MARKET PULSE: Telecom Sector, StarHill Global, CapitaLand, Lian Beng (19 Feb 2013)

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.98

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.04

MARKET PULSE: Telecom Sector, StarHill Global, CapitaLand, Lian Beng

19 Feb 2013

KEY IDEA Telecom Sector: Expecting higher capex in 2013 Summary: Out of the three telcos, M1's 4Q12 results were slightly below our forecast while the other two were mostly in line. But M1 also surprised with a special dividend of S$0.017/share on top of its final dividend of S$0.063. StarHub declared a quarterly dividend of S$0.05 as guided. Both M1 and StarHub expect to see earnings growth in 2013; but both are also guiding for higher capex targets, likely for the ongoing 4G roll-out and also more data capacity to meet growing usage trend. SingTel has kept its previous guidance, but note that its year-end is in Mar. For now, we maintain our OVERWEIGHT on the sector. But as the telcos have already done quite well YTD, further capital appreciation may be limited, although dividend yields are still relatively attractive. M1 remains our top pick. (Carey Wong) MORE REPORTS Starhill Global REIT: Expect extra DPU in 1Q13 Summary: Starhill Global REIT (SGREIT) announced that the rent review process relating to Toshin master lease at Ngee Ann City has been completed on last Thursday and that it has been awarded a 10.0% increase in base rent. Assuming the accumulated rental arrears owing as a result of the rental increase from 8 Jun 2011 to 31 Dec 2012 were paid in FY12 (after deducting expenses), management estimates an increase of 0.19 S cent or 4.3% in its FY12 DPU. SGREIT intends to distribute substantially the net arrears received from Toshin in 1Q13, on top of the regular distributable income generated for the quarter. We also understand that the new rate will serve as the base rent for the next lease renewal exercise in Jun. Management expects the renewal rent to be determined before the commencement of the lease period. We believe further upside in rent is still possible. However, we choose to incorporate only the new rate and distribution for now. This raises our fair value from S$0.95 to S$0.98. Maintain BUY. (Kevin Tan) CapitaLand Limited: Involvement in Danga Bay development in Johor Summary: It was reported in news yesterday that Capitaland Malaysia Pte Ltd, along with Temasek Holdings and Iskandar Waterfront Holdings Bhd, would buy and develop a 28.33ha man-made island at Danga Bay into a mixed integrated development, comprising high-rise residences, landed homes and retail centers. The total development cost for the project is reportedly RM4-5 billion. We note that the group has not made an announcement via SGX, and the extent of CapitaLand's involvement in the project is still unclear. We would speak further with them regarding this development, and in the meantime, maintain our BUY rating with a fair value estimate of S$4.04. (Eli Lee) Lian Beng Group: S$117m contract win boosts order book to S$664m Summary: Lian Beng Group has secured a S$117m contract for the construction of Skies Miltonia, a condominium development of TG Master Pte Ltd, at the junction of Yishun Avenue 1 and Miltonia Close. The project involves the construction of eight 13-storey residential blocks with penthouse and one 3-storey residential block, totalling 420 units, as well as basement car park, swimming pool, communal facilities and shops. Construction is due to start next month and will take about 33 months to complete. The new contract strengthens the group's order book to S$664m as at 18 Feb 2013, with projects lasting through FY2016. We are keeping Lian Beng UNDER REVIEW pending a change in analyst. (Research Team)

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