MARKET PULSE: SIAE, Tee, CRCT, StarHill, First REIT (25 Jul 2012)

Stock Name: SIA Engg
Company Name: SIA ENGINEERING CO LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.04

Stock Name: Tee Intl
Company Name: TEE INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.28

Stock Name: CapitaRChina
Company Name: CAPITARETAIL CHINA TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.44

Stock Name: First REIT
Company Name: FIRST REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.96

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.70

MARKET PULSE: SIAE, Tee, CRCT, StarHill, First REIT

25 Jul 2012

KEY IDEA SIA Engineering: Business as usual Summary: SIA Engineering Co Ltd's (SIAEC) 1QFY13 financial results were mostly in line with our expectations. Revenue increased 8.2% YoY to S$300.5m and PATMI grew 2.9% to S$70.1m. Revenue growth was primarily driven by its fleet management and line maintenance segments. However, SIAEC's saw a 1.1ppt slide in its operating margin to 11.4%, causing its operating profit to contract by 0.9% to S$34.4m. Positively, SIAEC's share of profits of JV and associated companies climbed 7.5% to S$40m, ensuring that it still recorded PATMI growth in the quarter. Going forward, management guided that demand for its services is expected to remain stable. We maintain our fair value estimate of S$4.04/share and HOLD rating on SIAEC. (Eric Teo) MORE REPORTS Tee International: Record quarter unlikely to repeat Summary: Tee International (TEE) yesterday released its FY12 financial results. Its FY12 PATMI grew 11% to S$19.3m, beating consensus estimate by 32%. This is in spite of the 43% slide in its revenue to S$143.6m. After recording 9MFY12 PATMI of only S$7.7m, TEE turned it up with a record quarterly PATMI of S$11.6m in 4QFY12. The record quarterly PATMI in 4QFY12 can be attributed to 1) an increase in operating margin, probably due to profit recognised from TEE's property development, and 2) asset valuation gains at the associate level. However, TEE's profit recognition from property development should remain lumpy, and the one-off asset valuation gains are unlikely to repeat. Thus, we maintain our fair value estimate of S$0.28/share and HOLD rating on TEE. (Eric Teo) CapitaRetail China Trust: 2Q12 results generally in line with expectations Summary: CapitaRetail China Trust (CRCT) announced this morning 2Q12 income available for distribution of S$16.65m, which was 23.5% higher YoY. 2Q12 DPU is 2.41 S-cents per share. The results were generally in line with expectations and YTD DPU of 4.82 S-cents now makes up 52% of our full-year forecast. 2Q12 revenue rose 18.2% YoY to RMB190.2m, with shopper traffic and tenant sales in its multi-tenanted malls increasing 26.4% and 13.1% respectively. Good rental reversions of 15.2% were achieved. CapitaMall Xizhimen in Beijing saw the highest rental reversion of 28.9% on the back of a 52.1% YoY increase in shopper traffic, following the opening of a basement connection to the subway. We will meet with management later today and, in the meantime, put our Buy rating with a fair value estimate of S$1.44 UNDER REVIEW.(Sarah Ong) First REIT: 2Q12 DPU of 1.93 S cents Summary: First REIT (FREIT) reported its 2Q12 results which were within our expectations. Gross revenue increased 6.1% YoY to S$14.0m, driven by contribution from its Sarang Hospital which was acquired in Aug 2011 and higher rental income from its remaining portfolio. Distributable amount to unitholders and DPU jumped 23.1% and 22.2%YoY to S$12.2m and 1.93 S cents, respectively. This was boosted by a special distribution of S$2.2m which arose from a gain from the sale of the Adam Road property. Sequentially, revenue and DPU were both flat. For 1H12, gross revenue rose 6.2% to S$28.0m and constituted 47.4% of our full-year projection. DPU increased 22.2% to 3.86 S cents. Excluding the special distribution highlighted earlier, DPU would have formed 50.1% of our FY12 forecast. Looking ahead, we believe that acquisitions could possibly take place in 2H12, given FREIT's low leverage ratio of 15.1% and ongoing negotiations with its sponsor Lippo Karawaci over the past few months. As FREIT's share price is currently trading close to our S$0.96 fair value estimate, we place our Buy rating under review, pending an analyst briefing. (Wong Teck Ching Andy) Starhill Global REIT: Consistent set of 2QFY12 results Summary: Starhill Global REIT (SGREIT) announced DPU of 1.08 S cents for 2QFY12 (+3.8% YoY), in line with our projections. Together with the distribution in 1Q, 1HFY12 DPU amounted to 2.15 S cents, meeting 49.6% of our FY12 DPU forecast (50.0% of consensus). Wisma Atria was the key driver for the quarterly performance, thanks to improved office occupancy and positive rental reversions following the asset redevelopment on its retail segment. Management updated that the asset enhancement initiative at Wisma Atria was substantially completed in the quarter and that the ROI of 12.8% based on annualized NPI has exceeded its initial target of 8%. As at 30 Jun, we note that SGREIT's portfolio occupancy rate stood at 99.5%, an improvement of 50bps from 99.0% seen in previous quarter. In addition, aggregate leverage remained healthy at 30.5% (30.4% in 1Q), with no debt refinancing until Jan 2013. We will be attending the analyst briefing later at noon to get more details on its outlook. For now, we place our Buy rating and S$0.70 fair value UNDER REVIEW. (Kevin Tan)

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NEWS HEADLINES - US stocks dropped on Tuesday following a report that Greece needs to go through further debt restructuring. The Dow fell 0.8% to 12,617.32. The S&P 500 Index sank 0.9% to 1,338.31. - IHH Healthcare is debuting on Bursa Malaysia and SGX today. The IPO price is MYR2.80 and S$1.11 per share. - Mapletree Industrial Trust reported 1Q13 distributable income of S$36.9m, up 27.1% YoY. Net property income rose 26.4% YoY to S$48.3m. DPU climbed 14% to 2.26 S-cents. - Ascendas India Trust reported a 3% YoY increase in 1Q13 total property income to S$32m. Net property income moved up 1% to S$17.8m. DPU is 1.2 S-cents. - Asia-themed fund United International Securities registered a net loss of S$112k for 1H12 versus a net profit of S$6.9m in the period a year ago. This is chiefly due to the loss on sale of investments due to a poorer market outlook and lower interest income.