MARKET PULSE: SingPost, Hoe Leong, PEC (24 Aug 2012)

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.14

MARKET PULSE: SingPost, Hoe Leong, PEC

24 Aug 2012

KEY IDEA SingPost: Property spin-off a bonus; buy for defensiveness The buoyant mood in Singapore's property sector means that this could be an opportune time for SingPost to spin off some of its assets; it may even receive an offer that is hard to resist. The group has about 61 post offices and we estimate that about 16 or so are potentially saleable. However, the jewel in its book is the Singapore Post Centre (SPC). We estimate that the SPC is worth S$765m based on its current mix of industrial, office and retail use, but the value may increase to about S$1.56b if the building is converted to full commercial use. However, putting market sentiment aside, the group may not be in a rush to unlock value as it is currently cash-rich. Hence we regard a spin-off as a bonus; and investors should focus on more fundamental factors such as the company's defensive nature and consistent dividends. Maintain BUY with S$1.14 fair value estimate. (Low Pei Han) MORE REPORTS Hoe Leong: Another quarter of hefty losses from Malaysian associate Hoe Leong Corp (HOE) reported a disappointing set of 2Q12 results with net loss of S$1.7m. 2Q revenue and gross profit jumped by 2.0% and 15.9% YoY to S$20.7m and S$6.1m respectively, but the gains were completely wiped out by losses from its associates and JVs of S$2.8m. For 1H12, HOE recorded a net loss of S$2.6m, mainly due to hefty losses from associates and JVs of S$6.1m. The main culprit for the poor performance was HOE's associate, Semua Group, which continues to be adversely impacted by high bunker prices. There is also a risk that Semua's financials may be consolidated into HOE, resulting in a material change in HOE's profitability and balance sheet ratios. Due to a reallocation of resources, we have decided to CEASE COVERAGE on HOE. (Chia Jiunyang) PEC: 4Q results boosted by write-back of losses for Amsterdam JV PEC Ltd (PEC)'s 4Q net profit increased by 30% YoY to S$4.6m and its FY12 net profit of S$11.4m came out above our expectations. This was mainly due to an unexpected and one-off write-back of its share of losses from its Amsterdam joint-venture for about S$11.1m during the quarter. We will be speaking with the management in the afternoon, in the meantime, we put our Hold rating and S$0.64 fair value estimate UNDER REVIEW. (Chia Jiunyang)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks took a hit after Federal Bank of St. Louis President James Bullard said he expressed that he would not support further quantitative easing. The Dow fell 0.9% to 13,057.46. The S&P 500 Index dropped 0.8% to 1,402.08. - Cordlife Group reported a 12.1% increase in revenue to S$28.8m for FY12. Due to one-off IPO expenses and higher capital expenditures to drive business growth, net profit decreased from S$8.5m for FY11 to S$6.9m. - Frencken Group has made a voluntary conditional offer for all shares in Juken Technology at 18 S cents cash per share or one Frencken share for every 1.8 Juken shares held. - Ryobi Kiso registered FY12 revenue increase of 24.4% to $153.3m but net profit declined by 52.1% to $4.2m. - Tiong Woon Corporation posted FY12 revenue of S$151.2m, up 41%, but registered a loss before tax of S$3.9m.