MARKET PULSE: StarHill Global, Tat Hong (03 Sep 2012)

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.79

Stock Name: Tat Hong
Company Name: TAT HONG HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 1.39

MARKET PULSE: StarHill Global, Tat Hong

03 Sep 2012

KEY IDEA Starhill Global REIT: Valuations still attractive Summary: Starhill Global REIT (SGREIT) recently entered into an agreement with its lender ANZ Bank for a A$63m term loan maturing in June 2017. The new facility will be used to refinance its existing A$63m loan taken up by SGREIT in Jan 2010 to partially fund the acquisition of David Jones Building. Based on our estimates, SGREIT's weighted average debt maturity will likely be extended from 1.8 years to ~2.0 years as at end Sep. In a separate announcement, SGREIT also updated the outcome of its appeal relating to the master lease with Toshin Development Singapore. According to management, the Court of Appeal did not find that the rent review mechanism had been rendered inoperable, as SGREIT had previously declared. Nevertheless, the Court ordered SGREIT and Toshin to jointly request the President of Singapore Institute of Surveyors and Valuers to appoint three valuation firms to determine the prevailing market rental rates. Our take on this development is neutral, as we have not factor in any rental upside resulting from a favourable outcome. We are adjusting our forecasts to reflect the refinancing activity. Our fair value stays unchanged at S$0.79. Maintain BUY. (Kevin Tan) MORE REPORTS Tat Hong Holdings: Stay invested! Summary: Since we upgraded our rating for Tat Hong Holdings (Tat Hong) to BUY ("Poised for a recovery", 9/1/2012), the stock has risen by 34%, compared to STI's 11% increase for the same period. The sharp run-up was mainly due to a strong recovery in Tat Hong's crane rental business. Looking ahead, we believe that there is still plenty of upside, arising from higher rental rates and increased infrastructure activities. The recently announced S$18b Thomson Line project should also contribute positively to the construction activity in Singapore over the medium term horizon. Tat Hong's business model has a significant operating leverage; and with rental and utilization rates likely to increase going forward, we believe the group is on track to deliver record profits for FY12-13F. Maintain BUY with unchanged S$1.39 fair value estimate. (Chia Jiunyang)

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NEWS HEADLINES - The Dow rose 0.7% to 13,090.84 on Friday while the S&P 500 Index climbed 0.5% to 1,406.58. For August, the Dow advanced 0.6%, while the S&P 500 rose 2%. The Nasdaq outperformed by surging 4.3%. - Novo Group expects to record a loss for 1Q12 ending 31 Jul mainly due decline in its trading business brought about by the euro-zone crisis and concerns of a hard landing in China. - Hi-P International intends to invest in Nantong Economic & Technological Development Area by establishing a production plant within it for the manufacture and sale of electromechanical components.