SG: MARKET PULSE: Fortune REIT, DBS, Yoma, SingPost, FEHT (1 Aug 2013)

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 18.28

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.87

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.32

Stock Name: Far East HTrust
Company Name: FAR EAST HOSPITALITY TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.01

MARKET PULSE: Fortune REIT, DBS, Yoma, SingPost, FEHT

1 Aug 2013

KEY IDEA Fortune REIT: MOU for Kingswood Ginza property Summary: FRT has entered into a non-binding MOU in connection with the acquisition of 100% of the issued share capital of a target company by FRT and assignment of the shareholder loans to FRT. The target company owns Kingswood Ginza Property, which comprises the entire Kingswood Ginza Mall as well as other retail, kindergarten, parking lots and ancillary spaces. The indicative purchase consideration is HK$5,849m. 142,962,000 new units, representing an increase of 8.4% of the total number of units currently in issue (excluding the new units), have been placed out at HK$6.82 each. The net proceeds of ~HK$947m will be used to partially fund the proposed acquisition. The remainder will be funded through new facilities. In our model, we assume that the acquisition will be completed by mid-September. While the acquisition is likely to be accretive, we note the continued increase in bond rates since late June, and hence lift our risk-free rate to 2.3% from 2.0%. Incorporating a higher expected market return of 13.5% as well (13.0% previously), we lower our FV to HK$6.95 from HK$7.51. On valuation grounds, we downgrade FRT to a HOLD. (Sarah Ong) MORE REPORTS DBS Group: 2Q in line; ended Danamon bid Summary: DBS Group Holdings posted 2Q net earnings of S$887m this morning, up 10% YoY and -7% QoQ. This is in line with consensus estimate of S$883m. Net Interest Margin (NIM) eased off from 1.72% in 2Q12 and 1.64% in 1Q13 to 1.62% in 2Q13. Loans grew a decent 5% from last quarter to S$234.8b by Jun 2013. In terms of fee income, the top performers were Investment Banking, up 82% in 1H to S$111m, followed by Wealth Management (+44% to S$214m) and Stockbroking (+29% to S$119m). An unchanged interim dividend of 28 cents has been declared. Stock will trade ex-dividend on 15 Aug and dividend will be paid on or about 7 Oct 2013. Meanwhile, DBS has also announced last evening that the long delayed acquisition of PT Bank Danamon Indonesia has lapsed. However, while this is a slight disappointment for its Indonesian strategy, it is not totally unexpected as this proposed acquisition has been long delayed with no clear outcome. We do not expect the market to have included any possible contribution from this proposed deal and as such do not expect this to impact earnings forecasts for the next two years. Meantime, do note that our pre-results rating was a BUY with fair value estimate of S$18.28. We will provide more details after the media and analysts' briefings later in the day. (Carmen Lee) Yoma Strategic Holdings: Key catalyst ahead - the Landmark Project Summary: Yoma reported 1QFY14 PATMI of S$0.4m, 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 below view - forming only 3.7% of our full year forecast - due to a slower than anticipated pace of recognition at Star City and higher staff costs. The group announced that it has entered into an agreement with a third party investor for the sale of LDRs for five buildings (1043 units) in Zone B of Star City and would receive incentive fees if certain sales targets to end buyers are met. We continue to await the completion of the Landmark Project acquisition, which would likely be a key catalyst for the share price ahead. Maintain HOLD with an unchanged fair value estimate of S$0.87 (20% premium to RNAV). (Eli Lee) Singapore Post: Expecting another steady quarter Summary: Singapore Post (SingPost) will be announcing its 1QFY14 results after market close on 2 Aug 2013. We expect net profit to be around S$35m, which would represent about 24% of our full year estimate. Expenses are likely to remain elevated due to inflationary cost increases, growth in volume-related expenses and other administrative costs and continued investments. Looking ahead, we expect the group to continue to grow inorganically as it will be the fastest way to diversify from the mail business. As the group increases its exposure to faster-growing businesses such as the logistics and e-commerce segments, we increase our terminal growth assumption from 1.5% to 2.0%, thus bumping up our fair value estimate from S$1.23 to S$1.32. Maintain HOLD. (Low Pei Han)

Far East Hospitality Trust: Rendezvous acquisition - Issue price for new stapled securities Summary: Far East Hospitality Trust (FEHT) has announced the issue price of new FEHT stapled securities to be issued to the The Straits Trading Company (as partial consideration for the proposed acquisition of Rendezvous Grand Hotel and Rendezvous Gallery), the Far East Organization (FEO) group of companies (pursuant to the equity placement to the FEO group), and the REIT manager (as payment for 80.0% of acquisition fee payable in relation to the acquisition). The issue price is at S$0.9302 per stapled security, based on the volume weighted price for FEHT trades done on the SGX for the period of 10 business days commencing from the day on which the existing stapled securities trade ex-distribution i.e. the period from 18 July 2013 to 31 July 2013. The trading of the 148,304,059 in aggregate of new stapled securities is expected to commence today, 1 Aug, at 2pm. Pending the 2Q13 results which will be released next week, we maintain our FV of S$1.01 and HOLD rating on FEHT. (Sarah Ong) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks on Wed ended little changed after the Fed offered few clues on potential changes to its monetary policy. - SGX-listed companies will have to hold their general meetings in Singapore beginning 1 Jan 2014 and conduct poll voting in two years' time. - SGX has launched long dated order types for securities, allowing investors to retain buy or sell orders for a maximum of 30 days. - StarHub has launched a high-speed Ethernet network for financial traders which it says is four times faster than the existing one.