CapitaLand's Bishan tender is defensive: Citigroup

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: Citigroup

Price Call: HOLD

Target Price: 3.28

CapitaLand is “paying to prevent a sky-fall” with its winning bid for a Bishan Street residential site adjacent to its current Sky Habitat project, Citigroup says.

 

With CapitaLand selling only 28% of Sky Habitat’s units, or 141 out of 509, after being on the market seven months, the bid is likely a defensive move to lengthen Sky Habitat’s shelf life and prevent competing developers from under-cutting its price, especially as the new site is slightly closer to the MRT station.

 

Citigroup expects the new site’s design, timing and pricing to be closely watched; “Sky Habitat was designed by renowned architect Moshe Safdie, and developing another iconic project next door could serve to dilute the exclusivity of Sky Habitat and may further impede the already slow sell-through rate.”

 

But it notes developing a less-iconic project might affect the new project’s pricing ability. It expects Sky Habitat’s $1,600 psf average-selling-price may be a potential price ceiling. It rates CapitaLand Neutral with $3.28 target. The stock is up 1.1% at $3.54.

 

CIMB upgrades Golden Agri to Outperform, Trims target

Stock Name: GoldenAgr
Company Name: GOLDEN AGRI-RESOURCES LTD

Research House: CIMB

Price Call: BUY

Target Price: 0.80

CIMB upgrades Golden Agri to Outperform from Trading Buy. “It is a good play on the theme of CPO price recovery given its strong liquidity and high earnings exposure to the plantations business.”

The house cuts its 2012-14 CPO price forecasts by 7%-9% to US$960-US$1,000/ton ($1,172-$1,221/ton) on US soybean crops’ recent upgrade and the fading El Nino.

But it still expects CPO prices will recover on slower output growth and improving demand, forecasting spot CPO prices to rise by 23% from the current US$780/ton to a 2013 average US$960/ton, although the timing may be delayed from its previous end-2012 to 1Q13 projection if demand stays soft on global economic uncertainty or supply exceeds its forecasts.

 

It cuts its target to $0.80 from $0.85 after lowering FY12-14 earnings forecasts by 3%-15% on lower CPO price assumptions and higher estate costs on Indonesia’s proposal to raise minimum wages. CIMB expects FY13 earnings to improve on fresh-fruit-bunch production improvement and better China agribusiness contributions, offsetting the higher production costs. The stock is up 1.5% at $0.68, extending Thursday’s 4.7% climb.

CIMB upgrades Wilmar to Outperform, Ups target 10.8%

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: CIMB

Price Call: BUY

Target Price: 3.90

CIMB upgrades Wilmar to Outperform from Neutral, expecting the stock to re-rate on its undemanding valuations and an improving crushing margin in 2013. It estimates the stock trades at only 1.2x FY12 P/BV, a 40% discount to its three-year average of 2.1x, which doesn’t price in Wilmar’s strong distribution channel and integrated business model, it says.

 

Wilmar’s recent share buybacks and major shareholders’ share purchases suggest the stock may have bottomed, while the stock’s poor showing this year is an overreaction to its poor earnings visibility, CIMB says.

 

The current high palm-oil inventory situation has shifted bargaining power from planters to refiners, benefiting Wilmar’s refining business, which accounts for around 30% of the company’s earnings, it says, noting the refineries are enjoying high utilisation rates and attractive raw-material costs.

 

It cuts FY12-14 earnings forecasts by 2%-6% after lowering 2012-14 CPO price assumptions by 7%-9%, but it still expects FY13-14 earnings to rise 26% and 12% respectively on better contributions from its oilseeds and grains division. It raises its target to $3.90 from $3.52 after eliminating the previous 10% discount to the sum-of-the-parts valuation. The stock is up 0.9% at $3.22, but remains down nearly 36% year-to-date.

 

Olam rises, off 3-1/2 year low

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.80

Shares of Singapore’s Olam International rose 3%, after hitting a three-and-a-half year low on Wednesday, as analysts said the commodity trader’s detailed defence against allegations from short-seller Muddy Waters was largely satisfactory.

By 9:34 a.m., Olam shares were 2.7% up at $1.54, but have lost 27.7% since the start of the year, compared with the Straits Times Index’s 14.4% rise.

“In our view, the explanations were satisfactory and should clear any misunderstanding caused by Muddy Waters’ accusations,” said CIMB Research, which upgraded Olam to ’neutral’ from ’trading sell’ and kept its $1.59 target price.

CIMB believes the worst of the clash with Muddy Waters is over and Olam’s share price should find support at book value of $1.35. However, it warned that sentiment could remain subdued as investors continue to remain cautious.

Citigroup was positive on Olam’s indication that it may consider reducing its expansion pace as investors signalled that greater execution focus and reduced leverage were important, given a tough macro environment.

OCBC Investment Research also believed investors are likely to adopt a cautious approach to valuing Olam. It now values the company at 10 times 2013 earnings per share versus 12.5 times previously, lowering its target price to $1.44 from $1.80.

Religare downgrades Olam to 'sell'

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: Religare Capital

Price Call: SELL

Target Price: 1.40

Religare Capital Markets downgraded Olam International to ‘sell’ from ’buy’ and cut its target price to $1.40 from $2.40, as it expects the commodity trader’s shares to be weighed down by concerns raised by short-seller Muddy Waters.

By 12:26 p.m., Olam shares were down 0.96% at $1.55, off an intraday low of $1.465, which was a three-and-a-half year low. Its shares have plummeted 27.5% since the start of the year, compared with a 13.5% rise in the Straits Times Index.

"Olam shares will face difficulty re-rating upwards and sustaining even a moderate earnings multiple for the next few quarters, even if the financial risks Muddy Waters warns of don’t materialize," Religare said in a note.

The brokerage noted Olam’s guidance that it won’t be generating positive free cash flow until 2015, making it hard for the company to completely dispel the concerns raised.

Olam insolvency unlikely: UOB-KayHian

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: UOB KayHian

Price Call: BUY

Target Price: 2.38

Muddy Waters’ concerns on Olam could be overblown, UOB KayHian says; “we believe the report premised on Olam’s insolvency, which in our opinion is unlikely unless there is outright fraud.”

 

The house notes while the report says Olam needs to raise or refinance up to $4.6 billion over the next 12 months to stay solvent, this quite likely includes short-term revolving facilities of $3.7 billion and $1 billion for trade financing and capex respectively; “the question is whether such a measure is valid in the first place.”

 

It adds some issues, such as accounting re-statements, were addressed previously. While Muddy Waters values Olam’s equity at zero based on insolvency expectations, UOB KayHian believes Olam should be valued as a going concern; “there are issues highlighted regarding overpayment and misleading investors, which Olam should address in its response to the report. However, these issues alone are not likely to cause Olam face solvency issues.”

 

It expects near-term volatility in the stock, with trade rangebound until the issues are addressed comprehensively; “due to the complexities of the business, it could be a protracted process.” It keeps a Buy call with $2.38 target pending further developments. The stock is last down 1.9% at $1.53.

 

MARKET PULSE: Downstream O&G, Marco Polo Marine, Olam (28 Nov 2012)

Stock Name: PEC
Company Name: PEC LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.76

Stock Name: Rotary
Company Name: ROTARY ENGINEERING LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.34

Stock Name: Marco Polo
Company Name: MARCO POLO MARINE LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.56

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.80

MARKET PULSE: Downstream O&G, Marco Polo Marine, Olam

28 Nov 2012

KEY IDEA Downstream Oil & Gas: Structural shifts towards developing nations The shift in oil demand growth from OECD countries to non-OECD countries, coupled with an increasing refining overcapacity has put pressure on global refinery utilization rates and refining margins. Against this backdrop, Singapore said that it has no plans to attract any more green-field refinery investments, and will focus on getting existing refineries to upgrade or expand their facilities to produce higher-value petrochemicals, fuels and lubricants. We believe the net effect will be fewer jobs and even stiffer competition for the EPC contractors. As such, we maintain our UNDERWEIGHT on the sector. We like PEC (BUY; FV: S$0.76) for its attractive valuations, but would avoid Rotary (SELL; FV: S$0.34) as we believe the risk of further cost over-run is still relatively high. (Chia Jiunyang) MORE REPORTS Marco Polo Marine: Increasing its exposure to the offshore sector Marco Polo Marine (MPM) reported a 3% YoY fall in revenue to S$19.8m and a 10% increase in net profit to S$3.9m in 4Q12, bringing full year revenue and net profit to S$89.8m and S$21.3m, respectively. Results were in line with our expectations; full year net profit was exactly what we had forecasted earlier. As for the long-awaited BBR listing, we think there is a possibility of it coming through in the coming months. We expect its offshore vessel fleet to grow while BBR downsizes its tugs and barges fleet. Meanwhile the ship repair business remains healthy while charter rates are expected to be stable. Rolling forward to FY13 earnings with an unchanged peg of 8x, our fair value estimate rises from S$0.53 to S$0.56. Maintain BUY. (Low Pei Han) Olam International: Refutes MW's report in brief statement Olam International has refuted the Muddy Waters (MW) report, saying that "there is no substance in their broad allegations" after an initial read. Olam adds that it will continue to study the report in greater detail and "will provide a fuller response in due course". In addition, Olam says it will clear its name and hold MW accountable for their damaging actions. While Olam has reiterated that its accounting practices are fully compliant with international accounting stands, we do not expect the market to be pacified by this brief statement, especially since the allegations made by MW were quite specific and relate to Olam's acquisitions, capex, and changes in accounting entries between the unaudited financial statements and its annual reports. We are still in the process of reviewing our Hold call and S$1.80 fair value; but we expect volatility in the share price to persist until Olam can provide a more substantial response that addresses the specific issues raised by MW. (Carey Wong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks fell on Tue after top lawmakers said that little progress had been made in talks to avoid the fiscal cliff. The Dow slid 0.7% to 12,878.13, led by Hewlett-Packard Co, while the S&P 500 Index declined 0.5% to 1,398.94 and the Nasdaq ended 0.3% lower at 1,398.94. - Goodland Group's FY12 PATMI rose to S$25m from S$9.2m a year ago, supported by an 84% surge in revenue to S$56m as sales from development projects of higher value were recognised. - Albedo Ltd plans to raise up to S$3.5m in net proceeds through the issue of 735.4m rights shares at 0.5 S cent each, with detachable warrants. It intends to use the money raised to fund its expansion and as general working capital. - Harry's Holdings warned that its FY12 performance is likely to be affected due to lower than expected sales and various one-time costs incurred since 30 Jun, as well as increased competition and inflationary pressure in food prices.

Citi upgrades UOB and OCBC

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: Citigroup

Price Call: BUY

Target Price: 20.30

Stock Name: OCBC Bk
Company Name: OVERSEA-CHINESE BANKING CORP

Research House: Citigroup

Price Call: HOLD

Target Price: 9.75

Citigroup upgraded Singapore banks United Overseas Bank to ‘buy’ from ‘sell’ and Oversea-Chinese Banking Corp
to ‘neutral’ from ‘sell’, citing favourable valuations if net interest margins stabilize and macro data improves in the coming quarters.

While low interest rates and the U.S. Federal Reserve’s latest round of quantitative easing will cap improvements in net interest margins, they may help banks generate healthy treasury and markets income, allowing provisions to remain below normalised levels.

Citi prefers UOB, which has experience dealing with balance sheet issues and looks well positioned to capture fee growth opportunities in the region. It raised its target price for UOB to $20.30 from $18.10.

Both OCBC and UOB need to drive higher contributions from its franchises in Southeast Asia to mitigate pressure on net interest margins, Citi said, increasing its target price for OCBC to $9.75 from $9.15.

By 1:47 p.m., UOB shares were up 1.2% at $18.26, and have gained 19.6% since the start of the year. OCBC rose 0.8% to $9.22, and is up 17.8% since the start of the year, against the Straits Times Index’s 13.7% gain.

MARKET PULSE: KepCorp, Mapletree Log, Pacific Andes, Marco Polo Marine (27 Nov 2012)

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.49

Stock Name: MapletreeLog
Company Name: MAPLETREE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.25

Stock Name: Pac Andes
Company Name: PACIFIC ANDES RESOURCES DEVLTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.143

Stock Name: Marco Polo
Company Name: MARCO POLO MARINE LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.53

MARKET PULSE: KepCorp, Mapletree Log, Pacific Andes, Marco Polo Marine

27 Nov 2012

KEY IDEA Keppel Corporation: Order flows to continue in 2013 In our year-end report on Keppel Corporation (KEP) last year, we highlighted that order flows for jack-up rigs would slow while prospects for semi-submersible rigs look increasingly brighter. The year played out as expected, with the group securing three jack-up rigs and seven semi-sub orders so far this year. This has been a front-end loaded year due to property, while O&M margins continued to normalize. Meanwhile KEP has started to improve the competencies and productivity of its regional satellite yards to meet heavier workload requirements. The group's net order book stood at S$13.1b as at end Sep with deliveries extending to 2019. We roll forward our valuations to FY13 earnings in which we are expecting lower operating margins mainly due to the O&M segment and comparatively lower property earnings contribution; as such, our fair value estimate slips from S$13.34 to S$12.49. Maintain BUY. (Low Pei Han) MORE REPORTS Mapletree Logistics Trust: Increasing presence in China Mapletree Logistics Trust (MLT) recently announced its intention to acquire Mapletree Wuxi Logistics Park in China from its Sponsor. The purchase consideration of RMB116m was at a 2.5% discount to the average valuation of RMB119m by two independent valuers. Management guided that the acquisition is expected to be accretive at the DPU level, with an initial NPI yield of 8.0%. This is higher than the implied yield of 6.0% for MLT's existing China portfolio. Separately, MLT also updated that the divestment of 30 Woodlands Loop in Singapore to Accenovate Engineering Pte Ltd will not proceed. This was because the buyer's application to purchase the property was not approved by JTC Corporation as it did not meet its evaluation criteria. We have earlier assumed the divestment to be completed by Feb 2013, as previously guided by MLT. We now factor the China warehouse acquisition into our forecasts and reverse the divestment of 30 Woodlands Loop as the sale will not be completed. Accordingly, our fair value inches up slightly from S$1.24 to S$1.25. We maintain BUYon MLT. (Kevin Tan) Pacific Andes: Below expectations 4Q Pacific Andes Resources Development (PARD) delivered a disappointing set of 4Q results, dragged down by lower earnings from China Fishery Group (CFG). Net earnings plunged to HK$8.9m, down from HK$146.1m in 3Q12. As a result of this, dividend per share was slashed from 1.08 S cents (which traditionally accounted for about one-third of its earnings) to 0.3 S cent (14.5% of earnings). Outlook is muted, and management is exploring new growth areas. While the Supply Chain Management (SCM) operation is still relative stable, the fishing operation appears to be under pressure. Overall, in view of the weaker outlook, we have cut our estimates for FY13 from HK$839m to HK$638m. In addition, we have also dropped our DPS projection to be the same as this year's payout at 0.3 S cent. Using the same valuation peg, but moving to blended FY13/14 earnings, we dropped our fair value estimate from 17.8 cents to 14.3 cents. Downgrade to HOLD. (Carmen Lee)

Marco Polo Marine: 4QFY12 results in line with expectations Marco Polo Marine (MPM) reported a 3% YoY fall in revenue to S$19.8m and a 10% increase in net profit to S$3.9m in 4Q12, bringing full year revenue and net profit to S$89.8m and S$21.3m, respectively. Results were in line with our expectations; full year net profit was exactly what we had forecasted earlier. Gross profit margin was 32.5% in FY12 vs 28.1% in FY11, mainly due to ship repair which performed well in the year. The group continues to receive enquiries for its ship building, repair and conversion services. Pending a briefing later in the afternoon, we maintain our BUY rating but put our fair value estimate of S$0.53 under review. (Low Pei Han) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks finished mostly lower on Monday, with the S&P 500 Index snapping its winning streak, as lawmakers prepared to debate the fiscal cliff. The Dow fell 0.3% to 12,967.37, while the S&P 500 Index slid 0.2% to 1,406.29. Only the Nasdaq ended higher, rising 0.3% to 2,976.78. - Straits Trading Co has offered to buy 23.6% of WBL Corp for S$218m, raising its stake in the firm to 40.6%. If successful, the deal would trigger a mandatory offer to buy the remaining WBL shares for S$3.41 in cash or 1.07 new Straits Trading shares each. - BRC Asia's FY12 PATMI rose 9% to S$16.5m, on the back of a 37% increase in revenue to S$388m. Sales volume was higher due to buoyant construction activities in Singapore. - Rising manpower costs have hit businesses hard, with construction firms suffering the most, a survey of over 10,000 SMEs in Singapore showed. Overall, 72% of the SMEs polled cited high labour costs as the main reason for their eroding profits. High material costs and rising rental costs were also blamed.

Citi cuts SembMarine target, but tips buy chance

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: Citigroup

Price Call: BUY

Target Price: 5.40

Citigroup cuts SembMarine target to $5.40 from $6.10 after lowering its 2012-13 EPS forecasts by about 4%-11% on lower margin projections. But it raises its 2014 EPS forecast by about 6% on higher repair contributions and drillship revenue recognition.

 

It expects earnings to bottom sharply in 2012, followed by a strong 2013-14 rebound, with 21% FY12-14 CAGR. It keeps a Buy call.

“Street concerns over its prospects are overdone. SembMarine remains a viable play on the strength of the E&P cycle and its enlarged product mix has broadened its market opportunity. With the stock trading below mid-cycle valuations, we see the recent weakness as an enhanced buying opportunity.”

 

It adds, the go-ahead from Sete Brasil to build its first drillship entirely in Singapore, effectively reducing the local-content requirement, is a positive, helping to address the risk of 2013-14 margin decline; “the street has not fully digested this news.”

 

It is upbeat on the E&P cycle, expecting it to continue into 2013, underpinned by demand for a broad mix of products. The stock is flat at $4.39.

 

MARKET PULSE: Tech Sector, CDLHT (26 Nov 2012)

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: HOLD

Target Price: 1.91

Stock Name: Venture
Company Name: VENTURE CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 9.22

MARKET PULSE: Tech Sector, CDLHT

26 Nov 2012

KEY IDEA Technology Sector: Uncertain times, insipid prospects Summary: Singapore-listed tech companies reported another set of lacklustre results in general during the recently concluded 3QCY12 results season. Under our sector coverage, ECS Holdings and Valuetronics Holdings delivered PATMI which exceeded our expectations, but Venture Corporation (Venture) and Micro-Mechanics Holdings came in below. Given the still uncertain macroeconomic environment, the outlook provided by bellwether U.S. tech companies has largely painted a tepid picture. This has also translated into weak earnings visibility for SGX-listed tech companies. Hence we advocate investors who are seeking cyclical exposure to be selective on stocks within the tech sector. We maintain our NEUTRALstance on the sector, with Venture [BUY; FV: S$9.22] remaining as our top pick. We believe that FY13 would be a turnaround year for Venture, while its balance sheet remains strong and FY12F dividend yield is also attractive at 7.2%. (Wong Teck Ching Andy) MORE REPORTS CDL Hospitality Trusts: Awaiting more positive hospitality figures Summary: Being both a dividend play and one of the most liquid hospitality counters with good exposure to Singapore, CDLHT saw its unit price climb 36% end-2011 to a one-year high in mid Oct. However, moderation in the industry's pace of growth, first seen in 2Q12, increased further in 3Q12 and CDLHT's unit price has fallen 9% from the recent high. Our outlook for the hospitality industry remains cautious for the early part of 2013 but more positive in the longer term. On another note, given the high prices at which hotel sites have been sold for recently, the size of new hotel rooms in the future may become smaller. This will favor existing hotel assets and incumbents such as CDLHT. We maintain our fair value of S$1.91 on CDLHT and HOLD rating. (Sarah Ong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks rallied on Friday on light volume, supported by signs of a rebound in China's manufacturing sector and hopes of a boost to US retail spending from Black Friday shopping sprees. The Dow rose 1.4% to 13,009.68, while the S&P 500 Index gained 1.3% to finish at 1,409.15 and the Nasdaq ended 1.4% higher at 2,966.85. - Etika International Holdings' FY12 PATMI fell 24% to MYR22m despite a 12% increase in revenue to MYR985m. It also declared a final dividend of 0.3 S cent per share, down from last year's 0.7 S cent. - NH Ceramics' FY12 net profit rose to S$3.7m from S$0.5m a year ago, mainly due to a S$3.5m fair value gain on investment properties. - Jackspeed Corp has received in-principle approval from SGX to be removed from the exchange's watch-list, effective today.

UOB cuts Keppel target price

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: UOB KayHian

Price Call: BUY

Target Price: 12.30

UOB Kay Hian cut its target price on Keppel Corp, the world’s largest rigbuilder, to $12.30 from $12.80, but kept its ’buy’ rating, citing lower operating margin assumptions.

By 10:08 a.m., Keppel shares were up 0.1% at $10.56, and have risen 13.5% since the start of the year, compared with the Straits Times Index’s 12.9% rise.

UOB lowered its offshore and marine margin estimates for Keppel in 2013 and 2014, which resulted in a 4% lower net profit forecast for next year. However, higher infrastructure earnings will help to support earnings in 2014.
 
Higher operating margins seen from 2010 to mid 2012 were mainly due to lucrative contracts secured during the boom years of 2007-2008, UOB said.

“We believe Keppel stands a good chance of registering higher offshore and marine margins than Sembcorp Marine as it is building semi-submersible rigs for Brazil,” which are not new to the company, the brokerage said.

Citi lowers STX OSV target price

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: Citigroup

Price Call: BUY

Target Price: 1.70

Citigroup cut its target price on STX OSV Holdings to $1.70 from $1.95 and kept its ’buy’ rating, citing lower margin and muted growth expectations over the next two years.

By 12:12 p.m., STX OSV shares were down 1.1% at $1.36, and have gained 17% since the start of the year, compared with the FTSE ST Oil & Gas Index’s 18% rise.

Concerns over the pace of STX OSV’s order wins and margin pressure are likely to weigh on its shares in the near term, Citi said.

However, the brokerage sees an attractive opportunity to buy STX OSV shares due to the recent fall in share price after its third-quarter earnings.

“We believe investors may have taken an overly bearish view and that risks have most likely been mispriced,” said Citi, adding that the decline in third-quarter sales was due mainly to lumpy revenue recognition.

MARKET PULSE: Karin Tech, Global Palm, Keppel Land (23 Nov 2012)

Stock Name: Karin
Company Name: KARIN TECHNOLOGY HLDGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.25

Stock Name: Global Palm
Company Name: GLOBAL PALM RESOURCES HLGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.19

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.49

MARKET PULSE: Karin Tech, Global Palm, Keppel Land

23 Nov 2012

KEY IDEA Karin Technology: An Apple for a Christmas cheer We expect Karin Technology (Karin) to be a key beneficiary of recent new product launches by Apple, given the latter's leadership position in the smartphones and tablets space. Karin has the license to sell the full range of Apple products through its In-Smart retail stores in Hong Kong, which includes the iPhone 5, iPad Mini and fourth-generation iPad. However, the limiting growth factors would be supply constraints and low margins on these products, in our opinion. Management would also strive to increase focus on higher margin network security products and enterprise software solutions to mitigate this. We maintain our HOLDrating and S$0.25 fair value estimate on Karin, still based on 6x FY13F core EPS. Prospective FY13F dividend yield remains attractive at 8.2%. (Wong Teck Ching Andy) MORE REPORTS Global Palm: Still no catalyst yet Global Palm Resources (GPR) has slashed its planting target by >60% to 300-400 ha for 2012 as it now faces increasing difficulties in its negotiation with the local population. Instead, management continues to be on the lookout for acquisitions to boost its plantation size; and believes that the process to be easier now with the drop in CPO (crude palm oil prices). Nevertheless, we note that rising inventory levels could remain an issue which could see stockpiles rising further in 4Q12 and even 1Q13 due to continued strong CPO production and muted demand. Unless there is a sharp recovery in CPO prices or a sizable brown-field acquisition, we do not see any catalyst in sight. Maintain HOLDwith an unchanged fair value of S$0.19 even as we roll forward our 10x peg from blended FY12/FY13 to FY13F EPS. (Carey Wong) Keppel Land: Establishes US$3bn multicurrency MTN program Keppel Land (KPLD) announced that it has established a US3bn Multicurrency Medium Term Note Program. As of end Sep 12, KPLD's net gearing is a healthy 21% and we see this program adding significant incremental financial flexibility to its balance sheet, particularly as the group continues to look into allocating capital into accretive land acquisitions. That said, we continue to see limited catalysts for the share price ahead given limited visibility for major launches and MBFC T3 divestment over the near term. Maintain HOLD with an unchanged fair value estimate of S$3.49 (35% discount to RNAV). (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US consumer sentiment rose slightly in Nov to the highest since Sep 2007, boosted by rising wages and an improving jobs market, but tempered by uncertainty about the fiscal cliff. US markets were shut yesterday for Thanksgiving. - Cambridge Industrial Trust has secured from its existing lenders a S$100m bridging loan to finance the purchase of properties and a S$50m revolving credit facility to fund various asset enhancement initiatives within its portfolio. - Technics Oil and Gas's 4Q12 PATMI declined 6% YoY to S$2.4m, despite a 10% rise in revenue to S$25m. Its gross profit margin fell due to more contract engineering contracts that command relatively lower margins being recognised. - Magnus Energy Group has received an A$2.7m payment for the sale of its entire investment in Acer Energy.

MARKET PULSE: Petra Foods, Bumi Armada, KepCorp, CMT (22 Nov 2012)

Stock Name: Petra
Company Name: PETRA FOODS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.98

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.34

Stock Name: CapitaMall
Company Name: CAPITAMALL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 2.38

MARKET PULSE: Petra Foods, Bumi Armada, KepCorp, CMT

22 Nov 2012

KEY IDEA Petra Foods: Play on EM Asia consumer demand Petra Foods (PF) is one of the world's largest producers and suppliers of cocoa ingredients, and it counts a stable group of chocolate confectionery conglomerates as its key clientele. It also has a Branded Consumer division, where it is a first mover into emerging Asia consumer demand. Given its competitive advantage via an extensive distribution network and strong brand equity, PF has achieved a dominant market share of more than 50% and 10% in the growing markets of Indonesia and the Philippines respectively despite a gradual influx of well-known international players. Combined, these two divisions form a formidable "twin-engine" growth strategy for the future. We initiate coverage with a BUY rating and a fair value estimate of S$2.98, based on 24x 12-month forward PE. (Lim Siyi) MORE REPORTS Bumi Armada: Margins eroded by FX losses Bumi Armada's 3Q12 revenue and net profit increased by 14% and 3% YoY to RM462m and RM95m respectively. On a nine-month period, revenue was flat at RM1.2b, while net profit increased by 18% to RM277m. Despite the increases, the results were very much below expectations as 9MFY12 net profits formed only 68% and 60% of ours and the street's full year estimates. As the group had not secured any new FPSO contracts year-to-date, we believe it may be hard to meet the street's expectation of two FPSO contract wins (and our projection of just one win) in 2012. Looking ahead, we continue to project one FPSO contract win per year for FY13-14F and believe our estimate is conservative (versus the street's). We adjusted our model for 3Q results, but kept our FY13F estimates largely unchanged. As we roll forward our estimates for FY13F, our fair value estimate rises slightly to RM3.48 (previously RM3.36), still on 20x PER. Maintain HOLD. (Chia Jiunyang) Keppel Corporation: Two semi-sub drilling rigs from Ukraine Keppel Corporation (KEP) announced that its O&M arm has been selected by Ukraine's National Joint-Stock Company, Naftogaz, as a winner of a tender to construct two semi-submersible drilling rigs. Like the earlier two jack-ups delivered by KEP for the same customer, these rigs are likely bound for the Black Sea as well. As both parties will be entering into further contract negotiations, no details were disclosed on the price and delivery schedule. Platts, however, mentioned that the cost of the two rigs are about US$1.2b, and are scheduled to be delivered by end 2014. We also note that an Oct 29 article in the Ukrainian Journal mentioned that KEP had submitted the most attractive price bid (at US$1.226b) amongst four bidders. Assuming a final price tag of US$600m/unit, this would bring KEP's order wins to S$10b YTD, forming 98% of our full year estimate. Maintain BUY with S$13.34 fair value estimate. (Low Pei Han) CapitaMall Trust: Raised S$250m through private placement CapitaMall Trust (CMT) announced that it has raised S$250m through a private placement of 125m new units at a price of S$2.00 per unit (5.2% discount to the last closing price of S$2.11). These 125m new units make up ~3.8% of the total number of units as of end Sep 12, and management indicates that it would use the proceeds to finance capital expenditure, asset enhancements, refinancing of existing debts, and general corporate and working capital needs. Post placement, CMT's aggregate leverage would fall from 37.7% to 35.1%. Overall, we are neutral on this development; though this placement would give CMT added financial flexibility in its balance sheet, we are cognizant of the dilutive effects on current shareholders. Maintain BUY with an unchanged fair value estimate of S$2.38. (Research team)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks ended higher on Wednesday ahead of tomorrow's Thanksgiving holiday, after Israel and Hamas agreed to a truce. The Dow rose 0.4% to 12,836.89, the S&P 500 Index added 0.2% to reach 1,391.03 and the Nasdaq ended 0.3% higher at 2,926.55. - CosmoSteel Holdings' 4Q12 net profit rose 47% YoY to S$2.5m, despite a 15% decline in revenue to S$27m. It declared a final dividend of 1.25 S cents, up from 1 S cent a year ago. - China Flexible Packaging Holdings expects a "significant impact" on its financial results for the full year to 31 Oct 2012 from a CNY378m impairment loss on the carrying value of its fixed assets. - Hor Kew Corp has completed the S$5.5m sale of its leasehold property at Sungei Kadut. It plans to use the cash for general working capital and to fund strategic investments. - Carriernet Global has signed a distributorship agreement with M1 to distribute and sell services on M1's mobile and fixed-line platform. The agreement started on 1 Nov and will be renewed yearly.

MARKET PULSE: Telecom Sector, Ezion, Olam (21 Nov 2012)

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.70

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.80

MARKET PULSE: Telecom Sector, Ezion, Olam

21 Nov 2012

KEY IDEA Telecom Sector: 3QCY12 Review - Still OVERWEIGHT Out of the three telcos, StarHub again posted 3Q12 results that were above our forecast, aided by a stronger-than-expected margin recovery (mainly coming from lower traffic expenses). Both M1 and StarHub are still guiding for relatively stable outlook for 2012, albeit with potential erosion in service EBITDA margins. However, SingTel surprised by guiding for consolidated group revenue to see a low single-digit (versus single-digit growth previously), mainly dragged down by continued weakness in Australia. However, we think that all the three telcos should continue to generate very positive operating cashflows and this should keep their healthy dividend payouts intact. Further yield compression could also be another price catalyst over the next 12 months. Hence we maintain our OVERWEIGHTrating and keep M1 as our top pick. (Carey Wong) MORE REPORTS Ezion Holdings: What a year, but the best is yet to come Ezion Holdings (Ezion) has performed very well so far this year, with its stock price up about 99% YTD. The good showing is mainly due to the clinching of contracts at attractive rates of return, smooth execution of projects, and commendable quarterly earnings. As we expected last year, 2012 was no less eventful than 2011 for Ezion, which continued to secure liftboat and service rig contracts for work in various parts of the world, and embarked on new initiatives such as its proposed acquisition of YHM Group. Looking ahead to 2013, we expect more news flow as additional assets are deployed, solidifying its earnings base. Though 2012 has been a fantastic year, we believe that the best is yet to come, assuming no drastic change to its current operational status quo. Maintain BUY with S$1.70 fair value estimate. (Low Pei Han) Olam: Still vulnerable to rumors Olam International hosted a teleconference with analysts and media last evening lasting some 1.5 hours to clarify some of the allegations made by Carson Block of Muddy Waters. While management was forth-coming in answering some queries, it did not have a lot to say without first seeing the full Muddy Waters report and the specific issues raised by Block. And until then, we suspect that the company may remain vulnerable to rumors and more near-term selling pressure. Recall that Olam suffered a 7.5% tumble yesterday after the halt was lifted at around 3.45pm yesterday. Management also noted a spike in short-selling interest in recent weeks, making Olam one of the most shorted stocks in Singapore. In light of the recent developments, we are putting our Hold rating and S$1.80 fair value under review. (Carey Wong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks ended mixed on Tuesday, after Ben Bernanke said that the Fed lacks the tools to cushion the economy if it slides off the fiscal cliff. The Dow declined 0.1% to 12,788.51, while the S&P 500 Index gained 0.1% to 1,387.81 and the Nasdaq ended flat at 2,916.68. Hewlett-Packard shares slumped 12% after it announced an US$8.8b asset-impairment charge due to improper accounting linked to its 2011 acquisition of Autonomy Corp. - Thai Beverage's 3Q12 PATMI rose 16% YoY to THB3.0b, supported by a 28% increase in revenue to THB37.6b, due to higher revenues at its spirits, non-alcoholic beverages and food businesses. - Altitude Aircraft Leasing Trust, backed by General Electric, has delayed plans for a US$750m Singapore IPO later this month, due to volatile market conditions. The business trust may list early next year instead, the WSJ reported.

Midas poised for a turnaround

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: DBS Vickers

Price Call: BUY

Target Price: 0.50

While orders have been slow in coming through to Midas, it has been enhancing both its production capacity and capabilities, in addition to diversifying its product range, says DBS Vickers. Jilin Midas now has an aluminium extrusion production capacity of 50,000 tonnes per annum and can fabricate a complete range of train parts, including for export.

DBS Vickers expects Midas to comfortably win orders of about RMB1b ($196 million) from metro, export and the non-rail segments (power and other extrusion products) over the next 12 months, while high-speed train orders will depend on how soon the Ministry of Railway (MoR) makes its purchases.

If the MoR does order 400 train sets, as people in the industry expect, DBS Vickers projects that Midas could win around RMB1b worth of high-speed train orders for delivery over the next 2-3 years. Meanwhile, associate Nanjing Puzhen should also see an earnings turnaround on its strong RMB8.5b order book.

DBS Vickers has Buy on Midas for 2013 turnaround story, with target price of $0.50. Midas is currently trading at 0.7x FY13 P/B, which the research house sees as attractive for a turnaround story.

“We believe the stock should re-rate as contracts start to flow in once again for the Group. Our TP is based on 1x FY13 P/B,” says DBS Vickers.

Midas is up 1.4% to $0.37.

Daiwa cuts Hutchison Port Holdings' target to US$0.84 vs US$0.90

Stock Name: HPH Trust S$D
Company Name: HUTCHISON PORT HLDGS TRUST S$

Research House: Daiwa

Price Call: BUY

Target Price: 0.84

Daiwa cuts Hutchison Port Holdings Trust target to US$0.84 from US$0.90 after lowering its 2012-14 EPS forecasts by 1%-8% to account for the recent throughput-growth slowdown in southern China and higher interest costs expected in 2014. It now expects 2013-14 DPU to be flat at around HK$0.50, vs previously expecting growth.

The house notes HPHT has deferred annual capex by a year, making its targeted 2012 DPU of HK$0.51 achievable, but as the trust has used up its pre-funded HK$2.8 billion ($443 million) cash in 2012, Daiwa believes 2013-14 DPU growth is unlikely unless management defers some capex further in 2013-14.

“Based on our revised DPU forecasts, the stock currently offers a 2013E dividend yield of close to 9%, which we believe remains attractive. Thus, we maintain our Outperform rating.” The stock is down 0.7% at US$0.75.

Some confidence may be returning to Noble: OCBC

Stock Name: Noble Grp
Company Name: NOBLE GROUP LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.28

Some confidence may be returning to Noble despite its medium-term outlook remaining murky, OCBC says in a note to clients.

It notes the stock dropped sharply after Vice Chairman Emeritus Harindarpal Singh Banga offered to sell 225 million shares at $1.10-$1.12, with the sale eventually done at $1.10, with Singh’s stake falling to 2.3% from 5.7%. While the buyer of the around 3.5% Noble stake isn’t known, key insiders, including the chairman emeritus and the CEO have increased their stakes, it notes.

“There may be some opportunity to pick up some Noble shares around current levels for a technical rebound, but we would still be looking to take profit around $1.30 or higher in the near term.” Its fundamental analysis has a Hold call with $1.28 fair value. The stock is up 1.9% at $1.08, but it remains down more than 17% month-to-date.

Value emerges in Ezra after selloff: Barclays

Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED

Research House: Barclays

Price Call: BUY

Target Price: 1.65

Value has emerged in Ezra’s shares after recent weakness, Barclays says, noting the decline came despite the company’s recent announcements of contract wins.

“The fundamentals for the company continue to remain strong with its recent order momentum and improvement in profitability. With the shares currently trading below regional and global peers, we see this as a good opportunity for investors to gain leverage to a company we expect to deliver improving profitability and strong earnings growth in the medium term.”

It notes Ezra trades at 8.1x 2013 P/E, a discount to regional and international peers’ 10x and 12x respectively. Barclays expects Ezra’s 2012-15 EPS CAGR at around 40%; “this strong earnings growth outlook is not yet reflected in the shares.”

It expects new order momentum to continue into 2013 after the four subsea-segment contracts the company won over the past two months, as the industry continues to see a high volume of subsea tenders. It rates the stock at Overweight with $1.65 target. The stock is up 1.0% at $1.01.

MARKET PULSE: Healthcare, Hospitality, SembMarine (19 Nov 2012)

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 2.82

MARKET PULSE: Healthcare, Hospitality, SembMarine

19 Nov 2012

KEY IDEA Healthcare Sector: Continues to deliver growth Summary: Under our Healthcare sector coverage, both Biosensors International Group (BIG) and Raffles Medical Group (RMG) continued to deliver YoY revenue and core earnings growth during the recently concluded 3QCY12 results period. BIG's reported core PATMI matched our estimates (although revenue missed) while RMG's earnings came in slightly below our expectations (but revenue was in line). Both companies also generated strong free cashflows during the quarter. We see positives from RMG's [BUY; FV: S$2.82] high quality defensive earnings in light of the ongoing macroeconomic uncertainties. We also reiterate our OVERWEIGHT rating on the broader sector, as fundamentals remain solid, although margin pressure from rising staff costs (healthcare service providers) and price cuts (medical device companies) remains as the main downside risk. BIG [BUY; FV: S$1.69] continues to be our preferred pick, given its attractive valuations and competitive advantage vis-à-visits peers. (Wong Teck Ching Andy) MORE REPORTS Hospitality Sector: Maintain OVERWEIGHT Summary: We have been hearing about lackluster performance for hotels in 3Q12 and likely in 4Q12 as well. While remaining cautious about 1Q13, we note that the top four places of origin for Singapore's visitor arrivals are projected to have real GDP growth rates of at least 4.9%. Since mid-Sep, the media has reported that tourists from mainland China are shunning Japan amid tensions over the Diaoyu/Senkaku Islands. Other tourist destinations like Singapore would be the net beneficiaries while tensions persist. We remain optimistic about longer term sustained growth till 2015 and maintain our OVERWEIGHT view on the hospitality industry. Our top pick is Ascott Residence Trust [BUY, FV: S$1.37]. We have BUY ratings on Far East Hospitality Trust [FV: S$1.08] and Global Premium Hotels [FV: S$0.29] and a HOLD on CDL Hospitality Trusts [FV: S$1.91]. (Sarah Ong)

Sembcorp Marine: Confirms US$295.2m semi-sub order Summary: Sembcorp Marine (SMM) announced that its subsidiary, Jurong Shipyard, has finalised a contract with Prosafe to build the second unit of a new generation harsh-environment accommodation semi-submersible worth US$295.2m. Scheduled for delivery no later than end Dec 2014, this unit will be based on the GVA 3000E design, similar as the first unit that was ordered in Dec 2011 (recall there were options for two additional units then, and one is now exercised with today's announcement). Along with this latest contract, Jurong has granted two additional options to Prosafe, who now has a total of three options. SMM has secured orders worth S$9.48b YTD, accounting for 99.7% of our full-year order win target. Fundamentally, we remain confident of SMM's operational capabilities, and believe that its established track record puts it in good stead to secure orders from a still buoyant industry. Maintain BUY with S$5.84 fair value estimate. (Low Pei Han) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks ended higher on Friday, breaking a long losing streak after a hopeful start to talks on how to avoid the fiscal cliff. The Dow rose 0.4% to 12,588.31, while the S&P 500 Index gained 0.5% to 1,359.88 and the Nasdaq ended 0.6% higher at 2,853.13. - Tension is rising in the Middle East as Israeli Prime Minister Binyamin Netanyahu warned on Sunday that it is prepared for a "significant expansion" of its attack on Hamas in the Gaza Strip. - Pan-United Corp has been awarded S$36m worth of concrete supply contracts by two firms involved in the development of Marina One. - Starland Holdings expects a net loss for the year ended 30 Sep, mainly due to lower residential property sales and expenses related to its IPO in Apr.

MARKET PULSE: Consumer Sector, Singapore Economy, KS Energy (16 Nov 2012)

Stock Name: Sheng Siong
Company Name: SHENG SIONG GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.49

Stock Name: VizBranz
Company Name: VIZ BRANZ LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.74

Stock Name: BreadTalk
Company Name: BREADTALK GROUP LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.49

Stock Name: KS Energy
Company Name: KS ENERGY LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.78

MARKET PULSE: Consumer Sector, Singapore Economy, KS Energy

16 Nov 2012

KEY IDEA Consumer sector: 3Q comeback; rally in the fourth? Summary: As a recap, consumer-related companies within the FTSE Straits Times Consumer Services Index fared better than expected in 3QCY12. While revenue growth was pretty much in line with consensus estimates, effective cost management resulted in earnings per share exceeding projections by 8.2%. Overall retail sales figures for Sep (excluding motor vehicles) continued to post encouraging data with the third month of gains in the most recent four. Furthermore, retail segments more vulnerable to swings in the economy exhibited a slowing pace of declines. Given the improving environment, we upgrade the sector to NEUTRAL. We continue to favour defensive plays with high dividend yields (Sheng Siong [BUY; FV: S$0.49]) and stocks with diversified geographical revenue streams (Viz Branz [BUY; FV: S$0.74]). We will avoid stocks with high F&B services exposure such as BreadTalk Group [SELL; FV: S$0.49], which has food court and restaurant operations. (Lim Siyi) MORE REPORTS Singapore Economy: 1.5% growth in 2012 and 1.0-3.0% in 2013 Summary: The Singapore economy grew by 0.3% YoY in 3Q12, worse than the street's expectations of a 0.9% growth and 2Q12's 2.5% increase. On a seasonally-adjusted annualized basis, the economy contracted by 5.9% QoQ, compared to the 0.5% expansion in 2Q12. The pullback in growth was largely due to the decline in externally-oriented sectors such as manufacturing and wholesale trade. Manufacturing declined by 9.6% QoQ with a contraction in the electronics. Construction also contracted by 17.2% with a decline in private sector building activities. Meanwhile, services contracted by 3.5% QoQ. The MTI expects Singapore to grow by 1.5% in 2012, though growth may be slightly lower than forecast if weakness in externally-oriented sectors persist. For 2013, the official growth forecast is 1.0-3.0%, but key risks include the fiscal cutback in the US and the Eurozone debt crisis. (Low Pei Han) KS Energy: Another profitable quarter Summary: KS Energy (KSE) reported a 21.9% increase in revenue to S$161.3m and a net profit of S$14k in 3Q12 vs. a net loss of S$11.5m in 3Q11. 9M12 revenue and gross profit accounted for 80% and 78% of our full year estimates, respectively. Net profit was also within our expectations. 3Q12 marks the group's second quarterly net profit after nine consecutive quarters of net losses. Management is still reticent about funding plans for its convertible bonds that may be redeemed in Mar. It also mentioned that operating conditions from now till early 2013 are likely "to remain challenging". After tweaking our estimates and rolling forward our valuation to 1.2x FY13F NTA, our fair value estimate slips from S$0.83 to S$0.78. Maintain HOLD. (Low Pei Han)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks continued their losing streak on Thursday as investors fretted about the fiscal cliff and the impact of Hurricane Sandy on the economy. The Dow and the S&P 500 Index each slid 0.2%, while Nasdaq fell 0.4%. - The euro zone slid into recession for the second time in four years due to the debt crisis, with 3Q12 GDP declining 0.6% YoY. - Triyards Holdings has won a US$90m order from an Asia-based customer for a mobile offshore platform service unit, taking its orderbook to over US$700m. - Global Logistic Properties has raised S$414m through the sale of 160m new shares at S$2.59 each, to fund its investment in properties in Brazil. Its share price fell 4.8% to S$2.59 on the news.

Global Logistic Properties' Brazil deal, J-REIT offer positives: CIMB

Stock Name: GLP
Company Name: GLOBAL LOGISTIC PROP LIMITED

Research House: CIMB

Price Call: HOLD

Target Price: 2.69

Global Logistic Properties  is a step closer to going global with its plan to enter Brazil through two JV funds, CIMB says; “taken with its planned J-REIT, assets under management looks set to balloon − a strong positive − though the deal comes with higher risk premiums and equity fund raising.”

It says the deal’s attractions are the AUM platform scaling up further and net property income upside with GLP projecting leveraged IRRs of 18%-19%. “However, investors may find it hard to swallow the high risk premiums associated with this deal and possible distraction from its China plans. GLP also intends to fund its initial equity contribution through share placements, which could further pressurise its share price.”

It notes 1H13 core EPS forms 52% of its FY13 estimate; it raises its FY13-15 core EPS forecasts by 8%-12% for the Brazilian deal, but notes NPI could plunge once its J-REIT is established. It estimates the J-REIT listing could add 12-14 cents/share to RNAV. It raises its RNAV-based target to $2.69 from $2.55, but keeps a Neutral call on limited upside from the Brazilian and J-REIT initiatives. The stock is down 4.4% at $2.60.

GLP's shares fully valued; Brazil deal neutral: Religare

Stock Name: GLP
Company Name: GLOBAL LOGISTIC PROP LIMITED

Research House: Religare Capital

Price Call: HOLD

Target Price: 2.61

Religare is neutral on GLP’s plan to team up with Singapore and China sovereign wealth funds and Canada Pension Plan Investment Board to buy Brazil properties worth US$1.45 billion ($1.77 billion); GLP is funding its portion with a share placement.

“Brazil investments are minimally accretive (+2.3% to RNAV), but placement of shares could signal share being fully-valued, given US$1.4 billion cash on balance sheet and low 24% net debt/assets. Moreover, investors’ unfamiliarity with Brazil could be an overhang.”

The house notes the stock is up around 55% year-to-date. It raises its target to $2.61 from $2.46 after rolling forward to par with end-2013 RNAV and incorporating recent divestments and investments. The house says 1H13 core net profit of US$181 million, up 27% on-year, was in line with expectations. It keeps a Hold call. The stock is down 3.3% at $2.63.

MARKET PULSE: CityDev, KSH, Olam, Swiber, STX OSV, Valuetronics, Viz Branz, Midas, KSE (15 Nov 2012)

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.10

Stock Name: KSH Hldg
Company Name: KSH HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.50

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.80

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.65

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.69

Stock Name: Valuetronics
Company Name: VALUETRONICS HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.20

Stock Name: VizBranz
Company Name: VIZ BRANZ LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.735

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.505

Stock Name: KS Energy
Company Name: KS ENERGY LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.83

MARKET PULSE: CityDev, KSH, Olam, Swiber, STX OSV, Valuetronics, Viz Branz, Midas, KSE

15 Nov 2012

KEY IDEA City Developments Limited: Looking ahead to Redhill launch in 4Q12 CDL reported 3Q12 PATMI of $134.5 which showed a marginal YoY increase (1.8%) over 3Q11. Recognition at development projects kept mostly in pace with the previous quarter and we judge this set of results to be generally in line with expectations. HAUS@SERANGOON GARDEN and Up@Robertson Quay have 86 and 48 units sold to date, respectively. In addition, The Palette and Bartley Residences are over 94% and 92% sold, respectively. Looking ahead to 4Q12, we expect CDL to launch the 508-unit condominium development (the Echelon) near Redhill MRT station and, in 1H13, another 912-unit project in Pasir Ris Grove. Hotel subsidiary M&C reported 3Q12 PATMI of GBP30.7, down 47.5% YoY due to the absence of disposal profit in 3Q11. YTD overall REVPAR was up 4.9%, with a particularly strong showing from London (up 10.2% YoY) from the Olympic games. Maintain BUYwith an unchanged fair value estimate of S$13.10 (15% RNAV disc.). (Eli Lee) MORE REPORTS KSH Holdings: Healthy earnings and dividends growth KSH reported 2QFY13 PATMI of S$9.8m, up a whooping 90% YoY mainly due to increased contributions from the construction business and project recognition from Cityscape@Farrer Park. We judge this set of results to be mostly in line with expectations as 1HFY13 PATMI now made up 46% of our FY13 forecast. We note the pace of profit recognition at Cityscape@Farrer in 2QFY13 (through share of results of associates) was somewhat below expectations - S$2.1m versus an expected S$3.5m-S$4.5m - but this was offset by higher profits from the construction segment. Management also announced an interim dividend of 1.35 S-cents, up 35% from a 1.0 S-cent interim dividend last year. KSH's order book continues to be healthy at S$375m as of end Sep 12, down 10% QoQ versus S$416m as of end Jun 12. Maintain BUY with an unchanged S$0.50 fair value estimate (50% discount to RNAV). (Eli Lee) Olam Int'l: 1QFY13 results mostly in line Olam International Limited (Olam) reported 1QFY13 revenue of S$4689.1m, though up 45% YoY, it was down 9% QoQ; but still met 24% of our full-year forecast. Reported net profit came in at S$43.2m, up 26% YoY but down 61% QoQ. We estimate that core earnings (excluding financial and biological revaluation gains) fell 16% YoY and 18% QoQ to S$28.4m, meeting around 8% of our FY13 estimate; but we still deem its results to be in line as 1Q typically contributes just 5-10% of its full-year earnings due to the unique seasonal pattern of its portfolio. As its results were mostly in line with our forecast, we are keeping our estimates unchanged. As such, our fair value also remains at S$1.80, or 12.5x FY13F EPS. Given the limited upside, we maintain our HOLD rating. (Carey Wong) Swiber Holdings: First dividend since FY05 Summary: Swiber Holdings (Swiber) reported a 92.6% YoY rise in revenue to US$265.3m but saw a 45.8% fall in net profit to US$7.3m in 3Q12, such that 9M12 net profit accounted for about 80% of our full year estimates, within expectations. Gross margin declined from 16.6% in 3Q11 to 14.1% in 3Q12, but was similar to 2Q12's 14.2%. Meanwhile, net debt to equity rose from 0.89x in Jun 2012 to 1.00x in Sep 2012. As of Nov 2012, Swiber's order book stood around US$1.4b vs. US$1.6b as at Aug. The group has also proposed an interim dividend of S$0.01/share. Meanwhile, we would be monitoring the group's operating cashflows. Maintain HOLDwith slightly lower fair value estimate of S$0.65 (prev. S$0.66). (Low Pei Han) STX OSV: Subdued 3Q STX OSV reported a fairly muted set of 3Q12 results that were below ours and the street's expectations. 3Q revenue and net profit to shareholders declined by 27% and 39% YoY to NOK 2.5b and NOK 228m respectively. On a sequential basis, revenue and net profit fell by 26% and 18% respectively. The weaker performance in 3Q12 was mainly due to slower pace of revenue recognition during the tail end of shipbuilding. Its yards reported generally stable operations, but the slow order intake (only NOK 900m in 3Q) may lead to under-utilization in its Norwegian yards in 2013. In view of this and the weaker-than-expected 3Q results, we reduce our fair value estimate to S$1.69 (previously S$2.00), Maintain BUY.(Chia Jiunyang) Valuetronics Holdings: Dearth of near-term catalysts Valuetronics Holdings Limited's (VHL) 2QFY13 PATMI plunged 88.5% YoY to HK$3.3m as it incurred hefty one-off termination expenses and provisions due to the cessation of its Licensing business. Revenue from continued operations was flat at HK$595.5m, or 11.6% below our forecast. However, we estimate that core PATMI came in at HK$31.5m, a 34.1% YoY increase, which exceeded our HK$26.2m projection. Looking ahead, we believe that sales from its largest customer would likely moderate, while there is also a strong sense of caution amongst its major customers. We trim our FY13 and FY14 revenue estimates by 9.7% and 10.6%, but raise our core PATMI forecasts by 8.0% and 6.5%, respectively, on higher margin assumptions. Applying a lower 4x (previously 4.5x) peg and rolling forward our valuations to blended FY13/14F core EPS, our fair value estimate falls from S$0.21 to S$0.20. While estimated 8.9% yield is attractive, we maintain HOLD given the lack of near-term catalysts. (Wong Teck Ching Andy) Viz Branz Limited: Faith will be rewarded Viz Branz (VB) reported a decent 1Q13 performance with continued margin improvements. Although revenue declined slightly, PATMI grew 17.4% YoY to S$4.5m following favourable raw material costs and effective cost control measures. With the performance coming in within our expectations, our FY13 outlook for VB remains unchanged, and we retain our fair value estimate of S$0.74. While there is no update on further share purchases by Lam Soon, we reiterate our optimism that an eventual general offer will materialize in the near-term. Given the recent price correction of the counter - and a supportive price base of S$0.735 from Lam Soon's partial stake purchase - we feel that an investment opportunity has presented itself. With a potential upside of nearly 10%, we upgrade VB to BUY. (Lim Siyi) Midas Holdings: 3Q12 net loss wider than expected Midas Holdings (Midas) reported a 21.8% YoY dip in its 3Q12 revenue to CNY202.7m, which was 6.0% below our projection. As a result of higher operating expenses, finance costs and a share of loss of CNY7.0m from its associated company, Nanjing SR Puzhen Rail Transport, Midas registered a loss before tax of CNY1.6m, which matched our estimate. However, net loss of CNY6.1m (3Q11: CNY27.4m PATMI) came in worse than our CNY1.3m forecast due to higher-than-expected income tax expenses. Midas' net gearing ratio also increased from 2.2% in 3Q11 and 22.5% in 2Q12 to 23.7% in 3Q12 as it increased its borrowings to finance its working capital requirements and capacity expansion plans. We expect this to translate into higher finance costs for the group in 4Q12 and FY13 and will thus adjust our estimates accordingly. More details will be provided after the analyst conference call. We still opine that FY12 would be a non-event for Midas and investors should instead focus on the likelihood of a recovery in its business operations in FY13, in line with the Chinese government's commitment to expand its rail transport system. We maintain our BUYrating but our S$0.505 fair value estimate is under review. (Wong Teck Ching Andy) KS Energy: Another profitable quarter KS Energy (KSE) reported a 21.9% YoY rise in revenue to S$161.3m and a net profit of S$14k in 3Q12 vs net loss of S$11.5m in 3Q11. 9M12 revenue and operating profit accounted for 80% and 73% of our full year estimates. 9M12 net profit was also within expectations, amounting to S$391k vs our full year estimate of a net loss of S$3.5m. Revenue growth was driven by the distribution business in 3Q12, while the drilling segment had a relatively stable quarter. More assets are expected to be deployed over the next 12 months, and we expect the earliest signs of a more significant recovery only in 2Q13. Pending a call with management, we maintain our HOLD rating but put our fair value estimate of S$0.83 under review. (Low Pei Han)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks slid further on Wednesday as worries about the fiscal cliff continued to weigh heavily on sentiment. The Dow slumped 1.5% to 12,570.95, despite surprisingly good results from Cisco Systems, while the S&P 500 Index fell 1.4% to 1,355.49 and the Nasdaq ended 1.3% lower at 2,846.81. - Otto Marine reported 3Q12 PATMI of US$4.7m, reversing a US$16.2m loss a year earlier. The improvement was supported by an 84% YoY jump in revenue to US$78.4m, with the increase coming mainly from its chartering and subsea services segments.

Mewah at 2-mth low after Q3 net profit fall

Stock Name: Mewah
Company Name: MEWAH INTERNATIONAL INC.

Research House: Nomura

Price Call: HOLD

Target Price: 0.45

Shares of Mewah International Inc dropped to the lowest in two months after the palm oil firm reported a 82% fall in third-quarter net profit to $1.2 million from a year earlier.

Mewah shares fell as much as 4.6% to $0.415, the lowest since Sept. 11. The stock has fallen nearly 11% so far this year, lagging the 25% gain in the FT ST Mid Cap Index.

“The primary reason for the erosion in profits was Mewah’s emphasis on trying to maintain its margins, even at the cost of volumes, and this resulted in net income being barely positive due to fixed costs,” Nomura said in a report.

Nomura, which has a ‘neutral’ rating and $0.45 target price on the stock, said the outlook for Mewah’s fourth quarter appears weak due to the volatile crude palm oil prices. It added that a downward revision in its and consensus estimates is “inevitable”.

MARKET PULSE: LMIRT, Tat Hong, PEC, Dyna-Mac, ECS (12 Nov 2012)

Stock Name: LippoMalls
Company Name: LIPPO MALLS INDO RETAIL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 0.52

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

Research House: OCBC

Price Call: BUY

Target Price: 1.70

Stock Name: PEC
Company Name: PEC LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.84

Stock Name: Dyna-Mac
Company Name: DYNA-MAC HOLDINGS LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.57

Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.52

MARKET PULSE: LMIRT, Tat Hong, PEC, Dyna-Mac, ECS

12 Nov 2012

KEY IDEA Lippo Malls Indonesia Retail Trust: 3Q12 results above expectations Summary: With effect from 1 May 2012, LMIRT engaged a third party operating company to co-manage its individual retail malls. The operating company is responsible for all costs directly related to the maintenance and operation of the individual retail malls, as well as pay for the rental of office and use of equipment. The operating company also has the right to collect a service charge and statutory income from the tenants. The adjustments for 2Q12 were reflected in the 3Q12 results. 3Q12 results were better than what we expected, partly due to the above arrangements. Total return for the period after tax rose 34.4% YoY to S$21.2m. 9M12 total return for the period before tax and revaluation of S$78.5m equaled 82% of our prior FY12F estimate, which we now raise to S$103m. Rolling forward our model, we raise our fair value from S$0.47 to S$0.52 and upgrade LMIRT from Hold to BUY. (Sarah Ong) MORE REPORTS Tat Hong Holdings: Steadily climbing higher Summary: Tat Hong Holdings (Tat Hong) reported a good set of 2Q13 results that were in line with ours and the street's expectations. 2Q revenue and PATMI increased by 18% and 37% YoY to S$216m and S$17.3m respectively, driven mainly by strong performances from its Crane Rental and Tower Crane segments. On a half year basis, Tat Hong's 1H12 PATMI surged by 88% to S$34.0m, making a strong comeback after three years of weak profitability (FY10-12). Looking ahead, we expect the group to utilize its placement proceeds to purchase more crane assets for deployment to the various projects in the region. This should deepen its presence and provide the next leg of growth for FY13F-14F. Given its strong growth momentum, we increased our valuation peg to 14x (previously 12x) and our fair value to S$1.70 (previously S$1.42). Maintain BUY. (Chia Jiunyang) PEC Ltd: 1Q net profit up 32% to S$3.3m Summary: PEC Ltd (PEC) reported its 1Q13 results last Friday evening. Revenue increased by 9% YoY to S$120m and net profit to shareholders by 32% to S$3.3m. Gross margin increased to 21% in 1Q13 (1Q12: 18%), due to settlement of certain variation orders. However, the gains were partially offset by higher administrative expenses (S$8.1m, +17% YoY) and other operating expenses (S$13.8m, +58% YoY). We will speak with management later and will provide further details later. We currently have a BUY rating with S$0.84 fair value estimate on its shares. (Chia Jiunyang) Dyna-Mac: 3Q12 net profit up 250% Summary: Dyna-Mac Holding Ltd (DMH) reported a strong set of 3Q12 results that were in line with our expectations. 3Q12 revenue and net profit increased by 157% and 250% YoY to S$59.8m and S$10.2m respectively, mainly due to more on-going projects and recognition of certain variation orders. We will provide further details after its briefing later today. We currently have a BUY rating with S$0.57 fair value estimate. (Chia Jiunyang) ECS Holdings: 3Q12 core earnings above expectations Summary: In line with the general weakness in the PC industry, ECS Holdings (ECS) reported a 9.5% YoY fall in its 3Q12 revenue to S$897.3m, although this was partially offset by higher demand from mobility devices (smartphones and tablets). Correspondingly, PATMI declined 8.6% to S$8.3m. Adjusting for exceptional items, we estimate core PATMI of S$8.7m, an increase of 8.3% YoY. Topline came in within our expectations but core PAMTI exceeded thanks largely to lower-than-expected operating expenses and finance costs. For 9M12, revenue slipped 2.2% to S$2,622.5m, or 72.5% of our full-year estimates. Reported PATMI decreased by 25.3% to S$22.6m, while estimated core PATMI fell 19.0% to S$22.7m, which formed 75.5% of our FY12 forecast. Looking ahead, global economic uncertainties have increased headwinds for the overall global IT industry, especially on PCs and notebooks. We expect mobility devices to form an increasing proportion of ECS' revenue, given their still robust demand. Focus would also be placed on its Enterprise Systems segment which includes developing its own cloud-based solutions and products. We will provide more details after speaking with management. We maintain our BUYrating but our S$0.52 fair value estimate is under review. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks edged slightly higher on Friday, boosted by a report showing improved consumer sentiment. The Dow rose 0.03% to end at 12,815.39, while the S&P 500 Index gained 0.2% to 1,379.85 and the Nasdaq ended 0.3% higher at 2,904.87. - Private-equity group Everstone Capital has offered to buy Harry's Holdings at S$0.23/share in cash, a 53% premium over Harry's closing price of S$0.15 last Friday. - Nam Cheong's 3Q12 PATMI fell 33% YoY to MYR31.6m as revenue slid 44% to MYR142m, caused by a sharp drop in turnover at its main shipbuilding segment due to the timing of revenue recognition on vessels sold. Separately, the firm said it had sold four vessels worth a total of US$45.1m, taking its order book to RM1.3b.