SG: Market Pulse: Viz Branz, CRCT, ST Engineering (8 Jul 2013)

Stock Name: CapitaRChina
Company Name: CAPITARETAIL CHINA TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.58

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: HOLD

Target Price: 3.97

MARKET PULSE: Viz Branz, CRCT, ST Engineering

8 Jul 2013

KEY IDEA Viz Branz Limited - Finally, a GO Summary: Viz Branz finally announced that its current CEO will launch a general offer for the company at S$0.78/share, which represents a 15.5% premium over the one-month weighted average trading price. The CEO already has a majority stake of 58.1% after acquiring his father's 38.3% share, so Lam Soon is not expected to launch a counter-offer. As the offer price is above with our long-stated target price of S$0.74, we deem the offer to be fair and urge investors to ACCEPT THE OFFER. Furthermore, the CEO intends to take Viz Branz private and delist from SGX, which would result in limited upside and recourse for minority shareholders going forward. (Lim Siyi) MORE REPORTS CapitaRetail China Trust: Time to enter on overselling Summary: As part of the general sell-down in the markets, CRCT's unit price has fallen 25.2% since the peak of S$1.865 on 11 April 2013. Apart from the prospect of early tapering of QE by the Fed, CRCT has been affected by concerns of a moderation in retail sales growth from: 1) a de-acceleration of China's economy and 2) President Xi Jinping's campaign against conspicuous consumption. According to media reports, some Chinese retail landlords have recently begun offering preferential leasing terms for mass-market fashion brands, whereas previously such terms were only reserved for luxury brands. The malls which are facing such pressure typically have poorer locations in second-tier and third-tier cities. We note that CRCT's malls are in good locations, with the bulk of assets in Beijing. Furthermore, the occupancies in CRCT's malls are healthy (96%-100%, excluding those which are undergoing tenancy adjustments and AEI). CapitaMalls Asia, which runs the CRCT malls, has the experience and size to better weather the slowdown in China. Factoring in the more challenging operating environment, we reduce our fair value from S$1.76 to S$1.58 but upgrade CRCT to BUY from hold on valuation grounds. (Sarah Ong) ST Engineering: ST Electronics won S$206.8m of contracts in 2Q13 Summary: ST Engineering (STE) announced that its electronics arm, Singapore Technologies has secured new contracts worth about S$206.8m in 2Q13. This includes a number of rail electronics contracts worth some S$24.8m, with S$18m worth of the contracts awarded by the LTA. Work on the projects has begun and are expected to be completed by 2016. ST Electronics also secured contracts worth about S$182m for the supply of satcoms solutions and communications systems projects to local and international customers. The magnitude of the contract wins is in line with our expectations. We maintain our fair value estimate of S$3.97 and HOLD rating on STE. (Sarah Ong)

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

NEWS HEADLINES

- US stocks closed with sizable gains Friday following a choppy, post-holiday session, as a stronger-than-expected jobs report helped the main indexes achieve a second up week in a row. - Purchase activity by directors of SGX listed companies plunged after three weeks of heavy buying, with 10 companies that recorded 22 purchases worth S$9.9m, according to SGX filings in the first week of Jul. - Cambridge Industrial Trust is selling its stake in a light industrial building in Hillview Avenue for S$140.8m. - First Ship Lease Trust has taken redelivery of Aqua, a crude oil tanker leased to Turkey's Geden Holdings, which has defaulted on lease payments. - The Ong family of Armstrong Industrial Corporation and a Japanese group have teamed up to take the company private with an exit offer of 40 S cents per share. - Boustead Singapore's industrial real estate arm, Boustead Projects, will design and build technology firm Seagate's R&D centre at the Fusionopolis, in a deal valued at over S$100m. - Advanced Integrated reported the purchase of a vacant bungalow lot and three super penthouse units in Penang, Malaysia.