SG: MARKET PULSE: Telecom Sector, Global Palm, Keppel Corp, ComfortDelGro (21 May 2013)

Stock Name: Global Palm
Company Name: GLOBAL PALM RESOURCES HLGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.17

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.68

Stock Name: ComfortDelGro
Company Name: COMFORTDELGRO CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.95

MARKET PULSE: Telecom Sector, Global Palm, Keppel Corp, ComfortDelGro

21 May 2013

KEY IDEA Telecom Sector: Downgrade to NEUTRAL All three telcos reported 1QCY13 results that came in within our expectations, with all of them meeting between 25% and 27% of our full-year forecasts. Going forward, other than M1 expecting moderate earnings growth, the other two are guiding for a pretty muted showing this year, with SingTel expecting stable group revenue while StarHub has eased its guidance to low single-digit revenue growth from single-digit previously. Besides the run-up in the telcos' share prices YTD, which makes the yields less attractive, a more "risk on" approach could see investors switch out of defensive stocks. As such, we downgrade our rating from Overweight to NEUTRAL on the sector. (Carey Wong) MORE REPORTS Global Palm: HOLD; No catalysts yet Global Palm Resources (GPR) posted 1Q13 revenue of IDR66.8b, down 33% YoY and 4% QoQ, while reported net profit tumbled 36% YoY to IDR8.3b, meeting 29% and 25% of our full-year revenue and net profit estimates, respectively. While GPR has maintained its new planting target of 300-400ha for this year, it has made a very slow start, planting just 5ha in 1Q13 (versus 166ha in 1Q12) - the lowest new planting since 1Q11. Meanwhile, the outlook also remains muted, given the still-sluggish CPO prices and an impending increase in labour cost (with the upward revision in Indonesia's minimum wages this year). Until we see fresh progress in its land negotiation and/or acquisition of either new or existing plantations, we opt to keep our HOLD rating and S$0.17 fair value (based on 10x FY13F EPS). (Carey Wong) Keppel Corporation: Sells 6.7% of Keppel REIT at S$1.555/unit Summary: Keppel Corporation (KEP) announced that its wholly owned subsidiary, Keppel Real Estate Investment Pte Ltd, has entered into a sale and purchase agreement with Goldman Sachs (the placement agent) for the sale of 180m units of Keppel REIT (6.7% of total issued units of KREIT) for S$1.555/unit. The aggregate cash consideration of S$279.9m took into account KREIT's last transacted price of S$1.605/unit as at 20 May 2013 and the 30-day VWAP of S$1.5129. This is at a premium to the book value and NTA/share of S$1.31 and S$1.28, respectively, as at 31 Mar 2013. Upon completion of the sale (expected 27 May), KEP's interest in KREIT remains substantial (from 58.2% to 51.5%). Recall that KEP earlier rewarded shareholders with dividend in specie of KREIT units; announced on 24 Jan 2013 when KREIT's share price was S$1.37. Maintain BUYon KEP with S$12.68 fair value estimate. (Low Pei Han) ComfortDelGro - Addition to Australian operations ComfortDelGro announced yesterday that it will acquire a privately-held bus company, Driver Group Pty Ltd, for A$22m. This acquisition will add five long-term, metropolitan bus routes in the Eastern suburbs of Melbourne to ComfortDelgro's Australian operations in Victoria, and increase its fleet to 420 buses from 378. Assuming regulatory approval, this deal will be completed in Jul 2013. While the deal is relatively smaller compared to its previous acquisitions in Australia and will not have a material impact on its earnings in FY13, it demonstrates management's intent to actively grow its overseas operations and we view this positively. However, valuations for ComfortDelgro remain expensive in our view and we maintain HOLD on the counter with an unchanged fair value of S$1.95. (Lim Siyi)

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NEWS HEADLINES - Singapore's domestic wholesale trade fell 7.3% YoY in 1Q. This was mainly attributed to a domestic decline in domestic sales of petroleum & petroleum products. - Singapore has maintained its stronghold as Asia's Top Convention City for the 11th consecutive year, according to the latest global rankings released by the International Congress and Convention Association (ICCA) - Plastoform Holdings has exited the SGX watch-list with effect from 21 May 2013. - Goldman Sachs launched on Monday a sale of about US$1.1b worth of Hong Kong-traded shares in ICBC, offering to sell its entire remaining stake in the world's biggest bank. - Morgan Stanley said on Monday it has signed an agreement to sell its Indian wealth management unit to Standard Chartered. - Brazil will grow less than 3% this year according to the latest forecast released on Monday.