SG: MARKET PULSE: Telco, Starhub, First REIT, Yoma, M1 (30 Jul 2013)

Stock Name: StarHub
Company Name: STARHUB LTD

Research House: OCBC

Price Call: SELL

Target Price: 3.82

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

Research House: OCBC

Price Call: HOLD

Target Price: 1.20

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.87

Stock Name: M1
Company Name: M1 LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.10

MARKET PULSE: Telco, Starhub, First REIT, Yoma, M1

30 Jul 2013

KEY IDEA Telco Sector: Minimal impact on SingTel 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. We maintain our NEUTRALrating on the sector. While we also maintain our HOLD rating on SingTel, we downgrade StarHub to SELL. (Carey Wong) MORE REPORTS StarHub Ltd: Downgrade to SELL; BPL likely non-event StarHub Ltd will be able to cross carry the widely-followed BPL (Barclays Premier League) live matches for the upcoming 2013 to 2016 seasons. However, with a seemingly steep price point of S$59.90/month (before GST) for new subscribers (while existing mioTV subscribers continue to pay the current S$34.90 (before GST)), we suspect that any migration of subscribers from mioTV to StarHub's cable TV platform would be quite muted. In light of the likely muted boost from the BPL cross carriage and recent strong run-up in share price (9.5% after our upgrade on 3 Jun), we feel that the stock may have run ahead of its fundamentals. As we are also keeping our DCF-based fair value unchanged at S$3.82 (already accounted for a higher risk-free rate), we foresee more downside risk from here. Hence, we downgrade our call back from Hold to SELL. (Carey Wong) First REIT: Contribution from new assets First REIT's (FREIT) 2Q13 results were within our expectations. Revenue and DPU (after stripping out a special distribution in 2Q12) rose 43.4% and 16.4% YoY to S$20.1m and 1.85 S cents, respectively. Only 0.86 S cents will be paid to unitholders (on 29 Aug 2013) 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 part payment of its acquisitions). FREIT is in the process of refinancing ~S$92m of its floating-rate debt to a 4-year fixed-rate unsecured bank loan. Upon completion, its floating rate exposure will be reduced from 72% to 46% of its total borrowings, which we view as a positive development. We retain our forecasts, HOLD rating and DDM-derived fair value estimate of S$1.20 on FREIT. (Wong Teck Ching Andy) Yoma Strategic Holdings: First take on Yoma 1QFY14 results Yoma Strategic Holdings (Yoma) reported 1QFY14 PATMI of S$1.6m, which decreased 80.6% YoY mostly due to higher staff costs as the group continues to build up a strong management team in anticipation of future activity. We judge 1QFY14 PATMI to be somewhat below view - forming only 14% of our full year forecast - but expect the pace of recognition at development projects to back-loaded in the year. 1QFY14 topline came in at S$15.2m, up 11.6% YoY due to higher contributions from recognition of residential sales. We highlight the slower pace of sales in Star City over 1QFY14, as the sales status for Buildings 3 and 4 only crept up by 22 units (from 491 units sold as at end Mar-13 to 513 units sold as at end Jun-13). However, we note the group also reported a potential conditional agreement with a third party investor for the sale of LDRs for five buildings (1043 units) in zone B of Star City, which could be a significant catalyst for Star City sales ahead. We would speak with management about this set of results and the outlook ahead and, in the meantime, maintain HOLD with our fair value estimate of S$0.87 under review. (Eli Lee) M1: Joins Pay TV fray M1 Ltd has announced its own Internet TV service - MiBox, which offers video-on-demand entertainment and educational titles, games, e-books and apps. Priced at just S$8/month with a 2-year contract for M1 fibre customers (S$12/month for non-M1 subscribers), customers will have access to MiBox's library of 18k video-on-demand titles, 116 TV channels, 1.2k e-books and 370 apps. In addition, there is also an extensive selection of chargeable premium video-on-demand, e-learning titles and apps. According to M1, the service offers a new TV experience for everyone, from students to working adults to homemakers to retirees. However, given M1's small fibre customer base and its relatively new presence in a pretty saturated Pay TV market, we do not expect to see any major impact on earnings. Maintain HOLD with an unchanged fair value of S$3.10. (Carey Wong)

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NEWS HEADLINES - US stocks posted a modest decline on Mon as home sales fell in the wake of higher mortgage rates and investors nervously awaited more data later in the week and a meeting of Federal Reserve policy makers. - United Envirotech Ltd has proposed to acquire membrane products manufacturer Memstar Pte Ltd, a wholly owned subsidiary of Memstar Technology Ltd, for S$293.4m. - Pteris Global Limited announced that it will be acquiring a 70% stake in Shenzhen CIMC-TianDa Airport Support Limited, owned by China International Marine Containers. - Blumont Group plunged into the red to the tune of S$22.4m during 2Q13 as the company wrote down financial assets. - SP Corporation Ltd posted a 20% drop in its revenue for 2Q13 to S$43.9m from S$54.7m last year.