Thursday, October 31, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED
Research House: CIMBPrice Call: BUYTarget Price: 0.74

Stock Name: IndoAgri
Company Name: INDOFOOD AGRI RESOURCES LTD.
Research House: UOB KayHianPrice Call: HOLDTarget Price: 0.90

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD
Research House: OSK-DMGPrice Call: HOLDTarget Price: 3.20




Market Compass


31 October 2013~ Good Morning Singapore!


Singapore Idea Snippets:
31 Oct 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 : Innovation distinguishes between a leader and a follower.
- STEVE JOBS
Singapore: The Day Ahead

SINGAPORE DAYBOOK :'No threat' to fair trading in Sky One, says SGX

[SINGAPORE] Singapore Exchange (SGX) has found "no threat to fair, orderly and transparent trading" in the sharp drop of Sky One Holdings stock earlier this week.
In contrast, a review of trading in Asiasons Capital, Blumont Group and LionGold Corp showed "a lack of transparency" that could have threatened fair trading, the local bourse operator said yesterday.
The exchange made these comments amid questions as to why regulators had not intervened more strongly in Sky One when just three weeks earlier they had suspended and then imposed trading curbs on the three other stocks, which had also suffered unusually sharp price drops.
"Not all sharp price movements, whether up or down, warrant a suspension of the stock . . . In the case of Sky One, SGX's review of the circumstances revealed no threat to fair, orderly and transparent trading. Hence, no suspension occurred," SGX said in a statement.
(Source: The Business Times)

MARKET SCOOP

Singapore Post Q2 profit up 8.5%
NOL Q3 net profit slides 60%
Eu Yan Sang Q1 net profit quadruples
Soilbuild Reit's first distribution better than expected
Fragrance Group Q3 net profit down 3.7% at S$22.8 million
Singapore Exchange says no trading curbs needed on Sky One
Pontiac in JV with Goldman Sachs, Hines for luxe condo project next to MoMA
GIC buys 47-storey int'l Grade A office tower in Jakarta
(Source: The Business Times)

CIMB Securities says ...

MIDAS HOLDINGS | OUTPERFORM | TP: S$0.74

We raise our FY14-15 EPS to 17-19% above consensus; the market is likely to follow suit
We believe further HSR contract wins could catalyse the stock
Maintain Outperform, with our target price unchanged at S$0.74, based on 1.29x CY14 P/BV (20% discount to average P/BV during 2010-11)
To improve connectivity between provinces and cities across China, the government plans to add 11,200 high-speed train cars (10,400 currently) and extend the high-speed railway to 18,000km by 2015
To achieve this, it has allocated a Rmb3.3tr budget for railway investments over the current five-year plan period that ends in 2015
In 2011-12, Rmb1.21tr was spent on building railway infrastructure, which leaves a budget of Rmb2.09tr for 2013-15
As the procurement of railway equipment (including train cars) tends to be back-end loaded, there could be an increase in the remaining budget to Rmb2.16tr that the market has yet to factor in
Based on Midas's 60% market share, we estimate that it could win Rmb2.5bn-3.2bn of HSR orders by end-2015
Midas has built up several competitive advantages over the years: 1) close relationships with its key customers, CNR Changchun, CNR Tangshan and CSR Bombardier Sifang, 2) having the dies to produce a variety of extrusion profiles, and 3) strong track record of manufacturing quality products
As a result, we believe Midas can maintain its position as a preferred supplier to its key customers, which will help it to retain its leading market share of 60% and win the bulk of the HSR contracts
Midas is currently trading at 0.9x P/BV (1 s.d. below mean)
We believe its discounted valuations are unjustified given the strong order momentum that is likely to come in 4Q13-2015
In the next round of procurement alone, we believe Midas could win Rmb545m of HSR contracts, an upward revision from our previous estimate of Rmb309m
This will provide a further re-rating catalyst for the stock

UOB KAY HIAN says ...

INDOFOOD AGRI RESOURCES | HOLD | TP: S$0.90

Indofood Agri Resources (IFAR) released 9M13 result with net profit declined by 66.7% yoy to Rp296b
This was mainly due to a) lower CPO ASP (-12.2% yoy), b) lower edible oils & fats sales volume (-3.9% yoy) but offset from strong sugar sales volume (+14% yoy) and a slight increase in CPO sales volume, c) higher production cost, d) forex loss of Rp93b in 9M13 vs. gain of Rp17b in 9M12 and e) higher corporate tax rate of 34% in 9M13 (9M12: 23%)
Lower EBITDA margin from plantation division to 21% in 9M13 (9M12: 35%)
Total consolidated EBITDA margin declined to 17% in 9M13 from 25% in 9M12 driven by: Lower ASP of CPO and higher production cost
But, the company managed to increase its EBITDA margin from edible oil & fats division to 6% in 9M13 from 5% in 9M12, which we believe due to lower CPO prices
Improvement in quarterly net profit by 86.4% qoq to Rp123b in 3Q13 due to a) better CPO ASP (+10.6% qoq) b) improvement in quarterly nucleus FFB production by 22% qoq as a result of FFB yield improvement to 4.4 tonnes/ha in 3Q13 from 3.6 tonnes/ha in 2Q13 and c) more contribution from sugar division
As such, EBITDA margin from plantation division improved to 30.4% in 3Q13 from 6.1% in 2Q13
Stock Impact: Results were below our and consensus expectation
The 9M13 net profit was below our expectation as it accounted 50% of our forecast and 60% of consensus
Maintain HOLD recommendation based on the sum-of-the parts valuation
We will update detailed on the results after the analyst briefing today

OSK DMG Securities says...

RAFFLES MEDICAL GROUP | NEUTRAL | TP: S$3.20

Revenue growth from its hospital division was 9.4% in 3Q13 (growth in previous quarters were in the teens)
Management attributed this to a number of specialists taking leave to attend medical conferences
We would not be too concerned about the slower growth at this point, as RFMD continues to increase its specialist pool while patient volume remains healthy
Its pricing level remains 20% below competitors on average
RFMD's hospital extension is on track, and construction is likely to commence soon
Special dividend not likely, but possibly higher normal dividend
RFMD expects to record a gain of SGD18m from the disposal of Thong Sia Building, which will further strengthen its cash hoard
However, we believe a special dividend is not likely, as management intends to pursue its plans to expand into China
RFMD has been paying out about 40% of earnings each year
Assuming it keeps to that ratio, the final dividend for FY13 could be higher
RFMD has signed a framework agreement to build a hospital in Shanghai
This is its second agreement to explore a possible venture in China, with the first agreement still in negotiations
RFMD has every intention to proceed with a venture in China
Despite its strong cash position, the company expects to fund the ventures using bank borrowings
Given the lower-than-expected revenue for 3Q13, we trim our FY13F revenue assumptions to derive a slightly lower TP of SGD3.20 (from SGD3.30)
Maintain NEUTRAL



SG: MARKET PULSE: GPH, SingPost, NOL, Soilbuild REIT, CapitaLand (31 Oct 2013)

Stock Name: GP Hotels
Company Name: GLOBAL PREMIUM HOTELS LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 0.33

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED
Research House: OCBCPrice Call: HOLDTarget Price: 1.32

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED
Research House: OCBCPrice Call: SELLTarget Price: 0.95

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 3.77




MARKET PULSE: GPH, SingPost, NOL, Soilbuild REIT, CapitaLand
31 Oct 2013
KEY IDEA

Global Premium Hotels: Solid performance in 3Q13 as expected
The 3Q13 results for Global Premium Hotels (GPH) were in-line with our expectations. The 3Q13 results for Global Premium Hotels (GPH) were generally in-line with our expectations. Total revenue climbed 5.7% YoY to S$15.7m and gross profit rose 5.7% to S$13.6m. Finance costs declined 13.6% to S$2.0m due to partial repayment of term loans and lower average interest rate. 3Q13 net profit climbed 18.7% to S$4.9m. 9M13 revenue and EPS came to 75% and 77% of our prior respective full-year estimates. RevPAR was flat at YoY at S$97.1. Average occupancy rate was up 1 ppt YoY to 91.6%. Using a 15% discount to RNAV, we maintain our fair value of S$0.33 and BUY rating on GPH. (Sarah Ong)

MORE REPORTS

Singapore Post: Still delivering on rainy days
Singapore Post (SingPost) reported a 32.6% YoY rise in revenue to S$203.8m and a 8.5% increase in net profit to S$35.6m in 2QFY14, such that 1HFY14 net profit accounted for 49.4% of our full year estimates. Underlying net profit increased 13.8% to S$37.3m in the quarter, in line with our expectations. We are seeing good topline growth with contributions from organic and inorganic initiatives, driven by e-commerce and regional growth via M&As. However, margins are expected to remain pressured in the medium term. As expected, the group has proposed an interim quarterly dividend of 1.25 S cents/share. Despite a challenging business environment, SingPost is still delivering a good ROE of about 43%. We also like its consistent dividends which are backed by stable operating cash flows, but see few re-rating catalysts for now. Maintain HOLD with S$1.32 fair value estimate. (Low Pei Han)

Neptune Orient Lines: No surprise over weak results
Neptune Orient Lines's (NOL) 3Q13 results confirmed our expectations of an absent peak season. Weaker freight rates caused a larger-than-expected drop-off in revenue (-10.4% to US$2.06b) and negated cost savings from its efficiency initiatives and efforts to manage capacity (headhaul utilisation rates remained at ~90%). As a result, 3Q13 core EBIT declined by 72.1% YoY to US$18.0m. Looking ahead, 4Q13 is likely to remain weak given the historical tendency for rates to fall QoQ (average drop of 8.8% for past three years). In addition, collective industry action remains far from ideal. With a lacklustre medium-term outlook over freight rates, we adjusting our projections downwards and our FY14F PATMI falls to a US$22m loss (+US$64m previously). Maintain our SELL on NOL with an unchanged fair value estimate of S$0.95. (Lim Siyi)

Soilbuild REIT: Strong maiden results
Soilbuild Business Space REIT (Soilbuild REIT) reported a stronger-than-expected set of 3Q13 (period from listing date on 16 Aug to 30 Sep) results last evening. NPI came in at S$6.9m, 2.0% higher than its prospectus forecast of S$6.8m due to higher income contribution and lower property expenses from Eightrium and Tuas Connection. Distributable income of S$6.1m and DPU of 0.76 S cents were also 3.1% and 3.0% above the respective prospectus forecasts due to higher net income and lower finance expenses. We note that Soilbuild REIT has achieved 100% retention rate for its leases, and has fully addressed its lease expiries for the year by renewing three leases (2.2% of portfolio NLA) at rental rates 7.9% higher than the preceding average passing rents. In addition, portfolio occupancy inched up to 99.8% from 99.7% as at listing date. We will be speaking to management later for more details on its outlook. In the meantime, we maintain our BUY rating and S$0.82 fair value on Soilbuild REIT. (Kevin Tan)

CapitaLand Limited: Continuing strong run in residential sales
CapitaLand (CAPL) reported 3Q13 PATMI of S$135.5m which decreased 8.7% YoY mostly due to lower portfolio gains recognized over the quarter. We judge this to be mostly within expectations as 9M13 PATMI now cumulates to S$706.9m which constitutes 80.3% of our full year forecast. 3Q13 topline came in at S$1047.1m, up 52.5% YoY mainly due to stronger contributions from development projects and higher rental revenue from retail malls, which is again broadly in line with our forecast; 9M13 revenues of S$2892.3m form 73.0% of our FY13 estimates. The group sold an impressive 1151 residential home units in Singapore over 9M13 versus 329 units in 9M12, and we continue to be positive on management's focus on realistic pricing and moving units in the pipeline. Residential sales in China continued the firm rate of sales seen over the year so far with 2398 homes sold in 9M13 versus 1978 homes in 9M12. Maintain BUYwith an unchanged fair value estimate of S$3.77. (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks retreated from records Wed as investors assessed a Fed statement that largely matched forecasts, but also had some Fed watchers saying a policy change could come sooner than expected.

- Two major overseas property investments were announced by Singapore groups yesterday - one by Pontiac Land Group in New York City and the other by GIC's property arm in Jakarta.

- China Minzhong posted a 60% plunge in net profit to 48.4m yuan (S$9.8m) for 1QFY14.

- Indofood Agri Resources' earnings dived 52% in 3Q13 due to the twin pressures of lower selling prices and higher production cost.

- Second Chance Properties reported a record net profit of S$57m for the year ended 31 Aug, thanks mainly to profit booked on revaluation of its properties.

- Eu Yan Sang International chalked up a net profit of S$1.43m for 1QFY14, up from a net profit of S$341,000 in the corresponding quarter a year earlier.

- Asiasons Capital plans to take a S$25m convertible loan facility from two of its key directors as a source of standby capital.





Wednesday, October 30, 2013

SG: MARKET PULSE: CMA, CDLHT (30 Oct 2013)

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 2.55

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS
Research House: OCBCPrice Call: BUYTarget Price: 1.83




MARKET PULSE: CMA, CDLHT
30 Oct 2013
KEY IDEA

CapitaMalls Asia: Chinese malls show underlying strength
CMA reported 3Q13 PATMI of S$64.8m, which increased 4.0% YoY mainly due to profit recognition from Bedok Residences, the opening of Star Vista and a higher contribution from CMT. Adjusting for one-time items and fair value gains, 9M13 PATMI cumulates to S$179.2m, forming 93% of our full year FY13 PATMI forecast and we judge this quarter to be above expectations due to lower-than-anticipated opening costs from newly opened malls. CMA's Chinese portfolio assets continue to put up firm numbers; the overall committed occupancy rate increased to 97.2% as at end Sep 13 from 96.9% as at end Jun 13. 9M13 tenant sales were also up a healthy 9.8% (excluding Tier 1 cities: 11.0%) while 9M13 shopper traffic increased 1.5%. We rate the stock with a BUY rating and an unchanged fair value estimate of S$2.55. (Eli Lee)

MORE REPORTS

CDL Hospitality Trusts: 3Q13 as expected
CDLHT has reported 3Q13 results that are generally in-line with ours and the street's expectations. 3Q13 revenue declined 0.8% YoY to S$35.9m. RevPAR for CDLHT's Singapore hotels had declined 6.4% YoY, driven by a 5.6% drop in average room rate. As we had anticipated, the rate of RevPAR decline was less in 3Q13 than over 1H13, which saw RevPAR fall 8.1% on the back of increased supply in the sector. 3Q13 net property income fell 1.7% YoY to S$33.0m. 3Q13 DPU is 2.64 S cents (down 2.9% YoY), bringing 9M13 DPU to 8.05 S cents, versus ours and the street's FY13 forecasts of 10.4 S cents and 11.1 S cents respectively. We maintain a BUY rating on CDLHT but place our S$1.83 fair value estimate under review. (Sarah Ong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES

- US stocks finished higher Tuesday with both blue-chip stocks and the S&P 500 index setting record closing highs, as results from Pfizer Inc. and an IBM stock buyback stoked momentum.

- Figtree Holdings has priced its IPO on the Catalist board at 22 S cents per share in a S$12m fully placed share sale.

- Sky One Holdings' collapse on Mon prompted a number of brokers to update their lists of restricted stocks this week.

- Yanlord Land Group has paid 2.88b yuan (S$586m) for a site in Nanjing with a GFA of 38.6 ha, which it plans to develop as a mixed-use project.

- Ezra's subsea services and offshore support services divisions have secured contracts worth US$110m.

- Great Eastern Holdings has reported growth in its core insurance business although the absence of year-ago one-time gains dragged its 3Q13 bottom-line down by 54%.

- Forterra Trust sank to a net loss of S$2.3m for 3Q13 from a S$8.8m net profit a year ago.

- Singapore has once again taken pole position for being the most business-friendly country for the eighth year, ahead of Hong Kong and New Zealand.





OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: OCBC Bk
Company Name: OVERSEA-CHINESE BANKING CORP
Research House: DBS VickersPrice Call: BUYTarget Price: 12.40

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD
Research House: UOB KayHianPrice Call: BUYTarget Price: 3.78

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED
Research House: OSK-DMGPrice Call: BUYTarget Price: 3.18




Market Compass


30 October 2013~ Good Morning Singapore!


Singapore Idea Snippets:
30 Oct 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 : Those who dare to fail miserably can achieve greatly.
- JOHN F. KENNEDY
Singapore: The Day Ahead

SINGAPORE DAYBOOK :Brokers raise shields with Sky One falling.

[SINGAPORE] Sky One Holdings' collapse on Monday prompted a number of brokers to update their lists of restricted stocks this week, raising questions about why the Singapore Exchange (SGX) did not impose trading curbs as it had done with three other stocks a few weeks earlier.
Trading in shares of Sky One, a logistics provider being targeted in a reverse takeover (RTO) by a coal- mining business, whose stock fell as much as 91 per cent early Monday before being halted, is currently restricted at several brokers, including AmFraser, CIMB, DMG, OCBC Securities and UOB Kay Hian, according to market sources and some of the brokers' own websites.
Sky One shares continued to retreat yesterday, shedding 7.6 per cent, or 0.7 cent, to close at 8.5 cents. The stock had entered the weekend at 47 cents.
"It took two years to climb all the way up to whatever price it was, and all it took was one morning for it to collapse all the way down," one trader said.
(Source: The Business Times)

MARKET SCOOP

Absence of one-time gain weighs on GEH'sQ3 earnings
Norwegian Cruise Line's Q3 earnings up 33%
Forterra Trust sinks to the red with net loss of S$2.34m in Q3
MAS expects wage growth to be strong
Singapore's economy more tied to advanced economies: MAS
Faster job creation in H1 2013, says MAS
(Source: The Business Times)

DBS VICKERS Securities says ...

OVERSEA-CHINESE BANKING CORP | BUY | TP: S$12.40

Great Eastern Holdings' (GEH) 3Q13 net profit came in at S$283m, a significant rebound from the previous quarter
This was contributed by unrealised mark-to-market gains brought about by the partial recovery in financial markets which normalised interest rates and narrowed credit and swap spreads
Gross premiums grew 11% q-o-q and 32% y-o-y on the back of strong underwriting for life assurance funds
Total weighted new sales improved 6% q-o-q and 38% y-o-y
Better performance from the bancassurance tie-up with OCBC NISP in Indonesia also contributed towards the rise in GEH's total weighted new sales
Elsewhere, new business embedded value was flattish q-o-q but 18% higher y-o-y
The strong recovery of GEH's contribution should reignite positive sentiment on OCBC
Wealth management fees are likely to be softer q-o-q on lower activities but as trade finance loans remain active, this will support fee income
We expect NIM to remain stable, but potentially with very slight pressure from mortgage re-pricing
Recall that OCBC kept its loan growth guidance conservative at a high single digit despite already recording 10% loan growth in 1H13
We have assumed a conservative run rate of 1% loan growth per quarter, with FY13F loan growth at 12%. Loan-to-deposit ratio should stay around 90%
Provisions and expenses should remain stable
No asset quality surprises
Capital is likely to improve with AFS gains recouped over the quarter
We believe OCBC's strong banking operations coupled with the rebound in GEH's performance in addition to its better-than-average asset quality indicators underlines our preference for OCBC
OCBC's Islamic banking business in Malaysia offers an added advantage over UOB in terms of product offerings
OCBC is a BUY with S$12.40 TP (1.6x FY14 BV) based on the Gordon Growth Model with 12% ROE, 5% growth and 9.3% cost of equity

UOB KAY HIAN says ...

RAFFLES MEDICAL GROUP | BUY | TP: S$3.78

Raffles Medical Group's (RMG) 9M13 net profit of S$41.7m (+14% yoy) is broadly in line with our estimate, accounting for 64% of our full-year estimate
4Q tends to be seasonally stronger (particularly during the holiday periods for non-critical treatment, such as aesthetics and medical screening)
3Q13 top-line grew 8.0% yoy, backed a 9.4% yoy rise in hospital revenue whereas the healthcare services gained only 5.7% yoy due to the loss of contract from Singapore Prison
On a like-for-like comparison, turnover from healthcare services would have risen by more than 10% yoy if the Singapore Prison contract were excluded
RMG has 73 clinics and expects to open another two before this year-end
Despite the upward pressure on costs, RMG continued to contain costs well, with staff costs (49.3% of revenue and within historical average) growing 10.8% yoy, in line with 9M13 top-line growth of 10.7% yoy
During the analyst briefing, management reiterated it is committed to its proposed joint ventures in China
These include a JV with China Merchants to develop an integrated international hospital with 250 beds in Shenzhen and another JV with Shanghai Lujiazui Co to develop an integrated international hospital with 400 beds in Shanghai
We understand RMG will have a 70% stake in these JVs but will have full control over the operations
The group hopes to finalise the terms of these JVs in the next three months
Funding will not be an issue given RMG's strong net cash of S$261.7m after the sale of Thong Sia Building
The group's cash balance continued to rise
As at Sep 13, its net cash balance was S$141.7m (S$0.26/share) compared with S$122.4m (S$0.22/share) as at Jun 13
Its cash could rise further in 4Q13 on the completion of the disposal of Thong Sia
Building for S$120m
Given the capital expenditure of S$80m-100m for expansion works for its flagship hospitals and potential JVs in China, management is unlikely to pay a special dividend
Instead, the group plans to maintain its dividend of at least S$0.045/share
Management highlighted that expansion work on its flagship hospital should commence by 4Q13 or 1Q14 at the latest
Management is undertaking technical studies to ensure disruptions to its existing operations are kept to a minimal during the construction period
Management expects to complete the sale of Thong Sia Building in 4Q13
We understand the estimated non-recurrent gain is S$18m after deducting professional fees, such as independent valuation and brokers' commission
The group remains keen on having a medical centre at Orchard Road and is still on the lookout for potential sites
We maintain our 2013-15 recurrent earnings forecasts and DCF-based target price of S$3.78
We have not included the expected gain of S$18m from the sale of Thong Sia Building as this is a non-recurrent item
Our target price of S$3.78 implies 27.5x 2014F PE, close to its +1SD to mean PE of 28.8x
We think this is deserved, given its strong cash flow generation and healthy financial position which could fund potential M&As or other investments
Meanwhile, 2013-15F ROE of 15.8-16.9% are also higher than its long term
average ROE of 11.0% (1997-2012)
Share price catalysts include: a) better-than-expected 2014-15 earnings, and b) accretive investments and more news flow on its China JVs

OSK DMG Securities says...

EZION HOLDINGS | BUY | TP: S$3.18

EZI has secured a new Letter of Intent (LOI) from an oil major to provide a service rig for three years in South-East Asia
The contract is expected to start in 3QCY15 and EZI will form a joint-venture (JV) company to order and own the rig
We understand that the 50:50 JV will own the rig with an estimated project cost of USD60m
We estimate the latest LOI raised its YTD new charter wins to USD584m (attributable to EZI)
Ever since the company started the liftboat and service rig business, it has won USD2.2bn worth of charters, with an average contract tenure of 4.3 years
We estimate a current backlog of USD1.9bn (including optional extension), which will run up to 2020
EZI will enjoy two source of income from this contract - income from operating the service rig and income from ownership of the asset under the JV
We estimate the LOI could add USD3.4m net profit on a full-year charter
We are maintaining our EPS estimates given insignificant impact (<1%) in our forecast period
Demand for liftboats and service rigs remains strong and we believe the rising acceptance by oil majors in the region could lead to more deployment opportunities
We estimate EZI has room for USD200m/USD500m new project capex in FY14/15 respectively, while keeping its net gearing at around 1.1x
This excludes any issuance of equity or perpetual securities
Our TP is based on 16x blended FY13F/14F P/Es. Key re-rating catalysts are the company's: i) EPS upgrades from new contracts, and ii) positive earnings momentum



Tuesday, October 29, 2013

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED
Research House: DBS VickersPrice Call: HOLDTarget Price: 1.34

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST
Research House: Credit SuissePrice Call: HOLDTarget Price: 1.47




Market Compass


29 October 2013~ Good Morning Singapore!


Singapore Idea Snippets:
29 Oct 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 : Happiness is beneficial for the body, but it is grief that develops the powers of the mind.
- MARCEL PROUST
Singapore: The Day Ahead

SINGAPORE DAYBOOK :SGX mulls over rebates for high-frequency market makers. Exchange keen to support liquidity and to compensate such traders for their cost and risk.

[SINGAPORE] Singapore Exchange (SGX) could consider rebates for high-frequency market makers to boost liquidity in the marketplace, a senior executive of the bourse operator told The Business Times yesterday.
"We are interested to see how we can support liquidity and market-making in our securities markets as market makers and liquidity providers provide a service to the market," said Chew Sutat, executive vice-president for sales and clients at SGX.
"Clearly for that service and the cost and risk that they are taking in providing two-way quotes, they will need to be compensated through appropriate schemes, including potentially liquidity rebates as an example."
These comments come as SGX begins to lay some of the key pieces that would allow it to make a bigger push for high-frequency trading (HFT). The exchange plans to put in place circuit breakers in 2014, and has invested heavily in low-latency technology.
Mr Chew said SGX was unlikely to go as far as a maker-taker system, a controversial model where liquidity providers are paid for posting both buy and sell offers, while traders that "take" those offers are charged a fee.
However, fee rebates or liquidity provisions are possibilities that SGX could offer to entice high-frequency traders to make markets for Singapore-listed stocks once the regulatory and infrastructural support is in place, Mr Chew said.
Such a possibility has to be considered partly because Singapore is a single-exchange market. In more fragmented and deeper markets such as the United States, high-frequency traders can make money by arbitraging price differences between exchanges or correlations within markets.
In Singapore, those opportunities exist mainly in the derivatives market, where about 30 per cent of volumes are already attributed to high-frequency players. With derivatives contracts, traders can exploit inefficiencies through parallel products that trade elsewhere in the world, for example.
On the securities side, high-frequency market-makers also exist for many of the exchange-traded funds and warrants, where issuers have a clear incentive to maintain liquidity. But it is in the listed stocks where high-frequency market-makers may need more enticement.
"There are investors already running some algorithm models profitably, such as trading correlations intra sector - for example trading the three banks against one another - or across index components in different sectors, but we would welcome more," Mr Chew said.
Ken Ang, an analyst at Phillip Securities, reckoned that the exchange might also consider lowering the maximum daily clearing fees or reducing clearing charges if traded volumes exceed a certain threshold.
But he noted that SGX has adopted a multi-pronged strategy to attract high-frequency traders.
Minimum board lot sizes could eventually be lowered to one share, and market diversity and depth are constantly in focus.
"What they are doing is constantly trying to improve the attractiveness of stocks on the exchange . . . Including more sector diversity, more overseas exposure," Mr Ang said.
But UOB Kay Hian analyst Jonathan Koh felt that SGX was already competitively priced against many other exchanges.
"The cost differential may not be that significant between us and the US. In terms of cost, it's probably not a serious issue that can derail the transformation from happening," he said.
SGX's Mr Chew agreed, noting that clearing fees were only a component of total trading costs. In terms of total costs, Singapore falls somewhere in the "lower middle" of the pack when factors such as taxes and market-impact costs are considered, he said.
"Also, the cost of trading is not the only reason for different types and levels of HFT activity in any exchange," he said.
A Hong Kong-based high-frequency trader, who declined to be named, said Singapore's pricing was competitive with Hong Kong, which imposes stamp duties on securities trades.
The Republic is "a small venue but it's a good venue. What matters is the computer systems are very quick, and that's the main thing for us", the trader said.
SGX would benefit from the boost in liquidity should high-frequency traders become more prominent, said Carmen Lee, head of investment research at OCBC.
"This will help with the liquidity in the market, as market players are able to quickly participate in market opportunities, leading to more efficient flow of information to share prices," she said. "There will also be risks associated with it, but measures must be in place to help mitigate these risks, including SGX's plan to introduce circuit breakers."
Some critics of SGX's plan to woo high-frequency traders argue that doing so would prejudice retail investors.
"Regulators of much bigger exchanges and practitioners of HFT, such as the stock exchanges in European Union and the United States, have recognised the unfair advantages accorded to its users at the expense of the rest," Jimmy Ho, president of the Singapore Society of Remisiers, wrote in a letter.
"Hence, these regulators are now contemplating restraining HFT to restore a level playing field in the markets."
(Source: The Business Times)

MARKET SCOOP

Prices of completed apmts/condos in Central Region fell 1.7% in Sept: NUS
Singapore's Straits Trading to buy 20.1% stake in ARA
SGX to set up electricity futures market by end-2014
Rex Int'l to place up to 70m new shares at 75.5 cts/shr
Ezion gets LOI worth US$65m to supply service rig over 3 yrs
Triyards secures additional US$59m in deals for the 10th SEU order
UOL in "Pan Pacific" hotel venture in Myanmar
Sembcorp's S$30m boiler plant expansion comes onstream
Raffles Medical's Q3 earnings up 10%
(Source: The Business Times)

DBS VICKERS Securities says ...

EZRA HOLDINGS | HOLD| TP: S$1.34

Core net profit for 4Q-FY13 came in at about US$10.1m, higher than our estimate of about US$5m
The outperformance was mainly driven by higher revenue contribution from the subsea division in a seasonally strong quarter and good performance from associates (EOC and Perisai)
The offshore chartering division's performance improved with utilisation recovering to above 90% as a large part of the fleet was redeployed back to Asia
While spot rates for OSVs have been recovering, the benefit to the Group is likely to be gradual over the next few years as majority of the fleet is on long term charters
Subsea division EMAS AMC turned around in 4Q, with gross margins in the mid-teens, a significant improvement over the losses incurred in 3Q13 (including write-offs related to legacy projects)
Subsea orderbook now stands at about US$1.25bn, about half of which will be delivered in FY14
The Group is also actively bidding for about US$5-6bn worth of subsea contracts
We maintain our new order win assumption of US$1.5bn for the subsea division in each of FY14/15
Based on 4Q13's performance, we believe execution is improving and the worst seems to be over for the subsea division, with almost all legacy projects completed now
Thus, we raise our FY14F earnings (after preference dividend) by 33% on better margin assumptions
Our TP is also raised to S$1.34, as we raise our P/BV peg for the core business to 1.15x (average multiple post GFC), in anticipation of the near term recovery trend
We believe the robust share price performance in recent weeks has priced in some of the expected earnings recovery but we recommend holding on to the stock in view of improving execution and potential for realising strategic options for the subsea division

CREDIT SUISSE Securities says ...

ASCOTT RESIDENCE TRUST | NEUTRAL | TP: S$1.47

Operationally in line: 9M13 DPU of S$7.07 was 79.5% of estimates
Gross profit (74% of estimates) fell 0.9% YoY due to a weaker yen and slower REVPAUs across 7/10 markets
However, distributable income of S$88.6 mn rose 15% YoY, as deferred tax expense was +65% to S$12.4 mn in 9M13 (on properties with fair value increase)
Portfolio REVPAU -10% YoY to S$133/day, driven by CH (-13%), AU, PH and SP (all three markets -12%) and SG (-10%)
Stripping out currency impacts, the other markets were relatively weak as well, except JP and UK which saw increases in REVPAU
Post completion of AEIs in Brussels and Shanghai, ART saw 20- 35% uplift in ADRs, which should underpin FY14 NPI growth. Gearing was 41.1% with 3.2% debt cost (69% debt fixed)
Most of FY13 refinancing completed--3.4 years average debt duration
We maintain our overall assumptions except for deferred tax (subjected to the revaluation trends), which saw a S$12.4 mn addition to this year's DPU
Hence, we have raised our FY13 DPU slightly by 4.5%
With an FY14 yield of 7%, maintain NEUTRAL

CIMB Securities says...

RAFFLES MEDICAL GROUP | OUTPERFORM | TP: S$3.81

In line with expectations, 3Q13 core profit is 21% of our FY13 estimate while 9M13 makes up 64% (9M usually 60-65%)
RFMD has a very good cash-churning business
We keep our EPS, target price (25x CY14 P/E, at parity with regional peers) and Outperform call
Catalysts could include Raffles Hospital's expansion and success in developing integrated international hospitals in Shenzhen and Shanghai with its JV partners
Revenue was S$85m (+8% yoy) in 3Q13 and up 12% yoy if 3Q12 was accounted for without the MHA contract
The hospital and healthcare services divisions increased revenue by 9% yoy and 6% yoy, respectively
Higher patient load and patient acuity characterised the results
Operating efficiencies continued to flow down to the bottomline
We think 4Q13 should see sequential growth in the healthcare service division, especially with new branches opening and continued growth in corporate sales
We like the group's S$8m positive change in working capital with a tightening of receivables that resulted in operating cash flow of S$25m in 3Q13
This formed the foundation for solid net cash of S$146m (S$122m in 2Q13) despite paying out interim dividends during the quarter
Cash will cross the S$270m mark when the disposal of the Orchard building is completed in a few days' time (31 Oct 13), with c.S$18m in disposal gains
Management gave an assured reply on the timeline given to conclude its two Chinese hospital ventures and we expect that to come into fruition in the next three months, serving as stock catalysts
Should management not pursue such ventures, more cash will be returned to shareholders, making RFMD a good investment case



SG: MARKET PULSE: Raffles Med, ST Eng, TEE (29 Oct 2013)

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD
Research House: OCBCPrice Call: BUYTarget Price: 3.61

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD
Research House: OCBCPrice Call: HOLDTarget Price: 4.11

Stock Name: Tee Intl
Company Name: TEE INTERNATIONAL LIMITED
Research House: OCBCPrice Call: HOLDTarget Price: 0.35




MARKET PULSE: Raffles Med, ST Eng, TEE
29 Oct 2013
KEY IDEA

Raffles Medical Group: Still delivering growth
Raffles Medical Group (RMG) reported 3Q13 revenue and PATMI growth of 8.0% and 10.3% YoY to S$85.1m and S$13.9m, such that 9M13 figures formed 72.8% and 68.7% of our full-year estimates, respectively. This was within our expectations. Looking ahead, RMG is seeking to finalise the negotiations for its proposed China hospital expansion plans with its partners; while the completion of sale of its Thong Sia building in 4Q13 would boost its FY13F net cash balance to S$241m (based on our estimates). We incorporate the gain in sale of the property in our forecasts and our FY13 PATMI estimate is bumped up by 35.2% to S$82.1m. Nevertheless, we view this gain as exceptional in nature and our valuation on RMG is also unaffected as it is premised on 29x FY14F EPS. Maintain BUY and fair value estimate of S$3.61 on RMG. (Wong Teck Ching Andy)

MORE REPORTS

ST Engineering: ST Aerospace wins Jetstar Asia line maintenance contract
ST Aerospace, the aerospace arm of ST Engineering (STE), and Jetstar Asia have announced the signing of a three-year line maintenance contract. The agreement covers a full suite of line maintenance support for Jetstar Asia's existing and future fleet of Airbus A320 aircraft. ST Aerospace has been supporting Jetstar Asia since 2004 for a wide range of maintenance services on their fleet of A320 aircraft. The contract is not expected to have any material impact on the consolidated net tangible assets per share and EPS of STE for the current financial year. Hence, we maintain our fair value estimate of S$4.11 and HOLD rating on STE. (Sarah Ong)

TEE International: Conditional LOI for Marina South Project
Tee International announced that it has signed a conditional letter of intent with Hyundai Mechanical and Construction Co., Ltd to deliver a S$142m Mechanical and Electrical (M&E) Package for the Marina South Mixed Development Project. The package is expected to have a duration of 28 months. We see this as a positive development which would significantly replenish the group's order book. Together with the Marina One Package, the group's current outstanding order book would stand at approximately S$317m. Maintain HOLD on Tee International with a fair value estimate of S$0.35. (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stock indexes posted a narrowly mixed finish in choppy trading Mon, with the S&P 500 setting a record high for a second straight session after an industrial-production reading beat expectations but a pending-home-sales gauge missed forecasts.

- Singapore Exchange could consider rebates for high-frequency market makers to boost liquidity in the marketplace, said a senior executive of the bourse operator.

- Straits Trading Company is buying into ARA Asset Management and is also setting up a co-investment company that will eventually boast a total capital commitment of up to S$950m.

- Rex International is forming a joint venture with Swiss company Ogsonic to provide a proprietary well stimulation technology to oil production and oil service companies.





Monday, October 28, 2013

SG: MARKET PULSE: Wilmar, ART, First REIT, StarHill REIT, Ezion, Raffles Med, Triyards (28 Oct 2013)

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED
Research House: OCBCPrice Call: HOLDTarget Price: 3.33

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST
Research House: OCBCPrice Call: BUYTarget Price: 1.39

Stock Name: First REIT
Company Name: FIRST REAL ESTATE INV TRUST
Research House: OCBCPrice Call: BUYTarget Price: 1.18

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT
Research House: OCBCPrice Call: BUYTarget Price: 0.95

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 2.90

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD
Research House: OCBCPrice Call: BUYTarget Price: 3.61

Stock Name: Triyards
Company Name: TRIYARDS HOLDINGS LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 0.88




MARKET PULSE: Wilmar, ART, First REIT, StarHill REIT, Ezion, Raffles Med, Triyards
28 Oct 2013
KEY IDEA

Wilmar: Downgrade to HOLD on valuation

Summary: Wilmar International Limited's (WIL) share price has done very well since we upgraded our rating to Buy on 6 Sep, rising as much as 14% to a recent high of S$3.50. As the current price is also 4% above our S$3.33 fair value (still based on 12.5x blended FY13/FY14F EPS), we downgrade our call to HOLD on valuation grounds. We also do not see any strong near-term catalysts to justify a re-rating before its 3Q13 results due 7 Nov. (Carey Wong)

MORE REPORTS

Ascott Residence Trust: 3Q13 ahead of expectations

Summary: ART announced 3Q13 results that were ahead of ours and the street's expectations. Revenue climbed 11% YoY to S$86.1m, chiefly due to additional revenue of S$14.1m from the properties acquired in second half last year and on 28 Jun 2013. The increase was partially offset by the decrease in revenue of S$4.7m from the divestment of Somerset Grand Cairnhill in Sep 2012 and lower contribution of S$0.7m from the existing properties, mainly properties in Philippines and Japan. The group achieved a RevPAU of S$133 in 3Q13, a decrease of 10% as compared to 3Q12. The decrease in RevPAU was mainly due to divestment of Somerset Grand Cairnhill Singapore and weaker performance from Philippines and Japan. Gross profit climbed 10% YoY to S$44.8m. Unitholders' distribution increased 17% YoY to S$30.0m. DPU rose 6% YoY to 2.37 S cents, bringing 9M13 DPU to 7.07 S cents, versus full year estimates of ours and the street of 8.9 S cents and 9.0 S cents respectively. Adjusting our assumptions, our FY13F DPU forecast increases from 8.9 S cents to 9.1 S cents and our FV increases to S$1.39 from S$1.37. We maintain our BUY rating on ART. (Sarah Ong)

First REIT: 3Q13 DPU below expectations

Summary: First REIT (FREIT) reported 3Q13 revenue of S$22.8m and DPU of S$0.0196, representing an increase of 60.7% and 16.7% YoY, respectively. For 9M13, revenue jumped 43.1% to S$60.4m and was within our expectations. However, DPU of S$0.0555 (+14.2% after excluding exceptional distributions) was below due to higher-than-estimated expenses. Looking ahead, FREIT will continue to seek opportunities at expanding its footprint in Indonesia, given her growing healthcare market and the strong pipeline of possible acquisition targets from its sponsor Lippo Karawaci. We maintain our revenue estimates but tweak our DPU forecasts for FY13 and FY14 downwards by 4.4% and 1.9%, respectively. This correspondingly lowers our DDM-derived fair value estimate from S$1.20 to S$1.18. Given a decent FY14F dividend yield of 7.5%, we maintain our BUY rating for FREIT. (Wong Teck Ching Andy)

Starhill Global REIT: Delivering as promised

Summary: Starhill Global REIT (SGREIT) reported 3Q13 DPU 1.21 S cents, up 9.0% YoY. This brings the 9M13 DPU to 3.77 S cents, in line with our expectations. SGREIT's Singapore portfolio continued to benefit from Wisma Atria (WA) redevelopment and upward rent reviews at Ngee Ann City (NAC). For its overseas properties, Australia portfolio was the key performer, raking up a 25.7% increase in NPI due to incremental income from Plaza Arcade. This more than offset the lower contributions from the other overseas properties due to unfavourable forex movements and increased competition. On the capital management front, we note that SGREIT has completed the drawdown of new unsecured loan facilities to refinance its debts due in 2013, leaving it with no refinancing needs until Jun 2015. As at 30 Sep, gearing stood largely unchanged at 30.6%, while the fixed/hedged debt ratio improved to 94.0% from 81.0% seen in 2Q. We maintain BUY and S$0.95 fair value on SGREIT as we continue to like its clear growth drivers, robust financial standing and compelling valuation. (Kevin Tan)

Ezion Holdings: Secures US$65m LOI for service rig

Summary: Ezion Holdings announced this morning that it has received a letter of intent with a contract value of up to about US$65m over a three-year period to provide a service rig for an oil major to support its oil & gas activities in SE Asia. The unit is expected to be deployed by late 3Q15, and will be funded through internal resources and borrowings, like Ezion's earlier projects. The group is in the process of forming a JV to order and own an additional service rig in conjunction with this project, and pending more details from management, we maintain our BUY rating and fair value estimate of S$2.90 on the stock. (Low Pei Han)

Raffles Medical Group: 3Q13 results in-line with expectations

Summary: Raffles Medical Group (RMG) reported its 3Q13 results this morning which were within our expectations. Revenue rose 8.0% YoY to S$85.1m. PATMI was up 10.3% to S$13.9m. Growth during the quarter was driven largely by a higher patient load. Both of RMG's core divisions contributed to its topline increase, with its Hospital Services and Healthcare Services segments growing 9.4% and 5.7% YoY, respectively. For 9M13, revenue and PATMI increased 10.7% and 14.0% to S$253.0m and S$41.7m, forming 72.8% and 68.7% of our full-year estimates, respectively. 4Q is traditionally RMG's strongest quarter and we expect this trend to continue in FY13. We will provide more details after the analyst briefing. Maintain BUY and S$3.61 fair value estimate. (Wong Teck Ching Andy)

Triyards Holdings: Secures contracts worth US$59m

Summary: Triyards Holdings announced this morning that it has secured two contracts worth US$59m, including its 10th Self-Elevating Unit (SEU) order. The SEU order is with an Asian-based client and is for TRIYARDS' BH 335, which has a leg length of more than 100m (~335ft). The other contract is for the construction of a turret for a Floating Storage Offloading (FSO) unit in Indonesia. As at 31 Aug 2013, the group's net order book stood at US$217m. Pending more details such as the delivery date of the SEU, we maintain our BUY rating with S$0.88 fair value estimate on the stock. (Low Pei Han)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES
- US stocks finished another week of gains with the S&P 500 index at a record high after earnings from large technology companies wowed investors with revenue growth.

- Singapore's industrial production for Sep outstripped even the most bullish of market forecasts to grow 9.3% from a year ago.

- Property consultants have given mixed reactions to the latest 3Q13 private housing data released by the Urban Redevelopment Authority.

- Fraser and Neave's move to shed its property arm and focus on its other core businesses took a step forward after Frasers Centrepoint Limited got the go-ahead for its planned listing.

- The units of three local firms - Tat Hong Holdings, Boustead Singapore and CSC Holdings - have set up a joint venture with AME Group to develop land in Iskandar Malaysia.


Friday, October 25, 2013

SG: MARKET PULSE: Suntec REIT, Tiger, Triyards, ART (25 Oct 2013)

Stock Name: SuntecReit
Company Name: SUNTEC REAL ESTATE INV TRUST
Research House: OCBCPrice Call: BUYTarget Price: 1.85

Stock Name: TigerAir
Company Name: TIGER AIRWAYS HOLDINGS LIMITED
Research House: OCBCPrice Call: HOLDTarget Price: 0.55

Stock Name: Triyards
Company Name: TRIYARDS HOLDINGS LIMITED
Research House: OCBCPrice Call: BUYTarget Price: 0.88

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST
Research House: OCBCPrice Call: BUYTarget Price: 1.37




MARKET PULSE: Suntec REIT, Tiger, Triyards, ART
25 Oct 2013
KEY IDEA

Suntec REIT: Poised for strong harvest
Suntec REIT posted 3Q13 DPU of 2.289 S cents, up 1.8% QoQ (-2.6% YoY). This brings the 9M13 DPU to 6.766 S cents (-5.6%), meeting 73.4% of both consensus and our FY13F DPU. As at 30 Sep, both the office and retail portfolio occupancy rates were maintained at high levels of 99.8% and 98.3%, respectively. We understand that ~160,000 sqft of leases was signed in 3Q, leaving only a balance of 1.7% of office NLA due for renewal in 2013. As such, its portfolio performance is expected to stay relatively steady, despite potential weakness in 4Q13/1Q14 as Suntec REIT prepares for Phase 3 AEI. Management also updated that pre-commitment at Phase 2 retail space has improved from 70.1% in 2Q to 83.7%. While there are a few anchor tenants (which may command lower rents), Suntec REIT reiterated that ROI of 10.1% remains on track. In 4Q, we can reasonably expect revaluation gains of the portfolio assets, which may improve Suntec REIT's gearing and P/B ratios (currently at 37.2% and 0.84x respectively). Maintain BUYwith higher fair value of S$1.85 (S$1.80 previously) as we roll our valuation to FY14. (Kevin Tan)

MORE REPORTS

Tiger Airways: Growing pains to sustain
We were disappointed by Tigerair's (TR) 2QFY14 results, which showed a larger operating loss (S$12.8m vs. S$11.5m in 2Q13) due to higher operating costs. Performance by its associate airlines during the quarter was also weak with overall losses at almost S$24m (S$26.6m in 1Q14; S$3.8m in 2Q13), and that lead to an erosion of gains from the disposal of 60% interest in Tigerair Australia. Although there were some seasonality factors at play, the lack of demand traction and competitive fare pressures force us to temper our earlier optimism over TR's performance for FY14/15. Lowering our FY14/15 net profit projections considerably to account for the growing pains of its associate airlines and the likelihood of depressed passenger yields for Tigerair Singapore in the near-term, we downgrade TR to HOLD with a reduced fair value estimate of S$0.55 (S$0.79 previously). (Lim Siyi)

Triyards Holdings: Proposes maiden dividend
Triyards Holdings (Triyards) reported a 6.5% YoY drop in revenue to US$76.7m and a 32.2% decrease in net profit to US$10.3m in 4QFY13, bringing FY13 revenue and net profit to US$275.1m and US$31.4m, respectively. Though results were good, the market is likely to focus on new orders. It has been about ten months since the group secured its last SEU order, and the lack of new contracts so far has been a key factor that has weighed on the share price, in our view. The group's net order book of US$217m will provide work for FY14, but more work has to be secured to keep its yards busy beyond that. Rolling forward our valuation to blended FY14/15F earnings with a lower P/E of 7x (prev 8x) due to the lack of orders so far, our fair value estimate dips from S$1.07 to S$0.88. Maintain BUY. Meanwhile, the group has proposed a final dividend of S$0.02/share, translating to a 3.1% dividend yield. (Low Pei Han)

Ascott Residence Trust: 3Q13 results ahead
ART has announced 3Q13 results that were ahead of ours and the street's expectations. Revenue climbed 11% YoY to S$86.1m, chiefly due to additional revenue of S$14.1m from the properties acquired in second half last year and on 28 June 2013. The increase was partially offset by the decrease in revenue of S$4.7m from the divestment of Somerset Grand Cairnhill in September 2012 and lower contribution of S$0.7m from the existing properties, mainly properties in Philippines and Japan. The group achieved a REVPAU of S$133 in 3Q 2013, a decrease of 10% as compared to 3Q 2012. The decrease in REVPAU was mainly due to divestment of Somerset Grand Cairnhill Singapore and weaker performance from Philippines and Japan. Gross profit climbed 10% YoY to S$44.8m. Unitholder's distribution increased 17% YoY to S$30.0m. DPU rose 6% YoY to 2.37 S cents, bringing 9M13 DPU to 7.07 S cents, versus full year estimates by us and the street of 8.9 S cents and 9.0 S cents respectively. We maintain our BUYrating on ART but place out FV of S$1.37 under review. (Sarah Ong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks climbed on Thu, as equities picked up steam along with large-cap companies on signs of an improving global economy.

- The total debt servicing ratio framework appears to have made a bigger dent on purchases of private homes by those with HDB addresses than by those with private addresses, according to consulting group DTZ.

- Mapletree Commercial Trust's DPU rose to 1.801 S cents in 2QFY14, up 16.5% from a year earlier, thanks to positive contributions from its properties.

- Far East Hospitality Management will launch three Singapore hotels over the next three months.

- Stamford Tyres has appointed a dealer for Sumo Firenza tyres in the United Arab Emirates to expand its presence in the Middle East.






OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Sheng Siong
Company Name: SHENG SIONG GROUP LTD
Research House: DBS VickersPrice Call: BUYTarget Price: 0.80

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD
Research House: Credit SuissePrice Call: BUYTarget Price: 12.50

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD
Research House: OCBCPrice Call: HOLDTarget Price: 0.84




Market Compass


25 October 2013~ Good Morning Singapore!


Singapore Idea Snippets:
25 Oct 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 : Action is the real measure of intelligence.
- NAPOLEON HILL
Singapore: The Day Ahead

SINGAPORE DAYBOOK : MAS, SGX reviewing penny stock saga. 'Extensive and thorough review' may lead to public consultation on broader issues raised

[SINGAPORE] Singapore's financial market regulators, the Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX), are conducting an "extensive review" of the activities around the now-infamous trio of stocks that crashed dramatically earlier this month after spectacular spikes over the past year.
The MAS has also been tracking the exposure of brokers to the three stocks - Blumont Group, Asiasons Capital and LionGold Corp - though it said their operations and financials remain sound. There had been talk that some brokers and remisiers may be saddled with bad debts after billions were wiped out from the market value of the three stocks.
MAS' remarks, made in response to queries from the media, were the first confirmation that authorities are investigating the circumstances surrounding the incredible rise of the three over the past year, way beyond their fundamentals, before their spectacular crash.
When the dust has settled, more than $8 billion had been wiped out from their collective market value. The fiasco had led to criticisms of whether SGX could have acted earlier to protect the interests of retail investors caught up in the bubble, and calls for a probe by authorities.
MAS said last night: "MAS and SGX are conducting an extensive review of the activities around these stocks.
"We cannot divulge more information at this point so as not to undermine potential investigations. This episode has also surfaced broader issues regarding the market structure and practices which MAS and SGX intend to review thoroughly." A public consultation could take place if changes are required after the review is completed, MAS said.
Investor Mano Sabnani said: "It's about time. If nothing is done, the credibility of the market would have been affected."
"It is necessary to do the investigation but at the same time, we can't pre-judge what caused the bubble or whether there had been any wrongdoing."
Asked about what areas could be reviewed, UOB Kay Hian's Jimmy Ho, president of the Society of Remisiers, told The Business Times that one issue is how to detect manipulation early enough. "To do so requires resources. Given the current structure, I believe SGX might not be able to do so in a proactive manner," Mr Ho said.
On the micro level, he said that the procedures followed - when SGX "designated" the stocks for nine days before lifting them - could also be questioned.
"When you come in with the designation, people expect an investigation. But before you can give them an answer, you open it up and allow opportunists to make money," he said, referring to how people carted cash to brokers to buy the stocks during the designated period, and how the stocks almost doubled in price when the restrictions were lifted.
But no matter how the review pans out, the "buyer beware rule" should still apply, said Mr Sabnani. "There's no way in which SGX and MAS can protect greedy, naive investors who want to plonk their money into... companies at high prices, but at the same time, there are laws to prevent manipulation and cornering of stocks that regulators will be looking into for violations."
The crash on Oct 4 led to SGX labelling Blumont, Asiasons and LionGold designated stocks, meaning a ban on short-selling and contra positions. This meant people had to bring cash to their brokers to settle their trades. When trading resumed on Oct 7, the three stocks fell further.
The restrictions were lifted on Monday, and prices almost doubled. Nevertheless, as of yesterday, Blumont and Asiasons were trading at 10 per cent of pre-crash levels, and LionGold at about 20 per cent.
The other area MAS said it was monitoring was the exposure of broking firms to the three stocks. It said it had been collecting reports on losses and major counterparty exposure arising from the brokers' exposures to the three counters.
"The operations and financial positions of the broking firms remain sound. We will continue to monitor the situation closely," it said.
Major brokerages DBS Vickers Securities, OCBC Securities and Maybank Kim Eng had said they suffered insignificant losses because risk controls were put in place. UOB Kay Hian, the largest retail brokerage here, had also put their own curbs on various penny stocks.
US online discount brokerage Interactive Brokers Group, however, said it has accounts in the deficit of US$68 million. This was revealed by Thomas Peterffy, the firm's chairman and CEO, in the firm's third-quarter earnings call on Oct 15. "The accounts were margined and we were able to liquidate only a small part of the position," he said.
Without naming the stocks, Mr Peterffy said there were four of them that lost over 90 per cent of their value in a short timeframe in early October. The customers, however, were about seven individuals who were "well-known industrialists" with positions in other companies.
"We believe that the customers have substantial assets independent of the companies involved and we are currently organising our legal team to collect on these debts. We are currently also in the process of modifying our margin lending methodology to limit the chances of similar events happening in the future," he said.
(Source: The Business Times)

MARKET SCOOP

Triyards Q4 net profit down 32% at US$10.3m
Digiland scales down share placement
Stamford Tyres appoints UAE dealer
Del Monte Pacific net profit down 13.4%
Aztech back in the black for Q3
SIA, SingTel win India approval for investment plans
OCBC weighing bid for Wing Hang Bank: source
(Source: The Business Times)

DBS VICKERS Securities says ...

SHENG SIONG GROUP | BUY | TP: S$0.80

3Q13 results were in line with our expectations
Sales grew 5% y-o-y to S$178m while earnings grew 8% to S$12m
Growth was driven by contribution from new stores and better margins, despite weak SSSG of -3.5% due to a decline in sales from matured stores in older housing estates, competitors' promotions and renovation works at Bedok Central and The Verge stores
Gross and operating margins hit a record high at 23.8% and 7%, respectively
This was a result of lower input costs from centralised bulk purchasing and distribution, as well as better sales mix of fresh vs dried groceries
We believe the coming quarters will be flat as store openings are likely to moderate
We see revenue growth supported by performance from the new stores and the newly refurbished stores
We expect store openings to be slow at <5 p.a. going forward, as competition for retail space has become challenging
Management's expectation to open 3 new stores a year is reasonable in our view
SSG could now be looking to buy new retail space as opposed to renting and will focus on locations where it is under represented
SSG has 33 stores currently and targets to reach 50 stores eventually
We understand that the launch of the pilot test on the e-commerce front has been delayed due to internal human resource constraints
We have not factored in the potential from e-commerce in our forecast
Share price has declined 13% since end-April and the shares are now attractively priced at 19.6x FY14F PE, 4.6% dividend yield with ROE of 27.9%
Maintain BUY and S$0.80 TP based on 25x FY14F earnings

CREDIT SUISSE Securities says ...

SINGAPORE AIRLINES | OUTPERFORM | TP: S$12.50

Singapore Airlines (SQ) will report its 2Q FY14 results after market close on 12 November, with an analyst briefing the next morning
we expect pre-ex NPAT of S$185 mn, 76% ahead of 2Q FY13 and ahead of consensus, currently listed as S$113 mn by Bloomberg
Most inputs have been reasonably stable YoY with currency slightly weaker against the USD, offsetting some of the benefits of a 4% drop in jet fuel
Parent company loads have been marginally better, although freight has continued to slump
While we expect the recovery in front-end traffic to remain the highlight of the results, a weak AUD and promotional pricing in that market as load factors decline are expected to have limited the extent to which yields expand
With passenger traffic still generally keeping its shape and both the EU and US markets firming, we remain optimistic around the balance of the year
We have made no change to our estimates (pending the results) and neither our S$12.50 target price nor our OUTPERFORM rating has been altered

OCBC Securities says...

YOMA STRATEGIC HOLDINGS | HOLD | TP: S$0.84

Yoma reported that it will operate Volkswagen's first service center in Yangon, which is expected to begin operations in Oct 2013
Yoma's 70% owned subsidiary, German Car Industries Company will enter into a service partner agreement with Volkswagen Aktiengesellschaft ("VW") to provide maintenance and repair services
We understand that the automotive market in Myanmar is currently dominated by
Japanese vehicles and that VW has no manufacturing facilities or car show room in Myanmar
Therefore, this agreement is expected to have limited financial impact over the near term
That said, we see this deal further strengthening the growth potential of the group's
automotive division which, together with a similar service agreement with Mitsubishi earlier, is one that is steadily growing
To recap, Yoma has a similar agreement with Mitsubishi to operate its automotive after-sales service center in Yangon
In addition, the group also recently announced an MOU for Mitsubishi Corp. and
Mitsubishi Estate to invest in the Landmark project (excluding the Peninsula Yangon), and that it would enter into a strategic alliance with Mitsubishi Corp. to jointly explore business opportunities in Myanmar
We see these as major positives which points to management's continued deal-making ability and ambitions to grow as a major conglomerate
In our view, the alliance with the blue-chip Mitsubishi also further cements Yoma's reputation as a solid name (note that Mitsubishi Estate and CapitaLand are partners in
Singapore) and would likely widen its access to capital and business opportunities in Myanmar
The group will report 2QFY14 results in early Nov and we anticipate a set of stronger numbers QoQ on the back of firmer contributions from sales in Zone B of Star City
Maintain HOLD
Our fair value estimate dips slightly to S$0.84, from S$0.87 earlier, as we update our
valuation model to reflect higher risk-free and discount rates