MARKET PULSE: Healthcare Sector, SIA (23 Aug 2012)

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD

Research House: OCBC

Price Call: HOLD

Target Price: 10.85

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.

Research House: OCBC

Price Call: BUY

Target Price: 1.81

MARKET PULSE: Healthcare Sector, SIA

23 Aug 2012

KEY IDEA Healthcare Sector: Growth profile continues Under our Healthcare sector coverage, both Raffles Medical Group (RMG) and Biosensors International Group (BIG) continued to deliver YoY revenue and earnings growth during the recently concluded 2QCY12 results period, although the former's PATMI was slightly below our expectations. Looking ahead, we believe that the strong balance sheets of RMG and BIG (net cash of S$63.9m and US$306.7m, respectively) would allow them to bolster their expansion plans despite the ongoing macroeconomic uncertainties. In our view, the major risk for the Healthcare sector stems from margin pressure, arising from higher manpower and consumables costs and mandatory price cuts for drugs and stents. Nevertheless, we believe that RMG and BIG would be able to meet our expectations for core earnings growth of 11.7% and 25.0% respectively, for their current fiscal year. Maintain OVERWEIGHT on the Healthcare sector, with BIG [BUY; FV: S$1.81] remaining as our preferred pick. (Wong Teck Ching Andy) MORE REPORTS Singapore Airlines: 2Q13 yields to remain stable Singapore Airlines' (SIA) Jul 2012 operating statistics saw passenger capacity (ASK) growth outpacing passenger traffic (RPK), resulting in lower passenger load factors (PLF). Despite the slight YoY dip in PLF, the continued uptick in passenger carriage validates the success of its fare promotion strategy. With growth in passenger revenues keeping pace with this increase, we do not anticipate further downward pressures on passenger yields in the coming quarter (2Q13), and yields should remain stable at 1Q13 levels. Although rising jet fuel prices could emerge as a potential downside risk to SIA going forward, we deem the increases relatively manageable at current levels. Maintain our HOLD rating on SIA at an unchanged fair value estimate of S$10.85. (Lim Siyi)

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NEWS HEADLINES - The S&P 500 Index closed relatively flat at 1413.49 points, erasing earlier losses as investors held hopes that the Federal Reserve would take further action to stimulate the economy. - Japan's overall exports in Jul dipped 8.1% YoY, giving it a trade deficit of JPY517.4b. - Saizen REIT reported a 26% YoY increase in its DPU to 0.63 S cents for 2HFY12, bringing its total FY12 DPU to 1.24 S cents. - Nam Cheong announced that it has secured contracts amounting to US$43.81m for the sale of three vessels.