OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.04

Stock Name: Wing Tai
Company Name: WING TAI HLDGS LTD

Research House: Nomura

Price Call: BUY

Target Price: 2.54

Market Compass

04 October 2013~ Good Morning Singapore!

Singapore Idea Snippets:

04 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 : Many of life's failures are people who did not realize how close they were to success when they gave up. - THOMAS A. EDISON Singapore: The Day Ahead SINGAPORE DAYBOOK : M1 dealt record-breaking $1.5m fine for service disruption. M1 failed to ensure good electrical installation practices while upgrading: IDA [SINGAPORE] M1, Singapore's smallest telco, has been slapped with the industry's largest fine on record in the country's history - $1.5 million - for the disruption of its 2G and 3G mobile phone services in January. These 2G and 3G mobile service disruptions lasted about 71 hours and 63 hours respectively in mid- January, affecting some 250,000 M1 customers. When the Infocomm Development Authority of Singapore (IDA) announced its record-breaking decision yesterday, a spokesman said the regulator was "extremely concerned about the length and scope of M1's telecom service disruption, especially when it affected services heavily relied upon by both consumers and businesses". According to IDA, the service disruption was caused by M1's "failure to ensure good electrical installation practices" during its upgrading works, which then set off a chain of events - sparks, smoke, the activation of a gas suppression system and, ultimately, the activation of a water sprinkler that caused one of M1's mobile network switches to fail. IDA's mammoth fine is more than treble the previous record held by SingTel: a $400,000 fine for a 3G mobile service outage that lasted more than 20 hours in September 2011. SingTel had in turn broken another record of M1's: a $300,000 fine that the orange-hued telco had to fork out for an outage in May 2011. On a national level, M1's latest fine likely occupies a podium position regardless of industry. One of the largest fines in recent memory is the $2 million one dealt to train operator SMRT last July, but that figure was split evenly between breakdowns on the North-South Line on two separate dates in December 2011. M1's financial penalty this time around was levied under the Service Resiliency Code, which carries a fine of up to $1 million or 10 per cent of a licensee's annual turnover, whichever is higher. At $1.5 million, this fine represents 0.14 per cent of M1's last full year of operating revenue, which stands at $1.08 billion. Responding to IDA's decision yesterday, an M1 spokesman said: "IDA did not agree with our reconsideration request to reduce the quantum of the fine in light of our strong mitigating factors including our view that the incident was unexpected and beyond our reasonable control." "We are accordingly evaluating the decision," he added. At this stage, M1 has the option of appealing to Minister for Communications and Information Yaacob Ibrahim. For the industry, more compliance hurdles might loom. Following a review of the network resiliency for all three operators - SingTel Mobile, M1 and StarHub Mobile - IDA noted yesterday that while they generally met international standards, there was "room for improvement". It will implement a new audit framework to review network resiliency regularly, IDA added. (Source: The Business Times) MARKET SCOOP MAS obtains default judgement against Ong Beng Hock for false trading, market manipulation China Gaoxian fined S$2.3m by Korean authority Mixed-use and hotel deals drive surge in investment activity: DTZ SMEs prefer to recruit locals, but face challenge in hiring SGX says trading, clearing volumes up in Sept (Source: The Business Times) OCBC Securities says... YANGZIJIANG SHIPBUILDING | HOLD | TP: S$1.04 Following the announcement of eight shipbuilding contracts in early Sep totaling US$214m, Yangzijiang Shipbuilding (YZJ) has secured 17 more contracts worth about US$871m, bringing total orders won YTD to US$2.096b The 17 new contracts are scheduled for deliveries in 2015-2016, and provide much-anticipated replenishment of the order book for execution of orders further down the road - indeed the company may have to rely on a higher volume turnover as it starts executing more of its newer orders (also lower-margin) to maintain the yard's profit level Meanwhile, the group still has a total of 28 options outstanding worth about US$1.36b As Exhibits 2 and 3 illustrate, newbuild prices for bulk carriers in Chinese yards have been on a slow but steady uptrend since early this year This has been more apparent in the larger ships, such as the Capesize carriers (e.g. US$50m in Sep 2013 vs US$45m in Dec 2012) Indeed, according to RS Platou, spot earnings for Capesize tonnage rose substantially over the last month due to higher Chinese iron ore imports The strength in Capesize has also influenced the Panamax sector positively as charterers started to take two Panamaxes instead of one Capesize when the spread in freight rates became greater than normal In the longer term, a gradual recovery in the world economy should drive the demand for tonnage With a gradually recovering newbuild market, we raise our peg from 8x to 9x P/E, while rolling forward our valuations from blended FY13/14F earnings to FY14F earnings, resulting in a slight rise in YZJ's fair value estimate to S$1.04 (prev. S$0.99) While the newbuild price trend of ships by Chinese yards looks positive, additional monitoring is needed to determine its sustainability, which is dependent on the global economic recovery, the rate of China's yard consolidation process as well as any further tightening in China's money supply that would affect financing terms offered by yards Maintain HOLD CIMB Securities says ... OFFSHORE AND MARINE | OVERWEIGHT | Keppel (KEP) may have the upper hand as PEMEX and Transocean are existing customers Sembmarine (SMM) will benefit from its experience with Mexican owners such as Oro Negro (likely to be chartered to PEMEX) and the jack-ups it built for Global SantaFe (before Transocean acquired it) KEP is our top pick for its lower execution risks in Brazil Maintain Overweight on the sector, with more orders as catalysts PEMEX will start the tendering process for 10 jack-up rigs in Dec-13 Delivery for the first unit will be in 28 months, with each subsequent unit to be delivered at an interval of three months The orders can go to two yards, with one building six and the other four (Source: ODS-Petrodata) Transocean is also expected to receive bids for up to 10 high-specification jack-ups by end-Oct and has approached yards in Singapore, Korea and China, with speedy delivery (27 months) as a key criterion (Source: Upstream) Global average jack-up day rates have risen 10% yoy to about US$123k/day and utilisation rate is above 80% We believe this may encourage more jack-up orders from speculators and drillers We think KEP can win US$2.2bn worth of jack-ups from the PEMEX/Transocean tenders, assuming it snatches six jack-ups from PEMEX and five from Transocean, given its long history with both the companies Including the operators' units, KEP has built/is building five jack-ups for PEMEX and seven units for Transocean SMM can win up to US$1.4bn (four from PEMEX and three from Transocean) SMM delivered three jack-ups in 2006-09 that were chartered to PEMEX in addition to the six units it is building for Oro Negro, likely to be deployed by PEMEX in 2014-15 It also has a relationship with Transocean, via the two jack-ups it built for Global Santa Fe (acquired by Transocean in 2007) We assume that Dalian shipyard in China can win two jack-ups from Transocean due to its track record with Seadrill Stay invested, We see upside to order wins in 2014, boosted by jack-up rigs on top of the semi-subs, drillships and FPSOs NOMURA Securities says... WING TAI HOLDINGS | BUY | TP: S$2.54 We met with management recently for a company update and found that while the prime luxury market is still relatively quiet, WING sold another unit at ultra luxury Le Nouvel Ardmore to a foreign buyer in September and Belle Vue Residences is now fully sold Following the recent success at The Tembusu, WINGT is looking to launch the Prince Charles Crescent project in 1Q14 at c.SGD2,000psf, which is similar to what nearby Mon Jervois is fetching While the initial take-up at Mon Jervois has been relatively slow, we think the smaller unit size at WINGT's project is likely to be an advantage Management believes there are already signs that developers are more cautious in bidding for land but going forward, the incremental capital could be deployed in Malaysia With The Tembusu already launched (and well taken up) and the special dividend of SGD0.09/share already proposed, it appears there are few positive catalysts that investors can look forward to, at least in the near term, in our view One such catalyst could be better-than-expected takeup at the Prince Charles Crescent project when it is launched We raise our NAV to SGD3.35 (from SGD3.27) and TP to SGD2.54 (from SGD2.49) to chiefly reflect the better-than-expected sales at The Tembusu and higher market value of WING Stock remains fundamentally undervalued despite an apparent lack of near term catalysts

SG: MARKET PULSE: OUE, Yangzijiang (3 Oct 2013)

Stock Name: OUE Ltd
Company Name: OUE LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.32

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.04

MARKET PULSE: OUE, Yangzijiang

3 Oct 2013

KEY IDEA OUE Limited: Well positioned for CBD office recovery Summary: We initiate coverage on OUE with a BUY rating and a fair value estimate of S$3.32. Our fair value applies a relatively less punitive 15% discount to RNAV due to three key reasons. First, the bulk of OUE's portfolio is positioned in the Core CBD office micro-market which we believe will face significant tailwinds in FY14; second, OUE has fairly limited exposure to the uncertain residential sector (~10% of its RNAV); and finally, management's sharp track record in creating value, seeking accretive deals and recycling capital expediently. On 25 Sep 2013, OUE also announced it was exploring the listing of a commercial REIT on the mainboard of the SGX. The initial portfolio is expected to include OUE Bayfront and other commercial properties owned by Lippo China Resources Limited (a company listed on HKSE). While the timing and size of the listing is yet to be confirmed, we believe this capital recycling may be an attractive catalyst for value realization and a possible special dividend ahead. (Research team) MORE REPORTS Yangzijiang Shipbuilding: Healthy order flow for replenishment Summary: Yangzijiang Shipbuilding (YZJ) has recently secured 17 contracts worth about US$871m, bringing total orders won YTD to US$2.096b. These new contracts are scheduled for deliveries in 2015-2016, and provide much-anticipated replenishment of the order book for execution of orders further down the road. Newbuild prices for bulk carriers in Chinese yards have been on a slow but steady uptrend since early this year, but additional monitoring is needed to determine its sustainability, which is dependent on the global economic recovery, the rate of China's yard consolidation process as well as any further tightening in China's money supply. With a gradually recovering newbuild market, we raise our peg from 8x to 9x P/E, while rolling forward our valuations from blended FY13/14F earnings to FY14F earnings, resulting in a slight rise in YZJ's fair value estimate to S$1.04 (prev. S$0.99). Maintain HOLD. (Low Pei Han)

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

NEWS HEADLINES - US stocks closed lower Wed, paring losses during the trading session as investors looked for a possible thaw in negotiations over the government shutdown after a private-sector jobs report came out weaker than expected. - Singapore's purchasing managers' index for Sep pointed to a further slowdown in new export orders, echoing the less-than-stellar manufacturing data from the region earlier this week. - Oil trading here remained in the trough in the Jul-Sep quarter, as the market was flat except for a brief spike in prices due to the Syrian chemical weapons crisis. - In a sign of Singapore's growing attractiveness as a listing venue for early-stage mineral, oil and gas firms, Australian upstream oil and gas company Linc Energy revealed plans to move its listing from Australia to Singapore. - Cordlife Group and Artivision Technologies announced that they are raising funds via share placements.

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: SuperGroup
Company Name: SUPER GROUP LTD.

Research House: Maybank Kim Eng

Price Call: BUY

Target Price: 6.00

Stock Name: SV3U
Company Name: SOILBUILD BUSINESS SPACE REIT

Research House: DBS Vickers

Price Call: BUY

Target Price: 0.87

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: Credit Suisse

Price Call: BUY

Target Price: 1.30

Market Compass

27 September 2013~ Good Morning Singapore!

Singapore Idea Snippets:

27 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 : I have no idols. I admire work, dedication and competence. - AYRTON SENNA Singapore: The Day Ahead SINGAPORE DAYBOOK :Shell plans groundbreaking pilot plant on Jurong Island. The group's diphenyl carbonate facility expected to start up next year. SHELL aims to start up its diphenyl carbonate (DPC) demonstration plant on Jurong Island next year. The plant will produce one of the key intermediates used to make polycarbonates. The product is the largest-volume thermoplastic used for various engineering applications ranging from optical media to automotive glazing of windscreens and lamp lenses to electronics and sheeting film. The Singapore demo plant marks a "scaled-up" project from the technological process first developed at the oil giant's laboratories, and it precedes a potential investment by Shell in a world-scale DPC plant once the project proves successful. Disclosing this at a press conference at the Shell Malaysia Innovation Summit in Kuala Lumpur this week, Matthias Bichsel, Shell's projects and technology director, said the company's patented process for producing DPC at the 500 tonne-per-year (tpy) demo plant in Singapore exemplifies how the oil giant is using innovative engineering to reduce the waste by-products of what it brings to market. (Source: The Business Times) MARKET SCOOP Singapore tycoon Oei sues Goldman Sachs for currency losses TTJ FY profit falls 11%, plans 0.9ct/shr dividend Singapore's SATS to buy terminal operator for S$110m S'pore bonds were Asia's 2nd worst performer Jan to July Global IPO activity down in Q3: EY Singapore factory output up 3.5% in August Prof Tommy Koh awarded Great Negotiator 2014 (Source: The Business Times) KIM ENG Securities says... SUPER GROUP | BUY | TP: S$6.00 Super recently launched its coffee products in China, where it used to just sell instant cereals The new products and brand identity were unveiled to the media on 18 August, along with endorsement from famous Chinese actress and singer Wang Luodan In the accompanying trade fair, more than 1,000 regional distributors turned up We understand from management that sales orders and reception were very positive Admittedly, China is a tea-drinking country with no coffee culture But coffee consumption is picking up, driven mainly by a younger audience influenced by the Starbucks Culture and patient marketing by market leader Nestle From a low base, consumption of instant coffee is expected to grow at 12% CAGR over the next five years and we believe the time is ripe for Super to capitalise on this expected growth without overinvesting A major marketing thrust is the introduction of a new instant cup format that will be sold mainly through convenience stores In recent years, companies like XiangPiaoPiao (香飘飘) have generated huge sales from bubble tea in instant cup formats, and Super hopes to achieve the same results for coffee In our view, being remembered as an early mover in a popular product category does wonders for building brand equity Super recently announced a 40:60 JV in China with a local company, Shanghai Shang Heng The JV will undertake the manufacturing of liquid glucose syrup solid, a key ingredient for non-dairy creamer Super's cash investment is estimated at USD3m With its non-dairy creamer production facilities and existing distribution network in Jiangsu Province, we believe the execution risk for its China branded consumer strategy is lower China branded consumer sales currently make up less than 5% of Super's total revenue (through cereal), but we believe this segment has the potential to become a significant contributor in the next 2-3 years We raise our FY14-15F estimates by 1-2%, but our DCF-based TP of SGD6.00 is unchanged, implying 28.3x FY14F PER Catalysts include faster-than-expected traction into new growth markets DBS Securities says ... SOILBUILD BUSINESS SPACE | BUY | TP: S$0.87 Soilbuild Business Space REIT ("SB REIT") offers exposure into a modern portfolio of business park/industrial properties in Singapore with a valuation of S$935m Compared to existing industrial S-REITs, its portfolio is the youngest, with an average age of 3.1 years (by GFA), backed by long land lease tenure of c.51 years SB REIT will derive 42-43% of its net property income from master leases, with tenures ranging from 5-15 years, and this will offer strong income visibility to the REIT At 43.2% of asset value, SB REIT will have one of the highest exposures in the business park space segment (peers have approximate exposure ranging from 7.9%-20.6% of value), which we believe will remain relevant in the face of Singapore's growth towards a knowledge-based, value-add manufacturing economy This augurs well for the performance of the portfolio in the medium term The Sponsor is Soilbuild Group Holdings Ltd. ("Sponsor"), a leading property group with end-to-end integrated real estate capabilities The Sponsor has given SB REIT a right of first refusal (ROFR), which currently covers four industrial properties When acquired and developed completely, the ROFR properties possess the potential to increase the REIT's GFA by 72% In addition, SB REIT can extract a further 0.8m sq ft (25% of current GFA) through maximising unutilized GFA from its portfolio At a FYP13F-15F yield of 7.8%-8.7%, SB REIT offers one of the highest yields amongst the S-REIT space, which is attractive Our DCF TP of S$0.87 implies a total return of 24% CREDIT SUISSE Securities says... YANGZIJIANG SHIPBUILDING | BUY | TP: S$1.30 At the launching ceremony of Yangzijiang's first 10,000 TEU containership, management expressed confidence that Seaspan is likely to exercise options for further vessels in the coming months The company is also looking to move further up the value chain to secure contracts for 14,000 TEU containerships The first 10,000 TEU containership is expected to take 16 months to complete and be delivered in 1Q14, slightly ahead of schedule The second unit is expected to be launched in October and delivered in 1Q14, with a shorter construction period of 14 months Yangzijiang is expected to deliver eight 10,000 TEU containerships in 2014 in total Management noted continued strong enquiries for newbuild orders As of September 2013, Yangzijiang has US$2.87 bn of options for 29 bulkers and 22 containerships We expect Yangzijiang to secure US$2 bn of contracts in 2013, and improving order momentum to drive a re-rating We reiterate our OUTPERFORM rating and target price of S$1.30

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: UOB KayHian

Price Call: BUY

Target Price: 0.93

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: Nomura

Price Call: HOLD

Target Price: 1.52

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.32

Market Compass

25 September 2013~ Good Morning Singapore!

Singapore Idea Snippets:

25 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 : The iPod completely changed the way people approach music. - KARL LAGERFELD Singapore: The Day Ahead SINGAPORE DAYBOOK :Reit flotations shore up Q3 property investment sales. Third-quarter tally of more than $13b highest since Q3 2007 [SINGAPORE] Property investment sales - which refer to big-ticket transactions of at least $10 million - have crossed $13 billion this quarter, roughly double the previous quarter and the strongest showing since Q3 2007. This quarter's figure has been buoyed by three real estate investment trust flotations (involving nearly $5.7 billion in asset sales), two government land sale sites (at Telok Ayer Street and in Yishun totalling $2.35 billion to Frasers Centrepoint) and the $1.16 billion sale of Grand Park Orchard hotel (including Knightsbridge mall) to Bright Ruby Resources, controlled by a Du family from China. Industry observers are not counting on a repeat performance next quarter. Figures from Savills Singapore show that investment sales have risen to $13.4 billion from $6.4 billion in Q2 and $8.7 billion in Q3 last year. (Source: The Business Times) MARKET SCOOP Geo Energy units ink mining related deals Ley Choon bags 4 contracts worth S$30.6m this month Singapore casinos trump Macau with tourism aces Singapore industrial output seen edging up in Aug: poll Smaller pre-school operators to receive S$40m boost over 5 years NTU, 360ip launch S$5.6m centre to promote SME growth in S'pore (Source: The Business Times) UOB KAY HIAN says... STARHILL GLOBAL REIT | BUY | TP: S$0.93 Upgrade to BUY (from HOLD) with a marginally higher target price of S$0.93 (from S$0.92) Starhill is offering the highest yieldsfor a Singapore-centric retail REIT with a forward yield of 6.4%, which is 40-100bp above comparable retail S-REITs and is 60bp above the sector average yield of 5.8% P/B for Starhill is also the lowest amongst its retail S-REIT peers at 0.89, 20bp below the sector average of 1.09 Locking in long-term financing following the drawdown of S$422m 3-year and 5-year loans and ¥700b (S$88m) 3-year loans All-in-cost of debt for the new loans is a favourable 2.4%, compared with an average interest rate of 3.03% as at 2Q13 Following the refinancing, Starhill Global REIT (Starhill) will not have any refinancing requirements until 2015 Building sustainability for the long termas although the new loans will only result in marginal cost savings, due to the lower proportion of yen-denominated loans (11% of outstanding loans from 19%), the refinancing enables Starhill to extend its debt maturity (3.5 years from 1.2 years in 2Q13) and lock in the current low financing costs In addition, Starhill has also fixed or hedged 94% of its debt via interest rate swaps and caps, limiting cost upside The new loans are also unsecured, enabling Starhill to raise the proportion of unencumbered assets to 79% from 42% This, coupled with the credit rating upgrade by Standard and Poor's (to BBB+), will mitigate the impact of rising interest rates on Starhill's distributions NOMURA Securities says ... GENTING SINGAPORE | NEUTRAL | TP: S$1.52 Action: Upgrade to Neutral; Street expectations more realistic Following a 40% cut in street FY13F EBITDA estimates since 2012, we feel that our revised FY13/14F EBITDA estimates of S$1.26bn/1.4bn are a much more realistic assessment of Singapore's baseline gaming revenue potential, taking into account a volatile win % and seasonal fluctuations With Singapore tourist arrivals moderating to single digits (YTD arrivals up 8% y-y), and this being reflected in Sentosa traffic, we forecast a mid-high single digit growth in RWS's top-line We argue that our and consensus earnings have limited downside risks now, and this should support the share price at current levels We tweak our FY13F/14F EBITDA estimates by -7%/+5% to build in a weak performance in 1Q13F due to a lower win rate However, we now value GENS at mid-cycle, as we no longer see a reason for it to trade at a discount given limited earnings downside We raise GENS to Neutral, with a TP of S$1.52/share (5% upside) Valuation: Target 12.5x adj FY14F EV/EBITDA, historical average Following a transfer of coverage, we ascribe a 12.5x adj multiple to FY14F EBITDA to value GENS, which is its historical average This implies a 25% discount to Macau-listed names' average multiple Macau stocks have seen a re-rating driven by mass market volumes, which are unlikely to occur in Singapore, and are additionally supported by better yields, RoE Catalysts: Upside possible through overseas ventures (eg Japan) With Singapore's market maturing, upside in GENS's earnings is possible either through a sharp upswing in VIP volumes / win rate (difficult to forecast) or a deployment of its huge cash balance in overseas ventures, like Japan, where there are uncertainties on timing and competition DBS Securities says... YANGZIJIANG SHIPBUILDING | BUY | TP: S$1.32 Yangzijiang is hosting a yard visit on 25 Sept in conjunction with the launching ceremony of its first 10k TEU containership Launching is the most important stage of construction, marking the birth of a new ship All the blocks are mounted and joined, and the vessel should be ready to "float" at this stage The on-track construction progress of Yangzijiang's first large containership is a confidence booster The first batch of seven 10k TEU containership orders will likely yield better gross margins of 15-20% vs earlier expectation of low teens, in the light of favourable steel cost and forex as well as smooth execution As such, we are lifting FY14F shipbuilding gross margins by 2ppts to 18% We are also raising order win assumption for FY14 to US$2.5bn (from US$2bn), on the back of active shipbuilding enquiries and the sizeable US$2.87bn worth of options that could be exercised in the coming quarters Taking these into account, our FY14F net profit is raised by 6.3% to Rmb2.2 bn We have also introduced FY15 earnings and have incorporated property income from FY15 We have changed our valuation methodology from price to book, to SOTP, to better reflect valuation for the various segments of shipbuilding, investment and property While some investors have concerns regarding Yangzijiang's investment segment, it is a supplementary business for Yangzijiang and its weighting should fall as the shipbuilding segment recovers Bad debts have been minimal with proper evaluation processes and risk management procedures in place As one of the most cost efficient yards in China, Yangzijiang is the best proxy to the shipbuilding recovery

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: CapitaRChina
Company Name: CAPITARETAIL CHINA TRUST

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.60

Stock Name: Halcyon
Company Name: HALCYON AGRI CORPORATION LTD

Research House: UOB KayHian

Price Call: BUY

Target Price: 1.00

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OSK-DMG

Price Call: BUY

Target Price: 1.31

Market Compass

13 September 2013~ Good Morning Singapore!

Singapore Idea Snippets:

13 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 : All this talk about equality. The only thing people really have in common is that they are all going to die. - BOB DYLAN Singapore: The Day Ahead SINGAPORE DAYBOOK :StarHub e-magazine store set for October launch. It'll offer 50 titles at first, to non-StarHub subscribers as well [SINGAPORE] StarHub is poised to be the latest telco to jump into the e-magazine fray with a service that is slated for launch early next month, The Business Times has learnt. This e-magazine service, which currently has the working name of StarHub eMags, will have a website storefront and an app. It will be open to all consumers, including non-StarHub subscribers, according to a source. The Android version of the app is expected to be launched first, followed by an iOS app for Apple devices later in the year. At least 50 titles are supposed to populate the store at launch-time. "We believe digital publishing in Singapore has growth potential, given the high penetration of smart mobile devices among consumers here," said Stephen Lee, head of StarHub's i³ division, when contacted by BT yesterday. i³ is a relatively new division of the telco, set up to handle the group's digital doings. (Source: The Business Times) MARKET SCOOP China Gaoxian responds to CAD'srequest OCBC opens RMB1 bln China HQ in Shanghai Guthrie GTS to delist as privatisation offer succeeds SP AusNet fails in tax appeal WE Hldgs makes S$8.8m placement Centurion to build 4,100-bed dorm SingTel, Optus win A$530m ANZ deal SembMarine wins US$346m Helix deal (Source: The Business Times) DBS Securities says... CAPITARETAIL CHINA TRUST | BUY | TP: S$1.60 The coming two years could be transformational for CRCT After fine-tuning its portfolio tenant mix and the completion of various asset enhancements, CRCT's portfolio of malls have been consistently seeing strong shopper traffic and tenant sales, resulting in higher rental reversions (averaging 17% over 2Q12-2Q13) compared to the average of 12% over 1Q11-1Q12 With a renewed tenant mix and a stronger operational footing, we believe this trend is likely to continue going forward In addition, CRCT aims to deliver earnings alpha through planned inorganic growth initiatives via (i) refurbishment of CapitaMall Mingzhongleyuan Mall and (ii) proposed acquisition of Grand Canyon Mall, which when completed in 1H14 will be key growth catalysts for CRCT Apart from a robust FY13-15F DPU CAGR of 7% (almost doubling its organic growth potential), CRCT's earnings base will also broaden and will be further diversified Contribution from its multi-tenanted malls will increase to 79% of net property income, meaning that the trust earnings should better reflect underlying performance BUY maintained, TP S$1.60 We see value emerging after the recent price decline The stock offers an attractive FY13-15F DPU yield of 7.0%-8.3%, which is higher than the S-REIT peer average of 6.3-6.7% UOB KAY HIAN says ... HALCYON AGRI CORP | BUY | TP: S$1.00 Halcyon Agri Corp (HACL) has entered into a term sheet with Mr Basuki Prawono Winata and Mr Hendrik Oking for the acquisition of a rubber processing factory in Jambi Province, Indonesia, together with all associated buildings, plant and machinery and leasehold land on which these assets are located and operated The assets are owned by PT. Golden Energi The factory produces SIR20 grade rubber and has an annual export capacity of 18,000 tonnes, with significant scope for further upgrades and expansion Purchase consideration is US$7m, arrived at after arm's length negotiations This will be funded through internal resources and/or bank borrowings The terms are being negotiated and subject to due diligence and the negotiation and execution of definitive agreements The proposed acquisition is targeted to be completed by end-13 Jambi province is part of Sumatra island and neighbours South Sumatra, where HACL's two existing factories are situated The targeted factory produces SIR20, one of HACL's existing rubber variants We see scope for significant synergies between the two operations with regard to maximizing cost efficiency and productivity It is highly likely that SIR20-VK, the premium variant of SIR20, will eventually be produced in the Jambi factory as well Management has always intended to achieve an annual midstream production capacity of about 360,000 tonnes (~1,000 tonnes per day) Assuming HACL's pending acquisitions and asset enhancements are completed, its annual capacity will reach 350,000 tonnes by 2015 We think management will undertake asset enhancements to increase the capacity in Jambi factory We also do not rule out the possibility of another acquisition of similar size We are comfortable with the company's current debt level We note the possibility of an equity fund-raising exercise within the next 3-6 months The potential dilution will be offset by the completion of its two midstream acquisitions in 4Q13 (targeted), which could begin contributing as early as end-13 or 1Q14 Maintain BUY and target price of S$1.00 based on a peer-average 2014F PE of 10x No change to our forecasts for now pending completion of the above DMG OSK Securities says... YANGZIJIANG SHIPBUILDING | BUY | TP: S$1.31 We upgrade Yangzijiang Shipbuilding (YZJ) from Neutral to BUY with a higher TP of SGD1.31 vs SGD1.00 previously In our view, the shipbuilding capacity cut in China and the recovery of ship orders in the dry bulk sector arising from improved supply and demand will drive the stock's re-rating Our SGD1.31 TP implies 9.5x FY14F P/E The Baltic Dry Index jumped 120% YTD and 54% in the past month due to slower supply growth while demand remains steady Ship prices have risen by 5-12% from the bottom six months ago, and seasoned shipping players are expanding their fleet aggressively Strength in dry bulk sustainable as fleet growth is slowing down Our analysis shows that global dry bulk demand will start outpacing supply by early 2014 We estimate global dry bulk capacity to grow 4.8%/4.4%/3.0% in 4Q13/2014/2015 while global demand is likely to rise by 5-6% annually We believe the recovery in ship orders and closure of inefficient yards in China will benefit YZJ Good visibility from USD3.4bn order book YTD, YZJ has secured USD1.22bn in new orders for 35 ships - making up 60% of our estimate - and has options for 51 ships worth USD2.87bn The options are split into 22 container ships (USD1.79bn) and 29 bulk carriers (USD1.08bn) The company's USD3.4bn (CNY20.9bn) outstanding order book, equivalent to 19 months of shipbuilding output, provides strong visibility in times when other yards are struggling for new orders We upgrade YZJ from Neutral to BUY and raise our SOP-derived TP to SGD1.31 from SGD1.00 Our TP is based on: i) 12x P/E on FY14F shipbuilding earnings (previously 8x), ii) net cash and financial assets, and iii) less debt and amount due to customers Our SGD1.31 TP is premised on a 9.5x FY14F P/E

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: DBS Vickers

Price Call: BUY

Target Price: 0.98

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.65

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: CIMB

Price Call: BUY

Target Price: 1.25

Market Compass

12 September 2013~ Good Morning Singapore!

Singapore Idea Snippets:

12 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 : It's tangible, it's solid, it's beautiful. It's artistic, from my standpoint, and I just love real estate. - DONALD TRUMP Singapore: The Day Ahead SINGAPORE DAYBOOK :Softer blow to local telcos with waning Apple mania. SingTel, StarHub, M1 start taking registrations of interest for upcoming iPhone 5c and iPhone 5s [SINGAPORE] It's margin pressure season for the telcos again with a new iPhone release, but the collective yawn that consumers are stifling could mean a softer blow to the telcos' bottom line for the coming quarter. Yesterday, SingTel, StarHub and M1 began taking registrations of interest for the new iPhone 5c and iPhone 5s. While the three telcos will sell both models from Sept 20, StarHub will take pre-orders for the iPhone 5c from tomorrow at 11.59pm as well. The telcos' subscriber acquisition costs have traditionally spiked in the last quarter of the year, following Apple's product launches in late September. iPhones hold the dubious distinction of costing telcos the most in handset subsidies compared to other handsets, both in nominal and percentage terms. Last year, after the iPhone 5 was released, SingTel's acquisition cost per postpaid customer stood at $322 for the last quarter of the year, up from $291, $301 and $289 in the three previous quarters. Post-iPhone 5 launch, M1's acquisition cost per postpaid customer, too, jumped from $370 in Q3 to $418 in Q4. Even so, industry watchers believe that the looming margin crunch will be milder with the new iPhone 5c and iPhone 5s. "I don't think the iPhone 5s is going to have very much impact. . . You normally see that the demand tends to be higher for the models that really make a difference to the user experience," said James Ong, senior manager of telecommunications consultancy Delta Partners. "The sentiment this time around is that Apple seems to have underperformed in terms of innovation and creativity." Waning Apple-mania had begun to set in as far back as a year ago. Between the last quarter of 2011 and the fourth quarter of 2012, SingTel's acquisition cost per postpaid customer fell 12 per cent year on year as a result of what it called "changes in smartphone mix" - a sign that Android handsets which carry lower subsidies were muscling into iPhone territory. This has been borne out over at M1, where Android devices made up 70 per cent of handset sales in Q2 this year. That said, the impact on margins - while muted - will be inevitable. "There will still be significant demand, given that Singapore is a market where people are held to two-year contracts. People who bought the iPhone 4S two years ago will be up for renewal now," Delta Partners's Mr Ong said. No price plan details have been released, but the cheaper iPhone 5c can be pre-ordered through the Apple Singapore store from tomorrow, while the iPhone 5s will be available a week later. The iPhone 5s is priced at $988, $1,148 and $1,288 for the 16 gigabyte (GB), 32GB and 64GB models, respectively, while the iPhone 5c costs $848 and $988 for the 16GB and 32GB models. The upside of this margin pressure is that the new iPhone 5s and iPhone 5c will do their bit to convert 3G mobile subscribers to more profitable Long Term Evolution (LTE) or 4G ones. "This will help drive LTE connections uptake in the market as users of iPhone4S will look for a replacement," said Shalini Verma, a principal analyst at Gartner. The older iPhone 4S is not LTE-enabled. "There will be some increase in data usage if users are using LTE service because a better performing phone does encourage users to use it more for data. . . The high-speed network will also contribute to it." While the margin pain might be felt over the short term, the telcos should eventually wring more data dollars from consumers in the long term. (Source: The Business Times) MARKET SCOOP Popular Holdings Q1 profit down 18.8% S'pore, Vietnam ink strategic partnership Singapore tightens rules on unsecured loans to rein in debt Japan's Xyec prices S$6.5m IPO at 26 S'pore cents SingTel to offer iPhone 5s, 5con Friday, Sept 20 (Source: The Business Times) DBS Securities says... UNITED ENVIROTECH | BUY | TP: S$0.98 United Envirotech has secured a Rmb286m (S$59m) contract with the municipal government of Hong Wei District, Liaoyang. For the TOT, UENV will acquire an existing 15,000 m³/day treatment plant for Rmb25m and upgrade it with a membrane bioreactor (MBR) system For the BOT portion, UENV will expand its treatment capacity by an additional 45,000 m³/day to a total capacity of 60,000 m³/day Upon completion, the plant will treat 30,000 m³/day of municipal wastewater and 30,000 m³/day of industrial wastewater The upgrading work will commence immediately and is expected to be completed by September 2014 The expansion work is expected to start in early 2014 and will take 12 months to complete The construction of the BOT will add Rmb261m to EPC's orderbook, lifting YTD new contract win to Rmb451m, above our Rmb400m assumption More importantly, the new capacity will add 6% to existing Phase 1 capacity, lifting UENV's total treatment capacity to 1.1m m³/day Based on minimum offtake for TOT and staggered guaranteed offtake from 70% of the design capacity for Year 1, this contract will boost SOTP of UENV to S$0.98 from S$0.90 previously In view of the improved upside, we therefore upgrade UENV to Buy from Hold We see more contract wins as catalysts for more upside on the stock CIMB Securities says ... YANGZIJIANG SHIPBUILDING | OUTPERFORM | TP: S$1.25 The heightened order momentum and FY15 delivery slots being quickly snapped up suggest that YZJ's order drought has bottomed out We like YZJ as it is one of the last privately-owned Chinese shipyards with decent profitability We keep our Outperform rating and target price (based on 1.4x FY13 P/BV; 1 s.d. below its 5-year mean) The stock has the highest dividend yield of 4.8% among the ship/rig builders With about half of its order book (US$3.24bn as at end-Jun) dominated by bulk carriers, we believe YJZ can benefit from more shipbuilding orders if the BDI's climb is sustained A high BDI also lowers the risk of order cancellations The BDI spiked recently to its 52-week high of 1,478, driven primarily by the increase in Chinese steel production that spurred demand for shipping vessels mainly in the Capesize sector China's macro fundamentals have stabilised with the recent data showing that the real economic activity is starting to improve Iron ore inventories are also relatively low and we expect the import demand to remain relatively strong in 4Q13, which can lead to further upsides in the BDI New orders have rebounded sharply from US$300m in FY12 to US$1.22bn YTD YZJ has been consistently getting new orders, with another US$241m (eight shipbuilding contracts) in the bag during the first two months of 2H13 The YTD order win is about 50% of our FY13 order target of US$2.5bn We look forward to more orders in 2H13 as YZJ has 51 options worth US$2.87bn, of which 22 are for containerships (US$1.79bn) and 29 for bulk carriers (US$1.08bn) The stock is trading at its trough of 0.98x FY13 P/BV, an unwarranted 20% discount to its peers despite a stronger ROE of 20% In comparison, Cosco is trading at 1.23 P/BV with an ROE of 3.7% OCBC Securities says... MIDAS HOLDINGS | BUY | TP: S$0.65 According to the China Railway Corporation (CRC) website, the results of its public tender for 91 high-speed train sets (speeds of 250 km/h) were released on 6 Sep 2013 CSR Qingdao Sifang, a subsidiary of Hong Kong listed CSR Corp, clinched all the orders This is a welcome relief to the railway industry as it is the first high-speed train car tender by CRC (formerly Ministry of Railways) after a hiatus of more than two years However, we believe this news is disappointing for Midas Holdings, as it has only managed to supply small quantities of aluminium alloy extrusion profiles to CSR Qingdao Sifang in the past Hence we expect Midas to miss out on this tender Nevertheless, Midas is actively engaging them and we believe Midas may be able to penetrate into their supply chain in the future Besides this open tender, we understand that CRC also carries out competitive negotiations with train manufacturers directly, and results of these negotiations may not be published on CRC's website According to our channel checks, there are 68 other train sets (speeds of 350 km/h) which will be procured by CRC under this format. In total, 108 out of the 159 train set orders will be awarded to CSR Corp, with the remainder going to China CNR As Midas is a key supplier to CNR Tangshan and CNR Changchun (both subsidiaries of China CNR), we expect Midas to still secure high-speed contracts in 4Q13 Assuming each 350 km/h train set costs CNY200m and the value of the train car body forms 1.5% of total train set value, we estimate potential addressable market size of CNY153m for Midas for this round of procurement (based on 51 train sets) We understand that there may also be another round of procurement by CRC by year end, while 2014 will likely see the bulk of purchases by CRC under China's 12th Five-Year Plan from 2011 to 2015 In light of the aforementioned factors, we expect order wins to be a rerating catalyst for Midas' share price Hence we maintain our BUY rating and fair estimate of S$0.65 on Midas, which is pegged to 1.3x blended FY13/14F P/B

SG: MARKET PULSE: United Envirotech, Yangzijiang Shipbuilding (23 Aug 2013)

Stock Name: UtdEnvirotech
Company Name: UNITED ENVIROTECH LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.975

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.99

MARKET PULSE: United Envirotech, Yangzijiang Shipbuilding

23 Aug 2013

KEY IDEA United Envirotech: Secures RMB100m BOT project United Envirotech Ltd (UEL) has just secured a RMB100m BOT (Build, Operate, Transfer) contract in Shandong Province, China; the 30k m3/day underground waste-water treatment plant is a follow-up to its earlier 100k m3/day drinking water project secured in Yantai last year. Despite the latest contract win, we note that it will only meet around 20% of our new contract wins expected this year; hence, we opt to leave our forecasts unchanged for now. Instead, we could see a large dilution from the move to issue shares to buy over the membrane operations of Memstar Technology Ltd. As such, we are also more inclined to maintain our HOLDrating, although the current upside to our unchanged S$0.975 fair value (13x FY14F) is around 8%. (Carey Wong) MORE REPORTS Yangzijiang Shipbuilding: VLGC orders for Chinese yards? According to Platts, a number of Chinese firms are seeking older VLGCs, as the country seeks to build its own VLGC fleet. There is talk that China Oriental Energy may look to order more VLGCs, with YZJ as a potential beneficiary, but we note that while the latter's Xinfu yard has plans to build large vessels and has an annual production capacity of up to 10 VLCCs, YZJ's capabilities remain primarily in containerships and bulk carriers. As China seeks to reduce its shipbuilding capacity, what is imperative for YZJ is to continue its smooth execution, secure orders (albeit at almost breakeven levels), scale up the value chain by building green vessels and developing its offshore capabilities, while waiting for the industry consolidation to run its course. Should it be one of the few large yards left standing when the dust has settled, YZJ would then find itself in a stronger position than before. Maintain HOLDwith S$0.99 fair value estimate. (Low Pei Han)

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

NEWS HEADLINES - US stocks closed higher, getting a slight boost after Nasdaq-listed stocks resumed trading from a more than three-hour halt due to technical trouble. - Fed's 30-31 Jul meeting minutes offered little hint on when the US central bank might reduce its support for the US economy. - Hafary Holdings posted a full-year net profit attributable to equity-holders of S$25.4m, 5.6 times the last financial year's S$4.5m. - China Environment is looking to raise about S$15.9m in net proceeds through the issue of up to 65 million placement shares at S$0.2513 each. - Global Logistic Properties pre-leased 24k square metres (258.3k square feet) to a global consumer goods company at GLP Park Jiangning in Nanjing, eastern China. - Centurion Corporation Limited announced that its subsidiary Westlite Dormitory (V One) Pte Ltd submitted a tender for a land at Woodlands Avenue 10 which closed on 16 Aug 2013.

SG: MARKET PULSE: Biosensors, NOL, Noble, UOL, Wilmar, YZJ, FEHT, CWT, Vard, Yoma, Singapore GDP (12 Aug 2013)

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 0.96

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.95

Stock Name: Noble Grp
Company Name: NOBLE GROUP LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.76

Stock Name: UOL
Company Name: UOL GROUP LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 7.16

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.10

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.99

Stock Name: Far East HTrust
Company Name: FAR EAST HOSPITALITY TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.92

Stock Name: CWT
Company Name: CWT LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.08

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.80

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.87

MARKET PULSE: Biosensors, NOL, Noble, UOL, Wilmar, YZJ, FEHT, CWT, Vard, Yoma, Singapore GDP

12 Aug 2013

KEY IDEA Biosensors International Group: A quarter to forget Summary: Biosensors International Group (BIG) reported 1QFY14 earnings which were significantly below ours and the street's expectations. Core PATMI plunged 57.3% YoY to US$12.1m on the back of a 11.2% decline in revenue to US$76.7m, forming 10.1% and 20.0% of our original FY14 forecasts, respectively. This was due to another lacklustre quarter of contribution from licensing and royalties revenue and an inventory drawdown in its distributor sales channels in China in anticipation of new stent tenders. Our revised FY14 revenue forecast implies a 10.4% growth and comes in below management's ~15% growth guidance. We also see mounting cost pressures for BIG and slash our FY14 and FY15 core PATMI projections by 34.4% and 29.9%, respectively. Our FCFE-derived fair value estimate falls from S$1.60 to S$0.96. We expect some near-term selling pressure on the stock and downgrade BIG from Buy to HOLD. (Wong Teck Ching Andy) MORE REPORTS Neptune Orient Lines - Lacklustre 2H ahead Summary: With a disappointing set of 2Q13 results, we downgrade Neptune Orient Lines's (NOL) to SELL. Despite the onset of the 3Q13 peak season, freight rates according to the Shanghai Containerised Freight Index remain weak across the board and traditional rate hikes have yet to make up ground lost in 2Q13. In addition, volume demand should remain weak given the tepid market conditions, and supply overhang continues to render industry action moot. With this downward outlook likely to extend into the medium term, we lower our FY13/14 forecasts accordingly and reduce our P/B peg to 0.9x from 1.1x previously. As a result, our fair value estimate falls to S$0.95 (S$1.38 previously). (Lim Siyi) Noble Group Ltd: Downgrade to SELL with S$0.76 FV Summary: Noble Group (Noble) reported a poor set of 1H13 results last Wed, marred by losses in its Agricultural segment in 2Q13, such that reported earnings only met 20% of our full-year forecast. No doubt the second half tends to be seasonally stronger; but we suspect that its Agriculture segment could continue to be a drag on its overall profitability. As such, we see the need to sharply reduce our FY13 earnings forecast by as much as 43% (FY14 by 18%); the group's targeted cost savings will probably have a more meaningful impact in FY14. Even as we roll forward our 10x valuation to blended FY13/FY14F EPS, our fair value will drop sharply from S$1.09 to S$0.76. Downgrade our call from Hold to SELL. (Carey Wong) UOL Group: Boost from fair value gains Summary: UOL reported 2Q13 PATMI of S$431.4m which increased 151% YoY mostly due to fair value gains at Novena Square, United Square and Odeon Towers where valuation cap rates have compressed some 25 to 50 bps. Excluding fair value and other one-time gains, 1H13 attributable profit is an estimated S$164.4m which is broadly in line with our expectations - constituting 45% of OIR's FY13 forecast of S$368.3m - but somewhat below the street's view (41% of FY13 consensus of S$391.8m). For UOL's residential strategy ahead, we see management remaining cautious and more likely to replenish land at the rate of sales or below, and capital deployment is likely to be focused on growing recurring income in investment and hospitality assets. To recap, UOL had made a cash offer of S$2.55 per share to delist PPHG and we understand that the exit offer is now unconditional with a closing date of 13 Aug 2013. Maintain HOLD with an unchanged fair value estimate of S$7.16 (20% RNAV disc.). (Eli Lee) Wilmar: 2H13 outlook still challenging Summary: Wilmar International Limited (WIL) reported 1H13 revenue slipping 4.0% to US$20626.8m, meeting 41.5% of our full-year forecast; net profit climbed 43.1% to US$533.9m, or about 40.1% of our FY13 forecast. WIL declared an interim dividend of S$0.025/share, versus S$0.02 in 1H12. Going forward, WIL notes that the overall environment remains "challenging", but it remains cautiously upbeat that it can continue to see a seasonally stronger second half performance. As 1H13 results were slightly below forecast, we pare our FY13F earnings by 6.7% (FY14F by 3.6%). But as we roll forward our unchanged 12.5x peg to blended FY13/FY14F EPS, our fair value inches up slightly from S$3.25 to S$3.33. In view of the still difficult operating environment and the credit crunch in China, we maintain HOLD and would be buyers at S$3.10 or better. (Carey Wong) Yangzijiang Shipbuilding: Still a steady ship Summary: Yangzijiang Shipbuilding (YZJ) reported a 12% YoY rise in revenue to RMB4.4b and a 8% decrease in net profit to RMB811.7m in 2Q13, such that 1H13 net profit accounted for about half of our full year estimates, within expectations. Gross margin in the shipbuilding related segment dropped from 24.2% in 2Q12 and 25.9% in 1Q13 to 20.6% in 2Q13, while gross margin in the group's investment division remained high. Despite stiff competition in the shipbuilding industry, YZJ secured 27 effective shipbuilding contracts worth about S$1.01b in 1H13, but likely at single digit gross margins. Meanwhile, the group continues to grow its financing business, which we now forecast greater revenue contributions. We increase our FY13/14F earnings by 3-4%, and with the more favorable RMB/SGD exchange rate, our fair value estimate increases from S$0.95 to S$0.99 (based on 8x FY13/14F core earnings). Maintain HOLD. (Low Pei Han) Far East Hospitality Trust: 2Q13 below expectations Summary: 2Q13 results for Far East Hospitality Trust (FEHT) were below our expectations and the street's. Gross revenue was S$29.3m or 7.9% lower than the IPO prospectus forecast, affected by the hotels' performance. Net property income and income available for distribution came in at S$26.9m and S$23.2m, which were 6.8% and 4.1% below the IPO forecasts, respectively. 2Q13 DPS was 1.43 S cents; 1H13 DPS of 2.81 S cents tracked below our expectations, corresponding to 47% of our prior FY13 estimate of 6.0 S cents, which we now lower to 5.7 S cents. We have transitioned to a DDM-based model, from a RNAV model previously. Adjusting our FY13F revenue assumptions downwards, our FV falls to S$0.92 from S$1.01. We maintain a HOLD rating on FEHT and estimate a FY13 yield of 6.2%. (Sarah Ong) CWT Ltd: 2Q13 within expectations Summary: CWT reported a decent set of 2Q13 results that were roughly in-line with our expectations. Revenue jumped 66% YoY to S$1.7b, driven by higher contribution from its newly established Commodity SCM business. However, the group incurred (i) higher administrative expenses (S$43.7m, +17% YoY) from management and restructuring costs, and (ii) higher financing costs (S$8.5m, +8% YoY) due to higher borrowing and trade volume. The declines were partially offset by improved contribution from its joint-ventures and tax saving, resulting in net profit easing 6% YoY to S$18.1m for 2Q13. For 1H13, revenue and net profit formed 50% and 46% of our FY13F estimates respectively. We will speak to management to obtain more colour. In the meantime, we keep our BUY rating and S$2.08 fair value estimate unchanged. (Chia Jiunyang) VARD Holdings: Secures USD1.1b contract Summary: Vard Holdings Limited has secured contracts for the design and construction of four Pipe Lay Support Vessels (PLSVs), worth about USD1.1b (NOK 6.5b). The contracts were from joint ventures of DOF Subsea and Technip. Two of the PLSVs will be built in Romania in 2Q-3Q16, while the remaining two will be delivered from Brazil in 4Q16-2Q17. We are in the process of adjusting our models. In the meanwhile, we put our Sell rating and S$0.80 fair value UNDER REVIEW. (Chia Jiunyang)

Yoma Strategic Holdings: JV successful in Mandalay airport tender Summary: Yoma reported that it has a 5% stake in a consortium, with Mitsubishi Corp. and JALUX Inc., that has successfully tendered for the upgrade and operation of the Mandalay International Airport. The consortium is expected to be awarded the tender upon negotiation, finalization and agreement of the final contract with relevant authorities. While this is a positive development, we see the financial impact on Yoma to be likely capped given that it has only a 5% stake and that the initial equity contribution by all the parties are estimated at around US$3.38m. Yoma also noted that the investment is not expected to have any material financial impact on the consolidated net tangible assets and earnings per share for the current year ending Mar 2014. Maintain HOLD with an unchanged fair value estimate of S$0.87. (Eli Lee) Singapore Economy: 2013 GDP growth forecast upgraded to 2.5-3.5% Summary: According to the MTI, the Singapore economy grew by 3.8% YoY in 2Q13, better than the street's expectations of 3.5% growth, and also better than the 0.2% growth seen in 1Q13. On a seasonally adjusted, annualised basis, the economy expanded by 15.5% QoQ, and was significantly higher than the 1.7% expansion in 1Q13. This was mainly driven by manufacturing, which grew by 32.1% QoQ, reversing the 12.1% contraction in 1Q13, largely due to higher output in the biomedical manufacturing and electronics clusters. Construction grew by 11.2%, compared to 1Q13's 10.3% growth. Finally, services expanded by 11.5% after 1Q13's 7.8% rise, driven mainly by the wholesale & retail trade and the transportation & storage sectors. As global macroeconomic conditions are expected to pick up in 2H13, the MTI has upgraded Singapore's 2013 GDP growth forecast from 1.0-3.0% to 2.5-3.5%. (Low Pei Han) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stock indexes declined on Fri, with the Dow Jones Industrial Average halting its longest weekly winning streak since Aug of last year. - Singapore-Listed companies have posted a lower aggregate 2Q13 net profit of S$7.04b, down by 2.8% YoY. - Raw material prices won support last week from upbeat Chinese economic data, while cocoa futures hit 11-month high points on tight supply fears, analysts said.

SG: MARKET PULSE: SCI, CityDev, Genting, Hyflux, StarHub, Wilmar, Ezion, YZJ, FEHT (7 Aug 2013)

Stock Name: Semb Corp
Company Name: SEMBCORP INDUSTRIES LTD

Research House: OCBC

Price Call: BUY

Target Price: 6.48

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 11.38

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: OCBC

Price Call: HOLD

Target Price: 1.41

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.215

Stock Name: StarHub
Company Name: STARHUB LTD

Research House: OCBC

Price Call: SELL

Target Price: 3.82

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.25

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.62

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.95

Stock Name: Far East HTrust
Company Name: FAR EAST HOSPITALITY TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 1.01

MARKET PULSE: SCI, CityDev, Genting, Hyflux, StarHub, Wilmar, Ezion, YZJ, FEHT

7 Aug 2013

KEY IDEA Sembcorp Industries: Steady performance in utilities Sembcorp Industries (SCI) reported a 6.3% YoY fall in revenue to S$2.5b and a 13.3% decrease in net profit to S$165.4m in 2Q13, such that 1H13 figures accounted for about 45% of our full year estimates. There was slower order book drawdown in the marine division in the quarter as fewer projects achieved the initial recognition milestone, while 1H13 revenue from the utilities division accounted for about 47% of our full year estimate. As expected, Singapore power spreads were weaker in 1H13 compared to 1H12, but overseas utilities helped to bump up net profit in the quarter. Going forward, management expects the utilities business to deliver a "steady performance" in 2013 despite intensified competition in the Singapore market. Maintain BUY with S$6.48 fair value estimate. (Low Pei Han) MORE REPORTS City Developments Limited: A dimmer residential sales outlook CDL's 2Q13 PATMI increased 48% YoY to S$203.8m, mostly due to disposal gains from an industrial site at 100G Pasir Panjang. 1H13 PATMI now cumulates to S$341.5m which makes up 49% of our full year forecast. We judge this to be mostly in line with our expectations. In 2H13, CDL is expected to launch the 380-unit Lush Acres EC project and a mixed development at MacPherson/Upper Serangoon Rd (266 residential and 28 retail units). Due to recent property curbs, the group expects stronger headwinds and moderating transaction volumes and prices in 2H13. In addition, management indicates that a situation of residential oversupply could ensue in 2014. While navigating a more onerous risk-reward landscape ahead, we believe that CDL could take a more measured approach to land-banking over FY13-14. Maintain HOLD with a lower fair value estimate of S$11.38 (20% RNAV disc.), versus S$12.04 previously, mainly due to a higher discount to RNAV reflecting a dimmer residential sales outlook. (Eli Lee) Genting Singapore: Decent 2Q13 showing; but upside limited Genting Singapore (GS) reported a better-than-expected set of 2Q13 results, with adjusted EBITDA margin recovering back to 44% from 37.3% in 1Q13. 1H13 revenue met around 50% of our full-year forecast, while net profit was nearly 64% of our FY13 figure. Going forward, management still remains slightly cautious about the slower growth outlook for China; but notes that it has yet to see much impact on its Chinese customers. Given the slightly better-than-expected showing, we opt to raise our net profit forecasts for FY13 and FY14 by around 3.5% each; but this has little impact on our DCF-based fair value, which remains at S$1.41. Given the limited upside from here, we maintain HOLD. Longer-term catalyst could come from a potential IR license overseas in markets like Japan, which is still a 2015 or 2016 story. (Carey Wong) Hyflux: 1H13 tracking below forecast Hyflux Ltd reported that its 2Q13 revenue fell 24.6% YoY (but rebounded 11.1% QoQ) to S$138.4m, while net profit came in around S$17.7m, +3.0% YoY and 119.9% QoQ. 1H13 revenue of S$262.9m fell 17.6% and met about 36.0% of our full-year forecast. While net profit climbed 2.1% to S$25.2m, it only met 32.8% of FY13 estimate, and we were expecting it to cover about 40%. Hyflux declared an interim dividend of S$0.007/share, same as 1H12. While the company continues to show a relatively healthy order book of S$2731m, we believe that the outlook may still be muted, given the credit crunch situation in China. As such, we are lowering our FY13 estimates for revenue by 9.6% (FY14 by 11.1%) and earnings by 12.8% and 14.0% respectively. Our fair value correspondingly falls to S$1.215 (based on 20x blended FY13/FY14F EPS). We maintain our HOLD rating; but we do not rule out any near-term knee-jerk reaction. (Carey Wong) StarHub Ltd: Decent 2Q13 showing; but risks remain StarHub Ltd reported a decent set of 2Q13 results, with revenue down 0.7% YoY (+1.2% QoQ); net profit improved 15.9% YoY and 10.3% to S$100.6m. StarHub declared a quarterly S$0.05/share dividend as guided. For 1H13, revenue slipped 1.2% to S$1166.9m, or about 46.4% of our full-year forecast, while net profit climbed 9.5% to S$191.8m, meeting 53.2% of FY13 estimate. For 2013, StarHub has kept its previous guidance; it also does not expect the BPL cross-carriage to have a material financial impact. Despite the decent 2Q13 showing, we opt to keep our FY13 estimates, as potential margin pressures are likely to emerge in 2H. Maintain SELLon the stock with an unchanged DCF-based fair value of S$3.82. (Carey Wong) Wilmar: 1H13 results slightly below expectations Wilmar International Limited (WIL) posted its 2Q13 results last evening, with revenue easing 5.4% YoY (+2.2% QoQ) to US$10426.3m, on lower CPO prices (but was alleviated by volume growth in other segments). While net profit jumped 86.5% YoY to US$218.5m (mainly due to the loss in its Oilseeds & Grains segment in 2Q12), it was still down 30.7% QoQ, likely hit by lower crushing margins in the quarter. For 1H13, revenue slipped 4.0% to US$20626.8m, meeting 41.5% of our full-year forecast, while net profit climbed 43.1% to US$533.9m, or about 40.1% of our FY13 forecast. WIL declared an interim dividend of S$0.025/share, versus S$0.02 in 1H12. We will have more after the analyst briefing at noon. We maintain HOLD on the stock but place our S$3.25 fair value (based on 12.5x FY13F EPS) under review. (Carey Wong) Ezion Holdings: Operations remain strong Ezion Holdings (Ezion) reported a 80.9% YoY rise in revenue to S$67.2m and a 28.8% increase in net profit to S$36.2m in 2Q13, such that 1H13 net profit accounted for 55% of our full year estimates. Excluding a one-off disposal gain in 1Q13, core 1H13 net profit represented 49% of our full year estimates, in line with expectations. Gross profit margin remained strong at 46.3% in 2Q13 vs 45.9% in 2Q12 and 44.9% in 1Q13. Looking ahead, more assets are expected to be deployed, and there should be more contributions from the commencement of the APLNG and GLNG projects this year. Meanwhile, Ezion is proposing a bonus share issue of one bonus share for every five existing ordinary shares. Pending an analysts' briefing later in the morning, we maintain our BUY rating but put our fair value estimate of S$2.62 under review. (Low Pei Han) Yangzijiang Shipbuilding: Still a steady ship Yangzijiang Shipbuilding (YZJ) reported a 12% YoY rise in revenue to RMB4.4b and a 8% decrease in net profit to RMB811.7m in 2Q13, such that 1H13 net profit accounted for 54% of our full year estimates, within expectations. Gross margin in the shipbuilding related segment dropped from 24.2% in 2Q12 and 25.9% in 1Q13 to 20.6% in 2Q13, while gross margin in the group's investment division remained high. YZJ has secured 27 effective shipbuilding contracts worth US$1.01b in 1H13 with four other options converted into effective orders in Jul 2013. As growth in the shipbuilding industry remains slow, management is looking at its investments business to weather through challenging times. Pending an analysts' briefing later, we maintain our HOLD rating but put our fair value estimate of S$0.95 under review. (Low Pei Han) Far East Hospitality Trust: 2Q13 below expectations Far East Hospitality Trust (FEHT) has announced 2Q13 results which we judge to be below our expectations and the street's. Gross revenue for was S$29.3m or 7.9% lower than the IPO prospectus forecast. In addition, RevPAR for the hotels was S$168, 11% lower than the forecast of S$189. The serviced residences, however, generally performed in line with expectations, with RevPAU of S$230, versus S$228 in the forecast.As a result, we see net property income and income available for distribution coming at S$26.9m and S$23.2m, which are 6.8% and 4.1% below the IPO forecasts, respectively. 2Q13 distribution per stapled security was 1.43 S cents which we view to be below expectations. We place our FV of S$1.01 and Hold rating on FEHT UNDER REVIEW. We will be speaking with management later today. (Sarah Ong)

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NEWS HEADLINES - US stocks extended losses into a second day Tue as Fed official Charles Evans said the economy should be able to shoulder reduced Fed asset purchases later this year. - Rotary Engineering posted a net profit increase to S$5.1m in 2Q13 from S$1.03m in 2Q12, with a 13% YoY increase in revenue to S$126.2 million. - The Hour Glass Ltd posted a net profit attributable to shareholders of S$8.8m for 1QFY13, down 6% YoY, on the back of higher operating expenses amid a more competitive marketplace. - Vallianz Holdings reported a 29% fall to US$1.89m in 2Q13 net profit attributable to shareholders.