MARKET PULSE: FCOT, Tech Sector (8 March 2013)

Stock Name: Frasers Comm
Company Name: FRASERS COMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.52

Stock Name: Venture
Company Name: VENTURE CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 9.08

MARKET PULSE: FCOT, Tech Sector

8 Mar 2013

KEY IDEA Frasers Commercial Trust: DPU gets another thrust Frasers Commercial Trust (FCOT) announced that it has successfully exercised the right of redemption for 157.1m Series A Convertible Perpetual Preferred Units (CPPUs). While this move is not expected, we expect it to result in an improvement in FCOT's DPU. Furthermore, this would remove any uncertainty pertaining to a possible dilution in unit base from a conversion of the CPPUs. The only trade-off, in our view, would be a higher aggregate leverage, which we believe would rise from 29.2% as at 31 Dec 2012 to ~40% assuming the CPPU redemption is fully funded by debt. We now project a full CPPU redemption in our model, as it may no longer be economical for FCOT to retain the remaining CPPUs. This raises our fair value from S$1.48 to S$1.52. Maintain BUY. (Kevin Tan) MORE REPORTS Technology Sector: Likely a backend loaded 2013 Under our tech sector coverage, only Venture Corp (VMS) managed to report earnings which exceeded our expectations for the recently concluded 4QCY12 results season. Karin Tech's core PATMI was in line, while that of ECS Holdings and Valuetronics Holdings missed. Two common trends we noted are apparent cost pressures present in the sector and a cut in dividends by some companies due to reduced profit levels and/or expansion plans in the pipeline. While near-term outlook remains muted, there are expectations that 2H13 would be brighter than 1H13, in line with an expected uptick in the global economy and contributions from new programmes. However, we maintain our NEUTRAL view on the tech sector, given the continued backdrop of political and economic uncertainties. VMS [BUY; FV: S$9.08] remains our top pick within this space. (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks rose on Thursday, with the Dow Jones closing at another record high, as jobless claims fell to a six-week low. The Dow is up 9.4% so far in 2013. - Dairy Farm International posted a 7% decline in net profit for FY12 to US$450.2m despite a 7% increase in turnover to US$9.8b. - Hongkong Land Holdings reported net profit attributable to shareholders of US$1.4b for FY12, down 73% on the back of a 9% decline in revenue to US$1.1b. - Mandarin Oriental International posted FY12 net profit of US$72.3m, up 7% from US$67.5m a year earlier. - Thai Beverage Public Co will replace IHH Healthcare in the Straits Times Index on 18 Mar following a quarterly review of the various Singapore market benchmarks. - SC Global will be delisted from SGX on Monday, bringing to a close chairman and chief executive Simon Cheong's bid to take the company private. - Hutchison Port Holdings is beefing up its Hong Kong container terminals portfolio with the acquisition of Container Terminal 8 West in Kwai Chung, Hong Kong for HK$3.9b.