MARKET PULSE: Residential Property, Swiber, Keppel Land

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.18

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.66

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.44

MARKET PULSE: Residential Property, Swiber, Keppel Land

17 Oct 2012

KEY IDEA Singapore Residential Property: Buyers out in force The URA reported a headline total of 2,771 new private homes (incuding 150 EC units) sold in Sep 2012, up a whooping 80% MoM. (In the same month last year, 2,060 new homes were sold, showing a more subdued 26% MoM increase.) Several new OCR launches performed strongly: ECO (Bedok South, 748 total units) sold 402 units at a median selling price of S$1,283 psf, and Kovan Regency (Kovan Rise, 393 total units) sold 369 units at S$1,275 psf. In our view, Sep 2012 sales points to a continued healthy state of buyer demand in the market, particularly with the additional visibility of low rates till 2015 after the announcement of QE3. Maintain OVERWEIGHT rating on the residential property sector, and we expect continued strength in the mass-market segment in FY12. Our top stock pick is City Developments [FV: S$13.18, BUY] for its mass-market exposure and strong balance sheet. (Eli Lee) MORE REPORTS Swiber Holdings: More Indonesian work in the pipeline? Summary: Indonesia's state-owned Pertamina Hulu Energi has invited contractors to register their interest in the bid round for the GG oilfield development. According to Upstream, the consortium of Meindo Elang Indah and Swiber Offshore has registered for pre-qualification. With a declining rate of oil production in Indonesia, we expect the country to increase oil field development and production activities, benefiting EPCIC contractors such as Swiber Holdings. The industry outlook is buoyant but in order for the stock to re-rate, we think the group has to demonstrate that it is able to grow its operations by the generation of sustainable operating cash flows besides the support of leverage. Given the limited upside potential to our fair value estimate of S$0.66, we maintain our HOLD rating. (Low Pei Han) Keppel Land: Land acquisitions in Singapore and China Keppel Land (KPLD) put in a top bid of S$434.6m for a GLS (Government Land Sales) site at New Upper Changi Road yesterday. The tender attracted 11 bids in total, and KPLD's bid (translating to a land cost of S$791 psf) was 7% above the second highest. The 99-year lease-hold site has an area of 343k sq ft with a maximum GFA of 549k sq ft, and would likely be developed into a condominium project with ~550 units. It is located close to the Tanah Merah MRT station, and accessible by the ECP and PIE. We estimated breakeven and selling ASPs of S$1,200 and S$1,300, respectively, for this project. In addition, KPLD acquired its fifth residential site in Chengdu, China for RMB 680.4m (S$132m). This Chinese site, located in Xinjin County in Sichuan province, has an area of 28.7 hectares and is ~20km away from the city center. We would speak with management further about these two acquisitions and in the meantime, maintain HOLD with our fair value estimate of S$3.44 under review. (Eli Lee)

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NEWS HEADLINES - US stocks closed higher Tuesday, with optimism following strong earnings for several companies and reports that Spain is considering requesting a line of credit from the EU. The Dow finished 1% up at 13,551.78. The S&P 500 Index rose 1% to 1,454.92. - Keppel T&T reported 3Q13 PATMI of S$13.5m, down 62% YoY. Revenue climbed 22% YoY to S$34.3m. - UE E&C Ltd. has entered a JV agreement with Sichuan Sanjia Real Estate (Singapore) Pte Ltd to undertake property development cum construction and/or project management in Malaysia. - AIMS AMP Capital Industrial REIT has extended 96.7% percent of the underlying leases for 27 Penjuru Lane out to FY2016 and FY2018, once the asset's master lease expires in December 2012. 27 Penjuru Lane represented 19.1% of the REIT's net rental income as at 30 Sep 2012. - Kitchen Culture Holdings has entered into a joint venture agreement with unrelated third parties for the establishment of a JV in HK for the sale and distribution of kitchen systems, kitchen appliances, wardrobe systems, household furniture and accessories.