MARKET PULSE: Residential Sector, Infrastructure Plays, STE, Transport Sector (18 Feb 2013)

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.04

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.53

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.55

Stock Name: Tat Hong
Company Name: TAT HONG HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 1.75

Stock Name: Tee Intl
Company Name: TEE INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.30

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.12

Stock Name: ComfortDelGro
Company Name: COMFORTDELGRO CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.95

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.71

MARKET PULSE: Residential Sector, Infrastructure Plays, STE, Transport Sector

18 Feb 2013

KEY IDEA Singapore Residential Property: Healthy Jan sales but expect weakness ahead Summary: URA reported that a headline total of 2,269 new private homes (including 256 EC units) were sold in Jan 2013, which was up 2% MoM and 9% YoY. Excluding EC and landed-units, 2,003 units were sold in the month - up 47% MoM and 7% YoY with a sustained above-par take-up rate at 111% (versus 144% in Dec 2012). Looking ahead, we expect Feb 2013 sales figure to fall MoM due to the traditionally quiet Chinese New Year season and a limited number of new launches. Immediate data-points ahead are the launches at Trilinq (IOI Group) near the Clementi MRT Station and Urban Vista (Fragrance Group) near the Tanah Merah MRT station. We have a NEUTRAL rating on the residential property sector and prefer diversified developers with strong balance sheets and significant exposure to the Chinese property sector. Our top picks are CapitaLand [BUY, S$4.04], Keppel Land [BUY, S$4.53] and CapitaMalls Asia [BUY, S$2.55]. (Eli Lee) MORE REPORTS Population White Paper favours Infrastructure Plays Summary: After five days of intense debate, Singapore's Parliament passed the amended White Paper on Population about a week ago. We reviewed the White Paper and emphasize the following: - (i) the government will now build infrastructure ahead of demand, (ii) planning parameters of 5.8m to 6.0 million in 2020 (and 6.5 to 6.9 million in 2030) are to be used, (iii) the housing supply will be ramped up and HDB prices will remain affordable, (iv) rail network will double by 2030 with the addition of five more lines. In our view, the most direct beneficiary is the infrastructure sector (public works providers opposed to construction-developers). We highlight several niche players such as Tat Hong Holdings (BUY; FV: S$1.75), Yongnam Holdings Limited (UNRATED), TEE International (HOLD; FV: S$0.30) and TTJ Holdings (UNRATED). (Chia Jiunyang) ST Engineering: FY12 in line Summary: Singapore Technologies Engineering (STE) reported FY12 results that were in line with ours and consensus expectations. For FY12, revenue rose 6% YoY to S$6.4b, profit before tax climbed 10% YoY to S$723mm and profit attributable to shareholders rose 9% to S$576m. All sectors recorded higher PBT for FY12 versus FY11. Aerospace, Electronics, Land Systems and Marine saw PBT increase by 9%, 11%, 6% and 5% YoY respectively. Aerospace's FY12 PBT margin of 15.0% improved over FY11's 14.4%. STE expects to achieve higher revenue and PBT in FY13 versus FY12. We forecast a FY13F EPS of 19.9 S cents, and keeping a P/E peg of 20.7x, we raise our fair value from S$3.90 to S$4.12 and maintain a HOLD on STE. We estimate a FY13F dividend yield of 4.5%. (Sarah Ong) Singapore Transport: Fare review report delayed till end-May Summary: We are unperturbed by the Transport Minister's decision to delay the submission of the Fare Review Mechanism Committee's report to end-May because i) our projections already factor in price increases from mid-2QCY13, and ii) broad-based fare increases will still materialise. Although the reason for the delay is to facilitate further study of the impact of fare increases on low-income families and/or dependent groups (e.g. polytechnic students), wording in recent speeches and reiterations by the Transport Minister have been clear that commuters should be prepared to bear some of the cost increases especially after the fact that current fares have been kept affordable over recent years at the expense of public transport operators. Therefore, we leave our forecasts for both public transport operators - ComfortDelGro and SMRT - unchanged and maintain HOLD for both counters at S$1.95 and S$1.71 respectively. (Lim Siyi)

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

NEWS HEADLINES - Japan's Prime Minister Shinzo Abe is expected to announce his candidate for Bank of Japan's new governor for this week - a move with international and financial implications. - According to the median estimate of economists by Reuters, Singapore's GDP likely grew by 1.2% in 4Q2012, faster than the advance estimate of 1.1%, helped by higher production of oil rigs and pharmaceuticals. - Singapore retail sales fell 1.5% YoY in Dec last year, dragged down by weaker sales of motor vehicles. - The new head of Real Estate Developers' Association of Singapore (Redas) says, developers here are "naturally anxious" about the latest cooling measures, but they understand the government's push for a soft landing of property market and support the population roadmap. - Mapletree Greater China Commercial Trust will be launching an IPO for up to US$1.3b, the largest ever for a real estate investment trust in Singapore. According to its prospectus, the trust is offering about 1.73 million units in a range of S$0.88-0.93 each.