MARKET PULSE: SMRT, CDLHT, StarHill Global, SingTel (30 Jan 2013)

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.71

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: HOLD

Target Price: 1.93

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.84

Stock Name: SingTel
Company Name: SINGTEL

Research House: OCBC

Price Call: BUY

Target Price: 3.53

MARKET PULSE: SMRT, CDLHT, StarHill Global, SingTel

30 Jan 2013

KEY IDEA SMRT Corporation: Rhetoric unchanged Summary: Although revenue growth continued unabated, SMRT's 3Q13 results disappointed as higher operating expenses - namely staff costs and repair and maintenance expenses - hit harder than we had anticipated. With this poor set of results, FY13 is now on track to become the worst performing year in seven in terms of bottom-line performance. Going forward, management continues to advocate caution over weaker profitability to end FY13 as its hiring needs remain unfulfilled, and ongoing repairs and maintenance work will inflate operating expenses. Nonetheless, most of the negativity has already been priced in, and our fair value estimate of S$1.71 stays the same despite lowering our estimates. Maintain HOLD. (Lim Siyi) MORE REPORTS CDL Hospitality Trusts: Flat 4Q12 results as expected Summary: CDL Hospitality Trusts (CDLHT) reported 4Q12 results that were generally in line with ours and consensus estimates. Revenue grew by 1.4% YoY to S$38.3m, and net property income rose by 0.2% YoY to S$35.6m. RevPAR for the Singapore hotels was flat YoY in 4Q12 at S$205 (excludes Studio M Hotel, which was acquired on 3 May 2011). For 1Q13, management noted that apart from stiffer competition, there will be the absence of the bi-annual Singapore Airshow and additionally, CNY will fall later this year (Feb instead of Jan), possibly delaying the seasonal pick-up in corporate travel. Weaker accommodation demand by corporates and leisure travellers is likely over the next 12 months. We maintain our fair value estimate of S$1.93 and HOLD rating on CDLHT. (Sarah Ong) Starhill Global REIT: Robust growth in 4Q12 DPU Summary: Starhill Global REIT's (SGREIT) 4Q12 results came in within our expectations. NPI grew 2.9% YoY to S$37.5m due primarily to strong contribution from its Singapore portfolio. DPU rose at a faster pace of 11.9% to 1.13 S cents on the back of lower interest costs and lower tax expenses. This set of results almost coincides with our quarterly NPI forecast of S$37.1m and DPU projection of 1.10 S cents. We note that ~S$0.6m from the distributable income will be retained for working capital purposes. For the full-year, DPU amounted to 4.39 S cents, up 6.6%. This translates to a respectable FY12 DPU yield of 5.2%. SGREIT recently proposed to acquire Plaza Arcade in Perth, Australia at an attractive yield of 7.8%, which is expected to contribute positively to its DPU post completion in 1Q13. Management guided that the gearing ratio is expected to remain very healthy at 31%, up slightly from 30.3% as at 31 Dec 2012. We will be attending SGREIT's analyst briefing later in the morning. For now, we maintain our BUY rating but place our S$0.84 fair value under review. (Kevin Tan) SingTel - Disposes entire stake in Warid Telecom Summary: SingTel announced that it has entered into a deal to sell its entire 30% stake in Warid Telecom to Warid Telecom Pakistan LLC (WTPL), subject to certain conditions being met. SingTel will receive an aggregate consideration of US$150m and the right to receive a 7.5% share of net proceeds from any future sale, public offering or merger of Warid. However, SingTel notes that the estimated loss on disposal will be approximately S$230m, including foreign currency translation losses and transaction costs. We expect the loss (likely booked in 4QFY13) to have a near-term impact but in the longer run, we see it positively. We currently have a BUY on SingTel and will review our S$3.53 fair value after its 3QFY13 results due 14 Feb. (Carey Wong)

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NEWS HEADLINES - US stocks mostly ended higher on Tue as oil prices rose to four-month highs, boosting the energy sector. The Dow and S&P 500 index each rose 0.5%, to 13,954.42 and 1,507.84, respectively, while the Nasdaq ended flat at 3,153.66. - Singapore is targeting slower, more sustainable, annual growth of 3-5% from now to 2020, and even more modest growth of 2-3% in 2020-2030, the government said in a new white paper. - Creative Technology reported 2Q13 net profit of US$38m, reversing a US$34m loss a year earlier, as revenue rose 10% YoY to US$66m, due to US$20m in new licensing income and other gains of US$26m for the three months to 31 Dec. - IPC Corp's 2012 net profit rose 31% to S$4.8m, despite a 61% fall in revenue to S$17m, as non-controlling interests fell 72% to S$0.5m. The drop in revenue was due to fewer completed residential units in Japan and the US being available for sale in 2012. - STATS ChipPAC has signed an agreement with Tessera Inc to dismiss all claims and counterclaims between the two companies as well as two of STATS ChipPAC's subsidiaries. It now expects 4Q12 net revenue to be about S$480m, near the upper end of its earlier S$475m-S$482m estimate.