SG: MARKET PULSE: FCOT, SATS, CapitaLand (30 Sep 2013)

Stock Name: Frasers Comm
Company Name: FRASERS COMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.45

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 3.35

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.77

MARKET PULSE: FCOT, SATS, CapitaLand

30 Sep 2013

KEY IDEA Frasers Commercial Trust: On accelerated growth mode Summary: Frasers Commercial Trust (FCOT) has essentially locked in robust growth for FY14 with lower interest costs and the redemption of its 321.9m Series A Convertible Perpetual Preferred Units (CPPUs) this year. In addition, we expect FCOT to gain from its growth initiatives embarked over the past year. For one, FCOT has completed the Precinct Master Plan and asset enhancement works for the office tower at China Square Central, and is likely to benefit from improved occupancy and higher secured rentals going forward. Moreover, FCOT has successfully completed the renewal of 511,000 sqft of the underlying leases at Alexandra Technopark and has achieved positive rental reversion of 17.4% at the property. According to the latest report by DTZ, we also note that sequential rental increments were seen within the CBD in 3Q13 on the back of better occupancy rates. This is consistent with our view that office leasing activity is likely to remain healthy. We maintain our BUY rating on FCOT with a revised fair value of S$1.45 (S$1.58 previously). (Kevin Tan) MORE REPORTS SATS Ltd: Cruise control Summary: SATS will acquire Singapore Cruise Centre (SCC) from Temasek for S$110m. This acquisition will complement SATS's existing cruise services at the Marina Bay Cruise Centre, and give it control of the ferry terminals at Tanah Merah, Pasir Panjang, and HabourFront Centre, which has an anchor client in the form of the popular Star Cruises. We view the deal favourably as it is cash generative (SCC had revenue of S$45m and PBT of S$16.7m in FY13), should enhance SAT's FY14F EPS by at least 5%, and will provide growth opportunities for its gateway and food solution businesses. We raise our fair value estimate to S$3.35 (S$3.10 previously) but maintain our HOLD rating on the counter as we foresee limited upside at this point. (Lim Siyi) CapitaLand Limited: A strong launch at Sky Vue Summary: Over the weekend, CapitaLand (CAPL) launched the 694-unit Sky Vue condominium project near the Bishan MRT station, and saw a strong sales performances with 430 units sold out of 505 units released for sale. The average selling price of the units sold was ~S$1,500 psf - which was 5% to 10% lower than those at the adjacent 509-unit Sky Habitat project. We like that the group has taken a rational approach, in terms of pricing, to move units during the Sky Vue launch. The strong sales performance will significantly reduce the group's unsold exposure in the locality from over a thousand units at Sky Habitat and Sky Vue to ~600 units currently. We continue to favor large-cap developers with strong balance sheets and diversified exposure across regional real estate markets. Maintain BUY on CAPL with an unchanged fair value estimate of S$3.77. (Eli Lee)

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NEWS HEADLINES - US stocks declined on Fri, with the S&P 500 index and Dow industrials recording their first weekly drop in four, as Wall Street remained unsettled over the lack of progress in budget negotiations on Capitol Hill, with a deadline just days away. - Tritech Group is planning to raise up to S$77.31m to help fund future expansion of its engineering and water-related businesses, including potential mergers and acquisitions. - City Developments' subsidiary Millennium and Copthorne Hotels New Zealand has increased its investment in an associate company by US$33.42m in response to a capital call. - Khong Guan Flour Milling registered a net profit of S$14.7m for the full year ended 31 Jul as it realised its gain from its quoted investment in a property development company.