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

Stock Name: ECS
Company Name: ECS HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.56

Stock Name: SuntecReit
Company Name: SUNTEC REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target 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)

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