MARKET PULSE: Fortune REIT, SIA Engineering (31 Oct 2012)

Stock Name: SIA Engg
Company Name: SIA ENGINEERING CO LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.14

Stock Name: Fortune Reit HK$
Company Name: FORTUNE REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target Price: 6.63

MARKET PULSE: Fortune REIT, SIA Engineering

31 Oct 2012

KEY IDEA Fortune REIT: 9M12 DPU up 23% YoY 9M12 DPU grew 23.1% YoY, representing the highest rate of growth in the REIT's nine-year history. The results are in line with our expectations, with 9M12 DPU of 23.98 HK cents forming 74% of our prior FY12 DPU estimate. 9M12 revenue increased by 21.1% to HK$822.1m. The 20.7% increase in 9M12 NPI to HK$581.4m can be broken down into an 11.6% increase from the two new properties acquired in mid-Feb and a 9.1% increase from the original portfolio due to strong reversion and AEI. The average rental reversion clocked was impressive at 20.1%, among the highest level in years. At an NAV per unit of HK$8.32, FRT is trading at 0.7x NAV, significantly below the retail S-REITs average of ~1.1x. Gearing remains fairly low at 24.6%. Rolling forward our DDM model to FY13, we raise our fair value from HK$6.49 to HK$6.63 and maintain our BUY rating on FRT. We believe that the FY13F DPU yield is attractive at 5.6%. (Sarah Ong) MORE REPORTS SIA Engineering: 1HFY13 results in line SIA Engineering Co Ltd's (SIAEC) 1HFY13 financial results were generally in line with our expectations. Diluted EPS for 1HFY13 was 12.37 S cents, 48% of our FY13F estimate of 25.6 S cents. Revenue climbed by 6.4% YoY to S$585m, attributable mainly to revenue from materials, fleet management program and line maintenance. Operating margin declined 1.4ppt from 1HFY12 to 11.1% in 1HFY13 because of higher material cost, exchange loss, and increase in subcontract and staff costs. 1HFY13 PATMI declined 1.5% YoY to S$137.2m chiefly because profit for the period a year ago included a S$3.1m write-back of tax provision. Rolling our valuation forward, we increase our fair value estimate from S$4.04 to S$4.14 and maintain our HOLD rating on SIAEC. (Sarah Ong)

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NEWS HEADLINES - US stock markets were shut for a second day due to Hurricane Sandy. Separately, US home prices rose 2% in Aug, the fastest growth since Jul 2010, according to the S&P/Case-Shiller index. - Indofood Agri Resources' 3Q12 PATMI rose 22% YoY to IDR258b, on the back of an 8% increase in revenue to IDR3.54t, due to higher palm products sales and contribution from its sugar operations. - Rickmers Maritime's 3Q12 net profit fell 26% YoY to US$8.2m, as revenue slid 5% to US$36.3m, mainly due to a lower charter rate for one of its vessels. It maintained its DPU at 0.6 US cents, unchanged from a year ago. - Mun Siong Engineering's 3Q12 PATMI fell 35% YoY to S$1.2m, despite an 18% rise in revenue to S$22.4m, due mainly to higher staff and raw material costs. - Creative Technology reported a 1Q13 net loss of US$4.5m, smaller than the US$29.6m loss a year ago, despite a 29% YoY slide in sales to US$35.7m, as it benefited from foreign-exchange gains.