25 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 : A hospital bed is a parked taxi with the meter running.
- GROUCHO MARX
Singapore: The Day AheadSINGAPORE DAYBOOK:Falling car prices keep inflation under control. But core inflation, which strips away private transport costs, surpasses headline inflation [SINGAPORE] Singapore's core inflation outdid the headline inflation rate in May - a rare sight - as a fall in car prices last month was offset by steeper increases in food prices and services fees.
The overall consumer price index (CPI) rose to 1.6 per cent year-on-year in May, after the inflation rate plunged to a three-year low of 1.5 per cent in April.
Just shy of the 1.7 per cent consensus forecast May's headline inflation rate was kept low by a fall in car prices which sent private road transport costs tumbling 3.7 per cent year-on-year - its first decline since 2009.
This did not surprise forecasters, since lower COE premiums in April were expected to feed into May's inflation with a lag. Car dealers had also adjusted prices after car loan curbs and a new tiered additional registration fee on vehicles were introduced earlier this year. (Source: The Business Times)
MARKET SCOOP
OKP secures S$15m PUB contract
Keong Hong gets S$161.9m contract
Singapore, Malaysia face economic hit from prolonged smog
Auric offers to buy rest of Food Junction at S$0.255/shr
Sime Darby denies fire hotspots responsibility
Secondary listing for New Britain Palm Oil in the works: The Edge
New guidelines for job flexibility in service sector kick in July 1
Fitch rates UOB's offshore RMB notes 'AA-'
Gallant Venture offers Rp5,426/shr for rest of IMAS
(Source: The Business Times)
UOB KAY HIAN says...
CAPITALAND LTD | BUY | TP: S$4.45
We see good value emerging in CapitaLand, which has been sold down 32% (from February high of S$4.03)
The pace of the selldown is worse than any of the S-REITs and is among the worst for developers under our coverage
Key concerns for CapitaLand include a slowdown in China and rising interest rates, which could deter homebuying
The finance cost for developers is a small component of the overall development cost (<10%)
As home-buying sentiment improves, developers are usually quick to pass on the cost to end-homebuyers and built in the scenario in their land acquisition bids
CapitaLand has a healthy average debt maturity of 3.6x with effective interest rates for bank borrowings ranging from 0.66% to 17% and effective interest rates for debt securities ranging from 0.66% to 8.78%
CapitaLand is trading at an attractive 41% discount to its RNAV and a 30% discount to its long-term P/B value of 1.2x (vs 0.84 currently)
CapitaLand recently acquired a 99-year leasehold plot in Coronation Road for S$366m, or $908.17psf ppr
The 403,007sf site is zoned for landed residential housing.
CapitaLand is looking to build a mix of semi-detached and bungalows on the site
Although CapitaLand's bid is 17% higher than the next highest bid (total 12 bids) of S$777psf from Far East Organization, the limited availability of good landed sites, together with its premier location in District 10 near the Farrer Road MRT station and amenities such as Coronation Plaza, will ensure there is good interest for the project
We estimate breakeven cost at S$1,400-1,500psf and selling price expectations from S$1,700psf
We estimate that the acquisition could add about S$95m in pretax profits and result in a RNAV accretion of 2 S cents (0.3%) a share
Maintain BUY, raised target price of S$4.45 (from S$4.41), pegged at 15% discount to its raised RNAV of S$5.23/share
OCBC Securities says ...
VENTURE CORPORATION | HOLD | TP: S$7.37
Our recent conversation with Venture Corp (VMS) highlighted that sentiment among its customers has largely remained cautious given the still uncertain macroeconomic conditions
Manufacturing data emanating from China has also illustrated sluggishness, with the latest China HSBC Manufacturing June PMI flash estimate falling to a nine-month low of 48.3
Singapore's electronics NODX also disappointed, slipping 13.2% YoY in May, representing a tenth consecutive month of YoY decline and was below the street's 10.5% median forecast
We now expect VMS's 2H13 recovery strength to be weaker than our previous expectations in light of the aforementioned factors
Hence, we see the need to pare our FY13/14F revenue forecasts by 5.4/1.6%, even as we take into account the recent appreciation of the USD vis-à-vis the SGD
Hence, we see the need to pare our FY13/14F revenue forecasts by 5.4/1.6%, even as we take into account the recent appreciation of the USD vis-à-vis the SGD
Our FY13/14F PATMI estimates are lowered by 7.8/6.6%, respectively
VMS's strategy in current uncertain times is to continue its acquisition drive for new customers and improve its product and service quality as a means of differentiating itself from its competitors
This also involves a targeted approach to increasing its market share with existing customers given its strong design and engineering capabilities
This would position the group for a future uplift in orders when the economic environment improves on a firmer footing, in our view
Although VMS's share price has dipped 11.5% since its disappointing 1Q13 results, we prefer to wait for clearer signs of a rebound in the global economic conditions before turning more positive on the stock
Maintain HOLD with a lower fair value estimate of S$7.37 (previously S$8.00) as a result of our reduced forecasts
CIMB Securities says...
CHINA MINZHONG FOOD | OUTPERFORM | TP: S$1.27
Minzhong's investor relations manager, Dave Tan, participated in CIMB's annual Asia Pacific conference in Kuala Lumpur on 19-20 June
The key takeaways from his meeting with investors are: 1) it will be the cultivation business rather than the processed business that will drive earnings
And to capitalize on this, it will be ramping up industrialised farming facilities
Management is targeting to open three new facilities in Tianjin, Jiangsu and Sichuan
Supply contracts for the processed business can be achieved within six months but the potential JV to build cultivation facilities in Indonesia will take time
The board is seriously considering paying dividends in FY13 but nothing is firm yet
It is possible that Minzhong will look to match Indofood's 40% payout over time
FY13 operating cash flow is guided to be about Rmb700m-800m
The key re-rating catalystswill be Indofood getting a board seat and dividends
These two events should ease corporate governance concerns
Although free cash flow in FY13 will be low given management guidance that free cash flow will hit a below-expectation Rmb1bn,we think dividends are still possible because of Indofood's Rmb455m cash injection
A 10%payout would translate into a yield of 2.2%
We raise out target price to a 10% premium to sector average (4.5x CY14 P/E) in anticipation of a re-rating as corporate governance concern eases
Maintain Outperform with dividends as a key re-rating catalyst |
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