OCBC raises target on Tiger Airways

OCBC Investment Research raised its target price on Tiger Airways Holdings to $0.83 from $0.76 and
maintained its buy rating, citing the Singapore budget carrier’s improved operations.

Tiger shares were up 0.7% at $0.695 and have risen around 9% so far this year versus the 15% gain in the FT ST Small Cap Index.

Tiger’s passenger yields in its fiscal first quarter rose 9% from a year earlier, while the fall in average jet fuel prices provided some cost relief, OCBC noted.

OCBC said the first-quarter operating profit posted by Tiger’s Singapore operations bodes well for the rest of the 2013 fiscal year as it is no longer burdened with excess aircraft, allowing it to moderate its capacity expansion in 2013.

Tiger’s Australian unit is primed for recovery with the ramping up of its operations to 60 sectors a day, after being hit by flying restrictions, and nd the expected peak travel season later in the year, OCBC said.

Deutsche cuts Cosco, Yangzijiang target prices

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: Deutsche Bank

Price Call: HOLD

Target Price: 1.10

Stock Name: CoscoCorp
Company Name: COSCO CORPORATION (S) LTD

Research House: Deutsche Bank

Price Call: HOLD

Target Price: 1.00

Deutsche Bank cut its target prices for Cosco Corp Singapore and Yangzijiang, citing poor outlook for the Chinese shipbuilding sector.

Shares of Yangzijiang were 0.5% lower at $1.005 by 11:05 a.m.. They have risen 10.4% so far this year. Cosco was down 0.5% at $0.955. It has gained 9% this year, compared with the FT ST Industrial Index's 13.7% rise.

“Operating conditions and outlook in the Chinese shipbuilding sector remain challenging,” due to declining new orders, falling ship prices, weak vessel financing and intensifying competition amongst Chinese yards, said Deutsche Bank in a report.

The brokerage cut its target price for Yangzijiang to $1.10 from S$1.20, kept its ‘hold’ rating, and lowered its new order assumptions in 2012-2014 by 13-33%.

It also lowered Cosco's target price toS$1.00 from $1.10, maintained its ‘hold’ rating and cut its new order assumptions for 2012-2013 by 11-17%. As a result, it trimmed its net income estimates for the shipbuilder by 9.1-9.4% over the same period.

JPMorgan cuts Wilmar target price

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: JP Morgan Chase

Price Call: HOLD

Target Price: 2.80

J.P. Morgan cut its target price for palm oil firm Wilmar International to $2.80 from $4.30 and kept its ‘neutral’ rating, citing tough outlook due to high soybean
costs.

By 11:29 a,m,, Wilmar shares were 1.2% lower at $3.24, and have fallen about 35% so far this year, versus the Straits Times Index's 14.4% rise.

“We think Wilmar’s share price may trade lower into the upcoming second quarter results," J.P. Morgan said in a report, adding that the tough operating environment has not been fully factored into consensus earnings estimates.

Soybean price has increased over 40% so far this year, and is expected to remain high, which will continue to pressure Wilmar's crush margins, the brokerage said.

It reduced earnings estimates for 2012 by 17% on lower margin assumptions.

MARKET PULSE: CMA, Tiger, SingPost, Sakari (31 Jul 2012)

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.85

Stock Name: TigerAir
Company Name: TIGER AIRWAYS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.83

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.14

Stock Name: Sakari
Company Name: SAKARI RESOURCES LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.45

MARKET PULSE: CMA, Tiger, SingPost, Sakari

31 Jul 2012

KEY IDEA CapitaMalls Asia: Appetite for acquisitions stay strong Summary: CMA would acquire Olinas Mall in Tokyo, close to JR Kinshicho Station, for S$367.3m (JPY 22.8b). The freehold-lease mall has an NLA of 381k sq ft and the acquisition price translates to a psf cost of S$964 per sq ft, with a NPI yield of 6%. In addition, management expects to acquire, from Vanke Real Estate Group, a shopping mall site in Qingdao, China. The mall is expected to have a GFA of 89.7k sqm, with a total development cost of S$294.9m (RMB1,457m). Both acquisitions appear to be fairly priced, in our view, and we see limited RNAV accretion at this juncture. We believe CMA's active acquisition stance, after recent divestments to a new private fund, points to an unabated appetite for portfolio expansion and capital recycling despite current macro uncertainties. Maintain BUY with an unchanged fair value estimate of S$1.85. (Eli Lee) MORE REPORTS Tiger Airways: Recovery gaining traction Summary: Tiger Airways' revenue in 1QFY13 edged 1% higher to S$181m while its net loss narrowed to S$14m, from S$21m a year ago. The increase in revenue was primarily driven by higher passenger yields, while lower average jet fuel prices (JETKSIFC Index) also provided some cost relief. In segmental terms, Tiger Singapore returned to profit for the first time since TGR's flying restrictions in Australia were imposed last year. On the other hand, Tiger Australia's operating losses narrowed to S$21m, from S$23m in 1QFY12, despite having a much smaller operations than a year ago. Furthermore, Tiger Australia is looking good with the ramping up of its operations to 60 sectors/day and the expected peak travel season later this year. Factoring in the improved operations of TGR, we increase its P/B multiple to 3x and our fair value estimate to S$0.83/share, from S$0.76/share previously, and maintain our BUY rating on TGR. (Eric Teo) Singapore Post: Good 1QFY13 showing Summary: Singapore Post (SingPost) reported a 6.5% YoY rise in revenue to S$151.6m but saw a 2.9% fall in net profit to S$38.1m in 1QFY13. Results were in line with our expectations, with net profit accounting for 26.5% of our full year estimates vs 28.1% of the street's estimate. SingPost remained in a net cash position of S$161.4m pending the use of funds raised earlier for investment opportunities. Amidst the uncertain environment for investors, we believe that the defensiveness of SingPost's businesses and its consistently decent dividends translates to a favourable risk-reward ratio for equity investors. In line with its usual practice, SingPost has declared an interim dividend of 1.25 S cents per share, which will be paid on 31 Aug 2012. Maintain BUYwith S$1.14 fair value estimate. (Low Pei Han) Sakari Resources: Shows 2Q12 improvement Summary: Sakari Resources Limited (SRL) reported a decent set of 2Q12 results, with revenue rebounding 5.4% YoY and 26.1% QoQ to US$238.0m. Revenue was boosted by higher sales volumes and steady ASPs of its thermal coal. While net profit tumbled 38.5% YoY to US$23.9m, it jumped 65.6% QoQ. The higher net profit was aided by lower costs, as a result of improved production efficiency, and gross margin also improved to 23.1% from 20.2% in 1Q12. Earnings were boosted by a fair value gain of US$8.3m, which was somewhat offset by an additional US$4.2m assessment for prior years' taxes. For 1H12, revenue fell 8% to US$426.8m, meeting 48.7% of our FY12 forecast, while net profit declined 57% to US$38.4m, or 63.5% of our full-year estimate. SRL declared an interim dividend of US$0.02/share (retaining its 60% payout ratio), though down from US$0.0424 a year ago. SRL will be hosting an analyst teleconference later in the evening. Until then, we place our HOLD rating and S$1.45 DCF-based fair value under review. (Carey Wong)

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

NEWS HEADLINES - Two critical central bank meetings (US Fed and ECB) and an unusually heavy load of economic data will be released this week. - Trading in shares of Luye Pharma have been suspended due to low public float. - Tuan Sing Holdings posted 2Q12 net profit of S$11.6m, up more than two-fold from 2Q11. - Cambridge Industrial Trust reported a 13.9% YoY rise in DPU to 1.18 S cents in 2Q12. - Riverstone Holdings delivered a 7.2% YoY increase in net profit to RM11m in 2Q12. Turnover rose due to higher demand for healthcare gloves and recovery in demand for cleanroom gloves. - Trek 2000 International expects to report a loss for 2Q12, mainly due to a one-time write-off of ASIC chips because of a design flaw.

Brokers raise Ascott Residence Trust target price

CIMB Research raised its target price for Ascott Residence Trust to $1.21 from $1.19 and kept its neutral rating, as it expects the serviced residence owner to report stronger revenues in the second half due to the London Olympics.

By 12:22 p.m., units of Ascott REIT were 1.2% higher at $1.225, and have gained about 26% since the start of the year, versus the FT ST Real Estate Investment Trust's 23% rise.

Ascott REIT reported second-quarter distribution per unit rose 2% to 2.38 cents, boosted by newly acquired assets in Japan, CIMB said.

However, the trust's growth in Europe was eroded by foreign exchange fluctuations, which CIMB said is a growing concern.

OCBC Investment Research also raised its target price for Ascott REIT to $1.34 from $1.23, and maintained its buy rating, citing better-than-expected second quarter earnings.

MARKET PULSE: ART, SGX, CDLHT, SMRT, SIA, CMA, RMG, Tiger (30 Jul 2012)

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.34

Stock Name: SGX
Company Name: SINGAPORE EXCHANGE LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 6.80

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: HOLD

Target Price: 2.06

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.71

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD

Research House: OCBC

Price Call: HOLD

Target Price: 10.85

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.85

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD

Research House: OCBC

Price Call: HOLD

Target Price: 2.63

Stock Name: TigerAir
Company Name: TIGER AIRWAYS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.76

MARKET PULSE: ART, SGX, CDLHT, SMRT, SIA, CMA, RMG, Tiger

30 Jul 2012

KEY IDEA Ascott Residence Trust: Raising fair value with good 2Q12 Summary ART registered 2Q12 revenue of S$78.9m, up 8% YoY, and gross profit of S$42.7m, up 4% YoY. Revenue per Available Unit (RevPAU) for the portfolio climbed 6% YoY to S$156. Strong performances in the UK, Philippines and China helped to offset some weakness in France and Singapore. The Olympics will provide a boost for the London properties for three weeks in 3Q12, with management seeing occupancies of 85% and average room rates increase of 25%. 1H12 DPU of 4.52 S-cents was better-than-expected, forming 53% of our initial FY12 projection. We raise our FY12 DPU projection from 8.6 S-cents to 9.1 S-cents. We maintain BUY and raise our RNAV-based fair value estimate from S$1.23 to S$1.34. (Sarah Ong) MORE REPORTS Singapore Exchange: Market conditions remain challenging Summary: Singapore Exchange (SGX) delivered 4QFY12 net earnings of S$61.1m or FY12 earnings of S$291.8m, and these were slightly below market expectations. While Securities Revenue fell 15.5% to S$244.1m in FY12, this was mitigated by an 18% rise in Derivatives Revenue to S$167.5m. Base dividend payout was unchanged at 4 cents for the final quarter with a variable of 11 cents. Recently, the SGX announced several new initiatives and this included higher admission criteria for Mainboard listing, revised bid-ask spreads, enhancing ETF suite, emphasis on retail investor education and participation. More initiatives are expected in FY13. We are expecting the outlook for global equity markets to remain fairly muted, and this will continue to be a drag on SGX's performance. We are lowering our fair value estimate from S$7.00 to S$6.80. Maintain HOLD. (Carmen Lee) CDL Hospitality Trusts: Downgrade to HOLD on price outperformance Summary: 2Q12 revenue increased 6.0% YoY to S$36.6m, versus +19.0% for 1Q12. YTD DPU of 5.70 S-cents made up 47% of our initial full-year forecast. We are changing our full year RevPAR growth assumption from 7.5% to 6.8% (excluding Studio M Hotel) given that we expect 2H12 RevPAR growth momentum to be subdued compared to 1H12. We are easing our FY12 payout assumption for income available for distribution to 90% and lowering our FY12 DPU estimate from 12.2 S-cents to 11.9 S-cents. To better reflect the prevalent low-interest rate environment, we have lowered the cost of equity assumption in our model and raised our fair value marginally from S$2.04 to S$2.06. However, as CDLHT's share price has run up 6.7% since our last report on 2 Jul 2012, we downgrade CDLHT to HOLD on valuation grounds. (Sarah Ong) SMRT Corporation: Definitely not a sell Summary: SMRT reported a decent set of 1Q13 results albeit on lowered expectations. Its revenue rose 8.8% YoY to S$275.2m on the back of higher ridership and full opening of the Circle Line (CCL) while net profit rose 4.7% to S$36.5m. Even when excluding a one-off S$8m insurance compensation, SMRT's EBITDA inched lower by only 0.1% YoY to S$71.5m. Overall, SMRT's 1Q13 results - well within our expectations - constituted 26% and 30.4% of our top and bottom line projections. Going forward, SMRT will seek to increase its headcount by 10% to cope with the rise in ridership and increased focus on repairs and maintenance. While this additional headcount means more costs, the hiring will be offset by savings in electricity costs due to hedging as well as increases in its rental and advertising spaces. We maintain our HOLD rating on SMRT with an unchanged fair value estimate of S$1.71 on valuation grounds, and we will turn buyers at S$1.60. (Lim Siyi) Singapore Airlines: Parent airline back in black Summary: In 1QFY13, Singapore Airlines' (SIA) revenue grew 6% YoY to S$3.8b while its PATMI jumped 74% to S$78m. SIA's operating expenses grew slower than its revenue growth partially due to the retreat in jet fuel prices. The parent airline (Singapore Airlines) swung back to an operating profit of S$85m in 1QFY13 from the S$36m loss a year ago. But all other segments were less profitable in 1QFY13 than a year ago. SilkAir's operating profit fell 14% YoY to S$18m and SIA Engineering's operating profit slipped 3% to S$34m. SIA Cargo's operating loss widened to S$49m from S$14m in 1QFY12, after soft air freight demand caused cargo yield erosion. Soft air freight demand is also expected to persist in the near term. We maintain our fair value estimate of S$10.85/share and HOLDrating on SIA. (Eric Teo) CapitaMalls Asia: Acquisitions in Japan and China Summary: CMA announced that it would acquire Olinas Mall in Tokyo, which is close to the JR Kinshicho Station, for S$367.3m (JPY 22.8b). The freehold-lease mall has an NLA of 381k sq ft, with 853 parking lots, and the acquisition price translates to a cost of S$964 per sq ft, with a current NPI yield of 6%. In addition, CMA has also signed a conditional agreement to acquire, from Vanke Real Estate Group Co. Ltd, a site for a shopping mall in the Sifang District in Dingdao (China). The mall is expected to have a GFA of 89.7k sqm and total development cost is expected to be S$294.9m (RMB1,457m). We would speak further with management regarding these transactions and, in the meantime, put our Buy rating and fair value estimate of S$1.85 UNDER REVIEW. (Eli Lee) Raffles Medical Group: Submits hospital development tender in Hong Kong Summary: Raffles Medical Group (RMG) announced that it has submitted a tender called by the Government of Hong Kong Administrative Region for the development of a private hospital. The deadline for the tender submission was 12 noon on 27 Jul 2012. The site for tender is Aberdeen Inland Lot No. 458 (~27,500 square meters) at Wong Chuk Hang, Hong Kong. RMG is aiming to tap on the increasing needs and demand of the Hong Kong community for good quality specialist and hospital services. Hong Kong's Food and Health Bureau (FHB) highlighted that there is currently an imbalance between the public and private sectors in hospital services. From a strategic standpoint, we are positive on RMG's decision to expand its overseas operations, given that it has predominantly been just a Singapore healthcare play. However, it is too premature to fully evaluate this bid until pricing details are known (possibility of occurrence of 'winner's curse'). In terms of awarding the tender, a 70% weighting is given to the service quality aspect and 30% to the land premium aspect. We opine that RMG would fare well for the former, given its established track record. According to FHB's website, the tender results are expected to be announced in early 2013. Our HOLD rating and S$2.63 fair value estimate remains intact. (Wong Teck Ching Andy) Tiger Airways: Singapore operations profitable again Summary: Tiger Airways (TGR) last Friday released its 1QFY13 financial results, which saw its first YoY improvement in a year. In 1QFY13, TGR's revenue edged 1% higher to S$181m while its net loss narrowed to S$14m, from S$21m a year ago. In terms of segments, Tiger Singapore's revenue grew 24% to S$138m but operating profit shrank 49% to S$4m. However, it is important to note that Tiger Singapore returned to profit for the first time since flying restrictions were imposed on the airline in Australia last year. On the other hand, Tiger Australia's revenue fell 37% to S$42m but its operating losses narrowed to S$21m, from S$23m in 1QFY12. We will be meeting management at TGR's results briefing later today, after which we will provide more updates. We currently have a fair value estimate of S$0.76/share and BUY rating on TGR. (Eric Teo)

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

NEWS HEADLINES - The White House said that the US federal deficit would top US$1.2t this year and would approach US$1t again in 2013. - Cambridge Industrial Trust this morning reported a 10.4% and 13.9% YoY growth in its 2Q12 revenue and DPU to S$21.5m and 1.18 S cents, respectively. - Jardine Cycle & Carriage reported a 5% YoY increase in net profit to US$245.7m on the back of an 18.6% rise in revenue to US$5,668.3m. - Sysma Holdings, a construction services company, has launched its IPO at 28 S cents per share for the 18m placement shares on offer.

CIMB, OCBC raise CapitaMalls target price

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED

Research House: CIMB

Price Call: SELL

Target Price: 1.47

CIMB Research raised its target price for CapitaMalls Asia to $1.47 from $1.42, citing higher valuations for its listed entities such as CapitaRetail China Trust , but the brokerage kept its ‘underperform’ rating.

By 9:42 a.m., shares of CapitaMalls were 0.6% higher at $1.62, and have surged 43.4% since the start of the year, compared to the Straits Times Index’s 14% rise.

CapitaMalls reported a 40.7% rise in its second quarter net profit to $232 million, driven mainly by revaluation gains of its Singapore and Malaysia shopping malls, said CIMB.

CapitaMalls management noted that its tenants in China are seeing some slowdown in sales on a year-on-year basis and growth in tier-1 cities is normalizing at a faster pace, CIMB said.

OCBC Investment Research also raised the target price for CapitaMalls to $1.85 from $1.79, and kept its ‘lbuy’ rating, as it expects retail conditions in China to remain healthy and noted that the company’s valuations remain undemanding.

MARKET PULSE: CMA, OSIM, Sheng Siong, Lian Beng, CDLHT (27 Jul 2012)

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.85

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: OCBC

Price Call: BUY

Target Price: 1.82

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

Research House: OCBC

Price Call: BUY

Target Price: 0.49

Stock Name: Lian Beng
Company Name: LIAN BENG GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.47

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: BUY

Target Price: 2.04

MARKET PULSE: CMA, OSIM, Sheng Siong, Lian Beng, CDLHT

27 Jul 2012

KEY IDEA CapitaMalls Asia: Chinese retail conditions remain healthy CMA announced 2Q12 PATMI of S$232.0m - up 40.7% YoY mostly due to a S$64.6m divestment gain (net-tax), offset partially by lower revaluation gains. Accounting for one-time items, we estimate 2Q12 core PATMI at S$39.0m which is somewhat below view due to a slower than expected rental income ramp-up in China. Management also declared an interim dividend of 1.625 S-cents, and a formal dividend policy to pay out at least 20% of annual PATMI. 1H12 shopper traffic and tenant sales (psf) in CMA's Chinese malls were up 10.7% and 11.6% YoY respectively, underscoring still healthy retail conditions. We pare our FY12 core PATMI estimate, however, by 16% to account for softer income growth from China. Despite this, our fair value estimate rises to S$1.85 (10% RNAV discount) versus S$1.79 previously, mostly due to stronger valuations for listed holdings. We believe CMA's valuation appears undemanding at this juncture. Maintain BUY. (Eli Lee) MORE REPORTS OSIM International: Special dividend surprise OSIM International Ltd's (OSIM) 2Q12 revenue of S$154.7m (+11.6% YoY) was similar to our forecast, but PATMI of S$22.5m (+20.1% YoY) exceeded our projection by 9.1% due to better-than-expected margins. Another positive surprise came from a special declared DPS of 1 S cent (on top of a 1 S cent/share interim dividend). The stronger bottomline growth was driven by a favourable product mix, better productivity and continued rationalisation of stores. We raise our FY12 and FY13 PATMI estimates by 3.6% and 2.9%, respectively. Despite ongoing concerns over China's slowing economy, we believe OSIM could be a laggard play as it continues to execute well on driving its productivity gains and product innovation. Our new FY12 PATMI estimate implies a robust 26.8% growth over FY11. Reiterate BUY with a revised fair value estimate of S$1.82 (previously S$1.61) as we roll forward our valuations to 14.3x blended FY12/13F EPS.(Wong Teck Ching Andy) Sheng Siong Group: Interim dividend declared There were no surprises in Sheng Siong Group's (SSG) reported 2Q12 results. Revenue grew 5.2% YoY to S$146.9m while net profit inched lower by 2% YoY to S$7m. In terms of SSG's 1H performance, revenue grew 4.6% YoY to S$306.7m and net profit increased 41.5% YoY to S$23.9m to form 47.3% and 54.2% of our FY12 top and bottom-line projections respectively. SSG also declared an interim dividend of 1 cent per share. Going forward, with the increased possibility of Singapore's growth falling below 1% this year, consumer spending as a whole is poised to decline further as consumers tighten up. This scenario should bode well with SSG as consumers transition from F&B spending to eating-in more. As such, we expect revenue growth to hold firm and offset the upward cost pressures from staff wages and rent. Leaving our FY12/FY13 projections unchanged, we maintain our fair value estimate of S$0.49 and BUYrating. (Lim Siyi) Lian Beng Group: Decent performance in 4QFY12 Lian Beng Group (LBG) reported that its 4QFY12 revenue fell 13% YoY to S$111.4m while PATMI remained flat at S$11.5m. LBG's operating margin climbed an impressive 3.6ppt to 14%, but the impact of one-off items resulted in no growth in its PATMI. Management also recommended final and special dividends totalling S$0.02/share. In full-year comparison, LBG's revenue in FY12 fell 12% to S$445.0m but PATMI rose 8% to S$52.1m. Revenue growth in ready-mixed concrete was particularly strong, jumping 83% in FY2012. LBG's order book contracted to S$652m at end-FY12. However, the order book is still robust since it is twice the size of its construction revenue in FY12. We maintain our fair value estimate of S$0.47/share and BUY rating on LBG. (Eric Teo) CDL Hospitality Trusts: 2Q12 roughly in line with expectations CDLHT announced this morning 2Q12 income available for distribution of S$29.8m, which was 17.7% higher YoY. 2Q12 DPU is 2.92 S-cents per share. The results were roughly in line with expectations and YTD DPU of 5.70 S-cents now makes up 47% of our current full-year forecast. 2Q12 revenue rose 6.0% YoY to 38.4m, versus +19.0% for 1Q12. The growth in 2Q12 revenue for CDLHT was due to a 5.9% growth in RevPAR for the Singapore hotels (excluding Studio M Hotel) and the recognition of a full quarter's revenue contribution (91 days) from Studio M Hotel as compared to only 59 days in 2Q 2011. On the other hand, contribution for 2Q 2012 from the Australia hotels was lower by S$0.16m as compared to the year-ago period due to weaker Australian dollar translation for the quarter. We are meeting management later today and, in the meantime, put our Buy rating with a fair value estimate of S$2.04 UNDER REVIEW. (Sarah Ong)

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

NEWS HEADLINES - US stocks jumped with optimism following comments by ECB President Mario Draghi that the organization is ready to do whatever it takes to preserve the common-currency union. The Dow climbed 1.67% and the S&P 500 Index rose 1.65%. - Parkson Retail Asia (PRA) has agreed to acquire 41.8% stake in Sri Lanka's leading fashion retailer, Odel PLC, for S$13.6m. The proposed acquisition will trigger a general offer which will result in PRA being the largest shareholder. - GUL Technologies Singapore has reported a 63% YoY increase in PATMI to US$7.45m for 2Q12. Revenue climbed 20% to US$74.24m. - STATS ChipPAC's second quarter net profit plunged to US$8.9m, versus US$19.2m for the year-ago period. Falling revenue was exacerbated by higher labor costs due to currency movements.

MARKET PULSE: Biosensors, Cache Log, CRCT, FCOT, First REIT, SATS, PEC, SIA (26 Jul 2012)

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

Research House: OCBC

Price Call: BUY

Target Price: 1.81

Stock Name: CACHE
Company Name: CACHE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.18

Stock Name: Frasers Comm
Company Name: FRASERS COMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.16

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

Research House: OCBC

Price Call: HOLD

Target Price: 0.96

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 2.55

Stock Name: PEC
Company Name: PEC LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 0.64

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD

Research House: OCBC

Price Call: HOLD

Target Price: 10.85

MARKET PULSE: Biosensors, Cache Log, CRCT, FCOT, First REIT, SATS, PEC, SIA

26 Jul 2012

KEY IDEA Biosensors International Group: Still 'stenting' strong Biosensors International Group's (BIG) reported 1QFY13 results were within our expectations. Revenue accelerated 51.3% YoY to US$86.3m, with solid growth recorded in EMEA, APAC and China. This formed 22.7% of our full-year forecast. Core PATMI rose 17.4% YoY to US$28.3m, in line with our US$29.2m forecast. BIG managed to achieve better economies of scale and a more favourable product and geographical mix for the quarter, which helped to boost its gross margin. However, gross margin is likely to taper down in subsequent quarters as DES price cuts across various regions have yet to be fully realised. We finetune our assumptions and tweak our core PATMI estimates for FY13 and FY14 downwards marginally by 2%. Our DCF-derived fair value estimate eases from S$1.88 to S$1.81. We reiterate our BUY rating as valuations still appear attractive. (Wong Teck Ching Andy) MORE REPORTS Cache Logistics Trust: Continuing its growth track Cache Logistics Trust's (CACHE) 1HFY12 results were generally consistent with our projections, with NPI and DPU forming 47.8% and 49.1% of our full-year forecasts respectively. For 2HFY12, we remain confident that CACHE will continue to deliver sustainable distributions, given its recent initiatives on growth plans and capital management. The acquisitions of Pan Asia Logistics Centre and Pandan Logistics Hub, we note, have to yet make their full-quarter contributions to CACHE's income stream and are expected to boost the DPU going forward. CACHE also refinanced all its outstanding debts with a new S$375.0m bank facility, thereby extending its debt maturity and enlarging its pool of unsecured assets. Notably, all-in financing cost is expected to improve to 3.44% from 4.38% over the quarter. This is in line with our view that CACHE is likely to gain from interest savings going forward. We maintain our BUY rating and fair value of S$1.18 on CACHE. (Kevin Tan) CapitaRetail China Trust: Better-than-expected 2Q12 For 2Q12, CRCT's revenue rose 18.2% YoY to RMB190.2m and net property income climbed 15.0% to RMB124.4m. Income available for distribution rose 23.5% to S$16.65m. Solid rental reversions of 15.2% YoY for the portfolio were achieved (versus 13.0% for 1Q12). CapitaMall Xizhimen in Beijing saw the highest rental reversion of 28.9% on the back of a 52.1% YoY increase in shopper traffic to approximately 85k-90k people per day, following the opening of a basement connection to the subway. CapitaMall Saihan in Huhot, Inner Mongolia, registered the highest NPI growth of 38.2%. We maintain our BUY rating on CRCT and raise out fair value from S$1.44 to S$1.50. CRCT is offering an attractive FY12F dividend yield of 6.9%. (Sarah Ong) Frasers Commercial Trust: More to come Frasers Commercial Trust (FCOT) turned in a strong set of 3QFY12 results last evening. The robust quarterly performance was mainly driven by the acquisition of the balance 50% interest in Caroline Chisholm Centre (CCC) and higher income from direct tenant leases at China Square Central (CSC) following the expiry of the master lease. Leasing activities within FCOT's portfolio has also remained robust. On the capital management front, FCOT updated that it has successfully completed the early refinancing of its S$500m term loan facility using two new facilities. Notably, blended interest margin is ~1ppt lower than its previous borrowing margin. Hence, we expect FCOT to gain from interest savings going forward. Maintain BUY on FCOT with a higher fair value of S$1.16. (Kevin Tan) First REIT: Steady quarter, no surprises First REIT's (FREIT) 2Q12 results were within our expectations. Gross revenue, distributable amount to unitholders and DPU rose 6.1%, 23.1% and 22.2%YoY to S$14.0m, S$12.2m and 1.93 S cents, respectively. For 1H12, gross revenue rose 6.2% YoY to S$28.0m and constituted 47.4% of our full-year projection. DPU increased 22.2% to 3.86 S cents and formed 50.1% of our FY12 forecast if we exclude a special distribution arising from an asset divestment. Looking ahead, we believe that acquisitions are possible in 2H12, which could be financed by a combination of debt and equity, given its current rich valuations. FREIT trades at FY12F P/B of 1.23x, a significant 26% premium to the S-REIT universes' average P/B of 0.98x. Hence we downgrade FREIT from Buy to HOLD on valuation grounds, with an unchanged fair value estimate of S$0.96. (Wong Teck Ching Andy) SATS Ltd: Strong revenue growth Summary: SATS Ltd's (SATS) reported its 1QFY13 financial results that were in line with market expectations, with revenue and PATMI coming in respectively at 24% and 22% of consensus full-year estimates. SATS' 1QFY13 revenue grew 14% to S$438m though PATMI fell 9% to S$41m. But if we exclude the discontinued operations and one-offs, SATS would have shown a 4% PATMI increase. Gateway services, In-flight catering and TFK revenues grew 8%, 16% and 41% YoY respectively; while non-aviation food revenue was flat YoY in 1QFY13. SATS' staff costs, its largest expense, grew almost at the same pace as revenue growth after the group increased the workforce in its Gateway Services segment. Considering its strong revenue growth and increasing expenses, we maintain our ex-dividend fair value estimate of S$2.55/share and HOLD rating on SATS. (Eric Teo) PEC Ltd: Secures S$65m project works contracts PEC Ltd has secured S$65m worth of project works from (i) Petrochemical Corporation of Singapore, (ii) SembCorp Utilities and Terminals Pte Ltd, and (iii) Sinopec Engineering & Construction Pte Ltd. The contracts involve piping, instrumentation, electrical and civil structural works as well as installation of equipment and process furnace; and are scheduled for completion in 2013. Although the three contracts would help replenish PEC's order-book (which stood at S$246m as of end-March 2012), we fear that project margins may be thin given the stiff market competition. Therefore, we opt to keep our HOLD rating and S$0.64 fair value estimate ahead of its full-year results due out next month. (Chia Jiunyang) Singapore Airlines: Parent airline swings back to profit Singapore Airlines (SIA) last night released its 1QFY13 results. The group's revenue gained 6% YoY to S$3.8b and PATMI jumped 74% to S$78m. The parent airline (Singapore Airlines) swung back to an operating profit of S$85m, from the S$36m loss a year ago. Management said promotional fares, despite causing passenger yield to fall 3%, boosted the parent airline's passenger traffic and helped it to record a higher operating profit. However, all other business segments were less profitable. SilkAir's operating profit fell 14% YoY to S$18m and SIA Engineering's operating profit slipped 3% to S$34m. In addition, SIA Cargo's operating loss widened to S$49m from S$14m a year earlier. We will be meeting management at tomorrow's results briefing, after which we will provide more updates. We currently have a fair value estimate of S$10.85/share and HOLDrating on SIA. (Eric Teo)

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

NEWS HEADLINES - Good earnings from Boeing and Caterpillar helped the Dow climbed 0.5% to 12676.05. The S&P 500 Index moved down less than 0.1% to 1337.89. Technology shares led declines in four of the index's 10 sectors as Apple fell 4.3%. - Jardine Cycle & Carriage has disposed its entire interest in a company for an aggregate cash consideration of US$135m. JC&C is expected to recognise a net gain of ~US$56m from the disposal. Proceeds will be used to reduce borrowings and for general working capital. - Aussino Group is to acquire the entire issued share capital of Max Strategic Investments Pte Ltd, allowing Aussino to operate 21 petrol kiosks across various key cities in Myanmar, for a consideration of S$70m to be satisfied by the issue of new consolidated shares.

Citi upgrades NOL to buy from sell

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: Citigroup

Price Call: BUY

Target Price: 1.35

Citi upgraded container shipping firm Neptune Orient Lines to ‘buy’ from ‘sell’ and raised its target price to $1.35 from $1.05, saying the company’s improved strategy may bring it back to profitability this year.

By 1:35 p.m., NOL shares were flat at $1.07, having dropped 4.9% so far this year, compared to the Straits Times Index’s 12.7% gain.

NOL’s earnings in the second half of the year and in 2013 may hold firm due to its high exposure to the relatively stable Transpacific trade.

Deliveries of lower-cost new ships could also mitigate an expected decline in freight rates, Citi said.

“The market may have over-looked progress in NOL’s improved strategy, due to lack of clear data points. However, this may eventually be reflected in a doubling of profits and return on equity in 2013,” the brokerage said.

CIMB downgrades Mapletree Industrial

Stock Name: MapletreeInd
Company Name: MAPLETREE INDUSTRIAL TRUST

Research House: CIMB

Price Call: HOLD

Target Price: 1.31

CIMB Research downgraded Mapletree Industrial Trust, which owns factories and other industrial assets, to ‘neutral’ from ‘outperform’, citing limited upside and lower distribution per unit estimates, but raised its target price as it applied a lower discount rate.

The brokerage raised its target price on the stock to $1.31 from $1.24.

By 10:10 a.m., units of Mapletree Industrial were up 0.8% at $1.245. They have risen 16% so far this year, compared with the FT ST Real Estate Investment Trust’s 21% rise.

Mapletree Industrial said its distribution per unit for April-June rose 14% to 2.26 cents, in line with CIMB’s estimates.

Mapletree’s current valuation at 1.2 times price-to-book value has priced in growth potential as organic growth is expected to moderate, with more resistance to rental increases likely in the current climate, CIMB said.

Higher asset leverage could also limit inorganic growth through debt-funding, the brokerage added.

MARKET PULSE: SIAE, Tee, CRCT, StarHill, First REIT (25 Jul 2012)

Stock Name: SIA Engg
Company Name: SIA ENGINEERING CO LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.04

Stock Name: Tee Intl
Company Name: TEE INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.28

Stock Name: CapitaRChina
Company Name: CAPITARETAIL CHINA TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.44

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

Research House: OCBC

Price Call: HOLD

Target Price: 0.96

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.70

MARKET PULSE: SIAE, Tee, CRCT, StarHill, First REIT

25 Jul 2012

KEY IDEA SIA Engineering: Business as usual Summary: SIA Engineering Co Ltd's (SIAEC) 1QFY13 financial results were mostly in line with our expectations. Revenue increased 8.2% YoY to S$300.5m and PATMI grew 2.9% to S$70.1m. Revenue growth was primarily driven by its fleet management and line maintenance segments. However, SIAEC's saw a 1.1ppt slide in its operating margin to 11.4%, causing its operating profit to contract by 0.9% to S$34.4m. Positively, SIAEC's share of profits of JV and associated companies climbed 7.5% to S$40m, ensuring that it still recorded PATMI growth in the quarter. Going forward, management guided that demand for its services is expected to remain stable. We maintain our fair value estimate of S$4.04/share and HOLD rating on SIAEC. (Eric Teo) MORE REPORTS Tee International: Record quarter unlikely to repeat Summary: Tee International (TEE) yesterday released its FY12 financial results. Its FY12 PATMI grew 11% to S$19.3m, beating consensus estimate by 32%. This is in spite of the 43% slide in its revenue to S$143.6m. After recording 9MFY12 PATMI of only S$7.7m, TEE turned it up with a record quarterly PATMI of S$11.6m in 4QFY12. The record quarterly PATMI in 4QFY12 can be attributed to 1) an increase in operating margin, probably due to profit recognised from TEE's property development, and 2) asset valuation gains at the associate level. However, TEE's profit recognition from property development should remain lumpy, and the one-off asset valuation gains are unlikely to repeat. Thus, we maintain our fair value estimate of S$0.28/share and HOLD rating on TEE. (Eric Teo) CapitaRetail China Trust: 2Q12 results generally in line with expectations Summary: CapitaRetail China Trust (CRCT) announced this morning 2Q12 income available for distribution of S$16.65m, which was 23.5% higher YoY. 2Q12 DPU is 2.41 S-cents per share. The results were generally in line with expectations and YTD DPU of 4.82 S-cents now makes up 52% of our full-year forecast. 2Q12 revenue rose 18.2% YoY to RMB190.2m, with shopper traffic and tenant sales in its multi-tenanted malls increasing 26.4% and 13.1% respectively. Good rental reversions of 15.2% were achieved. CapitaMall Xizhimen in Beijing saw the highest rental reversion of 28.9% on the back of a 52.1% YoY increase in shopper traffic, following the opening of a basement connection to the subway. We will meet with management later today and, in the meantime, put our Buy rating with a fair value estimate of S$1.44 UNDER REVIEW.(Sarah Ong) First REIT: 2Q12 DPU of 1.93 S cents Summary: First REIT (FREIT) reported its 2Q12 results which were within our expectations. Gross revenue increased 6.1% YoY to S$14.0m, driven by contribution from its Sarang Hospital which was acquired in Aug 2011 and higher rental income from its remaining portfolio. Distributable amount to unitholders and DPU jumped 23.1% and 22.2%YoY to S$12.2m and 1.93 S cents, respectively. This was boosted by a special distribution of S$2.2m which arose from a gain from the sale of the Adam Road property. Sequentially, revenue and DPU were both flat. For 1H12, gross revenue rose 6.2% to S$28.0m and constituted 47.4% of our full-year projection. DPU increased 22.2% to 3.86 S cents. Excluding the special distribution highlighted earlier, DPU would have formed 50.1% of our FY12 forecast. Looking ahead, we believe that acquisitions could possibly take place in 2H12, given FREIT's low leverage ratio of 15.1% and ongoing negotiations with its sponsor Lippo Karawaci over the past few months. As FREIT's share price is currently trading close to our S$0.96 fair value estimate, we place our Buy rating under review, pending an analyst briefing. (Wong Teck Ching Andy) Starhill Global REIT: Consistent set of 2QFY12 results Summary: Starhill Global REIT (SGREIT) announced DPU of 1.08 S cents for 2QFY12 (+3.8% YoY), in line with our projections. Together with the distribution in 1Q, 1HFY12 DPU amounted to 2.15 S cents, meeting 49.6% of our FY12 DPU forecast (50.0% of consensus). Wisma Atria was the key driver for the quarterly performance, thanks to improved office occupancy and positive rental reversions following the asset redevelopment on its retail segment. Management updated that the asset enhancement initiative at Wisma Atria was substantially completed in the quarter and that the ROI of 12.8% based on annualized NPI has exceeded its initial target of 8%. As at 30 Jun, we note that SGREIT's portfolio occupancy rate stood at 99.5%, an improvement of 50bps from 99.0% seen in previous quarter. In addition, aggregate leverage remained healthy at 30.5% (30.4% in 1Q), with no debt refinancing until Jan 2013. We will be attending the analyst briefing later at noon to get more details on its outlook. For now, we place our Buy rating and S$0.70 fair value UNDER REVIEW. (Kevin Tan)

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

NEWS HEADLINES - US stocks dropped on Tuesday following a report that Greece needs to go through further debt restructuring. The Dow fell 0.8% to 12,617.32. The S&P 500 Index sank 0.9% to 1,338.31. - IHH Healthcare is debuting on Bursa Malaysia and SGX today. The IPO price is MYR2.80 and S$1.11 per share. - Mapletree Industrial Trust reported 1Q13 distributable income of S$36.9m, up 27.1% YoY. Net property income rose 26.4% YoY to S$48.3m. DPU climbed 14% to 2.26 S-cents. - Ascendas India Trust reported a 3% YoY increase in 1Q13 total property income to S$32m. Net property income moved up 1% to S$17.8m. DPU is 1.2 S-cents. - Asia-themed fund United International Securities registered a net loss of S$112k for 1H12 versus a net profit of S$6.9m in the period a year ago. This is chiefly due to the loss on sale of investments due to a poorer market outlook and lower interest income.

Citi cuts SIA target to $9.40

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD

Research House: Citigroup

Price Call: SELL

Target Price: 9.40

Citi lowered its target price on Singapore Airlines to $9.40 from $10.40 and maintained its ‘sell’ rating to reflect the Singapore flagship carrier’s challenges.

SIA shares were down 1.6% at $10.63 on Tuesday. The stock has risen around 5% so far this year versus the 13% gain in the broader Straits Times Index.

Citi lowered its 2013-2014 fiscal year earnings estimates by 70-73%, factoring in lower yields and higher fuel costs.

SIA faces downward pressure on premium yields, aggressive market share gains by low-cost carriers and growing presence of Gulf carriers in Asia, while weak demand and high fuel costs are squeezing margins, Citi said.

Citi added that SIA’s strategy to tap low-cost airline demand by setting up independently-managed airlines, Scoot and Tiger Airways Holdings, may have the unintended effect of hollowing out its own economy class, while limiting flexibility to react to new opportunities and demand patterns.

In the near term, Citi expects SIA to report first-quarter net profit of $50 million as weak demand is offset by temporarily lower jet fuel costs. SIA will report its March-June result on July 25.

CIMB cuts Sakari Resources

CIMB Research downgraded Singapore-listed coal producer Sakari Resources to underperform from neutral and cut its target price to $1.01 from $1.96, citing prolonged coal price weakness.

Sakari shares were up 0.8% at $1.265 on Tuesday. The stock has fallen about 31% so far this year versus the 17% gain in the FT ST Midcap Index.

CIMB slashed its earnings per share estimates for Sakari’s 2012-2014 fiscal years by 16-51% on lower average selling price and volume assumptions.

It also trimmed its 2012-2013 volume projections by 3-4% as it expects Sakari to scale back on production amid weak market pricing.

“Today, the industry grapples not only with a cyclical pullback in demand but also a structural shift in energy consumption patterns given the emergence of cheap shale gas. A shift towards shale gas threatens to marginalise demand for thermal coal.”

MARKET PULSE: Raffles Medical, Downstream O&G (24 Jul 2012)

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD

Research House: OCBC

Price Call: HOLD

Target Price: 2.63

MARKET PULSE: Raffles Medical, Downstream O&G

24 Jul 2012

KEY IDEA Raffles Medical Group: Downgrading to HOLD Raffles Medical Group's (RMG) 2Q12 revenue of S$76.9m (+14.9% YoY; +5.5% QoQ) was in line with our expectations but PATMI of S$12.4m (+6.8% YoY; +6.9% QoQ) was slightly below due to higher-than-expected operating expenses. Topline growth was driven by both its Hospital Services and Healthcare Services divisions, which increased 19.1% and 9.1% YoY, respectively. As expected, an interim dividend of 1 S cent/share was declared, similar to 1H11. We maintain our revenue projections but cut our PATMI estimates for FY12 by 4.2% and FY13 by 3.0% on lower margin assumptions. Our fair value estimate thence declines from S$2.73 to S$2.63. While we expect RMG's earnings growth to remain fairly resilient despite cost pressures, we see limited upside from current price level given its recent share price surge. Downgrade RMG from Buy to HOLD. (Wong Teck Ching Andy) MORE REPORTS Downstream Oil & Gas: Weak 2QCY12 results expected Downstream oil & gas companies under our coverage (Rotary Engineering and PEC Ltd) will report their 2QCY12 results next month and we expect relatively weak financial performances from both companies. The sector has been experiencing severe pricing competition amidst a shortage of local large-scale petrochemical project works; and profitability for has fallen to historical lows. In our view, a quick turn-around is unlikely. Investors should also watch out for any unexpected delay on Rotary's Fujairah project and PEC's unresolved claim on its Rotterdam JV. As we feel that there are more downside risks than upside risks, we keep our UNDERWEIGHT rating. Maintain HOLD on both Rotary(FV: S$0.64) and PEC (FV: S$0.50). (Chia Jiunyang)

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

NEWS HEADLINES - U.S. stocks fell on Monday with concerns about Europe, pushing U.S. Treasury yields to new lows. The Dow and the S&P 500 Index closed down 0.8% and 0.9% respectively. - Spain's Valencia region has asked the central government for a financial lifeline. Madrid announced that it would ban short-selling after the interest rate on 10-year Spanish bonds rose past 7.5%. - Keppel Shipyard has secured three conversion contracts with an initial combined value of S$103m. - Orchard Parade Holdings has purchased a 33% stake in FEO Asset Management, the proposed manager of Far East Hospitality REIT, for S$330k. It has also purchased a 33% interest in FEO Hospitality Management, the proposed manager of Far East Hospitality Business Trust, for S$33. - Tainjin Zhong Xin Pharmaceutical Group Corp. says it expects to report a 50-70% YoY increase in 1H12 net profit from RMB195m (S$38.5m) due to gain on disposal of its subsidiary, an increase in return on investments from associates and better performance in its main business.

CIMB, OCBC raise CapitaCommercial target price

Stock Name: CapitaComm
Company Name: CAPITACOMMERCIAL TRUST

Research House: CIMB

Price Call: BUY

Target Price: 1.41

CIMB Research raised its target price for CapitaCommercial Trust to $1.48 from $1.41 and kept its ‘loutperform’ rating as it expects the trust to see higher rents.

Units of CapitaCommercial rose 1.1% to $1.345. They have surged 27.5% so far this year, compared with the FT ST Real Estate Investment Trust’s 20.8% gain.

CapitaCommercial said on Friday its second-quarter distribution per unit rose 7.3% to 2.06 centsfrom a year ago.

“With more lease expiries in 2013 and low expiring rents, we think CapitaCommercial Trust could offer the strongest rental reversion next year among office real estate investment trusts,” CIMB said in a report.

Separately, OCBC Investment Research also raised its target price for CapitaCommercial to $1.31 from $1.14 and maintained its ‘neutral’ rating.

It expects short-term vacancy rates to stabilise for the rest of the year due to limited new supply in Singapore’s central business district until the second half of 2013.

  

MARKET PULSE: MLT, Fortune REIT, OKP, CCT, Raffles Med (23 Jul 2012)

Stock Name: MapletreeLog
Company Name: MAPLETREE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.19

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

Research House: OCBC

Price Call: BUY

Target Price: 5.33

Stock Name: CapitaComm
Company Name: CAPITACOMMERCIAL TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.31

Stock Name: OKP
Company Name: OKP HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.53

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 2.73

MARKET PULSE: MLT, Fortune REIT, OKP, CCT, Raffles Med

23 Jul 2012

KEY IDEA Mapletree Logistics Trust: Robust 1QFY13 performance Summary: Mapletree Logistics Trust (MLT) delivered DPU of 1.70 S cents for 1QFY13. This is largely in line with both our and consensus expectations, as it formed 24.2% and 24.6% of the respective full-year forecasts. Going forward, MLT expects business sentiments to remain cautious in view of the slowing growth in Asia and concerns over the Eurozone debt crisis. While it is expecting its portfolio assets to stay resilient, management intends to focus on strengthening its fundamentals through active asset and lease management and prudent capital management. We maintain our BUY rating with an unchanged fair value of S$1.19 on MLT. (Kevin Tan) MORE REPORTS Fortune Real Estate Investment Trust: Highest DPU growth in nine years Summary: FRT achieved a record-breaking 1H12, with revenue and net property income climbing by 20.3% and 19.6% YoY to historic highs of HK$537.4m and HK$382.1m respectively. 1H12 DPU rose by 23.6% YoY, the highest growth in FRT's nine-year operating history, to 15.82 HK cents, slightly better than our expectations. The strong results are attributable to FRT's three-pronged growth strategy: active lease management, yield-accretive acquisitions of Provident Square and Belvedere Square in mid-Feb and good returns on AEIs of Fortune City One and Ma On Shan Plaza. We maintain our BUY rating and raise our fair value from HK$5.22 to HK$5.33. (Sarah Ong) CapitaCommercial Trust: Most positives priced in Summary: CapitaCommercial Trust (CCT) reported 2Q12 distributable income of S$58.5m - 7.5% higher YoY. This translates to a DPU of 2.06 S-cents per share which is broadly in line with expectations. 2Q12 revenues came in at S$95.8m - up 5.2% YoY mostly due to revenue contribution by Twenty Anson, higher revenues from Raffles City and HSBC Building, and higher yield protection income for One George Street.Though Grade A office rentals have dipped a further 4-5% in 2Q12, we see short-term vacancy rates likely stabilizing for the remainder of FY12 due to limited CDB additions till 2H13. We continue to like CCT's portfolio of prime office assets, and also note limited lease renewals of only 4.1% of office leases for the rest of FY12. At current price levels, however, we believe most positives are already priced in. Maintain HOLD with a higher fair value estimate of S$1.31, versus S$1.14 previously, due to stronger cap rate assumptions. (Eli Lee) OKP Holdings: Possible delay in new project Summary: OKP Holdings (OKP) reported that its 2Q12 revenue fell 17% YoY to S$23.6m, while PATMI sank 55% to S$3.1m. For the rest of 2012, management guided that revenue recognition is likely to remain slow and gross margin should remain in the range of low twenties. Management also said the fall in revenue is due to slower revenue recognition from some recently awarded projects. While management has not confirmed this, it is likely that the design-and-build project to expand the CTE/TPE/SLE interchange has experienced some execution delays, resulting in the slower recognition of revenue in 2Q12. Despite the delays, we expect the execution of this project to ramp up by the end of this year. Based on our 12-month investment horizon, we maintain our fair value estimate of S$0.53/share and HOLD rating on OKP. (Eric Teo) Raffles Medical Group: 2Q12 PATMI slightly below expectations Summary: Raffles Medical Group (RMG) reported its 2Q12 results this morning with revenue within our expectations but PATMI was slightly below due to higher-than-expected operating expenses. Revenue rose 14.9% YoY and 5.5% QoQ to S$76.9m. PATMI was up 6.8% YoY and 6.9% QoQ to S$12.4m. Growth during the quarter was driven by a higher patient load and patient acuity. Both RMG's core divisions contributed to its topline increase, with its Hospital Services and Healthcare Services segments growing 19.1% and 9.1%, respectively. For 1H12, revenue jumped 14.0% to S$149.9m, forming 48.0% of our full-year estimates; while PATMI increased 8.7% to S$24.0m, or 42.8% of our FY12 forecast. Note that 2H is typically a seasonally stronger half for RMG, and we expect this trend to be maintained in FY12. An interim dividend of 1 S cent/share was declared (payable on 31 Aug 2012), similar to 2Q11 and is in line with our expectations. RMG also continued to generate strong operating cashflows of S$22.4m in 2Q12, as compared to S$9.4m in 2Q11. We will provide more details after the analyst briefing. For now we place our Buy rating and S$2.73 fair value estimate under review. (Wong Teck Ching Andy)

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

NEWS HEADLINES - Spain's debt worries caused US stocks to slide, led by a decline in financial stocks. The Dow and the S&P 500 Index lost 0.9% and 1% respectively. - A subsidiary of AusGroup Limited has formalised a contract with BHP Billiton Iron Ore for the Jimblebar Project, valued at AU$48m for structural, mechanical and piping works for the inflow circuit of the plant. - A subsidiary of Full Apex (Holdings) Ltd has acquired 22% of the total issued share capital of Favour Development Ltd, which is engaged in the manufacture of PET performs and PET resin, at a purchase consideration of HK$90.5m. - SGX Catalist-listed AsiaMedic Limited has entered into a Memorandum of Understanding with Myanmar's Ni Ni Diagnostics And Healthcare to explore the possible establishment of a joint venture in Myanmar. - Mermaid Maritime Public Company Ltd has entered into a share purchase agreement to acquire the remaining equity in Seascape Surveys Pte. Ltd. and Seascape Surveys (Thailand) Ltd.

Maybank, DMG up Keppel Corp target

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: DMG

Price Call: BUY

Target Price: 13.80

Maybank Kim Eng raised its target price on Singapore’s Keppel Corp to $12.90 from $12.50 and maintained
its buy rating after the world’s largest rig builder reported better-than-expected earnings for its second quarter.

Maybank raised its 2012 fiscal year net profit estimate by 5% to reflect higher property and investment income.

Keppel shares were down 0.6% at $11.17. The stock ended 1.6% higher on Thursday ahead of the results.

Keppel reported a 35% rise in net profit and the results came ahead of market expectations.

While Keppel’s operating margin for offshore and marine stood at 13.2% in the quarter, Maybank remained optimistic that full-year margins would come within its expectation of 14-16%.

“A tight rig market with rising utilisation rates and an aging rig profile would continue to support the rig-building business,” Maybank said.

DMG & Partners Securities raised its target price on Keppel Corp to $13.80 from $13.60, after increasing its earnings per share estimate by 15% for 2012 fiscal year and by 1% for 2013. It maintained its buy rating.

MARKET PULSE: KepCorp, FCT, Suntec, CCT, MLT, SIAEC (20 Jul 2012)

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.34

Stock Name: FrasersCT
Company Name: FRASERS CENTREPOINT TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.89

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

Research House: OCBC

Price Call: HOLD

Target Price: 1.41

Stock Name: CapitaComm
Company Name: CAPITACOMMERCIAL TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.41

Stock Name: MapletreeLog
Company Name: MAPLETREE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.19

Stock Name: SIA Engg
Company Name: SIA ENGINEERING CO LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.04

MARKET PULSE: KepCorp, FCT, Suntec, CCT, MLT, SIAEC

20 Jul 2012

KEY IDEA Keppel Corporation: Strong results boosted by property arm Keppel Corporation (KEP) reported a 52.2% YoY rise in revenue to S$3.5b and a 35.4% increase in net profit to S$520.9m in 2Q12, such that 1H12 net profit accounted for 78% and 80% of ours and the street's full year estimates, respectively. Lumpy earnings from the property division boosted net profit, and this is not expected to recur in 2H12. Operating margin in the O&M division continued to normalize to about 12% in the quarter, in line with management's guidance. Meanwhile the group's net order book stands at S$7.6b, with deliveries extending to 2015. KEP remains optimistic about the return of semi-submersible orders, given the tight supply of deepwater rigs. We fine-tune our estimates and update the market values of KEP's listed entities, such that our fair value estimate eases slightly from S$13.38 to S$13.34. In line with our expectations, an interim dividend of S$0.18 has been declared. Maintain BUY. (Low Pei Han) MORE REPORTS Frasers Centrepoint Trust: Strong growth momentum Frasers Centrepoint Trust's (FCT) 3QFY12 DPU of 2.6 S cents (+33.3% YoY) was above our expectations. The strong performance was achieved mainly on the back of a 60.9% NPI growth by Causeway Point (CWP) and S$2.0m NPI contribution from newly-acquired Bedok Point. During the quarter, we note that FCT continued to track positive rental reversions, where rental rates of new leases were 27.2% higher than preceding leases on average (2Q: +11.0%). This reflects continued strong demand for suburban retail space, in our view. We now re-jig our FY12-13 forecasts to reflect the better-than-expected results. This in turn raises our fair value from S$1.74 to S$1.89. Maintain BUY. (Kevin Tan) Suntec REIT: Good news factored in Suntec REIT announced 2QFY12 DPU of 2.361 S cents, down 6.8% YoY and 3.8% QoQ. However, we feel that management has executed well, as this was achieved despite the loss of income from the divestment of Chijmes and commencement of asset enhancement works (AEI) at Suntec City on 1 Jun. Office segment, we note, was the star performer for the quarter, with gross revenue 5.5% higher YoY due to positive rental reversions. Suntec REIT also announced that the Suntec City AEI is now projected to complete by end 2014, earlier than its last guidance for completion in 2015. We now incorporate the stronger performance at Suntec REIT's office portfolio and the revised completion schedule of Suntec City AEI into our model. Maintain HOLD with a revised fair value of S$1.41 (prev: S$1.23) on Suntec REIT. (Kevin Tan) CapitaCommercial Trust: 2Q12 numbers tracking expectations CapitaCommercial Trust (CCT) announced this morning 2Q12 distributable income of S$58.5m, which was 7.5% higher YoY. This translates to a DPU of 2.06 S-cents per share. 2Q12 results were mostly in line with expectations and YTD distributable income now makes up 57% of our full year forecast. 2Q12 revenues came in at S$95.8m - up 5.2% YoY mostly due to revenue contribution by Twenty Anson, higher revenue from Raffles City (in which CCT has a 60% interest) and HSBC Building and higher yield protection income for One George Street. We estimate that Grade A office rentals have dipped a further 4-5% in 2Q12, though vacancy rates are likely to stabilize due to limited completions of major office projects in the CBD till 2H13. We will meet with management later today and, in the meantime, put our Hold rating with a fair value estimate of S$1.41 UNDER REVIEW. (Eli Lee) Mapletree Logistics Trust: Stable 1QFY13 results Mapletree Logistics Trust's (MLT) 1QFY13 DPU of 1.7 S cents (+6.3% YoY) was largely in line with our expectations, meeting 24.2% of our full-year DPU forecasts. The strength came chiefly from its recent acquisitions made in Japan, South Korea and Malaysia. During the quarter, we note that MLT's portfolio continued to enjoy a high occupancy of 99% and positive rental reversions of 10% on average (albeit lower than 12% in the previous quarter). Management also revealed that the rentals and occupancy rates of well-located, quality facilities continue to be supported by firm demand and tight supply. However, in face of the uncertain market condition, MLT intends to focus on strengthening its fundamentals through active asset and lease management and prudent capital management. We will be speaking to MLT later this morning to get more details on its outlook. For now, we place our Buy rating and fair value of S$1.19 under review. (Kevin Tan) SIA Engineering: New S$166m contract from Cebu Air SIA Engineering Co Ltd (SIAEC) yesterday announced it has won a five-year contract worth S$166m from Cebu Air. Under the agreement, SIAEC will provide Cebu Air with a wide range of fleet management and maintenance, repair and overhaul (MRO) services. The contract covers Cebu Air's fleet of A320/A319 aircraft, which will grow to 48 aircraft over the next five years. However, SIAEC added that this transaction is not expected to have a material impact on SIAEC's financial performance in the current financial year. Thus, we maintain our fair value estimate of S$4.04/share and HOLD rating on SIAEC. (Eric Teo)

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

NEWS HEADLINES - U.S. stocks climbed for a third session as better-than-expected earnings from IBM and other companies compensated for weak economic data. The tech-heavy Nasdaq Composite rose 0.8%. Both the Dow and the S&P 500 climbed 0.3%. - A subsidiary of Raffles Education Corp. has agreed to sell off the land use rights to a plot of land located in Langfang Development Zone, Hebei, China, for RMB159.3m (S$31.8m). - Jackspeed Corporation has signed a MOU with two firms (one Chinese and one Thai) to tender for a project to refurbish locomotives for the Thai rail operator. The value of the project is up to THB3.36b (S$133.6m).

CIMB lowers CapitaMall Trust target

Stock Name: CapitaMall
Company Name: CAPITAMALL TRUST

Research House: CIMB

Price Call: HOLD

Target Price: 2.01

Stock Name: CapitaMall
Company Name: CAPITAMALL TRUST

Research House: DBS Vickers

Price Call: HOLD

Target Price: 2.05

CIMB Research said Singapore shopping mall owner CapitaMall Trust’s second-quarter earnings showed signs of weakness in shopper traffic and tenant sales growth, and lowered its target price on the stock to $2.01 from $2.02.

By 10:55 a.m., CapitaMall Trust units were down 0.8% at $1.95. They have gained 14.7% this year, underperforming the FT ST Real Estate Investment Trust’s 22% rise.

CIMB said CapitaMall Trust’s shopper traffic fell 3% in the first half compared with a year ago, while tenant sales growth moderated to 1.5% year-on-year, versus 3.9% in the first quarter.

CapitaMall Trust’s management attributed the weakness to construction work at two of its properties in Singapore, IMM and Plaza Singapura, the brokerage noted.

“While portfolio performance should remain resilient, we see limited share price upside from current levels,” said CIMB, which kept its ’neutral’ rating on the stock.

Separately, DBS Vickers downgraded CapitaMall Trust to ’hold’ from ’buy’ and kept its target price at $2.05 citing valuations.

Maybank raises Keppel Land target price

Maybank Kim Eng raised its target price for property developer Keppel Land to $4.04 from $3.65 and kept its ’buy’ rating, on signs its sales in China are improving.

By 9:58 a.m., shares of Keppel were 1.5% higher at $3.44, and have surged 55% so far this year, outperforming the FT ST Financial Index’s 25.4% gains.

Keppel reported an 87.5% jump in its second quarter earnings to S$94.7 million, lifted by its high-end residential project in Singapore and K-REIT Asia, a real estate investment trust that it sponsors.

Keppel’s actual residential pre-sales improved in the second quarter, especially in China where it sold 491 units, up from 187 units in the previous three months, Maybank said.

“With buyers’ interest seemingly picking up in China, we think that Keppel Land will benefit and continue to roll out more units from its mass market projects, such as The Botanica in Chengdu and Tianjin Eco-city,” Maybank said.

It added that Keppel’s low net gearing of 0.2 times will allow it to remain nimble while seeking out acquisition opportunities.

DMG ups target price for OCBC

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

Research House: DMG

Price Call: HOLD

Target Price: 8.54

DMG & Partners raised its target price for Oversea-Chinese Banking Corp to $8.54 from $8.30 and kept its ’neutral’ rating, citing gains from the sale of its stake in Fraser and Neave and potential special dividends.

Shares of OCBC were up 1% at $9.39, and have gained nearly 20% since the start of the year, compared to the Straits Times Index’s 14.5% rise.

OCBC said it and its insurance unit Great Eastern Holdings will make a total post-tax gain of $1.15 billion from the stake sale in F&N to Thai Beverage and other companies linked to a Thai billionaire.

DMG said OCBC may pay out special dividends, but the amountwill not be significant as OCBC would want to retain capital toexpand its core financial business.

The brokerage estimates that OCBC’s potential special dividend could be up to 26 cents, but believes the bank will pay out less than that.

MARKET PULSE: CMT, KepLand, Midas (19 Jul 2012)

Stock Name: CapitaMall
Company Name: CAPITAMALL TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 2.04

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.30

MARKET PULSE: CMT, KepLand, Midas

19 Jul 2012

KEY IDEA CapitaMall Trust: Positives priced in - Downgrade to HOLD Summary: CapitaMall Trust (CMT) announced 2Q12 distributable income of S$79.6m or a DPU of 2.38 S-cents - up 0.8% YoY. This is mostly in line with expectations, and YTD DPU now makes up 50% and 47% of OIR and consensus FY12 forecast, respectively. CMT also booked a S$84.3m divestment gain during the quarter for the sale of Hougang Plaza. The portfolio kept up a healthy occupancy rate of 98.6% on a combined basis, as of end 2Q12, with most of the slack coming from the Atrium@Orchard (70.7% occupancy) now undergoing enhancement works. While we continue to like CMT's exposure to resilient suburban retail malls, we judge that most of the positives have been priced in at current share price levels, which has appreciated 15.6% YTD. Downgrade to HOLDwith a higher fair value estimate of S$2.04, versus S$2.02 previously, due to higher values of public holdings and marginally stronger cap rate assumptions. (Eli Lee) MORE REPORTS Keppel Land: Limited catalysts ahead - Maintain HOLD Summary. 2Q12 PATMI came in at S$97.7m, up 87.5% YoY mostly due to profits from Reflections at Keppel Bay and a stronger contribution from K-REIT Asia. This was mostly in line with our expectations and 1H12 PATMI now makes up 64% of our FY12 forecast. 2Q12 topline was S$130.3m, 25.1% higher YoY due to higher revenue recognition from The Luxurie and The Lakefront Residences. We like KPLD's strong balance sheet (S$1.6b cash, 19% net gearing) in the uncertain macro-economic environment currently, but see limited catalysts ahead, especially given that the divestment of MBFC T3 appears unlikely in FY12 and that no major launches appear likely in the near horizon. Maintain HOLD with a higher fair value estimate of S$3.44 (35% discount to RNAV), versus S$3.32 previously, due to higher valuations of K-REIT Asia and marginally stronger cap rate assumptions. (Eli Lee) Midas Holdings: Wins "Supplier of the Year Award" from Bombardier Summary: Midas Holdings (Midas) announced that it has received the "Supplier of the Year Award" from Bombardier Transportation for 2011, a leading manufacturer in the international rail equipment sector. We believe this is a testament to the quality of Midas' products and service to its customers. We understand that besides the supply of aluminium extrusion profiles, Midas also seeks to value-add by manufacturing fabricated component modules for its customers. We estimate that international contracts currently contribute ~5% of Midas' revenue, but we believe that there would be a stronger focus by management to clinch more international contracts moving forward given the current standstill in China's high-speed railway sector. We opine that international contracts could form 15-20% of Midas' revenue in the longer term, although there would be foreign exchange risks as these contracts are typically denominated in EUR, while Midas' reporting currency and operating expenses are in RMB. YTD, the EUR has already depreciated 3.8% against the RMB given the ongoing eurozone debt crisis. Maintain our HOLD rating and S$0.30 fair value estimate. (Wong Teck Ching Andy)

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

NEWS HEADLINES - US stocks rose on Wednesday as investors reacted to better-than-expected corporate earnings and continued optimism for intervention by the Federal Reserve. The S&P 500 Index climbed 0.7% to 1,372.78. The Dow climbed 0.8% to 12,908.70. - Structural steel company TTJ Holdings has secured several MRT Downtown Line 3 and industrial projects totalling S$38m, bringing its order book to S$175m. - Qian Hu Corporation has posted a 46.7% YoY drop in 2Q12 net profit to S$532k, largely due to oversupply of mass-market Dragon Fish in Malaysia. The company plans to divest its entire 65% stake in Kim Kang Aquaculture, a mass-market breeder in Malaysia, for S$9.4m. - A unit of heat transfer technology company Sunpower Group has won a RMB47.1m (~S$9.42m) contract from Shenzhen-listed Hengyi Petrochemical Co. to deliver six units of titanium condensers.