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)

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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.