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)

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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.