OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: UOB KayHian

Price Call: BUY

Target Price: 0.93

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: Nomura

Price Call: HOLD

Target Price: 1.52

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.32

Market Compass

25 September 2013~ Good Morning Singapore!

Singapore Idea Snippets:

25 Sept 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 iPod completely changed the way people approach music. - KARL LAGERFELD Singapore: The Day Ahead SINGAPORE DAYBOOK :Reit flotations shore up Q3 property investment sales. Third-quarter tally of more than $13b highest since Q3 2007 [SINGAPORE] Property investment sales - which refer to big-ticket transactions of at least $10 million - have crossed $13 billion this quarter, roughly double the previous quarter and the strongest showing since Q3 2007. This quarter's figure has been buoyed by three real estate investment trust flotations (involving nearly $5.7 billion in asset sales), two government land sale sites (at Telok Ayer Street and in Yishun totalling $2.35 billion to Frasers Centrepoint) and the $1.16 billion sale of Grand Park Orchard hotel (including Knightsbridge mall) to Bright Ruby Resources, controlled by a Du family from China. Industry observers are not counting on a repeat performance next quarter. Figures from Savills Singapore show that investment sales have risen to $13.4 billion from $6.4 billion in Q2 and $8.7 billion in Q3 last year. (Source: The Business Times) MARKET SCOOP Geo Energy units ink mining related deals Ley Choon bags 4 contracts worth S$30.6m this month Singapore casinos trump Macau with tourism aces Singapore industrial output seen edging up in Aug: poll Smaller pre-school operators to receive S$40m boost over 5 years NTU, 360ip launch S$5.6m centre to promote SME growth in S'pore (Source: The Business Times) UOB KAY HIAN says... STARHILL GLOBAL REIT | BUY | TP: S$0.93 Upgrade to BUY (from HOLD) with a marginally higher target price of S$0.93 (from S$0.92) Starhill is offering the highest yieldsfor a Singapore-centric retail REIT with a forward yield of 6.4%, which is 40-100bp above comparable retail S-REITs and is 60bp above the sector average yield of 5.8% P/B for Starhill is also the lowest amongst its retail S-REIT peers at 0.89, 20bp below the sector average of 1.09 Locking in long-term financing following the drawdown of S$422m 3-year and 5-year loans and ¥700b (S$88m) 3-year loans All-in-cost of debt for the new loans is a favourable 2.4%, compared with an average interest rate of 3.03% as at 2Q13 Following the refinancing, Starhill Global REIT (Starhill) will not have any refinancing requirements until 2015 Building sustainability for the long termas although the new loans will only result in marginal cost savings, due to the lower proportion of yen-denominated loans (11% of outstanding loans from 19%), the refinancing enables Starhill to extend its debt maturity (3.5 years from 1.2 years in 2Q13) and lock in the current low financing costs In addition, Starhill has also fixed or hedged 94% of its debt via interest rate swaps and caps, limiting cost upside The new loans are also unsecured, enabling Starhill to raise the proportion of unencumbered assets to 79% from 42% This, coupled with the credit rating upgrade by Standard and Poor's (to BBB+), will mitigate the impact of rising interest rates on Starhill's distributions NOMURA Securities says ... GENTING SINGAPORE | NEUTRAL | TP: S$1.52 Action: Upgrade to Neutral; Street expectations more realistic Following a 40% cut in street FY13F EBITDA estimates since 2012, we feel that our revised FY13/14F EBITDA estimates of S$1.26bn/1.4bn are a much more realistic assessment of Singapore's baseline gaming revenue potential, taking into account a volatile win % and seasonal fluctuations With Singapore tourist arrivals moderating to single digits (YTD arrivals up 8% y-y), and this being reflected in Sentosa traffic, we forecast a mid-high single digit growth in RWS's top-line We argue that our and consensus earnings have limited downside risks now, and this should support the share price at current levels We tweak our FY13F/14F EBITDA estimates by -7%/+5% to build in a weak performance in 1Q13F due to a lower win rate However, we now value GENS at mid-cycle, as we no longer see a reason for it to trade at a discount given limited earnings downside We raise GENS to Neutral, with a TP of S$1.52/share (5% upside) Valuation: Target 12.5x adj FY14F EV/EBITDA, historical average Following a transfer of coverage, we ascribe a 12.5x adj multiple to FY14F EBITDA to value GENS, which is its historical average This implies a 25% discount to Macau-listed names' average multiple Macau stocks have seen a re-rating driven by mass market volumes, which are unlikely to occur in Singapore, and are additionally supported by better yields, RoE Catalysts: Upside possible through overseas ventures (eg Japan) With Singapore's market maturing, upside in GENS's earnings is possible either through a sharp upswing in VIP volumes / win rate (difficult to forecast) or a deployment of its huge cash balance in overseas ventures, like Japan, where there are uncertainties on timing and competition DBS Securities says... YANGZIJIANG SHIPBUILDING | BUY | TP: S$1.32 Yangzijiang is hosting a yard visit on 25 Sept in conjunction with the launching ceremony of its first 10k TEU containership Launching is the most important stage of construction, marking the birth of a new ship All the blocks are mounted and joined, and the vessel should be ready to "float" at this stage The on-track construction progress of Yangzijiang's first large containership is a confidence booster The first batch of seven 10k TEU containership orders will likely yield better gross margins of 15-20% vs earlier expectation of low teens, in the light of favourable steel cost and forex as well as smooth execution As such, we are lifting FY14F shipbuilding gross margins by 2ppts to 18% We are also raising order win assumption for FY14 to US$2.5bn (from US$2bn), on the back of active shipbuilding enquiries and the sizeable US$2.87bn worth of options that could be exercised in the coming quarters Taking these into account, our FY14F net profit is raised by 6.3% to Rmb2.2 bn We have also introduced FY15 earnings and have incorporated property income from FY15 We have changed our valuation methodology from price to book, to SOTP, to better reflect valuation for the various segments of shipbuilding, investment and property While some investors have concerns regarding Yangzijiang's investment segment, it is a supplementary business for Yangzijiang and its weighting should fall as the shipbuilding segment recovers Bad debts have been minimal with proper evaluation processes and risk management procedures in place As one of the most cost efficient yards in China, Yangzijiang is the best proxy to the shipbuilding recovery