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)

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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.