03 Sept 2013 ~ Good Morning Singapore!
Central Execution Team - The Excellence of Execution
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Global Flash: While You Were Sleeping
Source: Marketwatch
Quote for the day : From your parents you learn love and laughter and how to put one foot before the other. But when books are opened you discover that you have wings.
- HELEN HAYES
Singapore: The Day AheadSINGAPORE DAYBOOK :Minzhong recovers as Indofood gallops in. Stock shoots up to regain lost ground as key shareholder makes bid at $1.12 a share [SINGAPORE] Hit hard by a short-seller last week, China Minzhong resumed trading yesterday with a vengeance as major shareholder Indofood Sukses Makmur flexed its muscles with a general offer of $1.12 a share.
Indofood made its offer at the same price at which it last upped its stake to 29.33 per cent six months ago, dispelling worries that it would increase its stake on the cheap.
Its offer came about after it acquired another 3.9 per cent of China Minzhong's issued shares in married deals yesterday at $1.12 a share, pushing its stake past 30 per cent and triggering the mandatory takeover offer.
When trading resumed in the late afternoon yesterday following a trading halt since last week, China Minzhong shares exchanged hands furiously. In the space of one- and-a-half hours, 174 million shares were traded and the counter closed slightly above the offer price at $1.125, up 59.5 cents or 112 per cent. Indofood itself fell 9.2 per cent to 5,900 rupiah a share. (Source: The Business Times)
MARKET SCOOP
Chasen Holdings secures S$9.1m in new contracts for Q2
TEE Land's associate to buy Thai property firm for S$8.3m
PSL to rid two loss-making firms toKH Foges
Forterra Trust adds 3,404 sqm space to Shanghai mall
China insurance funds target Singapore properties: CBRE
Indofood offers to buy China Minzhongat $1.12/shr as Glaucus keeps strong sell
(Source: The Business Times) OCBC Securities says... RAFFLES MEDICAL | BUY | TP: S$3.42
Raffles Medical Group's (RMG) share price has fallen ~5% since the start of Jul, and we believe this may have been caused by concerns over the impact of the weakening IDR on RMG's Indonesian patient visits, coupled with the broad market weakness
RMG updated us that it has not felt any significant effects of this on its medical tourism figures
We believe this is because a large proportion of its foreign patients come to RMG for the treatment of more acute illnesses
Demand for these cases tends to be more price inelastic in nature
However, there could still be some negative impact on elective surgeries done, in our
view, as patients may choose to delay such procedures
A mitigating factor could be RMG's competitive pricing vis-à-vis its local peers, which
may allow it to capture some market share from its competitors for foreign patients who decide to proceed with their treatment but prefer a cheaper alternative in Singapore without compromising on quality
Sale of property to bolster cash pile RMG recently entered into a sale and purchase agreement for the disposal of Raffles Medical Management (which owns the Thong Sia
commercial podium) for S$120m
This represents a 30.3% and 22.4% premium over its purchase price (acquired in Apr 2011) and latest valuation (as at 31 Dec 2012)
Proceeds would be used for RMG's expansion plans as it is negotiating on a collaboration for a possible integrated international hospital development in Shenzhen, China, which requires ~S$150m of capex (spread over three years)
We also do not rule out the possibility of RMG paying a special dividend or increasing its ordinary final dividend payout as a means of rewarding its shareholders
Reiterate our BUY rating RMG would recognise a net gain of ~S$21.4m upon the completion of sale of this asset (expected on 31 Oct 2013), which would boost its
earnings for FY13
However, this does not affect our valuations on the group as we view the gain as a non-recurring item
We maintain our BUY rating and S$3.42 fair value estimate on RMG
JP MORGAN says ...
SINGAPORE REITS
Singapore REITs (S-REITs) are currently trading at a 6.4% FY14E yield, a 372bp spread over 10-year government bonds, and 0.97x P/BV following the 21% decline since May
We believe that while the sector is not yet trading at distressed valuations, the market has priced in a significant amount of risk related to rising interest rates, and we forecast a 17% total return
We further stress-test our assumptions, and reduce our PTs by 11% on average to reflect a normalized valuation in a rising-rate environment
We prefer large-cap REITs and upgrade A-REIT to Overweight
We upgrade CDL Hospitality Trusts to Neutral on valuations
Within the Singapore real estate space, we still prefer developers over REITs
We further stress-test our assumptions for earnings estimates and fine-tune our estimates to price in refinancing costs at a normalized level of 3%
We put back our valuation assumptions to pre-QE levels, with a risk-free rate of 3% and a risk premium of 4.5%
We also raise our cap rate assumptions back to through-the-cycle levels, which are 50-75bp above current transaction cap rates
Consequently, our Jun-14 PTs fall by 11% on average
We believe the DPU growth profile will supersede dividend yield as one of the key share price drivers for the sector, especially in the current rising-rate environment
We also note an asymmetric sell-off in the liquid names and believe that the four large cap REITs are now trading at undemanding valuations
While we continue to prefer developers over REITs, with CapitaLand and CapitaMalls Asia being our top picks, we are now more comfortable with the S-REIT sector and see selected REITs as trading close to attractive levels
We upgrade A-REIT to OW given what we believe to be its reasonable valuation, good liquidity, and strong DPU growth
We also upgrade CDL Hospitality Trusts to N on valuations
CapitaMall Trust and Suntec REIT are our top REIT picks CREDIT SUISSE Securities says... AMTEK ENGINEERING LTD | NEUTRAL | TP: S$0.56
Amtek's 4Q13 net profit of US$10.9 mn (25% YoY) was better than expected with help from gain on sale of properties
Overall, while group revenue weakness (-7% YoY) continued, there were signs of bottoming in certain segments and margins were resilient
Reversing two years of revenue decline, some of the key segments are showing signs of bottoming: 1) casings sales have started growing due to new programmes; 2) increasing market share in automotives with new programme wins; 3) continued record tooling sales could mean higher volumes going into FY14
The key risk remains end demand
With the exception of mass storage, other segments should be helped by a recovery in global demand which could be further boosted by new programme wins
We lower our target price to S$0.56 (from S$0.70), and revise down our EPS estimates by 44-46% driven mainly by lower revenue assumptions
While timing of a demand recovery still remains uncertain, bottoming of profits, cheap valuations (6x P/E) and defensive dividend yield of 7-8% should provide downside support
Maintain NEUTRAL |
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