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.