SG: MARKET PULSE: GAR, CDLHT, Tee Intl, Telcos, First REIT, Lian Beng, Swiber (29 Jul 2013)

Stock Name: GoldenAgr
Company Name: GOLDEN AGRI-RESOURCES LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.57

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: HOLD

Target Price: 1.73

Stock Name: Tee Intl
Company Name: TEE INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.38

Stock Name: First REIT
Company Name: FIRST REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.20

MARKET PULSE: GAR, CDLHT, Tee Intl, Telcos, First REIT, Lian Beng, Swiber

29 Jul 2013

KEY IDEA Golden Agri-Resources: Downgrade to HOLD Summary: Golden Agri-Resources (GAR), being one of the largest palm oil plantation owners in the world, is likely to remain vulnerable to further pullbacks in CPO prices, which had recently hit their lowest levels since Nov 2009. In view of the more muted outlook for CPO, we deem it prudent to lower our 2013 forecast to US$700/ton from US$750 previously. This results in our FY13 revenue and core earnings estimates easing by 2%. Our fair value also drops from S$0.63 to S$0.57 as we are also lowering our valuation peg from 12.5x previously to 11x. Given the limited upside and still uncertain outlook, we downgrade our call to HOLD. (Carey Wong) MORE REPORTS CDL Hospitality Trusts: 2Q13 results miss street's expectations Summary: CDL Hospitality Trusts reported a 4.4% YoY fall in net property income in 2Q13 to S$32.6m. Income available for distribution contracted 6.4% YoY to S$29.4m. 2Q13 RevPAR for the Singapore hotels fell 8.5% YoY to S$193, affected by increased competition, weaker corporate demand and the absence of the biennial Food & Hotel Asia event in Apr. The results were in line with our expectations, but missed the street's. Estimating the financial effect of the planned closure of most of the Orchard Hotel Shopping Arcade for AEI (excluding the Galleria) from late 2013, and adjusting our assumptions for the non-Singapore hotels, our FY13F DPU falls to 10.4 S cents from 10.9 S cents. Incorporating a risk-free rate of 2.5% (versus 2.2% previously) into our model, our FV drops to S$1.73 from S$1.79. We maintain a HOLD rating on CDLHT. (Sarah Ong) TEE International: FY13 earnings marred by admin expenses Summary: TEE reported 4Q13 PATMI of S$6.4m, down 45% YoY mostly due to a S$4.1m increase in administrative expenses. Due to this, FY13 PATMI of S$13.1m was judged to be somewhat below our full year expectations. The order book of the Engineering segment now stands at S$215.4m, which remains fairly stable on a YoY basis. We like management's active stance on seeking accretive acquisitions; note that TEE recently announced an MOU to invest in a waste-water treatment plant in Huzhou, China and also formed a JV for a S$8.6m 3-year contract for a water management project near Chao Phaya River, Thailand. We currently have a HOLD rating on TEE with a fair value estimate of S$0.38. However, given the attractive dividend of 2.50 S-cents ahead, which translates to a yield of 6.8% on the last closing price of S$0.37, we believe the downside may be capped from here. (Eli Lee) Telco Sector - SingTel to offer BPL cross carriage Summary: SingTel will have to offer its BPL content to rival StarHub customers after the Ministry for Communications and Information (MCI) rejected its appeal for a stay of the Media Development Authority (MDA) ruling for the cross-carriage of the closely followed football content. However, the subscription comes with a price - new subscribers will have to fork out S$59.90 (before GST) for the stand-alone package, while existing mioTV subscribers can continue with the existing pricing of S$34.90 (before GST). While we may see some migration of subscribers from mioTV to StarHub's cable TV platform, we do not expect a huge number. For now, we maintain our NEUTRAL rating on the sector. While we also maintain our HOLD rating on SingTel, we are putting our Hold rating on StarHub under review. (Carey Wong) First REIT: 2Q13 results within expectations Summary: First REIT (FREIT) reported its 2Q13 results which were within our expectations. Gross revenue surged 43.4% YoY to S$20.1m due largely to contribution from its four newly acquired properties in Indonesia (two acquired in Nov 2012 and two in May 2013). Distributable amount to unitholders rose 4.0% YoY to S$12.7m but DPU fell 4.1% YoY to 1.85 S cents. However, if we strip out an exceptional distribution in 2Q12, FREIT's distributable amount to unitholders and DPU would instead have increased by 26.6% and 16.4%, respectively. As FREIT had already made an advance distribution of 0.99 S cents on 26 Jun 2013 (prior to the issuance of new units for payment of its acquisitions), only the remaining 0.86 S cents will be paid to unitholders. For 1H13, gross revenue rose 34.2% to S$37.6m and constituted 45.2% of our full-year projection. DPU (after stripping out the special distribution highlighted earlier) increased 12.9% to 3.59 S cents, or 45.5% of our FY13 forecast. We expect 2H13 to be stronger on a HoH basis due to a full-quarter of contribution beginning 3Q13 from the two hospitals acquired in May 2013. We will provide more details after the analyst briefing. Meanwhile, we maintain our HOLD rating and S$1.20 fair value estimate on FREIT. (Wong Teck Ching Andy) Lian Beng: Construction order book at S$1.3b Summary: Lian Beng announced FY13 (ended 31 May 2013) PATMI of S$39.4m - down 23.4% - this is mostly due to an absence of a S$7.9m gain from an investment property sale in FY12. FY13 topline, however, increased 13.6% to S$505.6m on higher revenue recognition from its construction and ready-mixed concrete segments. We note that Lian Beng's construction books as at end May 13 are at a very healthy level of S$1.3b, which is expected to underpin firm revenue numbers over the next 2-3 years. We would speak with management regarding FY13 results later today and, in the meantime, our rating and fair value estimate is under review. (Eli Lee) Swiber Holdings: Wins US$435m contracts; sets up Islamic Trust Certificates Summary: Swiber Holdings announced that it has clinched contracts worth about US$435m, US$330m of which were secured under the Swiber group and about US$105m under a joint venture company. Work will commence immediately and is expected to be completed by 2015. Meanwhile an SPV of the company has also established a US$500m multicurrency Islamic Trust Certificates Issue Programme; proceeds from new issues will be used to refinance existing borrowings and fund capital expenditure, amongst others. Recall that the company had said that it was exploring options to establish Islamic Trust Certificates in Jun. Maintain BUY with S$0.86 fair value estimate. (Low Pei Han)

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NEWS HEADLINES - US stocks finished with slight gains on Fri, lifting the Dow industrials to a fifth weekly gain, after Wall Street dug through earnings reports that included a better-than-expected profit from Starbucks Corp. - The construction industry may be able to reduce its overall workforce by 20-30% by 2020 if it attains a similar increase in productivity, according to the chief executive of the Building and Construction Authority, John Keung. - Pockets of price falls have surfaced in the latest official stats on the state of Singapore's private property markets, including the industrial space and some residential categories. However, the property market, as a whole, still remains firm. - Singapore's manufacturing sector shrank a slightly larger than expected 5.9% in Jun compared to a year ago, due to a sharp fall in pharmaceutical output. - Advance SCT Ltd said the suspension of its arbitration proceedings with plaintiff, Qingyuan Shengli Copper Material Co Ltd, is likely to be lifted over the next few weeks. - Property investment group MYP plans to buy 80,000 sqm of retail properties in Bali in a deal valued at S$43.3m.