SG: Market Pulse: Starhill Global, Hyflux, Yoma (27 Jun 2013)

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.95

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.30

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.87

MARKET PULSE: Starhill Global, Hyflux, Yoma

27 Jun 2013

KEY IDEA Starhill Global REIT: Prospects remain bright Summary: Starhill Global REIT (SGREIT) announced that its convertible preferred unit (CPU) holders have notified the REIT manager of their intention to exercise their rights to convert a total of 152.7m CPUs into new units on 5 Jul. With the conversion, we estimate that the distribution to CPU holders will drop from an average of S$2.4m to just S$0.3m per quarter, leaving a larger distributable amount available to unitholders. However, as the unit base is expected to increase by 10.8% upon the conversion, the net impact is likely a marginal dilution of ~1.1% to pro forma FY12 DPU, according to management. We now factor in the impending CPU conversion into our forecasts. We also update our CAPM assumptions to incorporate the continued increase in risk-free rate. As a result, our fair value eases from S$1.00 to S$0.95. Nevertheless, we continue to like SGREIT for its strong growth potential, robust fundamentals and attractive valuations. Maintain BUY. (Kevin Tan) MORE REPORTS Hyflux: Value is starting to emerge Summary: Hyflux Ltd recently saw a massive correction in its share price, plunging nearly 13.1% from a high of S$1.37 on 10 Jun to a low of S$1.19 on 24 Jun; it was down 6.1% on 24 Jun itself, no doubt spooked by recent reports of credit tightening in the mainland. But these worries - while valid - are overwrought. We believe that Hyflux should still have access to funds from overseas, and this should put the company on a better footing against local Chinese companies when it comes to bidding for projects. Nevertheless, as the market appears to be taking a more "risk off" approach, we now use a lower 20x peg (versus 22x previously) against our FY13F EPS, which results in our fair value easing from S$1.44 to S$1.30. However, value is starting to emerge, especially closer to its recent S$1.19 low; hence we maintain our HOLD rating on the stock. (Carey Wong) Yoma Strategic Holdings: Telco license award possibly delayed Summary: Yoma has requested for a trading halt last night pending the expected award of two telecommunications licenses today by the Myanmar authorities. However, latest news reports that the parliament had on Wednesday voted to delay the award until a new telecommunications law governing the industry is passed. This is due to concerns that the "industry risked being monopolized" and it is yet unclear if a proposed new rule - that only foreign companies with a local JV partners would be granted licenses - would be adopted. Given these latest updates, we believe that the license award could possibly be delayed as the decision from the parliament is purported to override that of the Telecommunications Operator Tender Evaluation and Selection Committee, which is overseeing the tender process. Maintain HOLD with a fair value estimate of S$0.87. (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - Kevin Rudd returned as Australian PM yesterday, executing a stunning party room coup on Julia Gillard with less than three months out from a general election. - Tuan Sing Holdings has entered into a sale and purchase agreement with Robinson Point (Cayman) Limited to acquire Robinson Point for S$348.9m. - Keppel Reit has acquired a 50% stake in a freehold office building, 8 Exhibition Street in Australia, for A$160.2m (S$192.4m). - Sin Heng Heavy Machinery announced that it plans to raise about S$18.4m through a one-for-four rights issue priced at 16 cents apiece. - Mirach Energy is proposing to raise some S$18.1m in net proceeds from a rights issue of 152m new shares and another S$36m via a convertible loan. - Singapore's industrial production grew 2.1% YoY in May, above the market's expectations of just 0.1%, driven by a 22.8% jump in pharmaceutical output.