SG: MARKET PULSE: Healthcare Sector, Frasers Commercial Trust (7 Jun 2013)

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.

Research House: OCBC

Price Call: BUY

Target Price: 1.60

Stock Name: Frasers Comm
Company Name: FRASERS COMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.60

MARKET PULSE: Healthcare Sector, Frasers Commercial Trust

7 Jun 2013

KEY IDEA Healthcare Sector: Growth traction still healthy Companies within the healthcare sector posted relatively decent results during the recently concluded 1QCY13 reporting period. Under our coverage, Biosensors International Group's (BIG) core earnings growth of 4.1% YoY beat our forecasts, while that of Raffles Medical Group came in within our expectations (+16.0% YoY). Looking ahead, healthcare companies have largely embarked on expansionary plans to capitalise on the still robust industry fundamentals. In our opinion, these plans augur well for the medium-to-long term, but there will likely be some initial start-up costs which may impact near-term margins. We maintain our OVERWEIGHTrating on the healthcare sector. BIG [BUY; FV: S$1.60] remains our top pick, given its strong product pipeline, attractive valuations (FY14F PER of 13.6x is slightly more than 0.5 SD below its 3-year average forward PER) and decision to enhance shareholder value by recently declaring its first ever dividend since IPO. (Wong Teck Ching Andy) MORE REPORTS Frasers Commercial Trust: Development opportunity resurfaced 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, 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. 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. 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. (Kevin Tan)

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NEWS HEADLINES - US stocks ended higher on Thursday, snapping a two-session losing streak, as investors eagerly awaited Friday's May employment report for clues about monetary policy. - Moody's Investors Service said that Singapore's Aaa sovereign rating and stable outlook reflect the country's very high economic, institutional, and government financial strengths, and its low susceptibility to risks from financial, economic, and political events. - Singapore is the ninth most expensive city in Asia for expatriates, according to the latest cost of living survey by ECA International. - AIMS AMP Capital Industrial REIT will further develop a property at 20 Gul Way at a cost of about S$77.2m to increase its value and boost returns to unitholders. - Ramba Energy's major shareholder Edward Seky Soeryadjaya has been approached by a potential buyer keen on a 51% stake in Ramba.