SG: MARKET PULSE: Keppel Corp, CCT, MLT (18 Oct 2013)

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.87

Stock Name: CapitaComm
Company Name: CAPITACOMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.61

Stock Name: MapletreeLog
Company Name: MAPLETREE LOGISTICS TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.15

MARKET PULSE: Keppel Corp, CCT, MLT

18 Oct 2013

KEY IDEA Keppel Corporation: O&M margin continues to rise Keppel Corporation (KEP) reported a 8.4% YoY fall in revenue to S$2.95b but saw a 32.1% increase in net profit to S$457.6m in 3Q13, such that 9M13 net profit accounted for 77% of our full year estimates. Stripping out one-off items, we estimate recurring net profit at S$396m, in line with expectations. Operating margin in the O&M segment was strong at 16.5% in 3Q13, much higher than 2Q13's 14.2%. Order flow YTD has also been healthy, with KEP securing about S$5b new orders so far vs our full year estimate of S$6b. The net order book stood at a record S$13.6b as at end Sep. We continue to see good prospects in the O&M sector with the healthy rig demand, and expect the group to continue with its Near Market, Near Customer strategy. Maintain BUY with S$12.87 fair value estimate. (Low Pei Han) CapitaCommercial Trust: Average portfolio rent continues uptrend CapitaCommercial Trust (CCT) reported 3Q13 distributable income of S$58.8m - 1.6% higher YoY. This cumulates to a 9M13 distributable income of S$174.4m, up 2.2% YoY, which is within expectations and make up 75.9% of our FY13 forecast. 3Q13 DPU is 2.04 S-cents which translates to a 5.7% distribution yield based on the last closing price of S$1.42. The growth in 3Q13 distributable income was mainly due to lower interest expenses and the distribution of S$1.7m in tax-exempt distributable income from Quill Capita Trust, which offset the impact from the loss of income support from One George St. Portfolio occupancy edged up to 97.6% as at end 3Q13, versus 95.8% in the previous quarter. In addition, as a result of continued rental reversions, CCT's average committed office portfolio rentals increased to S$8.03psf from S$7.96psf. We would speak further with management regarding these results and, in the meantime, maintainBUY with our fair value estimate of S$1.61 under review. (Eli Lee) Mapletree Logistics Trust: Delivering steady growth Mapletree Logistics Trust (MLT) reported a 1.3% YoY drop in 2QFY14 NPI to S$66.6m, as its Japan portfolio saw lower translated income on weaker JPY. Stripping out the forex impact, NPI would have increased by 3.4% due to positive rental reversions and contributions from its past three acquisitions. Total amount distributable to unitholders grew at a faster pace of 7.5% to S$44.5m, as MLT substantially hedged its income streams from Japan, benefitted from lower financing costs, and distributed S$0.6m in divestment gains from 30 Woodlands Loop. For the quarter, DPU came in at 1.82 S cents, representing a 6.4% growth YoY. We deem the results to be in line with our expectations, as 1HFY14 DPU of 3.62 S cents have met 49.9% of our full-year DPU forecasts (consensus: 51.0%). Looking ahead, MLT reiterated that it will continue to optimize the portfolio yield through repositioning, enhancement and redevelopment opportunities. We will be attending MLT's analyst briefing later in the morning. For now, we put our HOLD rating and S$1.15 fair value estimate under review. (Kevin Tan)

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NEWS HEADLINES - US stocks ended mostly higher on Thu, lifting the S&P 500 to a record finish, as Wall Street turned from the latest fiscal drama on Capitol Hill to corporate earnings. - Singapore's non-oil domestic exports fell YoY for an eighth consecutive month in Sep, though the contraction was narrower than market forecasts. - SGX said its 1QFY14 earnings rose 24% as revenue from securities and derivatives trading grew. - Qian Hu Corporation reported a net profit of S$88k for its 3Q13, reversing from a S$10.1m loss the same period a year ago caused by the disposal of its Malaysian subsidiary. - OUE Commercial Trust, a property trust controlled by OUE Ltd, will buy an office and shopping complex in Shanghai ahead of a listing that is likely to take place early next year. - A subsidiary of Cosco Shipyard Group has secured two contracts worth US$233.31m. - ISDN Holdings is embarking on a round of financing that will see it raise S$100m to S$150m via convertible bonds.