MARKET PULSE: Lippo Malls Indo, Cache Logistics, Tat Hong (19 Sep 2012)

Stock Name: LippoMalls
Company Name: LIPPO MALLS INDO RETAIL TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.45

Stock Name: CACHE
Company Name: CACHE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.26

MARKET PULSE: Lippo Malls Indo, Cache Logistics, Tat Hong

19 Sep 2012

KEY IDEA Lippo Malls Indonesia Retail Trust: Interest expense likely to hit DPU We have incorporated assumptions into our model about potential acquisitions that may be funded by the S$250m raised by LMIRT in early Jul under its S$750m MTN programme. We assume the acquisitions will be yield-accretive with initial net property yields of ~8.5%. The S$200m 3-year bonds were priced at 4.88% while the S$50m bonds were priced at 5.875%, giving a blended interest rate of ~5.1%. Since no proposed acquisitions have been announced yet, we believe that the end of this year is the earliest any acquisitions are likely to be completed. Before the acquisitions are completed, there is likely to be a drag on DPU due to the additional interest expense. We also have some concern about growth in the Jakarta retail space supply over 2012 and 2013 (+12.1% YoY and +18.2% YoY). We maintain our fair value of S$0.45 but downgrade LMIRT to a HOLD since the share price is close to our fair value. (Sarah Ong) MORE REPORTS Cache Logistics Trust: On strong footing We continue to favour Cache Logistics Trust (CACHE) for its resilient portfolio. The REIT currently owns 12 logistics warehouse properties, of which eight of them have ramp-up features. Such warehouse space is limited in Singapore as specialized planning and design specifications are required for the development. CACHE's portfolio has also remained 100% occupied since its listing in Apr 2010. In addition, the bulk of its leases are based on triple-net master lease structures with built-in annual rental escalation of 1.5-2.5%. This arrangement provides CACHE not only with high NPI margins but also stable income streams and a long weighted average lease to expiry of 4.4 years. For the rest of FY12, we expect CACHE to turn in a better set of results. While its 2Q12 DPU eased 5.0% YoY, we believe CACHE will see a lift in its DPU going forward when rental income from Pandan Logistics Hub starts to kick in from 2H12 onwards. Reiterate BUY on CACHE with a revised fair value of S$1.26 (S$1.18 previously). (Kevin Tan)

Tat Hong Holdings: Placement of 70m new ordinary shares at S$1.20 Tat Hong Holdings (Tat Hong) announced the placement of 70m new ordinary shares at S$1.20 per share, or a discount of 8% to yesterday's closing price (S$1.30). Assuming the 70m placement shares are allotted and issued, Tat Hong's share capital will be enlarged by 13.9%. The net proceeds of S$82m will be used to increase the group's crane fleet and expand the group's participation in infrastructure and oil & gas projects in the Asia-Pacific region. We will be speaking with the management later. In the meantime, we keep our BUY rating but put our S$1.39 fair value estimate under review. (Chia Jiunyang) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - Most US stocks fell for a second day. A gauge of home-builder sentiment showed improvement in Sep and FedEx Corp. reduced its profit forecast. The S&P 500 Index slipped 0.1% to close at 1,459.32. The Dow gained 0.1% to close at 13,564.64. - An ASEAN Trading Link connecting Bursa Malaysia and Singapore Exchange went live yesterday. - ThaiBev and TCC Assets Ltd agreed to support the sale of Fraser and Neave's stake in Tiger beer maker Asia Pacific Breweries Ltd to Heineken NV. - Olam International has won a bid for a full stake in Zambia's Northern Coffee Corporation Ltd for US$6.15m. Olam said it will commit a further US$40m as capital expenditure and pre-operative expenditure. - Ascendas India Trust has priced the S$65m 3.80% notes due 2018 to be issued by the trust.