MARKET PULSE: CityDev, Cache Logistics, Singapore Economy (2 Jan 2013)

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 14.05

Stock Name: CACHE
Company Name: CACHE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.30

MARKET PULSE: CityDev, Cache Logistics, Singapore Economy

2 Jan 2013

KEY IDEA City Developments Limited: Echelon launch performance above view We visited City Development's (CDL) latest launch, the 508-unit condominium project Echelon, over the weekend. The project near the Redhill MRT station put up a strong set of numbers in its first weekend of sales, with over 300 units sold at ASP of around S$1.7k psf. We believe this launch performance to be above view. We estimate breakeven ASP at $1.2k psf, which translates to an attractive gross profit margin around 40% for the project. To recap, CDL together with Hong Realty, put in the top bid (S$396m or S$754 psf GFA) for the 99-year GLS site at Alexandra Rd in Nov 2011. Maintain BUY with a higher fair value estimate of S$14.05 (10% RNAV discount), versus S$13.96 previously, as we update for firmer residential ASPs into our model. (Eli Lee) MORE REPORTS Cache Logistics Trust: FY12 to end on positive note Cache Logistics Trust (CACHE) announced that it will release its 4Q12 results after the market close on 21 Jan 2013. We expect CACHE to meet our 4Q NPI forecast of S$18.5m (+11.1% YoY) and distributable income projection of S$14.7m (+9.5%) comfortably, thanks to the contribution from its newly-acquired Pan Asia Logistics Centre and Pandan Logistics Hub. In the coming year, we believe CACHE's financial performance will remain sturdy, as it continues to benefit from upward rental adjustments and full-year contribution from its past acquisitions. A few industrial properties from its sponsor's pipeline assets are also ready for acquisition and may boost its income if CACHE injects any of these properties into its portfolio. We also continue to favour CACHE for its resilient portfolio. While the Singapore Purchasing Managers' Index (PMI) indicated that the manufacturing sector contracted for the fifth month in Nov, we expect CACHE's portfolio occupancy to maintain at 100% as the bulk of its leases are based on triple-net master lease structures. Maintain BUY and S$1.30 fair value on CACHE. (Kevin Tan) Singapore Economy: 1.2% growth in 2012 lower than forecast According to advance estimates from the MTI, the Singapore economy grew by 1.1% YoY in 4Q12, worse than the street's expectations of a 1.4% growth but better than the zero growth seen in 3Q12. On a seasonally-adjusted annualized basis, the economy expanded by 1.8% QoQ, compared to the 6.3% contraction in 3Q12. Manufacturing contracted by 10.8% QoQ, extending the 9.9% decline in 3Q12, largely due to continued weakness in the electronics cluster. Construction also contracted by 8.9% from 3Q12's 17.4% negative growth with lower private sector building activity. Services, however, grew by 7.0% QoQ, reversing the 3.9% fall in 3Q12. This was mainly due to a rebound in the wholesale & retail trade, finance and insurance sectors. All these factors brought 2012 growth to 1.2%, lower than MTI's growth forecast of 1.5%. For 2013, the official growth forecast is 1.0-3.0%, but key risks include the fiscal cutback in the US and the Eurozone debt crisis. (Low Pei Han)

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NEWS HEADLINES - US stocks rallied on Mon, ending the year with gains as details emerged of a budget deal to avoid the fiscal cliff. The Dow rose 0.5% to 13,004.44, the S&P 500 index gained 0.8% to 1,414.26 and the Nasdaq finished 2% higher at 3,019.51. - China's manufacturing activity expanded for a third straight month in Dec, with the official purchasing managers' index staying at 50.6 - a signal that the economy is continuing to recover. - Advance SCT has raised S$0.8m in new funds from individual investors through the sale of 61.5m new shares at 1.3 S cents each. - Mercator Lines (Singapore) has agreed to pay US$9m in cash and at least US$6m in shares to the owners of two vessels as compensation for the early termination of the charters of the vessels.