SG: MARKET PULSE: CWT, Rigbuilders, SGX, M1, FCT, KepLand (17 Apr 2013)

Stock Name: CWT
Company Name: CWT LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.08

Stock Name: SGX
Company Name: SINGAPORE EXCHANGE LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 6.80

Stock Name: M1
Company Name: M1 LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.10

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.68

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.64

Stock Name: FrasersCT
Company Name: FRASERS CENTREPOINT TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 2.13

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.53

MARKET PULSE: CWT, Rigbuilders, SGX, M1, FCT, KepLand

17 Apr 2013

KEY IDEA CWT: Growth from warehouse assets and Commodity SCM CWT is a leading provider of logistics solutions for worldwide customers in the commodities, chemical, petrochemical, marine, oil & gas, defense and industrial sectors. A competitive edge is its global logistics network which connects customers to around 200 direct ports and 1,500 inland destinations. The group is currently developing two large warehouses, estimated to add another 50% to its owned warehouse space in Singapore. In total, we estimate its entire warehouse portfolio to be worth about S$800m. Meanwhile, the recently acquired Commodity SCM business is also expected to scale up quickly, taking advantage of the group's strong global logistics network and reputation as an established commodity collateral manager. Our SOTP fair value estimate for CWT is S$2.08 per share. Given the ample upside, we initiate coverage with BUY.(Chia Jiunyang) MORE REPORTS Singapore Exchange: Strong 3Q, but likely QoQ slowdown in 4Q Singapore Exchange (SGX) generated above market expectation 3QFY13 net earnings of S$97.7m, up 25.6% YoY. The strong performance came from several units, especially its core Securities and Derivatives businesses. A 3Q dividend of 4 cents has been declared and is payable on 2 May 2013. The final quarter is likely to see some slowdown, largely due to prevailing macro economic uncertainties, and we expect volatility to come back again as sentiment is likely to turn more cautious especially after the good gains for the key equity indices since the start of the year. We have raised our fair value estimate slightly from S$6.80 to S$7.16 based on the same 23x blended earnings. With an estimated dividend yield of 3.5%, total return is -3.5% and we are buyers only at S$6.80 or lower. Maintain HOLD. (Carmen Lee) M1: 1Q13 results in line; downgrade to HOLD M1 Ltd reported its 1Q13 revenue of S$243.0m (-7.4% YoY, -25.8% QoQ) which met just 21.3% of our full-year forecast, mainly due to lower handset sales and also the mix of handsets (Android now makes up >50% of its postpaid subscriber base). Nevertheless, net profit grew 1.7% YoY and 8.2% QoQ to S$41.0m, meeting 26.5% of our FY13 forecast. It may have also gotten a one-off boost from recognizing the unused credit in expired pre-paid cards that were periodically terminated. While we are not making any chances to our FY13 estimates as 1Q13 results were largely in line, our DCF-based fair value improves to S$3.10 (from S$2.89) as we tweak our interest rate expectations slightly lower in view of the still sluggish global economic performance. But as there is now <10% total return from here, we downgrade the stock to HOLD. (Carey Wong) Rigbuilders: Who has been ordering from the Chinese yards? There have been recent reports on Chinese yards surpassing Singapore yards in terms of jack-up rig orders YTD. Indeed, we find that jack-up orders for the former have totaled ~US$2.3b so far, compared to ~US$2.1b for the latter. However, we note that many of the contracts that Chinese yards have won so far are mostly from newcomers in the offshore industry, including speculators who sell the rigs later for a profit. Meanwhile, Keppel Corp (KEP) and Sembcorp Marine (SMM) have been diversifying their product range and innovating to stay ahead in certain niche areas. Maintain BUY on both KEP [FV: S$12.68] and SMM [FV: S$5.64]; we note that markets may be increasingly volatile ahead, providing an opportune time to enter such quality stocks. (Low Pei Han) Frasers Centrepoint Trust: 2QFY13 results broadly in line Frasers Centrepoint Trust (FCT) announced its 2QFY13 results this morning. NPI and distributable income grew by 9.7% YoY and 10.4% YoY to S$28.7m and S$23.5m respectively. DPU for the quarter came in at 2.7 S cents, up by a slightly slower 8.0% YoY due to retention of S$1.2m in distributable income. For 1HFY13, DPU rose by 8.5% YoY to 5.1 S cents. This is broadly in line with both ours and consensus expectation, with 1HFY13 DPU forming ~47% of our full-year DPU forecasts. FCT's portfolio assets continued to exhibit resilience. Average occupancy improved to 98.2% as at 31 Mar from 97.2% in the prior quarter, and positive rental reversion of 6.6% was achieved for 1HFY13. We will be speaking to management during the analyst briefing scheduled later in the morning. For now, we keep our S$2.13 fair value and HOLD rating on FCT unchanged. (Kevin Tan) Keppel Land: Diversifying stake in Tanah Merah site Keppel Land (KPLD) announced yesterday that it would join China Vanke (Vanke) in a strategic alliance to develop property in China and Singapore. In addition, Vanke would take a 30% interest in a KPLD's Tanah Merah GLS site for S$135.5m. Recall that KPLD had won this site with a S$434.6m bid last Oct and Vanke's entry price is only marginally above that of KPLD's cost. We believe this price is reasonable and, all considered, expect a neutral market reaction to this transaction. In our view, the potential loss of accretion to KPLD's RNAV from this divestment is limited and mostly offset by the benefits of diversification in an increasingly uncertain domestic residential space. Maintain BUYwith an unchanged fair value estimate of S$4.53. (Eli Lee)

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NEWS HEADLINES - US equities rallied Tuesday, on the back of optimism from a bounce in gold prices, good corporate earnings and positive housing data. - Moody's has cut its outlook for China's credit rating from stable to progressive, citing risk from local government debt and credit growth from shadow banking. - From Jun 24, commuters who exit MRT stations in the city area before 7.45am on weekdays will travel for free. - Grand Banks Yachts is on track to complete five luxury yachts for buyers from Singapore, Japan and Micronesia in FY13 (ending Jun 2013). This marks the highest-ever sales to the region since the 2008-2009 global financial crisis. - The payable consideration by Europtronic Group for the proposed acquisition of Gold Impact is S$160m. - Sabana REIT has established a S$500m Multicurrency Islamic Trust Certificates Issuance Programme.