OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: DBS Vickers

Price Call: HOLD

Target Price: 0.84

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: Nomura

Price Call: BUY

Target Price: 5.20

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: OSK-DMG

Price Call: BUY

Target Price: 2.60

Market Compass

08 November 2013~ Good Morning Singapore!

Singapore Idea Snippets:

08 Nov 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 : Most of us are consumed with our own thoughts and desires and are not always thinking about what other people may want. This is not necessarily being egocentric; it is just being human. - BO BENNETT Singapore: The Day Ahead SINGAPORE DAYBOOK :Update: #TwitterIPO a huge hit on Wall Street [NEW YORK CITY] Twitter debuted on Wall Street with a bang Thursday as shares in the fast-growing social network soared amid investor frenzy over the most-anticipated listing since Facebook. The shares shot up by more than 90 per cent in early trade to as high as US$50.00. The stock closed with a spectacular one-day gain of 72.69 per cent at US$44.90, from the initial public offering (IPO) price of US$26 per share set on Wednesday. While some analysts cautioned about the fast-changing nature of social media, the debut led to a stampede for Twitter, known for its one-to-many messages of up to 140 characters. Appropriately, #TwitterIPO was among the top trending topics on the social network. (Source: The Business Times) MARKET SCOOP Singapore's Wilmar Q3 net profit rises 2.5% Roxy's Q3 net gets fillip from strong development business StarHub's Q3 net profit dips 1% ST Engineering Q3 net profit falls 10% Hyflux's Q3 net profit jumps 74% SIAEC net profit up 5.8% at $71m SGX selects London Stock Exchange's MillenniumIT for new post-trade system Singapore Windsor to issue up to 24.48m new shares at 22 cts/shr Parkway Life Reit posts Q3 DPU of 2.66 cents DBS to buy back up to S$800m of its S$1.7b preference shares callable in 2020 (Source: The Business Times) DBS VICKERS Securities says ... VARD HOLDINGS LTD | HOLD | TP: S$0.84 3Q13 results disappointed again, with no significant improvement in EBITDA margin of 4.3% compared to 4.1% in 2Q13 While net profit of NOK76m represented a sequential turnaround from the NOK20m loss in 2Q13, this was mainly due to the absence of impairment losses Revenue was down 4% y-o-y and net earnings were down 67% y-o-y as operational challenges at the Niteroi yard in Brazil continued, leading to further delays and cost overruns The scheduled deliveries of the remaining 4 vessels from the Niteroi yard have now been moved back by at least a quarter on average and the losses there are likely to continue depressing group EBITDA margins over the next few quarters At the end of 3Q13, Vard's orderbook had expanded to NOK19.6bn, boosted by the NOK6.5bn pipelay vessel contract YTDFY13, Vard has secured more than NOK12bn worth of new contracts, close to our new order win assumption of NOK12.5bn for FY13 We continue to expect good demand from the subsea support and construction vessels market, although AHTS and PSV orders from the North Sea could still be slow because of volatility in day rates We continue to expect another NOK11bn/12bn in new orders for FY14/15 While most of the cost overruns related to Brazilian yards have been provided for in 2Q13 and 3Q13, we are unlikely to see normalised margins anytime soon The pace of margin recovery is still uncertain and as such, we cut our FY13/14F earnings by 24%/ 18% respectively to factor in lower margins and delays in orderbook recognition Maintain HOLD with a lower TP of S$0.84 (pegged to 9x FY14 EPS) NOMURA Securities says ... SEMBCORP MARINE | BUY | TP: S$5.20 SMM reported 3Q13 PATMI of SGD130mn, up 12% y-y mainly due to strong revenue increase in the rigbuilding segment (+167%), while EBIT margins came in at 10.1%, down from 14.1% in 3Q12 and 13% in 2Q13, below our and consensus expectations Management attributed the strong rigbuilding revenue increase and lower margins to initial revenue recognition for a number of new products During the quarter, SMM recognized initial revenue for five rigs comprising a well intervention semi-sub, a harsh environment semi-sub and three jack-ups. In comparison, only one jack-up had achieved initial revenue recognition in 3Q12 Ship repair revenue increased to SGD204mn (+34% y-y and +29% q-q) as the Tuas yard commenced operations in August 2013 We believe this confirms management's annual ship repair revenue guidance of SGD1.0-1.1bn Results were also impacted by a sharp y-y decline in associate contribution (SGD4.2mn, down 67% y-y) and a higher effective tax rate during the quarter The lower associate contribution was mainly attributable to start-up operations at Sembmarine Kakinada Net orderbook stands at SGD13.5bn currently with deliveries extending to 2019, while new orders secured in 2013 total SGD3.9bn Management remains positive on the sector and believes the demand for high-specification rigs with advanced technology will continue to be robust At the analyst meet, management again highlighted the abilities of the new Tuas yard such as undertaking FPSO conversions and servicing a wide range of vessels including VLCCs, LNG carriers, new generation of mega containerships etc We reiterate our Buy rating on Sembcorp Marine with a TP at SGD5.20 based on our sum-of-the-parts valuation (SOTP; methodology unchanged) At current prices, on our estimates SMM trades at 17.7x and 15.7x FY13F and FY14F earnings, respectively, vs. the historical P/E band of 8-28x OSK DMG Securities says... OSIM INTERNATIONAL | BUY | TP: S$2.60 Our consumer analysts visited 14 OSIM, four Ogawa (OGAW MK, NR) and two OTO (6880 HK, NR) retail outlets in Hong Kong, Indonesia, Singapore and Malaysia earlier this month Findings from our channel checks suggest that: i) uInfinity is seeing good response - eg its beige color option in an Hong Kong outlet is sold out, with the next available delivery date being December, ii) uAngel remains a fast moving item, and iii) its closest competitor in Singapore is likely to be Ogawa, whose latest product's sales seem to have normalised after its launch in May All in all, these developments augment well for OSIM as its peak sales season nears We believe OSIM's strategy of riding on celebrity appeal and multiple product price points will help to capture existing and new opportunities created by growing wealth in the region We note that the number of households with annual disposable income of >USD35,000 (and >USD100,000 in China) is expected to expand by 69% from 11m households in 2010 to 18m by 2020, with China accounting for most of this gain To raise consumer awareness and product penetration rates, OSIM has engaged Hong Kong artistes Andy Lau and Sammi Cheng as its brand ambassadors, as well as introduced tier pricing for different market segments, eg uAngel ~SGD1,888, uDivine (~SGD5,288) and uInfinity (SGD6,988) The positive findings from our channel checks fuel our excitement on the coming year-end shopping season and belief that OSIM would be able to maintain its mid-teen growth pace into FY14 We lift our FY14F earnings by 4% to SGD116m and introduce our FY15F earnings of SGD133m, which correspondingly move up our DCF-derived TP to SGD2.60 (previously SGD2.38)

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: DBS Vickers

Price Call: HOLD

Target Price: 4.80

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: Golman Sachs

Price Call: SELL

Target Price: 0.67

Stock Name: Kreuz
Company Name: KREUZ HOLDINGS LIMITED

Research House: OSK-DMG

Price Call: BUY

Target Price: 1.16

Market Compass

07 November 2013~ Good Morning Singapore!

Singapore Idea Snippets:

07 Nov 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 : Your success and happiness lies in you. Resolve to keep happy, and your joy and you shall form an invincible host against difficulties. - HELEN KELLER Singapore: The Day Ahead SINGAPORE DAYBOOK :F&N spat with Myanmar partner turning ugly. MEHL starts arbitration process, saying it has clear right to buy over F&N's 55% stake. [SINGAPORE] An ugly spat is unfolding between Fraser and Neave (F&N) and a Myanmar state-owned enterprise - at a time when Singapore companies are flocking to the emerging market that is just about to leave its pariah status behind for good. Myanma Economic Holdings Limited (MEHL), the joint venture partner of F&N in Myanmar Brewery, yesterday said that it had a "clear right" to buy out the Singapore conglomerate's stake in the beer-making business - which it values at US$246 million - adding that the deal is not political in nature. The Myanmar military-linked investment firm, which holds 45 per cent of Myanmar Brewery, has commenced arbitration proceedings to claim F&N's 55 per cent stake in the brewery, the company said in a statement yesterday. F&N has described MEHL's arbitration claims as having no basis, and added that MEHL was also significantly undervaluing the asset. F&N said that it has engaged lawyers and "intends to vigorously resist the claim". (Source: The Business Times) MARKET SCOOP Singapore fund to sell US$350m of Glencore convertible bonds STATS ChipPac's 3Q revenue down 1.8% BreadTalk's Q3 profit flat; revenue up 22% CWT's net profit drops 53 per cent in Q3 to $19.2m SingTel to launch new mobile game portal, WePlay S'pore to become global insurance hub by 2020: MAS Aussino to raise US$30m in convertible notes (Source: The Business Times) DBS VICKERS Securities says ... SEMBCORP MARINE | HOLD | TP: S$4.80 Excluding S$1m disposal gain, recurring net earnings grew 11% y-o-y and 19% q-o-q to S$128.6m in 3Q13 Sales jumped 86% y-o-y and 48% q-o-q to S$1.66bn, with initial contributions from 5 new rigs Operating margins fell further to 10.0% from 11.8% in 2Q13 and 13.7% in 1Q13, the lowest since 2Q09 Associates income dived 67% to only S$4.2m due to weaker contributions from Cosco Shipyard Group. 9M13 earnings account for just 66% and 63% of our previous forecast and consensus' FY13 estimates, respectively Order book declined by 6%(S$0.9bn) to S$13.5bn during the quarter YTD, SMM has secured new projects worth S$3.9bn, or 79% of our new order wins assumption of S$5bn, and is on track to meet our expectations Construction of the first drillship for Petrobras is ahead of schedule with 48% completed, and is planned to be towed to Brazil in Mar 2014 The second drillship is expected to commence initial recognition of revenue in 1Q14 The construction of SMM's yard in Brazil is also on schedule YTD, global jack up orders amounted to 51 units, higher than the 19 units ordered in 2012 and 43 units in 2011 Jack up enquiries from the Gulf of Mexico remain buoyant, and FPSO demand should recover in the near future The robust sector fundamentals are underpinned by upbeat E&P capex and replacement demand for the aged fleet (c.60% of jack up and semi-submersible fleet > 25 years old) as oil prices stay above US$90/bbl We have trimmed FY13E/14F net earnings by 7% as we have assumed lower EBIT margins of 11.8%/12.1% vs 12.0%/12.4% previously and lower assoc income from Cosco As we roll over our SOTP valuation to FY14F earnings, TP increases marginally from S$4.70 to S$4.80 Maintain HOLD We believe margin recovery and strong order wins are required for the stock to re-rate GOLDMAN SACHS says ... GENTING SINGAPORE | SELL | TP: S$0.67 3Q13 headline net profit came in at S$4mn (-84% yoy; -65% qoq). 9M13 net profit of S$26mn (-68% yoy) was only 47%/42% of FY13E GSe/Bloomberg consensus The miss was due to lower-than-expected 3Q13 GM of 7.4% (1H13: 10.7%; GSe: 11.0%) because of a sizeable S$52mn write off, which we suspect was largely driven by project cost overruns COS did not provide any details on provisions We believe they likely came primarily from COS's offshore order book, which we think may contain too many non-repeat and first time (i.e. low margin and risky) orders COS said it does not rule out the possibility that it could take more provisions We note that on its recently cancelled drillship order from Dalian Deepwater (due to severe delivery delays), it has thus far received only 22% of the total payment That said, according to COS, there are some interested parties enquiring about the drillship with whom COS hopes to close a deal and consequently recoup the remaining outstanding payments The weak 3Q13 net profit was compounded by continued increase in leverage (net D/E rose further to 103% vs. 1H13 of 87%) and negative operating cash flow due to rising working capital needs (as a result of current orders having unfavorable payment terms) COS expects to secure more jackup orders, but is cautious on the commercial shipbuilding market despite the recent Baltic Dry Index rebound, as it is unconvinced of a sustainable recovery given still significant vessel oversupply in the market Maintain Sell We cut 2013/14/15E EPS 20%/4%/3%% mainly to factor in higher provisions Reflecting this, we lower our 12-m FY14E EV/GCI-CROCI/WACCbased TP to S$0.67 (S$0.70 prior) Risks: Stronger-than-expected recovery in macro conditions; stronger-than-expected execution in new products OSK DMG Securities says... KREUZ HOLDINGS LTD | BUY | TP: S$1.16 Kreuz is the subject of a takeover offer by private equity fund SEA9 Pte Ltd at a price of SGD0.80 per share Unusually, the method of acquisition is by scheme of arrangement, which aims to bypass a general offer We believe that the offer price undervalues Kreuz, given its long-term growth potential Our recommendation to shareholders is DO NOT ACCEPT, reiterating our SGD1.16 TP and DCF-value of SGD2.25 per share 31% discount to TP, 64% discount to DCF-value The offer price values Kreuz at a mere 7.4x FY13F P/E, resulting from the interplay between a weak seller and a strong buyer The offer price implies a 31% discount from our 12-month TP, and a 64% discount from our DCF-value of the company at SGD2.25 per share, based on a 10.6% WACC Factoring in the growth from the diving support vessels (DSVs) sector, we believe that Kreuz' earnings can grow to USD69.4m in FY15F and USD92.2m in FY16F from USD39.7m in FY12 At those earnings, its shares will be worth SGD2.07-2.61 at the same 10x P/E. SEA9 stands to achieve a 226% return in three years by taking Kreuz private now and potentially re-listing it later at an even higher multiple than at takeover Swiber (SWIB SP, NR) will recognise a USD90.6m gain upon deal completion However, we note that Kreuz accounted for 22-202% of the former's earnings in the last six quarters, and 50% overall for FY12 Swiber is selling its crown jewel for a one-time gain at the expense of future growth and profitability In this case, the combined stakes of Swiber's and Kreuz' directors already stands at 73.69%, almost at the requisite 75% to achieve "shareholder approval" The scheme of arrangement will then be brought to court, which can then sanction a compulsory acquisition of minority shareholders' stakes In this case, the minorities have little chance against the Goliath of the majority, and we expect the deal to go through We do, however, stand by our valuations and recommend that investors DO NOT ACCEPT

SG: MARKET PULSE: UOB, SMM, SATS, Vard, Swiber, CMA/CRCT, COSCO (6 Nov 2013)

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 22.97

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.68

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 3.35

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.80

MARKET PULSE: UOB, SMM, SATS, Vard, Swiber, CMA/CRCT, COSCO

6 Nov 2013

KEY IDEA UOB: Exceeded expectations UOB's 3Q13 net earnings of S$730m were above market expectations, and this was led by both YoY and QoQ improvements in Net Interest Income despite lower Non-interest Income. In addition, its Net Interest Margin (NIM) also stabilized at 1.71%, bucking the downtrend seen at the other two banks. Management is cautiously optimistic about its prospects, although it expects loans growth to be slower in 2014 versus 2013. While Indonesia and Thailand faced recent economic and political uncertainties, we do not expect this to have a lasting impact on UOB's long-term regional franchise and business. Overall, our earnings projections are still largely intact for both FY13 and FY14, and we are retaining our fair value estimates of S$22.97. Maintain BUY. (Carmen Lee) MORE REPORTS Sembcorp Marine: Business as usual; waiting for new yard ramp-up Sembcorp Marine (SMM) reported an 85.9% YoY fall in revenue to S$1.66b and a 12.3% increase in net profit to S$129.7m in 3Q13, within our expectations. Operating margin in 3Q13 was 10.1%; though on the lower side, this is still within management's guidance of 10-13% for this year. With the commencement of operations in the new Tuas yard, ship repair revenue rose 34% YoY. After securing new orders worth about S$3.9b YTD (vs our full year estimate of S$4b), the group's net order book stands at S$13.5b with deliveries extending till 2019. With the more conservative profit recognition stance adopted by management for at least this year, we lower our earnings estimates by 3-7% for FY13-14F. However, as we roll forward our valuations to FY14F earnings, our SOTP-based fair value estimate rises slightly from S$5.64 to S$5.68. Maintain BUY. (Low Pei Han) SATS Ltd: Same story as 1QFY14 SATS's 2QFY14 results came in below expectations. Revenue fell for the second straight quarter (-2.0% YoY to S$452.1m) following declines in the food solutions segment, and EBITDA and PATMI fell 11.6% YoY to S$65.7m and 3.2% YoY to S$48.7m, respectively, as a result of higher staff costs. Management declared an interim dividend of 5 S cents, similar to last year's amount. For 2HFY14, we expect revenue to decline further due to the full-year impact of Qantas' relocation to Dubai, and margins should stay compressed as well. With the weakened 2HFY14 outlook, we leave our fair value estimate unchanged at S$3.35 and maintain our HOLD rating. We foresee limited upside at this juncture and on-going tapering expectations may have a negative impact on dividend-yielding counters like SATS. (Lim Siyi) Vard Holdings: 3Q13 results below our expectations Vard Holdings Limited (VARD) reported its 3Q13 results this morning which fell short of our expectations. Revenue decreased by 3.5% YoY to NOK2,370m, while PATMI plunged 66.7% to NOK76m. However, this was a reversal from the net loss of NOK20m suffered in 2Q13 as VARD had taken an impairment of goodwill on its Niteroi yard in Brazil then. For 9M13, revenue and PATMI dipped 6.3% and 68.6% to NOK8,062m and NOK244m, forming 68.0% and 52.0% of our previous FY13 forecasts, respectively. Meanwhile, VARD also announced last evening that it has secured a new contract worth NOK55m for the construction of a survey vessel for Circle Maritime Invest JSC, with delivery scheduled in 3Q14. We place our Sell rating and S$0.80 fair value estimate under review, pending an analyst conference call with VARD's management and also due to a change in analyst coverage. (Wong Teck Ching Andy) Swiber Holdings: Disposes Kreuz for S$256.2m Summary: Swiber Holdings announced last evening that SEA9 Pte Ltd, an investment-holding company wholly-owned by The Headland Private Equity Fund 6 L.P, has proposed to acquire Swiber's entire 57.5% stake in Kreuz Holdings for S$0.80/share, translating to a consideration of S$256.2m for Swiber. Due to a netting agreement in which all trade and other receivables as well as payables between Kreuz and Swiber are set-off and settled, Swiber will receive S$129.2m in cash out of its S$256.2m consideration. The offer of S$0.80/share represents a premium of about 78.4% over Kreuz's NAV/share as at 30 Sep, and Swiber is expected to record a net gain of about US$90.6m from this proposed disposal. Pending further details from management, we put our Buy rating and fair value estimate of S$0.86 on Swiber under review. (Low Pei Han) CapitaMalls Asia: Divests Grand Canyon Mall in Beijing to CRCT CMA announced that CRCT has exercised its call option to acquire Grand Canyon Mall in Beijing. To recap, this divestment was set in motion in Jul 13 when a conditional call option was agreed upon between both parties as CMA successfully tendered for the asset. The mall is expected to be divested at cost price at ~RMB1.82b (S$367.5m), or ~RMB26k (S$5,249) psm based on GFA (excluding the car park). The mall has been valued at RMB1.83b as at 15 Apr 2013 by CBRE. The current occupancy (as of Apr 2013) is 92.7% with an annualized net property income (NPI) yield of about 3.5%, based on the divestment price. Maintain BUY on CMAwith an unchanged fair value estimate of S$2.55. We also have a BUYrating on CRCT with a fair value estimate of S$1.64. (Eli Lee) COSCO Corporation: Provisions hit bottom-line COSCO Corporation reported a 6% YoY rise in revenue to S$989.4m but saw an 84% drop in net profit to S$4.2m in 3Q13, such that 9MFY13 net profit accounted for 53% of our full year estimate. The results also disappointed the street, as 9MFY13 net profit only made up 42% of the full year consensus figure of S$62.6m. Gross profit margin was only 7.4% in 3Q13 vs. 12.3% in 3Q12, mainly because of a S$33.9m provision for expected losses on construction contracts. A S$15.8m provision was also taken for inventory write-down. This resulted in a net profit margin of 0.4% in the quarter vs. 2.8% in 3Q12. With a change in analyst coverage and pending details from a call with management later, we maintain our SELL rating but put our fair value estimate of S$0.60 under review. (Low Pei Han)

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

NEWS HEADLINES - Singapore's latest PMI exceeded forecasts, showing a stronger pick-up in manufacturing activity in Oct, less than two weeks after an unexpected jump in Sep's factory output. - The Fare Review Mechanism Committee has recommended more public transport fare concessions, with new schemes proposed for low-income workers and people with disabilities. - BBR Holdings said 3Q13 net profit more than tripled to S$8.35m on a busy construction schedule, but warned that there is a challenging year ahead. - Perennial China Retail Trust posted a DPU of 0.95 S cents for 3Q13, down slightly from 0.97 S cents last year. - Chip Eng Seng reported a net profit of S$27.2m for 3Q13, down 10% YoY.

SG: MARKET PULSE: Oil & Gas, Local Retail REITs (29 Aug 2013)

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.90

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.53

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.64

Stock Name: Semb Corp
Company Name: SEMBCORP INDUSTRIES LTD

Research House: OCBC

Price Call: BUY

Target Price: 6.48

MARKET PULSE: Oil & Gas, Local Retail REITs

29 Aug 2013

KEY IDEA Oil and Gas: Looking beyond the volatility YTD, the FTSE Oil and Gas index has generally tracked the broader market, though there have been instances of a divergence in performance. Besides the exploration and production segment garnering more investor interest, we are increasingly positive on the OSV segment, while prospects of the rig market remain bright, underpinned by the sustained high oil price environment. Still, the relatively high-beta O&G sector is very much sensitive to macroeconomic events. The possibility of increasing capital flows from Asia to the US remains, and investors may want to look beyond the short term volatility and focus on the positive longer-term growth prospects of the sector. Maintain Overweight with a one-year horizon, with Ezion Holdings [BUY, FV: S$2.90], Keppel Corp [BUY,FV: S$12.53] and Sembcorp Marine [BUY, FV: S$5.64] as our preferred picks. For investors seeking less volatility in terms of earnings but with O&G exposure, Sembcorp Industries [BUY, FV: S$6.48] is a worthy candidate. (Low Pei Han) MORE REPORTS Local Retail REITs: Outlook remains sanguine Local retail landlords ended 2Q13 on a positive note, with results mostly in line with our expectations. Aggregate leverage for the quarter has also improved sequentially across the board. Notably, a significant portion of the REITs' existing borrowings are either based on fixed rates or hedged. This will likely limit the impact of rising interest rates on the REITs' DPUs and yields. Looking ahead, we are maintaining our positive view on the local retail REITs due to AEI activities and better rental rates for the leases due for renewal. In addition, the local retail landscape has remained largely stable. According to Jones Lang LaSalle (JLL) 2Q13 Singapore property market review report, the growth in rents island-wide is likely to range between 0% and 0.2%, while capital values grow by 2.7%-3.8% in 2013. We are keeping our OVERWEIGHT rating on the local retail REIT subsector. Starhill Global REIT remains as our preferred pick, due to its apparent growth drivers, higher-than-average yield of 6.8% and compelling valuation (0.88x P/B). (Kevin Tan)

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

NEWS HEADLINES - US stocks advanced for the first session this week, with oil producers leading the gains as the price of crude settled at a more-than-two-year high above US$110 a barrel. - Sembcorp Industries announced the extension of its wastewater treatment business in China's Liaoning province to two new sites. - ASL Marine Holdings reported an 83.3% YoY jump in net profit to S$15.2m for 4QFY13 (versus S$8.3m in 4QFY12), on the back of a 27.8% YoY rise in revenue to S$149.5m. - Intraco has joined forces with Tat Hong Holdings and a Myanmar businessman to set up a JV company to enter the crane rental and excavator distribution business in Myanmar. - Metech International, a company that deals with electronic waste recycling, has reported a net profit of S$844k for 4QFY13 against a net loss of S$14.7m in 4QFY12. - Sin Heng Heavy Machinery's FY 2013 net profit rose 47.4% YoY to S$13.76m on the back of a "broad-based improvement across geographical markets and business segments".

SG: MARKET PULSE: SembMarine, UOB, Roxy, Cosco, LMIRT, SembCorp (2 Aug 2013)

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.64

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: HOLD

Target Price: 22.97

Stock Name: Roxy-Pacific
Company Name: ROXY-PACIFIC HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.81

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

Research House: OCBC

Price Call: SELL

Target Price: 0.60

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

Research House: OCBC

Price Call: HOLD

Target Price: 0.52

Stock Name: Semb Corp
Company Name: SEMBCORP INDUSTRIES LTD

Research House: OCBC

Price Call: BUY

Target Price: 6.48

MARKET PULSE: SembMarine, UOB, Roxy, Cosco, LMIRT, SembCorp

2 Aug 2013

KEY IDEA Sembcorp Marine: New yard opens at a time of record order book Summary: Sembcorp Marine (SMM) reported a 7.6% YoY fall in revenue to S$1.12b and a 12.5% decrease in net profit to S$124.9m in 2Q13, such that 1H13 figures accounted for about 43% of our full year estimates, which we judge to be largely within our expectations. The last quarter saw fewer projects achieving initial recognition; more are expected in 3Q13. The new Tuas yard should also see revenue contribution in 2H13. Operating margin in 2Q13 was 13.0% vs 13.1% in 2Q12. After securing new orders worth about S$3.5b YTD, the group's net order book stands at S$14.4b, a record high in SMM's history. Meanwhile the stock price has appreciated by about 7.3% since our last report on 6 May 2013, and has outperformed the STI by about 11.1% over the same period. Maintain BUYwith S$5.64 fair value estimate. (Low Pei Han) MORE REPORTS UOB: Stronger 2Q and modest rise in NIM Summary: UOB posted 2Q13 net earnings of S$783m, better than consensus estimate of S$699.9m. Net Interest Margin improved modestly from 1.70% in 1Q13 to 1.71% in 2Q13. For the Fee and Commission income, the key outperformers were its Investment-related and credit card operations which showed both YoY and QoQ improvements. Management has declared an unchanged 1H dividend of 20 cents. The group is continuing with its strategy of growing its regional franchise. For its Wealth Management business, AUM has grown from S$48b in 2010 to S$71b as of Jun 2013. We have adjusted our FY13 estimates, lowering impairment charges and increasing operating expenses. We are maintaining our HOLD rating and our fair value estimates of S$22.97, but will turn buyer at S$21.40 or lower. (Carmen Lee) Roxy-Pacific Holdings: $1.1b of revenues to drive earnings growth Summary: 2Q13 PATMI is S$19.5m (EPS: 2.05 S- cents) which increased 10% YoY due to higher property development profits. 1H13 PATMI now cumulates to S$31.2m, forming 40% of our full year forecast. We judge this to be within expectations; earnings are likely to be backloaded in FY13, particularly with an anticipated one-time boost from Wis@Changi upon its TOP in 2H13. The group now sits on S$1.1b of yet unrecognized revenues from sold units - this is equivalent to 8 times FY12 property revenues and would underpin a rigorous earnings growth profile ahead in our view. Maintain BUY with an higher fair value estimate of S$0.81 (25% discount to RNAV) versus S$0.76 previously as we update for latest sales datapoints and a reduced RNAV discount. Key catalysts in 2H13 ahead include the launch of LIV on Wilkie and an earnings boost from Wis@Changi's TOP. We also see a bonus share issue as a possibility in 2H13, which could help the counter's uneven trading liquidity. (Eli Lee) COSCO Corp (Singapore): Another weak quarter Summary: COSCO Corp (Singapore)'s revenue for 2Q13 declined by 9% YoY to S$890m, while net profit fell by 56% to S$12.0m. For 1H13, the group's net profit fell by 61% to S$21.8m, forming 45% and 29% of ours and the street's FY13 estimates respectively. As its operating weakness is more severe than what the street had expected, we think that the street would likely lower its FY13F forecasts. The group's balance sheet is debt-laden with net debt-to-equity ratio at 1.4x and S$1.3b of loans due within 12 months. Should the credit situation in China deteriorates further, the group may become vulnerable. Maintain SELL with unchanged FV of S$0.60. (Chia Jiunyang) Lippo Malls Indonesia Retail Trust: 2Q13 results as expected Summary: LMIRT posted 2Q13 gross rental income of S$40.1m, up 30.2% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions of 15.5% for the existing malls. Distributable income increased by 19.5% YoY to S$20.5m and DPU climbed 17.7% YoY to 0.93 S cents. Results for the quarter were in line with our and consensus expectations. 1H13 DPU of 1.82 S cent forms 50.6% of our FY13 estimate. We maintain our HOLD rating on LMIRT but place our fair value of S$0.52 under review. (Sarah Ong) Sembcorp Industries: Investing in its second energy-from-waste plant in Singapore Summary: Sembcorp Industries (SCI) announced that it will invest over S$250m to build, own and operate a facility capable of producing 140 tonnes/h of steam using industrial and commercial waste collected by its solid waste management operations. This will be SCI's largest energy-from-waste plant in Singapore to date (also its second one here), and will be located on Jurong Island. The project will be funded by bank borrowings and internal resources, and will be completed in early 2016. SCI has a track record of managing such facilities, and its portfolio includes energy-from-waste, biomass and wind power facilities in the UK and China. Maintain BUY with S$6.48 fair value estimate on the stock. (Low Pei Han)

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

NEWS HEADLINES - S&P 500 surpassed 1,700 for the first time, after the Fed announced continued stimulus, jobless claims fell to a five-year low and manufacturing index rose to a two-year high. - Crude palm oil prices in 2Q13 stayed flat QoQ, averaging just above RM2,300 (S$903) per tonne, a steep 30% drop from year-ago levels. - Singapore's manufacturing sector continued to outperform its regional counterparts in Jul, expanding for the fifth consecutive month despite weaker showings across the rest of Asia. - Keppel Offshore & Marine Ltd has secured a contract to build a jack-up rig for US$206m from Parden Holding, a company based in Uruguay. - Parkway Life REIT reported a distribution per unit of 2.63 S-cents for the 2Q13, up 6.1% YoY, as distributable income rose to S$15.9m.

SG: MARKET PULSE: CapitaLand, SIA, SATS, SMM, CDLHT, TEE (26 Jul 2013)

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.77

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD

Research House: OCBC

Price Call: SELL

Target Price: 9.50

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 3.12

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.64

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: HOLD

Target Price: 1.79

MARKET PULSE: CapitaLand, SIA, SATS, SMM, CDLHT, TEE

26 Jul 2013

KEY IDEA CapitaLand Limited: Building competitive scale CAPL's 2Q13 PATMI decreased 0.7% YoY to S$383.1m. We judge this to be within expectations; 1H13 PATMI now cumulates to S$571.3m which makes up 65% of our full year forecast. The group sold 736 Chinese residential units in 2Q13, which is respectable but somewhat slower than the 955-unit pace in 1Q13. Management guides that Chinese sales would likely fall to around 3.3k units for FY13, pointing to c.1.6k units in 2H13 - still healthy but below the 1.9k-unit pace in 2H12. In Singapore, residential sales slowed to 139 units in 2Q13 in the aftermath of a blowout 1Q13 (544 units sold) driven by discounts. Mall subsidiary CMA continues to report firm operating statistics: same-mall NPI in China and Singapore in 1H13 is up 12.1% and 2.0% YoY, respectively. We believe CAPL's strategy of growing competitive scale in six geographic clusters is sound and well thought out, and we continue to see value in CAPL shares at current levels. Maintain BUY with an unchanged fair value estimate of S$3.77. (Eli Lee) MORE REPORTS Singapore Airlines: No re-rating yet Excluding one-off items, Singapore Airlines's (SIA) 1Q14 results came in below expectations. Revenue would have fallen slightly while PATMI was inflated by exceptional items and aircraft/parts disposal gains. ). SIA remains plagued by intense competition within the premium carrier space and passenger yields continue to stay depressed. With the outlook for FY14 still expected to remain lacklustre, we anticipate an extension of selling pressure on the counter for the interim. Based on a peg of 0.8x P/Book, we maintain SELL on SIA with a fair value estimate of S$9.50 (S$10.00 previously). (Lim Siyi) SATS Ltd: Slightly off the mark SATS's 1Q14 results came in slightly under our expectations as revenue slipped 0.8% YoY to S$434.5m following declines in the food solutions segment and EBITDA fell 2.6% YoY to S$60.5m. Qantas's move to Dubai and lower business volumes from TFK were the main culprits for this decline. Only with a write-back of prior-year's tax provisions was the group able to record an 11.9% YoY improvement in PATMI to S$46.2m. For the coming quarters, we expect some softness in growth trends for passenger traffic and moderate our forecasts for the remainder of FY14 accordingly. While our fair value lowers to S$3.12 (S$3.15 previously) - suggesting limited upside at this juncture - we expect SATS's defensive qualities i.e. earnings stability and healthy dividend attractiveness to provide some support for its share price. Maintain HOLD. (Lim Siyi) Sembcorp Marine: Court of Appeal rules in favour of SMM Sembcorp Marine (SMM) announced that the Court of Appeal has ruled in its favour with regards to its appeal filed in Jun 2012 relating to the High Court's decision on SMM's claims against PPL Holdings. Amongst other rulings, it has been ruled that certain provisions on the JV agreement between SMM and PPL Holdings premised on equal shareholding no longer applied when SMM increased its shareholding from 50% to 85% in PPL Shipyard. SMM is "pleased with the outcome", and the group will now have complete control of PPL Shipyard's board. The consortium (involving Yangzijiang Shipbuilding) that owns the remaining 15% in PPL Shipyard is likely to have little say over the management of PPL Shipyard. MaintainBUY with S$5.64 fair value estimate on SMM. (Low Pei Han) CDL Hospitality Trusts: 2Q13 below street's expectations CDL Hospitality Trusts reported a 2.9% YoY decline in 2Q13 gross revenue to S$35.6m and a 4.4% YoY fall in net property income to S$32.6m. Income available for distribution contracted 6.4% YoY to S$29.4m. 2Q13 RevPAR for the Singapore hotels fell 8.5% YoY to S$193, affected by increased competition, weaker corporate demand, the absence of the biennial Food & Hotel Asia event in April, and a mild impact from the haze. The results were generally in line with our expectations, with 1H13 DPU of 5.41 S cents forming 50% of our FY13 estimate. We judge that the 2Q13 results missed the street's expectations with 1H13 DPU forming only 47% of the mean FY13 estimate. We maintain a HOLD rating on CDLHT but place our FV of S$1.79 under review. (Sarah Ong) TEE International: FY13 earnings down 32% YoY Summary: TEE International (TEE) reported 4Q13 PATMI of S$6.4m, down 45% YoY mostly due to a S$4.1m increase in administrative expenses. Tee reported that these expenses were incurred for marketing property development projects and also included administrative expenses for its newly acquired integrated turnkey material handling subsidiary. FY13 PATMI cumulates to S$13.1m which we judge to be somewhat below our full year expectations. We note, however, that FY13 topline increased 51% YoY to S$21.6m as the group recognized higher levels of contributions from engineering and property development projects. We would speak with TEE later regarding these results and, in the meantime, put our rating and fair value estimate under review. (Eli Lee)

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

NEWS HEADLINES - Japan's consumer prices rose the most since 2008 in June; consumer prices excluding fresh food increased 0.4% YoY. - Mapletree Industrial Trust reported 1Q14 distributable income of S$40.2m, up 9.0% YoY. - Oxley Holdings has issued S$25m fixed rate notes due 2018 under its S$300m multicurrency MTN programme. - Singapore Shipping reported 1Q14 net profit of US$1.95m, up 56% YoY; revenue had climbed 83% YoY to US$9.1m. - Ziwo Holdings expects to report operating loss for 2Q13 due to slowdown in sales.

SG: MARKET PULSE: Land Transport, Swiber, SembMarine, Ezra and Ezion (31 May 2013)

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.45

Stock Name: ComfortDelGro
Company Name: COMFORTDELGRO CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.95

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.86

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.64

Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.10

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.62

MARKET PULSE: Land Transport, Swiber, SembMarine, Ezra and Ezion

31 May 2013

KEY IDEA Land Transportation sector: Possibility of new entrant? The LTA recently re-iterated the possibility of introducing competition in the bus services industry. However, as with before, we do not anticipate any changes to the operating landscape in the medium term unless the government decides how it wants to strike a balance between a free-market and government assisted model. For the near-term, the street is awaiting the recommendations from the fare review committee and has already factored in some level of increase. That said, any further delays from this committee could lead to continued losses for both PTOs and even asset impairments for SMRT. We downgrade the sector to NEUTRALin light of this possibility but do not anticipate further deterioration in the share prices for both ComfortDelgro and SMRT at this juncture. Maintain our HOLD ratings on both SMRT [HOLD; FV:S$1.45] and ComfortDelgro [HOLD; FV:S$1.95] although we favour the latter for its more attractive overseas ventures. (Lim Siyi) MORE REPORTS Swiber Holdings: Expanding into deepwater According to Upstream, Swiber Holdings is preparing to invest in its first large deep-water offshore construction vessel for its fleet. In particular, the company is understood to have expressed its intention to purchase a vessel similar to Ezra's Lewek Constellation. The capex of US$400-500m is huge, but considering that the unit is expected to take up to three years to build and the group has not announced any additional substantial capex plans, this may be a manageable purchase. Meanwhile, we would continue to monitor the group's cashflow from operations. Pending an official statement from the company, we do not see this as a surprise, as Swiber has expressed its intentions to expand its operations into deeper waters. Maintain BUY with S$0.86 fair value estimate. (Low Pei Han) Sembcorp Marine: Secures US$220.5m jack-up rig Sembcorp Marine (SMM) announced that subsidiary PPL Shipyard has secured a contract to build a jack-up drilling rig from BOT Lease Co., Ltd, a leasing company of The Bank of Tokyo-Mitsubishi UFJ which is under the umbrella of Mitsubishi UFJ Financial Group. The contract price is US$220.5m (excluding cost of BOTL's project management team and pre-operations cost), and is scheduled for delivery at end-Jan 2015. The unit is based on the proprietary Pacific Class 400 design; we note that Oro Negro had ordered a rig of similar design from SMM with a price tag of US$208.5m in Mar and Perisai Petroleum at US$208m in Feb this year. With this latest win, SMM has secured orders worth about S$2.7b YTD, accounting for 67% of our full year estimate. Maintain BUY on SMM with S$5.64 fair value estimate. (Low Pei Han) Ezra Holdings and Ezion Holdings: Ezra divests remaining shares in Ezion Ezra Holdings announced that it will divest its holding of 40m shares in Ezion Holdings via a placement that is fully underwritten by DBS Bank. This represents about 4.17% of Ezion's issued share capital, and was transacted at a price of S$2.25/share (4.9% discount to VWAP over 30 May 2013) for a total consideration of S$90m. Ezra will realize an estimated net gain of ~US$65.7m, and it intends to use the proceeds for working capital needs, lowering debt and fund growth of operations. We are not surprised by this move as Ezra had also previously sold off 60m shares in Ezion in Mar 2012. Maintain BUY on Ezion with S$2.62 fair value estimate and HOLD on Ezra with S$1.10 fair value estimate. (Low Pei Han)

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

NEWS HEADLINES - US stocks rose on Thursday, rebounding from the previous session's losses, as tepid economic data eased concerns the US Federal Reserve would begin to gradually scale back its policy of stimulating growth. - WE Holdings Ltd will place 80m new shares at S$0.10224 each to raise S$7.5m in net proceeds to repay a bank loan and for general working capital purposes. - Ascendas Hospitality Trust has launched an equity-fund exercise to raise at least S$200m to partially fund the S$300m acquisition of Park Hotel Clarke Quay. - Del Monte Pacific Ltd announced that its application for listing by way of introduction of all the company's shares on the First Board of the Philippine Stock Exchange (PSE) was approved. - Yongnam Holdings has secured a 5-year S$130m syndicated loan from CIMB Bank, DBS Bank, OCBC and Chinatrust Commercial Bank. - The HDB on Thursday launched 8,000 flats for sale under the joint Build-to-Order (BTO) and Sale of Balance Flats (SBF) exercise.

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Tat Hong
Company Name: TAT HONG HOLDINGS LTD

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.80

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: Nomura

Price Call: BUY

Target Price: 5.20

Market Compass

30 May 2013~ Good Morning Singapore!

Singapore Idea Snippets:

30 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 more you trust your intuition, the more empowered you become, the stronger you become, and the happier you become. - GISELE BUNDCHEN Singapore: The Day Ahead SINGAPORE DAYBOOK:Olam rolls up its sleeves to unlock value. Deal in US and tie-up in Nigeria kick-start its new asset-light strategy [SINGAPORE] Olam International is hard at work, seeking to reinvent itself. In his first media interview since the firm released the results of its strategic review on April 25, chief executive Sunny Verghese told The Business Times that Olam is now in "active discussions" with investors on possible sale- and-leaseback transactions to optimise its balance sheet. The firm also plans to pursue joint ventures and strategic alliances on certain platforms, to monetise the intrinsic value of the firm. "(There are) a lot of potential partners, a lot of discussions underway," said Mr Verghese. He was visibly more relaxed than six months ago, when the firm came under attack from short-seller Muddy Waters, which accused Olam of being a "fiscal black box". (Source: The Business Times) MARKET SCOOP Metro'searnings plunge without disposal gain; cuts special dividends Chasen clinches 7 new projects worth S$19.3m United Envirotech's FY13 net profit up on higher sales DBS launches dim sum bonds in Singapore Mapletree awarded HK site for logistics development Willas-Array FY profit rises 3% despite fall in revenue Scorpio East rejects major shareholder's alternative fundraising plan Carlyle said to eye bids for SingTel Australia arm Oxley makes Malaysian acquisition (Source: The Business Times) OCBC Securities says... UNITED ENVIROTECH | BUY | TP: S$0.90 United Envirotech Ltd (UEL) reported its FY13 results last night, with revenue jumping 117% to S$185.0m, or just 2% above our forecast, aided by higher engineering Net profit surged 182% to S$29.5m, and was about 1.6% ahead of our estimate business (+132%) and also the 77% jump in water treatment business UEL also declared a final dividend of S$0.005/share Going forward, management continues to see growing demand for membrane-based eater and waste-water treatment services, especially in China; this mainly driven by stricter discharge limits imposed by the Chinese government and the shortage of water supply in various parts of the mainland We will be speaking to management shortly to get greater clarity on its plans Meanwhile, we are placing our Buy rating and S$0.90 fair value under review DBS VICKERS Securities says ... TAT HONG HOLDINGS | BUY | TP:S$1.80 FY13 revenue of S$837m and earnings of S$70m were in line with our forecasts Revenue grew 16%, driven by stronger tower and mobile crane rental segments which rose 27% and 37% respectively, through better utilisation and rental rates TAT declared final DPS of 2.5 Scts, bringing full year DPS to 4 Scts This was a surprise as we had expected total DPS of 2.5 Scts, similar to last year Infrastructure developments regionally continue to be robust In Singapore, the construction of the Thomson MRT Line will commence from 2H13 and there are other rail projects in ASEAN such as Malaysia and Thailand We expect TAT to be actively supplying its cranes for these projects We expect both rental rates and utilisation rates to remain strong given buoyant demand for cranes in regional infrastructure projects We are leaving our earnings estimates and TP intact Valuations remain compelling with the stock trading at an attractive 10x FY14F earnings currently Our S$1.80 TP is based on 12x FY14F earnings NOMURA Securities says... SEMBCORP MARINE | BUY | TP:S$5.20 Sembcorp Marine's Jurong shipyard today reported a new ultrahigh specification JU order win of USD 596mn from Noble Corporation with an option for an additional unit The rig will be delivered in 1Q16 and deployed for work in the North Sea The rig, which will be based on Gusto MSC CJ-70 design, is an enhanced version of Statoil's "Cat J" specifications With the new order secured today, SMM's new order wins for the year now stand at ~SGD 2.4bn New order win testament to SMM's established offshore reputation All eight such orders placed since 2001 (excluding today's order) have been secured by Singapore yards (six by Keppel and two by SMM) With brent oil prices continuing to trend above USD100/bbl and a rising oil demand outlook in the medium to long term, momentum for offshore drilling continues to be strong Additionally, recent announcements by Brazil, Australia and Indonesia to award offshore licenses for hydrocarbon exploration are likely to further boost demand for rigs SMM has had a strong start to 2013 with new order wins of ~SGD2.4bn YTD SMM's net orderbook stood at SGD13.6bn at the release of its 1Q13 results While semi-sub orders have been elusive for a while now and drillship orders have dried up in anticipation of a strong delivery pipeline, JU orders have witnessed a resurgence in the past six months It is currently trading at FY13F and FY14F P/E of 17.8x and 15.8x, respectively vs its historical P/E band of 8-28x Our target price of SGD5.20 is based on our sum-of-the-parts (SOTP) valuation, comprising a DCF valuation (WACC 7%, 1% terminal growth over a 15-year period)of the group's shipyard businesses, which includes its three Singapore yards, including Cosco Shipyard group and its remaining 4.8% stake in listed Cosco Corp

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: SPH
Company Name: SINGAPORE PRESS HLDGS LTD

Research House: UOB KayHian

Price Call: HOLD

Target Price: 4.50

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: DBS Vickers

Price Call: HOLD

Target Price: 4.70

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: Credit Suisse

Price Call: BUY

Target Price: 13.70

Market Compass

29 May 2013~ Good Morning Singapore!

Singapore Idea Snippets:

29 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 :Don't limit a child to your own learning, for he was born in another time. - RABINDRANATH TAGORE Singapore: The Day Ahead SINGAPORE DAYBOOK:All eyes on how SPH will deploy proposed Reit proceeds SHARES in Singapore Press Holdings (SPH) rose 8 cents yesterday as the media and property group moved a step closer to listing its mall assets, but questions remained about how the company will deploy an expected $757 million in cash following the deal. "Ultimately it will depend on what they do with the proceeds," DMG & Partners analyst Joshua Low said. The stock of SPH gained 1.8 per cent to close at $4.47 after the company announced that it planned to pay out 18 cents per share in a special dividend after spinning off its malls into a listed real estate investment trust (Reit). The Reit is targeted to be launched through an expected $540 million initial public offering in July. SPH, which could retain a 70 per cent stake in the Reit and collect fees as the manager, expects to receive about $1 billion in net cash proceeds, of which about $291 million will be paid out through the special dividend. That would leave $757 million for working capital and reinvestment in "growth strategies. (Source: The Business Times) MARKET SCOOP China Animal makes cash exit offer of 30 cts/shr as part of delisting plan MAS opens representative office in Beijing Tat Hong Q4 profit up 66% to S$18.6m Bukit Sembawang Q4 net profit up 19.4% IPOS inks MOU with China's IPO office Trading of Pertama's shares to remain suspended Stats ChipPAC expands facilities and staff strength (Source: The Business Times) UOB KAY HIAN Securities says... SINGAPORE PRESS HOLDINGS | HOLD | TP: S$4.50 After two months of deliberation, SPH has decided to go ahead with the listing of SPH REIT, subject to shareholder approval at an EGM on 18 June SPH REIT will focus on retail mall assets in Singapore and across Asia-Pacific with an ability to finance itself independently Pursuant to the listing, SPH will inject Paragon and Clementi Mall into SPH REIT at S$3.07b This is at a 3.5% discount to the malls' aggregate market value of S$3.18b Post listing, SPH is expected to hold approximately 70% of SPH REIT. SPH REIT will pay for Paragon and Clementi Mall in units and cash With the cash proceeds from the injection of Paragon and Clementi Mall into SPH REIT, SPH is to pay a cash special DPS of 18 cents SPH's net group gearing will fall from 40.6% to 9.3% before the payment of the special dividend Its NAV will increase by >63% from S$1.39 to S$2.27/share The special dividend is to compensate for a reduction in SPH's earnings and dividend yield post listing of SPH REIT We estimate SPH's earnings would be reduced by 2% with 2014-15 dividend yield reduced from 4.6% to 4.5% In return, SPH's shareholders are given a special dividend sweetener No material impact on our sum-of-the-parts (SOTP) valuation of S$5.28/share as it has already incorporated SPH's property assets at market values Our target price remains unchanged at S$4.50, which is set at 15% discount to our SOTP valuation DBS VICKERS Securities says ... SEMBCORP MARINE | HOLD | TP:S$4.70 Sembcorp Marine (SMM)'s subsidiary, Jurong Shipyard, has secured a US$596m contract for a newbuild ultra-high specification jack-up rig for deployment in the United Kingdom sector of the North Sea from Noble Corporation It comes with an option for an additional unit The rig will be built based on the Gusto MSC CJ70 design and is in line with an enhanced version of Statoil's "Cat J" specifications. Scheduled for delivery in 1Q16, it will have an air gap of 69 metres and will be capable of operating in water depths of up to 150 metres (492 feet) in harsh environment conditions, with a maximum total drilling depth capacity of 10,000 metres (approx. 33,000 feet) More significantly, SMM won this contract against another finalist, South Korea's Daewoo Shipbuilding & Marine Engineering This win demonstrates Singapore rigbuilders' competitive strength in the jack up segment In addition to this latest rig order, Jurong Shipyard is currently constructing six F&GJU3000N class jack-up rigs worth a total of US$1.3 bn (secured in 2010 and 2011) for Noble The yard has also successfully delivered two units of Bingo 9000 ultra-deepwater semisubmersibles the Noble Danny Adkins and Noble Jim Day, in 2009 and 2010 respectively The latest order brings SMM's YTD wins to S$2.43bn, forming 49% of our full year expectation of S$5bn While this sizeable contract win is encouraging, we would like to see a faster ramp up of new orders that will boost earnings visibility in 2014, strong pick up in repair sales in 2H13, and continued improvement in margins before revisiting our HOLD recommendation and TP of S$4.70 CREDIT SUISSE Securities says... KEPPEL CORPORATION | OUTPERFORM | TP:S$13.70 We visited the show gallery of Corals at Keppel Bay, a 366-unit 99-year leasehold condominium newly launched by Keppel last weekend More than 100 units of the project have been sold, close to all the units launched in the initial phase Prices for one- and two-bedroom units were at about S$2,160-2,310 psf This represents a 7-14% premium to the average 2013 transacted price of Reflections, and a 34-43% premium to the average 2013 transacted price of Caribbean We attribute the good sales to its waterfront location and proximity to the Harbourfront MRT station Demand was the strongest for the one-bedroom units due to limited supply in the vicinity We understand that buyers were an even mix between Singaporeans and foreigners We maintain our OUTPERFORM rating on Keppel and target price of S$13.70, with the property business representing 19% of our SOTP valuation This is based on Credit Suisse's target price for Keppel Land (NEUTRAL, TP S$4.10) and our Keppel Bay RNAV estimate of S$0.13 per share

SG: MARKET PULSE: KSH, Yoma, Valuetronics, Sembcorp Marine, SIA (28 May 2013)

Stock Name: KSH Hldg
Company Name: KSH HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.73

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.87

Stock Name: Valuetronics
Company Name: VALUETRONICS HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.195

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.64

Stock Name: SIA
Company Name: SINGAPORE AIRLINES LTD

Research House: OCBC

Price Call: SELL

Target Price: 10.00

MARKET PULSE: KSH, Yoma, Valuetronics, Sembcorp Marine, SIA

28 May 2013

KEY IDEA KSH Holdings: A strong year of performance Summary: KSH reported 4QFY13 PATMI of S$14.0m, up 85% YoY mostly due to an increase in profit contributions from development projects held by its associates and JVs. On a full year basis, FY13 PATMI is S$36.3m which increased a strong 98%. We judge this to be somewhat above our expectations (our FY13 PATMI forecast is S$30.7m) as the pace of revenue recognition at JV development projects came in faster than anticipated. Management proposed a final dividend of 1.15 S-cents per share. Likely catalysts ahead includes major pipeline launches at Hong Leong Garden (NeWest), King Albert Park and Seletar Garden which would all likely take place this year. In China, KSH's 45% Beijing condo project could also begin sales this year. We view a potential firm performance at this project to be significant for KSH's earnings profile which could sustain earnings growth into FY15 by contributing an estimated S$23m net earnings upon TOP. Maintain BUY with an unchanged fair value estimate of S$0.73. (Eli Lee) MORE REPORTS Yoma Strategic Holdings: Catalysts ahead - upgrade to HOLD Summary: Yoma reported 4QFY13 PATMI of S$11.5m, up 452% YoY mostly due to a S$9.1m one-time gain. FY13 PATMI cumulates to S$14.4m and, excluding one-time gains, is judged to be generally in line with our forecast. We see the completion of the Landmark Project acquisition as a key catalyst for the share price ahead but note that management has raised the possibility of another deadline extension. That said, the signing of a Heads of Agreement with the Hong Kong and Shanghai Hotels Group and other preparations by Yoma for site development points to a good level of confidence that they would acquire the site eventually, in our view. Sales at launched projects remain firm, with 491 out of total 528 units sold in buildings 3 and 4 at Star City. In addition, management showed a strong deal-making record in FY13 and is in the midst of acquiring more land sites and establishing businesses in tourism, retail, agriculture and automobiles. Upgrade to HOLD with an increased fair value estimate of S$0.87 (20% premium to RNAV), versus S$0.71 previously, as we incorporate firmer valuations for the Landmark Project and Yoma's existing land bank into our model. (Eli Lee) Valuetronics Holdings: Starting on a fresh page Summary: Valuetronics Holdings Limited's (VHL) FY13 results were within our expectations. Revenue from continuing operations fell 3.4% to HK$2,210.2m, or just 0.6% shy of our forecast. Net profit from continuing operations fell 26.1% to HK$118.4m, while net losses from its now discontinued Licensing division widened by 32.7% to HK$39.8m, resulting in overall PATMI decline of 39.6% to HK$78.7m. Excluding exceptional items, we estimate that core PATMI for FY13 fell 14.7% to HK$103.7m (1.1% above our estimate). VHL also slashed its FY13 DPS from HK$0.17 to HK$0.08. This was below our HK$0.11/share forecast but still translates into a decent yield of ~6.0%. We foresee an improvement in VHL's bottomline and DPS in FY14 as it does not expect to incur any further expenses for its Licensing business. We maintain our HOLD rating but raise our fair value estimate slightly from S$0.19 to S$0.195 due to a marginal 2.7% increase in our FY14 core PATMI forecast. (Wong Teck Ching Andy) Sembcorp Marine: Secures US$596m jack-up rig order from Noble Summary: Sembcorp Marine (SMM) announced that subsidiary Jurong Shipyard has secured a US$596m contract for a newbuild ultra-high spec jack-up rig for use in the United Kingdom sector in the North Sea from Noble Corporation. There is also an option for an additional unit. Calling it the "most advanced and versatile of its kind in the industry", this rig will be constructed based on the Gusto MSC CJ70 design, and is in line with an enhanced version of Statoil's "Cat J" specifications. Indeed, we note that the last Gusto MSC CJ70 order secured by SMM had a price tag of US$450m in Mar 2011. With this latest win (scheduled for delivery in 1Q16), SMM has secured orders about US$2.4b YTD, accounting for around 60% of our full-year estimate. Maintain BUY with S$5.64 fair value estimate. (Low Pei Han) Singapore Airlines - Grounds another cargo plane Summary: Singapore Airlines (SIA) announced that it will park another cargo freight plane until May 2014 in an effort to cut its cargo capacity further. This will be the second freighter taken out of service with the first pulled out in Dec 2012. As a recap, in its recent FY13 results, SIA Cargo experienced an operating loss for its second straight year. While the move is a welcomed one in light of the weak air cargo market, particularly in Asia-Pacific, we still expect operating losses for the division in FY14 and assert that a turnaround is unlikely even with capacity cuts as cargo yields remain depressed. Overall, SIA as a group continues to face competitive pressures from other premium carriers, and management has yet to take any concrete steps to invigorate its business prospects. Therefore, we maintain our SELL rating on SIA with an unchanged fair value estimate of S$10.00. (Lim Siyi)

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NEWS HEADLINES - Healthway Medical Corp will issue up to 97.5m new shares to raise as much as S$10m to fund its expansion plans in China and its obligations in an associate company that is eyeing a listing. - Soilbuild Construction Group enjoyed a strong debut yesterday, with shares closing up 44% at 36cts. - Technics Oil and Gas Limited has been awarded contracts worth a total of S$10.6m for the supply of Air Spread Systems from Singapore. - Hiap Seng Engineering has reported a net loss of S$4.5m for 4Q13, a widening from the S$2.2m for the same period last year. - Fragrance Group has signed a mandate letter for a S$1b multicurrency medium term note programme. - Business receipts for the services industry in Singapore rose 6.3% YoY in 1Q13, said Singapore's Department of Statistics yesterday.