MARKET PULSE: Astro Malaysia, Starhill Global, Valuetronics, United Envirotech (5 Feb 2013)

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.95

Stock Name: Valuetronics
Company Name: VALUETRONICS HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.20

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: OCBC

Price Call: BUY

Target Price: 0.67

MARKET PULSE: Astro Malaysia, Starhill Global, Valuetronics, United Envirotech

5 Feb 2013

KEY IDEA Astro Malaysia: Proxy to Malaysia's rising income/spending Astro Malaysia Holdings Berhad (Astro), the largest Pay TV operator in Malaysia (with a 99% market share in 2011), looks well-positioned to capitalise on the potential growth of the Malaysian economy and a young population demography that is open to the adoption of new technologies. And because of its steady stream of cash receipts, we believe that Astro could be seen as a dividend play. Given its stable cashflow, we believe that using a DCF (discounted cashflow) model to value the company would be appropriate. Based on our assumptions, we derive a fair value of MYR2.98. And coupled with a stable dividend yield of 3.5%, we expect Astro to generate a total return of 10.3% over the next one year; hence, we initiate coverage on the stock with a BUY rating. (Carey Wong) MORE REPORTS Starhill Global REIT: Asset sale a positive move Starhill Global REIT (SGREIT) announced that it had divested its entire interest in the Roppongi Primo Building in Tokyo, Japan for JPY700.0m (~S$9.5m). We welcome the move because 1) the divestment is likely to lead to an improvement in both occupancy and yield, 2) it may mean that its Japan properties are starting to gain investor interest, and 3) it is expected to reduce its gearing level by 30bps to 30.0% since the net proceeds would be used to repay its JPY loans. Going forward, we remain positive that SGREIT will continue to turn in firm performance, supported by strong contribution from its Singapore portfolio and incremental income from its recently acquired Plaza Arcade property in Perth. We also believe that upcoming refinancing activities and rental valuation for the Toshin master lease may provide a further catalyst for its DPU growth if favourable interest rates and rental terms are secured. We now factor in the divestment in our forecasts. Our fair value, however, remains unchanged at S$0.95. Maintain BUY on SGREIT. (Kevin Tan) Valuetronics Holdings: 3QFY13 core earnings below expectations Valuetronics Holdings Limited (VHL) reported its 3QFY13 results this morning. Revenue from continuing operations fell 16.3% YoY to HK$508.1m, or 10.5% below our forecast. Profit from continuing operations dipped 41.8% YoY to HK$25.6m. Adjusting for exceptional items, we estimate core PATMI of HK$23.9m, a 17.9% YoY decline, and this fell short of our projection by 16.2%. VHL continued to incur operating losses (HK$1.1m) from its Licensing division, but this was a significant reduction from 2QFY13 (HK$31.2m) which includes HK$28.0m worth of one-off termination expenditure and impairment charges given its decision to cease operations of the division. We expect VHL's outlook to remain challenging, as margin pressure from rising labour costs and slower growth from its largest customer are likely to weigh at least in the near term. We will provide more details after a teleconference call with management. We maintain our HOLDrating but our S$0.20 fair value estimate is currently under review. (Wong Teck Ching Andy) United Envirotech: Very strong 9M13 showing United Envirotech Ltd (UEL) put in a strong set of 9MFY13 results, with net profit jumping 145.7% to S$22.5m, meeting 95% of our full-year forecast, after revenue surged 108.9% to S$138.2m, also 95% of our FY13 estimate. 3QFY13 revenue was up 159.4% at S$32.2m, while net profit was up 350.2% at S$8.5m. According to management, the strong showing came from higher engineering and treatment revenue over the period. Going forward, UEL says it will continue to expand its recurring income by investing in more water treatment projects in China. Funding should also not be an issue given that KKR will be injecting another US$40m into the company following the recent share placement. We will be speaking with management for more insights. We are keeping our BUY rating and will review our S$0.67 fair value after our discussion with management. (Carey Wong)

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NEWS HEADLINES - US stocks fell on Mon in their worst drop so far this year, as investors fretted anew over Europe's problems. The Dow slid 0.9% to 13,880.08, the S&P 500 index fell 1.5% to 1,495.71 and the Nasdaq ended 1.5% lower at 3,131.17. - Singapore's purchasing managers' index (PMI) rose to 50.2 in Jan from 48.6 in Dec, signalling a marginal expansion of the manufacturing sector for the first time in seven months. - Global Logistic Properties and Canada Pension Plan Investment Board are each pumping a further 29b yen into their joint venture, GLP Japan Development Venture, set up to develop modern logistics properties in Japan. - Wing Tai Holdings' net profit surged to S$88.7m in the three months ended 31 Dec, from S$34.2m a year ago, supported by a 73% rise in revenue to S$321.8m. - HSR Global Ltd and Huan Hsin Holdings have each separately warned of full year losses for 2012 ahead of their release of results. - Sim Lian Group's net profit for the three months ended 31 Dec rose 35% YoY to S$48m, supported by a 64% surge in turnover to S$208m.