Friday, August 30, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED
Research House: UOB KayHianPrice Call: BUYTarget Price: 2.85

Stock Name: EuYanSang
Company Name: EU YAN SANG INTERNATIONAL LTD
Research House: OSK-DMGPrice Call: BUYTarget Price: 0.92




Market Compass


30 August 2013~ Good Morning Singapore!


Singapore Idea Snippets:
30 Aug 2013~ Good Morning Singapore!

Central Execution Team - The Excellence of Execution

This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome.

Global Flash: While You Were Sleeping



Source: Marketwatch

Quote for the day : Man seeks to change the foods available in nature to suit his tastes, thereby putting an end to the very essence of life contained in them.
- SAI BABA
Singapore: The Day Ahead

SINGAPORE DAYBOOK : Now Minzhong says it was misunderstood. It dismisses fraud claims but will respond only later; analysts seek strong response

[SINGAPORE] China Minzhong Food Corp has dismissed claims of fraud against it by a shortseller as a misunderstanding of its business and said that it would issue a response by the end of the week.
The company delayed reporting its full-year results from yesterday morning to yesterday evening to address some of the issues raised by shortseller Glaucus Research Group, but those numbers would mean little until Minzhong gives its response, observers said.
"It really has no meaning if people have doubt about the numbers, so the main thing is to restore investors' confidence," Voyage Research analyst Ng Kian Teck said.
Late yesterday, Minzhong reported a 4.9 per cent decline in fourth-quarter net profit to 162.7 million yuan, or 0.25 yuan per share, for the period ended June. For the full year, net profit rose 11.1 per cent to 755.1 million yuan, or 1.28 yuan per share.
Minzhong has declared a dividend of one Singapore cent per share.
Trade receivables turnover days, a metric that Glaucus raised questions about, increased by 31 days to 116 days.
Glaucus this week issued a report alleging that Minzhong faked its past sales numbers and manipulated receivables and capital expenditure to cover its tracks.
In a statement, Minzhong said that Glaucus misunderstood its business. "The company has done a preliminary review of the report and notes that most of the issues raised by Glaucus with regard to the financials of the company were nothing new and arose out of a complete lack of understanding of the company's business model as well as the operating environment in China.
"They have also failed to analyse the company's growth path over the years and have chosen to take snapshots of the company's results at specific times."
Minzhong expects to issue its response by the end of the week, and has extended its trading halt to Friday's close.
On Monday, the company had said it "will take all necessary steps to defend its reputation and will not hesitate to take legal action against those who put up and disseminate false or misleading statements without due regard to their truth and for the purpose of inducing others to deal in securities".
PT Indofood, Minzhong's largest shareholder with a 29.3 per cent stake, is also waiting to hear Minzhong's side.
"Indofood is still awaiting for the response from CMZ," Indofood director Thomas Tjhie said via e-mail. "Currently, Indofood remains committed to its investment in the company." It is the unusually serious nature of Glaucus's allegations that will require an equally strong answer, Voyage's Mr Ng said.
Referring to Muddy Waters attack on Olam International near the end of 2012, Mr Ng said it "was more about accounting treatment, but this one, it's very serious. It's like an outright slap." Minzhong will have to mount a robust defence to survive those allegations, he added.
"What the public wants is for them to address whatever they've raised, especially about the sales channels," Mr Ng said. "Are the sales numbers true? . . . It's quite challenging for Minzhong now, and market confidence is not strong."
Minzhong may even have to consider opening up more of its inner workings than normal, if that is what it takes to refute the allegations.
"I know there are some trade secrets involved, but it would be good if they can show some invoices," said Mr Ng. "They cannot leave the halt with so many questions lying around."
Glaucus said that the incorporation date and regulatory filings of two top customers suggest that Minzhong faked sales during its initial public offering in 2010.
It also claimed Minzhong's regulatory filings in China were inconsistent with its financial filings in Singapore. Minzhong's unusually high profit margins, rising receivables, cash flow and recent capital expenditures are also suspicious, Glaucus said.
Minzhong said: "The company would seek to substantiate in its detailed response to the report that its financials are sound and that there were no fabricated sales or alleged cover-up by the company.
"In particular, the company wishes to highlight that its accounts have been prepared in accordance with Singapore Financial Reporting Standards and audited by external auditors Crowe Horwath First Trust LLP, and there has been no qualification in their reports over the years." (Source: The Business Times)

MARKET SCOOP

Singapore's Fraser & Neave says in beer spat with Myanmar partner
Singapore's Olam Q4 net profit down 48% on higher tax charges
JTC, URA offer 4 industrial sites for sale
Record 21 billionaires in Singaporethis year: Forbes
Ezion secures deal to provide service rig over 4 yrs
Chinavision half-year earnings up on growth in core businesses
China Minzhong refutes Glaucus report, FY13 results to be released this evening
Moody's upgrades Keppel REITto Baa2; outlook stable
China Minzhong says short-seller misunderstands its business model

(Source: The Business Times)

CIMB Securities says...

FRASER & NEAVE | OUTPERFORM | TP: S$6.61

We expect more corporate actions to form the share price catalysts
Meanwhile, we retain our Outperform call with unchanged target price of S$6.61 (still on 20% discount to property RNAV)
We estimate the current share price of FNN implies a 34% discount to RNAV for FCL (in line with the sector average),backed by S$3.3bn of unbooked presales and a low pro forma net gearing of 36%
FNN management held a briefing for sell-side analysts on the demerger of its property entity (FCL) via a proposed separate listing on SGX by undertaking a dividend in specie
For FNN (excl.FCL), management plans to go deeper into its ASEAN markets, with Thailand an obvious longer-term target
Some cost savings are expected on the procurement side as a combined group with Thai Bev -a positive
The bulk of the discussion was on FCL about how synergies can be reaped with TCC
Management says that it is studying the possibility of acquiring TCC's international hotels (excl.Thailand) and sees future development collaboration opportunities in Thailand
With TCC, FCL believes it can be very competitive in that segment
As such, it is likely to be more proactive in the development space. For now, it sees its asset allocation mix as optimum. It is now ready to explore a hospitality REIT, which could come by 1H14
It looks like it is status quo for now with the same assets, mandate and management
But we get the sense that the two new entities are likely to be more aggressive in acquisitions compared to the past
Management says that its Thai shareholders are acquisitive in nature
FNN (ex-FCL), in a net cash position, will be on the look-out for things to buy
For FCL, we believe the prospect of integrating with TCC to form a property behemoth is the long-term driver for the stock
Overall, we expect more corporate activity at the FCL level, including restoring the free float to above 10% before 31 Dec
Management says that a key reason for keeping FCL listed is to be able to tap the equity markets in the future
FNN remains an Outperform

UOB KAY HIAN says ...

EZION HOLDINGS | BUY | TP: S$2.85

Ezion has secured a US$49.1m 4-year bareboat charter to provide a refurbished service rig to support an oil major's oil & gas activities in the Middle East
The oil major is a new client
The rig to be deployed around mid-14
The rig will be owned by a 50:50 JV company between Ezion and Kim Seng Holdings Pte Ltd
Ezion will charter rig from the JV company to re-charter to the oil major
This is a different arrangement from Ezion's past JVs in which it was typical for both the charter contract and rig to be owned by the JV company
Ezion said this time round is different because Ezion was a pre-qualified supplier of the oil major whereas the JV company was not, hence the entire charter contract could only be awarded to Ezion
Ezion will pay the annual charter revenue of US$12.3m to the JV company
All the profit margin is captured by JV company
Rig capex, estimated at US$40m, will be funded by US$12m equity and US$28m debt at the JV company level
Cost of debt is estimated at 6% p.a., which is 1ppt higher than the usual 5% p.a. because the JV company will be utilising floating debt facilities
We estimate a net profit of US$6.6m p.a. from the project, with Ezion's 50% share at US$3.3m p.a.
With the rig deployment around mid-14, this would translate into a marginal net profit enhancement of 0.8% (a 6-month impact) in 2014 and 1.3% in 2015 for Ezion
We estimate the project's ROE at 55% which is well above Ezion's minimum ROE of 30% for new projects
No change in our earnings forecasts and target price of S$2.85 which is pegged at 11x 2014F fully-diluted EPS (adjusted for dividends on perpetual securities and preference shares)
This is 16% above the long-term 1-year forward PE mean of 9.5x for the offshore support vessel (OSV)-owner segment of the offshore & marine sector
Maintain BUY

OSK DMG Securities says...

EU YU SANG | BUY | TP: S$0.92

4Q13 revenue came in at SGD77m, driven mostly by a 23% surge in Hong Kong sales to SGD34m, buoyed by its strong retail and wholesale businesses
We note demand in the territory was supported by a stable domestic market that benefited from increasing Chinese tourist arrivals, as well as satisfactory performance from its first retail store on board a cruise ship under the Star Cruises line
Growth in Hong Kong was partially offset by a 4% dip in Singapore contribution to
SGD17.6m on cautious consumer spending
Sales in Australia rose 15% to SGD9.0m, or 22% growth in local currency terms
This suggests that EYSAN's core markets' GPMs rose to 52%-54%, sufficient to
compensate for Australia's lower profitability at ~40% GPM
Operating margins widened ~0.7ppt on better cost control
Its reported operating profit dipped 1% to SGD24.1m, and would have improved by 18% if Australia and China are excluded
We note that the Australia unit saw a loss of SGD2.8m in 4Q13, or SGD9.0m for the full year, on the opening of seven new self-operated stores in 2H13, and inventory write-offs
We keep our FY14F profit estimates largely intact at SGD20.2m, or +37% y-o-y, and expect earnings to surge 34% to SGD27.0m in FY15
We are also projecting for earnings to recover from a low base a year ago to SGD2.3m in 1Q14, and grow by 21% y-o-y to SGD5.7m in 2Q14
We switch to DCF valuation to better reflect the group's long operating history and 10% profit CAGR since 2001
We assume a 9.1% WACC and terminal growth rate of 3%
This lifts our TP to SGD0.92 (previously SGD0.88)
Maintain BUY



SG: MARKET PULSE: ComfortDelGro (30 Aug 2013)

Stock Name: ComfortDelGro
Company Name: COMFORTDELGRO CORPORATION LTD
Research House: OCBCPrice Call: BUYTarget Price: 1.95




MARKET PULSE: ComfortDelGro
30 Aug 2013
KEY IDEA

ComfortDelGro: Recent weakness creates buy-in opportunity
ComfortDelgro (CDG) was re-awarded the region 4 contract by the New South Wales transport ministry on Thursday, and this should remove any negative overhang for the group's future in one of its key markets of Australia. However, its share price has failed to react to the news and remains weak, which is unwarranted in our view. Although investors may have concerns over rising fuel prices and the potential for rate hikes, CDG is unaffected given its substantial hedge (80%) on fuel requirements for the rest of the year and low gearing position. Therefore, we feel that this recent share weakness creates an attractive opportunity for investors to allocate into this fundamentally healthy company with earnings stability. We upgrade CDG to BUY with an unchanged fair value estimate of S$1.95. (Lim Siyi)


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


NEWS HEADLINES

- Better-than-expected US economic data has increased the odds that the Fed will scale back bond purchases next month.

- Higher taxation levels and challenging market conditions caused Olam's 4QFY13 PATMI to plunge 48% YoY to S$56.8m, in spite of a rise in revenue.

- Lum Chang Holdings' FY13 PATMI rose a marginal 2% YoY to S$21.5m despite a 75% YoY increase in turnover to S$494.6m.

- Fraser and Neave's JV partner in Myanmar Brewery Ltd is trying to oust the conglomerate from the partners' promising beer-making business.

- Guocoland Limited saw its net profit for FY13 tumble 49% to S$32.22m.

- Chinavision Media Group Ltd posted a 30% rise in net profit to HK$133m (S$22m) for 1H13, (versus HK$102.3m in 1H12).

- Oxley Holdings boosted its PATMI to S$38m for 4QFY13 (versus S$1.7m in 4QFY12)as it started to recognise inflows from the more than two dozen projects it launched over the past year.

- Genting Bhd reported a 12.7% YoY fall in 2Q13 net profit to RM466.3m (versus RM534.5m in 2Q12).

Thursday, August 29, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: IHH
Company Name: IHH HEALTHCARE BERHAD
Research House: DBS VickersPrice Call: HOLDTarget Price: 1.50

Stock Name: Wing Tai
Company Name: WING TAI HLDGS LTD
Research House: UOB KayHianPrice Call: BUYTarget Price: 2.67

Stock Name: Goodpack
Company Name: GOODPACK LIMITED
Research House: DBS VickersPrice Call: BUYTarget Price: 2.00




Market Compass


29 August 2013~ Good Morning Singapore!


Singapore Idea Snippets:
29 Aug 2013~ Good Morning Singapore!

Central Execution Team - The Excellence of Execution

This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome.

Global Flash: While You Were Sleeping



Source: Marketwatch

Quote for the day :The only time a woman really succeeds in changing a man is when he is a baby.
- NATALIE WOOD
Singapore: The Day Ahead
SINGAPORE DAYBOOK : F&N: Weighing square feet and fluid ounces. Demerger appears to be a 'price discovery exercise', says analyst
[SINGAPORE] Fraser and Neave's (F&N) split-up will test whether the company's diverse businesses had actually been weighed down by a conglomerate discount.
"F&N's planned demerger and listing of two separate entities appear to be a price discovery exercise for now," CIMB analyst Donald Chua wrote in a report.
F&N on Tuesday said it plans to distribute two shares of its property business, Frasers Centrepoint Ltd (FCL), for every one F&N share held.
FCL will then be listed by way of introduction, with no plans to raise additional capital during the listing. (Source: The Business Times)

MARKET SCOOP

PM makes changes to cabinet and other appointments
IDA launches public consultation on proposed acquisition of OpenNet
Metech reverses loss position
Dukang's Q4 earnings jump on higher sales
Olam gets US$120m IFC loan for Nigerian, Indian projects
Sembcorp to build 2 water treatment plants in Liaoning

(Source: The Business Times)

DBS Securities says...

IHH HEALTHCARE | HOLD | TP: S$1.50

2Q13 headline revenue and net profit dropped by 38% and 61% y-o-y to RM1.68bn and RM157m respectively
The drop was due to the recognition of medical suite sales from Novena hospital in 2Q12, which contributed RM1.2bn and RM193.6m in revenue and net profit, respectively
In addition, 2Q12 profits were boosted by exceptional items, including fair value gains on investment properties
In fact, 2Q13 core net profit (excl. exceptional items and medical suite sales in 2Q12) at RM189m was 60% higher than a year earlier
EBITDA margins (excl PREIT) strengthened marginally by 1.7ppts to 22.5% (2Q12: 20.8%) despite cost pressures
This came on the back of improving revenue intensity and positive EBITDA contribution from Novena Hospital and Acibadem Ankara Hospital
In addition, Acibadem Bodrum Hospital also saw a smaller EBITDA loss in 2Q13
Novena Hospital posted a turnaround in EBITDA contribution, with positive RM2m EBITDA
This is in line with earlier expectations for Novena Hospital to turn EBITDA positive in 2H13
Operational beds are unchanged from 1Q13 at 116, with occupancy estimated at c.50-60%
This is on track to meet our expectation of EBITDA contribution of RM16.8m for FY13FMaintain HOLD while our TP is adjusted slightly to account for the weakening in RM against S$
While we believe the long term prospects for healthcare remain positive and IHH commands a premium due to its scarcity and geographical spread, the stock is already trading at 43x/36x on FY13F/14F earnings

UOB KAY HIAN says ...

WING TAI HOLDINGS | BUY | TP: S$2.67

Wing Tai reported 4QFY13 net profit of S$275.8m (81% yoy) bringing FY13 net profit to S$531.1m (102% yoy)
Core net profit of S$458.1 excluding fair value gains (S$52.1m) and the effect of a change in accounting policy (S$20.9m) was above expectations
The strong contribution from the development properties was underpinned by earnings recognised from Foresque Residences, L'VIV, Helios Residences and Belle Vue Residences in Singapore as well as Verticas Residences in Malaysia
FY12) comprising of an ordinary dividend of 3 S cents and a special dividend of 9 S cents (payout - 32% of core earnings)
NTA per share rose 27% yoy to S$3.62/share
Wing Tai's recent launch of the Tembusu project was very well received with over 220 options granted to date (S$1,400-1,500 psf)
We expect Wing Tai to record strong margin of more than 40% for the project due to the low land cost as this site was formerly an industrial building (Wing Tai's headquarters)
During FY13 Wing Tai sold a total of 318 units (FY12: 225 units) in Singapore and 169
units in Malaysia with a sales value of S$725m and S$130m respectively
Management guided a cautious outlook for the Singapore residential market and believes that the new measure introduced on the Total Debt Servicing Ratio (TDSR) framework for property loans is likely to slow the demand for new residential units in
Singapore
Going forward, Wing Tai is expected to launch the Prince Charles Crescent site and its high-end development at Ardmore Park
Wing Tai's net-gearing dropped further to 0.15x (from 0.17x in end-FY12)
Assuming a comfortable gearing of 0.5x, this would provide headroom of over S$700m
The group is on the lookout for suitable investment opportunities in its core markets of Singapore, Malaysia, China and Hong Kong
Maintain BUY with an unchanged target price of S$2.67/share pegged at 20% discount to its RNAV of S$3.33
Wing Tai's low gearing levels and sufficient cash buffer present good acquisition opportunities

DBS Securities says...

GOODPACK | BUY | TP: S$2.00

While FY13 revenue of US$190.7m (+8% y-o-y) matched our estimate, headline net profit came in slightly above at US$51.3m (+13% y-o-y), 6% ahead of ours and consensus' expectations of US$48m
The key variants were the US$1.4m disposal gain of PPE and US$0.9m forex gain as well as lower-than-expected operating expenses in 4Q13
Goodpack is on track to achieve volume growth of 250k boxes in FY14, underpinned by the firm ramp up of new SR markets in Singapore and Russia
Demand from US/Europe markets seems to be stabilizing and bottoming out. It has also made good progress in autoparts market with the secure of 10 new customers in FY13 and is at an advance stage of an approval process with one of the major OEMs in Europe
Valuation is undemanding for Goodpack, trading at 1 SD below mean of 12x FY14PE and 1.8x P/Bv
Our DCF-based TP is raised to S$2.00 as we roll over to FY14, which translates to 15x FY14PE and 2.3x P/Bv or 2-11% discount to historical mean
In addition, Goodpack also offers 3-4% dividend yield based on an informal dividend payout ratio of about 45%
Company declared final dividend and special dividend totaling 5 Scents for FY13
Reiterate BUY for Goodpack's rosy growth prospects and a lucrative 30% upside potential to our TP
The finalisation of autoparts contracts will serve as an imminent catalyst.



SG: MARKET PULSE: Oil & Gas, Local Retail REITs (29 Aug 2013)

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 2.90

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 12.53

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD
Research House: OCBCPrice Call: BUYTarget Price: 5.64

Stock Name: Semb Corp
Company Name: SEMBCORP INDUSTRIES LTD
Research House: OCBCPrice Call: BUYTarget Price: 6.48




MARKET PULSE: Oil & Gas, Local Retail REITs
29 Aug 2013
KEY IDEA

Oil and Gas: Looking beyond the volatility
YTD, the FTSE Oil and Gas index has generally tracked the broader market, though there have been instances of a divergence in performance. Besides the exploration and production segment garnering more investor interest, we are increasingly positive on the OSV segment, while prospects of the rig market remain bright, underpinned by the sustained high oil price environment. Still, the relatively high-beta O&G sector is very much sensitive to macroeconomic events. The possibility of increasing capital flows from Asia to the US remains, and investors may want to look beyond the short term volatility and focus on the positive longer-term growth prospects of the sector. Maintain Overweight with a one-year horizon, with Ezion Holdings [BUY, FV: S$2.90], Keppel Corp [BUY,FV: S$12.53] and Sembcorp Marine [BUY, FV: S$5.64] as our preferred picks. For investors seeking less volatility in terms of earnings but with O&G exposure, Sembcorp Industries [BUY, FV: S$6.48] is a worthy candidate. (Low Pei Han)

MORE REPORTS

Local Retail REITs: Outlook remains sanguine
Local retail landlords ended 2Q13 on a positive note, with results mostly in line with our expectations. Aggregate leverage for the quarter has also improved sequentially across the board. Notably, a significant portion of the REITs' existing borrowings are either based on fixed rates or hedged. This will likely limit the impact of rising interest rates on the REITs' DPUs and yields. Looking ahead, we are maintaining our positive view on the local retail REITs due to AEI activities and better rental rates for the leases due for renewal. In addition, the local retail landscape has remained largely stable. According to Jones Lang LaSalle (JLL) 2Q13 Singapore property market review report, the growth in rents island-wide is likely to range between 0% and 0.2%, while capital values grow by 2.7%-3.8% in 2013. We are keeping our OVERWEIGHT rating on the local retail REIT subsector. Starhill Global REIT remains as our preferred pick, due to its apparent growth drivers, higher-than-average yield of 6.8% and compelling valuation (0.88x P/B). (Kevin Tan)

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


NEWS HEADLINES

- US stocks advanced for the first session this week, with oil producers leading the gains as the price of crude settled at a more-than-two-year high above US$110 a barrel.

- Sembcorp Industries announced the extension of its wastewater treatment business in China's Liaoning province to two new sites.

- ASL Marine Holdings reported an 83.3% YoY jump in net profit to S$15.2m for 4QFY13 (versus S$8.3m in 4QFY12), on the back of a 27.8% YoY rise in revenue to S$149.5m.

- Intraco has joined forces with Tat Hong Holdings and a Myanmar businessman to set up a JV company to enter the crane rental and excavator distribution business in Myanmar.

- Metech International, a company that deals with electronic waste recycling, has reported a net profit of S$844k for 4QFY13 against a net loss of S$14.7m in 4QFY12.

- Sin Heng Heavy Machinery's FY 2013 net profit rose 47.4% YoY to S$13.76m on the back of a "broad-based improvement across geographical markets and business segments".







Wednesday, August 28, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC
Research House: Credit SuissePrice Call: BUYTarget Price: 1.75

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED
Research House: UOB KayHianPrice Call: BUYTarget Price: 2.85

Stock Name: Silverlake
Company Name: SILVERLAKE AXIS LTD
Research House: OSK-DMGPrice Call: BUYTarget Price: 0.82




Market Compass


28 August 2013~ Good Morning Singapore!


Singapore Idea Snippets:
28 Aug 2013~ Good Morning Singapore!

Central Execution Team - The Excellence of Execution

This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome.

Global Flash: While You Were Sleeping



Source: Marketwatch

Quote for the day : The only means of strengthening one's intellect is to make up one's mind about nothing, to let the mind be a thoroughfare for all thoughts.
- JOHN KEATS
Singapore: The Day Ahead
SINGAPORE DAYBOOK : F&N exits buildings, keeps drinks in hand. Frasers Centrepoint to be spun off into listed entity via in specie distribution of stock
[SINGAPORE] Fraser and Neave (F&N) plans to spin off its property business into a new listed entity via an in specie distribution of stock, taking its largest step yet towards breaking up one of Singapore's most storied conglomerates.
F&N said yesterday that it will distribute, for free, two shares of Frasers Centrepoint Ltd (FCL) for every one F&N share held.
After unwinding intercompany loans, FCL will then be listed by introduction, targeted for November or December.
Following the exercise, F&N will no longer hold any shares in FCL, and its remaining key businesses will be food and beverage (F&B), and printing and publishing.
(Source: The Business Times)

MARKET SCOOP

CAO leases first fuel oil storage space in Singapore
Yale opens controversial college in Singapore
New flat-type for multi-generation families launched
Income ceiling for housing grant raised to $6,500
S'pore PR to wait 3 years to buy HDB resale flat
Maximum tenure for HDB housing loans cut to 25 years
Business receipts of services sector up 7.7% in Q2

(Source: The Business Times)

CREDIT SUISSE Securities says...

GENTING SINGAPORE | OUTPERFORM | TP: S$1.75

We continue to rate GENS at OUTPERFORM, in anticipation of a 2H13 recovery in EBITDA (assuming VIP win rates normalise)
Potential progress on gaming legislation in Japan could also be a wildcard catalyst
The positives:
Singapore has seen a strong rebound in VIP volumes YTD (+34% YoY)
Both GENS and LVS have enjoyed new highs in quarterly rolling chip volumes
At the same time, impairment levels have remained broadly stable, in the range of S$32-45mn per quarter in the past six quarters (compared to a high of S$57mn in 3Q11)
Historical average EV/EBITDA valuations suggest 26% potential upside to GENS' stock price
GENS is also trading at a 25% discount to the Macau average FY14E EV/EBITDA of 3x
The market is sceptical about Japan but should there be progress on gaming legislation, we believe GENS' stock price could benefit. GENS' track record in Singapore and its strong balance sheet put it in a good position to compete in new markets, in our view
Management is optimistic on an initial step in casino gaming legislation by year end
The negatives:
Whilst we expect the VIP win rate to recover in 2H13 and drive a meaningful half-on-half recovery in EBITDA, it is unlikely to make up for the shortfall from the exceptionally low rate in 1H13
As such, we have cut FY13E EBITDA to S$1.3 bn and rolled forward our TP to S$1.75 (from S$1.80)
The authorities are considering tighter measures against civil service members who are frequent patrons of the casinos, potentially requiring disclosure on the frequency of visitations
This followed an incident involving a civil service graft case whereby the money allegedly misappropriated was gambled away at a casino

UOB KAY HIAN says ...

EZION HOLDINGS | BUY | TP: S$2.85

We met up with management last week
Ezion continues to be the only player in the liftboat market in Asia
Its fleet of liftboats and service rigs has increased to 27 units from 17 a year ago
Ytd, Ezion has won seven new charter contracts
Given the high ROE of these projects, it is a surprise that thus far, competition to Ezion has still not emerged
Management gave its rationale: Liftboats operating in Asia are niche assets as their
designs have been modified from the original American designs
For competition to emerge, Ezion's competitors would need to offer designs that are suitable for Asian waters
For asset investors who are non-oil & gas specialists, they may not have adequate knowledge of Asian offshore oil & gas market - and hence the confidence - to invest in these niche assets
A liftboat is usually used to facilitate the maintenance of a fixed offshore oil & gas production platform
North America has a fleet of 250 liftboats servicing 3,257 fixed platforms, or a ratio of 13 platforms per liftboat
The liftboat fleet in Southeast Asia (SEA), the Middle East and West Africa comprises only 62 units against a fixed platform market of 3,266 units, or a ratio of 53 platforms per liftboat
Obviously, there is a large potential demand for liftboats in these markets
Traditionally, these markets use work barges (together with other offshore support vessels) in fixed platform maintenance but they post higher safety risks than liftboats as
they are less stable
Despite the large potential demand, Ezion's management feels real demand still needs to be "created" by convincing Asian oil companies of liftboats' superior productivity
With an expected lower demand for housing loans going forward (following the latest round of government measures on the Total Debt Service Ratio), banks are looking for alternative avenues of lending, including corporate lending
Ezion continues to be courted by bankers and interest rates for new projects remain unchanged at 5% p.a
We expect a sharp earnings ramp-up over 2013-15 with net profit more than trebling as
more liftboats and service rigs commence operation
Ezion's fleet comprises 28 liftboats and service rigs (excluding a liftboat sold in Mar 11)
Twelve units have yet to commence operation
Following its breakthroughs in Indonesia, Malaysia and Vietnam, we expect Ezion to
announce more new charter contracts
Ytd, it has clinched seven new contracts
There are seven funding options available for new projects
These include include: a) internally-generated cash flows, b) sale-and leaseback transactions, c) a higher debt level, and d) JVs
While net gearing as of end-2Q13 was 101%, this is expected to fall rapidly to 69%
and 46% by end-14 and end-15 respectively because of strong operating cash flows
All projects that have been announced - including those that have not commenced operation - are fully funded
We maintain our earnings forecasts
Project execution remains the key risk
Our target price of S$2.85 is pegged at 11x 2014F fully diluted EPS (adjusted for dividends on perpetual securities and preference shares)
This is 15% above the long-term 1-year forward PE mean of 9.5x for the offshore support vessel-owner segment of the offshore & marine sector

DMG OSK Securities says...

SILVERLAKE AXIS | BUY | TP: S$0.82

In line with expectation, SILV reported stellar 4QFY13 results with PATAMI of MYR59.8m (+31.4% y-o-y) on the back of a MYR110.2m revenue (+14.6% y-o-y)
With the final dividend of 1.1 cent, the stock is now trading at an attractive 4.1% yield with strong growth potential
We put our forecasts and TP under review pending the company's analysts briefing
Our most recent TP was SGD0.82 and maintain BUY
Silverlake Axis (SILV)'s FY13 revenue came in flat y-o-y at MYR398.6m as a result of the decline in hardware sales (-80% y-o-y) as well as the fall in contribution of software project services (-44% y-o-y)
We see no signs of concern as hardware sales hardly generated any profits during the year while the amount of software project related work performed through the year was low as most of the major projects - for CIMB Thailand, CIMB Singapore, Thanachart-Siam City Bank and Hong Leong EON Bank - were already close to the completion
On the other hand, SILV saw strong revenue growth in software licensing (+89% y-o-y),
healthy revenue increase in maintenance services (+18% y-o-y) as well as the fresh contribution from the group's newly acquired insurance software business
The change of revenue mix as a result of major project completions resulted in a jump in software licensing revenue, which in turn drove up the margins and profitability
Both the FY13 gross and net profit margins jumped by 9ppts to 63% and 49% respectively
Yield at an attractive 4.1%
In view of its record profitability and robust balance sheet, the group declared a final dividend of 1.1 cents/share, largely in line with our expectation
The full-year FY13 dividend aggregate of 3.1 cents/share translates to an attractive yield of 4.1%, based on the stock's last closing price of SGD0.75



SG: MARKET PULSE: Goodpack (28 Aug 2013)

Stock Name: Goodpack
Company Name: GOODPACK LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 1.69




MARKET PULSE: Goodpack
28 Aug 2013
KEY IDEA

Goodpack Limited: Decent FY13 results
Goodpack's FY13 results were in-line with expectations. Revenue grew by a smaller 7.7% YoY to US$190.9m while PATMI improved 13.4% YoY to US$51.3m as its cost saving initiatives helped to offset higher depreciation and financing costs from a larger fleet and increased borrowings respectively. Similar to last year (FY12), management declared a final dividend of 2 S cents and a special dividend of 3 S cents. Although we lower our revenue forecasts for FY14, we still expect growth improvement following the commencement of key clients' synthetic rubber (SR) operations in Singapore and a new SR contract in Russia. In terms of margins, we only expect a small drop-off as continued cost saving initiatives should keep a lid on logistic and handling expenses. In light of its unchanged fundamentals and recent share price correction, we maintain BUY on Goodpack with a slightly lower fair value of S$1.69 (S$1.80 previously). (Lim Siyi)

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


NEWS HEADLINES

- US stocks fell hard, with the Dow ending at a two-month low, as unease over possible US action against Syria shook global markets.

- Monday's short-selling attack on China Minzhong Food (CMF) by Glaucus Research prompted some local broking houses to either cease coverage of CMF or even the entire S-chip sector.

- Eu Yan Sang International registered a 49% YoY fall in net profit to S$4.7m for 4QFY13 despite an 11% YoY rise in revenue to S$77.3m.

- Wing Tai's 4QFY13 earnings rise 72% YoY to S$275.8m and is proposing to reward shareholders with 12 S-cents in total dividends for FY13 (versus 7 S-cents in FY12).

- IHH Healthcare Bhd registered an improved operational performance in 2Q13, boosted by the ramp-up of new hospitals, as well as a large one-off tax credit write-back.

- Sim Lian Group's net profit for FY13 fell 27% YoY to S$166.9m on the back of higher contract costs and a fall in revenue.

- Ausgroup yesterday reported a 93.6% YoY plunge in net profit to A$525k in 4QFY13 (versus A$8.25m in 4QFY13).






Tuesday, August 27, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Amtek
Company Name: AMTEK ENGINEERING LTD
Research House: DBS VickersPrice Call: HOLDTarget Price: 0.48

Stock Name: Sabana REIT
Company Name: SABANA SHARI'AH COMPLIANT REIT
Research House: UOB KayHianPrice Call: HOLDTarget Price: 1.29




Market Compass


27 August 2013~ Good Morning Singapore!


Singapore Idea Snippets:
27 Aug 2013~ Good Morning Singapore!

Central Execution Team - The Excellence of Execution

This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome.

Global Flash: While You Were Sleeping



Source: Marketwatch

Quote for the day : You cannot create experience. You must undergo it.
- ALBERT CAMUS
Singapore: The Day Ahead
SINGAPORE DAYBOOK : China Minzhong gets ambushed by shortseller

[SINGAPORE] In a sharply timed attack yesterday morning, Californian shortseller Glaucus Research Group sent China Minz-hong shares plunging by more than half after publishing a 49-page report accusing the China vegetable producer of fraud and financial irregularities.
China Minzhong shares fell from $1.015 to as low as 50 cents, before a share trading halt was called by the company at 11.15am. Its last traded price was 53 cents, down a staggering 48 per cent, wiping out more than $300 million from the company's market capitalisation.
China Minzhong said last night that it is reviewing the Glaucus report and will respond shortly. "The company will take all necessary steps to defend its reputation and will not hesitate to take legal action against those who put up and disseminate false or misleading statements without due regard to their truth and for the purpose of inducing others to deal in securities," it said.
Responding to a Singapore Exchange (SGX) query about its trading activity, the company reiterated its compliance with listing rules and said that other than the shortseller's report, it is not aware of any information that will explain yesterday's trading.
In its report, Glaucus cast doubts on China Minzhong's balance sheet in a manner reminiscent of Muddy Waters' attack on commodities trader Olam International last year. Glaucus alleged China Minzhong boosted sales artificially through suspicious capital expenditures and increasing receivables, amid abnormal profit margins and negative free cash flow.
Glaucus also went one step further, alleging that at the time of its listing on SGX in 2010, China Minzhong had already faked sales to its then-top two customers as well as payments to its top supplier.
Said Glaucus: "We believe that Minzhong . . . has so significantly deceived regulators and investors about the scale of its business and its financial performance that we expect trading in its shares to be halted and its shares to be worthless."
China Minzhong's biggest shareholder is PT Indofood Sukses Makmur, which holds a 29.33 per cent stake. The Indonesian food giant's shares fell 5.6 per cent yesterday. It bought part of its stake at end-February this year from Tetrad Ventures, a subsidiary of the Government of Singapore Investment Corporation. Tetrad sold the remainder of its stake to PT Indofood.
Observers have speculated that PT Indofood might even take the company private. Another major shareholder in China Minzhong is global investment firm Franklin Resources, which bought most of its 14.76 per cent stake last year.
Maybank Kim Eng Research's Wei Bin, who had put out a "buy" call with a target price of $1.36 in an earnings preview report yesterday morning, told BT it is difficult to prove if the allegations are true or false at the moment: "We need to wait for the company to come up with some announcements to clarify the questions raised," he said.
China Minzhong is the 11th company targeted by Glaucus, founded in 2011 by former investment banker Matt Wiechert, who then roped in his University of Chicago schoolmate, lawyer Soren Aandahl. Shortsellers such as Glaucus borrow shares to sell in the hope of the price going down so the shares can be bought back cheap for a profit.
The firm's attacks have been hit and miss. Its most recent attack was on New York Stock Exchange-listed real estate website SouFun Holdings in April. But SouFun has since doubled in price.
A notable success was Hong Kong-listed China Metal Recycling. In January this year, Glaucus alleged the company misled the market about the size of its business. Trading in China Metal was immediately suspended. After investigations, Hong Kong's Securities and Futures Commission recently moved to have the company wound up, with provisional liquidators suing the company's husband-and-wife founders for fraud.
China Minzhong was targeted probably because it met the aggressive growth metrics and other statistical outliers that Glaucus had said it screens for to find targets. In its 2012 annual report, the company noted that in the last five years, its revenue had grown at a compound annual growth rate of 41.9 per cent a year, while net profit grew at an average of 33.1 per cent a year.
In its financial statement for the period ended March 31, 2013, China Minzhong reported a 38 per cent rise in revenue to 2.4 billion yuan (S$502 million), and a 16.5 per cent increase in net profit to 592 million yuan.
The company went public in April 2010 at a price of $1.20 a share. Glaucus focused on what the company said were its top customers and suppliers in the initial public offering (IPO) prospectus.
Two major customers, Hong Kong Yifenli Trading and Putian Daziran Vegetables Produce, were singled out. Glaucus said a search on the website of the ICRIS companies registry in Hong Kong showed that Yifenli, which China Minzhong said contributed to its sales from its fiscal year 2007 onwards, was incorporated only in November 2009. Yifenli was a Taiwan-based food distributor according to China Minzhong, but Glaucus claimed it could not find any trace of the company being registered in Taiwan.
Meanwhile, filings with China's State Administration for Industry & Commerce also purportedly show that Putian Daziran had zero revenues and cost of goods sold in 2009. Glaucus said Daziran's inventory balance did not change in 2010, allegedly proving it was not buying vegetables from China Minzhong. It added that Daziran's supervisor Lin Guo Ping was also the legal representative of a Minzhong subsidiary, a connection that was not disclosed.
Glaucus also alleged that China Minzhong fabricated payments to Cheng Du Shu Feng Nong Ye, its largest supplier pre-IPO. The company had been deregistered and stripped of its business licence in February 2010, two months before China Minzhong went public, Glaucus said.
Glaucus then said that upon considering that China Minzhong sells to middlemen before a commoditised product reaches consumers, its yearly fresh produce segment pre-tax margins of 63 per cent to 90 per cent were abnormally high. It also highlighted alleged red flags: increasing receivables and negative free cash flow of one billion yuan since its IPO.
The report was distributed at 9.30am. At 10am, the stock was still trading at $1 a share. But a deluge of sell orders pushed the stock down: 90 cents at 10.30am, 76 cents at 11am, and a low of 50 cents in a frenetic 15 minutes of activity before the trading halt took effect. (Source: The Business Times)

MARKET SCOOP

CAOhalves jet fuel needs in tender after tax change
Singaporeto help foster China, Asean cooperation
Thai tycoon Charoen eyes $500m IPO for F&N REIT: sources
Tiong Woon swings back into profit in FY13 on higher turnover
Cedar cans Trechance RTO, to buy certain Hua Cheng assets instead
Jaya wins S$25.6m charter deal in East Africa

(Source: The Business Times)

DBS Securities says...

AMTEK ENGINEERING LTD | HOLD | TP: S$0.48

Headline net profit of S$10.9m included a S$10.8m gain from the divestment of a factory building
Without this gain, 4Q13 would be a small loss of S$0.1m, compared to S$2m forecast
Key variance was c.S$5m of capacity restructuring expenses
Sales fell 7% y-o-y but rebounded 9% q-o-q to S$160.7m
Except for Mass Storage and Consumer Elec., all segments grew q-o-q and performed better than expected, thanks to new programmes which offset softer end market demand
Tooling sales hit another record high on more wins, indicating a strong pipeline of new progammes awaiting mass production
Gross margin was 14.6% (4Q12:16%, 3Q13:13.5%)
Firstly, high tooling sales would begin to contribute, especially in Casings/Enclosures and Automotive
Notwithstanding weak HDD industry, management is positive on a new baseplate programme
Secondly, margins would sustain or improve, benefiting from continuous consolidation and automation to combat rising labour costs
Our margin assumptions are conservatively kept flat amid volatile market demand
Stronger than expected end market demand would pose margin upsides
TP raised to S$0.48 on earnings rollover to FY14 PE
Customer sentiment has improved but growth finally depends on end demand, which at the moment, remains short term
Hence, we recommend Hold for its 6-7% dividend yield while waiting for more growth conviction to emerge

UOB KAY HIAN says ...

SABANA SHARI'AH COMPLIANT REIT | HOLD | TP: S$1.29

(Sabana) has announced the acquisition of Advanced Micro Devices' (AMD) light industrial building at 508 Chai Chee Lane for S$67.2m (~S$205 psf inclusive of upfront land premium of S$7.7m)
The building is a seven-storey light industrial facility with a GFA of 327,571sf and has
a remaining lease tenure of 46.5 years
The facility is well-located near the Kembangan MRT, and will also be near the upcoming Bedok North (completing 2017) MRT
AMD has committed to leaseback at least 50% of the property for a period of 10 years, with options to renew for a further 11 years
We estimate that the rentals that AMD will be signing are between S$2.50-3.00 psf pm, implying a 5% initial cap rate although this would rise to 7-8% upon fully leasing out the remainder of the facility to third-party tenants
The acquisition will be yield accretive if fully-funded by debt
However this will increase Sabana's gearing level by 3.4ppt to 40.5% from 37.1%, leaving little further headroom for acquisitions
We estimate accretion to DPU of about 3-5% for the acquisition
Equity fund raising on the horizon as gearing shifts above the 40% level
This is likely to be paired with additional acquisitions as management continues to see opportunities for acquisitions in the industrial space
We raise our 2014-15 DPU estimates by 3-5% to factor in the impact of the acquisition and also higher future occupancies for the acquisition
Key near term risks remain the expiry of the master-leases in Nov 13 and also potential equity fund raising to fund further acquisitions
We maintain HOLD with a higher target price of S$1.29 (from S$1.27), based on DDM (required rate of return: 8.1%, terminal growth:1.8%)
Entry price is S$1.12

OCBC Securities says...

CPO STOCKS: OUTLOOK STILL FAIRLY MUTED

Most CPO (crude palm oil) companies reported fairly disappointing 1H13 results recently, no doubt hurt by weaker CPO prices in 2Q13 (CPO prices fell 25% YoY and another 5% QoQ)
Under our coverage, Golden Agri's (GAR) 1H13 earnings only met about 34% of our full-year forecast
Global Palm Resources (GPR) was even harder hit, as its 1H net profit met just 27% of our full year forecast
Wilmar International Limited (WIL) fared slightly better, with 1H13 core earnings meeting 40% of our FY13 forecast, as its substantial downstream business helped to mitigate the poorer upstream showing
But going forward, the outlook for CPO prices remains largely muted, given the sluggish
economy in China (one of the biggest buyers of CPO and other vegetable oils), while even Indonesia's economy1 could be facing increased headwinds due to reduced spending power on the back of a higher than-expected spike in inflation and a sharp weakening in the IDR1
On the supply side, things are not looking too good either - CPO production as well as the other vegetable oil substitutes are expected to increase in 2H13
Based on current estimates, market watchers like Oil World1 believe that "world production is likely to exceed demand"
The Hamburg based industry researcher adds that there is little scope for more growth in demand for vegetable oils to make biodiesel, citing unchanged biodiesel mandates in the EU and "hesitatingly" implemented increases in Brazil and Argentina1
Most of the plantation stocks have corrected quite a bit of late - on average, we estimate
that these stocks are down about 17% YTD, versus the STI's 3% slide, making valuations less demanding
But we note that there could still be earnings disappointments for upstream players should CPO prices fall further
We have a SELL on GGR and are reviewing our Hold rating on GPR
While we have a HOLD on WIL, its downstream business may be vulnerable to further
economic contraction in China



SG: MARKET PULSE: Tech Sector, Suntec REIT (27 Aug 2013)

Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED
Research House: OCBCPrice Call: HOLDTarget Price: 0.56

Stock Name: SuntecReit
Company Name: SUNTEC REAL ESTATE INV TRUST
Research House: OCBCPrice Call: BUYTarget Price: 1.80




MARKET PULSE: Tech Sector, Suntec REIT
27 Aug 2013
KEY IDEA

Technology Sector: Slightly improved sentiment
Under our tech sector coverage, Venture Corp (VMS) reported earnings which were in-line with our expectations for the recently concluded 2QCY13 results season. However, core PATMI for ECS Holdings missed due to weaker-than-estimated gross margin. Encouragingly, a number of companies which we spoke to highlighted an improvement in sentiment amongst their key customers, which is in-line with the expected uptick in the global economy. However, we maintain NEUTRAL on the tech sector, as we believe that the economic recovery remains fragile. ECS [BUY; FV: S$0.56] is still our preferred pick within the sector given its cheap valuations (FY14F PER of 5.0x and P/NTA of 0.5x). (Wong Teck Ching Andy)

MORE REPORTS

Suntec REIT: New city taking shape
Suntec REIT announced on 15 Aug that it has established a US$1.5b Euro Medium Term Note programme. We believe Suntec REIT may use this to address part of its refinancing needs due in 2014. If so, this will lock in part of its debts into fixed rates, enhance its debt maturity profile and improve its unencumbered asset ratio. Looking ahead, we remain positive on Suntec REIT's performance. While its 2Q13 NPI and distributable income were down 38.5% and 18.7% YoY respectively due to the concurrent execution of Phases 1 and 2 of the remaking of Suntec City, we believe that the worst is likely over given that Phase 1 enhancement works were completed in Jun and the retail space there has since become operational. At current price, Suntec REIT trades at one of the lowest P/B in the S-REITs sector at 0.73x, while offering a compelling FY14F yield of 6.9%. We are revising our fair value from S$1.85 to S$1.80 due to higher risk-free rate. As valuations remain attractive and outlook is positive, we maintain BUY on Suntec REIT. (Kevin Tan)

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


NEWS HEADLINES

- US stocks closed lower in light volume after Secretary of State John Kerry called Syria's actions 'inexcusable' and a report said the US would hit its debt limit in Oct.

- Fraser and Neave will gain an effective way to monetise its assets by creating a hospitality real estate investment trust, analysts say.

- Silverlake Axis posted a 21% YoY increase in PATMI to RM196m for FY13 as a shift to higher-margin products helped to overcome flat revenue growth.

- Cordlife Group saw its FY13 net profit rise nearly 95% YoY to S$13.5m due to healthy revenue growth, strong margins and a S$2.7m one-time gain from disposal of a stake in associate China Stem Cells (South) Co.

- FJ Benjamin Holdings reported a 68% YoY drop in PATMI to S$4.45m for FY13 as sales in its North Asian timepiece business declined on slower economic growth in China and reduced tourist spending in Hong Kong.

- 4QFY13 earnings rose 10% YoY to S$9.2m at Civmec, helped by a R&D tax incentive.

- Tiong Woon Corporation Holding reported a net profit of S$17.6m for FY13, reversing a net loss of S$4.85m in FY12.







Monday, August 26, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED
Research House: OSK-DMGPrice Call: HOLDTarget Price: 1.10

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD
Research House: OCBCPrice Call: HOLDTarget Price: 0.975




Market Compass


26 August 2013~ Good Morning Singapore!


Singapore Idea Snippets:
26 Aug 2013~ Good Morning Singapore!

Central Execution Team - The Excellence of Execution

This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome.

Global Flash: While You Were Sleeping



Source: Marketwatch

Quote for the day : Movies can and do have tremendous influence in shaping young lives in the realm of entertainment towards the ideals and objectives of normal adulthood - WALT DISNEY
Singapore: The Day Ahead

SINGAPORE DAYBOOK :DC rate hikes expected to be conservative. Chief Valuer may factor in potential impact of the Total Debt Servicing Ratio framework, suggest some analysts.

[SINGAPORE] Development charges are generally expected to go up from Sept 1 on the back of higher land prices over the past six months. However, the pace of hikes may be conservative in line with the objective of promoting a stable property market, said some property consultants polled by BT.
Development charge (DC) is paid to the state in exchange for the right to enhance the use of certain sites or to build bigger projects on them. In addition to being tracked in property circles as they can affect redevelopment sites with a sizeable DC component, DC rates are seen as the government's reading of land and property values.
The rates are revised every six months taking into account current market values and stated according to use groups across 118 geographical sectors.
For the upcoming revision, property consultants expect the average DC rate for commercial use to rise between 3 and 10 per cent. For landed residential use, a smaller rise is predicted, between 0 and 5 per cent.
Increases forecast for the average DC rate for non-landed residential use vary widely: 0-3 per cent for Colliers, 3-5 per cent for Jones Lang LaSalle and 10-20 per cent for CBRE.
For the average industrial use DC rate too, CBRE has the most bullish forecast: 10-15 per cent growth. JLL expects the increase to be sub-one per cent and Colliers, 0-3 per cent.
JLL says the average DC rate hike for hotel use will be under 5 per cent and Colliers, 3-8 per cent.
DC rates are revised by the Ministry of National Development in consultation with the Chief Valuer (CV).
In the March 1, 2013 revision, the average DC rates for commercial and hotel use were jacked up significantly by 23.7 per cent and 26.1 per cent respectively. These were the market segments spared the January 2013 cooling measures, notes Colliers International consultant (research and advisory) Tay Huey Ying.
On the other hand, the residential and industrial property sectors, which were the subject of the cooling package, saw just a marginal increase or were left untouched - despite transaction evidence pointing to DC rates trailing land prices, she added.
For the March 1 revision, the average DC rate for industrial use inched up 0.6 per cent and that for landed residential use, 3.9 per cent. Non-landed residential DC rates were left completely untouched. "This was possibly the result of CV giving due consideration to the potential impact of the January 2013 cooling measures," says Ms Tay.
"For the upcoming review, CV is likely to give similar due consideration to the potential effects of the Total Debt Servicing Ratio framework introduced in late-June and affecting the purchases of all types of properties. Consequently, CV is likely to adopt a conservative stance when deciding on the extent of hikes in DC rates applicable for the coming six months," she added.
JLL's SE Asia research head Chua Yang Liang too expects the "outcome of the DC revision exercise to align with the government's overall intention of having a stable and sustainable property market as well as a healthy collective sales market (to promote overall urban regeneration and asset renewal), where DC rates can have a bigger impact".
Alan Cheong, research head of Savills Singapore, said: "Among the various use groups, DC rates for commercial use are likely to rise the most island-wide due to exponential price gains for strata shop and office units. Increases of up to 20-25 per cent in certain locations will not be surprising. An example would be Sector 109, where retail units at King Albert Park project have achieved high prices."
CBRE Research associate director Desmond Sim does not expect any major changes in commercial use DC rates in the CBD given their already high base, but predicts hikes of up to 10 per cent in suburban hubs with growth potential such as Jurong East, Woodlands and Paya Lebar.
Dr Chua expects Sector 27, which includes the Middle Road location, to post the biggest hike of 8-12 per cent, supported by the price for Bright Chambers' collective sale, which was 70 per cent above the land value implied by the sector's current DC rate for commercial use.
Ms Tay says that the commercial DC rate for Sector 112 (which includes Jurong East), which was raised by 15.4 per cent in the last revision, could see a further 8-12 per cent appreciation. A plot in Venture Avenue was sold at a state tender for $1,009 psf ppr in March, 25.7 per cent above the DC rate-implied land value. Morever, market watchers expect continuing buzz in the location to allow land values to keep trending upwards.
For non-landed residential use, Knight Frank research head Alice Tan predicts the biggest DC rate jump of around 15 per cent will be in Sector 112 (which also includes the Pandan/West Coast areas). She cites the sale of a Faber Walk plot in June at $687 psf ppr - a 35 per cent premium over the DC rate-implied land value. Dr Chua says Sector 100 has potential for an over-5 per cent rate hike this round, citing the en bloc sale of Yi Mei Garden in Tampines Road at 130 per cent above the DC rate-implied land value. Colliers says DC rates could rise 10-15 per cent in Sector 74 (which includes Tiong Bahru Road) and the adjacent Sector 80 (Kim Tian Road, Jalan Membina).
Tuas, Woodlands, Mandai and Ubi are among candidates for above-average increases in industrial use DC rates going by prices achieved at state tenders.
(Source: The Business Times)

MARKET SCOOP

Prima commits to rehiring workers till 68
Sabana Reit to buy Chai Chee Lane property for S$68.2m
Centurion's unit submits highest bid of S$80.8m for Woodland site
Hafary FY net profit jumps on S$22.7m gain
S'pore industrial output seen edging higher in July: poll
Singapore's inflation edges up to 1.9 per cent in July

(Source: The Business Times)

DBS Securities says...

SINGAPORE REITS

Flows presiding over fundamentals
Despite reporting a firm set of financial performance in 2Q13 (growing top line and stable interest costs), S-REITs share prices continue to remain under pressure
The weakness in share prices appears to derive from fund outflows and heightened required returns rather than weakening fundamentals
Volatility to stay; not time to pile in
While valuations for the sector appear more palatable at 1.05x P/Bk NAV, FY13-14F yield of 6.3%-6.7%, we believe that volatility is here to stay
Looking back at historical performance as a guide, S-REITs traded within a volatile range in times of rising interest rates (through the previous rate hike over 2004-2006) with only a sustainable re-rating kicked-start by a period of high DPU growth of c13% over 2006-2008
This period also coincided with the S-REITs trading at a tighter than average yield spreads of 250 bps
Our forecasted slower growth of c5% over FY13-14F implies the risk of thinning spreads coming from further bond yield hikes (DBS forecasts 10 year bonds to spike a further 30 bps from current levels)
Thus, we believe that as a sector, the S-REITs appear fairly priced at yield spreads of 370-380bps
Adjusting to a more volatile environment; further downside if bond yields spiked above 3.5%
As we update assumptions to reflect higher discount rates (+0.05 in average betas and higher interests) as the sector negates its way through the current interest rate upcycle, our TPs are reduced by up to 10%
Further sensitivity analysis of the impact of further hikes in bond yields to 3.5%/4.0 and required returns (pegged to 2009 levels) imply further downside of between 4% and 20% for most S-REITs
A right price for everything
Amidst the "blood in the street" we found certain S-REITs that have fallen below our bear case TPs, implying that most of the negatives are already priced in
Selective BUYs in CDREIT, Cache, Suntec and CRCT

DMG OSK Securities says ...

VARD HOLDINGS LTD | NEUTRAL | TP: S$1.10

Vard won a NOK800m (USD131m) repeat order from Farstad for an offshore subsea construction vessel (OSCV), bringing its YTD order win to NOK11.3bn
We maintain our EPS estimates but see some upside risks to our new order forecast of NOK12bn
We like Vard for its strong positioning in building high-end offshore support vessels
(OSVs) and its attractive valuations at 7.4x FY14F P/E and EV/EBITDA of 3.9x
Rising orderbook erases concerns on visibility
We estimate that the new order lifted Vard's YTD order win to NOK11.3bn - accounting for 94% of our FY13 forecast of NOK12bn - and unbilled orders to NOK21.2bn (USD3.48bn)
Vard has secured NOK7.3bn worth of new orders in August alone compared with NOK4bn in 1H2013
Investors were concerned about the company's thin orderbook when its 2Q13 results were announced but recent announcements should put their concerns to rest
Repeat order likely to carry better margins
We are positive on this order as it is a repeat order with Vard's own design
A similar unit was ordered by Farstad in Feb 2013 and scheduled for delivery in 1Q2015
The latest order will be built based on VARD 3 07 design with a total length of 143 metres, beam of 25 metres and deck space of more than 1,800 sq m
The vessel can carry three remote operating vehicles (ROVs) and accommodate 130 people
The hull will be fabricated in Vard Tulcea in Romania and we expect the final delivery from Vard Langsten in Norway in 3Q2015
Maintain BUY, with SGD1.10 TP
We value the stock at a 10x FY14F P/E
The key catalyst is the potential recovery in margin from the lows in 2Q2013
Key risks are further delays and poor cost control in Brazil

OCBC Securities says...

UNITED ENVIROTECH LTD | HOLD | TP: S$0.975

United Envirotech Ltd (UEL) has just secured a RMB100m BOT (Build, Operate, Transfer) contract in Shandong Province, China; this to construct and operate a 30k m3/day municipal waste-water treatment plant
Scheduled to be completed by 3QCY14, it will use the company's membrane bioreactor (MBR) technology and will be built underground, just like the 100k m3/day one it built in Guangzhou City in 2010
As before, UEL plans to fund the project using the proceeds from the CB issue and share placement to KKR and bank financing
Based on its usual 40% equity/60% debt split, UEL should have no issues with coming up with S$8m of cash, given its cash balance of S$25.9m as of end Jun 2013
Recall that UEL can also tap on the recently launched US$300m MTN programme
Noting that the latest project (which will reach 80k m3/day upon completion of Phase 2) is a follow-up of the 100k m3/day membranebased drinking water project it secured in Yantai last year, management remains upbeat about its prospect there and intends to
continue to secure more similar projects in Shandong and other parts of China
Despite the latest contract win, we note that it will only meet around 20% of our new contract wins expected this year; hence, we opt to leave our forecasts unchanged for now
Separately, UEL has entered into an agreement to acquire 100% of Memstar Technology Ltd's (MTL) membrane operations for S$293.4m - paying S$73.354m in
cash and issuing 200.055m UEL shares at S$1.10 each
While the move is positive in the longer term, the stock could see a large dilution on the completion of that deal
As such, we are also more inclined to maintain our HOLD rating, although the current upside to our unchanged S$0.975 fair value (13x FY14F) is around 8%