SG: MARKET PULSE: CapitaLand, Karin Tech (11 Jun 2013)

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.29

MARKET PULSE: CapitaLand, Karin Tech

11 Jun 2013

KEY IDEA CapitaLand Limited: Expanding serviced residence presence Summary: CapitaLand (CAPL) announced yesterday that it has secured a contract to manage a serviced residence in Manila, Philippines. We note this is the sixth contract acquired over the last month by its serviced residence unit, the Ascott Ltd (Ascott). We note Ascott has been actively expanding its presence (an impressive 13% CAGR of units owned/managed since 2000) and is the world's largest international owner-operator with 31,770 units in 78 cities as at end 1Q13. We see this continued growth extending its competitive edge in terms of scale and branding and, with about S$0.9b of assets under development (on an effective stake basis), it enjoys a good pipeline for capital recycling ahead. We continue to favor CAPL for its diversified real estate portfolio across asset classes, its strong balance sheet and management focus on improving shareholder ROE. Maintain BUY with an unchanged fair value estimate of S$4.29 (20% discount to RNAV). (Eli Lee) MORE REPORTS Karin Technology: Dropping coverage Summary: Our recent conversation with Karin Technology's (Karin) management revealed that its Components Distribution business has continued to pick up momentum. This is due to the proliferation of lower-end smartphones in China, resulting in stronger distribution volume of connectors used in these smartphones for Karin. Management is also focusing on growing its higher-margin IT Infrastructure segment. This has been boosted by robust demand for network security solutions and enterprise software products. Meanwhile, we expect Karin's Consumer Electronics Products segment to remain as its largest revenue contributor, as Apple is still one of the most dominant players within the mobile devices space despite growing concerns over slowing iPhone sales. While we like Karin's solid dividends payout track record as a means of rewarding its shareholders, we are CEASING COVERAGE on the stock due to a reallocation of resources and a lack of trading liquidity in its shares. (Wong Teck Ching Andy)

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