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)

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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).