Wilmar's Moroccan sugar acquisition positive: CIMB

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: CIMB

Price Call: BUY

Target Price: 3.74

CIMB is positive on Wilmar’s  Moroccan sugar acquisition. “Wilmar’s acquisition of a strategic 27.5% stake in Cosumar gives the group exposure to the regulated Moroccan sugar industry and access to Africa’s structurally sugar-deficient market.

It can add value by introducing better techniques for farming and procuring raw sugar.” It views the asset valuations are fair, estimating the deal values Cosumar at US$956 million ($1.05 billion), representing a historical P/E of 11X, below the 14X-17X historical P/E for leading Malaysian sugar refiner MSM Malaysia.

It expects the deal to enhance Wilmar’s future earnings base by around 1% in FY14. It keeps the stock at Outperform with $3.74 target. The stock is up 0.6% at $3.29.

SG: MARKET PULSE: Property Sector, First REIT, A-REIT, KepCorp, FEHT (16 Apr 2013) - Resend

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.29

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.53

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.55

Stock Name: First REIT
Company Name: FIRST REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.31

Stock Name: Ascendasreit
Company Name: ASCENDAS REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 2.63

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.68

MARKET PULSE: Property Sector, First REIT, A-REIT, KepCorp, FEHT

16 Apr 2013

KEY IDEA Singapore Residential Property: Wave of launches driving firm Mar sales Summary: URA reported that a headline total of 3,072 new private homes (including 279 EC units) were sold in Mar 13, which was up 235% MoM and 1% YoY. These healthy numbers were driven by a wave of new launches after the Lunar New Year, including D'Nest (912 total units, Pasir Ris) 699 units sold at a median S$963 psf, Bartley Ridge (868 total units, Mt Vernon Rd) 367 units sold at S$1,296 psf and Urban Vista (582 total units, Tanah Merah) 348 units sold at S$1,503 psf. We see sales reflecting still firm residential demand and an environment of continued liquidity but remain cognizant of potential incremental curbs should the housing sector show excessive activity going forward. Maintain NEUTRAL on the residential property sector and we prefer developers with strong balance sheets and diversified exposure. Our top picks are CapitaLand [BUY, S$4.29], Keppel Land [BUY, S$4.53] and CapitaMalls Asia [BUY, S$2.55]. (Eli Lee) MORE REPORTS First REIT: No major impact from possible Siloam Hospitals IPO Summary: News agency Reuters reported that Lippo Karawaci (Lippo), which is First REIT's (FREIT) sponsor, is seeking to raise at least US$200m in an IPO of its Siloam Hospitals healthcare division. We do not foresee any major impact to FREIT's prospects, as we believe that FREIT would remain as an important vehicle for Lippo to implement its asset-light strategy. Moreover, FREIT has a right-of-first-refusal for the purchase of healthcare assets from its sponsor and/or any of its subsidiaries. Meanwhile, FREIT will hold an EGM on 29 Apr to seek unitholders' approval in relation to its two proposed acquisitions from Lippo. As we expect the acquisitions to be DPU accretive and value-enhancing to unitholders, we expect unit-holders to vote in favour of the proposed conditions. Maintain HOLD and S$1.31 fair value estimate on FREIT. (Wong Teck Ching Andy) Ascendas REIT: Strength reflected in price Summary: Ascendas REIT's (A-REIT) FY13 DPU totalled 13.74 S cents, up 1.3%. This is somewhat below our and street's full-year estimates of 14.0-14.2 S cents. Excluding performance fee, however, we note that DPU would have grown 3.6% to 14.05 S cents, closer to our projections. Looking ahead, A-REIT expects the positive rental reversions to persist, albeit at a slower pace. Management also pointed out there is ~10% vacancy in the multi-tenanted portion of its portfolio, which may provide upside if these spaces are leased out. During the quarter, A-REIT announced the development of DBS Asia Hub Phase 2 for S$21.8m and two new asset enhancement projects totalling S$14.0m. These initiatives, together with the announced investments, are likely to maintain its stable performance in FY14, in our view. We incorporate the results into our forecasts and roll over our valuation to FY14. Maintain HOLD with a marginally higher fair value of S$2.63 (previously S$2.60) on A-REIT. (Kevin Tan) Keppel Corporation: Secures US$226m jack-up rig contract from Falcon Summary: Keppel Corporation (KEP) announced that its O&M arm has secured a US$226m contract from Falcon Energy to construct a KFELS Super B Class jack-up rig. Recall that KEP won a US$820m contract for four jack-up rigs from Grupo R in Mar (KFELS B Class design) and a US$225m contract from Ensco in early Apr (KFELS B Class design). The latter figure includes the construction cost, commissioning, systems integration testing and project management costs. Meanwhile, the last time Keppel secured a KFELS Super B Class jack-up rig was in Mar 2011 for US$210m. This latest order brings KEP's YTD orders to about S$2.2b, accounting for about 43% of our full year order win estimate. Maintain BUY with S$12.68 fair value estimate on KEP; the group will also be announcing its results on 18 Apr 2013. (Low Pei Han) Far East Hospitality Trust: Agreement to acquire Rendezvous Grand Hotel Singapore Summary: Far East Hospitality Trust (FEHT) has entered into an agreement with The Straits Trading Company Limited (STC) to acquire Rendezvous Grand Hotel Singapore and Rendezvous Gallery (70-year old leasehold estate) for an estimated total cost of acquisition of S$270.1m. The acquisition will be financed by the proposed issue proposed issue of new stapled securities in FEHT to STC (S$68.0m), the Sponsor (S$67.8m), as well as debt facilities (S$132.2m). The pro forma effects of the acquisition for FY12 (27 Aug-31 Dec) would have been an increase in DPU from 2.09 S-cents to 2.12 S-cents. Pro-forma effect on NAV per stapled security as of 31 Dec 2012 would have been an increase from 97 S-cents to 98 S-cents. This is Far East H-Trust's first acquisition since its initial public offering in August 2012. The master leasee will be a member of the Far East Organization group of companies. We maintain a HOLD rating but place our fair value of S$1.05 under review. (Sarah Ong)

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

NEWS HEADLINES - US equity indexes fell the most in five months, with the prices of commodities dropping after disappointing growth numbers from China and bomb blasts at the Boston Marathon. - Keppel REIT's net property income increased 20.7% YoY to $34.4m primarily due to improved performance from Ocean Financial Centre and 77 King Street. - Qian Hu's 1Q13 net profit fell 88% YoY to S$62k. Revenue declined 2% YoY to S$20.2m. - K-Green Trust achieved 1Q13 profit after tax of $3.2 m, down 10% YoY. Cash flow from operating activities was S$9.8m, down 16% YoY. - Sino Gradness has reported that it received tremendous response at a Chengdu trade exhibition, with indicative orders for "Garden Fresh" juices received to-date exceeding RMB290m, ~45% more than last year.

Keppel may top contract-win forecast

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: UOB KayHian

Price Call: BUY

Target Price: 12.55

Keppel’s jack-up rig order from new customer Falcon Energy, appears to be the highest price paid so far for a KFELS B Class jack-up at US$226 million, UOB KayHian says. With Keppel’s year-to-date new contracts already at $2.15 billion, the company could exceed UOB-KH’s 2013 target for $5 billion, it says. It rates the stock at Buy with a $12.55 target. The stock is down 1.0% at $11.28.

SG: MARKET PULSE: KSH, Rotary, ST Engineering (11 Apr 2013)

Stock Name: KSH Hldg
Company Name: KSH HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.73

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.12

MARKET PULSE: KSH, Rotary, ST Engineering

11 Apr 2013

KEY IDEA KSH Holdings: More earnings growth momentum likely We recently met with KSH management and keep intact our FY13E and FY14E forecasts at S$30.7m (up 68% YoY) and S$53.0m (up 72% YoY), respectively, which are underpinned by progress billings for already-sold projects in Singapore. Beyond FY14, we see earnings growth momentum likely continuing due to the upcoming launch of its Beijing condo project this year (Liang Jing Ming Ju Phase 4) which would contribute an estimated S$23m net earnings upon TOP. We also understand management is also focused on launching Phase 1 of its 533-hectare Gaobeidian township project (GBD), located 30 mins away from Beijing city via high-speed rail. For upcoming FY13E results, we expect final dividends in the range of 0.5 - 1.5 S-cents and possibly a bonus share issue as well. Maintain BUYwith an increased fair value estimate of S$0.73, versus S$0.62 previously, as we now incorporate accretion from Liang Jing Ming Ju into our SOTP valuation model and raise our PE multiple for the construction segment from 4x to 5x, in line with peers trading at 5-7 times. (Eli Lee) MORE REPORTS Rotary Engineering Ltd: Ceasing coverage Rotary Engineering Ltd (Rotary) had a difficult year in 2012, as it battled escalating cost over-runs on its US$745m SATORP mega-project and repeated delays on its S$260m Fujairah Oil Terminal project. In 4Q12, the group appeared to be making progress on its SATORP project, although the non-controlling deficit is still a thorny issue. The group recently secured S$42m of project work in Singapore's Jurong Island, and S$300m of EPC work in Pulau Busing. However, the tighter foreign labour market in Singapore could mean lower project margins over the medium term horizon. Coupled with the uncertainty at its SATORP JV, it may still be too early for investors to buy its shares, which are currently trading at 1.4x PBR. Meanwhile due to a reallocation of resources, we have decided to CEASE COVERAGE. (Chia Jiunyang) ST Engineering: ST Aerospace won S$480m of contracts in 1Q13 ST Engineering (STE) announced that its aerospace arm, Singapore Technologies Aerospace Ltd (ST Aerospace) has secured new contracts worth about $480m in 1Q13. The contracts are for airframe, component and engine maintenance, as well as engineering and development, which will be carried out through its global maintenance, repair and overhaul (MRO) network. As this is in line with our expectations, we maintain our fair value estimate of S$4.12 and HOLD rating on STE. (Sarah Ong)

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

NEWS HEADLINES - Malaysians will choose their next government on May 5 after the Election Commission fixed the nomination of candidates on April 20. - Forterra Trust, formerly Treasury China Trust (TCT), is set to divest itself of its Central Plaza property in Shanghai for US$266.7m. - Resale prices of non-landed private residential properties edged up in the first quarter, despite fewer transactions taking place, data from the Singapore Real Estate Exchange showed. - GKE Corporation, previously Van der Horst Energy Limited, has injected an additional HK$31.3m (S$5m) into its wholly owned subsidiary GKE Holdings (HK) through a share subscription at HK$1 per ordinary share.

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: UOB KayHian

Price Call: BUY

Target Price: 3.80

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.44

Market Compass

11 April 2013~ Good Morning Singapore!

Singapore Idea Snippets:

11 April 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 : The truth is you don't know what is going to happen tomorrow. Life is a crazy ride, and nothing is guaranteed. - EMINEM Singapore: The Day Ahead SINGAPORE DAYBOOK:Upside for office Reit sector limited: Credit Suisse. But sector still attractive given hunger for yields THE office real estate investment trust (Reit) hot streak is expected to cool, with CapitaCommercial Trust (CCT) and Keppel Reit pegged at "neutral" in the latest Credit Suisse equity research report. Suntec Reit, with its larger exposure to older offices, has been rated "underperform". CCT and Keppel Reit appear set for "moderate rental growth" and were favoured by Credit Suisse for their higher proportions of Grade A offices, at 67 per cent and 92 per cent, respectively. Yesterday, CCT and Keppel Reit's counters closed a cent lower at $1.655 and half a cent higher at $1.375, respectively. The report has a target price on CCT of $1.59 a share and on Keppel Reit of $1.32 a share. Over much of 2012, the Reit space in general enjoyed a blistering performance in the realm of investor sentiment. The FTSE ST Real Estate Index, for example, has climbed more than 20 per cent over the last year, compared to the Straits Times Index's (STI) gain of about 10 per cent during the same period. MARKET SCOOP Private residential resales up in March S'pore 2nd most attractive destination for China FDI: EIU Car COE premiums fall across board Forterra to sell Central Plaza for US$267m to fund development DBS:Danamon takeover bid aids Indonesian bank consolidation UOB KAY HIAN Securities says... WILMAR INTERNATIONAL | BUY | TP: S$3.80 In its 2012 annual report, Wilmar highlighted its long-term strategy to focus on greenfield projects with high potential despite the longer gestation Key expansion will be in the fast-emerging markets in Africa - Ghana and Nigeria We expect lower refining margins for 2013 but will be compensated by the expanded capacity in Indonesia Sustaining its market leader position in:- Consumer packs cooking oil - the main markets are China,Indonesia, Bangladesh, Vietnam and India (under Adani Wilmar). Wilmar's share price has fallen 8% over the last one week on fears over the avian flu in China Crushing pre-tax margin still holding up as soybean prices trend down Maintain BUY and target price of S$3.80, based on sum-of-the-parts (SOTP) methodology, implying a blended PE of 13.6x 2013F, below its historical mean of 14.8x 1-year forward PE OCBC Securities says... HYFLUX LTD | HOLD | TP: S$1.44 Hyflux recently announced that its subsidiary - Hyflux Investment Consultancy and Management Service (Tianjin) Co - has signed two memoranda of understanding (MOUs) with the prefectural governments of Chuxiong and Qujing in Yunnan province to develop water and environmental projects in these two cities While it is still early days yet, we view the MOUs as a positive development as it suggests that China is back on the radar screen These projects are certainly not small - management estimates the total investment value for the project in Qujing to be around RMB1.2b and Chuxiong to be less than RMB2b, where these could be developed by Hyflux and/or its potential partners Meanwhile, we note that the company's current order book remains healthy at S$2.9b (as of end-2012) This is expected to increase with the recent signing of the water purchase agreement (WPA) to deliver desalinated water to the Dahej Special Economic Zone in Gujarat, India Management expects the WPA to have positive material financial impact if the financial close is concluded by end FY13 For now, we will maintain our HOLD rating and S$1.44 fair value on the stock; but we do see room for re-rating should these MOUs translate into actual contracts NOMURA Securities says... COMFORTDELGRO CORPORATION | BUY | TP: S$2.13 Metroline to acquire London bus operations from FirstGroup for S$109mn (£57.5mn) The acquisition will increase its London bus market share from 12.5% to 19%, according to management The acquired business has an annual turnover of ~£111mn and an EBITDA margin close to 10%, according to the press release The acquisition is priced attractively at a historical EV/EBITDA of 5.2-5.5x, in our view We believe there is room to extract synergies from the acquisition to enhance the return on investment We estimate that the accretion to the bottom line will be in the range of S$7.6-11.4mn (£4-6mn), which is 2.6-3.9% of FY14F earnings We expect the stock reaction to be neutral to mildly positive, as this acquisition provides additional growth but which will only be meaningful in FY14F

HSBC starts Mapletree Greater China Trust at Neutral

Stock Name: MapletreeGCC
Company Name: MAPLETREE GREATER CHINACOMM TR

Research House: HSBC

Price Call: HOLD

Target Price: 1.10

HSBC initiates Mapletree Greater China Commercial Trust (RW0U.SG), or Magic, at Neutral with $1.10 target.

It calls Magic's portfolio "best in class," on the quality of tenants and size, offering a quality Greater China commercial-property exposure. It expects the portfolio to see steady rental growth on the two assets' relatively resilient nature, high occupancy levels and periodic rental step-up provisions.

"We believe Magic is well-positioned to enhance rental growth via asset enhancements and/or acquisitions, both of which should be supported by the track records of Magic's management and sponsor." It estimates FY14-15 DPU growth at 7.2% and 6.7% respectively, with the trust offering fiscal-FY14-15 dividend yields of around 5.2%-5.5% at the current share price.

But based on HSBC's target price, the stock only offers an 11% potential return including forecast dividend yield, which isn't high enough to clear the house's "hurdle rate" for a volatile Singapore stock, leading to the Neutral call. The stock is down 0.5% at $1.045.

 

SG: MARKET PULSE: Hyflux, ComfortDelgro, Midas (10 Apr 2013)

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.44

MARKET PULSE: Hyflux, ComfortDelgro, Midas

10 Apr 2013

KEY IDEA Hyflux: China back on radar screen Summary: Hyflux recently announced that its subsidiary - Hyflux Investment Consultancy and Management Service (Tianjin) Co - has signed two memoranda of understanding (MOUs) with the prefectural governments of Chuxiong and Qujing in Yunnan province to develop water and environmental projects in these two cities. Management estimates the project in Chuxiong to be less than RMB2b and Qujing to be ~RMB1.2b. While it is still early days yet, we view the MOUs as a positive development as it suggests that China is back on the radar screen. For now, we will maintain our HOLD rating and S$1.44 fair value on the stock; but we do see room for re-rating should these MOUs translate into actual contracts. (Carey Wong) MORE REPORTS ComfortDelGro: Now joint-second in London ComfortDelGro's acquisition of a portion of FirstGroup plc's London bus business for approximately S$109m will increase its London bus fleet significantly by 494 to 1,700, and bring its market position to joint-second alongside Arriva London with a market share of around 19% (previously 12%). In addition, its UK bus revenue and operating profit should increase by ~37% as a result (assuming FY12 figures). With the outlook for ComfortDelgro's overseas ventures in FY13 remaining positive, our focus shifts domestically where we expect a fare increase to materialise by mid-2Q13, which we feel much of the street has already priced in. Pending its upcoming 1Q13 results, we maintain our HOLDrating on ComfortDelgro with an unchanged fair value estimate of S$1.95. (Lim Siyi) Midas Holdings: Secures S$17.3m in orders for Singapore MRT train parts Midas Holdings announced last evening that it has secured S$17.3m (~CNY86.5m) worth of orders from longstanding customer Alstom Transport S.A. This entails the supply of train car body parts for 18 train sets (or 108 train cars) for Singapore's North East Line and 24 train sets (or 72 train cars) for the Circle Line. Delivery is scheduled to take place from 2013 to 2015.This is Midas' second international contract win of the year and helps to boost its total orders won YTD to ~CNY379m, already higher than the CNY325m in orders won for the whole of 2012. Given that the Singapore government has committed to spending ~S$1.75b from 2013 to 2019 to upgrade and purchase assets for its rail system, we believe that future contract wins for similar projects are possible for Midas. We retain our forecasts as we have already assumed such contract wins in our assumptions. Maintain BUY and S$0.595 fair value estimate on Midas, based on 1.2x FY13F P/B. (Wong Teck Ching Andy)

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

NEWS HEADLINES - The Dow Jones Industrial Average shook off early weakness Tuesday and pressed on to another record close, led by strong gains in tech shares Microsoft and Intel. - KPMG Corporate Finance, the independent financial adviser (IFA) to the takeover of WBL Corporation, has rejected United Engineers' S$4.15 per share offer for the company as "not fair from a financial point of view". - The judicial managers of Poh Lian Construction are looking for buyers for the troubled construction firm and have already received several expressions of interest. - Frasers Centrepoint and Lum Chang have launched Twin Fountains, a 418-unit EC, located at the junction of Woodlands Avenue 6 and Woodlands Drive 16. - Asia should continue to enjoy solid economic growth this year and next, but efforts by the world's most advanced economies to reflate their flagging economies could touch off inflation and asset bubbles in developing Asian nations, the Asian Development Bank cautioned. - Most used car dealers are enjoying the government's 60-day reprieve, but they are now looking beyond clearing their stocks and hoping that financing restrictions will be eased for their market segment.