MARKET PULSE: CDL, Midas (10 Sep 2012)

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.18

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.435

MARKET PULSE: CDL, Midas

10 Sep 2012

KEY IDEA City Developments Limited: Land banking continues Summary: Yesterday evening, a JV between CDL and Hong Leong Holdings put in the top bid (S$245m) for a government land site tender at Tai Thong Crescent. The tender attracted eight bidders and CDL's bid was 11% above the 2nd highest. We believe the site, with a land area of 88.3k sq ft and maximum permissible GFA of 308.9k sq ft, would likely be developed into a mixed-use development of up to 19 storeys with ~265 residential units and 28 commercial units on the ground floor. The top bid translates to a land price of S$793 per sq ft GFA and an estimated project-wide breakeven ASP between S$1.2k - S$1.3k psf, which we believe is reasonable given the site location and attractive mix of use. Maintain BUY with a higher FV of S$13.18 (15% RNAV disc.), versus S$13.10 previously, as we account for the accretion from this acquisition and update valuations of listed holdings. (Eli Lee) MORE REPORTS Midas Holdings: Light shimmering more brightly Summary: Since we upgraded Midas Holdings (Midas) to 'Buy' on 16 Aug 2012, its JV company NPRT and itself have gone on to secure more contract wins, thus boosting its share price. Meanwhile, more positive industry news flow has emerged, with China's NDRC approving 25 urban rail projects amounting to ~CNY842.7b. China Railway Group also said that the Chinese government would boost targeted railway infrastructure investments from CNY470b to CNY496b in 2012. While we expect Midas' financials to remain lacklustre in the near-term as it transitions towards a recovery in FY13, we expect management to secure more metro, power and international railway contract wins in the meantime. We maintain our forecasts and BUY rating but lift our fair value estimate to S$0.435 (previously S$0.41) as we increase our valuation peg from 0.8x to 0.85x FY13F P/B on the back of the improved sentiment in China's railway sector. (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks closed higher on Friday, adding to multi-year highs, after lower-than-expected Aug jobs growth increased speculation the Fed will announce additional stimulus measures. - A CNMC Goldmine Holdings' subsidiary has awarded a technical services contract to Sinomine Resource for diamond core drilling services at its goldmine project at Sokor, Kelantan State, Malaysia. - China Essence says that it expects production and potato harvesting to continue as planned for this season despite the typhoon in northeastern China. - Interra Resources' jointly controlled entity has completed drilling infill development well YNG 3246 in the Yenangyaung oil field in Myanmar. - Kencana Agri has completed the US$5.7m acquisition of a company to increase the group's plantation land bank for development of new oil palm cultivations.