SG: MARKET PULSE: Starhub, Fortune REIT, Hyflux, Marco Polo Marine (10 May 2013)

Stock Name: StarHub
Company Name: STARHUB LTD

Research House: OCBC

Price Call: SELL

Target Price: 4.00

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: BUY

Target Price: 1.44

Stock Name: Marco Polo
Company Name: MARCO POLO MARINE LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.56

MARKET PULSE: Starhub, Fortune REIT, Hyflux, Marco Polo Marine

10 May 2013

KEY IDEA StarHub Ltd: Downgrade to SELL - pricey now StarHub Ltd posted 1Q13 revenue of S$580.1m, down 2% YoY and 11% QoQ, but still met 23% of our full-year forecast. Net profit grew 3% YoY and 4% QoQ to S$91.2m, meeting 25% of our FY13 forecast. And as guided, StarHub declared a quarterly dividend of S$0.05/share, payable on 30 May 2013. For 2013, StarHub now expects to see low single-digit revenue growth, versus single-digit growth guidance previously. Management says it is being more cautious in view of the 2% drop in revenue in 1Q13. Otherwise, it has kept everything else unchanged. Stock price has outperformed not only its peers but also the STI. While part of the run-up could be driven by investors searching for yield, current valuation looks pricey; yield has also fallen to 4.2%. A more "risk on" approach could also see investors switching out of defensive stocks. As such, we downgrade our call from Hold to SELL, with an unchanged DCF-based fair value of S$4.00. (Carey Wong) MORE REPORTS Fortune REIT: 1Q13 exceeds expectations Fortune REIT reported excellent results for 1Q13. Revenue and net property income climbed 16.3% YoY and 17.6% YoY to HK$301.4m and HK$217.9M respectively. Occupancy rose to 98.6%, the highest level in over two years, with good portfolio-wide operational statistics and a fast recovery after AEI. Average passing rents grew by 10.0% YoY to a new high of HK$32.9 sq ft. Due to a strong leasing market, rental reversions were at 19.5%, higher than the mid-teen percentages that management had guided. While 2Q/3Q may see anchor tenants renewing leases with lower percentages, we think that revenue and net property income are likely to grow on a QoQ basis. DPU of 9.0 HK cents formed 27% of our initial FY13 estimate and 26% of the street's FY13 consensus estimate. Raising revenue assumptions and lowering interest cost assumptions, we lift our fair value to HK$8.64 from HK$7.28 and we maintain a BUY rating on FRT. It is trading at a still-attractive P/B of 0.9x. (Sarah Ong) Hyflux: Slow start to 2013 as expected Hyflux Ltd reported its 1Q13 results last night, with revenue slipping 8% YoY and 38% QoQ to S$124.5m, or around 17% of our full-year forecast; net profit rose 5% YoY (though down 62% QoQ) to S$8.0m, or 10.2% of our FY13 estimate. However, we are not perturbed by the seemingly slow start as 1Q is traditionally their weakest quarter. Going forward, Hyflux remains fairly optimistic about its prospects; and will actively pursue opportunities in Asia and MENA. As results are in line, we opt to keep our estimates unchanged. Maintain HOLD with an unchanged S$1.44 fair value. (Carey Wong) Marco Polo Marine: Drop in shipbuilding activity Marco Polo Marine (MPM) reported a 31% YoY fall in revenue to S$21.3m but a 121% rise in net profit to S$9.3m in 2QFY13, such that 1HFY13 net profit accounted for 58% of our full year estimate. Excluding an exceptional gain of S$5.7m, core net profit was about S$3.7m, slightly below our expectations. The lower revenue was mainly due to lower contributions from the shipbuilding and repair segment with fewer third-part new-built contracts. Gross margin was 42% in 2QFY13, compared to 27% in 2QFY12 and 39% in 1QFY13. Pending an analysts' briefing later, we put our Buy rating and fair value estimate of S$0.56 under review. (Low Pei Han)

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

NEWS HEADLINES - UOB-Kay Hian posted a 37.8% YoY jump in 1Q net profit to S$31.9m as improved market sentiment and "penny fever" fuelled exceptional stock market activity. - Parkson Retail Asia's 3Q13 net profit inched up 1.3% YoY to S$9.78m, helped by higher sales. - Ryobi Kiso Holdings Ltd made a S$271,000 loss in 3Q13, compared with a net profit of S$695,000 a year ago, due to a drop in revenue and higher administrative expenses. - Cordlife Group Limited, in partnership with Thomson Medical Pte Ltd, announced the launch of the first umbilical cord-tissue banking service yesterday. - An indirect subsidiary of Falcon Energy Group, Longzhu Oilfield Services, has exercised options to acquire four properties at International Plaza for S$16.6m.