MARKET PULSE: Wilmar, KS Energy (12 Mar 2013)

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.90

Stock Name: KS Energy
Company Name: KS ENERGY LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.64

MARKET PULSE: Wilmar, KS Energy

12 Mar 2013

KEY IDEA Wilmar: Upgrade to BUY; sell-down likely overdone Summary: Wilmar International Limited (WIL) fell some 3.8% yesterday to S$3.30, likely spooked by news that China's inflation rate has rebounded to a 10-month high; this after consumer prices rose 3.2% YoY in Feb, driven by a 6% increase in food prices due to the Chinese New Year festivities. While the Chinese government is understandably hawkish about inflation, market watchers do not expect them to take any drastic measures such as tightening monetary policy or introducing price caps on essential food items, especially since the spike could be seasonal in nature. The stock has also corrected somewhat since we downgraded it to Hold, and as there is now a potential 18% upside to our unchanged S$3.90 fair value (still based on 15x FY13F EPS), we upgrade our call to BUY. (Carey Wong) MORE REPORTS KS Energy: Rights issue and new convertible bonds issue Summary: KS Energy (KSE) recently announced that it will undertake a renounceable underwritten rights issue to raise gross proceeds of about S$42.1m. The company is offering up to 111.65m new ordinary shares at an issue price of S$0.41 for each rights share, on the basis of one rights share for every four existing shares. The group will also be issuing S$45m worth of new convertible bonds to OCBC and TAEL One Partners. This ensures that KSE will have sufficient funds for the early redemption of its earlier issue of convertible bonds. We have been highlighting the early redemption option of KSE's convertible bonds and the group has finally resolved this issue. With the increase in share base due to the rights issue, we lower our fair value estimate to S$0.64 (prev. S$0.78), still based on 1.2x FY13F NTA/share. Maintain HOLD. (Low Pei Han)

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

NEWS HEADLINES - WBL Corporation Limited saw its net profit for the fiscal first quarter ended Dec 31, 2012 plunge 74.3% YoY to S$6.08m from S$23.68m. - China Environmental Resources Group posted a net loss attributable to owners of HK$23m for the six months ended Dec 31, 2012, reversing its net profit of HK$704,000 a year ago. - Overseas Union Enterprise Limited (OUE) is buying the tallest building in California, the US Bank Tower, and some related properties for US$367.5m (S$459.4m). - SingXpress Land said it was eyeing expansion into the US property market, and is looking to take over distressed property assets or even the property assets from the local bankruptcy courts. - More than 80% of singles above the age of 35 are eligible to buy new Build-to-Order (BTO) flats, said National Development Minister Khaw Boon Wan, and he revealed that the government might look at raising the income cap - The Singapore Tourism Board (STB) is expecting tourism receipts to hit between $23.5b and $24.5b this year while visitor arrivals are slated to increase to between 14.8m and 15.5m.