OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: FirstRes
Company Name: FIRST RESOURCES LIMITED

Research House: DBS Vickers

Price Call: BUY

Target Price: 2.18

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: CIMB

Price Call: BUY

Target Price: 12.10

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.68

Market Compass

17 July 2013~ Good Morning Singapore!

Singapore Idea Snippets:

17 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 :Many men go fishing all of their lives without knowing that it is not fish they are after. - HENRY DAVID THORREAU Singapore: The Day Ahead SINGAPORE DAYBOOK : Low expectations for Q2 earnings season. Rising interest rates loom large while biggest sectors lack strong growth [SINGAPORE] SINGAPORE enters its second-quarter earnings season this week with low expectations and the specter of rising interest rates haunting property players and banks. "Singapore's largest sectors seem to be lacking strong growth right now, be it industrials, financial services, or property, and we don't see this changing any time soon," said Religare Capital Markets director of Asean Research Vincent Fernando. He expects an 8 per cent decline in aggregate earnings for non-property sector Straits Times Index companies this year. In the past six months, the Singapore market has stayed stagnant while earnings estimates fell 5 per cent. This makes the market more expensive now compared to before, he said. Citi Singapore's head of research, Patrick Yau, has a mere 1 per cent earnings per share growth outlook for the Singapore market in 2013. Noting Singapore sentiment has been weak for some time, he said other Asean markets are more attractive, with earnings in Thailand, the Philippines and Indonesia forecast to grow at 10 to 18 per cent this year. MARKET SCOOP M1's Q2 net profit up 11.2% at $39.2m SingHaiyi set to spread its wings in the US UOB issues Asia's first Basel III- compliant bond A-Reit posts DPU of 3.55 cents in Q1 See Hup Seng unit officers may quit in support of chairman UniFiber to acquire coal miner in RTO deal (Source: The Business Times) DBS VICKERS Securities says... FIRST RESOURCES | BUY | TP: S$2.18 First Resources reported Jun13 operating data today 2Q13 CPO output was 126,797 MT (+10% y-o-y; +10% q-o-q) or 21% of our full year target of 592,151 MT, weaker than the 24% we were expecting The culprit was a marked deceleration in own FFB production growth to 5% y-o-y from 14% booked in 2Q12, despite inclusion of output from recently purchased GSI (since Nov12) and Lynhurst (since Feb13) Smallholders FFB output also fell 24% y-o-y (-14% q-o-q) We understand this reflects a slowdown after growing by c.40% p.a. in the past two years However, the drop was partly compensated by jump in third-party FFB purchases to almost 6-fold from the previous year (these were mainly purchased for the group's West Kalimantan mill) Assuming there was no further inventory draw-down and the group achieved CPO ASP of US$900/MT (18% higher than spot due to forward sales), FR may book 2Q13 net profit of US$45-50m (down 21-29% q-o-q), in our estimate This would have missed our previous estimate of US$50-57m We understand output is expected to rebound in 2H13 and the management has not revised its guidance of 5-10% growth in own FFB production We also expect smallholders' output to recover to match FY12 level by the end of this year Subject to changes to management guidance for 2Q13 results, we are maintaining our forecasts, TP and rating for the stock FR's production will pick up again post-Eid festival in Aug13 At current price, the counter is trading at undemanding 9.4x FY14F earnings Any near term weakness would be an opportunity to accumulate the stock CIMB Securities says ... KEPPEL CORPORATION | OUTPERFORM | TP: S$12.10 We raise our 2013 order forecast from S$5.5bn to S$6bn in view of the heightened momentum We adjust our EPS forecasts for FY14-15 by 1-4% to factor in the new orders Our Outperform rating is maintained with a slightly higher target price, still based on RNAV valuations Stronger-than-expected margins could catalyse the stock Keppel has received another jack-up rig order from Mexican conglomerate Grupo R worth US$206m for delivery in 4Q15 In Mar FY13, Keppel clinched four similar jack-up rigs orders worth US$205m per rig for delivery from 2Q15 to 4Q15 We estimate Keppel's order book now stands at S$14bn YTD, about 35% of Keppel's orders are for the Mexican waters Similarly, its rival Sembcorp Marine also has about 32% of its 2013 orders from Mexican operators We believe that after the mega orders of drillships/semi-subs in 2012 from the Brazilian operators, investments from Mexican operators could be the next to watch out for We also believe that Keppel's 2015 delivery slots are almost full, with two or three more jack-up rigs to go With more than 90% of its order book filled with benign jack-up rigs YTD, we think upside to Keppel's order book will come from diversification of products such as FPSO conversion, semi-sub accommodation, semi-submersibles and harsh-environment jack-ups These products made up for about 90% of its 2012 non-Petrobras orders Investors should stay invested Keppel is our preferred pick among the big-cap O&M stocks for its quality, lower execution risks and better margins OCBC Securities says... KEPPEL CORPORATION | BUY | TP: S$12.68 Keppel Corporation's O&M arm has secured a contract to build a jack-up rig worth US$206m from Grupo R, a Mexican drilling company Scheduled for delivery in 4Q15, the unit will be built to Keppel's proprietary KFELS B Class design Grupo R is a repeat customer, having ordered four similar units for US$205m each in Mar this year With this new contract, Keppel currently has on order nine KFELS B Class jack-up rigs from Mexican customers. We expect more orders as Mexico aims to boost oil production through increased exploration and production activity Keppel has won contracts worth about S$3.7b YTD, accounting for 73% of our full year estimate Maintain BUY with S$12.68 fair value estimate The group is releasing 2Q13 results this Thursday