MARKET PULSE: Cache Logistics, TEE, SingTel (14 Feb 2013)

Stock Name: CACHE
Company Name: CACHE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.34

Stock Name: Tee Intl
Company Name: TEE INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.30

Stock Name: SingTel
Company Name: SINGTEL

Research House: OCBC

Price Call: BUY

Target Price: 3.53

MARKET PULSE: Cache Logistics, TEE, SingTel

14 Feb 2013

KEY IDEA Cache Logistics Trust: New ramp-up warehouse addition Cache Logistics Trust (CACHE) has signed an option agreement to acquire a three-storey fully ramp-up warehouse for S$55.2m, or S$194 psf GFA. The transaction is expected to complete in Apr, subject to JTC approval. According to management, the initial NPI yield is ~8.7%, higher than CACHE's FY12 implied portfolio yield of 7.1%. Hence, we expect the acquisition to be earnings accretive. CACHE also announced that it has received its maiden corporate family rating from Moody's Investors Service. With this development, we believe CACHE may finance the acquisition wholly by debt, since it is now able to exceed its previous regulatory debt ceiling of 35%. We raise our fair value to S$1.34 from S$1.32 after factoring in the investment. Maintain BUY. (Kevin Tan) MORE REPORTS TEE International: Better outlook, but still cautious Since our last report on TEE International (10 Jan), its share price has stayed firm, retaining most of the gains made since the start of the year, despite its disappointing 2QFY13 results. We believe that TEE's share price has been supported by recent strong interest in Singapore construction stocks generally, boosted by the government's latest projections for construction demand and population growth, both of which should benefit the construction sector. We raise our valuation of TEE's main engineering business to 5.5x FY13 forecast earnings from 5x previously, to reflect the improved long-term outlook for its engineering segment. This raises our overall fair value estimate for TEE to S$0.30, from S$0.28. Given its weak 2QFY13 showing, however, we prefer to remain cautious on TEE until we see stronger contributions from its real estate business. We maintain our HOLD rating on TEE. (Conrad Tan) SingTel: Stable 3QFY13 results SingTel reported its 3QFY13 results this morning, with group revenue dipping 4.8% YoY to S$4597m, and while EBITDA rose 0.5% to S$1262m, net profit fell 8.3% to S$827m (mainly due to exceptional loss of S$67m). However, excluding exceptional items, underlying net profit was down 2.3% at S$874m. 9MFY13 revenue fell 2.4% to S$13702m, meeting 73% of our FY13 forecast, while net profit slipped 2.2% to S$2640m; core earnings was down 1.6% at S$2610m, or 69% of full-year estimate. SingTel has kept its guidance for FY13, and we will have more after the analyst teleconference. For now, we maintain our BUY rating but our S$3.53 fair value is under review. (Carey Wong)

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NEWS HEADLINES - Most US stocks closed fractionally higher on Wed, while blue chips declined, as positive market momentum mixed with investor anticipation of an overdue correction. The Dow fell 0.3%. - Boustead Singapore posted a net profit of S$26.2m for 3QFY13, up from S$5.5m in 3QFY12. - Memtech International Ltd warned that it is likely to report a financial loss for FY12, due to significantly lower demand for mobile phone keypads and impairment charge on fixed assets. - Perennial China Retail Trust's 4Q12 amount available for distribution to unitholders of S$11.2m was in line with the forecast disclosed in its prospectus. - SMRT said that a tunnel fire that caused a 2.5-hour disruption to services on the North-South MRT line yesterday was caused by a short-circuit in a power cable. - Marina Bay Sands has been fined S$475k by the Casino Regulatory Authority of Singapore for surveillance breaches. - A study by the Washington-based Institute of International Finance said that capital flows into emerging market economies are set for recovery.