MARKET PULSE: Residential Sector, S-REITs, CDL, Nam Cheong, Ezra (14 Jan 2013)

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.04

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.17

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.84

Stock Name: Fortune Reit HK$
Company Name: FORTUNE REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target Price: 7.28

Stock Name: CapitaComm
Company Name: CAPITACOMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.75

Stock Name: CACHE
Company Name: CACHE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.30

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 13.01

Stock Name: Nam Cheong
Company Name: NAM CHEONG LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.30

Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.30

MARKET PULSE: Residential Sector, S-REITs, CDL, Nam Cheong, Ezra

14 Jan 2013

KEY IDEA Singapore Residential Property: Barrage of measures could crack the market Summary: Authorities have implemented their most comprehensive set of property cooling measures since Sep 2009. The new measures would impact the private residential segment, public housing, ECs, and industrial property as well. We believe the latest private residential curbs, consisting of more ABSDs, tighter LTVs and higher cash down-payments, are amongst the most onerous seen thus far, and would likely crimp buyer demand significantly. We see developer stocks showing knee jerk reactions of 3%-7% price dips on these curbs but caution against buying on weakness for two reasons: 1) the latest set of cooling measures would likely have a deep and sustained impact on demand fundamentals, and 2) these curbs point to a strong political will to soften property prices and possibly more aggressive measures ahead. We downgrade the Singapore residential property sector to NEUTRAL. Our top sector picks are currently CapitaLand [BUY, FV: S$4.04] and CapitaMalls Asia [BUY, FV: S$2.17]. MORE REPORTS Singapore REITs: Still offering superior gains Summary: Since our S-REIT strategy report ("Foundation laid for growth", dated 18 Dec 2012) highlighted an expected continued interest in S-REITs, the FTSE ST REIT Index has risen by 3.8% versus STI's gain of 1.8% over the same period. Most of our preferred picks, we note, have also fared very well. In the week ahead, S-REITs will commence the results reporting period for 4QCY12. We expect majority of the S-REITs to showcase sturdy financial performance and balance sheets, aided by contributions from their investments, healthy operating metrics and active capital management. For 2013, we believe that S-REITs will continue to retain their shine in 2013, underpinned by comparatively higher yield spreads against its peers in other geographical markets, continued interest in lower-beta yield plays by investors and a generally positive sector outlook. As such, we reiterate our OVERWEIGHT view on the S-REIT sector. Our sector top picks are still Starhill Global REIT[BUY, FV: S$0.84], Fortune REIT [BUY, FV: HK$7.28], CapitaCommercial Trust [BUY, FV: S$1.75] and Cache Logistics Trust [BUY, FV: S$1.30]. (S-REITs Team) City Developments Limited: Hit by latest cooling measures Summary: We believe that City Developments (CDL) would be unfavorably affected by the most comprehensive set of property cooling measures implemented by Singapore authorities since Sep 2009. The latest private residential curbs, consisting of more ABSDs, tighter LTVs and higher cash down-payments, are amongst the most onerous seen thus far, and would likely crimp residential buyer demand significantly. Though CDL management continues to execute well on its residential strategy, we expect headwinds for the group ahead as these measures affect demand fundamentals meaningfully. We downgrade CDL to HOLD with a lower fair value estimate of S$13.01 (15% RNAV disc.), versus S$14.05 previously, as we raise the RNAV discount and incorporate lower ASPs into our model to reflect softer sector fundamentals after the latest measures. (Eli Lee) Nam Cheong Limited: Gearing up for faster growth Summary: Nam Cheong has proposed an ordinary share placement to raise S$47m. If successful, its ordinary share capital will be enlarged by about 10%. This placement comes right after its S$110m MTN issuance in Nov 2012. Taken together (and assuming the placement shares are fully taken up), the group would have raised close to S$160m. We believe this is mainly to fund a rapid expansion in its FY14F shipbuilding programme. In our view, there is still plenty of upside for shareholders despite a dilution of their interests post-placement. We also prefer to keep our BUY rating and S$0.30 FV unchanged ahead of its FY12F results next month. (Chia Jiunyang) Ezra Holdings: Soft 1QFY13 results Summary: Ezra Holdings (Ezra) reported a 54% YoY rise in revenue to US$278.7m and a 44% rise in gross profit to US$49.9m in 1QFY13. Higher administrative expenses, a lower share of profit of associated companies, and a higher tax rate led to a 49% fall in net profit to US$6.8m. Stripping out exceptional items such as fair value changes of financial instruments and forex changes, we estimate core net profit to be around US$4.3m, 16% lower than 1QFY12. This represents only about 13% of our full year core net profit estimate of US$33m, which is already one of the lowest in the street. Still, we expect better performance in 2HFY13 as the subsea division continues to grow. Ezra's share price has run up by about 23.7% since our last report on 3 Dec 2012. Pending more details from management, we put our Buy rating and fair value estimate of S$1.30 under review. (Low Pei Han)

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

NEWS HEADLINES - US stocks ended largely unchanged on Fri as investors stayed on the sidelines ahead of more company earnings releases this week. The Dow rose 0.1% to 13,488.43, the S&P 500 index ended flat at 1,472.05 and the Nasdaq ended 0.1% higher at 3,125.63. - Showflats in Singapore were quiet yesterday, after the government announced on Fri a sweeping package of property cooling measures which kicked in on Sat. - The mandatory unconditional cash offer for developer SingXpress Land closed on Fri with offerer Haiyi Holdings receiving acceptances amounting to 6.96m shares, or about 0.05% of the company, giving it a 62.23% stake in the firm.