MARKET PULSE: Residential Property, First REIT, STX OSV (3 Oct 2012)

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.18

Stock Name: First REIT
Company Name: FIRST REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.98

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.00

MARKET PULSE: Residential Property, First REIT, STX OSV

3 Oct 2012

KEY IDEA SG Residential Property: Prices still creeping up 3Q12 flash estimates for the URA Residential Price Index showed a sustained increase of 0.5% QoQ (versus 0.4% in 2Q12), cumulating to a total rise of 0.9% year to date. Again, the most bullish action was in the mass-market segment (Outside Central Region) where prices increased 1.0% in 3Q12 (versus 0.5% in 2Q12). In addition, we also saw a 0.2% and 0.7% price increase in the high-end (Core Central Region) and mid-tier (Rest of Central Region) segments, respectively. We believe an environment of ample liquidity would continue to drive residential demand and prices, particularly after QE3 and consequently increased visibility of low interest rates further out to 2015. Maintain OVERWEIGHT on residential developers. Our top pick is City Developments [FV: S$13.18, BUY]. (Eli Lee) MORE REPORTS First REIT: Entrenching its Indonesian footprint First REIT (FREIT) recently announced its proposal to acquire two Indonesian properties (one integrated hospital and hotel and the other a hospital) from its sponsor Lippo Karawaci for a total purchase consideration of S$142.9m. This would be funded largely by debt and partly by a private placement exercise. While the lease structure was largely similar to its existing Indonesian asset portfolio and would continue to provide unitholders with stability and income visibility, there were some lease terms which we were disappointed with. We had previously assumed new acquisitions in our model and hence finetune our assumptions in accordance to the updated details. We also roll forward our valuations to FY13, although this is partially mitigated by an enlarged unit base from its impending private placement exercise. Our RNAV-derived fair value estimate increases from S$0.96 to S$0.98. Maintain HOLD given FREIT's rich valuations. (Wong Teck Ching Andy) STX OSV: Secures contract for cable laying vessel STX OSV has secured a contract for the design and construction of one Cable Laying Vessel worth about NOK 450m (approx USD 80m). The vessel will be of STX OSV's own CLV 01 design. Delivery is scheduled from Norway in 3Q14. As contract win already forms part of our forward assumption (estimated NOK12-14b new orders over the next 12 months), we will be keeping our projections unchanged. Maintain BUY with unchanged fair value estimate of S$2.00. (Chia Jiunyang)

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NEWS HEADLINES - The Dow dropped slightly following the Spanish PM's denial that a bailout request was imminent. The Dow closed down 0.2% to 13,482.36. The S&P 500 Index climbed 0.1% to 1,445.75. - Loyz Energy has signed an agreement to sell its sanitary ware division for S$9.0m so as to concentrate on its exploration and production business. The sale is subject to shareholders' approval. - Olam International, the largest shareholder in NZ Farming Systems Uruguay, is offering to acquire the remaining 14.07% it does not own in the diary farm company for NZ$25.8m (S$26.4m). - Jason Parquet Holdings has been awarded three contracts worth a total of S$5.1m. - Frasers Property Australia has started work on Australia's first cantilevered high-rise garden located in Central Park, its residential project along the southern edge of Sydney's CBD.