SG: MARKET PULSE: CapitaLand, OSIM, SMRT, DBS (1 Nov 2013)

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.77

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: OCBC

Price Call: BUY

Target Price: 2.56

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.30

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 18.28

MARKET PULSE: CapitaLand, OSIM, SMRT, DBS

1 Nov 2013

KEY IDEA 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. 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 generating sales. That said, with significant uncertainty in the residential space and 1239 unsold units in its pipeline, we see the group's FY14 domestic sales likely easing from current levels.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 BUY with an unchanged fair value estimate of S$3.77. (Eli Lee) OSIM International: Solid bottomline growth OSIM International Ltd (OSIM) reported a 16.1% YoY jump in its 3Q13 PATMI to S$22.8m on the back of a 7.5% increase in revenue to S$153.0m. Bottomline closely matched our forecast of S$23.0m although revenue was 5.3% below our projection. An interim dividend of S$0.01/share was declared, in-line with our forecast. We are positive on OSIM's recent increase in effective shareholding in TWG Tea to a controlling stake as we believe the latter has strong growth prospects. We take into account the consolidation of TWG Tea's financials in our model. Our fair value estimate is raised from S$2.40 to S$2.56 as we lift our FY14 PATMI forecast by 2.0% and roll forward our valuations on OSIM to 16.5x FY14F EPS. Reiterate BUY. (Wong Teck Ching Andy) SMRT Corporation: Net profit falls 57% YoY As expected, SMRT's 2QFY14 revenue grew 5.3% YoY to S$296.3m on account of higher rail and bus ridership but operating profit fell 50.7% YoY to S$20.0m and net profit declined 57.1% YoY to S$14.3m. Higher staff costs and depreciation expenses were the main causes, and we expect them to continue weighing down SMRT's financial performance for 2HFY14. Furthermore, the lack of a fare increase will ensure the continued gap between top-line growth and operating expenses for the time being. Nonetheless, despite this weak set of 2Q14 results, we do not expect SMRT's share price to slide further as its woes have been well-documented over the past year. That said, SMRT remains an unattractive investment at this juncture as it remains susceptible to downside moves in response to bad press and/or service disruptions. Maintain HOLD with an unchanged fair value estimate of S$1.30. (Lim Siyi) DBS: Above expectations 3Q DBS posted 3Q13 net earnings of S$862m (+1% YoY and -3% QoQ) which were slightly better than consensus estimate of S$839.4m (based on Bloomberg). Net Interest Income rose 6% YoY or 2% QoQ to a new high of S$1.41b. Loans grew 19% to S$242b. Net Interest Margin (NIM) eased off slightly from 1.62% in the last quarter to 1.60% in 3Q13. Non-interest Income increased 11% YoY to S$744m. This benefited from several contributors including Fee Income (+9% YoY to S$462m) and Trading Income (+45% YoY to S$188m). For the former, this was led by better contributions from Trade and Transaction Services, Wealth Management and Cards. As a result, Total Income grew 7% YoY (or down 7%) to S$2.15b. Core Equity Tier 1 ratio was 13.3%, Tier 1 was 13.3%, Total Capital Adequacy Ratio was 15.9% as of Sep 2013. We currently have a BUY on DBS with a fair value estimate of S$18.28. There is an analyst briefing later in the morning and we will provide more details after the briefing. (Carmen Lee)

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NEWS HEADLINES - US stocks closed lower on Thu as investors digested the possibility that the Fed may taper bond buys sooner than expected. - The jobless rate in Singapore fell to 1.8% in Sep - the lowest level since last Dec - as layoffs subsided in 3Q13, preliminary official figures released yesterday showed. - Natural Cool Holdings CEO Ang Choon Cheng has been hit with a civil penalty and has resigned from his position over false trading and manipulation of shares in the company. - Jaya Holdings posted a 24% fall in 1QFY14 net profit to US$7.6m from a year ago. - Sin Heng Heavy Machinery reported a net profit of S$3.8m for 1QFY14, up 15.8% from S$3.3m for the same period a year ago. - Soilbuild Construction Group's 3Q13 net profit rose 13% YoY to S$6.32m, on the back of healthy progress in its construction projects.