10 June 2013~ Good Morning Singapore!
Central Execution Team - The Excellence of Execution
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Global Flash: While You Were Sleeping
Source: Marketwatch
Quote for the day : An investment in knowledge pays the best interest.
- BENJAMIN FRANKLIN
Singapore: The Day AheadSINGAPORE DAYBOOK:Softer room rates offset by strong occupancies. Upscale hotel room rates lead with 10% fall over Jan-April [SINGAPORE] After hitting a record high last year, room rates appear to have softened slightly in the first four months of 2013. But the impact is mitigated by strong occupancies.
Preliminary estimates from the Singapore Tourism Board (STB) show that average room rate (ARR) for the period January to April slipped 2.2 per cent year-on-year to $253.70 while revenue per available room (RevPAR) - a performance indicator - was 2.6 per cent lower at $217.80.
However, the average occupancy rate for the four months held firm, edging down just 0.3 per cent to 86 per cent. Total room revenue collected over this period was virtually flat at $940.5 million.
Still, the strong occupancy is helping to keep any sharp fall in RevPAR at bay. A simultaneous drop in both the ARR and occupancy could impact RevPAR more significantly. (Source: The Business Times)
MARKET SCOOP
Rolls-Roycewins Singapore Airlines engine deal
EU regulators okay Barry Callebaut to buy Petra Foods cocoa unit
STX Pan Ocean files for court receivership in Seoul
Singapore's Aaa rating reflects very sound fundamentals: Moody's
Del Monte's shares to be listed in the Philippines on June 10
(Source: The Business Times)
DEUTSCHE BANK says...
CAPITALAND LIMITED | BUY | TP: S$4.43
Deutsche Bank hosted CapitaLand at our dbAccess Asia Conference 2013
Discussions focused on the company's China and Singapore operations, its recent acquisition in Iskandar, and plans for Australand
Sales momentum in China remains firm, with sales rising 3x YoY to 955 units (RMB 1.9bn) (-19% QoQ on seasonality)
The company noted that sales came primarily from its Metropolis, Pinnacle, Paragon, Loft and iPark projects, and plans to have an additional 3500 units launch ready in 2013
Meanwhile, earnings are expected to be boosted by the TOP of 3000 units in 2013 (2077 in 2H13
Moving forward, CapitaLand stated that they will engage local authorities in pursue larger tracts of land in China in landbank acquisitions
The company also reiterated its strategy to focus on 8 cities in order to leverage its platform in cities with the strongest underlying fundamentals
In Singapore, sales momentum also improved, with 544 units sold (S$1.3bn), up from 352 units in 4Q (S$667m) dominated by D'Leedon following recent price cuts
Looking ahead, CapitaLand targets to launch Marine Pt and Bishan St 14 in 2H13 and will continue to bid for well-located sites, and targets 10% market share in Singapore
The company stated that it views its recent Danga Bay acquisition (60-70% of GFA residential, 30-40% of GFA commercial) as an extension of its Singapore strategy, and believes that demand could be boosted by population migration in Malaysia to the Iskandar region, a return to Malaysia from Malaysian expats in Singapore, and finally, Singaporean investors and retirees
CapitaLand also did not rule out pursuing additional acquisitions in Iskandar
Finally the company stated that it is still in the midst of its strategic review for Australand, and will need to balance the decrease in earnings with capital redeployment opportunities and shareholder returns
UOB KAY HIAN says ...
KREUZ HOLDINGS | BUY | TP: S$0.88
We recently met up with Kreuz's management and these are our key takeaways
In 2014, management plans to charter one additional third-party vessel on a long-term contract, which will ease the capacity bottleneck and allow Kreuz to bid for additional contracts
We estimate that the chartered-in vessel could lift earnings by 5-15%
Currently, Kreuz charters in three third-party vessels and owns another three vessels, which are expected to be fully utilised till end-13
In our view, Kreuz is likely to clinch higher-than-expected variation orders, which will more than offset the lower-than-forecasted contract wins that will be announced in 2013
As a result, we have lowered our 2013 contract wins forecast from US$200m to US$135m
Kreuz's end-1Q13 order book stood at US$200m, which will be recognised over 12-18 months
Ytd, we estimate that Kreuz has won contracts totalling US$60m-80m, including smaller contracts which were not announced
Kreuz has an option with a Chinese shipyard to build a second deepwater subsea construction vessel for US$113.65m
In our view, Kreuz is likely to exercise the option in the light of an attractive contract price and buoyant subsea activity
In our view, continued improvement in Kreuz's trade receivables and gearing will drive its share price re-rating
Maintain BUY with a higher target price of S$0.88 (previously S$0.68), pegged to an undemanding 2014F PE of 8.0x (previously 6.5x), which is at a 17% discount to the offshore support vessel owner segment's long term PE mean of 9.6x
We have raised our target PE to reflect Kreuz's consistent execution track record, improved balance sheet position and operating cash flow
OCBC Securities says...
FRASERS COMMERCIAL TRUST | BUY | TP: S$1.60
Frasers Commercial Trust (FCOT) announced that it has successfully exercised its right of redemption in respect of 2.2m Series A Convertible Perpetual Preferred Units (CPPUs)
This is consistent with our view that FCOT may attempt to redeem all the CPPUs in issue as the funding cost is relatively high at 5.5%
A total of 12.2m CPPUs will remain outstanding after the exercise
This, together with the redemption of 157.1m CPPUs in Apr, is likely to provide FCOT with further DPU uplift going forward
We also understand that FCOT has been granted a provisional permission (PP) by URA for the proposed additions and alterations to the existing commercial development at China Square Central and erection of a new hotel block on 18 Cross Street, Singapore earlier this week
The terms and conditions include an additional 16,000 sqm GFA for hotel use, which is equivalent to the PP first granted in Jun 2008 (already lapsed)
According to the 2008 announcement, the space could potentially accommodate a 10-storey hotel tower of ~350 rooms
While FCOT highlighted that it is still in the preliminary stage of exploring all options with regard to the property, we believe FCOT may possibly divest the hotel space or capitalize on its sponsor's capabilities to develop the hotel
Either way, we are positive on the news as FCOT could use the proceeds from a sale to pare down its aggregate leverage or enhance its growth profile through the development (although FCOT has an estimated development capacity restriction of ~S$185m and an equity fund raising may be necessary)
We continue to like FCOT for its growth potential, proactive management approach and compelling P/B of 0.97x
We are keeping our forecasts unchanged but we now tweak our CAPM assumptions to reflect a higher risk-free rate
Maintain BUY with revised fair value of S$1.60 (S$1.66 previously) on FCOT |
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