SG: MARKET PULSE: Sembcorp Marine, FCT, KSH, TEE (3 Apr 2013)

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.64

Stock Name: CapitaMall
Company Name: CAPITAMALL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 2.32

Stock Name: KSH Hldg
Company Name: KSH HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.62

Stock Name: Tee Intl
Company Name: TEE INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.30

MARKET PULSE: Sembcorp Marine, FCT, KSH, TEE

3 Apr 2013

KEY IDEA Sembcorp Marine: More prudent on margins Sembcorp Marine (SMM) is currently building a 82.5ha yard in Brazil to undertake drillship construction, amongst others. Should inflation in Brazil continue to be unrelenting, SMM may face further margin pressures from labour costs, especially since there is already a shortage of skilled labour in the country. Over the longer term, however, we believe that SMM's foray into the drillship business puts it in good stead to secure more drillship orders, diversifying its product range. In the shorter term, however, we prefer to be more prudent on the group's operating margin assumptions, and lower these to 12.1% and 12.3% for FY13F and FY14, respectively (2012: 12.5%). As such, our SOTP-based fair value estimate slips from S$5.84 to S$5.64. Maintain BUY. (Low Pei Han) MORE REPORTS Frasers Centrepoint Trust: Downgrade to HOLD - fair value hit Frasers Centrepoint Trust (FCT) has enjoyed a good run-up in its unit price, clocking a 7.0% return YTD and 40.8% return YoY. This compares significantly to the 5.7% YTD and 31.4% YoY increase seen by the FTSE ST REIT Index. Now trading near its historical high and our fair value, FCT is the most expensive (P/B of 1.40x) when compared to its local retail peers (1.18x) and the S-REITs sector average (1.17x). As such, we believe that most of the good news has been priced in. While the asset injection of Changi City Point into FCT's portfolio may possibly be a catalyst to its unit price and DPU growth, the timeline is uncertain as the regulatory procedures for the strata division into its retail, business park and hospitality components is a lengthy process. In view of the limited upside potential in the near term, we now downgrade FCT from Buy to HOLDon valuation grounds. We recommend switching FCT to CapitaMall Trust [BUY, S$2.32 FV] as a cheaper alternative to blue-chip local retail play with exposure to equally resilient suburban portfolio assets. (Kevin Tan) KSH Holdings: Awarded S$60m JTC construction contract KSH announced yesterday that it was awarded a S$60m construction contract by Jurong Town Corporation ("JTC") for a district cooling system plant at Ayer Rajah Ave. We understand management wanted to diversify their condominium-heavy construction book with a public project, and gross margins continue to exceed a 10% hurdle rate. In 2013 to date, order book replenishment now cumulates to S$202m - tracking somewhat above forecast and exceeding the S$161m total last year. The order book now stands at S$489m. Given its momentum, we are reviewing our valuation of KSH's construction segment - currently pegged at 4 times FY13E earnings versus 5-7 times seen at peers. We also see upcoming launches at key property projects (Hong Leong Gardens, Seletar Gardens and King Albert Park) to be potential catalysts ahead. We will speak further with management later today and, in the meantime, reiterate BUY while our fair value of S$0.62 is under review. (Eli Lee) TEE International: Joint bid for Myanmar airport project TEE International, Yongnam Holdings and Samwoh Corp have joined forces to participate in a consortium with JGC Corp and a unit of Changi Airport International to tender for the construction and operation of Myanmar's new international airport. TEE and Samwoh will each take a 25% stake in a special purpose vehicle (SPV) that will in turn supply up to 60% of the project consortium's equity. Yongnam will own 50% of the SPV and represent it in all negotiations involving the project. We are neutral on the announcement, pending further updates, and we maintain our fair value estimate of S$0.30 and HOLD rating for TEE. (Conrad Tan)

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

NEWS HEADLINES - The Dow and S&P 500 reached record closing highs, as health insurers gained on Medicare-reimbursement news and US factory orders climbed in Feb. - WE Holdings proposes a rights cum warrants issue, which could raise S$10.10m under maximum subscription, to strengthen its balance sheet and fund expansion into resources businesses in Myanmar. - Kreuz Holdings has secured a subsea installation contract worth ~US$25.0m from a third-party client. Estimated completion is by the fourth quarter of this year. - Boustead Singapore has divested its entire shareholding in OM Holdings Limited, an ASX-listed manganese mining company, for a total sales consideration of AU$18.5m. - Radiance Investment Pte. Ltd has agreed to subscribe for an aggregate of 51m new ordinary shares in the capital of Pacific Healthcare Holdings Ltd at the price of S$0.0828 per share. - ISDN Holdings has entered into a non-legally binding MOU with Tun Thwin Mining Co., Ltd to explore joint partnerships in energy opportunities in Myanmar.