SG: MARKET PULSE: ART, Wilmar (11 Jul 2013)

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.31

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.25

MARKET PULSE: ART, Wilmar

11 Jul 2013

KEY IDEA Ascott Residence Trust: Cut FV to S$1.31 The unit price of Ascott Residence Trust (ART) has fallen 13.3% since the high of S$1.50 on 22 May 2013 along with the general market pull-back over concerns about an early tapering of the Fed's QE program. In this context, it is worthwhile highlighting that ART's gearing has increased from 36% to 41% following the completion of the acquisition of three prime serviced residences in China and a portfolio of 11 rental housing properties in Japan for S$287.4m on 28 June 2013. The new gearing level is high compared to hospitality REIT peers, e.g. 28% for CDLHT and 29% for FEHT, and may be viewed less favorably by investors given an environment of higher interest rates. In addition, we expect fairly mute operational performance for ART's assets in multiple geographies for the rest of the year. Given the increase in risk-free rates, we reduce our FV to S$1.31 from S$1.35 and maintain a HOLD rating on ART. (Sarah Ong) MORE REPORTS Wilmar: No boost from Clariant JV Wilmar international Limited (WIL) has just announced that it has received the relevant merger clearances for the establishment of a 50-50 JV called "the global amines company" with Clariant International Ltd (CIL), a world leader in Specialty Chemicals. However, WIL's share price did not show any positive reaction to the news. Instead, sentiments were likely depressed by continued concerns over the slowing economy in China. Nevertheless, we opt to keep our forecasts for FY13 and FY14 intact for now; this as any downside risk is likely to be mitigated by a firmer USD. Maintain HOLD with an unchanged S$3.25 fair value (based on 12.5x FY13F EPS). (Carey Wong)

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NEWS HEADLINES - US stocks ended little changed on Wed after minutes from the Federal Reserve's last meeting had multiple members looking for more improvement in the labor market before cutting the pace of central-bank bond purchases. - China is likely to miss its 10% trade growth target for the second straight year amid tighter scrutiny of trade bills, economists said. - PS Group Holdings Ltd announced that its IPO with a placement of 20.4m new shares at S$0.25 each has received strong interest from investors. - Global Logistic Properties announced an agreement to develop BMW's largest distribution centre in China. Construction will commence this year. - Tigerair Singapore posted a 22% YoY rise in passenger traffic in Jun, while capacity was boosted by 21.7%, giving rise to a 0.3ppt increase in load factor to 86.5% for the month.