our contract wins target of US$950m for this year, bumping up our fair value estimate to S$0.63 (prev. S$0.61). Maintain HOLD. (Low Pei Han) MORE REPORTS Suntec REIT: MBFC Properties obtains tax transparency Summary: Suntec REIT announced last Friday that BFC Development Pte Ltd (BFCD PL), which holds MBFC Properties, has been successfully converted from a private limited company to a limited liability partnership with the name BFC Development LLP (BFCD LLP). This is positive news as unitholders will now enjoy tax transparency on Suntec's share of income from MBFC Properties. This means that the distributable income may be higher as the income generated from MBFC Properties will not be subject to corporate income tax at BFCD LLP level. We understand that Suntec REIT, which held one-third interest in BFCD PL, will continue to hold one-third interest in BFCD LLP as a partner after the conversion. We will be speaking to management to get more details on the impact of the conversion. For now, we put our Hold rating and S$1.20 fair value under review. (Kevin Tan)

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

NEWS HEADLINES - The euro shot upward late on Sunday after initial Greek election results pointed to the likelihood of a pro-bailout, pro-euro-zone government with the New Democracy holding a lead over the anti-austerity Syriza. - US stocks on Friday closed higher on optimism for action by global central banks to support markets if need be after the Greek elections. The Dow and the S&P 500 Index climbed 0.9% and 1.0% respectively. - Singapore Airlines has reported a higher passenger load factor for May, which was up 2.2 ppt at 75.8% versus a year ago. - Otto Marine has secured a time charter contract in the Persian Gulf for its new 75m work maintenance vessel. It values the contract at S$7.5m - A fund related to Keppel Telecommunications & Transportation has bought an 80% stake in a data centre in Malaysia for an undisclosed amount.

DBS says S'pore tourism sector healthy

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: DBS Vickers

Price Call: BUY

Target Price: 2.06

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: DBS Vickers

Price Call: BUY

Target Price: 2.05

Singapore’s tourist arrivals in April rose 9 % from a year ago, and could point to a record breaking performance for hoteliers in the second quarter, which will benefit the hospitality sector, said DBS Vickers.

The brokerage also said the Singapore Tourism Board’s (STB) target of 13.5 million to 14.5 million visitor arrivals this year could be exceeded.

According to STB data, tourism arrivals for the month of April rose 9 % to 1.2 million from a year earlier, raising year-to-date arrivals to 4.8 million.

Hotel occupancy rates for April were at 87 % with revenue per available room around $227 per night, a 12 % year-on-year jump, STB said.

“Visitor arrival numbers should continue to remain robust given the expected strong line-up of Meetings, Incentives, Conventions and Exhibitions events in coming months,” DBS said.

Its top picks for the hospitality sector are CDL Hospitality Trusts, with a buy rating and target price of $2.06, and Genting Singapore. It has a buy rating and target price of $2.05 on Genting stocks.

MARKET PULSE: Healthcare, CDLHT, STX OSV (15 Jun 2012)

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: BUY

Target Price: 2.04

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.00

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.

Research House: OCBC

Price Call: BUY

Target Price: 1.88

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 2.58

MARKET PULSE: Healthcare, CDLHT, STX OSV

15 Jun 2012

KEY IDEA Healthcare Sector: Still positive on general outlook Under our Healthcare sector coverage, both Raffles Medical Group (RMG) and Biosensors International Group (BIG) continued to deliver healthy revenue and earnings growth during the recent 1QCY12 results period, although the former's PATMI was slightly below our expectations. We expect BIG to continue its growth trajectory moving forward, despite price cuts of drug-eluting stents in some countries which would dampen BIG's gross margins. While competitive and wage pressures are on the rise for RMG, we expect the group to continue to benefit from thriving industry fundamentals and see room for RMG to raise its ASPs given its competitive pricing vis-à-vis its peers. Maintain OVERWEIGHT on the Healthcare sector, with BIG [BUY; FV: S$1.88] remaining as our preferred pick. We believe its recent share price sell down is overdone, and current valuations compare favourably against its peers. We also reiterate our BUYrating and S$2.58 fair value estimate on RMG. (Wong Teck Ching Andy) MORE REPORTS CDL Hospitality Trusts: Slower growth for Singapore hotels in 2Q The weak global macroeconomic conditions have begun to take a toll on the short-term performance of the local hotel industry. Apr figures released by the Singapore Tourism Board show that visitor arrivals grew 9% YoY, much less than the 14.6% YoY growth for 1Q12. Average RevPAR for April grew 10.3% YoY versus the 14.7% for 1Q12. Speaking to a hotel rooms wholesaler, we understand that May and June to-date have been relatively quiet. We estimate that occupancy growth for May was two-thirds of what was seen for January-April. The long-term growth prospects for the hospitality sector are still positive and we believe our 7.5% YoY RevPAR growth estimate for CDLHT is achievable. We maintain a BUY rating on CDLHT and our fair value of S$2.04. (Sarah Ong) STX OSV: Secures contract for one OSCV and signs Letter-of-Intent for one PSV STX OSV has secured a contract worth NOK1.4b (USD 230m) for the design and construction of a large Offshore Subsea Construction Vessel (OSCV) for Ocean Installer and Solstad Offshore. The contract is subject to approval from the Norwegian Guarantee Institute for Export Credits (GIEK), which is expected to be received on or around 20 June 2012. Separately, the group has also signed a letter of intent with Troms Offshore Supply for the design and construction of one Platform Supply Vessel (PSV) for an undisclosed amount. The actual contract is expected to be signed by end of June 2012. The vessel, of STX OSV's own PSV 07 design, will be one of the largest PSVs in the market with deadweight of 5,700 tons. As the contract win and letter-of-intent already form part of our FY12F projections (NOK 11b), we are keeping our forward estimates unchanged. Maintain BUYwith S$2.00 fair value estimate. (Chia Jiunyang)

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

NEWS HEADLINES - US stocks climbed after media reports indicated possible action by G-20 central bankers and the release of poor US economic data increased speculation that the Fed will engage in monetary easing. - Khong Guan's PATMI fell 58% to S$1.94m for FY12; profit was hit by its Malaysian associate, United Malayan Flour, which eroded trading margins by offering generous sales rebates to capture market share. - Lifebrandz sunk deeper into the red for 3QFY12 with a net loss of S$2.11m, vs a net loss of S$947k a year ago. Revenue declined due to ceased operations of two cafes and fewer operating outlets in its Clarke Quay premises. - Midas Holdings' subsidiary has signed a new master agreement with Siemens. The subsidiary will continue to be engaged by Siemens as a preferred supplier of aluminium profiles. - Catalist-listed Chasen Holdings, which engages in specialist relocation solutions, technical and engineering services and third-party logistics, has secured contracts worth about S$4.2m.

MARKET PULSE: Sheng Siong, Golden Agri (14 Jun 2012)

Stock Name: Sheng Siong
Company Name: SHENG SIONG GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.49

Stock Name: GoldenAgr
Company Name: GOLDEN AGRI-RESOURCES LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.74

MARKET PULSE: Sheng Siong, Golden Agri

14 Jun 2012

KEY IDEA Sheng Siong Group: Time to revisit SSG Summary: With the rest of the broad market performing poorly in the face of global uncertainty, we deem the proportionally greater sell-off of SSG (-17.3%) to be related to loss-covering as investors use gains from SSG since its IPO to cover other unprofitable ventures. Nonetheless, the sell-offs have resulted in an attractive entry point for SSG, and we base our argument on three main factors: 1) shifting consumer spending patterns towards supermarkets, 2) improving and promising operations supporting our FY12 outlook, and 3) likelihood of an interim dividend. We upgrade our rating on SSG to BUY on valuations grounds with an unchanged fair value estimate of S$0.49. (Lim Siyi) MORE REPORTS Golden Agri-Resources Ltd: Easing CPO assumptions Summary: Given the continued uncertainties in Europe, US and even China, we believe that the commodities sector could face increased headwinds; which could also affect CPO (crude palm oil) prices. In view of the increasingly less optimistic outlook, we are also paring our CPO assumptions for this year to US$925/ton from US$1000 previously. Golden Agri-Resources (GAR), being one of the largest CPO plantation owners in the world, is likely to be affected. Based on our new CPO assumption, we will be paring our FY12 forecasts by 3% (we estimate that every US$10-drop in CPO prices will trim 0.4% off our FY12 forecasts). Keeping our valuation peg at 12.5x FY12F EPS, our fair value eases slightly from S$0.77 to S$0.74. But we think that most of the negatives have been into account, hence we maintain our BUY rating on the stock. (Carey Wong)

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

NEWS HEADLINES - US stocks dropped on Wednesday as worries about Europe and disappointing US data outweighed earlier optimism about the outlook for financial stocks. The Dow and the S&P 500 Index closed down 0.6% and 0.7% respectively. - Low Keng Huat registered a 39% YoY decline in 1QFY13 net profit to S$13.15m. Lower construction profit was offset by higher profits from development, hotel and investment segments. Revenue declined 17% to S$33.2m. - Boustead Singapore has won a S$14m contract to design and build an integrated food processing and office facility for RE&S Enterprises Pte Ltd. - Courage Marine Group is disposing a vessel, MV Courage, for a total cash consideration of US$4.3m. It is estimated that the group will record a US$1.8m loss on the disposal. - Medi-Flex, a cleanroom glove manufacturer, has posted a 61% YoY increase in 3Q12 to MYR1.53m (~S$615k). This was due to marginally higher revenue, better gross margins and higher foreign exchange gain. - Asia Water's 70%-owned subsidiary has entered into a build-operate-transfer agreement with the Dalian City municipal government to construct three wastewater treatment plants in Liaoning province, China. The term will be for 30 years and the investment value is ~S$31.2m.

CIMB ups Frasers Centrepoint Trust target

Stock Name: FrasersCT
Company Name: FRASERS CENTREPOINT TRUST

Research House: CIMB

Price Call: BUY

Target Price: 1.78

CIMB raised its target price on Frasers Centrepoint Trust to $1.78 from $1.75 and kept its outperform rating, citing interest cost savings due to refinancing.

Units of Frasers Centrepoint were up 0.3% at S$1.60 at 10:39 a.m. and have risen around 14% so far this year.

Frasers Centrepoint on Monday issued two new multi-currency medium-term notes worth $70 million at 2.3% and $30 million at 2.85%, due at 2015 and 2017 respectively.

CIMB said it expects part of the proceeds to be channelled towards refinancing the firm’s $75 million multi-term note due in fiscal 2012. Interest cost savings are an estimated 2% of distribution per unit for fiscal 2013, it added.

It expects the remaining $25 million to be used in funding an impending rights issue by Hektar Real Estate Investment Trust (HEKR.KL) to fund the acquisition of two retail assets in Malaysia. Frasers Centrepoint owns 31% of Hektar REIT.

Olam share buyback may not benefit: Maybank

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: Maybank Kim Eng

Price Call: SELL

Target Price: 1.43

Commodity trading firm Olam International’s share buyback may not benefit shareholders, as it is highly leveraged, said Maybank Kim Eng.

Olam’s shares fell 1.4% to $1.78, but have jumped about 10% since the company announced its share buyback programme on June 8. They have lost about 16% since the start of the year, versus the Straits Times Index’s 5% gain.

“While such a move is usually a positive sign, the circumstances for Olam seem rather unusual. Other than to deter the short sellers, we do not think it is necessarily an enhancive step for shareholders,” said Maybank in a report.

The case for share buyback is stronger for companies with large idle cash positions, but Olam has a net gearing of 189%, Maybank said.

The brokerage has a sell rating on Olam shares with a target price of $1.43.

Orchard Parade shares skyrocket, highest in 4 years

Stock Name: OrchardP
Company Name: ORCHARD PARADE HOLDINGS LTD

Research House: DMG

Price Call: BUY

Target Price: 2.23

Shares of hotel and property group Orchard Parade Holdings jumped as much as 17% to their highest level in more than four years, after the company said it will divest three of its hospitality assets into a trust.

By 9:19 a.m., Orchard Parade shares were 15.4% up at $1.875, and have surged about 46.5% since the start of the year.

DMG & Partners initiated coverage of Orchard Parade, the hospitality arm of property developer Far East Organisation, with a ‘buy’ rating and target price of $2.23.

“Spinning off its hospitality assets into a real estate investment trust will enable the group to monetise its hotels at a good valuation and create a platform for sustainable growth,” DMG said in a report.

Maybank Kim Eng raises Ezion target

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: Kim Eng

Price Call: BUY

Target Price: 1.38

Maybank Kim Eng raised its target price on Ezion Holdings to $1.38 from $1.35, while keeping its ‘buy’ rating, after the oil and gas services firm won a US$86.3 million ($111 million) service rig contract.

Ezion shares were down 1.9% at $0.795, underperforming the 0.8% drop in the FT ST Small cap Index. The stock has risen about 20% so far this year.

Maybank raised its net profit forecasts for Ezion’s 2013-2014 fiscal years by about 5% to factor in the firm’s new contract, believed to be from Mexico’s Pemex. The broker estimated the project would add US$7 million per annum to Ezion’s net profit over the 2013-2016 fiscal years.

Ezion is also gunning for a third Australian liquefied natural gas marine logistics contract and the tender results are likely to be known by next month, Maybank said.

While Ezion’s gearing is set to rise to fulfill the estimated capital expenditure of US$450 million this year, Maybank said the strain on the balance sheet should ease as operating cash flows increase on the deployment of its units.

The broker said Ezion was the cheapest offshore and marine stock under its coverage, while offering one of the strongest earnings growth potential at a 33% compound annual growth rate over the next three years.


 

CIMB raises Super Group target

CIMB Research raised its target price for Super Group to $2.43 from $2.37 and kept its ‘outperform’ rating, on expectations that the instant beverage maker’s ingredients division will benefit from rising milk tea consumption in China.

By 11:34 a.m., Super’s shares were 0.98% higher at $2.07, and have surged 57% since the start of the year, compared with the FTSE ST Mid Cap Index’s 9.7% gain.

China’s milk tea market grew by 140% in 2011, according to a study by AC Nielsen, and CIMB said it expects Super’s ingredients sales to grow 50% this year.

“We remain positive on Super’s outlook, led by its branded consumer business in Asean and supplemented by its ingredients business,” said CIMB in a report.

MARKET PULSE: OSIM Intl, KSH Holdings (8 Jun 2012)

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: OCBC

Price Call: BUY

Target Price: 1.61

Stock Name: KSH Hldg
Company Name: KSH HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.25

MARKET PULSE: OSIM Intl, KSH Holdings

8 Jun 2012

KEY IDEA OSIM International: Stronger position to weather a storm We expect OSIM International's (OSIM) earnings momentum to continue in FY12, underpinned by innovative product launches and its strong focus on improving productivity and operational efficiencies. We believe that OSIM is on track to deliver earnings that would exceed consensus' expectations of S$81.2m in FY12. OSIM has also developed a stronger brand equity and is in a better financial health since the last financial crisis, in our opinion. This would enable to group to withstand the current macroeconomic uncertainties. Recent share buyback activities would also enhance shareholder value and lend support to its share price. We retain our forecasts, BUY rating and fair value estimate of S$1.61, which implies total potential returns of 42.8%. (Wong Teck Ching Andy) MORE REPORTS KSH Holdings: Execution at redevelopments to be key The BCA is forecasting a 16% to 34% dip in total construction demand to S$21b-S$27b in 2012, with the bulk of the dip expected to come from lower private demand (S$8b - S$12b in 2012 versus S$16.8b in 2011). KSH has historically been focused on private projects given higher margins, and the weakened outlook would likely put downward pressure on its construction business over the mid-term. With net gearing at a low 4.1% and its expertise in construction, we see KSH well-poised to add value as a JV partner with larger developers. Already we have seen KSH taking stakes in the redevelopment of Hong Leong Garden Shopping Centre, Seletar Garden and 11 King Albert Park. We see execution at KSH's redevelopment projects to be key drivers for the share price ahead and could offset, to an extent, the weaker private construction outlook. Maintain HOLD rating at an unchanged S$0.25 fair value estimate. (Eli Lee)

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

NEWS HEADLINES - US stocks lost much of Thursday's gains following Bernanke's comments that the Fed would review the economy before making a decision on further stimulus. - The People's Bank of China on Thursday lowered benchmark interest rates on loans and deposits. The one-year benchmark deposit rate will fall from 3.50% to 3.25% effective today. - SGX is launching dual-currency trading for ETFs on Jun 15th, enabling investors to trade foreign-currency denominated ETFs in Singapore dollars. - Olam International is acquiring Kayass Enterprises SA, a Nigerian maker of dairy and beverage products for US$66.5m. - Riverstone Holdings has awarded construction contracts amounting to ~MYR13m as part of its expansion plans to meet the increasing market demand for the group's cleanroom and healthcare gloves.

MARKET PULSE: A-REIT, CDLHT (07 Jun 2012)

Stock Name: Ascendasreit
Company Name: ASCENDAS REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target Price: 2.22

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: BUY

Target Price: 2.04

MARKET PULSE: A-REIT, CDLHT

07 Jun 2012

KEY IDEA Ascendas REIT: Fortified financial position Summary: Ascendas REIT's (A-REIT) share price performance has clearly attested to its resilience, gaining 10.4% YTD as opposed to a 4.3% increase in the broader market. The strength, in our opinion, is mainly attributable to its diversified portfolio of 102 properties, healthy lease profile, strong sponsor and quality management. Outlook is also expected to remain sanguine, with recent acquisitions and developments likely to contribute positively to its performance. We also note that A-REIT's financial position had been fortified by the recent private placement and divestment of Goldin Logistics Hub. This is likely to provide it with greater financial ability to capitalize on growth opportunities, as well as secure borrowings at potentially more competitive terms to fund its committed investments. We maintain our BUY rating with an adjusted fair value of S$2.22 (S$2.31 previously) on A-REIT, after factoring in the developments. (Kevin Tan) MORE REPORTS CDL Hospitality Trusts: Singapore room rates can grow substantially Summary: On a worldwide basis, Singapore commands fairly high hotel room rates, but still has substantial room to grow in comparison to other quality destinations worldwide. Travelers from China, India, Australia, HK and the UK, which form half of the top ten places of origin for travelers to Singapore in 2011, are willing to pay 24-61% more for a hotel room in the most expensive destinations versus Singapore. Regional low-cost carriers will continue to further enhance the relative affordability of Singapore hotels and increase their ability to raise rates. We maintain a BUY rating on CDLHT and our fair value of S$2.04. (Sarah Ong)

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

NEWS HEADLINES - US stocks rallied, with the Dow and S&P 500 gaining the most for 2012 (climbing 2.4% and 2.3% respectively), on speculation that the world's central bankers will move to stimulate growth. - Australia's economy surged with a 4.3% growth for the year through March, its fastest expansion in over four years since the financial crisis. A key driver was engineering construction, mainly in mining, which saw a 19.7% jump. - United Envirotech has won a RMB104m (S$21m) engineering procurement and construction project in Liaoning province, China. The contract, awarded by the municipal government, involves upgrading a municipal wastewater treatment plant. - Sembcorp Industries has signed a JV for an industrial wastewater treatment plant in China's Jiangsu province. The project gives Sembcorp exclusivity as provider of industrial wastewater treatment within an industrial park.

OCBC cuts Ascendas REIT target price

OCBC Investment Research lowered its target price on shares of Ascendas Real Estate Investment Trust, which owns industrial properties, to $2.22 from $2.31 but kept its ‘buy’ rating.

Units of Ascendas REIT were down 1% at $2.00, while the FT ST Mid Cap Index was nearly flat. The stock has risen around 9% so far this year, matching the gain in the index.

OCBC said it factored in an enlarged unit base following Ascendas REIT’s unit placement and an expected loss in income after the firm sold one of its properties, partially balanced out by lower interest expenses from fewer borrowings.

Despite market concerns that industrial rents may ease slightly in 2012, OCBC said it saw upside potential for Ascendas REIT’s rents that are due for renewal. This should support the estimated distribution per unit yield of 6.9% for the firm’s 2013 fiscal year, which OCBC said is attractive.

OCBC added that Ascendas REIT’s stronger financial position will likely give it a greater ability to tap on growth opportunities, as well as secure borrowings at potentially more competitive terms to fund its committed investments.

UOB raises Ezion target to $1.42

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: UOB KayHian

Price Call: BUY

Target Price: 1.42

UOB Kay Hian raised its price target on Ezion Holdings to $1.42 from $1.34 after it said the offshore services provider won a third service rig contract from Mexico’s Pemex.

Ezion shares were up 0.65% at $0.780 at 9:45 a.m., the FT ST Small Cap Index edged up 0.3%. The stock has risen 19% so far this year, outperforming a 6% gain in the index.

The charter contract is for four years with total revenue at US$86.3 million ($110 million) or US$21.6 million per year, and UOB estimates the project to yield a net profit of US$7 million, adding 7% to its 2013 and 2014 earnings forecast.

The project also has a “very high” return on equity (ROE) of 42%, well above Ezion’s minimum project ROE requirement of 30%, said UOB and kept its ‘buy’ rating on Ezion.

The broker expects Ezion’s share price to benefit from a ramp-up in earnings as more liftboats and service rigs come onstream and demand is seen strong.

OIR BITES: Ezion secures US$86.3m service rig contract; keeps momentum going

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.13

OIR BITES: Ezion secures US$86.3m service rig contract; keeps momentum going 6 Jun 2012

We attended Ezion's analyst briefing this morning following its trading halt earlier. Here are the key takeaways: Service rig contract The company has secured a charter contract worth about US$86.3m over a four-year period to provide a service rig for use by a national oil major in Central America. This will be the group's third rig to be deployed in the Sonda de Campeche field, and we believe the customer is likely to be Mexico's PEMEX. Ezion will be buying an old rig (Ensco 59) which it will then refurbish and upgrade at Gulf Copper's Galveston facility in the US. We estimate total project cost of US$55m (rig: S$23m, refurbishment, upgrading: S$32m), depreciation period of 10 years, and interest cost of 5% over five years. Ezion's European partner will undertake maintenance work (est. US$4.5-5m cost) and there is also a withholding tax for Ezion in this contract. Our calculations show that this project will not be as profitable as the typical newbuild liftboat contract, but ROE is still good at about 40%. Australia logistics projects The Australian logistics projects are progressing well (Gordon LNG and Queensland Curtis LNG), and Ezion is currently tendering for a third area (APLNG) for logistics contracts. Results should be known by end Jul this year. Ezion's service rig contract momentum has kept up, with the group announcing one almost every month since the start of this year. With the group's newly established S$500m note programme and placement proceeds of S$94.6m earlier this year, we do not foresee further fund raisings in the near term. Maintain BUY with S$1.13 fair value estimate.

Warm regards,

Company Registration No: 198301152E

Maybank cuts Keppel Land target price

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: Maybank Kim Eng

Price Call: BUY

Target Price: 3.65

Maybank Kim Eng lowered its target price on shares of Keppel Land to $3.65 from $4.04 as it pegs the property developer’s valuations at a higher discount to its restated net asset value.

The broker, which kept its ‘buy’ rating on the stock, now expects Keppel Land to sell units at its high-end residential project Marina Bay Suites at a lower average price of $2,400 per square foot (psf), compared to its prior assumption of $2,750 psf.

Keppel Land is expected to defer the divestment of its Marina Bay Financial Centre Tower 3, until it receives committed leasing of at least 90%, up from 67% now, Maybank said.

The broker noted Keppel Land has a strong cash position of about $1.6 billion, but has not been actively bidding for land in Singapore and China.

“As uncertainties continue to plague global markets, Keppel Land is in a position of strength to navigate through the medium-term volatilities and possibly pick up attractive assets for future growth, which could be a positive catalyst,” said Maybank.

Shares in Keppel Land were up 1.1% at $2.85, and have jumped 28% since the start of the year, more than the Straits Times Index’s 3% rise.

MARKET PULSE: Transportation Sector & Rotary Engineering (5 Jun 2012)

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.71

Stock Name: ComfortDelGro
Company Name: COMFORTDELGRO CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.53

Stock Name: Rotary
Company Name: ROTARY ENGINEERING LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.50

MARKET PULSE: Transportation Sector & Rotary Engineering

5 Jun 2012

KEY IDEA Land Transportation sector: Difficulties to remain For the month of May, the defensive nature of the two public transport operators (PTOs), Comfort Delgro (CD) and SMRT, has limited their losses against a backdrop of worsening equity market performance. Although this market pull-back has resulted in lower fuel prices and provided a temporary relief for the PTOs, any upside potential remains limited at this juncture. We expect greater fuel consumption and increasing staff costs to negate any potential fuel cost savings resulting from the dip in fuel costs. Furthermore, no fare adjustments are expected for the year, which will cause the trend of declining average fares to persist further. While a fare review committee has been announced by the government, any beneficial effects from revisions will only be felt in 2H2013. Therefore, we downgrade the sector to NEUTRAL and maintain our HOLD ratings on both SMRT [HOLD; FV:S$1.71] and CD [HOLD; FV:S$1.53]. (Lim Siyi) MORE REPORTS Rotary Engineering: Not time to buy yet Rotary Engineering Limited (Rotary) share price has fallen by 22% in June and is now at a three-year historical low of S$0.50, representing almost 1x P/B (one standard deviation below its 5-year average). We believe that this was mainly due to its disappointing 1Q12 results, continued uncertainty in the global economy and investors' preference for defensive non-cyclical counters. That said, we do not see any clear near-term catalysts. Moreover, we believe that there could be more downside than upside risks at this juncture. Therefore, we lowered our valuation peg to 1x (previously 1.2x) and fair value to S$0.50 (previously S$0.61). Maintain HOLD. (Chia Jiunyang)

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

NEWS HEADLINES - A surprise drop in US factory orders weighed on shares of manufacturers and sent the Dow lower for the fourth consecutive session, while a late rally moved up the S&P 500 Index and the Nasdaq. - The euro rose against the dollar Monday on conjecture that European leaders will strengthen fiscal union across the shared-currency zone. - OKP Holdings has clinched a second contract from the PUB in two months. The latest contract, valued at S$7.5m, involves drain works in the areas of Queen Astrid Park, Benoi Rd and Wan Lee Rd. - F&N's wholly-owned serviced residence operator, Fraser Hospitality Pte Ltd, opened its third Middle East property in Qatar yesterday. Fraser Hospitality is on target to add three more properties in Oman and Saudi Arabia by next year. - Catalist-listed ES Group (Holdings) Ltd launched the first of its two bunker vessels constructed at the group's 50%-owned subsidiary's shipyard in Thailand. Both vessels are expected to contribute positively to financial performance starting from 2H12.

DBS ups Starhill Global target price

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: DBS Vickers

Price Call: BUY

Target Price: 0.75

DBS Vickers has raised its target price for Starhill Global Real Estate Investment Trust to $0.75 from $0.71 and has retained its ‘buy’ rating, citing higher rents from its Singapore and Malaysian shopping malls.

Starhill Global units were 0.8% higher at $0.62, and have risen 11% since the start of the year, compared to the FT ST Real Estate Investment Trust’s 10% gain.

After upgrading works are completed on Starhill’s Singapore mall Wisma Atria in the third quarter, DBS expects about 20% of the property’s net leaseable area to see a 50% rise in rents.

Starhill’s master lease with Malaysia’s Katagreen Development Sdn Bhd, which makes up 17% of its gross revenue, is expected to see a rent increase of 7% next year, which should help lift the REIT’s distribution per unit, DBS said.

MARKET PULSE: Fortune REIT, Roxy-Pacific Holdings (4 June 2012)

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

Research House: OCBC

Price Call: BUY

Target Price: 5.22

Stock Name: Roxy-Pacific
Company Name: ROXY-PACIFIC HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.45

MARKET PULSE: Fortune REIT, Roxy-Pacific Holdings

4 June 2012

KEY IDEA Fortune Real Estate Investment Trust: Rents in New Territories grow the fastest HK retail sales grew at 11.4% YoY for April to reach HK$35.7b. While this is slower than the 17.1% YoY increase for March (revised figure), the moderated pace could be partially attributed to the inaugural nationwide Consumption Promotion Month on the Mainland for most of April, which could have reduced average spending by Mainlander tourists in HK. Private retail rents and prices set new highs in March. New Territories, where the majority of Fortune's suburban malls are located, outperformed both HK Island and Kowloon with rents climbing 31% MoM and 24% YoY. We maintain our BUY rating and fair value of HK$5.22. (Sarah Ong) MORE REPORTS Roxy-Pacific Holdings: Progress billings to underpin earnings ahead Despite increasing market uncertainty from European macro concerns, we believe that ROXY's earnings continue to be underpinned by significant progress billings of about S$780m and highlight this is more than five times of FY11 development revenue (S$132.6m). We also note that ROXY's recently launched projects, such as Eon Shenton, The Millage and Natura@Hillview, are converting well into sales, and also expect the MKZ to launch later this year. We continue to like ROXY for its ability to seek accretive land acquisitions, quick turnaround time for projects and efficient sales conversion at recent launches. Execution at Jade Towers would likely be an important catalyst for ROXY's share price ahead. We maintain our BUY rating at an unchanged fair value estimate of S$0.45 with a RNAV discount of 25%. (Eli Lee)

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

NEWS HEADLINES - US stocks started June with more than 2% losses on Friday after a US jobs report showed poor growth in May. The unemployment rate had its first increase in 11 months, climbing from 8.1% to 8.2%. - Gold futures rallied as investors looked for a safe haven and the USD fell on speculation that the weak data could trigger more quantitative easing from the Fed. - SMOE Pte Ltd (a unit of Sembcorp Marine), in consortium with Swiber's JV company, has secured a US$175m contract for offshore engineering and construction work in Indonesia. SMOE's share of work is US$63m out of the entire contract. - GuocoLeisure has established a S$300m Multicurrency Medium Term Note Programme. - LionGold has entered an agreement to acquire a 100% stake in Amayapampa Gold Project in Bolivia for US$7.0m.

DBS Vickers starts Kreuz with buy rating

Stock Name: Kreuz
Company Name: KREUZ HOLDINGS LIMITED

Research House: DBS Vickers

Price Call: BUY

Target Price: 0.43

DBS Vickers initiated coverage of Singapore offshore marine services provider Kreuz Holdings with a ‘buy’ rating, citing attractive valuations and a positive outlook for order flow.

Kreuz shares were up around 2% at $0.26, outperforming the FT ST Small Cap Index which was down 1.7%. Kreuz shares have fallen nearly 19% so far this year, compared to a 4% rise in the index.

DBS said its target price of $0.43 is pegged at six times Kreuz’s 2012 fiscal year earnings, which it said is at a “conservative” 10% discount to the firm’s Singapore-listed small-cap offshore services peers.

The buoyant offshore market is likely to drive good order flows for Kreuz, leading to a compound annual growth rate of 15% for 2011-2013 fiscal year net profit, said DBS, adding that catalysts should come from new order wins in the near term.

OCBC cuts Sakari to 'hold'

Stock Name: Sakari
Company Name: SAKARI RESOURCES LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.45

OCBC Investment Research downgraded its rating on Singapore-listed Indonesian coal mining firm Sakari Resources to ‘hold’ from ‘buy’, citing lower coal prices.

Shares of Sakari fell 1.38% to S$1.42 and have fallen 22.3% so far this year.

Sakari’s share price has plunged about 32% since it reported first quarter results on April 30, underperforming the Straits Times Index’s 8.6% fall in the same period.

Sakari’s share price drop was partly due to its poor earnings in January-March and a continued fall in coal prices, said OCBC, and lowered its target price on the stock to $1.45 from $2.29.

The broker cut its coal price assumption by 10% to US$76 ($98) per tonne, resulting in a 48% fall in its 2012 earnings forecast for Sakari.

“If coal prices continue to remain depressed or drift lower, this would further jeopardise the company’s targeted average selling price of around US$85-$90 per tonne for this year,” OCBC said.