SG: MARKET PULSE: Ezion, UEL, CapLand, KepLand (19 Jun 2013)

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: OCBC

Price Call: BUY

Target Price: 1.03

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.29

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.53

MARKET PULSE: Ezion, UEL, CapLand, KepLand

19 Jun 2013

KEY IDEA Ezion Holdings: Resilience in the stock price Summary: The recent market sell-down has highlighted the resilience of the stock of Ezion Holdings. YTD, the STI has given up its gains this year, while the FTSE Oil and Gas Index is down about 1.2%. However, investors of Ezion are still sitting on gains of about 35.5%. Possible reasons behind this good performance include 1) good earnings visibility from its secured contracts, 2) limited risk of contract cancellations with its well-diversified and established customer profile, and 3) upside risk as Ezion leverages on its scalable model to continue to expand its presence in various parts of the world. Our fair value estimate of S$2.62 is based on Ezion's existing contracts; contracts secured in the future that impact FY13F and FY14F earnings may be further price catalysts. Maintain BUY. (Low Pei Han) MORE REPORTS United Envirotech: Establishes US$300m MTN programme Summary: United Envirotech Ltd (UEL) has recently announced the establishment of a US$300m MTN (medium-term note) programme, where it intends to use the proceeds to either refinance existing borrowings, make investments/acquisitions, and for general working capital and corporate purposes. According to management, the main rationale for the MTN programme is to get ready its funding to cater for the still-buoyant waste-water treatment industry in China. Note that UEL still has about S$88m of un-utilized proceeds from its convertible bond issue and share placement to KKR. Since we had recently revised our estimates after its FY13 results, we opt not to change anything for now. Hence our fair value remains unchanged at S$1.03 (still based on 13x FY14F EPS). But we do see potential catalyst coming from project wins. Maintain BUY. (Carey Wong) CapitaLand Limited: Acquires mixed Shanghai site Summary: CapitaLand (CAPL) announced yesterday that it has paid RMB1.95b (S$397.5m) for a 70% stake in Shanghai Guang Chuan Property Co. Ltd, which owns a prime site in Hanzhonglu, Zhabei District, Shanghai. The 25.4k sqm site has a total GFA of 110k sqm (105k sqm GFA above ground comprising 75k of office and retail space and 30k sqm residential) and is located within a 15-min drive from the Shanghai CBD. The project is expected to begin construction in 2015 and complete by 2017. The price paid translates to an acquisition cost of RMB25.3k per sqm which we see as a fairly reasonable level for this site. The completion of the acquisition is subject to the approval from PRC authorities and is expected to take place by 2Q14. Maintain BUY on CAPL with an unchanged fair value estimate of S$4.29 (20% discount to RNAV). (Eli Lee) Keppel Land: Secures residential landed site in Shanghai Summary: Keppel Land's (KPLD) announced that it has acquired a 17.5ha residential site in Shanghai's Seshan area for RMB1.33b (S$266m) on which it would develop ~200 landed homes with 250-350 sqm GFA. The site is 20km away from Shanghai Hongqiao International Airport and 32km from the city centre and is KPLD's ninth project in the city of Shanghai. Owners of landed homes on the site would enjoy views of the Sheshan National Forest Park. We take a positive view on this acquisition and estimate that it would accrete 3.5 to 5.2 S-cents to KPLD's RNAV. We would speak further with management later today and, in the meantime, maintain BUY with our fair value estimate unchanged at S$4.53 (25% discount to RNAV). (Eli Lee)

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NEWS HEADLINES - US stocks rallied on Tuesday, with a two-day advance wiping out last week's losses, as Wall Street gave an advance thumbs up to the upcoming Federal Reserve monetary-policy announcement. - Intraco Limited has extended its mandatory cash offer for its listed associated company Dynamic Colours Limited by two weeks. - ST Aerospace, a unit of ST Engineering, announced a string of contract wins yesterday, including a US$28m maintenance deal with Spring Airlines Japan and a 20-year repair license agreement to provide MRO services for US-based UTC Aerospace Systems. - Hengyang Petrochemical Logistics has found a strategic investor in MEGCIF Investments 5 Ltd, which is investing 271.25m yuan (S$54.25m) for a 35% stake in its new subsidiary, Hengyang Holding. - Singapore has contacted Indonesia to express "serious concerns" over the worsening haze crisis, urging Jakarta to name the errant companies involved in illegal forest burning. - Business travel is projected to grow modestly in the coming months, as improved financial market sentiment and moderate expansion in the global economy balance out weak trade growth, a report said.