OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: UOB KayHian

Price Call: BUY

Target Price: 4.45

Stock Name: Venture
Company Name: VENTURE CORPORATION LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 7.37

Stock Name: ChinaMinzhong
Company Name: CHINA MINZHONG FOOD CORP LTD

Research House: CIMB

Price Call: BUY

Target Price: 1.27

Market Compass

25 June 2013~ Good Morning Singapore!

Singapore Idea Snippets:

25 June 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 : A hospital bed is a parked taxi with the meter running. - GROUCHO MARX Singapore: The Day Ahead SINGAPORE DAYBOOK:Falling car prices keep inflation under control. But core inflation, which strips away private transport costs, surpasses headline inflation [SINGAPORE] Singapore's core inflation outdid the headline inflation rate in May - a rare sight - as a fall in car prices last month was offset by steeper increases in food prices and services fees. The overall consumer price index (CPI) rose to 1.6 per cent year-on-year in May, after the inflation rate plunged to a three-year low of 1.5 per cent in April. Just shy of the 1.7 per cent consensus forecast May's headline inflation rate was kept low by a fall in car prices which sent private road transport costs tumbling 3.7 per cent year-on-year - its first decline since 2009. This did not surprise forecasters, since lower COE premiums in April were expected to feed into May's inflation with a lag. Car dealers had also adjusted prices after car loan curbs and a new tiered additional registration fee on vehicles were introduced earlier this year. (Source: The Business Times) MARKET SCOOP OKP secures S$15m PUB contract Keong Hong gets S$161.9m contract Singapore, Malaysia face economic hit from prolonged smog Auric offers to buy rest of Food Junction at S$0.255/shr Sime Darby denies fire hotspots responsibility Secondary listing for New Britain Palm Oil in the works: The Edge New guidelines for job flexibility in service sector kick in July 1 Fitch rates UOB's offshore RMB notes 'AA-' Gallant Venture offers Rp5,426/shr for rest of IMAS (Source: The Business Times) UOB KAY HIAN says... CAPITALAND LTD | BUY | TP: S$4.45 We see good value emerging in CapitaLand, which has been sold down 32% (from February high of S$4.03) The pace of the selldown is worse than any of the S-REITs and is among the worst for developers under our coverage Key concerns for CapitaLand include a slowdown in China and rising interest rates, which could deter homebuying The finance cost for developers is a small component of the overall development cost (<10%) As home-buying sentiment improves, developers are usually quick to pass on the cost to end-homebuyers and built in the scenario in their land acquisition bids CapitaLand has a healthy average debt maturity of 3.6x with effective interest rates for bank borrowings ranging from 0.66% to 17% and effective interest rates for debt securities ranging from 0.66% to 8.78% CapitaLand is trading at an attractive 41% discount to its RNAV and a 30% discount to its long-term P/B value of 1.2x (vs 0.84 currently) CapitaLand recently acquired a 99-year leasehold plot in Coronation Road for S$366m, or $908.17psf ppr The 403,007sf site is zoned for landed residential housing. CapitaLand is looking to build a mix of semi-detached and bungalows on the site Although CapitaLand's bid is 17% higher than the next highest bid (total 12 bids) of S$777psf from Far East Organization, the limited availability of good landed sites, together with its premier location in District 10 near the Farrer Road MRT station and amenities such as Coronation Plaza, will ensure there is good interest for the project We estimate breakeven cost at S$1,400-1,500psf and selling price expectations from S$1,700psf We estimate that the acquisition could add about S$95m in pretax profits and result in a RNAV accretion of 2 S cents (0.3%) a share Maintain BUY, raised target price of S$4.45 (from S$4.41), pegged at 15% discount to its raised RNAV of S$5.23/share OCBC Securities says ... VENTURE CORPORATION | HOLD | TP: S$7.37 Our recent conversation with Venture Corp (VMS) highlighted that sentiment among its customers has largely remained cautious given the still uncertain macroeconomic conditions Manufacturing data emanating from China has also illustrated sluggishness, with the latest China HSBC Manufacturing June PMI flash estimate falling to a nine-month low of 48.3 Singapore's electronics NODX also disappointed, slipping 13.2% YoY in May, representing a tenth consecutive month of YoY decline and was below the street's 10.5% median forecast We now expect VMS's 2H13 recovery strength to be weaker than our previous expectations in light of the aforementioned factors Hence, we see the need to pare our FY13/14F revenue forecasts by 5.4/1.6%, even as we take into account the recent appreciation of the USD vis-à-vis the SGD Hence, we see the need to pare our FY13/14F revenue forecasts by 5.4/1.6%, even as we take into account the recent appreciation of the USD vis-à-vis the SGD Our FY13/14F PATMI estimates are lowered by 7.8/6.6%, respectively VMS's strategy in current uncertain times is to continue its acquisition drive for new customers and improve its product and service quality as a means of differentiating itself from its competitors This also involves a targeted approach to increasing its market share with existing customers given its strong design and engineering capabilities This would position the group for a future uplift in orders when the economic environment improves on a firmer footing, in our view Although VMS's share price has dipped 11.5% since its disappointing 1Q13 results, we prefer to wait for clearer signs of a rebound in the global economic conditions before turning more positive on the stock Maintain HOLD with a lower fair value estimate of S$7.37 (previously S$8.00) as a result of our reduced forecasts CIMB Securities says... CHINA MINZHONG FOOD | OUTPERFORM | TP: S$1.27 Minzhong's investor relations manager, Dave Tan, participated in CIMB's annual Asia Pacific conference in Kuala Lumpur on 19-20 June The key takeaways from his meeting with investors are: 1) it will be the cultivation business rather than the processed business that will drive earnings And to capitalize on this, it will be ramping up industrialised farming facilities Management is targeting to open three new facilities in Tianjin, Jiangsu and Sichuan Supply contracts for the processed business can be achieved within six months but the potential JV to build cultivation facilities in Indonesia will take time The board is seriously considering paying dividends in FY13 but nothing is firm yet It is possible that Minzhong will look to match Indofood's 40% payout over time FY13 operating cash flow is guided to be about Rmb700m-800m The key re-rating catalystswill be Indofood getting a board seat and dividends These two events should ease corporate governance concerns Although free cash flow in FY13 will be low given management guidance that free cash flow will hit a below-expectation Rmb1bn,we think dividends are still possible because of Indofood's Rmb455m cash injection A 10%payout would translate into a yield of 2.2% We raise out target price to a 10% premium to sector average (4.5x CY14 P/E) in anticipation of a re-rating as corporate governance concern eases Maintain Outperform with dividends as a key re-rating catalyst

DBS downgrades China Minzhong to hold

Stock Name: ChinaMinzhong
Company Name: CHINA MINZHONG FOOD CORP LTD

Research House: DBS Vickers

Price Call: HOLD

Target Price: 0.60

DBS Vickers downgraded vegetable processing firm China Minzhong Food Corp to ’hold’ from ’buy’ and cut its target price to $0.60 from $1.45, citing cost challenges, lower margins outlook and muted growth prospects.

By 10:15 a.m., China Minzhong shares were 1.6% lower at $0.60 and have fallen about 26% so far this year, compard to the FT ST China Index’s 2.4% rise.

“The slower-than-expected flushing out of crops due to the winter delay in FY12 and persistently higher costs are likely to depress margins going forward,” said DBS in a report.

It also noted that China Minzhong is now more focused on expanding industrial farmland instead of agricultural farmland, which means slower earnings growth as margins for processing vegetables are much lower than for cultivating vegetables, said DBS.

The brokerage said it expects China Minzhong’s gross margins to decline to 35.3% in 2014 from 38% this year.

China Minzhong Food Corp upgraded to 'buy' by DBS

Stock Name: ChinaMinzhong
Company Name: CHINA MINZHONG FOOD CORP LTD

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.28

DBS Vickers Securities in a Sept 30 research report says: "In our view, MINZ is oversold. MINZ's share price has fallen 52% from its peak of $1.85 in Feb 28. The stock currently trades at 3.8x FY12 PE and 0.7x FY12 P/BV, at about -2 standard deviation from its average valuations of 7x PE and 1.3x P/BV. 4QFY 06/11 and FY06/11 results were within expectations.

"We expect fundamentals to be intact supported by favourable operating environment. In view of the strong earnings visibility, the current valuation gap is unjustifiable.

"Based on lowered target valuation of 5.5x FY12 PE (in line with valuation of S-chip companies under our coverage), we revised our target price to $1.28, representing P/BV of 1.0x. Upside of 43%. UPGRADE TO BUY."

DMG cuts China Minzhong target price

Stock Name: ChinaMinzhong
Company Name: CHINA MINZHONG FOOD CORP LTD

Research House: DMG

Price Call: BUY

Target Price: 1.68

DMG & Partners cut its target price for Singapore-listed China Minzhong Food Corporation (CMFC.SI) to $1.68 from $2.28 and kept its buy rating.

China Minzhong reported fourth-quarter net profit of 97 million yuan, up 33% from a year ago and ahead of DMG's expectations, due to strong revenue growth from its fresh and processed vegetable segments.

However, DMG has cut its fiscal 2012-2013 earnings estimates by 5-3%, due to uncertainty over demand from the United States and Europe in light of a potential economic slowdown.

“We continue to like China Minzhong as it will likely remain a key beneficiary of current high food inflationary environment and the management’s strong execution post-listing, delivering quarterly results that were either within or exceeded consensus expectations,” DMG said.

At 10:59 a.m., shares of China Minzhong were 1.7% higher at $1.215 and have fallen 10.7% since the start of the year.

JPMorgan ups China Minzhong to $2 vs $1.70

Stock Name: ChinaMinzhong
Company Name: CHINA MINZHONG FOOD CORP LTD
Research House: JP Morgan Chase

JPMorgan has raised its target price for Singapore-listed vegetable producer China Minzhong (CMFC.SI) to $2.00 from $1.70 and kept its overweight rating.

JPMorgan has raised its net profit estimates by 3.6% for this year, and by 7.5% for 2012, as it raised its gross profit margin assumptions for processed and fresh vegetables.

The brokerage noted that China Minzhong's strategies of focusing on high-margin vegetable products and expanding its processing capacity rapidly sets it apart from competitors.

At 9:45 a.m., shares of China Minzhong were 0.64% higher at $1.57, and have gained 15% since the start of the year.

ChinaMinzhong - Macquarie initiates 'outperform' on China Minzhong

Stock Name: ChinaMinzhong
Company Name: CHINA MINZHONG FOOD CORP LTD
Research House: MacQuarie

Macquarie has initiated an “outperform” rating on Singapore-listed vegetable producer China Minzhong (CMFC.SI) and a target price of S$1.80.



Macquarie said China Minzhong, a large vegetable grower and processor in China that is part-owned by Singapore’s GIC, is gaining overseas market share as its product quality improves.

 

The brokerage said China Minzhong posted a 48% compounded annual growth rate (CAGR) in exports for its 2007-2010 financial years by aggressively investing in equipment and international quality standards.

Macquarie projected a 29% CAGR for the firm’s exports in the next two years, adding that it can effectively double its combined gross installed plant and land under cultivation in the next 12 months.

The key risks for China Minzhong include a faster-than-expected yuan appreciation and executing its growth strategy.

 

At midday, China Minzhong shares were up 1.6% at $1.29 on a volume of 1.5 million shares.

ChinaMinzhong - China Minzhong Food started at Buy by DBS Vickers

Stock Name: ChinaMinzhong
Company Name: CHINA MINZHONG FOOD CORP LTD
Research House: DBS Vickers

DBS Vickers starts China Minzhong Food (K2N.SG) at Buy with $1.58 target price, implying 11.0x FY11 P/E, 8.3x FY12 P/E, according to Dow Jones.



DBS Vickers says vegetables processor well placed to gain from China’s growing importance as 1 of world’s key vegetables exporters; “the company will also benefit from the consolidation of the fragmented vegetables farming industry in China.”

Broker notes Minzhong’s cultivation bases, processing facilities well diversified across China, with customer base spanning 26 countries worldwide. Says having Government of Singapore Investment Corp. as second largest shareholder, with 17.5% stake, positive for corporate governance. Shares off 1.5% at $1.35.

ChinaMinzhong - China Minzhong Food started at Outperorm by CIMB

Stock Name: ChinaMinzhong
Company Name: CHINA MINZHONG FOOD CORP LTD
Research House: CIMB

CIMB starts China Minzhong Food (K2N.SG) at Outperform with $1.52 target price, based on 7.5x FY11 P/E. Tips EPS CAGR of 28% over FY11-13 for vegetables processor, driven by higher selling prices, volumes, according to Dow Jones.



CIMB says management’s plan to acquire more land for cultivation should support growth, while diversification of products, increase in proportion of higher-margin offerings expected to boost profits; “potential catalysts are likely to come from announcements of land acquisitions at attractive prices and good quarterly results.”



Shares +0.8% at $1.30.

ChinaMinzhong - China Minzhong Food target raised to $1.60 by JPMorgan

Stock Name: ChinaMinzhong
Company Name: CHINA MINZHONG FOOD CORP LTD
Research House: JP Morgan Chase

JPMorgan lifts China Minzhong Food (K2N.SG) target price to S$1.60 from S$1.45 after increasing FY11-12 earnings estimates by 13%-12%, says Dow Jones.



JPMorgan is keeping its Overweight call, saying “We believe Minzhong will be able to continue delivering average selling price and volume growth with its organic/GAP (Good Agriculture Practices) certified produce favoured by its export customers as well as domestic consumers who place great importance on food safety.”

Research house says core fiscal FY10 earnings of RMB383 million ($76.5 million) (+37%), excluding fair value losses, 5% above consensus estimates. Notes plantations of vegetables processor not affected by recent China floods, allowing Minzhong to partly benefit from higher vegetable spot prices. Shares +1.6% at $1.30.