SG: MARKET PULSE: CDLHT, Olam, Geo Energy (3 Sep 2013)

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: HOLD

Target Price: 1.56

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.45

MARKET PULSE: CDLHT, Olam, Geo Energy

3 Sep 2013

KEY IDEA CDL Hospitality Trusts: Industry remained challenging in July Based on STB figures, we estimate that RevPAR for Singapore hotels fell 8% YoY for July. 3Q13 for the sector as a whole could well show a contraction like in 1H13. This is disappointing as we were anticipating a possible YoY growth in RevPAR figures for July and August, based on industry sources. CDLHT's hotels in Singapore are best classified as being in the Mid-tier/Upscale categories. It is worth highlighting that we anticipate a huge growth of 10.9% p.a. in mid-tier room supply, which means that CDLHT's Singapore hotels could face significant RevPAR pressure over the medium-term. Previously using an RNAV model, we have transitioned to a DDM model. Incorporating a risk-free rate of 2.7% (versus 2.5% previously) into our model, our FV drops to S$1.56 from S$1.73. We maintain a HOLDrating on CDLHT. (Sarah Ong) MORE REPORTS Olam Int'l: New Muddy Water report Muddy Waters (MW) has just issued a new report on Olam International Limited (Olam), titling its "Not Changing the Old Ways", which again raised issues over transparency and corporate governance, as well as remaining skeptical if Olam will operate differently in the future. In particular, the viability of the Gabon fertilizer project was called into question, where MW believed that Tata Chemical (TCL) is highly unlikely to participate in the project. In any case, our current forecasts do not include any contributions from Gabon as we have always held the conservative view and would only include the project if it has achieved financial close. While we expect the new MW report to weigh slightly on sentiment, we are maintaining our forecasts for now, given that we have already pared our FY14F core net profit figure by 16% recently. Maintain HOLD with an unchanged S$1.45 fair value (based on 10x FY14F EPS) for now. (Carey Wong) Geo Energy Group - New kid on the mining block Geo Energy Group (GEG) is a coal mining specialist in Indonesia, which started as a mining contractor, and has since moved on to become a mine owner. We recently visited its BEK Mining Concession and BJPE site (where it is a mining contractor). For its own BEK mine, GEG has produced some 1.84m tonnes of coal from this site as of 30 Jun; and the company believes it is on track to achieve its 2m-tonne target by year end. It has also entered into five other mining concessions and these will start producing over the next few years. GEG remains upbeat about its prospects, noting strong demand from countries like China and India, even though near-term coal prices are likely to remain relatively soft due to the supply growth. We do not have a rating on GEG. Currently, GEG is trading at a historical PER of 15x versus the simple average of 36x of its peers in Indonesia. (Carey Wong)

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NEWS HEADLINES - The White House's push for congressional approval of limited military strikes against Syria and the Aug jobs report will dominate when investors return Tue from the holiday weekend. - Thai Beverage Public Co has appointed Maybank Kim Eng as a financial adviser, as the beer brewer seeks to integrate recently acquired Fraser and Neave. - CNA Group's unit has landed a S$10.6m contract to renovate, upgrade and expand the domestic terminals in Ho Chi Minh's Tan Son Nhat International Airport. - Rawa Investments, a wholly owned subsidiary of Malaysia's sovereign wealth fund Khazanah Nasional, is exercising a put option to sell a 10% stake in OUC back to Raffles Education Corporation.