SG: MARKET PULSE: STE, Hyflux, Starhub, Yoma, Roxy-Pacific, Wilmar, SIAE, FEHT (8 Nov 2013)

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: HOLD

Target Price: 4.32

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.23

Stock Name: StarHub
Company Name: STARHUB LTD

Research House: OCBC

Price Call: SELL

Target Price: 3.82

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.84

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

Research House: OCBC

Price Call: BUY

Target Price: 0.65

Stock Name: Wilmar
Company Name: WILMAR INTERNATIONAL LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 3.33

Stock Name: SIA Engg
Company Name: SIA ENGINEERING CO LTD

Research House: OCBC

Price Call: HOLD

Target Price: 5.00

MARKET PULSE: STE, Hyflux, Starhub, Yoma, Roxy-Pacific, Wilmar, SIAE, FEHT

8 Nov 2013

KEY IDEA ST Engineering: Earnings miss in 3Q13 Singapore Technologies Engineering (STE) reported 3Q13 results that missed ours and the street's expectations. While revenue grew 0.5% YoY to S$1.55b, PATMI fell 9.9% to S$131.4m. Highlights include: 1) lower gross profit from Aerospace and Land Systems; 2) an impairment of S$23.7m for ROPAX due to the prolonged softness in the shipping market in Europe, partially offset by a write-back of warranty provisions of S$14.4m that were no longer required; 3) an increase in net finance costs of S$5.1m (driven by a S$3m lower FX gain and a S$2.8m lower gain on disposal of investments). 9M13 EPS of 13.34 S cents formed only 66% and 68% of the street's and our prior FY13 forecast. We adjust our assumptions and cut our FY13F EPS to 18.0 S cents from 19.6 S cents. Using the same peg of 21x against FY14F EPS of 20.6 S cents (as opposed to FY13 EPS previously), our fair value rises to S$4.32 from S$4.11. Maintain HOLD on STE. FY14F dividend yield is 4.1%. (Sarah Ong) MORE REPORTS Hyflux: Slow 4Q after strong 3Q In 3Q13, Hyflux saw revenue jumped 26% YoY to S$187.7m and net profit rose 74% to S$25.3m, such that 9M13 revenue of S$450.7m met 68% and earnings of S$51.0m met 75% of our FY13 forecasts, respectively. But with the completion of Tuaspring in 3Q, Hyflux believes that 4Q is likely to be slow. Nevertheless, management remains largely upbeat about its prospects, as it is working on tenders for various projects in MENA potentially worth S$2b. As we roll forward our 20x multiple from blended FY13/FY14 to FY14F EPS, our fair value inches up from S$1.215 to S$1.23. But we opt to keep our HOLD rating on the stock until we see better clarity on its project wins. (Carey Wong) StarHub Ltd: 3Q13 slightly before forecast StarHub Ltd reported 3Q13 revenue easing 1.2% YoY (down 1.4% QoQ) to S$578.8m, versus our S$592m forecast; net profit slipped 0.9% YoY (down 5.2% QoQ) to S$95.3m, as compared to our S$100m estimate. Quarterly dividend of S$0.05/share was declared as expected. As 9M13 revenue of S$1745.7m (down 1.2%) met just 69% of our full-year forecast, we need to pare our FY13 estimate by 6% (FY14 by 5%). Note that StarHub now expects to see a lower operating revenue (but flat service revenue) in 2013, as opposed to an earlier guidance for low single-digit revenue growth. Our DCF-based fair value remains at S$3.82. Maintain SELL.(Carey Wong) Yoma Strategic Holdings: No surprises from 2QFY14 earnings Yoma reported 2QFY14 PATMI of S$3.3m versus a loss of S$4.2m in 2QFY13. The return to profitability was mainly due to the sale of two buildings in Zone B of Star City, for which Yoma recognized S$15.1m of revenue and an incentive fee of S$2.3m, and lower staff costs. YTD PATMI now cumulates to S$3.76m and is judged to be mostly within expectations, making up 48.0% of our full year forecast for FY14. We note, however, that the gross margin has slipped 2.4 ppt YoY to 44.9% over the quarter due to a lower contribution from Pun Hliang Golf Estate (a higher margin project). In terms of the topline, 2QFY14 revenues increased 132.4% YoY to S$27.0m, again mostly due to recognition of residential sales and LDR sales at Star City. Maintain HOLD with an unchanged fair value estimate of S$0.84.(Eli Lee) Roxy-Pacific Holdings: Earnings momentum continues Roxy reported 3Q13 PATMI of S$16.1m, up 97% YoY due to stronger progress recognition at property projects. On a QoQ basis, however, 3Q13 PATMI was 18% lower mainly due to the absence of S$5.5m in fair value gains booked in 2Q13. After adjusting for fair value gains, we estimate 9M13 core PATMI to be S$42.9m, which forms 55% of our full year forecast. This is judged to be in line given that we foresee a back-loaded FY13 with Wis@Changi's contribution coming in wholly only upon obtaining TOP (anticipated to be 4Q13). 3Q13 topline increased 76% to S$76.7m again due to higher contributions from the property segment. We note that the hotel segment, which forms 16% of 3Q13 revenues, are putting in milder numbers with RevPar down 8% from S$189.2 (3Q12) to S$174.2 (3Q13), due to both lower occupancy and room rates. This is generally in line with OIR's outlook for the domestic hospitality sector. Maintain BUYwith an unchanged fair value estimate of S$0.65 (adjusted for 1-for-4 bonus issue in Sep-13). (Eli Lee) Wilmar: 9M13 earnings in line Wilmar International Limited's (WIL) reported its 3Q13 results last night, with revenue easing 4% to US$11,837m, mainly due to lower CPO prices. Nevertheless, reported net profit climbed 3% to US$416m, aided by better margins from its Palm & Laurics and also Oilseeds & Grains divisions. Core earnings was up 1% at US$391m. For 9M13, revenue slipped 4% to US$32,463m, meeting 66% of our FY13 forecast, while reported net profit climbed 22% to US$950m; core earnings rose 24% to US$950m, meeting 76% of our full-year forecast. We will be attending an analyst briefing at noon and will have more updates after that. In the meantime, we maintain our HOLD rating but place our S$3.33 fair value under review.(Carey Wong) SIA Engineering: 2Q14 results in-line SIA Engineering Company's (SIAEC) 2Q14 results were in-line with ours and the street's expectations. 1H14 basic EPS of 12.60 S cents formed 50% of ours and 49% of consensus FY14 estimates. 2Q14 revenue rose 3.3% YoY to S$293.9m, chiefly due to an increase in airframe and maintenance overhaul work. Operating profit contracted 9.8% YoY to S$28.5m due to higher staff and subcontract service costs. Share of profits from associated and JV companies expanded 25.0% YoY to S$48.5m, representing a contribution of 60.0% of the group's pre-tax profits. 2Q14 PATMI thus rose 5.8% YoY to S$71.0m. However, we note that 1H14 PATMI and basic EPS are only up 2.0% and 1.0% at S$140.0m and 12.60 S cents respectively. We maintain our HOLD rating on SIAEC but place our fair value of S$5.00 (EPS forecast of 25.0 S cents for FY14 and 20.0X peg) under review. We will be meeting management later today for more updates. (Sarah Ong) Far East Hospitality Trust: 3Q13 results in line Far East Hospitality Trust (FEHT) has announced 3Q13 results which are in line with ours and the street's expectations. 9M13 distribution per stapled security of 4.22 S cents forms 74% of ours and 73% of the street's FY13 forecasts. Gross revenue for was S$31.5m or 9.4% lower than the IPO prospectus forecast. RevPAR for the hotels, excluding the Rendezvous property (which was acquired on 1 Aug), was S$167.1, down 2.7% YoY mostly due to price competition in the sector. The serviced residences also performed poorer YoY, with RevPAU falling 0.6% to S$227.1. Net property income was 9.4% below forecast at S$28.5m. Income available for distribution was S$24.2m or 7.4% below forecast. 3Q13 distribution per stapled security was 1.43 S cents or 4.7% lower than forecast. However, we emphasize that the results were within expectations for the market. We maintain our HOLD rating on FEHT but place our FV of S$0.92 under review. We will be speaking with management later today. (Sarah Ong)

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

NEWS HEADLINES - US stocks dropped on Thu, with strategists pinning the slide on investors taking profits after a strong run that has left key benchmarks just below record highs. - DBS Group Holdings is offering to buy back S$800m of an outstanding S$1.7b preference share issue, offering in exchange new notes with a higher payout and a shorter tenor. - Parkway Life REIT saw its 3Q13 DPU rise to 2.66 S cents from 2.58 S cents a year ago. - Nera Telecommunications' net profit for 3Q13 fell 42.1% YoY to S$3.3m, as operating expenses soared. - FJ Benjamin Holdings' 1QFY14 net profit tumbled 83%, hit by a fair value loss on investment securities and foreign exchange losses.

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: DBS Vickers

Price Call: HOLD

Target Price: 0.84

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: Nomura

Price Call: BUY

Target Price: 5.20

Stock Name: OSIM
Company Name: OSIM INTERNATIONAL LTD

Research House: OSK-DMG

Price Call: BUY

Target Price: 2.60

Market Compass

08 November 2013~ Good Morning Singapore!

Singapore Idea Snippets:

08 Nov 2013 ~ Good Morning Singapore! Central Execution Team - The Excellence of Execution This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome. Global Flash: While You Were Sleeping Source: Marketwatch Quote for the day : Most of us are consumed with our own thoughts and desires and are not always thinking about what other people may want. This is not necessarily being egocentric; it is just being human. - BO BENNETT Singapore: The Day Ahead SINGAPORE DAYBOOK :Update: #TwitterIPO a huge hit on Wall Street [NEW YORK CITY] Twitter debuted on Wall Street with a bang Thursday as shares in the fast-growing social network soared amid investor frenzy over the most-anticipated listing since Facebook. The shares shot up by more than 90 per cent in early trade to as high as US$50.00. The stock closed with a spectacular one-day gain of 72.69 per cent at US$44.90, from the initial public offering (IPO) price of US$26 per share set on Wednesday. While some analysts cautioned about the fast-changing nature of social media, the debut led to a stampede for Twitter, known for its one-to-many messages of up to 140 characters. Appropriately, #TwitterIPO was among the top trending topics on the social network. (Source: The Business Times) MARKET SCOOP Singapore's Wilmar Q3 net profit rises 2.5% Roxy's Q3 net gets fillip from strong development business StarHub's Q3 net profit dips 1% ST Engineering Q3 net profit falls 10% Hyflux's Q3 net profit jumps 74% SIAEC net profit up 5.8% at $71m SGX selects London Stock Exchange's MillenniumIT for new post-trade system Singapore Windsor to issue up to 24.48m new shares at 22 cts/shr Parkway Life Reit posts Q3 DPU of 2.66 cents DBS to buy back up to S$800m of its S$1.7b preference shares callable in 2020 (Source: The Business Times) DBS VICKERS Securities says ... VARD HOLDINGS LTD | HOLD | TP: S$0.84 3Q13 results disappointed again, with no significant improvement in EBITDA margin of 4.3% compared to 4.1% in 2Q13 While net profit of NOK76m represented a sequential turnaround from the NOK20m loss in 2Q13, this was mainly due to the absence of impairment losses Revenue was down 4% y-o-y and net earnings were down 67% y-o-y as operational challenges at the Niteroi yard in Brazil continued, leading to further delays and cost overruns The scheduled deliveries of the remaining 4 vessels from the Niteroi yard have now been moved back by at least a quarter on average and the losses there are likely to continue depressing group EBITDA margins over the next few quarters At the end of 3Q13, Vard's orderbook had expanded to NOK19.6bn, boosted by the NOK6.5bn pipelay vessel contract YTDFY13, Vard has secured more than NOK12bn worth of new contracts, close to our new order win assumption of NOK12.5bn for FY13 We continue to expect good demand from the subsea support and construction vessels market, although AHTS and PSV orders from the North Sea could still be slow because of volatility in day rates We continue to expect another NOK11bn/12bn in new orders for FY14/15 While most of the cost overruns related to Brazilian yards have been provided for in 2Q13 and 3Q13, we are unlikely to see normalised margins anytime soon The pace of margin recovery is still uncertain and as such, we cut our FY13/14F earnings by 24%/ 18% respectively to factor in lower margins and delays in orderbook recognition Maintain HOLD with a lower TP of S$0.84 (pegged to 9x FY14 EPS) NOMURA Securities says ... SEMBCORP MARINE | BUY | TP: S$5.20 SMM reported 3Q13 PATMI of SGD130mn, up 12% y-y mainly due to strong revenue increase in the rigbuilding segment (+167%), while EBIT margins came in at 10.1%, down from 14.1% in 3Q12 and 13% in 2Q13, below our and consensus expectations Management attributed the strong rigbuilding revenue increase and lower margins to initial revenue recognition for a number of new products During the quarter, SMM recognized initial revenue for five rigs comprising a well intervention semi-sub, a harsh environment semi-sub and three jack-ups. In comparison, only one jack-up had achieved initial revenue recognition in 3Q12 Ship repair revenue increased to SGD204mn (+34% y-y and +29% q-q) as the Tuas yard commenced operations in August 2013 We believe this confirms management's annual ship repair revenue guidance of SGD1.0-1.1bn Results were also impacted by a sharp y-y decline in associate contribution (SGD4.2mn, down 67% y-y) and a higher effective tax rate during the quarter The lower associate contribution was mainly attributable to start-up operations at Sembmarine Kakinada Net orderbook stands at SGD13.5bn currently with deliveries extending to 2019, while new orders secured in 2013 total SGD3.9bn Management remains positive on the sector and believes the demand for high-specification rigs with advanced technology will continue to be robust At the analyst meet, management again highlighted the abilities of the new Tuas yard such as undertaking FPSO conversions and servicing a wide range of vessels including VLCCs, LNG carriers, new generation of mega containerships etc We reiterate our Buy rating on Sembcorp Marine with a TP at SGD5.20 based on our sum-of-the-parts valuation (SOTP; methodology unchanged) At current prices, on our estimates SMM trades at 17.7x and 15.7x FY13F and FY14F earnings, respectively, vs. the historical P/E band of 8-28x OSK DMG Securities says... OSIM INTERNATIONAL | BUY | TP: S$2.60 Our consumer analysts visited 14 OSIM, four Ogawa (OGAW MK, NR) and two OTO (6880 HK, NR) retail outlets in Hong Kong, Indonesia, Singapore and Malaysia earlier this month Findings from our channel checks suggest that: i) uInfinity is seeing good response - eg its beige color option in an Hong Kong outlet is sold out, with the next available delivery date being December, ii) uAngel remains a fast moving item, and iii) its closest competitor in Singapore is likely to be Ogawa, whose latest product's sales seem to have normalised after its launch in May All in all, these developments augment well for OSIM as its peak sales season nears We believe OSIM's strategy of riding on celebrity appeal and multiple product price points will help to capture existing and new opportunities created by growing wealth in the region We note that the number of households with annual disposable income of >USD35,000 (and >USD100,000 in China) is expected to expand by 69% from 11m households in 2010 to 18m by 2020, with China accounting for most of this gain To raise consumer awareness and product penetration rates, OSIM has engaged Hong Kong artistes Andy Lau and Sammi Cheng as its brand ambassadors, as well as introduced tier pricing for different market segments, eg uAngel ~SGD1,888, uDivine (~SGD5,288) and uInfinity (SGD6,988) The positive findings from our channel checks fuel our excitement on the coming year-end shopping season and belief that OSIM would be able to maintain its mid-teen growth pace into FY14 We lift our FY14F earnings by 4% to SGD116m and introduce our FY15F earnings of SGD133m, which correspondingly move up our DCF-derived TP to SGD2.60 (previously SGD2.38)

SG: MARKET PULSE: BreadTalk, Vard, LMIRT, Yoma, KepCorp (7 Nov 2013)

Stock Name: BreadTalk
Company Name: BREADTALK GROUP LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.77

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.84

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

Research House: OCBC

Price Call: HOLD

Target Price: 0.44

Stock Name: Yoma
Company Name: YOMA STRATEGIC HOLDINGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.84

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.87

MARKET PULSE: BreadTalk, Vard, LMIRT, Yoma, KepCorp

7 Nov 2013

KEY IDEA BreadTalk Group: Same ol' same ol' BreadTalk's 3Q13 results exhibited the same traits as before. Revenue and operating profit increased following top-line growth across all three operating segments but operating margins remained depressed. In the coming quarters, we expect this trend to persist, especially with its new stated goal of having S$1b in revenue by 2016 and 2,000 stores by 2018. In our view, achieving these goals will be challenging in such a short-time as even our moderately optimistic medium-term projections has them missing the mark. More importantly, we feel that group has to address margin declines sooner rather than later as revenue growth without corresponding bottom-line increases via margin improvements will be hollow. Until then, we maintain SELL on BreadTalk with an unchanged fair value estimate of S$0.77. (Lim Siyi) MORE REPORTS Vard Holdings: Strong margins pressure Vard Holdings Limited's (VARD) 3Q13 results fell short of ours and the street's expectations, with revenue and PATMI dipping by 3.5% and 66.7% YoY to NOK2,370m and NOK76m, respectively. There was also strong margins pressure as its Niteroi yard in Brazil continued to experience cost overruns and delays. Nevertheless, the situation appears to be stabilising and we are also positive on its healthy orders intake worth NOK7.95b in 3Q13. This has boosted its orderbook to NOK19.5b as at 30 Sep 2013, versus NOK16.4b as at 30 Sep 2012. We rework our assumptions following a change in analyst coverage, lowering our FY13 and FY14 PATMI projections by 23.1% and 2.7%, respectively. Applying a PER valuation peg of 8x (approximately in-line with its average forward PER since listing) to our FY14F EPS forecast, we derive a new fair value estimate of S$0.84 (previously S$0.80). Upgrade VARD from Sell to HOLD. (Wong Teck Ching Andy) Lippo Malls Indonesia Retail Trust: 3Q13 results in-line LMIRT reported 3Q13 gross rental income of S$38.9m, up 13.6% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions for the existing malls. Distributable income increased by 20.7% YoY to S$19.1m and DPU climbed 19.2% YoY to 0.87 S cents. Results for the quarter were in-line with ours and consensus expectations. 9M13 DPU of 2.69 S cents forms 75% of our FY13 estimate. We maintain our HOLD rating on LMIRT but place our fair value of S$0.44 under review. We will be speaking with management shortly. (Sarah Ong) Yoma Strategic Holdings: No surprises from 2QFY14 earnings Yoma reported 2QFY14 PATMI of S$3.3m, versus a loss of S$4.2m in 2QFY13. The return to profitability was mainly due to the sale of two buildings in Zone B of Star City, for which Yoma recognized S$15.1m of revenue and an incentive fee of S$2.3m, and lower staff costs. YTD PATMI now cumulates to S$3.76m and is judged to be mostly within expectations, making up 48.0% of our full year forecast for FY14. We note, however, that 2QFY14 gross margin has slipped 2.4 ppt YoY to 44.9% due to a lower contribution from Pun Hliang Golf Estate which is a higher margin project. In terms of the 2QFY14 topline, it increased 132.4% YoY to S$27.0m, again mostly due to recognition of residential sales and LDR sales at Star City. As at end Sep-13, 523 (out of 528 total units) at Star City's Building A3 and A4 were sold, up marginally from 513 units sold as at end Jun-13. Maintain HOLD with an unchanged fair value estimate of S$0.84. (Eli Lee) Keppel Corporation: Secures order for five jack-ups from Transocean Keppel Corporation's (KEP) offshore and marine arm has secured an order from returning customer Transocean to build five KFELS Super B Class jack-up rigs for US$1.1b. In addition, Transocean has options to build up to another five similar jack-up rigs with KFELS. With a price tag of about US$220m for each rig, this is more or less in line with Falcon Energy's order from KEP in Apr this year for a similar rig. We view this contract as an affirmation of KEP's leading position as a rigbuilder in the eyes of established industry players, and think that the contract likely landed in KEP's hands due to 1) the proven track record the KFELS Super B Class design has with Transocean (recent units enjoyed high revenue efficiency), and 2) the tight delivery schedule (progressive from 1Q16 to 3Q17) is safer in a pair of trusted hands. KEP has secured orders worth about S$6.4b YTD, exceeding our full year estimate of S$6b. Maintain BUY with S$12.87 fair value estimate. (Low Pei Han)

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

NEWS HEADLINES - Wages are expected to increase by 4.5% in Singapore next year, according to a survey by Towers Watson. - STATS ChipPAC reported 3Q13 net profit of US$13.3m, versus US$3.2m last year. 3Q13 net profit includes an exceptional gain of US$19.6m insurance settlement on account of business disruption due to the floods in Thailand. - Baker Technology reported 3Q13 net profit of S$3.6m versus S$5.7m a year ago. - Aussino Group, which has been on the SGX watch-list since Sep 2011, has announced that it plans to issue up to US$30m in convertible senior notes to a US investment firm. - Hengyang Petrochemical has issued a profit warning for 3Q13. - Action Asia expects to report a loss for 3Q13 due to lower revenue.

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: DBS Vickers

Price Call: HOLD

Target Price: 4.80

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: Golman Sachs

Price Call: SELL

Target Price: 0.67

Stock Name: Kreuz
Company Name: KREUZ HOLDINGS LIMITED

Research House: OSK-DMG

Price Call: BUY

Target Price: 1.16

Market Compass

07 November 2013~ Good Morning Singapore!

Singapore Idea Snippets:

07 Nov 2013 ~ Good Morning Singapore! Central Execution Team - The Excellence of Execution This product is made available by your Central Execution Team, for you as TRs of OCBC Securities to help you with your business and therefore it is confidential and only for internal circulation. It is not intended for onward circulation to non-OSPL TRs, clients or any other third party in this or any other version. Neither is this intended to be relied upon as a sole basis for any recommendation. TRs must also consider their clients' investment objectives, financial position and needs when intending to make or making any recommendation. For the front desk, by the front desk. All feedback to make this a better product is welcome. Global Flash: While You Were Sleeping Source: Marketwatch Quote for the day : Your success and happiness lies in you. Resolve to keep happy, and your joy and you shall form an invincible host against difficulties. - HELEN KELLER Singapore: The Day Ahead SINGAPORE DAYBOOK :F&N spat with Myanmar partner turning ugly. MEHL starts arbitration process, saying it has clear right to buy over F&N's 55% stake. [SINGAPORE] An ugly spat is unfolding between Fraser and Neave (F&N) and a Myanmar state-owned enterprise - at a time when Singapore companies are flocking to the emerging market that is just about to leave its pariah status behind for good. Myanma Economic Holdings Limited (MEHL), the joint venture partner of F&N in Myanmar Brewery, yesterday said that it had a "clear right" to buy out the Singapore conglomerate's stake in the beer-making business - which it values at US$246 million - adding that the deal is not political in nature. The Myanmar military-linked investment firm, which holds 45 per cent of Myanmar Brewery, has commenced arbitration proceedings to claim F&N's 55 per cent stake in the brewery, the company said in a statement yesterday. F&N has described MEHL's arbitration claims as having no basis, and added that MEHL was also significantly undervaluing the asset. F&N said that it has engaged lawyers and "intends to vigorously resist the claim". (Source: The Business Times) MARKET SCOOP Singapore fund to sell US$350m of Glencore convertible bonds STATS ChipPac's 3Q revenue down 1.8% BreadTalk's Q3 profit flat; revenue up 22% CWT's net profit drops 53 per cent in Q3 to $19.2m SingTel to launch new mobile game portal, WePlay S'pore to become global insurance hub by 2020: MAS Aussino to raise US$30m in convertible notes (Source: The Business Times) DBS VICKERS Securities says ... SEMBCORP MARINE | HOLD | TP: S$4.80 Excluding S$1m disposal gain, recurring net earnings grew 11% y-o-y and 19% q-o-q to S$128.6m in 3Q13 Sales jumped 86% y-o-y and 48% q-o-q to S$1.66bn, with initial contributions from 5 new rigs Operating margins fell further to 10.0% from 11.8% in 2Q13 and 13.7% in 1Q13, the lowest since 2Q09 Associates income dived 67% to only S$4.2m due to weaker contributions from Cosco Shipyard Group. 9M13 earnings account for just 66% and 63% of our previous forecast and consensus' FY13 estimates, respectively Order book declined by 6%(S$0.9bn) to S$13.5bn during the quarter YTD, SMM has secured new projects worth S$3.9bn, or 79% of our new order wins assumption of S$5bn, and is on track to meet our expectations Construction of the first drillship for Petrobras is ahead of schedule with 48% completed, and is planned to be towed to Brazil in Mar 2014 The second drillship is expected to commence initial recognition of revenue in 1Q14 The construction of SMM's yard in Brazil is also on schedule YTD, global jack up orders amounted to 51 units, higher than the 19 units ordered in 2012 and 43 units in 2011 Jack up enquiries from the Gulf of Mexico remain buoyant, and FPSO demand should recover in the near future The robust sector fundamentals are underpinned by upbeat E&P capex and replacement demand for the aged fleet (c.60% of jack up and semi-submersible fleet > 25 years old) as oil prices stay above US$90/bbl We have trimmed FY13E/14F net earnings by 7% as we have assumed lower EBIT margins of 11.8%/12.1% vs 12.0%/12.4% previously and lower assoc income from Cosco As we roll over our SOTP valuation to FY14F earnings, TP increases marginally from S$4.70 to S$4.80 Maintain HOLD We believe margin recovery and strong order wins are required for the stock to re-rate GOLDMAN SACHS says ... GENTING SINGAPORE | SELL | TP: S$0.67 3Q13 headline net profit came in at S$4mn (-84% yoy; -65% qoq). 9M13 net profit of S$26mn (-68% yoy) was only 47%/42% of FY13E GSe/Bloomberg consensus The miss was due to lower-than-expected 3Q13 GM of 7.4% (1H13: 10.7%; GSe: 11.0%) because of a sizeable S$52mn write off, which we suspect was largely driven by project cost overruns COS did not provide any details on provisions We believe they likely came primarily from COS's offshore order book, which we think may contain too many non-repeat and first time (i.e. low margin and risky) orders COS said it does not rule out the possibility that it could take more provisions We note that on its recently cancelled drillship order from Dalian Deepwater (due to severe delivery delays), it has thus far received only 22% of the total payment That said, according to COS, there are some interested parties enquiring about the drillship with whom COS hopes to close a deal and consequently recoup the remaining outstanding payments The weak 3Q13 net profit was compounded by continued increase in leverage (net D/E rose further to 103% vs. 1H13 of 87%) and negative operating cash flow due to rising working capital needs (as a result of current orders having unfavorable payment terms) COS expects to secure more jackup orders, but is cautious on the commercial shipbuilding market despite the recent Baltic Dry Index rebound, as it is unconvinced of a sustainable recovery given still significant vessel oversupply in the market Maintain Sell We cut 2013/14/15E EPS 20%/4%/3%% mainly to factor in higher provisions Reflecting this, we lower our 12-m FY14E EV/GCI-CROCI/WACCbased TP to S$0.67 (S$0.70 prior) Risks: Stronger-than-expected recovery in macro conditions; stronger-than-expected execution in new products OSK DMG Securities says... KREUZ HOLDINGS LTD | BUY | TP: S$1.16 Kreuz is the subject of a takeover offer by private equity fund SEA9 Pte Ltd at a price of SGD0.80 per share Unusually, the method of acquisition is by scheme of arrangement, which aims to bypass a general offer We believe that the offer price undervalues Kreuz, given its long-term growth potential Our recommendation to shareholders is DO NOT ACCEPT, reiterating our SGD1.16 TP and DCF-value of SGD2.25 per share 31% discount to TP, 64% discount to DCF-value The offer price values Kreuz at a mere 7.4x FY13F P/E, resulting from the interplay between a weak seller and a strong buyer The offer price implies a 31% discount from our 12-month TP, and a 64% discount from our DCF-value of the company at SGD2.25 per share, based on a 10.6% WACC Factoring in the growth from the diving support vessels (DSVs) sector, we believe that Kreuz' earnings can grow to USD69.4m in FY15F and USD92.2m in FY16F from USD39.7m in FY12 At those earnings, its shares will be worth SGD2.07-2.61 at the same 10x P/E. SEA9 stands to achieve a 226% return in three years by taking Kreuz private now and potentially re-listing it later at an even higher multiple than at takeover Swiber (SWIB SP, NR) will recognise a USD90.6m gain upon deal completion However, we note that Kreuz accounted for 22-202% of the former's earnings in the last six quarters, and 50% overall for FY12 Swiber is selling its crown jewel for a one-time gain at the expense of future growth and profitability In this case, the combined stakes of Swiber's and Kreuz' directors already stands at 73.69%, almost at the requisite 75% to achieve "shareholder approval" The scheme of arrangement will then be brought to court, which can then sanction a compulsory acquisition of minority shareholders' stakes In this case, the minorities have little chance against the Goliath of the majority, and we expect the deal to go through We do, however, stand by our valuations and recommend that investors DO NOT ACCEPT

OSPL - Good Morning S'pore - Central Dealing Desk

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: DBS Vickers

Price Call: HOLD

Target Price: 1.64

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: UOB KayHian

Price Call: HOLD

Target Price: 1.42

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: OCBC

Price Call: HOLD

Target Price: 1.47

Market Compass

06 November 2013~ Good Morning Singapore!

Singapore Idea Snippets:

06 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 : All action results from thought, so it is thoughts that matter. - SAI BABA Singapore: The Day Ahead SINGAPORE DAYBOOK :Temasek appoints Wing Tai head as deputy chairman [SINGAPORE] Wing Tai Holdings chief Cheng Wai Keung, 63, has been appointed deputy chairman of Singapore investment firm Temasek Holdings. The well-known property developer and businessman's new appointment at Temasek took effect on Monday. He has been a non-executive director on Temasek's board since September 2011, and is also a member of its executive committee. Mr Cheng's appointment comes some three months after Temasek appointed Lim Boon Heng its new chairman. Mr Lim took over from S Dhanabalan, who had served as Temasek's chairman for 17 years. Mr Dhanabalan said then that a new chairman does not mean a change in direction for Temasek as "the chairman together with the board and management determine which direction to take". (Source: The Business Times) MARKET SCOOP BBR cautious despite Q3 profit jump Oct PMI rises, points to pick-up in S'pore manufacturing Swiber Holdings plans to sell Kreuz stake for US$206m Chip Eng Seng Q3 net profit down 10% to S$27.2m Singapore's COSCO Corp Q3 net profit falls 61% Singapore's Sembcorp Marine Q3 net profit rises 12.3% on year SATS Q2 profit down 3.2% to S$48.7m UOB Q3 net profit up 3.3% PCRT's Q3 DPU dips to 0.95 cents (Source: The Business Times) DBS VICKERS Securities says ... GENTING SINGAPORE | HOLD | TP: S$1.64 3Q13 EBITDA came in at S$347m (+15% y-o-y, +12% q-o-q), bringing 9M13 EBITDA to 71% and 75% of consensus and our estimates respectively After 2 quarters of unfavourable luck factor, VIP win rate rebounded to 2.9-3.0% (2Q13: 2.5%; 3Q12: 2.8%) Similar to MBS, rolling chip continued to see strong growth (+58% y-o-y, +19% q-o-q) across the board This helped to cushion impact from lower mass volume (tables: -10% y-o-y/q-o-q; slots: -5% y-o-y, -9% q-o-q) If not for the higher property tax (due to one-off prior year adjustment) and impairment losses (5% of receivables vs 2Q13's 3%, largely expected given strong VIP volume growth), EBITDA margin would have improved 3.4ppts y-o-y, 4.2ppts q-o-q to 53.6% Western Zone continues to ramp up, with visitor arrivals still rising (non-gaming +27% y-o-y, 7% q-o-q to constitute 22% of revenue) RWS' overall GGR market share improved by 3ppts to 51%, driven by an improvement in the VIP segment to 54% (based on rolling chip), making up for the slide in the mass segment to 44% VIP is increasingly contributing a bigger chunk of RWS' GGR (60% vs 2Q13: 53%; 3Q12: 50%) Management turning less cautious as market uncertainty reduces with US QE tapering put on hold and global recovery on track Nevertheless, we would watch the mass segment closely given lower local visitors and slower tourist arrivals growth, along with rising cost pressures from restrictions on foreign labour Limited clarity on new venture, which could take another 12 months to materialise (potential M&A in Asia with minimum 12% IRR target) As for Japan, gaming liberalisation may be delayed to 1Q14 from end-2013 although the gaming bill will likely be introduced at the current diet session Japan could emulate Singapore by introducing an entry fee for locals We see GENS and Las Vegas Sands as front-runners given their strong IR track record Maintain Hold, but raise TP to S$1.64(from S$1.42) based on regional sector average of 13x FY14F EV/EBITDA For gaming exposure, we prefer stocks leveraged to Macau and Philippines (Sands China, SJM, Travellers) given stronger growth potential UOB KAY HIAN says ... GENTING SINGAPORE | HOLD | TP: S$1.42 9M13 EBITDA of S$907.9m contributed 73% of our full-year forecast, in line with our expectations, as we expect a stronger 4Q due to seasonality factor GENS's win percentage improved to slightly above the theoretical win percentage of 2.85% in 3Q13 (2Q13:2.5%, 1Q13: 2.1%), contributing largely to the upswing in EBITDA margin to 44.7% from 43.9% in 2Q13 However, the margin gains were slightly offset by lower contribution from the lucrative mass-marke 3Q13 rolling chip volume (RCV) grew to an estimated S$20.2b (+15% qoq, +58% yoy), with GENS's RCV market share standing at 54%, gaining RCV market leadership for the first time since 2Q11 While management did not elaborate on the growth factors, our channel check suggests the strong RCV growth was partly attributed to a baccarat tournament held during the quarter In the conference call, management sounded upbeat on sustaining a modest to moderate the RCV growth trend Worryingly, the mass segment defied previous flattish growth trends, contracting 10% qoq and 10% yoy in 3Q13 Looking ahead, we expect this segment to improve in 4Q13 due to year-end school holidays across the region Impairment-to-receivables rose to 4.9% in 3Q13 (2Q13: 3.5%) as management adopted a more prudent recognition stance While receivables continued to rise in tandem with RCV growth, management has made cumulative provisions amounting to about 38% of total receivables as of 3Q13 Management shared its optimism on Japan's gaming bill to be tabled in the upcoming Diet session in two weeks' time, and expects the gaming bill to be passed in 1H14 If successful, we expect the first Japan casino to open in 2020 at the earliest, given the lengthy legislation and construction process involved We gauge that recently, GENS is more sanguine in engaging meaningful M&A activities We note that management has been actively scouting for sizeable M&A opportunities within Asia, especially after raising S$2.3b through perpetual securities in 2012 Maintain HOLD and target price of S$1.42,based on 12x 2014F EV/EBITDA We think GENS is fairly valued with share price having rallied 18% from its Aug13 low as investors gradually priced in an 'option value' for potential greenfield and M&A opportunities Entry price is S$1.30 Prefer Genting Bhd (GENT/Target: RM12.74, or 8.5x 2014F EBITDA) within the Genting group of companies as it is a major laggard following the regional gaming sector's re-rating Moreover, GENT offers a complete exposure to any greenfield and M&A opportunities within the Genting group OCBC Securities says... GENTING SINGAPORE | HOLD | TP: S$1.47 Genting Singapore (GS) reported its 3Q13 results last evening, with revenue climbing 16% YoY and 10% QoQ to S$776.8m, while adjusted EBITDA gained 15% YoY (+12% QoQ) to S$347.4m, as both gaming (saw higher volume in the premium player segment) and nongaming (daily visitation exceeded 18k) segments performed better As a result, net profit jumped 75% YoY and 38% QoQ to S$193.0m, versus our S$190m forecast 9M13 revenue inched 1% lower to S$2154.4m, meeting 73% of our full-year forecast, while net profit also slipped 1% to S$449.1m, or 80% of our FY13 estimate Looking ahead, 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; although it notes that the global economic environment is still relatively unpredictable Building on its track record (RWS has again been named the best IR for the 3rd consecutive year at the 23rd Annual TTG Travel Awards), GS says it is seriously pursuing opportunities in the gaming, leisure/entertainment and hospitality sectors in the region Management believes that it could have something to announce within the next 12 months Meanwhile, GS is also watching the developments in Japan closely and it expects the legislative passage of the IR Executive Law in early 2014 With margins expected to stabilize from here as more of its nongaming operations enter into steady state, we bump up our FY13 and 14 earnings forecasts by 2.5% while leaving our revenue numbers unchanged Our DCF-based fair value also inches up from S$1.41 to S$1.47 But given the limited upside from here, especially after the pre-results run-up, we maintain our HOLD rating We would be buyers closer to S$1.40

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

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 22.97

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.68

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 3.35

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.80

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

6 Nov 2013

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

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

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

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