MARKET PULSE: Ezra, A-REIT, Triyards (11 Sep 2012)

Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.35

Stock Name: Ascendasreit
Company Name: ASCENDAS REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 2.28

MARKET PULSE: Ezra, A-REIT, Triyards

11 Sep 2012

KEY IDEA Ezra Holdings: Earnings impact from Triyard listing not significant Ezra Holdings (Ezra) recently announced that Triyards, its engineering and fabrication division, has received conditional eligibility to list on the Main Board of the SGX. The listing will be by way of an introduction whereby Ezra is proposing to distribute Triyards shares by way of dividend in specie to Ezra shareholders. We are positive on this development as this would allow the Triyards Group to tap the debt and equity capital markets independently from Ezra to pursue future growth opportunities. The move may also allow Ezra and Triyards to leverage on each other for business opportunities. Ezra is currently trading at about 12x FY12F earnings; should the market assign a lower P/E multiple to Triyards, this would lower our sum-of-the-parts based valuation of Ezra, and vice versa. As the proposed move is subject to the approval of Ezra shareholders, we maintain our BUY rating with S$1.35 fair value estimate on Ezra for now. (Low Pei Han) MORE REPORTS Ascendas REIT: Strong but not compelling Ascendas REIT (A-REIT) has been actively involved in capital recycling activities YTD in a bid to optimize its portfolio yield. Following the proposed sale of 6 Pioneer Walk in Jun, we note that A-REIT had on 24 Aug announced the divestment of another property, Block 5006 Techplace II, for S$38m. Based on our estimates, the proceeds may likely relieve its interest burden going forward and may potentially add 0.01 S cents to its FY14F DPU. For the rest of FY13, we believe A-REIT will deliver a stable set of performance, supported by full-year contributions from its past investments. However, we are maintaining our cautious view on its significant exposure (34% by valuation) to the business/science park segment, which has been seeing downward pressure on occupancy and rents. On a positive note, we understand that the current market rents are 16-35% higher than the average passing rents for the areas due for renewal. As such, we believe A-REIT will still put in a stable set of results. We maintain our HOLD rating on A-REIT with a revised fair value of S$2.28 (S$2.27 previously). (Kevin Tan) Triyards Holdings Ltd: Up-and-coming specialist yard With two yards in Vietnam and a fabrication facility in the US, Triyards Holdings Ltd (Triyards) is an engineering and fabrication solutions provider focused on the offshore oil and gas industry. Unlike many shipyards, the group has a strategic focus on the construction of self-elevating units (liftboats), having established a significant track record. Originating from Ezra Holdings which will hold a 67% stake post listing, Triyards may be able to be involved in some of the projects that Ezra undertakes and tap into Ezra's clientele base. The group delivered an average of US$15.9m in net profit each year from FY09-FY11, but 1HFY12 saw a strong performance of US$14.5m. A quick calculation based on 8x FY12 annualised EPS would result in a share price of about S$0.98. We do not have a rating on Triyards. (Low Pei Han)

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NEWS HEADLINES - US stocks fell on Monday as investors were cautious ahead of the Fed's policy decision later this week. The Dow and the S&P 500 Index closed down 0.4% and 0.6% respectively. Intel fell 3.8% after guiding for lower 3Q12 revenue. - A subsidiary of MDR has been appointed Nokia's sole authorised distributor in Singapore. - COSCO Corp (Singapore) has obtained a US$200m preliminary order for a new semi-submersible accommodation rig from Axis Offshore, and added that it will make a further announcement when the contract turned effective. - Popular Holdings' 1Q13 net profit fell 36% YoY to S$6.6m as revenue fell 16% to S$119m. Last year, sale of units in 18 Shelford had helped the company record higher revenue and profit. - Global Logistic Properties will begin to develop specialized industrial parks for the home appliance sector in China with Haier Group, a Chinese home appliance maker.