SG: MARKET PULSE: Raffles Medical, Residential Property (18 Jun 2013)

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 3.42

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.53

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.29

MARKET PULSE: Raffles Medical, Residential Property

18 Jun 2013

KEY IDEA Raffles Medical Group: Upgrade to BUY premised on re-emergence of value Summary: Raffles Medical Group (RMG) is targeting the sale of its freehold seven-storey commercial podium which is located near Orchard Road. This is because it has failed to secure regulatory approval for the change of use of the property to a medical centre. The podium is independently valued at S$98m (as at end 2012), a 6.4% premium to its purchase price in Apr 2011. Meanwhile, management is aiming to improve its operating efficiencies by implementing a new Hospital Information System and Electronics Medical Records System. We believe that value has re-emerged for RMG following its drastic 16.5% share price decline from its recent peak. RMG remains on track to achieve a core EPS CAGR of 12.7% from FY12-14F, while offering FY13F ROE of 14.9%. Rolling forward our valuations to 29x blended FY13/14F EPS, we derive a higher fair value estimate of S$3.42 (previously S$3.22). Upgrade RMG from Hold to BUY. (Wong Teck Ching Andy) MORE REPORTS Singapore Residential Property: Stabilizing sales environment Summary URA reported that a headline total of 1,912 new private homes (including 457 EC units) were sold in May 13, which was up 2.4% MoM and down 7.0% YoY. The majority of sales (49.8% of total) continues to fall in the mass-market segment (OCR). In the mid-tier (RCR) space, there was a significant 28.1% MoM uptick in sales. Key RCR launches include Corals at Keppel Bay (366 total units, Keppel Bay Drive) 132 units sold at S$2,150 psf, and KAP Residences (142 total units, King Albert Park) 105 units sold at S$1,839 psf. We see FY13 primary sales slowing down to a rate of 16k-18k versus 22k units in FY12, pointing at a less frothy albeit still healthy environment. In view of this, the risks of incremental property curbs going forward appear more diminished, in our view. We have a NEUTRAL rating on the residential property sector and prefer developers with strong balance sheets and diversified exposure. Our top picks are CapitaLand [BUY, S$4.29], Keppel Land [BUY, S$4.53] and CapitaMalls Asia [BUY, S$2.55]. (Eli Lee)

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NEWS HEADLINES - US stocks surged Monday, with the Dow extending their triple-digit moves into a fifth session, as investors latched onto any clues ahead of Wednesday's monetary-policy decision by the FOMC. - Singapore's non-oil domestic exports (NODX) fell 4.6% YoY in May, extending the 1% dip in Apr. - Roxy-Pacific Holdings has acquired the freehold Yi Mei Garden in Tampines Road through a collective sale for $136m. - Singapore Airlines has posted a lower passenger load factor of 74.6% for May, which was down 1.2ppt compared to the previous year. - Cityneon Holdings Ltd said it has clinched S$5.7m worth of contracts for the Formula 1 Singapore Grand Prix. - Banks say that a move to set financial benchmarks based on actual trades will have zero financial impact on customers. - First Ship Lease Trust's B+/negative outlook rating has been unaffected by a counterparty default, said Standard & Poor's Rating Services.