Keppel down 0.9%; Results lackluster: Religare

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: Religare Capital

Price Call: BUY

Target Price: 12.80

Keppel is down 0.9% at $11.29 after reporting 3Q12 net profit fell 14.7% on-year to $346.4 million. The results were lackluster, says Vincent Fernando, an analyst at Religare Capital.

He notes the results showed further margin pressure; “While the company has been guiding for margins to come down for some time, we’re seeing this play out,” he says, noting Keppel is guiding for lower steady-state margins ahead. He has cut his target price to $12.80 from $13.90. He keeps a Buy call, noting there’s still upside to the stock, but he expects continued margin pressure and sees a lack of major catalysts near-term.

Orderbook quotes suggest the stock is unlikely to retest its $11.24 intraday low.

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O&M To drive Keppel growth ahead: Daiwa

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: Daiwa

Price Call: BUY

Target Price: 12.45

Daiwa says Keppel’s 3Q12 results were slightly below its expectations, but it still expects a strong 2012. It says the results missed its forecast on weaker-than-expected property contribution and higher materials and subcontract costs, but the house remains optimistic; it notes O&M’s 3Q12 revenue was the strongest in the past three years, with margins above management’s guided range of 10%-12%.

It expects the key share price driver for the next year to be O&M order wins, noting $9.13 billion-worth landed year-to-date. It expects the property segment to be less of a factor ahead, with Keppel likely to adopt a more cautious stance on property development, leveraging growth more toward the offshore business. It raises its target to $12.45 from $12.25, keeping an Outperform call. The stock is down 0.9% at $11.29.

Market Pulse: KepCorp, SGX, MLT (19 Oct 2012)

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.34

Stock Name: SGX
Company Name: SINGAPORE EXCHANGE LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 6.80

Stock Name: MapletreeLog
Company Name: MAPLETREE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.19

MARKET PULSE: KepCorp, SGX, MLT

19 Oct 2012

KEY IDEA Keppel Corporation: Continues to see good prospects Keppel Corporation (KEP) reported a 19.1% YoY rise in revenue to S$3.2b but saw a 14.7% drop in net profit to S$346.4m in 3Q12, such that 9M12 net profit accounted for 87% and 88% of ours and the street's full year estimates, respectively. This has been a front-end loaded year as lumpy earnings from the property division boosted net profit in 1H12. O&M margins continued to normalize to 12.9% in 3Q12 but this was still slightly above our expectations. Meanwhile KEP has started to improve the competencies and productivity of its regional satellite yards to meet heavier workload requirements, which we think is a good strategy. After securing S$8.8b of orders in 9M12 (5% higher than in 9M11), the group's net order book stood at S$13.1b as at end Sep with deliveries extending to 2019. Maintain BUY with S$13.34 fair value estimate. (Low Pei Han) MORE REPORTS Singapore Exchange: Continued muted market outlook Singapore Exchange (SGX) delivered 1QFY13 net earnings of S$74.3m which were fairly in line with market expectation. Securities Revenue accounted for 36% while Derivatives Revenue made up another 28% of group revenue. Base dividend payout per quarter of 4 cents will be paid on 5 Nov 2012. SGX continues to work on several new initiatives, but these are fairly long term in nature and we expect minimal financial impact for FY13. We are keeping our FY13 estimates despite it being below market as we see continued softness in the global market, and this will also limit share price upside for the near term. We are maintaining our fair value estimate of $6.80 and HOLD rating. (Carmen Lee) Mapletree Logistics Trust: No surprises in 2QFY13 Mapletree Logistics Trust (MLT) reported NPI of S$67.5m and distributable amount of S$41.4m for 2QFY13, representing a YoY growth of 14.6% and 1.2% respectively. Contributions from its past acquisitions and improved operating metrics were the key drivers for the performance. DPU similarly grew 1.2% YoY to 1.71 S cents. This brings the 1HFY13 DPU to 3.41 S cents, forming 48.3% of our full-year DPU projections. Operationally, we note that MLT's portfolio occupancy improved 0.2ppt QoQ to 99.2%, while leases renewed/replaced achieved positive rental reversions of 8% on average (albeit lower than 10% seen in previous quarter). For the rest of FY13, management expects its portfolio income to remain stable as only 4.2% of its leases by NLA are due for renewal. In addition, MLT introduced the Distribution Reinvestment Plan (DRP), which will be applied to the quarterly distribution. We will be attending the analyst briefing this afternoon to get more insight on MLT's outlook and strategy. For now, we place our Buy rating and S$1.19 fair value UNDER REVIEW. (Kevin Tan)

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

NEWS HEADLINES - US stock indexes fell on Thursday with a rise in jobless claims offsetting upbeat manufacturing data and Google Inc.'s earnings miss. The Dow fell less than 0.1% to end at 13,548.94. The S&P 500 index lost 0.2% to 1,457.34. - Indonesian coal-mining firm Geo Energy Resources' IPO of 289.26m shares at 32.5 S cents was 2.9 times subscribed. Geo Energy is expected to begin trading on the mainboard today. - Second Chance Properties posted net profit of S$30.47m for the 14 months to end-Aug 2012 (FY12) and proposed dividends translating to an annualized yield of ~8%. - Food Junction has issued a profit warning for 3Q12 and FY12. It cites higher pre-operating costs for losses in its restaurant operations. - Interra Resources has received in-principal approval from the Singapore Exchange to transfer its listing from Catalist to the mainboard.

MARKET PULSE: KepLand, A-REIT, Raffles Med, UE E&C

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.49

Stock Name: Ascendasreit
Company Name: ASCENDAS REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 2.43

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 2.82

Stock Name: UE E&C
Company Name: UE E&C LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.71

MARKET PULSE: KepLand, A-REIT, Raffles Med, UE E&C

18 Oct 2012

KEY IDEA Keppel Land: No surprises in 3Q12 numbers Keppel Land (KPLD) announced 3Q12 PATMI of S$74.5m, which was up 29% YoY mostly due to an increased contribution from Keppel REIT and a S$16.7m gain from a stake divestment in Saigon Centre Ph 2. This was mostly in line with our expectations, with 9MFY12 PATMI (S$311.1m) now constituting 83% of our annual forecast. KPLD sold ~120 Singapore homes in 3Q12 - keeping with the ~100 unit/quarter pace seen over 1H12 previously. In China, after a mild pickup last quarter (491 units sold), the pace of sales settled back in 3Q12 with ~290 units sold, mainly from the Springdale, Central Park City and The Botanica. We continue to see limited catalysts for the share price ahead given no major launches over the horizon and limited likelihood for the divestment of MBFC T3 in the near term. Maintain HOLD with a higher fair value estimate of S$3.49 (35% discount to RNAV), versus S$3.44 previously, mostly due to higher valuations of Keppel REIT. (Eli Lee) MORE REPORTS Ascendas REIT: Delivers good results again Ascendas REIT (A-REIT) achieved a 4.4% YoY gain in 2QFY13 DPU to 3.53 S cents, notwithstanding a 7.5% increase in units. For 1HFY13, DPU amounted to 7.06 S cents, up 7.3% YoY. This is slightly ahead of our expectations, as the half-year DPU already formed 51.0% of our FY13 forecast. Going forward, management revealed that positive reversions may possibly continue into FY13-14, as the passing rents are generally below the current market rates for the area due for renewal. While A-REIT expects the acquisition activity to remain 'quiet', it can focus on the consolidation of its properties. To this extent, A-REIT announced another two asset enhancement initiatives (AEIs) for 31 Ubi Road 1 and 1 Changi Business Park Ave 1 to upgrade the building specifications and enhance their marketability. We now incorporate the results and AEIs into our assumptions. This lifts our fair value from S$2.28 to S$2.43. However, as A-REIT appears fairly priced at current level, we maintain our HOLDrating. (Kevin Tan) Raffles Medical Group: Likely delay in new Specialist Centre commencement Raffles Medical Group (RMG) announced that its application for the change of use of its commercial podium at 30 Bideford Road for medical clinics has been unsuccessful. As a recap, RMG had announced on 21 Feb 2011 that it was purchasing a 7-storey commercial podium block of Thong Sia Building in the Orchard Road vicinity for S$92.08m, with the aim of establishing a new Specialist Centre there. The transaction has since been completed. RMG said that it intends to work with the relevant authorities to amend its plans in a bid to address their concerns. We see this as a minor setback given that this would likely result in some delay to the original commencement plan of operations (previously highlighted as 1H13). No further details were provided regarding the reason for the application rejection, but we remain optimistic that RMG would be able to work out a resolution with the authorities. We maintain our BUYrating and S$2.82 fair value estimate on RMG for now as the group is slated to release its 3Q12 results next Monday (22 Oct) before the market open, and we would provide more updates after the analyst briefing. (Wong Teck Ching Andy) UE E&C: Acqusition of APG Geo-Systems UE E&C has entered into a sale and purchase agreement with shareholders of APG Geo-Systems Sdn Bhd (APG) to acquire a 90% stake for RM12.3m (~S$4.9m) in cash. The selling shareholders are: (i) UED Developments Sdn Bhd (an indirectly wholly owned subsidiary of United Engineers Limited) - 60%, and (iii) three unrelated third party individuals - 30%. APG is a geo-technical foundation engineering company in Malaysia with more than 20 years of experience. APG recorded net profit of S$292k for FY11 and its net asset value is expected to be not less than RM15m (S$6m). As we are expecting UE E&C to announce its 3Q12 results in the coming weeks, we keep our BUY rating and S$0.71 fair value unchanged. (Chia Jiunyang)

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

NEWS HEADLINES - US stocks rose with a pair of good readings on the US housing sector, although a fall by IBM weighed on the Dow. The Dow rose 0.04% to 13,557.00. The S&P 500 Index climbed 0.41% to 1,460.91. - Qian Hu Corporation reported a net loss attributable to shareholders of S$10.1m for 3Q12 (versus a PATMI of S$574k a year ago) mainly due to the disposal of its Malaysia-based Dragon Fish subsidiary, which resulted in a loss on disposal of S$9.1m. - Religare Health Trust plans to revise its SGX debut from 9am on 22 Oct to 2pm on 19 Oct, subject to regulatory approval. - Gaylin Holdings, a Singapore-based rigging and lifting solutions provider to the offshore O&G industry, intends to raise net proceeds of S$35.4m through a mainboard listing on SGX.

CapitaMalls Asia down 1.7%; China focus eyed

Stock Name: CapMallsAsia
Company Name: CAPITAMALLS ASIA LIMITED

Research House: Citigroup

Price Call: BUY

Target Price: 2.08

CapitaMalls Asia is down 1.7% at $1.755, after an early jump to $1.795, its highest since April 2011. The stock is retracing a bit of Tuesday's 5.0% surge, with several analysts saying they are puzzled by the rise as there isn't company-specific news.

"Even when they do big deals, the stock price doesn't normally react significantly," one analyst says. A couple analysts note Citigroup initiated the stock at Buy with a $2.08 target Tuesday, calling it "a top-class retail-mall developer/operator." Another analyst notes Credit Suisse has upgraded its view on China, where much of CMA's portfolio is located; the house says China's "worst is probably over and investors should add some beta to their portfolio."

It cites signs of consumption growth picking up, with a retail-sales pickup during the recent holidays, and it tips China discretionary plays as better proxies to play the "economy bottom-up story" vs China staples. The April 2011 peak at S$1.90 may offer a near-term cap, while the $1.69 10-day moving average likely offers near-term support.

Keppel Land Buy raises policy concerns: Citi

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: Citigroup

Price Call: SELL

Target Price: 3.38

The premium Keppel Land paid for a Tanah Merah-area residential site suggest developers continue to adopt a forward-pricing mentality, Citigroup says, citing the high breakeven cost.

The bid price of $791psf was a record for residential land in the outside Central Region area, and at 17%-48% premiums to two other land tenders in the vicinity this year, it notes.

Citigroup estimates breakeven at $1,200psf, slightly under the estimated around $1,300psf average selling price for the nearby eCO project. It expects a $1,400psf ASP for the Keppel Land site.

This should continue to drive sales for the eCO and nearby Urban Vista project on the expectation prices would creep higher, it says; "while this would serve to keep the physical market relatively stable, it raises the spectre of further regulatory intervention to avert any signs of an asset bubble." Citigroup keeps a Sell call with $3.38 target. The stock is up 0.6% at $3.49.

MARKET PULSE: Residential Property, Swiber, Keppel Land

Stock Name: CITYDEV
Company Name: CITY DEVELOPMENTS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 13.18

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.66

Stock Name: KepLand
Company Name: KEPPEL LAND LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.44

MARKET PULSE: Residential Property, Swiber, Keppel Land

17 Oct 2012

KEY IDEA Singapore Residential Property: Buyers out in force The URA reported a headline total of 2,771 new private homes (incuding 150 EC units) sold in Sep 2012, up a whooping 80% MoM. (In the same month last year, 2,060 new homes were sold, showing a more subdued 26% MoM increase.) Several new OCR launches performed strongly: ECO (Bedok South, 748 total units) sold 402 units at a median selling price of S$1,283 psf, and Kovan Regency (Kovan Rise, 393 total units) sold 369 units at S$1,275 psf. In our view, Sep 2012 sales points to a continued healthy state of buyer demand in the market, particularly with the additional visibility of low rates till 2015 after the announcement of QE3. Maintain OVERWEIGHT rating on the residential property sector, and we expect continued strength in the mass-market segment in FY12. Our top stock pick is City Developments [FV: S$13.18, BUY] for its mass-market exposure and strong balance sheet. (Eli Lee) MORE REPORTS Swiber Holdings: More Indonesian work in the pipeline? Summary: Indonesia's state-owned Pertamina Hulu Energi has invited contractors to register their interest in the bid round for the GG oilfield development. According to Upstream, the consortium of Meindo Elang Indah and Swiber Offshore has registered for pre-qualification. With a declining rate of oil production in Indonesia, we expect the country to increase oil field development and production activities, benefiting EPCIC contractors such as Swiber Holdings. The industry outlook is buoyant but in order for the stock to re-rate, we think the group has to demonstrate that it is able to grow its operations by the generation of sustainable operating cash flows besides the support of leverage. Given the limited upside potential to our fair value estimate of S$0.66, we maintain our HOLD rating. (Low Pei Han) Keppel Land: Land acquisitions in Singapore and China Keppel Land (KPLD) put in a top bid of S$434.6m for a GLS (Government Land Sales) site at New Upper Changi Road yesterday. The tender attracted 11 bids in total, and KPLD's bid (translating to a land cost of S$791 psf) was 7% above the second highest. The 99-year lease-hold site has an area of 343k sq ft with a maximum GFA of 549k sq ft, and would likely be developed into a condominium project with ~550 units. It is located close to the Tanah Merah MRT station, and accessible by the ECP and PIE. We estimated breakeven and selling ASPs of S$1,200 and S$1,300, respectively, for this project. In addition, KPLD acquired its fifth residential site in Chengdu, China for RMB 680.4m (S$132m). This Chinese site, located in Xinjin County in Sichuan province, has an area of 28.7 hectares and is ~20km away from the city center. We would speak with management further about these two acquisitions and in the meantime, maintain HOLD with our fair value estimate of S$3.44 under review. (Eli Lee)

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

NEWS HEADLINES - US stocks closed higher Tuesday, with optimism following strong earnings for several companies and reports that Spain is considering requesting a line of credit from the EU. The Dow finished 1% up at 13,551.78. The S&P 500 Index rose 1% to 1,454.92. - Keppel T&T reported 3Q13 PATMI of S$13.5m, down 62% YoY. Revenue climbed 22% YoY to S$34.3m. - UE E&C Ltd. has entered a JV agreement with Sichuan Sanjia Real Estate (Singapore) Pte Ltd to undertake property development cum construction and/or project management in Malaysia. - AIMS AMP Capital Industrial REIT has extended 96.7% percent of the underlying leases for 27 Penjuru Lane out to FY2016 and FY2018, once the asset's master lease expires in December 2012. 27 Penjuru Lane represented 19.1% of the REIT's net rental income as at 30 Sep 2012. - Kitchen Culture Holdings has entered into a joint venture agreement with unrelated third parties for the establishment of a JV in HK for the sale and distribution of kitchen systems, kitchen appliances, wardrobe systems, household furniture and accessories.