MARKET PULSE: Telecom Sector, TEE (6 Dec 2012)

Stock Name: M1
Company Name: M1 LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.89

Stock Name: Tee Intl
Company Name: TEE INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.34

MARKET PULSE: Telecom Sector, TEE

12 Dec 2012

KEY IDEA Telecoms Sector: Defensive earnings in still-uncertain times Going into 2013, with the global economic outlook still looking somewhat shaky, we believe that investors may continue to favour stable yield plays for recurring income in their portfolios. We think that the telecommunication stocks will continue to be good candidates as their defensive earnings and strong ability to generate free cashflow should continue to sustain their relatively attractive dividend yields. As such, we maintain our OVERWEIGHT rating for the sector. Among the three telcos, we have a slightly preference for M1 (BUY, FV: S$2.89). (Carey Wong) MORE REPORTS TEE International: Unlocking value TEE International plans to unlock the value of its real estate business by spinning it off and listing it separately on SGX. It intends to keep a 70-75% stake in the property business, which TEE sees as a valuable source of future earnings. TEE plans to pay out part of the proceeds raised from the listing as a special dividend and use the rest to fund its expansion into new ventures. We have changed our valuation model to better capture the value of TEE's real estate business using the RNAV surplus method. This gives us a fair value estimate of S$0.34 per share for TEE (previously S$0.28), implying a potential upside of 7% from its last traded price of S$0.315. We have not factored in any potential gains from the real estate spin-off. TEE could see further upside in the current financial year as more revenue from its property projects is recognised. We maintain our HOLD rating. (Conrad Tan)

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NEWS HEADLINES - US stocks mostly rose on Wed, amid signs that political leaders were willing to compromise in talks to avoid the fiscal cliff. The Dow rose 0.6%, the S&P 500 +0.2%; but Nasdaq fell 0.8%, weighed by Apple Inc's court battle with Samsung. - Majority shareholder Simon Cheong is offering to take SC Global Developments private at S$1.80 a share, valuing the firm at S$745m. Trading is set to resume today. - Oakwell Engineering plans to raise up to S$10m in working capital through the sale of five-year convertible bonds paying interest of 8% a year, to an individual investor. The bonds are convertible into Oakwell shares at S$0.0875 each. - Keppel REIT's subsidiary, Ocean Properties, has obtained a S$505m five-year term loan to refinance its outstanding loans. The loan facility will be secured by a mortgage against Ocean Financial Centre. - Sysma Holdings is offering S$35m to buy De Paradiso Development Pte Ltd, a Singapore investment holding company which owns two plots of land at Serangoon. The proposed acquisition is non-binding and subject to due diligence checks and the approval of Sysma's shareholders.