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)

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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.