MARKET PULSE: ST Engin, SingPost, ART (28 Sep 2012)

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: BUY

Target Price: 3.81

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.20

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.30

MARKET PULSE: ST Engin, SingPost, ART

28 Sep 2012

KEY IDEA ST Engineering: Defensive play with room to climb A safe haven in turbulent times, STE has outperformed the STI significantly since the beginning of the year, rising 29.0% versus the 15.6% increase by the index. The stock reached its 52-week high of S$3.55 last Friday. The counter is trading at a historical P/E multiple of 20.1x and should still have room to climb. With the win of S$179m worth of contracts by ST Marine announced in 3Q12 so far, we think that STE's order book may be greater than S$13b by the end of 3Q12. We note that the order book has been growing faster than annual revenues, implying increasing earnings visibility into the future. Rolling forward our valuation to blended 2H12/1H13 EPS and increasing our P/E multiple from 20.0x to 20.5x, we raise our fair value from S$3.50 to S$3.81 and maintain a BUY. (Sarah Ong) MORE REPORTS SingPost: Not just a "dividend" stock The steady climb of Singapore Post's (SingPost) stock has continued since the start of the year when we upgraded the stock to BUY. Cautiously improving market sentiment and the flood of liquidity searching for safe havens with respectable yields has supported performance, along with greater expectations of further growth opportunities in SingPost after the issuance of perpetual capital securities in Feb. Though spectacular gains are unlikely to be enjoyed by investors in the stock, SingPost's total return has been attractive since 2010 in an uncertain environment. The group has launched new initiatives over the years and diversified into other business areas, but the next leg of growth is heavily dependent on management's astute use of the group's cash pile. We update our valuation assumptions (lower cost of equity: 6.49%, terminal growth unchanged: 1.5%), and our DDM-derived fair value estimate rises from S$1.14 to S$1.20. Maintain BUY. (Low Pei Han) Ascott Residence Trust: Acquires property in Hamburg, Germany ART has entered into the agreement for the acquisition of a 166-unit serviced residence for a consideration of EUR37.5m (~S$59.4m). The property ("Madison Hamburg") is strategically located at the junction of three prime areas in the city centre of Hamburg, Germany. Madison Hamburg will continue to be managed under a master lease arrangement by a local operator, who has been managing the property since it opened in 1993. The acquisition is not expected to have any material impact on the NTA, EPU or DPU of ART for FY12. We maintain our BUYrating and S$1.30 fair value. (Sarah Ong)

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NEWS HEADLINES - US stocks rose on Thursday after Spain revealed an austerity plan that centres on spending cuts as opposed to tax increases and better-than-expected US jobs market data. The Dow climbed 0.5% to 13,485.97. The S&P 500 rose 1.0% to 1,447.15. - Vicplas International posted FY12 net profit of S$6.34m, up 354%. Revenue had increased 0.5% to S$73.5m. - TTJ Holdings registered a 15% rise in FY12 net profit to S$16.6m. Revenue grew 48% to S$142.9m. - Grand Banks Yachts signed an agreement with Pen-Marine Sdn Bhd to sell Grand Banks yachts in Malaysia. The company has also signed an agreement with Ocean Alexander to represent each other's brands and boats at sales offices in China and Australia. - ECS Holdings signed a US$90 million three-year term loan financing facility.