SG: MARKET PULSE: OSIM, SMRT, Fortune REIT (31 Jul 2013)

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: OCBC

Price Call: BUY

Target Price: 2.40

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: SELL

Target Price: 1.30

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

Research House: OCBC

Price Call: BUY

Target Price: 7.51

MARKET PULSE: OSIM, SMRT, Fortune REIT

31 Jul 2013

KEY IDEA OSIM International: To uInfinity and beyond! Despite challenging economic conditions in China, OSIM International Ltd (OSIM) managed to record a 15.9% YoY jump in its 2Q13 PATMI to S$26.1m on the back of a 7.0% increase in revenue to S$165.5m. The former was 4.4% ahead of our forecast while the latter was 2.4% below. An interim DPS of 2 S cents was declared, in line with expectations and brings YTD dividends to 3 S cents/share. As a continuation to its innovative product drive, OSIM launched its new high-end massage chair named uInfinity in Hong Kong. This will also be sold in its other key markets in the coming weeks. We raise our FY13 and FY14 PATMI estimates by 2.5% and 2.4%, respectively, largely to account for higher share of profits of associated companies (mainly from TWG-Tea). Rolling forward our valuation to 16.5x blended FY13/14F EPS, our fair value estimate is raised from S$2.21 to S$2.40. Maintain BUY. (Wong Teck Ching Andy) MORE REPORTS SMRT Corporation: Disruptions continue SMRT's 1Q14 results came in below our expectations as revenue growth slowed while higher staff and depreciation expenses caused operating and net profit to decline 49.4% YoY to S$22.2m and 55.2% YoY to S$16.3m respectively. In the coming quarters - and in the absence of fare adjustments - we expect this trend to persist as higher operating expenses continue to compress margins. In addition, recurring service disruptions suggest elevated repair and maintenance expenses. With the lack of any immediate catalysts (a switch to the new rail financing framework within FY14 is unlikely in our view), we lower our FY14 forecast figures yet again and our DDM-derived fair value estimate falls to S$1.30 (S$1.45 previously). Downgrade to SELL. (Lim Siyi) Fortune REIT: MOU for Kingswood Ginza property FRT has entered into a non-binding MOU in connection with the acquisition of 100% of the issued share capital of a target company by FRT and assignment of the shareholder loans to FRT. The target company owns Kingswood Ginza Property, which comprises the entire Kingswood Ginza Mall as well as other retail, kindergarten, parking lots and ancillary spaces. Kingswood Ginza Mall is the largest shopping center in HK's Yuen Long district. The proposed acquisition, a connected party transaction, is expected to be yield accretive. The indicative purchase consideration is HK$5,849m. 142,962,000 new units, which is an increase of 8.4% of the total number of units currently in issue (excluding the new units), have been placed out at HK$6.82 each. The issue price represents a discount of 4.4% to the volume weighted average price of HK$7.1356 per unit for trades done on the SGX-ST and the SEHK for 29 July 2013. The net proceeds of ~HK$947m will be used to partially fund the proposed acquisition. We place our Buy rating and FV of HK$7.51 under review. (Sarah Ong)

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

NEWS HEADLINES - US stocks ended slightly higher on Tue, as investors mostly adopted a cautious tone a day ahead of a monetary-policy decision from the Federal Reserve. - Hutchinson Port Holdings Trust reported a 26% YoY drop in net profit to HK$420.5m (S$69m) for the 2Q13, due to weak trade demand from the US and the EU. - Mapletree Greater China Commercial Trust posted available distribution per unit of 1.73 S-cents for the quarter ending 30 Jun, beating its forecast of 1.6 S-cents. - Aussino Group has terminated the reverse takeover deal with Max Strategic Investments, the energy business of Max Myanmar Group. - Blumont Group plans to raise about S$42.67m through the issue of up to some 861m one-for-two rights shares priced at 5 S-cents apiece. - Horizon Oil Limited announced a S$53.5m fully underwritten accelerated non-renounceable pro-rata entitlement offer.