SG: MARKET PULSE: Residential Property, Fortune REIT, KepCorp (16 Jul 2013)

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.77

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.53

Stock Name: Roxy-Pacific
Company Name: ROXY-PACIFIC HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.76

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

Research House: OCBC

Price Call: BUY

Target Price: 7.51

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.68

MARKET PULSE: Residential Property, Fortune REIT, KepCorp

16 Jul 2013

KEY IDEA Singapore Residential Property: Record launch at J Gateway A headline total of 2,119 new private homes (incl. 313 EC units) were sold in Jun 13, up 11% MoM and 23% YoY. The highlight of the month was undoubtedly the launch of 738-unit J Gateway near Jurong East MRT station, which saw 737 units snapped up at a median price of S$1,486 psf. Our current base case is for FY13 primary sales (excluding EC) to slow to 16k-18k units sold - an 18% to 27% dip versus 22k units in FY12. With 10k units sold in 1H13, we expect sales to further ease as the market digests the impact of latest curbs. Maintain NEUTRAL on the residential property sector. We prefer developers with strong balance sheets and diversified exposure, such as CapitaLand [BUY, S$3.77] and Keppel Land [BUY, S$4.53]. In the mid-small cap space, we prefer Roxy-Pacific [BUY, S$0.76] which is sitting on a substantially sold development portfolio and has a track record of prudent execution. (Eli Lee) MORE REPORTS Fortune REIT: Solid 2Q13 FRT reported income available for distribution of HK$153.7m (+12.6% YoY), driven by a 10.7% YoY increase in revenue to HK$307.9m and a 11.6% YoY rise in net property income to HK$219.6m. DPU was the same as 1Q13 at 9.00 HK cents (+11.9% YoY). The results were in line with ours and the street's expectations. The portfolio valuation as of 30 June stood at HK$22.2B, up 9.8% from Dec 2012. The increase was mainly driven by improved asset performance, with cap rates of 4.3%-5.1%. The increase in asset valuation pushed the gearing ratio down to 20.9%. FRT is trading at a P/B of 0.71x (NAV of HK$10.01). We maintain our FV of HK$7.51 and BUY rating on FRT. (Sarah Ong) Keppel Corporation: Secures another Mexican order Keppel Corporation's O&M arm has secured a contract to build a jack-up rig worth US$206m from Grupo R, a Mexican drilling company. Scheduled for delivery in 4Q15, the unit will be built to Keppel's proprietary KFELS B Class design. Grupo R is a repeat customer, having ordered four similar units for US$205m each in Mar this year. With this new contract, Keppel currently has on order nine KFELS B Class jack-up rigs from Mexican customers. We expect more orders as Mexico aims to boost oil production through increased exploration and production activity. Keppel has won contracts worth about S$3.7b YTD, accounting for 73% of our full year estimate. Maintain BUY with S$12.68 fair value estimate. The group is releasing 2Q13 results this Thursday. (Low Pei Han)

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NEWS HEADLINES - US stocks climbed modestly on Mon, with the S&P 500 and the Dow industrials rising to record closing highs again, after Citigroup Inc. reported better-than-expected earnings. - Moody's Investors Service has downgraded the outlook for Singapore's banking system to negative from stable, owing to rapid loan growth and rising real estate prices. - Retail sales in Singapore rebounded in May, rising 3.2% YoY, as most categories registered growth. - Keppel REIT posted a distribution per unit of 1.97 S cents for the three months ended June, up 1.5% from the 1.94 S cents posted a year ago. - Qian Hu Corporation's net profit for 2Q13 plunged 84.4% to $83,000 due to lower takings in its ornamental fish division as well as by higher raw materials prices.