MARKET PULSE: FCOT, NOL, CDL and Ezra (7 Sep 2012)

Stock Name: Frasers Comm
Company Name: FRASERS COMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.23

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.38

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.10

Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.35

MARKET PULSE: FCOT, NOL, CDL and Ezra

7 Sep 2012

KEY IDEA Frasers Commercial Trust: Updates on preferred units Summary: Frasers Commercial Trust (FCOT) announced that it has not exercised its right to redeem the Series A Convertible Perpetual Preferred Units (CPPUs). However, CPPU holders had successfully exercised their right to convert ~1.0m CPPUs at a conversion price of S$1.1845 per unit. We note that 878,697 new ordinary units will be issued on 1 Oct through the conversion process and ~341.5m CPPUs will be left in issue post conversion. We are currently maintaining our view that FCOT will likely redeem half of its CPPUs as the distribution rate is relatively high at 5.5% of its offer price. In view of the CPPU conversion, we now factor in the new ordinary units into our model. Our fair value, however, remains unchanged at S$1.23. Maintain BUY on FCOT. (Kevin Tan) MORE REPORTS Neptune Orient Lines: Cautiously optimistic Summary: The G6 Alliance (of which NOL belongs to) recently pulled the Loop 3 service on the Asia-Europe (AE) route after the carriers cited 'the forecast lack of improvements' in the trade lane. This latest development reiterates the softness of the AE route although the more important Transpacific route is still exhibiting encouraging signs with volume picking up and incremental rate increases holding up well. Whether the peak season will provide a much needed boost for carriers remains to be seen but we adjusted our forecasts slightly to account for the recovery in bunker fuel price and potential dip in freight rates in 4Q. The industry remains well aware that managing container shipping capacity is essential for profitability and collective efforts to withdraw service/capacity have been encouraging. Coupled with NOL's Efficiency Leadership Programme (ELP) showing significant cost savings, we maintain our BUY rating on NOL with an unchanged P/B based fair value estimate of S$1.38/share. (Lim Siyi) City Developments Limited: Tip bid for GLS tender at Tai Thong Crescent 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 an unchanged FV of S$13.10 (15% RNAV disc.). (Eli Lee) Ezra Holdings: Secures more subsea work Summary: Ezra Holdings (Ezra) announced that its subsea construction division, EMAS AMC, has won a contract from ABB for the installation of subsea power cables. This is part of ABB's second contract with Statoil to supply subsea HVDC light transmission systems to the Troll A platform in the North Sea. Though the contract value is not disclosed, we note that ABB has won a total of orders worth US$360m from Statoil in connection with the installation of two new compressors on the Troll A platform. Based on this and previous announcements by ABB, we estimate this latest contract to be worth around US$65m for ABB, with Ezra taking a share of it. However, there is the possibility that Ezra's win may incorporate previous work secured by ABB from Statoil. We will obtain more details from management; meanwhile we maintain our BUY rating with S$1.35 fair value estimate on Ezra. (Low Pei Han)

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NEWS HEADLINES - The ECB has agreed on a plan to purchase an unlimited amount of short-term bonds from countries struggling to raise money in the markets. - The Dow closed at its highest level since Dec 2007, the S&P 500 Index closed at its highest level since Jan 2008 and the Nasdaq Composite Index closed at its highest level since Nov 2000. - Wee Hur Holdings has acquired Thomson View Condominium for S$590m through a new 51:49 JV with Lucrum Capital Pte Ltd. - Keppel Telecommunications & Transportation Ltd has established a S$500m Multicurrency Medium Term Note Programme. - Tiong Seng Holdings has been awarded a contract worth ~S$229m from NTUC Fairprice Co-Operative Limited for the proposed erection of a 16-storey single-user warehouse development. - Hu An Cable Holdings has sealed a RMB92.8m deal with China's State Grid Corporation.