CIMB cuts Cosco Corp to Underperform, cuts target 53%

Stock Name: CoscoCorp
Company Name: COSCO CORPORATION (S) LTD

Research House: CIMB

Price Call: SELL

Target Price: 0.46

CIMB downgrades Cosco Corp. (F83.SG) to Underperform from Neutral after 1Q13 core profit accounted for only 10% of the house's full-year forecast, coming in well below expectations on negative operating leverage and lower other income.

CIMB cuts its target to $0.46 from $0.98 after lowering FY13-15 EPS forecasts by 50%-53% on lower scrap sales and margins.

"Despite the dismal outlook, we believe that Cosco, as a state-owned firm, could be forced to keep its workforce and yards intact to sustain employment rather than making the required cuts to improve operational leverage," CIMB says. "We see no reason to own the stock with its sharp earnings declines and premium valuations."

The stock is down 4.6% at $0.83.
 

Citi stays optimistic on Genting Singapore

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: Citigroup

Price Call: BUY

Target Price: 1.85

Genting Singapore’s 1Q13 results beat expectations solidly on a hold-adjusted basis, Citigroup says, adding normalizing for the low 2.12% VIP hold, adjusted EBITDA would have been around $400 million, 6% above its forecast. It notes reported adjusted EBITDA was $255 million, down 34% on-year. Because of the less-favorable VIP hold rate at GENS’ Resorts World Sentosa vs rival Marina Bay Sands’ 2.51%, RWS captured around 45% of total 1Q13 market share vs 4Q12’s 51%, it estimates.

“The two Singapore casinos delivered stronger-than-expected VIP rolling volume growth, but they were both dragged down by subpar VIP hold,” it says, adding “VIP recovery remains the key driver in the market, while mass gross gaming revenue will likely show little growth, reflecting subdued local demand.” Citigroup remains optimistic on the Singapore market’s growth and expects RWS to benefit from easy comparisons near-term.

It lowers GENS’ FY13 earnings forecast on 1Q13’s weak hold, but raises its 2014-15 earnings forecasts by 6%-7% on the better-than-expected VIP volume recovery. It keeps a Buy call and raises its target to $1.85 from $1.80. The stock is down 8.4% at $1.475.

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Broadway
Company Name: BROADWAY INDUSTRIAL GROUP LTD

Research House: DBS Vickers

Price Call: HOLD

Target Price: 0.30

Stock Name: Venture
Company Name: VENTURE CORPORATION LIMITED

Research House: Nomura

Price Call: BUY

Target Price: 9.20

Stock Name: OCBC Bk
Company Name: OVERSEA-CHINESE BANKING CORP

Research House: UOB KayHian

Price Call: BUY

Target Price: 12.02

Market Compass

03 May 2013~ Good Morning Singapore!

Singapore Idea Snippets:

03 May 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 brain is a wonderful organ; it starts working the moment you get up in the morning and does not stop until you get into the office. - ROBERT FROST Singapore: The Day Ahead SINGAPORE DAYBOOK:China PMI dips to 50.4 on weak export orders. Pull-back in HSBC index likely to add to concerns over short-term risks [BEIJING] China's factory-sector growth eased in April as new export orders fell for the first time this year, a private survey showed yesterday, suggesting the eurozone recession and sluggish US demand may be risks to China's economic recovery. The final HSBC Purchasing Managers' Index (PMI) dropped to 50.4 in April from March's 51.6 and was largely in line with a flash reading last week of 50.5. China's official PMI on Wednesday painted a similar picture, falling to 50.6 in April from an 11-month high of 50.9 in March as new export orders fell. The pull-back in both the official and HSBC PMIs are likely to add to concerns over risks to China's economy in the short term, although most analysts expect a steady and gentle recovery this year, aided by government support. MARKET SCOOP Taiwan cable firm's S'pore IPO aims to raise S$1.38b UOB Q1 profit up 4.9% Genting S'pore's Q1 net falls 44% Sing Investments Q1 profit falls 22% Elec & Eltek Q1 profit falls 28% S'pore April PMI dips to 50.3, indicates slower growth ST Engg's aerospace arm buys Turbo Mach for US$250k DBS VICKERS Securities says... BROADWAY INDUSTRIAL GROUP | HOLD | TP: S$0.30 1Q13 formed 4% of FY13F, if excluding forex and one-off items, Broadway would have just achieved break-even with S$0.2m profits, which is significantly lower than our S$2m estimate despite higher-than-expected sales Weaker sales (-23% y-o-y) and operating losses (S$3.3m) at HDD (57% of group sales) dragged down group performance Foam Plastics was stellar as EBIT quadrupled to S$6.7m on a 37% y-o-y sales growth, thanks to last quarter's order push-back Unfortunately, it is insufficient to offset HDD's decline Near term, HDD would be flat-line and Foam Plastics could scale back as quarterly orders normalise Broadway has started production of stamped parts for smartphone OEMs in South Korea and Taiwan New CEO JC Lee plans to focus on1) developing new business to diversify from HDD; 2) driving optimisation and automation to improve margins In view of volatile earnings during this period of recovery, we have re-pegged the valuation base to 0.6xPB, deriving TP of S$0.30 NOMURA Securities says... VENTURE CORP | BUY | TP: S$9.20 Venture reported 1Q13 net profit of SGD28.0mn (-26.0% q-q, -21.0% yy), 21% below our expectation of SGD35.5mn While we believe Venture could see a 2Q13F sales growth incrementally better than peers on higher contribution from Oclaro, overall demand environment remains weak We believe, margins are unlikely to see full recovery till a meaningful portion of Oclaro business gets ramped, probably by end-2013F Ventures revenues dropped q-q across nearly all major segments Venture noted that it continues to focus on increasing its market share from existing customers and winning new programmes and customers The company generated a mere SGD9.7mn in operating cash flows and SGD5.7mn in free cash flows in 1Q13 which puts focus on sustainability of dividends At 2013F dividend yield of 6.6% with 2012 dividend payout to go ex-date on 5th May 2013, that reason still stands firm The stock has declined 1.8% over the last 3 months (MSCI Singapore: +3.7%) and is currently trading at an FY13F PE of 13.6x and PBV of 1.2x UOB KAY HIAN says... OVERSEA-CHINESE BANKING CORP | BUY | TP: S$12.02 OCBC reported a net profit of S$696m for 1Q13 (-16% yoy, +5% qoq), slightly below our forecast of S$720m OCBC achieved healthy loan growth of 3.1% qoq, driven by expansion of 3.8% qoq in Singapore NIM contracted by a severe 6bp sequentially to 1.64% due to refinancing for housing loans Fee income increased 15% yoy to S$316m The main growth driver was wealth management, which expanded 17% yoy to S$105m and accounted for one-third of total fee income Net trading income was significantly lower at S$56m after five consecutive quarters with sizeable profits OCBC's 1Q13 performance was "off colour" with net interest income and non-interest income coming in slightly below expectations We have cut our net profit forecast for 2013 and 2014 by 8.1% and 8.8% respectively due to lower NIM and higher staff costs We have lowered our target price for OCBC to S$12.02, based on P/B of 1.67x, derived from Gordon Growth Model (ROE: 11.0%, required return: 7.8% and growth: 3.0%)

SG: MARKET PULSE: UOB, Genting, LMIRT (3 May 2013)

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 22.97

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: OCBC

Price Call: SELL

Target Price: 1.41

Stock Name: LippoMalls
Company Name: LIPPO MALLS INDO RETAIL TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.52

MARKET PULSE: UOB, Genting, LMIRT

3 May 2013

KEY IDEA UOB: Above expectations 1Q UOB Group posted 1Q13 net earnings of S$722m, ahead of consensus estimate. This was buoyed by higher Non-Interest Income, which rose 12% YoY and 13% QoQ to S$708m. Fee & Commission Income jumped 17% QoQ or 25% YoY to S$453m, supported by strong double-digit growth from loans (+63%), fund management (+19%) and Investment (+18%). As 1Q accounted for about 25% of our full year estimate, we made very slight adjustments to our FY13 earnings. Based on P/B of 1.5x, we raised our fair value estimate from S$21.30 to S$22.97. While we continue to like UOB for its good cost controls and strong quarterly performance, the stock has outperformed and appreciated some 11% YTD. It is now trading close to our fair value estimate. As such, we downgrade our rating to HOLD. (Carmen Lee) MORE REPORTS Genting Singapore: 2013 outlook more cautious Genting Singapore (GS) reported 1Q13 revenue of S$669.6m, down 15% YoY and also 16% QoQ, hit by much weaker win percentage (2.12% versus 2.85% theoretical) in the premium players' business; net profit posted a decline of 44% YoY and 13% QoQ to S$115.9m. All in, a pretty muted set of numbers, as top-line only met 20% of our original FY13 forecast while bottom-line met 18% of our full-year number. Going forward, management has turned slightly more cautious, citing the still uncertain global economic outlook, especially with the recent muted economic data coming out of China. We pare our FY13 revenue estimates by 10% and core earnings by 16%. As such, our DCF-based fair value also slips to S$1.41 from S$1.52 previously. Recent run-up in share price seems slightly over-done; hence we downgrade to SELL from Hold on valuation grounds. However, we would buyers closer to S$1.30 or lower. Longer-term catalyst could come from a potential IR license overseas in markets like Japan. (Carey Wong) Lippo Malls Indonesia Retail Trust: 1Q13 results in line LMIRT posted 1Q13 gross rental income of S$39.4m, up 29.3% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions for the existing malls. The higher gross rental income was partially offset by the effect of FX rates used for translating into SGD revenues denominated in IDR. Results for the quarter were in line with our and consensus expectations; DPU of 0.89 S cent formed 25% of ours and 26% of the street's FY13 estimate. We maintain our fair value of S$0.52 and HOLD rating on LMIRT. We estimate a FY13F yield of 6.7%. (Sarah Ong)

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

NEWS HEADLINES - US stocks rose Thurs, with the S&P 500 reaching a new record, after the ECB lowered its benchmark interest rate and US jobless claims fell to a five-year low. - GuocoLand has plans for an integrated mixed-use development at the white site above Tanjong Pagar MRT station. Named Tanjong Pagar Centre, the 290m development will be Singapore's tallest building. - UOB-Kay Hian Holdings has entered into a sales and purchase agreement to dispose of a 93.47% owned subsidiary in Thailand for a total consideration of ~S$40m. - Ezra's subsea division has won a US$75m contract from Statoil. - Innopac Holdings' proposed takeover offer for ASX-listed Merlin Diamonds has received acceptances representing 42.52% of Merlin's issued and paid-up share capital in a little over one month after the offer opened for acceptance.

DBS results beat expectations "by a mile": CIMB

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: CIMB

Price Call: BUY

Target Price: 17.39

DBS' 1Q13 results beat expectations “by a mile,” or 11%-15%, on broad-based strength in all revenue, CIMB says.

It notes net interest income rose 2.6% on-quarter as NIMs unexpectedly expanded and loans grew 6.2% on-quarter, while fee income was “strong all around,” especially for trade-related and capital-markets-related fees.

DBS HK continued its “impressive” turnaround, it adds. “DBS remains an Outperform and our high-conviction top pick in Singapore banking,” CIMB says.

It keeps its target at $17.39. The stock is up 3.2% at $17.29.

SG: MARKET PULSE: Venture, DBS, OKP, CAPL, ART (2 May 2013)

Stock Name: Venture
Company Name: VENTURE CORPORATION LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 8.00

Stock Name: OKP
Company Name: OKP HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.46

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 4.29

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.35

MARKET PULSE: Venture, DBS, OKP, CAPL, ART

2 May 2013

KEY IDEA Venture Corp: Disappointing start to FY13 Venture Corp (VMS) reported a sluggish set of 1Q13 results which came in below ours and the street's expectations. Revenue fell 7.6% YoY to S$530.5m, forming 20.6% of our full-year estimate. PATMI fared worse, dipping 21.1% YoY to S$28.0m, or just 16.9% of our original FY13 forecast. Management sounded cautious during the analyst briefing, given the still uncertain macroeconomic environment. We believe that VMS's 2H strength would be weaker than our previous expectations. We expect some near term selling pressure on the stock given this lacklustre set of results and also because the stock trades ex-dividend today (2 May, from 9 a.m.). We cut our FY13 revenue forecasts by 5.7% (FY14 by 4.8%) and our PATMI estimates by 11.9% (FY14 by 5.4%). Consequently, our fair value estimate is lowered from S$9.08 to S$8.00 (15x FY13F EPS). Downgrade VMS from Buy to HOLD. (Wong Teck Ching Andy) MORE REPORTS DBS: Stronger-than-expected 1Q DBS Group Holdings Ltd posted stronger-than-expected 1Q13 net earnings of S$950m, up 2% YoY and -21% QoQ, and this is sharply ahead of market expectations of S$824m (based on Bloomberg poll). Net Interest Income fell 1% YoY to S$1327m, but higher Non-Interest Income, which rose 21% YoY to S$990m, helped to give total income a boost to S$2317m (+7.5% YoY). The key contributors were the strong double-digit increase in Fee and Commission Income, +25% YoY to S$507m, as well as higher Trading Income (+26% YoY to S$410m). With this strong set of 1Q performance, there is likely to be upward revision of its full year 2013 earnings forecast, as 1Q now accounted for 27% of consensus full-year earnings. We will provide more details after the analysts' briefing later in the day. Meantime, do note that we have a BUY rating on DBS but we are likely to revise our fair value estimate. (Carmen Lee) OKP Holdings: 1Q13 misses expectations OKP's 1Q13 revenue grew 28.4% YoY to S$32.0m but gross margin fell to 15.1% from 21.0% in 1Q12, chiefly due to increased subcontracting and labour costs. PATMI dropped 22.2% YoY to S$2.4m. 1Q13 EPS of 0.77 S cents was lower than expected, forming 18% of ours and 15% of the street's FY13 estimates. The effective tax rate fell from 16.0% in 1Q12 to 13.2% in 1Q13 due to tax-deductible purchases under the Productivity and Innovation Credit plan, which will apply through 2015. We have adjusted our forecasts for OKP's FY13 and FY14 performance. Applying the same P/E multiple of 11x to FY13F EPS, we derive a FV of S$0.46, slightly lower than our previous FV of S$0.48. We maintain our HOLD rating on OKP. (Sarah Ong) CapitaLand Limited: Capital recycling at serviced residences CAPL announced that it would divest three serviced residences in China and 11 rental housing properties in Japan for a total of S$165.0m to Ascott Residence Trust. The divestment of these properties, which include Somerset Heping in Shenyang, Citadines Biyun in Shanghai and Citadines Xinghai in Suzhou, would take place by 28th Jun 2013 and result in a net gain of S$15.1m for CapitaLand. We like that management continues to recycle capital steadily for stabilized assets in its serviced residences business segment, which would free up capital for deployment and further consolidate its balance sheet. Maintain BUY on CAPL with an unchanged fair value estimate of S$4.29 (20% discount to RNAV). (Eli Lee) Ascott Residence Trust: Proposed acquisition of assets in China and Japan Ascott Residence Trust (ART) has entered into conditional agreements to acquire three prime serviced residences in China and a portfolio of 11 rental housing properties in Japan for an aggregate purchase consideration of S$165.0m. ART expects to acquire the target properties at an EBITDA yield of 5.4% on a pro forma basis for FY12. On a pro forma basis, these accretive acquisitions are expected to have increased FY12 distribution per unit by 2.9% from 8.76 S cents to 9.01 S cents. The acquisitions will be funded partly by the S$150m recently raised from an equity placement and the balance will be funded by debt. We are placing our Hold rating and S$1.35 fair value UNDER REVIEWpending incorporation of the acquisitions into our model. (Sarah Ong)

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

NEWS HEADLINES - US stocks fell Wednesday as the Fed said it would continue purchasing US$85b in bonds each month, but may reduce or expand the programme depending on the economy. - Forterra Trust reported 1Q13 net loss of S$16.7m. It had registered a net profit of S$8.0m in 1Q12. - Religare Health Trust has announced that the Gurgaon Clinical Establishment, which accounts for 26% of its total portfolio value, had its official opening launch on 1 May 2013. - Del Monte posted 1Q13 net profit of S$4.4m, up 3.7% YoY, as revenue climbed 17% to S$87.4m. - Ho Bee's 1Q13 PATMI climbed 230% YoY to S$52.1m on the back of a 68% increase in revenue to S$60.8m.

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: DBS Vickers

Price Call: HOLD

Target Price: 2.07

Stock Name: Frasers Comm
Company Name: FRASERS COMMERCIAL TRUST

Research House: OSK

Price Call: BUY

Target Price: 1.65

Stock Name: Bumitama
Company Name: BUMITAMA AGRI LTD.

Research House: UOB KayHian

Price Call: BUY

Target Price: 1.12

Market Compass

02 May 2013~ Good Morning Singapore!

Singapore Idea Snippets:

02 May 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 :It takes a long time to grow an old friend. - JOHN LEONARD Singapore: The Day Ahead SINGAPORE DAYBOOK:S'pore must continue to be attractive to investors: PM Lee. It is critical that it retains reputation for reliability and, openness, he says [SINGAPORE] Investments are still critical to transform Singapore's economy and to upgrade workers, Prime Minister Lee Hsien Loong said at the annual May Day Rally yesterday. What's different now, however, is that the country is seeking higher-skilled and higher value-added activities that are less manpower-intensive or land-intensive. He was addressing some 1,600 people at Downtown East in Pasir Ris, including cabinet ministers, union leaders, workers and employers. Speaking for an hour in both English and Mandarin, Mr Lee said it is important that Singapore retains its reputation as an attractive place to do business. MARKET SCOOP Virgin, Tiger to push back deal deadline KepCorp regroups two infrastructure units into one new entity Investments crucial to transform economy: PM Lee Yoma extends deadline on development of Myanmar site DBS VICKERS SECURITIES says... CDL HOSPITALITY TRUSTS | HOLD | TP: S$2.07 Given the seasonally slower start to 2013, CDL Hospitality Trusts'(CDREIT) gross revenue and NPI declined marginally by 1% and 2% y-o-y to S$37.9m and S$35.8m respectively Income available for distribution (before retained income) dipped 3% y-o-y to S$ 28.7m, while DPU of 2.59 Scts was 3% lower y-o-y after a 10% retention ratio CDREIT's Singapore portfolio RevPAR was 7.9% lower y-o-y at S$191/night (occupancy rate of 87%, average daily rate of S$219/night) However, its overseas acquisitions performed well, especially the recently acquired Angsana Velavaru, which outperformed with a 28.5% y-o-y hike in RevPAR to US474/night However, given new incoming hotel supply in 2013 (4,138 rooms, +8% of current supply), we believe that further room rate hikes will be limited. We now assume that rates will remain flat y-o-y in FY13 (+3% previously) Given little upside to RevPAR in the immediate term, we do not see any re-rating catalysts But, downside to share price is limited with CDREIT trading at yields of close to 6% DMG OSK says... FRASERS COMMERCIAL TRUST | BUY | TP: S$1.65 FCOT reported 2QFY13 DPU of 1.99 cents (+14% y-o-y) Together with its 1QFY13 DPU of 1.58 cents, 1HFY13 DPU accounts for 43.4% of our full year forecast The higher dividend per unit (DPU) was mainly attributed to the redemption of convertible perpetual preferred units (CPPU) which was costing FCOT an average 5.5% annually at the DPU level Its management indicated that the pre-commitment rate in China Square Central reached a stable 92.6% from the actual occupancy of 73% With the pro-active management of its properties, the occupancy rate of FCOT's portfolio has hit a high of 95.3% (Singapore properties - 93.1%, Australia properties - 99.5%) Going forward, we expect FCOT to continue to register stronger DPU as the trust: i) reaps the full year benefit from the acquisition of another 50% of interest in Caroline Chisholm Centre and ii) benefits from CPPU buyback Given its bright prospects and strong portfolio, we favour FCOT for its attractiveness and maintain our BUY rating on this counter with a higher DDM based (COE: 7.1%; TGR: 2.0%) TP of SGD1.65 UOB KAY HIAN says... BUMITAMA AGRI | BUY | TP: S$1.12 Bumitama Agri (BAL) announced its 1Q13 production data with CPO production growth of 30.9% yoy to 116,971 tonnes (-21.3% qoq) 1Q13 production was within our expectation and is current the best among the Indonesia based companies, which had announced production in Indonesia Strong production growth in 1Q driven by its young age profile and about 10,000ha of newly mature areas that came on-stream in 1Q13 BAL is scheduled to announce its 1Q13 results on 13 May 2013 after market close We are expecting the net profit of Rp150b-Rp170b for 1Q13 (18-20% of full year estimated net profit) Maintain BUY with target price of S$1.12, based on 14x 2014F PE We like BAL for its young age profile and best oil extraction rate to support its 5-year net profit CAGR of 32%