OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD

Research House: Credit Suisse

Price Call: BUY

Target Price: 12.50

Stock Name: SATS
Company Name: SATS LTD.

Research House: Nomura

Price Call: HOLD

Target Price: 3.40

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.77

Market Compass

29 July 2013~ Good Morning Singapore!

Singapore Idea Snippets:

29 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 : There are no secrets to success. It is the result of preparation, hard work, and learning from failure. - COLIN POWELL Singapore: The Day Ahead SINGAPORE DAYBOOK :Bulls taking charge while the weather is still fine. So long as the Fed keeps to its plans, the market can take what it sees coming STOCK buyers will continue to make hay this week as long as the central-bank sun shines. In its latest policy statement on Wednesday, the Federal Reserve is expected to keep its bond-buying programme unchanged for another month, but lay the groundwork for the formal beginning of "tapering" at its September meeting. Traders had feared that a change in the Fed's policy would be triggered by a strong employment report. Now that the Fed's committed to changing policy in September anyway, a strong July jobs report on Friday could be cause for unequivocal celebration. Initially, Fed chief Ben Bernanke's June warning that bond purchases would soon slow seemed premature. The shock drove up mortgage rates, threatening to derail the housing-market rebound. (Source: The Business Times) MARKET SCOOP Innopac Q2 profit tumbles 95% Rickmerskeeps Q2 DPU at 0.60 US cents First Reit posts Q2 DPU 1.85 cents Lian Beng full year profits down 24.3 per cent SingTelloses EPL cross-carriage appeal Mercator posts Q1 loss of US$6.71m Keppel Reit issues 95m new units to raise S$119.7m China Fishery Group settles Copeinca share dispute (Source: The Business Times) CREDIT SUISSE Securities says... SINGAPORE AIRLINES | OUTPERFORM | TP: S$12.50 Singapore Airlines (SQ) has reported 1 QFY14 pre-ex NPAT of S$133 mn, ahead last year's S$103 mn and ahead consensus (at breakeven) but below our S$215 mn expectations Gains on the sale of its Virgin Atlantic stake were offset by freighter and other impairments netting only S$18.4 mn in exceptional items While passenger yield declines shrank significantly from recent periods, negative currency and main cabin pricing strategies still saw them fail to hit our flat YoY estimates, falling 2.6% YoY We have lowered our estimates modestly, noting management's expectation of better traffic yet competitive pressure on pricing - although we still expect a better yield track as the year progresses We now expect NPAT of S$780 mn for FY14, with FY15's S$955 mn retained and expect consensus estimates to rise We continue to view SQ as a beneficiary of rising premium traffic and believe it's near trough valuations offer an attractive entry point Our OUTPERFORM rating is unchanged, with our little altered S$12.50/ share TP equal to an FY14 EV/EBITDAR of 5x NOMURA Securities says ... SATS | NEUTRAL | TP: S$3.40 SATS's 1Q14 adjusted net income (ex-forex, impairments) of SGD47.5mn, was up 16% y-y, and form 22% of Nomura and Street's FY14F estimates, in line with seasonal weakness Overall Food Solutions business revenue fell 6% y-y due to 1) Qantas changing its Kangaroo route hub to Dubai and 2) TFK revenue decline on JPY depreciation and low traffic This offset the 8% y-y revenue growth from the Gateway Services business on higher unit services and cargo volumes Overall revenues were down 1% y-y, but better cost management (lower utilities costs, depreciation) helped bottom-line growth We estimate 6% earnings CAGR for SATS in FY14-15F, and believe current FY14F yield at 4.6% would limit further share price upside In the absence of any earnings surprises, we remain Neutral Weak Food Solutions - Food Solutions revenue was down 5.6% y-y and 6.1% q-q mainly due to loss of business from Qantas's move to Dubai hub for Kangaroo routes and lower load factors in airlines The performance of TFK in Japan was also weak due to lower traffic, weaker JPY Although SATS has stopped disclosing TFK financials separately, we estimate a 22% y-y decline in revenues to ~S$65mn Management also commented that although TFK is operationally profitable, the profits have contracted from an already anemic S$2.6mn EBIT last year Note that the JAL contract with TFK (50% of TFK's revenues) is up for renegotiation later this year, and although JAL has another in-house catering arm at Narita (not at Haneda), management feels that their kitchen capacity at the airports give them an edge in renewing the contract Gateway Services strong - Revenue from Gateway Services grew by 8% y-y and 2% q-q, helped by 9% y-y and 6% y-y growth in flights and passengers handled respectively This was also helped by continuing momentum in signing and renewing contracts with existing and new customers Cargo volumes saw second consecutive quarterly increase (up 3.2% y-y) after dropping for four consecutive quarters prior to 4Q13 We note that this does not signal a cargo recovery, but merely SATS gaining market share, as total cargo traffic at Changi airport was down 2% in the quarter Management highlighted labour availability and staff costs continue to be key challenges for the company; and a higher depreciation and tax rate from next quarter onwards We think SATS's growth will come from organic growth in the Singapore market (~5% y-y traffic growth) and associate contributions OCBC Securities says... CAPITALAND LTD | BUY | TP: S$3.77 CAPL's 2Q13 PATMI decreased 0.7% YoY to S$383.1m We judge this to be within expectations; 1H13 PATMI now cumulates to S$571.3m which makes up 65% of our full year forecast 1H13 topline is S$1,844.6m, up 22.7% YoY mostly due to higher recognitions from residential projects in Singapore and China and stronger contributions from CMA and Ascott However, we note that group-wide gross margins dipped significantly QoQ from 40% in 1Q13 to 28% in 2Q13 due to slimmer margins at projects booked over the quarter No interim dividend is announced by the group Chinese sales likely to hold steady in 2H13 CAPL sold 736 Chinese residential units in 2Q13, which is respectable but somewhat slower than the 955-unit pace in 1Q13 Management guides that Chinese sales would likely fall to around 3.3k units for FY13, pointing to c.1.6k units in 2H13 - still healthy but below the 1.9k-unit pace in 2H12 In Singapore, residential sales slowed to 139 units in 2Q13 in the aftermath of a blowout 1Q13 (544 units sold) driven by discounts Unsold pipeline as of end Jun-13 consists of 883 units at The Interlace, d'Leedon and Sky Habitat, and the group aims to launch Marine Point (124 units) and Bishan St 14 (694 units) in 2H13 CMA's business model gaining traction Mall subsidiary CMA reported 2Q13 PATMI of S$245.6m, up 5.9% YoY mainly due to higher fair value gains for Chinese assets and ION Orchard, and profit recognition at Bedok Residences We continue to see firm operating statistics: same-mall NPI in China and Singapore in 1H13 is up 12.1% and 2.0% YoY, respectively We believe CAPL's strategy of growing competitive scale in six geographic clusters (Singapore,Beijing/Tianjin,Chengdu/Chongqing,Shanghai/Hangzhou/Suzhou/Ningbo,Guangzhou/Shenzhen, and Wuhan) is sound and well thought out, and we continue to see value in CAPL shares at current levels Maintain BUY with an unchanged fair value estimate of S$3.77