MARKET PULSE: KepCorp, Midas, ART, STE, Tiger (09 Jul 2012)

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.38

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.28

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.14

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: BUY

Target Price: 3.50

Stock Name: TigerAir
Company Name: TIGER AIRWAYS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.76

MARKET PULSE: KepCorp, Midas, ART, STE, Tiger

09 Jul 2012

KEY IDEA Keppel Corporation: Well-positioned to service offshore wind sector Summary: According to Upstream, a shortage of vessels equipped to work in the renewable offshore sector has spurred new building programmes, and green energy ventures in the US are turning to the offshore industry to acquire expertise needed to execute marine projects. This has resulted in opportunities for yards such as Keppel Corporation (KEP) which has a significant presence in the US Gulf coast. KEP is well-positioned to tap the offshore wind sector - it has its own offshore wind turbine vessel design and the group has been expanding its capabilities in this area. Still the sector is a relatively new frontier for most countries and time would be needed for more orders to come. However, we appreciate KEP's steady efforts to build up its capabilities to service the offshore wind industry which also has synergies with the offshore oil and gas sector. Maintain BUY with fair value estimate of S$13.38 on KEP. (Low Pei Han) MORE REPORTS Midas Holdings: More orders needed Summary: We lower our FY12 and FY13 PATMI estimates for Midas Holdings (Midas) by 14.9% and 6.8% respectively, on lower margin assumptions. We expect Midas to report a set of lackadaisical 2Q12 results (PATMI: -58% YoY). But improvement in 2H12 on a YoY basis remains a possibility, due largely to a low-base effect. Midas' 32.5%-owned JV company NPRT recently clinched a RMB860m metro contract, thus boosting its order book to ~RMB7.4b, according to our estimates. Notwithstanding its strong order book, contribution to Midas' earnings has been lumpy. In addition, high-speed railway contracts remain an integral element to Midas' recovery, but there is still an impasse on this front currently. We cut our fair value estimate from S$0.33 to S$0.30 (11x blended FY12/13F EPS) on account of our reduced projections. Maintain HOLD. We would turn buyers at S$0.28 or lower. (Wong Teck Ching Andy) ART: Divestment of Somerset Grand Cairnhill Singapore at S$359m Summary: Ascott Residence Trust (ART) announced today that it has entered into a conditional agreement with The Ascott Limited and CapitaLand Residential Singapore Pte Ltd, both wholly-owned subsidiaries of CapitaLand, to divest Somerset Grand Cairnhill Singapore at S$359m, which translates to a 3.8% implied exit EBITDA yield which enables ART to recognise a gross divestment gain of S$87.1m. ART has also entered into conditional agreements with CapitaLand to acquire Ascott Raffles Place Singapore, Ascott Guangzhou in China and a new serviced residence with a hotel license (New Cairnhill serviced residence). The New Cairnhill serviced residence will be built together with high-end residential units for sale by CapitaLand as part of the redevelopment of Somerset Grand Cairnhill Singapore. We place our fair value estimate of S$1.14/share and Buy rating on ART UNDER REVIEW. (Sarah Ong)

ST Engineering: Not acquiring Nera Telecommunications Summary: ST Engineering (STE) on Friday announced that shareholders of Nera Telecommunications Ltd (Nera) have voted against the acquisition of all its shares by STE. While the voting down of the proposed acquisition is a setback to STE's inorganic growth plans, STE's core businesses are intact. We maintain our fair value estimate of S$3.50/share and BUY rating on STE. (Eric Teo) Tiger Airways: New CEO Summary: Tiger Airways' (TGR) on Friday announced it is appointing Mr. Koay Peng Yen as Group Chief Executive Officer (CEO), starting from 10 Aug 2012. Mr. Koay will take over from TGR's interim CEO Mr. Chin Yau Seng, who is returning to Singapore Airlines. Mr. Koay is new to the aviation sector but has significant previous experience from the shipping and offshore sectors. Mr Koay will also be proposed for election as director at the next TGR AGM on 31 Jul 2012. The conclusion of TGR's CEO search should provide continuity in its recovering operations. We maintain our 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 - US stocks dropped on Friday as investors responded to a third consecutive month of employment data that were worse than expectations. The S&P 500 Index and the Dow closed at 0.9% and 1.0% down respectively. - Chinese Premier Wen Jiiabao said yesterday that China needs to take aggressive steps to fine-tune economic policies to support its economy. He reiterated that the country remains on track to meets its official growth target of 7.5% this year. - Swiber Holdings has issued S$75m in principal amount of 7.0% notes due Jul 2016 under its S$700m Multicurrency Medium Term Note Programme. - World Precision Machinery has increased its investment in its wholly-owned subsidiary, World Heavy Machine Tools (China) Co. by way of a cash injection of USD4m to increase the general working capital of the subsidiary. - Lifebrandz's wholly-owned subsidiary, Cannery Leisure Pte Ltd has been served with a writ of summons in a suit filed in the High Court of Singapore by Mint Studio, which is claiming S$728k for five purported contracts for renovation works, legal costs and interests.