SG: MARKET PULSE: Fortune REIT, OSIM (3 Jul 2013)

Stock Name: Fortune Reit HK$
Company Name: FORTUNE REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target Price: 7.51

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: OCBC

Price Call: BUY

Target Price: 2.21

MARKET PULSE: Fortune REIT, OSIM

3 Jul 2013

KEY IDEA Fortune REIT: Affected by rising discount rates The prospect of an early tapering of US Federal Reserve's quantitative easing program has driven up bond yields and, as a result, high-yield counters such as Fortune REIT (FRT) have seen a correction in their prices. FRT's unit price has fallen 15.1% since the peak of HK$8.43 on 15th May this year (but still up 12.4% YTD). We note that rising risk-free rates will not have much impact on cost of debt for FRT given that interest cost for ~76% of FRT's debt exposure has been hedged to fixed rates with effective interest cost at 2.76%. FRT has no refinancing needs till 2015 and has a weighted term to maturity of 2.7 years. FRT's gearing continues to remain low at 23%. Accounting for the higher HK 10-year government risk-free rate (which climbed from 0.8% at the beginning of May to 2.0% currently), we raise our cost of equity assumption to 7.5% from 6.6%. We also raise our LT nominal growth rate for dividends from 1.75% to 2.0%. Our FV falls to HK$7.51 from HK$8.64. We maintain a BUY rating on FRT. (Sarah Ong) MORE REPORTS OSIM International: 2Q13 results preview OSIM International Ltd (OSIM) is scheduled to report its 2Q13 results on 30 Jul after trading hours. We forecast a 9.5% and 11.0% YoY growth in its revenue and PATMI to S$169m and S$25m, respectively. This would be driven largely by a full quarter of contribution from its recently launched uAngel Sofa-Tranzformer massage chair. We see OSIM as a beneficiary of China's immense consumer market, underpinned by a rising middle-class population and affluence. The group has established a strong brand profile in China given its near 20 years of experience there. Its share price has also remained fairly resilient despite the recent global equities sell-down, supported by its solid financial performance and decent FY13F yield of 3.0%. Maintain our BUY rating and S$2.21 fair value estimate on OSIM. (Wong Teck Ching Andy)

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

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