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)

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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.