SG: MARKET PULSE: OUE, Yangzijiang (3 Oct 2013)

Stock Name: OUE Ltd
Company Name: OUE LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.32

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.04

MARKET PULSE: OUE, Yangzijiang

3 Oct 2013

KEY IDEA OUE Limited: Well positioned for CBD office recovery Summary: We initiate coverage on OUE with a BUY rating and a fair value estimate of S$3.32. Our fair value applies a relatively less punitive 15% discount to RNAV due to three key reasons. First, the bulk of OUE's portfolio is positioned in the Core CBD office micro-market which we believe will face significant tailwinds in FY14; second, OUE has fairly limited exposure to the uncertain residential sector (~10% of its RNAV); and finally, management's sharp track record in creating value, seeking accretive deals and recycling capital expediently. On 25 Sep 2013, OUE also announced it was exploring the listing of a commercial REIT on the mainboard of the SGX. The initial portfolio is expected to include OUE Bayfront and other commercial properties owned by Lippo China Resources Limited (a company listed on HKSE). While the timing and size of the listing is yet to be confirmed, we believe this capital recycling may be an attractive catalyst for value realization and a possible special dividend ahead. (Research team) MORE REPORTS Yangzijiang Shipbuilding: Healthy order flow for replenishment Summary: Yangzijiang Shipbuilding (YZJ) has recently secured 17 contracts worth about US$871m, bringing total orders won YTD to US$2.096b. These new contracts are scheduled for deliveries in 2015-2016, and provide much-anticipated replenishment of the order book for execution of orders further down the road. Newbuild prices for bulk carriers in Chinese yards have been on a slow but steady uptrend since early this year, but additional monitoring is needed to determine its sustainability, which is dependent on the global economic recovery, the rate of China's yard consolidation process as well as any further tightening in China's money supply. With a gradually recovering newbuild market, we raise our peg from 8x to 9x P/E, while rolling forward our valuations from blended FY13/14F earnings to FY14F earnings, resulting in a slight rise in YZJ's fair value estimate to S$1.04 (prev. S$0.99). Maintain HOLD. (Low Pei Han)

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NEWS HEADLINES - US stocks closed lower Wed, paring losses during the trading session as investors looked for a possible thaw in negotiations over the government shutdown after a private-sector jobs report came out weaker than expected. - Singapore's purchasing managers' index for Sep pointed to a further slowdown in new export orders, echoing the less-than-stellar manufacturing data from the region earlier this week. - Oil trading here remained in the trough in the Jul-Sep quarter, as the market was flat except for a brief spike in prices due to the Syrian chemical weapons crisis. - In a sign of Singapore's growing attractiveness as a listing venue for early-stage mineral, oil and gas firms, Australian upstream oil and gas company Linc Energy revealed plans to move its listing from Australia to Singapore. - Cordlife Group and Artivision Technologies announced that they are raising funds via share placements.