SG: MARKET PULSE: Tat Hong, Golden Agri (9 Oct 2013)

Stock Name: Tat Hong
Company Name: TAT HONG HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.96

MARKET PULSE: Tat Hong, Golden Agri

9 Oct 2013

KEY IDEA Tat Hong Holdings: Weakness already priced in Following our recent discussion with Tat Hong's management, we are upgrading Tat Hong to HOLD and raise our valuation peg to 11x (previously 9x) and fair value estimate to S$0.96 (previously S$0.80). We feel that the stock has bottomed since the sell-off after its disappointing 1Q14 results, and that the street has adequately priced in its expectations for a weakened performance for the remainder of FY14. Its key market of Australia should start to see a pickup in business activity by early FY15 on commitments on infrastructure spending by the new Coalition government and as improving business confidence translate to actual spending. In the interim, relative stability from its SEA and greater China markets will help to offset some of the shortfall in performance figures for FY14. (Lim Siyi) MORE REPORTS Golden Agri: Headwinds remain Golden Agri-Resources (GAR), being one of the largest palm oil plantation owners in the world, could continue to underperform with average CPO prices down 22% YoY and 2% QoQ in 3Q13. Outlook for CPO prices is also likely to remain muted, with stockpiles growing faster than expected going into 2H13. Market watchers are expecting an excess supply of oilseeds (soy, corn etc) to further weigh on CPO prices. Meanwhile, the impasse over the raising of the US debt ceiling could send the US economy into a recession, further weighing on global sentiment. In light of the headwinds ahead, we maintain our SELL rating on the stock with an unchanged fair value of S$0.465. (Carey Wong)

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NEWS HEADLINES - US stocks fell sharply on Tue hit by growing jitters over the budget impasse in Washington, with the partial government shutdown extending into a second week with few signs of a deal to end it or raise the nation's debt ceiling. - Singapore's central bank is widely expected to keep the Singapore dollar on its rising path next Monday even as growth is expected to slow. - Despite a sputtering global economy, business sentiment in Singapore remains positive for 4Q13, said Dun & Bradstreet Singapore's latest Business Optimism Index. - SunMoon Food Company's latest debt restructuring has finally removed the proverbial sword of Damocles hanging over its head and given it a fresh impetus for growth. - The proposed IPO of a Philippine casino joint venture between Genting Hong Kong and Philippine conglomerate Alliance Global Group is back on the table, but looks to raise about half its initial target of up to 42.3b pesos (S$1.22b). - The vendor of Reflections Oasis Inc, the company that steel trader Albedo is trying to acquire in a reverse takeover deal to transform itself into a property play, has stressed its commitment to see the deal go through.