OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: OUE Ltd
Company Name: OVERSEAS UNION ENTERPRISE LTD

Research House: UOB KayHian

Price Call: BUY

Target Price: 3.63

Stock Name: Goodpack
Company Name: GOODPACK LIMITED

Research House: Credit Suisse

Price Call: BUY

Target Price: 1.67

Market Compass

12 July 2013~ Good Morning Singapore!

Singapore Idea Snippets:

12 July 2013~ Good Morning Singapore! Central Execution Team - The Excellence of Execution This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome. Global Flash: While You Were Sleeping Source: Marketwatch Quote for the day :If you want to make peace with your enemy, you have to work with your enemy. Then he becomes your partner. - NELSON MANDELA Singapore: The Day Ahead SINGAPORE DAYBOOK : Global stocks rise as Bernanke sticks to QE [LONDON] Global stocks rose yesterday after Federal Reserve chairman Ben Bernanke promised to keep supporting the US economy. Mr Bernanke said that the US needs "highly accommodative monetary policy" - or low interest rates - "for the foreseeable future". That reassured investors who were dismayed by Mr Bernanke's comments last month that the Fed would likely slow its bond purchases later this year and end them around mid-2014 if the economy strengthens. Critics said that the Fed bungled its communications strategy. The Fed has been buying US$85 billion of financial assets a month to keep interest rates low and encourage borrowing and spending. That stimulus has driven global stocks higher, so the prospect of reducing it caused market volatility in recent weeks. "In one short and sweet statement, Federal Reserve chairman Bernanke has flicked a switch on the markets," said strategist Evan Lucas of Australia's IG Markets in a report. (Source: The Business Times) MARKET SCOOP Triyards Q3 profit down 55% to US$7.55m Vard pushed into losses by Brazil ops in Q2 Opening of SNB's Singapore branch signals importance of Asian market: MAS Genting Singapore breaks ground on new hotel in Jurong Smart's taxi service operator licence will not be renewed: LTA HLF to sponsor more SMEs for Catalist listing SCEinks S$8.8m deal with Mauritius Mencastsecures two offshore services contracts from Keppel U of Chicago Booth School moves to HK (Source: The Business Times) UOB KAY HIAN says... OVERSEAS UNION ENTERPRISE | BUY | TP: S$3.63 Overseas Union Enterprise (OUE) has lodged its preliminary prospectus for OUE Hospitality Trust (OUEHT) OUEHT will be offering 434.6m new units to public and institutional investors at S$0.88-S$0.90 per unit to raise S$382m-452m, while a further 247.2m units will be offered to cornerstone investors to raise S$218m-223m The total amount of funds raised will range from S$600m-675m Cornerstone investors include Credit Suisse (Private Banking and Wealth Management), Goldhill Group, Gordon Tang, Lucille Holdings and Splendid Asia Macro Fund Lead managers for the offering include Credit Suisse, Goldman Sachs and Standard Chartered, with co-leads Bank of America Merrill Lynch, Deutsche Bank and OCBC Figures from the preliminary OUEHT prospectus indicate that OUE will be retaining a larger stake of between 42.7-47.9% (depending on offering price and whether the overallotment option of 68.2m units is exercised) in OUEHT as opposed to its earlier intentions to retain a 30% stake Special dividend still substantial with a 5.0-8.3% yield based on the current share price and a payout ratio of 30-50% of the remaining net cash proceeds following the offering This is lower than our initial estimates of a 6-10% payout, although the higher stake retained will generate long-term dividend income for OUE Gearing to improve to 22% post-listing of OUE H-REIT from 62.1% currently The lower gearing will provide opportunities for OUE to leverage on its balance sheet to pursue development projects across geographies and property segments OUEHT to offer a forward yield of 7.3-7.5%, based on an initial offering price of S$0.88-S$0.90 per unit This is marginally higher than the average 7.2% forward yield for Singapore-listed hospitality trusts sector, while OUEHT offers a quality initial Singapore portfolio anchored by Mandarin Gallery (S$536m/31%) and Mandarin Orchard (S$1,220m/69%) The choice of Mr Chong Kee Hiong as CEO of OUE H-Trust should be viewed favourably by the market Mr Chong Kee Hiong brings immense experience in the hospitality industry, having served as the CEO of The Ascott Limited in his last appointment and the CEO of Ascott Residence Trust from Mar 06 to Feb 12 OUE has granted a Right of First Refusal (ROFR) to OUE H-Trust to acquire relevant hospitality assets in the pipeline OUE has identified S$413m worth of hospitality assets, including Crowne Plaza Changi Airport, Meritus Mandarin Haikou and Meritus Shantou China, for potential divestment into OUE H-Trust Further developments such as the addition of 200 rooms at Crowne Plaza Changi Airport and the partial conversion 163,000sf of NLA at 6 Shenton Way into serviced apartments will boost pipeline assets We retain our forecasts pending the listing of OUEHT and further details from management Maintain BUY with an unchanged target price to S$3.63/share which is pegged at a 20% discount to our RNAV of S$4.54/share CREDIT SUISSE Securities says ... MAPLETREE INDUSTRIAL TRUST | OUTPERFORM | TP: S$1.67 Among the industrial REITs, MINT has been the third worst performer, down 16% since end-April We believe valuations are looking attractive We upgrade MINT from Neutral to OUTPERFORM after stress-testing our DDM and rent assumptions Vacancy concerns at Signature is not as bad as the market perceives, with the major tenant, CS (4.5% of gross rental income), vacating in 2H13 About 10% of the space has already been back-filled While Iskandar is seen as a potential threat to industrial landlords, we note that it may take perhaps another five years before the infrastructure and the ease of doing business get up to a level where they become a meaningful threat For now, there is no meaningful competition in the flatted factory space (62% of MINT's NPI) Even after trimming our FY14-16E DPU by 0.3-1.9% to account for vacancy, our new DDM of S$1.67 (from S$1.70) still offers 27% potential upside We estimate that current share price implies a further 20% decline (on top of our existing assumptions) in FY14 rents Meanwhile, stress-testing our DDM for risk-free rates reveals that current share price is factoring a +200 bp in cost of equity CIMB Securities says... GOODPACK LIMITED | OUTPERFORM | TP: S$1.80 We raise FY13 EPS by 2% to adjust for better-than-expected 4QFY13 results, but cut FY14-15 EPS to reflect higher-than-expected finance costs and operating expenses We maintain our Outperform rating, with a target price of S$1.80, based on 14.9x CY14 P/E (5% discount to historical mean) The catalysts for the stock are the recovery of synthetic rubber demand and expansion of the auto parts business Goodpack has seen successive dips in quarterly revenues since 1QFY13, mainly due to 1) weak tyre demand as end-users extend the useful life of their tyres, and 2) weak synthetic rubber demand as customers whittle down inventory Synthetic rubber shipments are finally picking up though We noticed that there was a recovery in synthetic rubber shipments by Lanxess (one of Goodpack's major customers) from Europe to Asia in May and June To cater to the specific requests of synthetic rubber clients, Goodpack has manufactured c.145,000 IBCs, or c.5% of total IBCs, in a larger-than-usual size (MB7) Although the clients initially requested the new dimensions, they later recognised the MB7's inefficiency as a 20' container can fit only half as many MB7s as MB5s As such, Goodpack is in the process of modifying the MB7 IBCs into MB5s, which will temporarily reduce their available fleet by 5% The recent management updates revealed that the GMSA contract is not as big as we expected Goodpack is currently in talks with a large European car manufacturer to ship 32 auto parts to-and-from its production facilities in Asia and Europe Trade flows will improve if Goodpack successfully secures this potentially huge contract Given that the auto parts market is estimated to have five to ten times the volume of natural and synthetic rubber, the expansion of the auto parts segment could be an exciting new chapter for Goodpack However, the impact will not be recognised in the near term as Goodpack still has to scale-up its IBC fleet and expand its logistics capabilities, which will require time and raise expenses in the near term