MARKET PULSE: Sakari, CapitaLand and Breadtalk (01 Aug 2012)

Stock Name: Sakari
Company Name: SAKARI RESOURCES LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.45

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.25

Stock Name: BreadTalk
Company Name: BREADTALK GROUP LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.56

MARKET PULSE: Sakari, CapitaLand and Breadtalk

01 Aug 2012

KEY IDEA Sakari Resources: Longer-term outlook still muted Summary: Sakari Resources Limited (SRL) posted a decent improvement in 2Q12. 1H12 revenue met 49% of our FY12 forecast, while net profit met 64% of our full-year estimate. Higher sales volume, steady ASPs and improved cash costs were the key reasons behind the better-than-expected showing. We are upgrading our FY12 earnings estimate by 42% as SRL is likely to achieve the lower end of its US$85-90/ton ASP guidance for this year. However, with current global coal prices already below its ASP guidance, a prolonged slump could affect FY13 performance. With the current undemanding valuation, we maintain our HOLD rating and S$1.45 fair value. (Carey Wong) MORE REPORTS CapitaLand: Little surprises in 2Q12 numbers Summary: CAPL announced 2Q12 PATMI of S$385.9m - down 5.1% YoY. Adjusting for revaluations and impairments, we estimate 2Q12 PATMI at S$179.5m, which is broadly in line with our expectations. Top-line for the quarter came in at S$862.5m, climbing 16.5% YoY mostly due to a stronger contribution from residential sales in Singapore, China and Australia and revenues from Japanese shopping malls. In China, we saw the number of residential units sold jump 218% QoQ to 812 units, from an anemic 189 units in 1Q12, as buyer sentiments rebounded somewhat over the quarter. The Phase 3 of Beaufort in Beijing on 20 May 12 turned in positive numbers with over 61% of units launched already sold. In Singapore, 202 units were sold in 2Q12 (57 in 1Q12) with most of the increase in QoQ sales due to the Sky Habitat launch in Apr 12. We would speak with management about the results later today and in the meantime, put both our Buy rating and fair value estimate of S$3.25 UNDER REVIEW. (Eli Lee) BreadTalk Group: Stable 2Q12 expected Summary: Despite the difficult operating environment during the second quarter of the year, we remain hopeful for a stable QoQ showing in BreadTalk Group's (BTG) 2Q12 results, which are due to be released on 10 August. While F&B retail sales in Singapore have declined on a MoM basis, we do not anticipate a significant revenue drop-off due to BTG's strong bakery brand equity and popular Din Tai Fung (DTF) restaurant chain. Furthermore, BTG's operations in China and Thailand will provide additional support through strong sales in its bakery and Bangkok DTF respectively. Going forward, the environment remains challenging as costs of raw materials such as wheat and corn have touched 17 month highs on supply concerns. While we retain our confidence in management's ability to control costs, we adjusted our FY12 costs of sales projections slightly to incorporate the likelihood of a sustained elevation in raw material costs for the year. This adjustment sheds a cent off our fair value estimate to S$0.56. Reaffirm our HOLD rating ahead of BTG's 2Q12 earnings announcement. (Lim Siyi)

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NEWS HEADLINES - US stocks fell on concerns that central banks would not stimulate the global economy sufficiently. The Dow fell 0.5%, but still ended up 1% in Jul. The S&P 500 Index lost 0.5%, giving it a 1.3% rise from end-Jun. - BH Global Marine saw 2Q12 revenue decline 32% YoY to S$27.9m. PATMI fell 49% to S$2.0m. - Hotel Properties Ltd has formed a JV with two other companies to purchase a freehold, income-producing property located at 29-30 Old Burlington Street, London, for a consideration of £85m. - Parkson Retail Asia has completed its proposed acquisition 41.82% of the issued and paid up share capital of Sri Lankan company Odel for a total consideration of ~S$13.6m. - Yamada Green Resources expects to record a 4QFY12 loss, mainly due to fair-value losses from biological assets and lower gross profit from sale of self-cultivated fungi; but expects to remain profitable for FY12.