MARKET PULSE: CapitaRetail China, Roxy-Pacific (13 Sep 2012)

Stock Name: CapitaRChina
Company Name: CAPITARETAIL CHINA TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.70

Stock Name: Roxy-Pacific
Company Name: ROXY-PACIFIC HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.54

MARKET PULSE: CapitaRetail China, Roxy-Pacific

13 Sep 2012

KEY IDEA CapitaRetail China Trust: China aiming for 15% p.a. retail sales growth According to the 12th Five-year Development Plan for Domestic Trade released by the State Council recently, China aims to grow its retail sales of consumer goods at an average annual growth rate of 15% for 2011-2015. Beijing, which accounted for 67% of CRCT's 2Q12 gross property revenue, saw overall retail sales grew 13.0% in 1H12. While Beijing's 1H12 expenditure per capita only expanded by 3.6%, disposable income climbed 6.4%, which means that consumers have growing amounts of unutilized "firepower". We are confident that CRCT can achieve healthy double-digit positive rental reversions for 2012 for its multi-tenanted malls. The only listed pure-play China retail REIT globally, CRCT is our top pick in the overseas retail REIT space. We maintain our BUY rating on CRCT and our fair value of S$1.70. (Sarah Ong) MORE REPORTS Roxy-Pacific Holdings: Limited impact from new shoebox rules The URA recently enacted caps on the number of units, based on an average 70 sqm size, in non-landed residential projects outside the central area. In addition, a cap based on a 100 sqm average, originally for the Telok Kurau estate, was extended to Kovan and Joo Chiat/Jalan Euno. We see limited impact for ROXY's pipeline of projects as two of the five recent acquisitions lie in the central area, with the remaining three sites subject to an unchanged 70sqm average. Since we had upgraded ROXY to a buy rating on 20 Mar 2012, the share price has appreciated 32.4% to date, significantly outperforming the STI (up 0.9%). We believe, however, that management's execution remains spot on and further upside likely lies ahead. Maintain BUY with a higher fair value estimate of S$0.54 (25% RNAV disc), versus S$0.50 previously, as we lower the RNAV discount to reflect a higher sell-through in existing projects and careful execution. (Eli Lee)

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NEWS HEADLINES - US stocks finished slightly higher Wednesday after Germany's top court declined to block a euro-zone rescue fund. The Dow climbed 0.08% to 13,333.35, its highest finish since Dec 2007. The S&P 500 Index rose 0.2% to 1,436.56. - Thai Beverage and TCC Assets have increased their combined stake in Fraser & Neave to 30.36%, thus triggering a mandatory general offer to buy the remaining F&N shares at S$8.88 each. - Low Keng Huat reported a 54% YoY rise in net profit to S$26.9m for 2Q13. Revenue rose 17% to S$35.2m. - SembCorp will be investing a total of RMB326.6m (~S$63.5m) to develop centralised utilities facilities in the Fushun Petrochemical and Fine Chemical Park in Liaoning Province, China. - STATS ChipPAC has announced the launch of its Quad Flat No-Lead package design kit for Agilent Technologies' Advanced Design System, which is an electronic design automation software.