MARKET PULSE: KSH, DBS, SMRT (1 Nov 2012)

Stock Name: KSH Hldg
Company Name: KSH HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.50

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 15.94

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.71

MARKET PULSE: KSH, DBS, SMRT

1 Nov 2012

KEY IDEA KSH Holdings: Expect Cityscape boost in quarterly results ahead Summary: We conducted an independent visit to Cityscape@Farrer Park yesterday and found that 61% (152 out of 250 total units) have been sold to date, up significantly from 22% sold as of end Jun 2012. After visually inspecting the construction site, we judged it likely that progressive recognition for Cityscape would begin in 2QFY13 and boost earnings (to be announced in mid Nov 2012) by an estimated $3.5m to S$4.5m. This would drive a substantial YoY increase over last year's quarterly PATMI of S$5.2m. Since we have upgraded KSH to a Buy on 21 Sep 2012, its share price has appreciated 31%. We still see significant upside at current price levels , however, against our fair value estimate of S$0.50 (40% discount to RNAV). In particular, we see the upcoming results as a postitive near-term catalyst, while the company's fundamentals continue to strengthen as sales conversions continue at a healthy pace across its property developments. Reiterate BUY as our key small-cap conviction idea. (Eli Lee) MORE REPORTS DBS: Stronger-than-expected 3Q Summary: DBS Group Holdings released its 3Q results this morning and net earnings of S$856m, +12% YoY or 6% QoQ, was better than street expectations of S$801m (based on Bloomberg consensus number). While Net Interest Income rose 10% YoY and marginally by 1% QoQ to S$1332m for the quarter, the main reason for the better bottom-line was due to a sharp decline in allowances for credit and other losses. This fell 76% YoY and 47% QoQ to S$55m. Net earnings for the 9-month period came in at S$2599m, up 13%. Net Interest Margin continued on the downtrend for another quarter, down from 1.77% in 1Q12 and 1.72% in 2Q12 to 1.67% for this quarter. We will provide more details after the briefings later today. Meantime, we are likely to review our estimates and put our Buy rating and fair value estimate of S$15.94 under review. (Carmen Lee) SMRT Corporation: Uninspired but still okay Summary: SMRT's 2Q13 results came in within our expectations although operating expenses outpaced revenue growth. Revenue grew 7.7% YoY to S$281.2m on the back of higher ridership and full contribution from the Circle Line (CCL) while operating profit fell 3.5% YoY to S$40.6m following increases in operating expenses. SMRT also declared an interim dividend of 1.5 S cents (as compared to 1.75 S cents last year). While SMRT's electricity hedges had yielded encouraging cost savings and will continue to do so in 2H13, we lowered our estimates on the likelihood of higher operating expenses i.e. greater staff, repairs and maintenance costs. Nonetheless, our DDM-derived valuation of S$1.71 (assuming a 60% full-year PATMI payout) remains unchanged. Maintain HOLD. (Lim Siyi)

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NEWS HEADLINES - US stocks ended mixed on Wednesday as trading resumed in the aftermath of Hurricane Sandy. The Dow fell 0.1% to 13,096.46, weighed by Walt Disney, while the S&P 500 Index ended almost flat at 1,412.16. The Nasdaq slid 0.4% to 2,977.23, dragged down by Facebook and Apple. - Jardine Cycle & Carriage's 3Q12 PATMI rose 12% YoY to US$323m, despite a 2% dip in revenue to US$5.33b, as operating costs also fell. Slowing demand for heavy equipment and lower crude palm oil prices are affecting profitability at its Astra International unit, while its other motor interests also face difficult trading conditions. - Sin Heng Heavy Machinery's 1Q13 PATMI more than doubled to S$3.3m, from S$1.6m a year ago, on the back of a 36% rise in revenue to S$43m. The strong performance was contributed by higher revenue from both its equipment rental and trading businesses.