18 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 : Any man who reads too much and uses his own brain too little falls into lazy habits of thinking.
- ALBERT EINSTEIN
Singapore: The Day Ahead
SINGAPORE DAYBOOK:Asian markets relatively calm ahead of key FOMC meet. But volatility could return if Fed sends ambiguous signals about its QE policy, say analysts. ASIAN financial markets enjoyed a day of relative stability yesterday ahead of the critical meeting today and tomorrow of the US Federal Reserve Open Markets Committee (FOMC), which investors hope will calm turbulence caused by uncertainty over the future conduct of US monetary policy.
A growing consensus that Fed chairman Ben Bernanke will signal at the meeting that it is too early yet to decide upon the timing of "tapering" off monetary easing - despite his recent hints that this could begin in coming months - brought some poise back to equity, bond and currency markets.
In Tokyo, the Nikkei 225 stock average climbed back out of technical bear market territory by rising 2.7 per cent or 346.60 points to 13,033.12, while the yen sank back below the 95 to the dollar level and government bonds enjoyed a reprieve from volatility.
Hong Kong's Hang Seng index, meanwhile, added 1.3 per cent to 21,251.17, while Australia's S&P/ASX 200 advanced 0.3 per cent to 4,905.90. South Korea's Kospi shed 0.1 per cent to 1,887.08. Benchmark indices in China, Singapore and Taiwan also rose while Thailand's SET fell. (Source: The Business Times)
MARKET SCOOP
Developers sold 1,455 private homes excluding ECs in May
Eutelsat, KKR said to place bids for SingTel's Australia unit
Yoma's Yangon land buy hits delay
Govt to make more data available to public
Govt releases five sites under GLS
Singapore punishes 20 banks in benchmark rate review
S'pore May non-oil exports fall 4.6%
CosmoSteel explores Mynamar tie-up
(Source: The Business Times)
UOB KAY HIAN says...
STARHILL GLOBAL REIT | BUY | TP: S$1.06
Starhill Global REIT (SGREIT) announced that its sponsors, YTL Hotels and Properties and YTL Corporation, will be converting 152.7m (88% of outstanding CPUs) of convertible preference units (CPUs)
The CPUs were issued in Jun-2010 as part consideration for SGREIT's acquisition of Starhill Gallery and Lot 10 properties and offered a distribution yield of 5.65% p.a.
The CPUs are convertible at S$0.7266 per unit, at a 30% premium to VWAP when issued, and a 17% discount to current share prices
Following the conversion on 5 Jul 2013, the total number of units will increase by 210m (10.8%) to 2,153m units from 1,943m units while the number of CPUs will decrease 88% to 20.3m units from 173.1m units
Net impact of the conversion, assuming it taken place on 1 Jan 2012, would be a 1.1% dilution of DPU in 2012 and a 10.3% drop in NAV to S$0.87 per unit
The impact to DPU is substantially offset as the CPUs were offering a high distribution yield of 5.65%, while the substantial conversion removes a large equity overhang
This is in-line with our projections as the CPUs were due to be converted between June 2013 and June 2017
We have a BUY recommendation on SGREIT with a target price of S$1.06, based on the dividend discount model (required rate of return: 6.5%, terminal growth: 2.0%)
DMG OSK Securities says ...
NERA TELECOMMUNICATIONS LTD | BUY | TP: S$0.79
NeraTel (BUY, SGD: 0.79) announced today that it has partnered with Juniper Networks, a leading network equipment provider worldwide, in delivering the software-defined network (SDN) solution in Southeast Asia
In a nut shell, the SDN is a new generation of networking model which i) provide an open infrastructure for data centre and cloud networks (as opposed to the traditional network infrastructure) and ii) automate the infrastructure management, driving down operating costs for telecommunication and internet services providers
The news bodes well with NeraTel's outlook, strengthening its position as a premium solution provider in the network equipment space (fending off competitors who focus on cost-competitiveness)
With a 60-year brand name and track record, NeraTel is well positioned to tap on the robust Telco spending outlook. The counter remains the top pick for our Singapore tech coverage
CIMB Securities says...
STARHILL GLOBAL REIT | NEUTRAL | TP: S$0.93
Starhill has received notices from YTL Hotels & Properties and YTL Corporation, both under its sponsor, the YTL Group, that each intends to exercise its rights to convert in aggregate 153m convertible preferred units (CPUs, out of a total 173m issued in 2010) into new units of SGREIT on 5 July 2013, at a conversion price of S$0.73/unit
This will raise the group's stake in SGREIT from 29% to 36%
The CPUs were issued by SGREIT in June 2010 to fund the acquisition of Starhill Gallery and Lot 10 in Malaysia
The conversion price of S$0.73 is 17% below the closing price of S$0.88 on 14 June
Based on our estimates, the dilution from the conversion is approximately 1-3% for FY13-15 DPUs
As a result of the enlarged share base, proforma NAV per unit will also drop by 10% post-CPU conversion to about S$0.87/unit
We view this event as a marginal negative given the dilution and a lost opportunity of a potentially accretive redemption by SGREIT
That said, dilution is fairly minor, with some marginal positives stemming from a higher stake to be held by the sponsor post-CPU conversion
Our DDM-based target price drops marginally to S$0.93 (discount rate: 7.6%)
We see potential re-rating catalysts in asset enhancement initiatives and accretive acquisitions
We remain Neutral on SGREIT as we see positives from rental reversions largely priced in, with the stock trading at 1.0x proforma P/BV, above its 5-year historical average of 0.7x
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