SG: MARKET PULSE:Market Pulse: Residential Property, SATS, Vard (1 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: 4.59

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.55

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 3.15

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.52

MARKET PULSE: Residential Property, SATS, Vard

1 Jul 2013

KEY IDEA SG Residential Property: A total debt profile framework Summary: MAS announced a set of Total Debt Servicing Ratio (TDSR) requirements whereby FIs will now account for borrowers' other debt obligations when granting property loans. A TDSR limit of 60% will be imposed. We see an immediate impact that borrowers now cannot circumvent LTV and ABSD rules by purchasing homes under others while acting as loan guarantors. In addition, the TDSR framework would also be applied to the refinancing of loans. From our channel checks, this could affect, off the bat, 5%-20% of the current cross-section of buyer profiles. Over the mid-to-longer term, we see these measures further constricting financing for buyers with existing property loans. That said, the current 60% TDSR limit appears to be fairly reasonable and is not intended to cool down the property market as much as to encourage financial prudence. Maintain NEUTRAL on the domestic residential sector. We continue to prefer developers with diversified portfolio exposure and strong balance sheets. Maintain BUY on CapitaLand [BUY, FV: S$3.77], Keppel Land [BUY, FV: S$4.59] and CapitaMalls Asia [BUY, FV: S$2.55]. MORE REPORTS SATS Ltd - Middle-East exit for now Summary: SATS announced that it will sell its 40% equity interest in its Adel Abuljadayel Flight Catering Company joint venture for a cash consideration of US$18.4m (~S$23.4m), which is slightly below the book value of the asset as of 31 Mar (S$24.1m). Despite the short two-year tenure of the JV, the exit does not signal a change in management intent regarding the region. Management still intends to re-enter the Middle East, and will continue to pursue other attractive investment opportunities. In the interim, the outlook for SATS remains positive and we believe the counter's earnings stability and healthy dividends will allow it to stay resilient amidst recent market volatility. Maintain HOLD with an unchanged fair value of S$3.15. (Lim Siyi) Vard Holdings: Profit Guidance Summary: Vard Holdings warned that its 2Q2013 financial results are likely to be below current consensus estimates due to difficulties in its operations in Brazil. The group had previously guided that its Brazil operations are coming under control and would stabilize by year-end. However, after a recent assessment, management found further delays, cost over-runs at its Niteroi yard due to lower-than-expected productivity, additional costs for outsourcing and higher start-up costs at the Promar yard. These issues have adversely impacted its 2Q margin. Operations elsewhere are stable and Vard Holdings as a group remains profitable. Our FY13F net profit estimate is 6% below consensus, but we would likely revise lower after speaking with management later to get more colour. Thus, we put our Buy rating and S$1.52 fair value UNDER REVIEW. (Chia Jiunyang)

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