OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: Nomura

Price Call: BUY

Target Price: 2.00

Stock Name: Kep REIT
Company Name: KEPPEL REIT

Research House: UOB KayHian

Price Call: BUY

Target Price: 1.46

Stock Name: SGX
Company Name: SINGAPORE EXCHANGE LIMITED

Research House: OSK-DMG

Price Call: HOLD

Target Price: 8.10

Market Compass

22 October 2013~ Good Morning Singapore!

Singapore Idea Snippets:

22 Oct 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 : Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway. - WARREN BUFFETT Singapore: The Day Ahead SINGAPORE DAYBOOK : Asiasons, Blumont, LionGold stocks soar. Their prices nearly double after SGX lifts trading curbs. [SINGAPORE] Share prices of Asiasons Capital, Blumont Group and LionGold Corp almost doubled in yesterday's no-holds-barred trading as the market sought to put a value on the stocks after trading curbs were ended. Traders The Business Times spoke to said the share prices of the three counters can now be "freely" determined by market forces after the Singapore Exchange (SGX) lifted trading restrictions on the stocks. Asiasons shares surged 91 per cent, Blumont stock rose 80 per cent and LionGold soared 93 per cent by the close of trading yesterday. They were among the top 10 actively traded stocks in early trade, with higher volumes than their 30-day full-day average. Asiasons, Blumont and LionGold shares finished at 24.5 cents, 24 cents and 29.5 cents respectively. "The lifting of the trading curbs levels the playing field for these three counters. Investors put off by the trading restrictions previously can now buy into these counters just as they can buy into other counters," said Liu Jinshu, an analyst at Voyage Research. SGX yesterday allowed the counters to be traded freely without the trading shackles that had banned investors from contra trading and short-selling them since Oct 6. Traders said the "pent-up" demand for Asiasons, Blumont and LionGold shares will continue to move their prices to an equilibrium level determined by a free market. "I feel (the increase) can be further sustained because the stocks have taken such a huge bashing. Now the market is trying to do a price discovery on them," said a broker who requested anonymity. Asiasons, Blumont and LionGold experienced strong run-ups in their stock prices this year, trading at around $2 before they were struck by a downward spiral on Oct 4, prompting SGX to suspend trading in the three counters. The suspension was lifted the next trading day on Monday but SGX labelled them as designated stocks, in a move aimed at reining in excessive speculation and possible disorderly trading. The stocks traded between 10 and 15 cents. "The $2 they were trading before the designation was unrealistic; the 10 to 15 cent range was also unrealistic because it was due to unusual measures," the broker said. He believes Asiasons' "true" value could settle in the region of 30 to 40 cents, while LionGold's could lie between 40 and 50 cents as it has a higher book value. Blumont shares might, however, come under pressure as its recent rights issue was under-subscribed, he said. "Blumont may be the weakest of the three." (Source: The Business Times) MARKET SCOOP HPH Trust Q3 profit down 8.4% SGX to develop commodity products with Shanghai Futures ValueMax plans to raise S$70.4m in IPO Indofood plans to keep China Minzhong listed Singapore inflation seen easing in September (Source: The Business Times) NOMURA Securities says ... OLAM INTERNATIONAL | BUY | TP: S$2.00 The last day of our trip was a ride through the ~USD200mn Special Economic Zone Olam is developing in partnership with government of Gabon (60:40 share) This is the first SEZ in Gabon, and among the few in West Africa (probably one of the largest) Spread over 1,200ha of land, phase 1 is developing 440ha, which is divided into commercial (19ha), industrial (240ha) and residential (via government) In our view, the locational advantage is connectivity through water, land and rail Besides receiving good tax breaks, other incentives for corporates/industrial houses for being based in Gabon include cheaper infra (power), trade incentives, access to forest land, government departmental access, etc. Industries that have stepped foot range from timber, pharma, retail, banking, etc Phase 1 infra is 99% complete and a significant portion has already been sold We believe this SEZ could contribute significant one-time income in the near term, although there is not much clarity yet on recurring income to Olam from this In our view, this is more of a strategic partnership venture to receive better co-operation from government in other key projects Key takeaways from the trip - With this, we wrap ~USD3bn worth of capex in Gabon/Nigeria (most of which is yet to be invested) Key takeaways from the trip include: ? Olam has considerable on-ground expertise in Africa - in terms of local regulations, management bandwidth, asset and infrastructure access, etc It seems that Olam has efficiently made the progression from supply chain manager to pan value chain presence Most of the investments already made are not fully gestating (CFM, rice farms, palm etc) and could contribute significantly over next few years if execution stays strong There is some material progress on the Fertilizer plant but we think the market should still be waiting for key milestones The assets which we saw could alone contribute to run rate of ~USD500mn+ EBITDA in next few years, per our estimates More than anything, this trip provides us with confidence in Olam's execution capabilities and management presence for key processing and upstream assets and that capex could bear returns over a period of time We stick to our Buy call, as valuations appear reasonable, there are option values in terms of fertilizer/palm and growth vs sector should remain better The catalysts may yet take time but long term value creation should happen UOB KAY HIAN says ... KEPPEL REIT | BUY | TP: S$1.46 Management is currently comfortable with the level of investments into Australia (at 12% of portfolio) and is increasingly looking at opportunities in Singapore, such as the acquisition of the one-third stake in MBFC Tower 3 from parent Keppel Land Asset sales increasingly likely to support the acquisition of MBFC The tantalising prospect of the acquisition of MBFC Tower 3 with minimal equity fund raising was discussed As part of their portfolio reconstitution strategy, management is exploring options including the sale of older assets to fund the acquisition In our view, a possible scenario for MBFC Tower 3 (~S$1.2b) could include a ~S$500m divestment of an older Singapore office building (Prudential Tower or Bugis Junction Office Tower) and perhaps one or two buildings in Australia (~S$200m-300m), supported by additional debt headroom from year-end revaluation gains for its portfolio However, management highlighted that timing the asset sales with the acquisition is challenging as DPU could be impacted in the short term if there is a gap between the asset sale and the acquisition Early refinancing to lock in interest rates KREIT completed the early refinancing of its debt maturing in 2014 and will not have any refinancing requirements over the next 24 months Management is also proactively refinancing debt due in 2015, with S$60m of 2015 borrowings already extended Financing rates achieved are still relatively attractive, with new debt pricing at a 10-20bps discount over the debt which was refinanced Income support at Ocean Financial Centre (OFC) continues to remain substantial (S$15.2m in 3Q13, down 2% qoq) as committed tenants have not fully moved into OFC and as rental contributions from the retail podium are not significant yet Also, management highlighted that over the next 1-2 years, rent reviews for key anchor tenants, such as ANZ and BNP, will improve passing rents, as some of these large leases were signed at the height of the great recession in 2008-09 8 Chifley Square, Sydney has managed to achieve 70% pre-commitments upon completion in July, and negotiations are ongoing to fill up the remaining space Management is confident that committed occupancy would soon reach 95%, although downside risk is protected by a 5-year rental guarantee from the seller, Mirvac Office leasing demand continues to be resilient supported by smaller financial institutions, legal firms and IT firms With occupancies essentially full at key buildings, KREIT is in discussions with larger tenants to extend leases prior to expiry DMG OSK Securities says... SINGAPORE EXCHANGE | NEUTRAL | TP: S$8.10 SGX had a decent start to the year with 1QFY14 net profit up 24% y-o-y (+5% q-o-q, based on reported net profit) to SGD92m Average daily turnover (ADT) in the securities market was stable y-o-y but down 16% q-o-q to SGD1.3bn Meanwhile, derivative volume posted strong y-o-y growth (+36% y-o-y) Our earnings forecasts and SGD8.10 FV (23x CY14EPS) are unchanged1QFY14 results in line SGX's 1QFY14 net profit of SGD92m (+24% yo-y; +5% q-o-q) was within our and consensus expectations, accounting for 25% of our and consensus full-year net profit estimates Higher clearing fee, better derivative volume drive y-o-y profit growth Y-o-y, while average daily turnover (ADT) in the securities market was broadly stable at SGD1.3bn, securities revenue rose 15% Average clearing fee increased to 3.2bps from 2.7bps a year ago, as the proportion of capped trades fell to 35% from 46% in 1QFY13, with institutions trading a broader range of stocks and retail participation rising Turnover velocity, however, was weaker at 47% (1QFY13: 51%; 4QFY13: 55%) Meanwhile, derivatives revenue was up 16% y-o-y as total traded volume jumped 36% y-o-y to 26.4m contracts, led by the FTSE China A50 futures, Nikkei 225 futures and options, and iron ore swaps Q-o-q, revenue fell 9% reflecting weaker ADT (-16% q-o-q) and derivative volume (-16% q-o-q) Expenses broadly under control (+6% y-o-y; -6% q-o-q) Management continued to guide for FY14 operating expenses of SGD320m-330m (FY13: SGD300m) Technology-related capital expenditure is expected be around SGD35m-40m As expected, SGX declared an interim DPS of 4 cents (1QFY13: 4 cents) We are forecasting FY14 total DPS of 31 cents (FY13: 28 cents), based on a net payout ratio of 90% We are maintaining our SGD8.10 FV, which is based on target CY14 P/E of 23x (a 10% discount to average P/E of 25x) Maintain NEUTRAL

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: SGX
Company Name: SINGAPORE EXCHANGE LIMITED

Research House: DBS Vickers

Price Call: HOLD

Target Price: 7.15

Stock Name: M1
Company Name: M1 LIMITED

Research House: UOB KayHian

Price Call: BUY

Target Price: 3.95

Stock Name: Kep REIT
Company Name: KEPPEL REIT

Research House: Nomura

Price Call: HOLD

Target Price: 1.21

Market Compass

17 October 2013~ Good Morning Singapore!

Singapore Idea Snippets:

17 Oct 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 :One has to grow up with good talk in order to form the habit of it. - HELEN HAYES Singapore: The Day Ahead SINGAPORE DAYBOOK : Senate deal struck to avert default. Dow rises 1.3% at midday as US crisis nears end. [WASHINGTON] Senate Majority Leader Harry Reid said yesterday that a deal had been reached with Republican leaders to end a fiscal impasse that has threatened the United States with default. Mr Reid, speaking from the Senate floor, said that the agreement called for reopening the federal government with a temporary budget until Jan 15 and to extend US borrowing authority until Feb 7. Stocks soared as the crisis that has gripped Washington for weeks appeared to be nearing its end. Republican Senator Kelly Ayotte said that the House of Representatives might vote first on the plan to speed its way through Congress and put it on President Barack Obama's desk for signing before today's midday default deadline. The Dow Jones industrial average spiked 200 points, or 1.3 per cent, to 15,370 in midday trading. The crisis began on Oct 1 with a partial shutdown of the federal government after House Republicans refused to accept a temporary funding measure unless Mr Obama agreed to defund or delay his healthcare overhaul law. It escalated when House Republicans also refused to move on needed approval for raising the amount of money the Treasury can borrow to pay US bills, raising the spectre of a catastrophic default. Mr Obama vowed repeatedly not to pay a "ransom" in order to get Congress to pass normally routine legislation. (Source: The Business Times) MARKET SCOOP Keppel Land Q3 net profit jumps 70% to $126.4 million UniSIM to host third law school Keppel T&T Q3 profit up 4.2% Sky Vue top selling project in Sept RH Petrogas starts drilling of Klagalo-1 well in Indonesia ST Engineering secures S$600m of aerospace projects in Q3 Loyz Energy to issue 50m new shares at 35 cts/shr OCBC not seeking compensation from SingTel (Source: The Business Times) DBS VICKERS Securities says ... SINGAPORE EXCHANGE | HOLD | TP: S$7.15 Daily average trading volumes have remained high (3Q13: 3.6bn) amid the strong market activity for small cap stocks during the quarter The value-to-volume ratio has dropped further to S$0.37 compared to S$0.54 the previous quarter As a result, average trading value for 3QCY13 declined 18% q-o-q to S$1.3bn (2Q13: S$1.6bn) On a positive note, the proportion of capped trades (> S$1.5m) has declined to 35% (2Q13: 41%), providing support to average trading value Compared to HKEX and Bursa, SGX generates a higher proportion of its revenue from derivatives - 29% as at 2Q13 (Bursa: 16%, HKEX: 20%) This has helped SGX keep revenues strong Derivative activities for SGX have been picking up strongly over the past 4 quarters However, we expect a slight softening this quarter as derivative volumes declined by 17% q-o-q, largely from the Nikkei 225 Index Futures Although open interest rose 3% q-o-q, we do not believe this will be sufficient to offset the volume decline We estimate total revenues to drop by 10% to S$182m, expenses to remain stable at S$81m, and net profit of S$84m for the quarter Base DPS of 4 S cts is expected to be declared, similar to previous quarters Maintain HOLD, S$7.15 TPbased on DDM implying 23x FY14F EPS Downside to the stock price should be limited, supported by dividend yields of 4-5% based on a 90% dividend payout assumption Our forecasts are marginally tweaked and we introduce FY16F numbers Comparatively, our BUY recommendation for HKEX is on expectation of improving trading values, revival of IPO activities and improving LME profitability while for Bursa, we see upside from structural changes over time We see limited catalysts for SGX given soft trading values ahead. 4QCY13 is typically a slow quarter Possible revival of trading activity in 1QCY14 may add traction UOB KAY HIAN says ... M1 | BUY | TP: S$3.95 M1 reported a net profit of S$39.5m for 3Q13 (+19.4% yoy), in line with our expectations M1 added 9,000 post-paid subscribers while post-paid subscriber base expanded 4.4% yoy Post-paid ARPU declined by a marginal 0.8% qoq to S$61.80 due to lower roaming revenue The proportion of post-paid subscribers on tiered data plans has expanded from 26% in 2Q13 to 32% in 3Q13 Mobile data accounted for 29.7% of service revenue (3Q12: 24.3%) M1 added 10,000 fibre broadband customers with a higher adoption of mass-market plans The pace of activation appears to have improved. ARPU declined 2.3% qoq to S$46.20 M1's net debt/EBITDA was only 0.6x in 3Q13, vs 0.8x last year It generated free cash flow of S$79m in 9M13, +12.2% yoy Management will review the possibility of capital management exercise in 4Q13 Management maintained guidance of a moderate growth in earnings for 2013 Capex is expected at S$130m M1 will complete network enhancements in 4Q13, including: a) deploying a nationwide 3G radio network on 900MHz spectrum, and b) upgrading its core infrastructure to an all-IP core network, which supports dynamic allocation of resources involving pooling of mobile switching centres and customer databases M1 launched internet TV service MiBox in Jul 13 Management did not disclose the size of its subscriber base for pay-TV but expects to start the cross carriage for exclusive content, such as Barclays Premier League (BPL) matches, in mid-14 We like M1 as it is the largest beneficiary of the migration to tiered data plans as mobile accounted for 78.3% of service revenue in 3Q13 M1 has strengthened its ability to bundle multiple services with the addition of fibre broadband and pay TV services We maintain our earnings forecasts Our target price is S$3.95, based on DCF (required rate of return: 6.7%,terminal growth: 1.0%) Evolution into a triple-play telco encompassing mobile, fibre broadband and pay-TV services Special dividend could provide a positive surprise NOMURA Securities says... KEPPEL- REIT | NEUTRAL | TP: S$1.21 KREIT reported its 3Q13 results on 14 October after the market closed 3Q DPU of 2Scts (+0.5%y-y; flat q-q) met 24.9% of our full-year forecast of 7.9Scts Higher-than-expected income support and lower-than expected tax expenses helped offset higher-than-expected interest expenses and lower-than-expected contribution from associates KREIT's aggregate leverage was 43.9% as of end-September (vs. 44.2% as of end-June) Refinancing has been secured for the SGD282mn and SGD60mn in borrowings due in FY14F and FY15F respectively, which will increase KREIT's weighted average term to expiry for its debts to 3.8 years (from 3.6 years) It remains our view that management's near-term focus will remain on capital management On our estimates, same store NPI (SSNPI) grew 5%y-y in 3Q13 (vs. +7.2%y-y in 2Q13), underpinned by growth at Ocean Financial Centre (OFC), One Raffles Quay (ORQ) and Marina Bay Financial Centre Phase 1 (MBFC 1) Committed occupancy at KREIT's Singapore portfolio increased slightly to 99.5% as of end-September (from 99.2% as of end-June), principally driven by improvements at ORQ (100% from 99.8%) and OFC (98.8% from 97.9%) We reiterate our Neutral rating on KREIT. At FY13F yield of 6.3% (implied spread 3.9pp, vs the stock's own trading historical average of 4.8pp and office REITs' blended historical average of 3.9pp) and multiple of 1x the end-September book value of SGD1.25/unit (vs KREIT's trading historical average of 0.8x), we think valuation remains fair at best

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Kep REIT
Company Name: KEPPEL REIT

Research House: UOB KayHian

Price Call: BUY

Target Price: 1.46

Stock Name: Olam
Company Name: OLAM INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.45

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

Research House: CIMB

Price Call: SELL

Target Price: 10.09

Market Compass

04 September 2013~ Good Morning Singapore!

Singapore Idea Snippets:

04 Sept 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 : Wealthy men can't live in an island that is encircled by poverty. We all breathe the same air. We must give a chance to everyone, at least a basic chance. - AYRTON SENNA Singapore: The Day Ahead SINGAPORE DAYBOOK :Court quashes Thomson View sale [SINGAPORE] A proposed $590 million collective sale of Thomson View Condominium is scuppered after the High Court found that its marketing agent's offer of more than $548,000 in incentive payments to four owners to get a requisite 80 per cent majority amounted to bad faith. Justice Andrew Ang, in a 30-page decision released yesterday, found that HSR International Realtors "egregiously breached its duty to avoid any possible conflict of interest", and also "breached its duty of transparency" by failing to disclose the incentive payments to the Collective Sales Committee (CSC) and other owners. As such, the four owners should not be counted in the requisite 80 per cent majority for the sale to go through, he ruled. Discounting these owners, the 80 per cent consent threshold would not be reached; the plaintiffs were therefore not even in a position to apply for court approval of the sale, he said. Yesterday's ruling came two weeks after the Court of Appeal upheld a decision by Justice Belinda Ang to disallow a $33 million en bloc sale of Harbour View Gardens because she found its marketing agent's offer of a $200,000 inducement to a couple to join the sale is "commercially unacceptable", and that its CSC had failed to act in good faith. (Source: The Business Times) MARKET SCOOP Govt mulls underground version of Master Plan EMA fines PowerGas $1.5m for supply disruption $200m raised for needy students at 2 unis as LKY turns 90 Havelock Rd hotel site triggered fromReserve List Singapore Aug manufacturing activity expansion slows (Source: The Business Times) UOB KAY HIAN says... KEPPEL REIT | BUY | TP: S$1.46 Valuations are now more compelling as Keppel REIT (KREIT) offers a yield of 6.6%, 40bp over the average 6.2% yield for office S-REITs With physical office transactions at 3-3.5% cap rates, office REITs offer better value for investors to gain exposure to economic growth and improvements in office rentals Its recent private placement (completed on 6 August) of 95m new units at S$1.26 per unit raised gross S$120m (S$118m after fees) The proceeds were used to fund the S$192m acquisition of 8 Exhibition Street in Melbourne, Australia, and remove the near-term equity overhang following the recent acquisition Mirvac and KREIT recently announced that 8 Chifley Square in Sydney is 70% pre-committed ahead of its completion in Oct 13 This is 14ppt up from Apr 13's (56% pre-committed) and reflects positive leasing sentiment for high-quality office space despite slowing economic growth due to a moderation in commodity prices The new tenant, data analytics firm Quantium, joins other tenants including law firm Corrs Chambers Westgarth and insurance leader QBE Insurance Group, at 8 Chifley. Occupancies and pre-commitments for the other Australia properties (275 George Street, 77 King Street and Old Treasury Building) in KREIT's portfolio are all above 97% About 90% of KREIT's portfolio by valuation is centred in Singapore, despite recent acquisitions in Australia Among office REITs, KREIT has the highest quality office portfolio with over 92% of its Singapore portfolio located in the Raffles Place and Marina Bay precincts Following the latest distribution-in-specie of 8 KREIT units for every 100 Keppel Corp shares, we estimate Keppel Corp has pared down its stake to a mere 0.1% (~3.7m shares) Keppel Land remains a substantial shareholder, with a 46% stake in KREIT Although there could still be some near-term weakness when Keppel Corp's shareholders receive their KREIT units on 13 September, the previous distribution-in-specie on 8 May marked a 6.8% one-week rally in the share price as new unit holders did not divest of their KREIT units We view any near-term weakness as a good opportunity to accumulate KREIT We expect Grade-A office rentals to rise 8% yoy in 2014 after bottoming in 2013 Office rentals in 2Q13 remained unchanged qoq at S$9.55psf pm, slowing from the average 3.4% quarterly decline in 2012 We expect office demand to rebound to 2.1m sf p.a. in 2013-17, while demolitions could remove over 60% of upcoming supply over the next two years As MBFC Tower 3 achieves close to 80% occupancy, and following the positive leasing momentum for OFC, we believe MBFC Tower 3 will be leased by end-13 Any acquisition could be supported through asset divestments, potentially strata-office units in Prudential Tower, as demand for strata-office space remains buoyant Space at Prudential Tower is valued at S$2,200psf, while strata units at Suntec City are transacting at S$2,750psf Key risks remain the relatively high gearing of 44% post equity fund raising and the acquisition of 8 Exhibition Street, although further equity fund raising will likely be paired with acquisitions We upgrade the stock to a BUY (from HOLD) with an unchanged target price of S$1.46, based on dividend discount model (required rate of return: 7.1%, terminal growth: 2.2%) OCBC Securities says ... OLAM INTERNATIONAL | HOLD | TP: S$1.45 Muddy Waters (MW) has just issued a new report on Olam International Limited (Olam), titling its "Not Changing the Old Ways" following the release of its FY13 results The report again raised issues over transparency and corporate governance, as well as remaining skeptical if Olam will operate differently in the future; this given that there have been no changes to Olam's board since MW's initial report In particular, the viability of the Gabon fertilizer project was called into question, where MW believed that Tata Chemical (TCL) is highly unlikely to participate in the project We note that during the results briefing, Olam stated that its relationship with TCL is "still strong" but added that they are "still discussing and have not reached closing conditions" MW now recommends that Olam "fall on the sword" and terminate the project, despite spending significant money on dredging In any case, our current forecasts do not include any contributions from Gabon as we have always held the conservative view and would only include the project if it has achieved financial close Recall that the Gabon project was first raised in Apr 2011 where Olam announced that TCL will invest US$290m to acquire a 25.1% stake While we expect the new MW report to weigh slightly on sentiment, we are maintaining our forecasts for now, given that we have already pared our FY14F core net profit figure by 16% recently Maintain HOLD with an unchanged S$1.45 fair value (based on 10x FY14F EPS) for now CIMB Securities says... OCBC | UNDERPERFORM | TP: S$10.09 Our GGM-based target price of S$10.09 (based on 1.27x CY13 P/BV) remains unchanged Maintain Underperform, with the de-rating catalysts of rising interest rates, poor investment appetite from private banking clients and eventually, rising credit costs OCBC remains our least preferred Singaporean bank In Aug, 10-year SGS yields rose by ~30bp and 10-year US treasury yields rose by 20bp Talk of tapering has intensified The US Fed is widely expected to scale back QE by 4Q13 When interest rates rise, OCBC's insurance earnings will be dragged down as non-par gains subside OCBC's 2012 ROE beat peers because GEH's accounting earnings were buoyed by the rising bond market The reverse is now true We expect OCBC's ROE to lag peers now, making it difficult to justify current valuations If OCBC's non-interest income engines were more diversified, then there would be some support from transactional fee income Our findings show that it has lagged peers in trade fees, loan fees and investment-related fee growth The only fee streams that OCBC excels at are wealth management (WM) and insurance The recent guidance that private banking flows have been slower than normal does not foster confidence that WM will cushion the lower insurance contribution The worst credit quality problems of Singaporean banks typically do not emanate from their Singaporean loan books In 1998, it was Indonesian loans In 2008, it was OECD loans and investment securities (CDO, bank debt) OCBC was top in 2009's asset quality class because it did not have these credits However, as OCBC currently has the highest exposure to problematic Indonesia and India, it is likely that its NPL will deteriorate to the same level as its peers' Coming from especially low levels, increasing credit costs will pose a potential headwind to earnings

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Kep REIT
Company Name: KEPPEL REIT

Research House: UOB KayHian

Price Call: BUY

Target Price: 1.64

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.08

Market Compass

28 June 2013~ Good Morning Singapore!

Singapore Idea Snippets:

28 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 :Being an intellectual creates a lot of questions and no answers. - JANIS JOPLIN Singapore: The Day Ahead SINGAPORE DAYBOOK:SingTel, Yoma lose out on Myanmar bids. Norway's Telenor and Qatar's Ooredoo outbid nine others to win the licences SINGAPORE-LISTED companies Singapore Telecommunications (SingTel) and Yoma Strategic Holdings have been shut out of two highly sought mobile licences in Myanmar that the authorities awarded yesterday. Norway's Telenor and Qatar's Ooredoo beat out nine other bids to take the licences, wire services reported. France's Telecom-Orange, with Japan's Marubeni Corp, was named as a reserve, in case negotiations between Telenor or Ooredoo and the Myanmar authorities fall through. This is the first time that Myanmar is opening mobile telco licences to foreign players. SingTel, which had been seen as a frontrunner by market observers, was in a consortium with Myanmar's KBZ Group and Myanmar Telephone Co. (Source: The Business Times) MARKET SCOOP Freight Links FY profit up 19.1%, raises dividends China Fishery says to start arbitration against Veramar No client data compromised by hacking: Eu Yan Sang Private pre-schools eligible for government's Anchor Operator Scheme Keppel Reit's portfolio to improve through Melbourne acquisition: Moody's URA releases sales details for Havelock hotel site Changi Airport passenger traffic up 4.7% in May LTA to tender for operators of short bus routes in 2H13 (Source: The Business Times) UOB KAY HIAN says... KEPPEL REIT | BUY | TP: S$1.64 Keppel REIT (KREIT) has announced the acquisition of a 50% interest in 8 Exhibition Street, Melbourne from United Super Investments for A$160.2m (S$192.4m) The 35-storey freehold prime office building has a NLA of 480,309sf and is 100% leased to well-established tenants in the financial, aviation, financial advisory, tax and transaction services sectors KREIT has paid a deposit of S$9.6m with the remaining S$182.8m due upon completion of the transaction around 1 August 2013 DPU accretive with pro-forma 2.4% accretion to DPU if the transaction were fully funded by debt However, gearing is estimated to rise from 43.3% in 1Q13 to 45.2% post-transaction if fully debt-funded Management has guided that it will be looking to fund the transaction with an optimal mix of debt and equity, as the transaction will bring gearing above the 45% level However, any equity fund raising conducted will be balanced to ensure that the transaction remains DPU accretive The transaction is relatively small, representing about 2.9% of total asset valuations of S$6.6b We retain our estimates pending further details on the financing for the transaction We remain currently have a BUY on KREIT with a target price of S$1.64 DBS VICKERS Securities says ... YOMA STRATEGIC HOLDINGS | BUY | TP: S$1.08 Yesterday, Myanmar's Parliament voted to delay awarding the licenses until a new telecommunications law governing the industry is passed Members of the Parliament agreed that the "industry risked being monopolised" if the winners of the telecommunications license were announced before a new telecommunications law is passed in the country In addition, it was also proposed that only foreign companies with a local joint-venture partner should be granted a telecommunications license, although it is unclear whether this new rule will be adopted Some of the foreign bidders, including a consortium of Orange and Japan's Marubeni Corp. and Bharti Airtel, are competing for a license without a local partner The Telecommunications Operator Tender Evaluation and Selection Committee is the independent body that oversees the bid but members of Parliament said that the decision from its lower house would override the authority of the Telecommunications Operator Tender Evaluation and Selection Committee Hence, it is now unclear when the winners will be announced Although bureaucratic delays are common in frontier markets, we hope that the delay will not be for too long as these developments - telecom networks and airports - are the new government's first attempts to revamp the country It is crucial that the government shows that they are able to plan and execute the country's development forward As mentioned in our earlier reports, we do not expect and have not imputed into our forecast any earnings impact from this telco bid Maintain BUY and S$1.08 TP OCBC Securities says... YOMA STRATEGIC HOLDINGS | HOLD | TP: S$0.87 Yoma has requested for a trading halt last night pending the expected award of two telecommunications licenses today by the Myanmar authorities However, latest news reports that the parliament had on Wednesday voted to delay the award until a new telecommunications law governing the industry is passed This is due to concerns that the "industry risked being monopolized" and it is yet unclear if a proposed new rule - that only foreign companies with a local JV partners would be granted licenses - would be adopted Given these latest updates, we believe that the license award could possibly be delayed as the decision from the parliament is purported to override that of the Telecommunications Operator Tender Evaluation and Selection Committee, which is overseeing the tender process Maintain HOLD with a fair value estimate of S$0.87

Barclays tips accumulating S-REITs on dips

Stock Name: Kep REIT
Company Name: KEPPEL REIT

Research House: Barclays

Price Call: BUY

Target Price: 1.70

Stock Name: CapitaComm
Company Name: CAPITACOMMERCIAL TRUST

Research House: Barclays

Price Call: BUY

Target Price: 1.87

Barclays notes that markets concerns about the end of QE3 or the Fed 'tapering' with long-dated government bond yields spiking up has resulted in both high-yield credit and high-yield equities, in particular S-REITs, being sold off.

The house believes "the concern is premature and we do not expect the Fed to cut back its bond purchases until 2014 vs the market's expectation of 2H13."

With that in mind, Barclays continues to believe that S-REITs' valuations are not expensive -- still above normalised average yield spread with the office sector having bottomed.

It prefers REITs that could grow faster even when interest rates gradually move up due to sustainable growth in the US. "We would accumulate on dips," it says noting that Keppel REIT (K71U.SG) and CapitaCommercial Trust (C61U.SG), both rated Overweight with respective $1.70 and $1.87 targets, are its top picks among S-REITs.

Shares are down 1.4% at $1.42 and down 1.3% at $1.53, respectively.


 

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: UBS

Price Call: HOLD

Target Price: 18.50

Stock Name: Kep REIT
Company Name: KEPPEL REIT

Research House: Nomura

Price Call: SELL

Target Price: 1.34

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD

Research House: UOB KayHian

Price Call: BUY

Target Price: 13.30

Market Compass

23 May 2013~ Good Morning Singapore!

Singapore Idea Snippets:

23 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 :You can't put a limit on anything. The more you dream, the farther you get. - MICHAEL PHELPS Singapore: The Day Ahead SINGAPORE DAYBOOK:DBS reluctant to settle for a minority stake. Bank hopes central bank talks will clear way for takeover of Danamon [SINGAPORE] DBS Group Holdings may not settle for the minority stake it has been offered in Indonesia's Bank Danamon. It hopes that talks between the central banks of Indonesia and Singapore will clear the way for a majority takeover. Pending these, it may ask for an extension from seller Temasek Holdings. On Tuesday, Bank Indonesia (BI) said it will approve a maximum 40 per cent sale of Bank Danamon, the country's sixth largest bank with some 3,000 branches, and approval for a larger stake may for DBS depends on Indonesian banks getting wider access to Singapore's banking market. On April 2 last year, DBS had proposed buying over from parent Temasek Holdings its 67.4 per cent stake in Danamon, and the rest from the market - a deal worth $9.1 billion. Sources say that Temasek and DBS still want to pursue that path. DBS is "very reluctant" to buy minority stakes, chief executive officer Piyush Gupta said on May 2. (Source: The Business Times) MARKET SCOOP Chinavision to place 60m warrants at 1 HK ct each Singapore Shipping Corp Q4 profit falls 43% S'pore earnings seen improving in H2: Citi DBS-Danamon decision may temper Indonesian bank M&A: Fitch S'pore banks' rally running out of steam: Macquarie Temasek raises stake in ICBC to 7.04% Temasek buys major stake in Markit Jason Marine's FY13 net profit falls 62.8% (Source: The Business Times) UBS Securities says... DBS GROUP HOLDINGS | NEUTRAL | TP: S$18.50 According to newswires (Reuters) Indonesia's Central Bank has approved the acquisition of just a 40% stake in Danamon by DBS The group had previously wanted to take a full 99% holding via acquisition of Fullerton's 67% stake followed by a mandatory tender offer for the remaining shares This ruling clearly falls well short of that goal DBS may well be disappointed For DBS to increase its holding beyond 40% Bank Indonesia has made clear that it needs to see reciprocity from MAS allowing its 3 state banks (BRI, Bank Mandiri & BNI) to operate more freely in Singapore We assume this means full QFB licenses, the power to grant these is beyond the control of DBS management It is not clear to us that MAS would be willing to waive the significant capital usually required to support these full banking licenses for the 3 Indonesian banks DBS has previously stated that it views minority stakes in other banks as generally unattractive Other than the smaller retained economic benefit for DBS shareholders of any synergies achieved, a 40% holding would also potentially be a big drag on Basel III regulatory capital ratios Without a clear, undisputable path to control within a sensible timeframe, we think DBS may need to reconsider its options Our DCF derived TP for DBS is S$18.5 (CoE 10%, LT growth of 3.5%) NOMURA Securities says ... KEPPEL-REIT | REDUCE | TP:S$1.34 KEP announced on 21 May that it is placing out 180mn units in KREIT at SGD1.555/unit, which will further reduce its direct stake in KREIT to c.5.2% from c.29% at the start of 2013 (following the earlier placement and distribution in specie) KREIT's free float, on the other hand, will increase to c.48% from just c.24% at the start of 2013 While KEP's sale of its direct holdings in KREIT is in line with the group's strategy of concentrating the property business under KPLD, which still owns c.46.3% of KREIT, it is perhaps also true that the current share price is perceived as a good level to take profits on most of its holdings KREIT has outperformed benchmarks across the board YTD and trades at a yield spread of just 3.6pp (vs. its historical mean of 5.4pp and that of office REITs of 4.5pp) as well as P/B of 1.2x (vs. mean +1SD of 1.1x) While trading liquidity can potentially increase further if KEP were to sell its remaining direct stake in KREIT, the incremental benefit is likely to be much less significant As we approach FY14F, we believe the market will also focus on any potential acquisition (and its implication on KREIT's balance sheet) as well as a potential decline in distribution as the rental support at OFC runs out, on our numbers Our TP is raised to SGD1.34 (from SGD1.29) to reflect a higher NAV and FY14F DPU Our TP implies a potential total return of -11.2% (potential downside of -16.2% + FY13F yield of 5%) Downgrade on valuation UOB KAY HIAN says... SINGAPORE AIRLINES | BUY | TP:S$13.30 Singapore Airlines(SIA) and SilkAir announced a new codeshare agreement with Shenzhen Airlines The codeshare agreement enables it to double its frequency to two daily flights Both Shenzhen Airlines and parent Air China , along with SIA are part of Sky Team alliance and we view the latest codeshare agreement as a strategic move which will benefit both parties For SIA, this is another way of gaining additional air rights as well as over coming slot restrictions at Tier 1 and Tier 2 Chinese airports SIA's will also be able to tap into Shenzhen's domestic network and high speed rail connectivity and feed traffic towards South East Asia and Australia This latest codeshare will complement its codeshare Virgin Australia with Singapore serving as a hub between the two nations The codeshare agreement also underscores SIA's focus towards North Asia, South East Asia and Australia where it faces less competitive pressures compared to the Middle East and Europe These codeshare formations clearly show a concise strategy for long term growth and SIA's core airline operations does not deserve to be valued at 0.7x book value At current levels, the market is ascribing 1x P/B for the SIA group, with no value attached to SIA Engineering For Shenzhen airlines, the focus on codeshare growth reduces the risk of yield erosion and substantial capital investment and contrasts with China Southern's focus on direct capacity expansion

Keppel REIT falls after parent firm trims stake

Stock Name: Kep REIT
Company Name: KEPPEL REIT

Research House: UOB KayHian

Price Call: HOLD

Target Price: 1.64

Units of Keppel REIT dropped more than 2% after its parent, Keppel Corporation, said it would sell a 6.7% stake in the trust for $280 million.

The price fall came after Keppel REIT marched to a 5-1/2-year high of $1.63 last week, rallying more than 20% so far this year and outperforming a 13% rise in the sector index .

An analyst at a foreign brokerage said the uncertainty of a new shareholder and concerns about further stake sales by Keppel Corp weighed on the trust.

Keppel REIT stood at $1.57 per unit but still above the selling price of $1.555 for the 180 million units or 6.7% of the total issued units of the trust. It was the second most actively traded stock.

Brokerage UOB Kay Hian said it remained positive on Keppel REIT because of the trust's strong office portfolio in Singapore, and retained its target price of $1.64.