MARKET PULSE: Singapore Strategy, Healthcare REITs, Biosensors (14 Dec 2012)

Stock Name: First REIT
Company Name: FIRST REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.98

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.

Research House: OCBC

Price Call: BUY

Target Price: 1.69

MARKET PULSE: Singapore Strategy, Healthcare REITs, Biosensors

14 Dec 2012

KEY IDEA Singapore Strategy: A Good Year for Equities The Singapore market clocked in good gains in 2012, and our core favourite sectors also outperformed. Moving into 2013, we see better economic and market conditions, and while earnings growth is still in the single-digit region, it is a recovery from the slowdown in 2012. Valuations for the Singapore market are not excessive and we expect a healthy pipeline of IPOs, takeover and privatisation exercises in 2013 to help buoy interest in the market. We are sticking with our strategy of overweighing the Oil & Gas, Banking, Healthcare and selective property sub-sectors. Our stock picks for 2013 include Biosensors, CapitaMalls Asia (CMA), CapitaMall Trust (CMT), City Developments, DBS, Ezion Holdings, Keppel Corp, M1, Sembcorp Marine, Starhill Global REIT, UOB and Venture Corp. (Carmen Lee) MORE REPORTS Healthcare REITs: Stable outlook for 2013 The S-REITs sector has been a standout performer in 2012 (+34.5% YTD), buoyed by the 'yield compression' theory in light of the low interest rate environment. Unsurprisingly, healthcare REITs have also delivered strong YTD price appreciation, with First REIT (FREIT) rising 36.2% and Parkway Life REIT (PLREIT) a more modest 19.0%. Both healthcare REITs also continued to showcase steady financial performance for 9M12. We believe that healthcare REITs offer the most defensive attributes amongst the S-REITs, which would provide stability for investors amid the still-uncertain macroeconomic environment. However, in terms of valuation, we believe that the subsector positives have already been priced in, with healthcare REITs trading at a rich premium to the S-REITs universe, while offering lower yields. Hence we maintain our NEUTRAL rating on the healthcare REIT subsector. Within this space, we have a HOLD rating and S$0.98 fair value estimate on FREIT. (Wong Teck Ching Andy) Biosensors International Group: First patient enrolment in new clinical trial Biosensors International Group (BIG) announced that it has enrolled its first patient in LEADERS FREE, a clinical trial involving its next generation BioFreedom™ polymer-free drug-coated stent (DCS), which is still awaiting CE Mark approval. This trial would be carried out on patients at high risk of bleeding and is aimed at comparing the safety and efficacy of BioFreedom™ to a bare-metal stent. Patients would only be required to take a month-long course of dual anti-platelet therapy, versus 12 months for its current flagship BioMatrix™ drug-eluting stent. The clinical trial will enrol c.2,500 patients across Europe, Asia and South America, with the enrolment process expected to be completed by early 2014; while primary endpoint data is likely to be presented during 2015. We believe that this trial is significant to the continued growth of BIG, as clinical trial results are one of the most important factors impacting an interventional cardiologist's decision to adopt a stent for use. Hence any positive outcomes reported would enable BIG to further drive its penetration rates, in our view. Meanwhile, BIG's share price has jumped 8.8% since we recommended it as our top healthcare pick for 2013 on 4 Dec 2012. Maintain BUY and S$1.69 fair value estimate, which still translates into an attractive potential upside of 36.3%. (Wong Teck Ching Andy)

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

NEWS HEADLINES - US stocks fell on Thursday despite positive economic data, as politicians blamed each other in public for the lack of progress in a deal to avoid the fiscal cliff. Both the Dow and the S&P 500 Index ended 0.6% lower, the Nasdaq fell 0.7%. - Gallant Venture has agreed to buy a 52% stake in Indonesia's Indomobil Sukses Internasional for US$809.3m, which it will fund via a rights issue of 2.4b new shares at S$0.28 each. - Wheelock Properties (Singapore) has bought 1.1m more shares in SC Global Developments at ~S$1.81 each in the open market (versus S$1.80 buy-out offer price), taking its stake to 16.09%. - IPCO International's 2QFY13 net profit nearly doubled YoY to S$4.9m, supported by a 31% rise in revenue to S$16.8m. - Ace Achieve Infocom's 1HFY13 PATMI rose 9.7% to CNY15m, supported by an 8% increase in revenue to CNY99m.