MARKET PULSE: Healthcare Sector, A-REIT, SPH (11 Mar 2013)

Stock Name: Ascendasreit
Company Name: ASCENDAS REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 2.60

Stock Name: SPH
Company Name: SINGAPORE PRESS HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.05

MARKET PULSE: Healthcare Sector, A-REIT, SPH

11 Mar 2013

KEY IDEA Healthcare Sector: 4QCY12 results roundup Summary: The healthcare companies under our coverage reported a contrasting set of results during the recently concluded 4QCY12 results season. While Raffles Medical Group (RMG) delivered double-digit YoY revenue and core PATMI growth which were in line with our expectations, Biosensors International Group's (BIG) results missed ours and the street's estimates. However, this was due to weak licensing revenue from Japan. Its core drug-eluting stent (DES) business continued to perform well. Other healthcare companies, notably IHH and Q&M Dental, have also largely delivered growth in 4QCY12. We maintain our OVERWEIGHTrating on the healthcare sector as we are still positive on the growth trajectory of the industry. BIG [BUY; FV: S$1.63] remains our preferred pick within the sector. Despite its recent share price decline, which we attribute partly to market jittery over the uncertainty of its acquisition timeline, we are optimistic that management would be able to finalise earnings accretive acquisition(s) in the near future. (Wong Teck Ching Andy) MORE REPORTS Ascendas REIT: First acquisition in three quarters Summary: Ascendas REIT (A-REIT) has raised gross proceeds of ~S$406.4m through a private placement. Management intends to use the bulk of the gross proceeds to fund the potential acquisition of a property within Singapore Science Park II and an integrated industrial mixed-use property at Kallang Avenue. We project the initial NPI yields for both assets to come in at around the 6%-handle, comparable to A-REIT's implied portfolio yield. Aggregate leverage is expected to increase slightly from 32.8% as at 31 Dec 2012 to 34.6%, assuming that the potential acquisitions and committed investments are funded immediately after the placement. However, as the Kallang Avenue property is expected to obtain TOP only around mid-2014, we believe part of the proceeds may be used to repay debt pending its deployment. We now factor in the proposed acquisitions and placement into our forecasts. This raises our fair value from S$2.43 to S$2.60. However, as A-REIT appears to be fairly priced at current level, we maintain our HOLD rating. (Kevin Tan) Singapore Press Holdings: Exploring a REIT listing Summary: Friday evening, Singapore Press Holdings (SPH) announced that it is exploring a REIT listing on the SGX Mainboard. The properties forming the REIT and the terms at which they would be injected are currently under review. We note that SPH now holds three retail mall assets: Paragon currently valued at S$2.43b; a 60% stake in Clementi Mall valued at S$598m (100% basis); and a 70% stake in Seletar Mall, currently under development, valued at S$505m (100% basis). If this transaction does occur, we see it to be a favorable move which would unlock additional value from its mall assets, by housing them in a more tax-effective REIT structure, and recycle capital back into the group's growing retail mall business. More importantly, we see this move to have deeper implications from a strategic perspective. The group has steadily built up a solid skill-set as a retail mall developer and manager over the last few years, and the establishment of a REIT, as a destination for stabilized assets, would further enhance its position as a major player with end-to-end capabilities, from developing greenfield projects to managing stabilized REIT assets. We would speak with management further regarding this development and, in the meantime, put our Hold rating and fair value estimate of S$4.05 UNDER REVIEW. (Eli Lee)

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NEWS HEADLINES - The HDB will contemplate returning to a model where flat owners can only sell their units back to HDB as a way to drive down prices of new flats. Other measures being considered include lengthening the minimum occupancy period and shortening leases. - According to the data from SLP International, demand for strata factories moderated following the introduction of the seller's stamp duty in January this year. - Transcu Group has appointed its founder, Akihiko Matsumura, as chairman of the board, after the passing of its previous chairman, Hironori Aihara - Jardine Matheson Holdings on Friday reported a 51% fall in net profit to US$1.69m from US$3.45m a year ago for the fiscal year ended Dec 31, 2012. - Raffles Education Corporation on Friday announced plans to set up a university in Sri Lanka with an investment of S$25m, over five years.