OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Cambridge
Company Name: CAMBRIDGE INDUSTRIAL TRUST

Research House: DBS Vickers

Price Call: HOLD

Target Price: 0.70

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: Credit Suisse

Price Call: BUY

Target Price: 19.00

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: UBS

Price Call: HOLD

Target Price: 18.10

Market Compass

05 November 2013~ Good Morning Singapore!

Singapore Idea Snippets:

05 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 : You must not lose faith in humanity. Humanity is an ocean; if a few drops of the ocean are dirty, the ocean does not become dirty. - MAHATMA GANDHI Singapore: The Day Ahead SINGAPORE DAYBOOK :Twitter IPO seen as trend-setter for Web startups' share offers. Strong debut a good sign, weak start like Facebook's will send valuations down. [SAN FRANCISCO] There's more at stake in Twitter Inc's initial public offering than just shares held by employees and investors. The performance will influence how Silicon Valley's dealmakers value emerging Web startups. Venture capitalists and entrepreneurs will view a robust Twitter debut as a positive sign for other consumer-Internet IPOs and the prices that startups can command in funding rounds. A drop in shares - akin to the weakness that followed Facebook Inc's initial share sale in May 2012 - could chill startup valuations and send venture capital investments downwards. "If Twitter's IPO doesn't go well and the six months to one-year performance doesn't go well, it will suppress valuations in the consumer space," said George Zachary, a partner at Charles River Ventures in Menlo Park, California, and an early Twitter investor. "It affects peoples' animal reactions to pricing as opposed to the rational way they price." Facebook's 50 per cent drop in its first three months as a public company reverberated across the startup landscape. Venture investing in US Internet companies fell for three straight quarters before bouncing back in this year's second quarter, according to the National Venture Capital Association. (Source: The Business Times) MARKET SCOOP Hiap Hoe Q3 net profit more than doubles to $33.3 million Yongmao Q2 net up 76.4% at 14.9m yuan S&P assigns BB+ and axBBB+ with stable outlook to Viva Industrial Reit Genting Singapore Q3 EBITDA rises 20% to S$335m on year Viva Industrial Trust falls 1.9% from offer price F&N allows Heineken to enter soft drinks market in S'pore Kreuz's Q3 net profit up 60.3% Chasen's Q2 net profit falls 53% on higher expenses (Source: The Business Times) DBS VICKERS Securities says ... CAMBRIDGE INDUSTRIAL TRUST | HOLD | TP: S$0.70 Cambridge REIT (CREIT) reported a 5.9% and 0.7% y-o-y rise in revenues and net property income to S$23.8m and S$19.3m respectively The higher performance was mainly due to the contribution of various acquisitions (four properties) and development/asset enhancement projects (88 Int'l Rd and 4/6 Clementi Loop in 1H13) which more than offset the income vacuum from the divestment of four properties (of which 63 Hillview and 23 Lorong 8 Toa Payoh were only recently divested and thus were still contributing to topline in 3Q13) Portfolio occupancy remained high at c.97% Distributable income rose by 6.0% y-o-y to S$15.4m (including S$1.2m capital distribution), translating to a DPU of 1.251 Scts (+3.9% y-o-y) CREIT refinanced S$250m worth of debt facilities due in 2014 and in the process lowered average cost to c.3.9% The manager has also paid down S$108m of the loan, funded by its divestment proceeds As a result, gearing ratio fell to c.27.9% (as of end 3Q13) CREIT will be renewing close to 26.1% of its leases in 2014, of which a majority will be single-tenanted properties The manager expects, out of the eight expiring head leases, to renew one, divest three and convert the remainder into multi-tenanted properties During the course of the conversion/renewal, earnings should remain fairly stable In addition, the completions of the acquisition of 30 Teban Gardens (by 4Q13 and the development projects at 3 Pioneer Sector 3 and 21B Senoko Loop (both by 4Q14)) will underpin a steady growth profile in the coming years We expect gearing to settle at c.31% after all these investments are accounted for by the end of 2014 CREIT continues to offer a steady, resilient and growing DPU growth profile of c.5-6% which, in our view, is transparent and easily achievable Our HOLD call is maintained, given limited upside to our roll-forward TP of S$0.74 CREDIT SUISSE Securities says ... DBS GROUP | OUTPERFORM | TP: S$19.00 DBS reported 3Q13 core net profit of S$862 mn (-3% QoQ, 1% YoY - CS/consensus S$760-830 mn) The beat was driven by better-than-expected non-interest income (trading, fee and investment gains) and slightly lower provisions The underlying drivers remained healthy and within expectations-loan growth (2.9% QoQ, 14.7% YTD), NIMs (-2 bp QoQ) and NPLs (up 2% QoQ) While the street would have to revise up FY13E numbers to reflect this beat, 3Q results do not change the guidance for FY14 by much Positives: (1) Healthy broad-based loan growth (2.9% QoQ), (2) Resilient fee income given the market conditions (-3% QoQ), (3) Cost discipline remains in focus (-4% QoQ) Negatives: (1) New NPA formation continues to remain high Looking forward to FY14, management is confident of delivering high-single digit revenue growth and mid-single digit earnings growth: 8-10% loan growth, flat NIMs, continued operating cost discipline and credit costs in-line with FY13 UBS Securities says... DBS GROUP | NEUTRAL | TP: S$18.10 DBS Q3 results showed a continuation of H1 trends NIM fell 2bps QoQ to 1.60% driven by a further narrowing of the core loan yield less deposit cost spread In Q3 this "core" spread fell 4bps to 1.92%, an all-time low (DBS' total gross lending yield is now just 2.6%) The drivers of this decline we believe are an on-going shift in mix of lending to shorter tenor "trade relate" business and the on-going impacts of QE on asset spreads around the region (too much cheap US$ liquidity) Year to date we estimate that c50% of DBS' net new lending has been to Mainland China A key driver of this growth is China corporates looking to tap cheaper sources of funding overseas than is available domestically With a closed capital account "trade finance lending" is one obvious way they can do this With a large pool of US$/HK$/S$ funding Singapore is an ideal place to provide this cheap, short-term credit (often collateralised with a mainland bank letter of credit) This type of activity we believe is contributing to the rapid rise in LDR for the Singapore bank system as a whole & DBS' strong funding base & HK franchise allows it to facilitate this activity for its clients DBS' "fully loaded" Basel III core tier 1 capital ratio continued to build in Q2, up c40bps to 11.7% This was not so much driven by capital retention but rather by tweaking lower the risk weighting it applies to large Chinese bank exposures The impact of this was a fall in the RWA/total asset ratio in the quarter to 58.8% from 62.8% at end Q2 This resulted in a 2-3% fall in RWAs QoQ despite c4% growth in total assets Our DCF derived target price of S$18 uses a cost of equity of 10% and a sustainable RoE of 12.0% This values the bank at 1.55x YE 13E tangible book vs a 12-13% forecast RoTE, equivalent to a FY 14E P/E of 12.0x

SG: MARKET PULSE: Genting Singapore, ART (5 Nov 2013)

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: OCBC

Price Call: HOLD

Target Price: 1.47

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.39

MARKET PULSE: Genting Singapore, ART

5 Nov 2013

KEY IDEA Genting Singapore: 3Q13 as expected; but limited upside Genting Singapore (GS) reported 3Q13 earnings (attributable to shareholders) of S$193.0m, versus our S$190m forecast, as both gaming and non-gaming segments performed better. Going forward, management has turned slightly more positive, as compared to the previous quarter, after seeing a better spread of VIP customers coming from SE Asia and not just China. It is also seriously exploring gaming and non-gaming opportunities in the region; and expects to announce something in the next 12 months. In line with the continued margin improvement, we up our DCF-based fair value from S$1.41 to S$1.47. But given the limited upside, we maintain our HOLD rating and would be buyers closer to S$1.40. (Carey Wong) MORE REPORTS Ascott Residence Trust: S$253.7m underwritten rights issue ART has launched an underwritten renounceable rights issue to raise approximately S$253.7m. Existing unitholders can subscribe for one right unit at S$1 each for every existing five units held. This represents a discount of approximately 22.5% to the closing price of S$1.29 per unit as at 4 Nov. The Ascott Limited, which owns 45.3% of ART, has undertaken to subscribe in full its allotment of rights units. Those who do not wish to subscribe for the rights units may sell their rights entitlements during the nil-paid rights trading period. Approximately S$204.9m (or 80.8% of the gross proceeds) will be used to pay down debt (bringing gearing from 41.1% to ~35%) and S$45.0m (17.7% of gross proceeds) will be used for capex and AEI, etc. Management has indicated that the chief motivation of the rights issue is to ensure financial flexibility, particularly for potential acquisitions in Asia that it hopes to close in 1H14. Management is comfortable bringing gearing back up to low 40s in percentage terms. We maintain our BUY rating on ART and FV of S$1.39 (pre-rights FV; ex-rights FV of S$1.325 from 12 Nov). (Sarah Ong)

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

NEWS HEADLINES - US stocks settled with modest gains on Mon as investors took a cue from upbeat earnings and shook off fears the market is overdue for a correction. - Fraser and Neave will not enforce a non-compete agreement that would have banned Heineken International from selling soft drinks in Singapore until Nov 2014. - Yongmao Holdings reported a net profit of RMB14.9m (S$3m) for its 2QFY14, up 76.4% YoY. - Superbowl Holdings posted a 61.3% plunge in 3Q13 net profit to S$1.1m. - Progressive revenue recognition from three residential projects helped property group Hiap Hoe to more than double its 3Q13 net profit to S$33.3m. - Sky One Holdings posted a smaller 1H14 net loss as its old businesses suffer from weak demand. - Kreuz Holdings yesterday posted a 60.3% YoY surge in 3Q13 net profit to US$16.6m. - Viking Offshore & Marine has entered into separate strategic agreements with two co-founders of Labroy Marine in a move to venture into the mainstream offshore rig-building and rig charter market.

SG: MARKET PULSE: Soilbuild REIT, DBS, Wilmar, Dyna-Mac (4 Nov 2013)

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 18.28

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.33

Stock Name: Dyna-Mac
Company Name: DYNA-MAC HOLDINGS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 0.44

MARKET PULSE: Soilbuild REIT, DBS, Wilmar, Dyna-Mac

4 Nov 2013

KEY IDEA Soilbuild REIT: Strong maiden results Summary: Soilbuild Business Space REIT (Soilbuild REIT) reported a stronger-than-expected set of 3Q13 results. As at 30 Sep, portfolio occupancy inched up to 99.8% from 99.7% (at listing date) due to expansion by an exiting tenant at Eightrium. We also understand that Soilbuild REIT has achieved 100% retention rate for its leases since listing, and has fully addressed its lease expiries for the year by renewing three leases at rental rates 7.9% higher than the preceding average passing rents. This reflects the keen leasing demand at Soilbuild REIT's portfolio assets, in our view. While we maintain our view that the industrial market may potentially face downward pressures in rental and occupancy rates going forward, we note that only 17.3% of Soilbuild REIT's portfolio NLA is due for renewal in 2014. As such, we believe its financial performance is likely to stay firm. Maintain BUY with unchanged S$0.82 fair value. (Kevin Tan) MORE REPORTS DBS: Remains our top pick in the sector Summary: DBS posted 3Q13 net earnings of S$862m which were slightly better than market expectations. Net Interest Income touched a new high of S$1.41b. Loans grew 19% to S$242b as of Sep 2013. Net Interest Margin (NIM) eased off 2bp from the last quarter to 1.60% in 3Q13. Non-interest Income increased 11% YoY to S$744m. The positive uptrend for several growth units remained intact; namely Wealth Management, Trade and Transaction Services and Treasury customer flows. Cost/income came off from 45% in FY12 to 43% in 9M13. Despite the muted outlook for the global economic, management remains generally positive and expects its loans book to grow 8-10% in 2014. We are leaving our FY13 and FY14 net earnings largely intact, with some minor line adjustments. We are also keeping our fair value estimate of S$18.28. DBS remains our top pick in the sector. BUY. (Carmen Lee)

Wilmar: Forms AKD JV in China Summary: Wilmar International Limited (WIL) and Kemira Oyj (global chemical company serving customers in water-intensive industries) has signed a JV agreement to make AKD (Alkyl Ketene Dimer) wax in China in two JVs. The 50-50 JV entities will integrate the current Kemira facilities in Yanzhou and the relevant WIL facilities in Lianyungang. According to WIL, the move will be an expansion down the oleo-chemicals value chain, which capitalizes on WIL's advantage in sourcing of raw materials and also cost efficiencies from its integrated manufacturing operations. While we view the move as a long-term positive for WIL, we note that the current valuation looks fair. As such, we continue to maintain our HOLD rating on the stock with an unchanged S$3.33 fair value (still based on 12.5x blended FY13/FY14F EPS). (Carey Wong) Dyna-Mac Holdings: Secures new fabrication orders worth US$117m Summary: Dyna-Mac Holdings announced that it has won new fabrication orders for a provisional sum of US$117m. These orders were awarded by Daewoo Shipbuilding & Marine Engineering Co Ltd and OneSubsea Malaysia Systems Sdn Bhd. The former involves the fabrication of 14 units of pre-assembled modules which are due for delivery in 3Q16; while the latter's order is scheduled for completion by end 2013. These latest contracts win has boosted Dyna-Mac's net order book to ~S$392.3m (not taking into account the portion that is recognised as revenue in 3Q13). Pending a change in analyst coverage, our Hold rating and S$0.44 fair value estimate is under review. (Wong Teck Ching Andy) For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks gained on Fri after a solid manufacturing report, leading to a fourth straight weekly gain for the S&P 500 and Dow industrials. - Two surveys showed China's manufacturing sector expanded in Oct, though mixed readings from key indicators point to what will at best be a gradual economic recovery. - United Industrial Corporation booked a net profit attributable to equity-holders of S$43.4m, up 8% from a year ago. - China Aviation Oil's net profit rose 65% to US$21.8m for 3Q13 from a year ago, thanks to an increase in its share of associate companies' results. - CH Offshore yesterday posted a 19.7% decline in its net profit for 1QFY14 as revenue fell a steep 40.3%. - Olam International has sold its Dirranbandi cotton gin in Queensland to Cubbie Ginnery for A$20m (S$23.5m). - Oxley Holdings has proposed to acquire East London's 40-acre Royal Wharf development site for ~S$397.4m.

OSPL - Good Morning S'pore - Central Dealing Desk

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

Research House: DBS Vickers

Price Call: BUY

Target Price: 12.40

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: Credit Suisse

Price Call: BUY

Target Price: 2.50

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

Research House: UOB KayHian

Price Call: BUY

Target Price: 11.84

Market Compass

04 November 2013~ Good Morning Singapore!

Singapore Idea Snippets:

04 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 : Continuous effort - not strength or intelligence - is the key to unlocking our potential. - WINSTON CHURCHILL Singapore: The Day Ahead SINGAPORE DAYBOOK :The Valley of choice for Singapore professionals. High salaries, flexible hours, progressive culture make Silicon Valley a major draw [SINGAPORE] More Singaporeans have moved to Silicon Valley (SV) for work in the last decade, according to people who have worked or are working there. And while information technology (IT) and engineering professionals are known to command higher salaries, those who move cite other reasons. "As a trend, I do see it increasing; we actually try to keep track of the numbers," said Vinnie Lauria, founding partner of tech incubator Golden Gate Ventures (GGV) which has offices in Singapore and SV. "As the Singaporean network in SV gets stronger, it encourages more folks to make the jump - something they were afraid to do earlier." Although there are no absolute numbers to show, Mark Sin, president of SingaporeConnect, a grassroots organisation that supports Singaporeans living in San Francisco, noted that he is seeing more Singaporeans at get-togethers. For James Chan, the founder-CEO of tech incubator Silicon Straits who studied and worked in SV from 2005 to 2009, said the increase was not obvious to him - until he came home. "It got a lot more obvious after I returned to Singapore and tried to wrap my head around the shortage of startup-compatible software engineers here. Those who were sufficiently exposed to Western tech media tended to aspire to leave Singapore to work at startups in SV," he said. Why SV? A major pull factor mentioned by many is surprisingly not the salary, but that there is a greater respect for tech and engineering professions there. Said Shaun Lim, who moved to SV to work at PayPal after graduating from the National University of Singapore (NUS) in 2010: "I'm a software engineer and this is arguably the best place to be for my profession. "The work here is more interesting and meaningful. Even as a junior engineer, I was able to start projects of significant size from scratch and be responsible for design and implementation. I don't believe this is something engineers in Singapore enjoy." Caleb Chao, a fellow NUS graduate and now a software engineer at Google, said he appreciated the opportunity to develop and work on established and complex IT systems there. "Large IT companies have offices in Singapore mainly for sales, marketing and technical support; development is mostly non-existent and at the very most a token presence," Mr Chao said. The Valley's open, welcoming and progressive culture is another much-talked-about pull factor. "Hours are flexible. If people want to take time off for appointments or errands, there's no need to specifically take vacation hours," Mr Sin said. "SV is an inspirational place to be in. Words like 'disrupt', 'change' and 'new technologies' are all the rage; coffee shops are always packed with entrepreneurs working on startup ideas or pitching to investors. We also get to be at the forefront of and use the latest technologies before others do," said Jenn Ng, who worked at DBS and PwC Singapore before joining SV-headquartered software company Intuit. "It's the only spot in the world that has kept up with its virtuous cycle of paying it forward, and celebrates failure as much as it celebrates successes," said Silicon Straits' Mr Chan. Agreeing, GGV's Mr Lauria said: "It's a culture that rewards risk-seekers. Most people in the Valley are from somewhere else; 52 per cent of startups are by foreign-born entrepreneurs. These are the people who aren't scared of failure and will dare take a jump into the unknown." In fact, one of the reasons why SV thrives is that it is a land of equal opportunities for immigrants, said Tan Yinglan, author of The Way of the VC and venture partner at Sequoia Capital. "Anecdotally, immigrants in SV have been entrepreneurial, motivated, hungry and eager to improve their lot in life. This creates economic dynamism in the Valley," Mr Tan noted. "It can be a pretty competitive place to be in. Analysts are expected to have a certain level of technical abilities such as coding skills. Many interns don't mind working for free, and it is still a male-dominated industry," Ms Ng pointed out. For those who work for pay, the US Bureau of Labor Statistics showed that the software engineer in SV commanded an average annual wage of US$100,049 last year. This compares with the average annual salary of $57,936 drawn by a software engineer in Singapore. Human resource consulting firm Robert Half International also ranked SV as the fourth metro area in the United States likely to offer the biggest pay raise in 2014. And while many places, including Singapore, have aspired to learn from SV's successes, observers said the island-state should not aspire to be the next SV. It has made significant strides in maturating its tech and startup ecosystem, and is better-placed to be Asia's startup hub instead. "The 'SV label' carries with it a heavy burden of expectations that Singapore is still far from meeting. A good amount of entrepreneurial talent bled out of our ecosystem after the dotcom bust. "We're only just beginning to see a revival of key elements in our ecosystem over the past two years - designers, engineers, entrepreneurs, capitalists, investments, acquisitions - yet, much remains to be done before Singapore becomes the 'SV of Asia'," said Mr Chan. Mr Sin added it is difficult for Singapore to claim the title with competition from bigger markets such as China and India. Another hindrance to the startup scene here is that most people live with their families, unlike in the US, and this inhibits entrepreneurship and risk appetite, Mr Lauria said. "The number of start-up teams that live and work out of the same apartment in SV is very high. It's amazing what you can do when you're all forced into a small apartment 24/7," he said. Mr Lim of PayPal added: "I do feel that like many things, entrepreneurship in Singapore is being driven largely from a top-down approach, and that can't be too healthy." But many cited Singapore's stable economic and political systems, high cultural acceptance, strong government funding support and startup events such as Echelon and TechVenture, as beneficial in growing its tech ecosystem. Said Steve Leonard, executive deputy chairman of Singapore's Infocomm Development Authority, at the 2013 TechVenture in September: "It is not Singapore's goal to be another version of SV. We should find something to create for ourselves." "It is great that Singaporeans are moving to SV. I anticipate that some of them will return home to start their new venture or work for local startups. But as the region's startup hub, it is good for Singapore to have close ties with the Valley," said Mr Tan. Mr Lauria, who travels frequently to look up the startup scene in each country, said: "Singapore really stood out for me because of the startup community here - it reminds me of SV in terms of openness and enthusiasm. There are few global cities as international and diverse as Singapore, and that's an asset for the startup scene. "That said, I don't think being the 'SV of Asia' is a great goal to set. Singapore should figure out its place in the region and execute as a startup hub." (Source: The Business Times) MARKET SCOOP Oxley makes inroads into London with S$397.1m property deal CH Offshore Q1 net profit falls 20% SingLand Q3 profit down 13% to S$49.4 million CAO Q3 profit up 65%, thanks to associates United Industrial Corp Q3 profit up despite lower revenue F&N plays hardball with bond investors DBS sees 2013 loans growth at 15%: Piyush Vallianz posts US$2.14m profit for Q3 Gems TV plans S$571.38m RTO to be agri product trader (Source: The Business Times) DBS VICKERS Securities says ... OVERSEA-CHINESE BANKING CORP | BUY | TP: S$12.40 Non-interest income significantly improved q-o-q mainly from Great Eastern Holding's (GEH) non-par fund performance as markets recovered Other fee income was stable despite headwinds in the operating environment during the quarter Wealth management income fell 12% q-o-q on slower activities; Bank of Singapore's (BoS) assets under management was flat q-o-q but grew 15% y-o-y. Expenses edged lower largely from staff costs NIM remained stable at 1.63% while loans grew 2% q-o-q and 16% y-o-y, largely driven by its non-S$ portfolio With a corresponding growth in deposits, loan-to-deposit ratio stayed below 90% The increase in absolute NPLs came mainly from its Malaysian steel industry portfolio (a couple of other Malaysian banks have showed similar trends) In Greater China, there was an uptick from the transportation sector, while in Singapore there were small delinquencies in housing loans Elsewhere, capital ratios were lower due to the redemption of its S$1bn preference shares, which offset lower risk weighted assets Particularly in Malaysia, revenues were driven by strong Islamic banking income while NIM increased 3bps q-o-q. In Indonesia, NIM rose 10bps to 4.33% with non-interest income as its key earnings driver OCBC NISP derives most of its funding from its SME customers We still believe in OCBC's ability to derive a greater boost from its non-interest income franchise, particularly from GEH and BoS Already firmly established in Singapore and Malaysia, OCBC has introduced its bancassurance model to OCBC NISP, which should pick up speed over time The BoS franchise is still largely ASEAN-centric Judging from the early part of 4Q13, activities have resumed, which should provide a positive bias Management guides for high single-digit loan growth and expects NIM to improve as credit spreads increase, but there may be pockets of funding cost pressures Credit cost and NPLs should have fairly stable trending patterns over the past six quarters Maintain BUY, S$12.40 TP based on the Gordon Growth Model with 12% ROE, 5% growth and 9.3% cost of equity equivalent to 1.6x FY14 P/BV CREDIT SUISSE Securities says ... OSIM INTERNATIONAL | OUTPERFORM | TP: S$2.50 OSIM reported 3Q13 net profit of S$22.7 mn (-13% QoQ, 16% YoY) in line with our expectations (3Q is seasonally the weakest), 9M13 profit came in 74% of our FY13 estimates OSIM continues to show strong top-line performance, with 3Q13 marking the 19th consecutive quarter of YoY profit growth uInfinity, OSIM's super premium massage chair launched in 3Q13 is showing good momentum across all markets, according to management Our channel checks also indicate strong demand for uInfinity across markets with overall chair volumes improving uAngel, OSIM's entry level massage chair continues to see very strong demand across markets OSIM has also refreshed its smaller massage products for the holiday season We expect strong volumes and revenue pickup in the coming quarters We increase our EPS estimates by 1-7% on higher sales volumes and TWG consolidation We expect consensus EPS upgrades to follow. At 13x 2014E P/E, valuations remain attractive We increase our TP to S$2.50 (from S$2.20). Maintain OUTPERFORM UOB KAY HIAN says... OVERSEA-CHINESE BANKING CORP | BUY | TP: S$11.84 OCBC reported net profit of S$759m for 3Q13 (+5% yoy, +27% qoq), above our expectations of S$688m and consensus estimate of S$651m. Loan growth moderated to 1.9% qoq in 3Q13 with expansion largely driven by a 17.8% qoq increase from Greater China Loans in Singapore surprisingly contracted by 1.7% qoq Loans in Malaysia and Indonesia declined 1.7% and 3.5% qoq respectively due to depreciation of regional currencies Net interest margin (NIM) was relatively unchanged at 1.63% Fee income increased 1% qoq and was more resilient than we had expected Contribution from wealth management decreased 12% qoq but was offset by strong performance from investment banking, where contribution increased 52% qoq Contribution from Great Eastern rebounded to S$240m (our forecast: S$150m) due to a reversal to mark-to-market (MTM) gains for non-participating fund Net trading income was inconspicuous at only S$47m NPL ratio has risen slight from 0.7% to 0.8% The stress on asset quality came from Malaysia, where NPL ratio has increased from 1.9% to 2.2% The better performance was largely due to higher-than-anticipated contribution from Great Eastern (refer to RMN dated 27th September)

SG: MARKET PULSE: CapitaLand, OSIM, SMRT, DBS (1 Nov 2013)

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 3.77

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: OCBC

Price Call: BUY

Target Price: 2.56

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.30

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 18.28

MARKET PULSE: CapitaLand, OSIM, SMRT, DBS

1 Nov 2013

KEY IDEA CapitaLand Limited: Continuing strong run in residential sales CapitaLand (CAPL) reported 3Q13 PATMI of S$135.5m which decreased 8.7% YoY mostly due to lower portfolio gains recognized over the quarter. We judge this to be mostly within expectations as 9M13 PATMI now cumulates to S$706.9m which constitutes 80.3% of our full year forecast. The group sold an impressive 1151 residential home units in Singapore over 9M13 versus 329 units in 9M12, and we continue to be positive on management's focus on realistic pricing and generating sales. That said, with significant uncertainty in the residential space and 1239 unsold units in its pipeline, we see the group's FY14 domestic sales likely easing from current levels.Residential sales in China continued the firm rate of sales seen over the year so far with 2398 homes sold in 9M13 versus 1978 homes in 9M12. Maintain BUY with an unchanged fair value estimate of S$3.77. (Eli Lee) OSIM International: Solid bottomline growth OSIM International Ltd (OSIM) reported a 16.1% YoY jump in its 3Q13 PATMI to S$22.8m on the back of a 7.5% increase in revenue to S$153.0m. Bottomline closely matched our forecast of S$23.0m although revenue was 5.3% below our projection. An interim dividend of S$0.01/share was declared, in-line with our forecast. We are positive on OSIM's recent increase in effective shareholding in TWG Tea to a controlling stake as we believe the latter has strong growth prospects. We take into account the consolidation of TWG Tea's financials in our model. Our fair value estimate is raised from S$2.40 to S$2.56 as we lift our FY14 PATMI forecast by 2.0% and roll forward our valuations on OSIM to 16.5x FY14F EPS. Reiterate BUY. (Wong Teck Ching Andy) SMRT Corporation: Net profit falls 57% YoY As expected, SMRT's 2QFY14 revenue grew 5.3% YoY to S$296.3m on account of higher rail and bus ridership but operating profit fell 50.7% YoY to S$20.0m and net profit declined 57.1% YoY to S$14.3m. Higher staff costs and depreciation expenses were the main causes, and we expect them to continue weighing down SMRT's financial performance for 2HFY14. Furthermore, the lack of a fare increase will ensure the continued gap between top-line growth and operating expenses for the time being. Nonetheless, despite this weak set of 2Q14 results, we do not expect SMRT's share price to slide further as its woes have been well-documented over the past year. That said, SMRT remains an unattractive investment at this juncture as it remains susceptible to downside moves in response to bad press and/or service disruptions. Maintain HOLD with an unchanged fair value estimate of S$1.30. (Lim Siyi) DBS: Above expectations 3Q DBS posted 3Q13 net earnings of S$862m (+1% YoY and -3% QoQ) which were slightly better than consensus estimate of S$839.4m (based on Bloomberg). Net Interest Income rose 6% YoY or 2% QoQ to a new high of S$1.41b. Loans grew 19% to S$242b. Net Interest Margin (NIM) eased off slightly from 1.62% in the last quarter to 1.60% in 3Q13. Non-interest Income increased 11% YoY to S$744m. This benefited from several contributors including Fee Income (+9% YoY to S$462m) and Trading Income (+45% YoY to S$188m). For the former, this was led by better contributions from Trade and Transaction Services, Wealth Management and Cards. As a result, Total Income grew 7% YoY (or down 7%) to S$2.15b. Core Equity Tier 1 ratio was 13.3%, Tier 1 was 13.3%, Total Capital Adequacy Ratio was 15.9% as of Sep 2013. We currently have a BUY on DBS with a fair value estimate of S$18.28. There is an analyst briefing later in the morning and we will provide more details after the briefing. (Carmen Lee)

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NEWS HEADLINES - US stocks closed lower on Thu as investors digested the possibility that the Fed may taper bond buys sooner than expected. - The jobless rate in Singapore fell to 1.8% in Sep - the lowest level since last Dec - as layoffs subsided in 3Q13, preliminary official figures released yesterday showed. - Natural Cool Holdings CEO Ang Choon Cheng has been hit with a civil penalty and has resigned from his position over false trading and manipulation of shares in the company. - Jaya Holdings posted a 24% fall in 1QFY14 net profit to US$7.6m from a year ago. - Sin Heng Heavy Machinery reported a net profit of S$3.8m for 1QFY14, up 15.8% from S$3.3m for the same period a year ago. - Soilbuild Construction Group's 3Q13 net profit rose 13% YoY to S$6.32m, on the back of healthy progress in its construction projects.

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.50

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: Credit Suisse

Price Call: SELL

Target Price: 0.95

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: UOB KayHian

Price Call: BUY

Target Price: 4.35

Market Compass

01 November 2013~ Good Morning Singapore!

Singapore Idea Snippets:

01 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 : I couldn't find the sports car of my dreams, so I built it myself. - FERDINAND PORSCHE Singapore: The Day Ahead SINGAPORE DAYBOOK :Muddy Waters: Game over for Olam if Temasek pulls out. [SINGAPORE] Almost a year after it first released its report on Olam International, shortselling research firm Muddy Waters is not letting up on the agri-commodities trader yet. "My view is that if Temasek decides tomorrow that it wanted out of this investment, it would be game over within months for them, without Temasek's backstop," its research director Carson Block told The Business Times in his first visit to Singapore since launching its report against Olam last November. "For us, the be-all and end-all when we're looking at Olam is free cashflow. It's a company that seems to be in general wholly-incapable of generating free cash flow. It takes on more and more debt, and eventually, this debt has to be repaid." The shortseller had late last year accused Olam of relying on accounting tricks to boost its bottomline, spending too much on poor quality assets, and said it valued Olam on a "liquidation basis". The attack, the first of its kind in Singapore, caused Olam's shares to fall 20 per cent to a low of $1.395 at the height of the saga, and subsequently led to an overhaul of Olam's plans after a strategic review. The firm said that it now aims to be free cashflow positive from the 2014 financial year onwards, a year earlier than its original target of FY2015, and has laid out plans to cut planned capital expenditure, monetise its balance sheet and divest certain assets. Mr Block said of these: "The company's saying the right things. The question is whether it actually does those things. It might have become slightly more selective, but you still see substantial cash burn in the company." "Maybe they can finance their way out of it, however many more times, but there will come a day - it might be sooner, it might be later - when the market will not be open to this company." In August, Olam reported a negative free cashflow of $316 million for the 2013 financial year, compared with negative $661 million a year before. Olam's net gearing now stands at 1.93 times, as compared to 2.20 times the previous quarter, and 1.81 times at the end of FY2012. When asked if Muddy Waters still retains a short position on the firm, Mr Block said it does not usually comment on its positions aside from the release of its reports. But in a hint that Muddy Waters is still short on Olam, he added: "Obviously we're usually used to winning within a shorter period of time. Fortunately for many of the names we've shorted in the past, we haven't really had to think to answer that question. Olam is different." Shares for Olam, and Muddy Waters' target after that, US cellphone antenna operator American Towers, had not dropped as much as the shortseller's earlier targets, leading to talk that its influence has faded. In a sign that its streak of lacklustre results is ending, however, Muddy Waters' latest report launched last Thursday against Chinese mobile services provider NQ Mobile led to its shares falling more than 60 per cent within an hour. Temasek moving into the ring to support Olam was a move that the shortseller had not foreseen, Mr Block admitted. "We looked at it from a purely economic standpoint, which is that it is not an investible company, and maybe we ignored the political elements of this, the psychological element, the issues that were more systemic in Singapore that could interest a sovereign in a bailout," he said. Two weeks after Muddy Waters spoke out against Olam, Temasek, then the firm's second-largest shareholder, threw its weight behind Olam by agreeing not just to take up its pro-rata entitlement of Olam's US$1.25 billion bonds-cum-warrants rights issue, but also sub-underwrite it. The issue was eventually 1.1 times subscribed. Temasek has also since then progressively increased its ownership of Olam, from an initial 16.3 per cent before the Muddy Waters attack to 24.07 per cent now. In Mr Block's view, Temasek had stepped in because of the wider implications that an Olam collapse would have posed to the commodity-trading industry in Singapore. "If Olam had failed, what would the banks have done with the other commodity houses that are borrowing in Singapore?" he said. "It's reasonable to assume that if the banks had to write off losses to Olam, you could have a real funding freeze for the commodity trading industry in Singapore. " Temasek's spokesman Stephen Forshaw said the Singapore investment company's reason for investing in Olam remained the same: "We have been, and remain, supportive of its publicly known strategy to take the opportunity, in recent years, to add on more upstream and midstream capabilities and capacities. "We also acknowledged that no business is without risks. But that said, at the time of the investment, we were comfortable with Olam's credit position and longer term prospects, and were very pleased to have another opportunity to invest in the company, alongside others." (Source: The Business Times) MARKET SCOOP Soilbuild Q3 net profit up 13% SMRT's Q2 profit down 57% at $14.3m OSIM Q3 net profit up 16% at $23m Sin Heng Q1 net up 15.8% at $3.8m Two residential sites yielding 980 units released Singapore offers 5 industrial sitesfor sale Metax clinches S$6.7m PUB tender Unemployment falls in Q3 on strong manpower demand: MOM Bank loans growth up 1.1% in Sept from Aug: MAS (Source: The Business Times) DBS VICKERS Securities says ... SINGAPORE POST | BUY | TP: S$1.50 2Q14 revenue grew 32.7% y-o-y but operating profit was stable due to high developmental costs Excluding contribution from new subsidiaries, revenue grew a healthy 9.6% Overall operating profit edged up 0.9% to S$43.7m The Mail segment booked S$34.8m operating profit, down 0.3% y-o-y Meanwhile, the Logistics segment recorded S$2.6m operating profit, up 116.5% y-o-y, due to the inclusion of Famous Holdings and General Storage Company But operating profit for Retail & E-commerce fell 63.8% to S$1.4m due to development costs incurred for its e-commerce business Property & rental related income rose 11.5% y-o-y to S$11.5m, uplifting the operating income Underlying profit benefitted from 60% y-o-y decline in interest costs due to the repayment of S$300m bond in April 2013 Singpost is positioned to ride on e-commerce growth in Asia The company is pursuing a Low-Cost-Carrier (LCC) strategy rather than speed to compete with the likes of DHL and FedEx Singpost offers a niche service due to its access to last mile delivery network of postal peers in various countries It has a strong balance sheet with S$139m net cash, and acquires a business only if it is earnings-accretive and provides new capabilities or geographies Singpost offers mid-single digit growth plus ~5% yield New acquisitions may give a fillip to growth Our S$1.50 TP (DCF: WACC 6%, terminal growth 0%) implies 20% total potential returns CREDIT SUISSE Securities says ... NEPTUNE ORIENT LINES | UNDERPERFORM | TP: S$0.95 Neptune Orient Lines (NOL) has reported a pre-ex loss of US$6 mn for 3Q13, down US$48 mn on last year, slightly better than our US$64 mn loss, but below consensus NPAT of US$21 mn The company's headline announced profit benefitted from a US$32 mn FX gain, as well as a logistics contribution that exceeded our estimates, offsetting liner EBIT that barely broke even A 5% fall in volumes was compounded by a 9% drop in rates to drive liner revenues down by 13%, with unit costs falling 5% and providing some cushion Nonetheless, a 4Q13 profit, whether smoke and mirrors like this one, or "clean" appears unlikely We have cut our estimates >US$180 mn for 2013E and 20% for 2014E to reflect ongoing rate weakness that should prevail into next year Rolling our TP base to 2014 and marking NOL's book value to market, we believe it should trade at 0.8x 2014E P/B - equivalent to the 20% discount to book that its fleet is worth at market value While marginally better than our numbers, we see no reason to change our UNDERPERFORM rating UOB KAY HIAN says... CAPITALAND | BUY | TP: S$4.35 CapitaLand reported 3Q13 net profit of S$135.5m bringing the 9M13 earnings to S$706.9m, up 5.9% yoy driven by strong revenue contribution from development projects in Singapore and China, as well as rental income from the shopping mall business Excluding the impact of portfolio gains of S$124.3m and revaluation gains/impairments of S$239.5m, the core 9M13 operating profit of S$343.1m is below our expectations accounting for 48% of our full year forecast of S$717m (50% of consensus forecast of S$680.4m) ?Strong residential sales of S$2.2b reported in Singapore with 1151 units sold, which is more than a threefold increase over S$633m seen in 9M12 CapitaLand launched Sky Vue, Bishan in September, selling 433 (86%) of 505 units launched (ASP S$1,400 psf) while The Interlace received TOP in September CapitaLand targets to launch Marine Point and remaining units at Sky Vue (261 units), The Interlace (205 units), d'Leedon (315 units) and Sky Habitat (334 units) in the coming quarters In China, CapitaLand Sep 2013 ytd sales value of Rmb 4.24b (S$865m) is 1% above the Rmb 4.17b achieved in ytd 2012 The number of units sold was up 21% yoy to 2,398 units by Sep 2013 The units sold were from The Loft in Chengdu, The Metropolis in Kunshan, Dolce Vita in Guangzhou and iPark in Shenzhen Management guided that Singapore residential sales will be moderated by cumulative impact of various property cooling measures However, management remains positive on long term prospects of the property market in Singapore supported by a resilient economy and policies to support population growth They plan to continue investing in well-located sites to build up the pipeline of residential and commercial developments The outlook for the Chinese economy is stabilizing, and with structural changes in the economy, stable and sustainable growth will remain intact For CapitaMalls Asia Limited (CMA), revenues grew 21.3% to S$120.7m in 3Q13 due to revenue recognition of Bedok Residences, offset by lower fee income from China CMA will continue to open new malls and explore opportunities in its key markets of Singapore, China, and Malaysia Ascott is seeking to improve the quality of its investment portfolio through AEIs and with new investments in Asia and Europe We have a BUY recommendation with a target price of S$4.35/share, pegged at a 15% discount to our RNAV of S$5.11/share

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: CIMB

Price Call: BUY

Target Price: 0.74

Stock Name: IndoAgri
Company Name: INDOFOOD AGRI RESOURCES LTD.

Research House: UOB KayHian

Price Call: HOLD

Target Price: 0.90

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD

Research House: OSK-DMG

Price Call: HOLD

Target Price: 3.20

Market Compass

31 October 2013~ Good Morning Singapore!

Singapore Idea Snippets:

31 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 : Innovation distinguishes between a leader and a follower. - STEVE JOBS Singapore: The Day Ahead SINGAPORE DAYBOOK :'No threat' to fair trading in Sky One, says SGX [SINGAPORE] Singapore Exchange (SGX) has found "no threat to fair, orderly and transparent trading" in the sharp drop of Sky One Holdings stock earlier this week. In contrast, a review of trading in Asiasons Capital, Blumont Group and LionGold Corp showed "a lack of transparency" that could have threatened fair trading, the local bourse operator said yesterday. The exchange made these comments amid questions as to why regulators had not intervened more strongly in Sky One when just three weeks earlier they had suspended and then imposed trading curbs on the three other stocks, which had also suffered unusually sharp price drops. "Not all sharp price movements, whether up or down, warrant a suspension of the stock . . . In the case of Sky One, SGX's review of the circumstances revealed no threat to fair, orderly and transparent trading. Hence, no suspension occurred," SGX said in a statement. (Source: The Business Times) MARKET SCOOP Singapore Post Q2 profit up 8.5% NOL Q3 net profit slides 60% Eu Yan Sang Q1 net profit quadruples Soilbuild Reit's first distribution better than expected Fragrance Group Q3 net profit down 3.7% at S$22.8 million Singapore Exchange says no trading curbs needed on Sky One Pontiac in JV with Goldman Sachs, Hines for luxe condo project next to MoMA GIC buys 47-storey int'l Grade A office tower in Jakarta (Source: The Business Times) CIMB Securities says ... MIDAS HOLDINGS | OUTPERFORM | TP: S$0.74 We raise our FY14-15 EPS to 17-19% above consensus; the market is likely to follow suit We believe further HSR contract wins could catalyse the stock Maintain Outperform, with our target price unchanged at S$0.74, based on 1.29x CY14 P/BV (20% discount to average P/BV during 2010-11) To improve connectivity between provinces and cities across China, the government plans to add 11,200 high-speed train cars (10,400 currently) and extend the high-speed railway to 18,000km by 2015 To achieve this, it has allocated a Rmb3.3tr budget for railway investments over the current five-year plan period that ends in 2015 In 2011-12, Rmb1.21tr was spent on building railway infrastructure, which leaves a budget of Rmb2.09tr for 2013-15 As the procurement of railway equipment (including train cars) tends to be back-end loaded, there could be an increase in the remaining budget to Rmb2.16tr that the market has yet to factor in Based on Midas's 60% market share, we estimate that it could win Rmb2.5bn-3.2bn of HSR orders by end-2015 Midas has built up several competitive advantages over the years: 1) close relationships with its key customers, CNR Changchun, CNR Tangshan and CSR Bombardier Sifang, 2) having the dies to produce a variety of extrusion profiles, and 3) strong track record of manufacturing quality products As a result, we believe Midas can maintain its position as a preferred supplier to its key customers, which will help it to retain its leading market share of 60% and win the bulk of the HSR contracts Midas is currently trading at 0.9x P/BV (1 s.d. below mean) We believe its discounted valuations are unjustified given the strong order momentum that is likely to come in 4Q13-2015 In the next round of procurement alone, we believe Midas could win Rmb545m of HSR contracts, an upward revision from our previous estimate of Rmb309m This will provide a further re-rating catalyst for the stock UOB KAY HIAN says ... INDOFOOD AGRI RESOURCES | HOLD | TP: S$0.90 Indofood Agri Resources (IFAR) released 9M13 result with net profit declined by 66.7% yoy to Rp296b This was mainly due to a) lower CPO ASP (-12.2% yoy), b) lower edible oils & fats sales volume (-3.9% yoy) but offset from strong sugar sales volume (+14% yoy) and a slight increase in CPO sales volume, c) higher production cost, d) forex loss of Rp93b in 9M13 vs. gain of Rp17b in 9M12 and e) higher corporate tax rate of 34% in 9M13 (9M12: 23%) Lower EBITDA margin from plantation division to 21% in 9M13 (9M12: 35%) Total consolidated EBITDA margin declined to 17% in 9M13 from 25% in 9M12 driven by: Lower ASP of CPO and higher production cost But, the company managed to increase its EBITDA margin from edible oil & fats division to 6% in 9M13 from 5% in 9M12, which we believe due to lower CPO prices Improvement in quarterly net profit by 86.4% qoq to Rp123b in 3Q13 due to a) better CPO ASP (+10.6% qoq) b) improvement in quarterly nucleus FFB production by 22% qoq as a result of FFB yield improvement to 4.4 tonnes/ha in 3Q13 from 3.6 tonnes/ha in 2Q13 and c) more contribution from sugar division As such, EBITDA margin from plantation division improved to 30.4% in 3Q13 from 6.1% in 2Q13 Stock Impact: Results were below our and consensus expectation The 9M13 net profit was below our expectation as it accounted 50% of our forecast and 60% of consensus Maintain HOLD recommendation based on the sum-of-the parts valuation We will update detailed on the results after the analyst briefing today OSK DMG Securities says... RAFFLES MEDICAL GROUP | NEUTRAL | TP: S$3.20 Revenue growth from its hospital division was 9.4% in 3Q13 (growth in previous quarters were in the teens) Management attributed this to a number of specialists taking leave to attend medical conferences We would not be too concerned about the slower growth at this point, as RFMD continues to increase its specialist pool while patient volume remains healthy Its pricing level remains 20% below competitors on average RFMD's hospital extension is on track, and construction is likely to commence soon Special dividend not likely, but possibly higher normal dividend RFMD expects to record a gain of SGD18m from the disposal of Thong Sia Building, which will further strengthen its cash hoard However, we believe a special dividend is not likely, as management intends to pursue its plans to expand into China RFMD has been paying out about 40% of earnings each year Assuming it keeps to that ratio, the final dividend for FY13 could be higher RFMD has signed a framework agreement to build a hospital in Shanghai This is its second agreement to explore a possible venture in China, with the first agreement still in negotiations RFMD has every intention to proceed with a venture in China Despite its strong cash position, the company expects to fund the ventures using bank borrowings Given the lower-than-expected revenue for 3Q13, we trim our FY13F revenue assumptions to derive a slightly lower TP of SGD3.20 (from SGD3.30) Maintain NEUTRAL