Local Brokerages Stock Call 10 September 2013

From OCBC:

CapitaMalls Asia: Stabilizing fundamentals in China
Latest Chinese economic data-points has mostly been above view, painting a picture of modestly recovering fundamentals. Over the last month, the Chinese PMI, trade and inflation figures have mostly beat expectations which increasingly establishes a base case for at least a 7.5% economic growth rate this year – the target set by Chinese authorities. We look forward to Chinese industrial production and retail sales reports today, which are expected to further add to signs of recovery. We believe these are key positives for CMA and reinforces the long-term outlook of its Chinese mall portfolio, which has continued to put up firm numbers year to date. 1H13 tenants sales at CMA’s Chinese malls grew at 9.5% YoY on a psf basis; excluding tier 1 cities, tenant sales grew by 11.0% YoY. Long term tailwinds from the secular growth in Chinese retail consumption remain intact, in our view. Maintain BUY with an unchanged fair value estimate of S$2.55.

From DBS:

CSE Global is likely to return most of the proceeds, which
our analyst estimates to be 26-28 Scts DPS, from the
divestment of its UK business. The UK business (~33% of
group profit) can fetch higher PE than CSE itself, thus
unlocking value for its shareholders. We estimate that CSE
will take three years to recover the earnings gap due to
divestment of UK business. Our TP of S$1.07 ((Prev.
S$0.97) implies potential returns of 28%. Maintain BUY.
A successful IPO could lead to a re-rating of the stock.

Local Brokerages Stock Call 9 September 2013

From OCBC:

Singapore REITS: Downgrading to neutral
Summary: We now see fairly solid grounds for a base case that the Fed would taper in Sep 2013 or soon after, and we downgrade the S-REIT sector to NEUTRAL on three key reasons. First, we believe this is the beginning of a long term secular, not cyclical, trend of rising interest rates. Higher discount rates and liquidity factors, due to capital re-allocation across asset classes, would likely negatively impact REIT prices over the mid to long term. Second, we believe a limited fundamental growth outlook for the sector is unlikely to trump the negative impact of rising rates on S-REIT prices. Finally, a key proxy for cheapness – the sector’s yield spread against the SG 10Y bond – implies that the sector appears fairly priced now. Our most preferred sub-sectors are domestic retail and office where rental outlooks and valuations still appear fairly appealing. Our top picks are CapitaCommercial Trust [BUY, FV: S$1.61], Starhill Global REIT [BUY, FV: S$0.95] and Suntec REIT [BUY, FV: S$1.80].

From UOB KH:
Blue Chips: KREIT, DBS, CapitaLand
Selective pickings after the selldown
Highlights
Some big-cap names appear attractive after the recent selldown.
We find Keppel REIT (KREIT) a very compelling BUY as it holds the
best office portfolio in Singapore.
DBS is our top pick in banking for its strong execution capabilities
and attractive valuation.CapitaLand is setting new directions with a renewed emphasis on
ROE and on its key markets Singapore and China.

Keppel REIT (KREIT SP, K71U) –
More compelling for the best office portfolio in Singapore
(BUY/Target: S$1.46)
Despite expectations of rising interest rates, we think the increase
would be gradual and could commensurate with economic growth.
Hence, we believe stocks with high and sustainable dividend yields
would continue to attract interest. Valuations of KREIT are more
compelling as it offers a 40bps premium to the average 6.2% yield
for office REITs. Equity overhang from a private placement and
Keppel Corp’s distribution in-specie has been largely removed.
KREIT offers the highest-quality Singapore office portfolio and will
benefit from the improving office outlook. We upgraded the stock to
BUY recently with a DDM-based target price of S$1.46.
Technically, KREIT is likely to be supported near S$1.14 and has a
resistance level of S$1.31.

DBS (DBS SP, D05) –
Strong management, ROE improvement
(BUY/Target: S$20.45)
DBS has raised its guidance for loan growth for 2013 from 10% to
14%. Management expects NIM to remain unchanged at 1.6%.
Customers are showing greater interest in fixed rate and longer
tenure loans, which are higher yielding. DBS has beefed up loanloss
coverage to a high of 141%. Over 40% of its NPLs are still
considered current. Management intends to maintain loan-todeposit
ratio at about 90%. DBS deserves to be re-rated due to its
strong management team and an improvement in ROE. It is our top
pick in banking with a target price of S$20.45, based on a P/B of
1.5x.
Technically, the stock has been supported near S$15.80 and is
likely to trend up towards S$17.00.

CapitaLand (CAPL SP, C31) –
Setting new directions
(BUY/Target: S$4.35)
CapitaLand is targeting an 8-12% ROE as it focuses on its two core
markets in Singapore and China. Emphasis is on CapitaLand’s key
strengths to execute on integrated/mixed developments and to
improve project profitability by undertaking larger projects with
faster time to market. Residential sales in Singapore and China
remain robust despite cooling measures. Singapore residential
sales more than doubled in 1H13 and demand in China remains
buoyant due to urbanisation and income growth. We have a BUY
for CapitaLand with a target price of S$4.35, pegged at a 15%
discount to its RNAV.
Technically, watch to see if the stock could continue to be well
supported above S$2.95 to test S$3.19 for further upside.

Singapore Property Nuggets: Office – Rising occupancies supporting
growth in rentals.
Office demand remains buoyant as pre-commitments surpass 80% for
The Metropolis project. Asia Square 2 has also been awarded its
Temporary Occupation Permit (TOP) on 2 September, and is about 25%
pre-committed with tenants including Allianz, National Australia Bank,
Swiss Re and Bank Mandiri. Net absorption of space in 1H13 was 474,000
sf. CBRE reported that Grade-A occupancies had risen 4.2ppt from 91.2%
in 4Q12 to 95.4% in 2Q13.
We see superior investment opportunities in the office segment presented
by the yield gap of 250-300bps between office REITs (6-6.5%) and
physical office transactions (3.5% yield). Office REITs also offer the best
value in the REITs sector, trading at an average of 0.8 Price/Book. We
expect the yield gap to narrow as positive rent reversions gain momentum
and growth expectations start building up with a turnaround in office
rentals. We forecast Grade-A rentals to rise 6-10% in 2014 after bottoming
out this year. Our key office picks are Suntec REIT, CapitaCommercial
Trust, OUE, Ho Bee and Keppel Land.

From Maybank KE:
Yongnam Holdings: Healthy 17-year Work Pipeline, Maintain Buy, 
$0.295 - TP $0.40
YNH SP | Mkt Cap USD292.3m | ADTV USD3.3m
We believe Yongnam has hit the bottom of the cycle and is geared up and 
ready to replenish its orderbook. Yongnam is tendering for SGD670m of 
potential projects which would commence in 2H13. Reiterate BUY with a
TP of SGD0.40.
Sixteen Thomson Line civil contracts have been placed out, with three already
awarded to the main contractors. We expect subcontracts will be given out in
late 2013 or early 2014.
We peg Yongnam to its closest peer, Malaysia-listed Eversendai at 11x 
forward PER. We keep our TP unchanged at SGD0.40, pegged at 11x
 FY13F-15F earnings

From DBS:
Markets have been weighed down by the anticipation of
FED QE tapering; emerging markets sell-off and the risk of
a military strike on Syria. We look for bargain/value
hunting opportunities should the STI dips moderately
lower towards 2900 that coincides with 12.3x (-1SD) 12-
mth forward PE. Guided by a 10.4% EPS growth forecast
for FY14, the Singapore market currently trades at 12.6x
FY14F PE, which is reasonably attractive. Singapore
market should recover past the September-October period
of uncertainty. Expect the STI to recover pass 3200 (13.1x
(-0.5SD) FY14F PE) but cap below 3400 [(13.9x (average)
FY14F PE) by year-end.

We continue to prefer stocks with exposure to developed
markets, and avoid emerging markets. Stocks with
earnings visibility supported by yield are likely to remain in
favour. Our picks are SingPost, Comfort Delgro, ST Eng,
HPH Trust and Overseas Education.

DBSV Research issues an Equity Explorer report on OUE
Hospitality Trust with a fair value of S$0.93, offers 8%
upside. OUE HT is a Singapore-based REIT with an initial
portfolio of two properties in prime locations - the 1051-
room Mandarin Orchard Hotel, and the accompanying
Mandarin Gallery retail mall. The properties are collectively
worth S$1.7bn as of 31 Mar13. The Trust has resilient
earnings structure with strong visibility. Multiple growth
drivers are also in place. While earnings are sensitive to
RevPAR changes, we expect earnings volatility to RevPAR
changes to be limited given a high % of income pegged
to fixed rates. In addition, yields of 7.6%-8.0% are higher
than S-REIT peers. 


 

Local Brokerages Stock Call 29 August 2013

From OCBC:
Oil and Gas: Looking beyond the volatility
YTD, the FTSE Oil and Gas index has generally tracked the broader market, though there have been instances of a divergence in performance. Besides the exploration and production segment garnering more investor interest, we are increasingly positive on the OSV segment, while prospects of the rig market remain bright, underpinned by the sustained high oil price environment. Still, the relatively high-beta O&G sector is very much sensitive to macroeconomic events. The possibility of increasing capital flows from Asia to the US remains, and investors may want to look beyond the short term volatility and focus on the positive longer-term growth prospects of the sector. Maintain Overweight with a one-year horizon, with Ezion Holdings [BUY, FV: S$2.90], Keppel Corp [BUY,FV: S$12.53] and Sembcorp Marine [BUY, FV: S$5.64] as our preferred picks. For investors seeking less volatility in terms of earnings but with O&G exposure, Sembcorp Industries [BUY, FV: S$6.48] is a worthy candidate. 

Local Retail REITs: Outlook remains sanguine
Local retail landlords ended 2Q13 on a positive note, with results mostly in line with our expectations. Aggregate leverage for the quarter has also improved sequentially across the board. Notably, a significant portion of the REITs’ existing borrowings are either based on fixed rates or hedged. This will likely limit the impact of rising interest rates on the REITs’ DPUs and yields. Looking ahead, we are maintaining our positive view on the local retail REITs due to AEI activities and better rental rates for the leases due for renewal. In addition, the local retail landscape has remained largely stable. According to Jones Lang LaSalle (JLL) 2Q13 Singapore property market review report, the growth in rents island-wide is likely to range between 0% and 0.2%, while capital values grow by 2.7%-3.8% in 2013. We are keeping our OVERWEIGHT rating on the local retail REIT subsector. Starhill Global REIT remains as our preferred pick, due to its apparent growth drivers, higher-than-average yield of 6.8% and compelling valuation (0.88x P/B).  

From UOB KH:
KSH Holdings (KSHH SP, ER0)
Technical BUY with +10.2% potential return
Last price: S$0.49
Resistance: S$0.54
Support: S$0.46
BUY with a target price of S$0.54 with tight stops placed
below S$0.465. The stock may have a short-term
rebound as a potential bullish hammer pattern has
formed near to its rising 200-day SMA. Its Stochastics
Indicator as formed a bullish crossover and could turn
up. Watch to see if the stock could break above its
middle Bollinger band. Our retail research has a
fundamental BUY with a target price of S$0.71.

Tiong Woon (TWC SP, T06) –
Technical SELL with +6.2% potential return
Last price: S$0.34
Resistance: S$0.375
Support: S$0.30
SELL with a target price of S$0.30 with tight stops
placed above S$0.360. The stock could continue to
trend down after being resisted near S$0.375 which was
a support now turned resistance level. A dead cross
could be formed on its 50- and 200-day SMAs. Its
Stochastics Indicator has formed a bearish crossover
and could continue to turn down. Watch to see if prices
could break below S$0.34.

Sinarmas Land (AFP SP, A26) –
Take profit from previous technical SELL
Last price: S$0.505
Resistance: S$0.60
Support: S$0.475
The stock was featured as a technical SELL when it
opened at S$0.60 on 20 Aug 13. The stock has since
returned 15.8% on closing prices, and its intraday low of
S$0.485 has exceeded our initial SELL target of
S$0.505. Some profits could be taken off the table as
the stock could be supported at around S$0.475 which
is also near to its rising 200-day SMA.

StarHub- Maintaining leadership in pay-TV.
(STH SP/BUY/S$4.12/Target: S$4.60)
FY13F PE (x): 20.4
FY14F PE (x): 18.6
Maintaining leadership in pay-TV. StarHub intends to differentiate and
maintain its lead in pay-TV through producing local content, such as
Academy Fantasia (a reality singing competition) and Lady First Singapore
(a variety show). Viewership for Lady First Singapore is said to be five
times higher than the original Taiwanese version. The programme is very
popular because fashion advice and beauty tips given are tailored for
Singapore’s women. StarHub is also looking into the production of
localised content for variety shows. It defrays costs of production through
advertising and sponsorship deals.
Maintain BUY. Our target price is S$4.60, based on DCF (required rate of
return: 6.7%, terminal growth: 1%).

From DBS:
United Envirotech announced a RMB90m (~S$19m) EPC
contract to upgrade a 100,000m3/day industrial
wastewater treatment plant in Nantong City, Jiangsu
Province, China. This wastewater treatment plant serves
industries located in the Nantong Economic Development
Zone and about 70% of the wastewater is from textile
industry. Upgrading of the plant is required to meet the
more stringent Grade 1A discharge standard imposed by
the local government. This project will commence
construction immediately and is expected to be completed
by the end of Dec 2013. Together with a RMB100m
contract announced last week, United Envirotech has met
~50% of our FY14 new win assumption of RMB400m. No
change to our forecast, S$0.90 TP and Hold call.

Local Brokerages Stock Call 28 August 2013

From OCBC:
Goodpack Limited: Decent FY13 results
Goodpack’s FY13 results were in-line with expectations. Revenue grew by a smaller 7.7% YoY to US$190.9m while PATMI improved 13.4% YoY to US$51.3m as its cost saving initiatives helped to offset higher depreciation and financing costs from a larger fleet and increased borrowings respectively. Similar to last year (FY12), management declared a final dividend of 2 S cents and a special dividend of 3 S cents. Although we lower our revenue forecasts for FY14, we still expect growth improvement following the commencement of key clients’ synthetic rubber (SR) operations in Singapore and a new SR contract in Russia. In terms of margins, we only expect a small drop-off as continued cost saving initiatives should keep a lid on logistic and handling expenses. In light of its unchanged fundamentals and recent share price correction, we maintain BUY on Goodpack with a slightly lower fair value of S$1.69 (S$1.80 previously). 

From Maybank KE:
Sino Grandness: Ready, Willing And Able; Buy, $1.05 - TP $1.89
SFGI SP | Mkt Cap USD240.2m | ADTV USD1.4m
Reiterate BUY and SGD1.89 TP. In light of the recent short seller’s
attack  on  China  Minzhong,  Sino  Grandness’ management has been very
responsive  and  open  in  dealing with investors’ concerns and readily
agreed to hold a conference call with our clients yesterday despite the
extremely short notice given to them.
In  all, the conference call was organised within 90 minutes and 20
clients participated. We think the information shared by management was
helpful  and  informative, and should go a long way to calming investor
concerns.
In our view, the share price drop in the past two days was purely
due to fallout from the Minzhong short selling incident. Fundamentals
are still firm and the biggest catalyst, the Garden Fresh IPO, still
lies ahead. We believe Sino looks more attractive today compared to
last week.
  
Wing Tai: Sturdy as a Tembusu Tree; Buy, $2.04 - TP $2.78
WINGT SP | Mkt Cap USD1.2b | ADTV USD1.2m
We  reiterate  our  BUY  recommendation  on Wing Tai, with a slightly
higher  TP  of  SGD2.78,  pegged  to  a 30% discount to RNAV. A bumper
dividend  of  12  cts/share  has  been  proposed,  translating  to  an
attractive FYJun13 yield of 5.9%.
Its  FYJun13  core  PATMI  of  SGD294m was in line with expectations.
Having achieved SGD885m worth of property sales in FY13, Wing Tai went
on  to  launch  The Tembusu in mid-August. 220 units have been booked,
with an ASP of ~SGD1,500 psf.
The  Group  will  remain  selective in land acquisitions. Malaysia is
deemed   its   most   attractive  market  in  the  near-term  for  new
investments,  but  the Group will continue to explore opportunities in
Singapore, HK and China. 

From DBS:
FY13 results for Goodpack slightly above. The key variants
were the US$1.4m disposal gain of PPE and US$0.9m
forex gain in 4Q13. Goodpack is on track to achieve
volume growth of 250k boxes in FY14, underpinned by
the firm ramp up of new SR markets in Singapore and
Russia. It is also gaining traction in the autoparts market.
Maintain BUY with higher TP of S$2.00. The finalisation of
autopart contracts serve as an imminent catalyst.

2Q13 results for IHH Healthcare within expectations.
EBITDA margins improved with positive contribution
from new hospitals. Novena hospital turned in RM2m
EBITDA profit, on track for positive contribution in FY13.
Maintain HOLD, TP adjusted to S$1.50 (Prev S$ 1.55),
accounting for recent currency effects. While we believe
the long term prospects for healthcare remains positive
and IHH commands a premium due to its scarcity and
geographical spread, the stock is already trading at
43x/36x on FY13F/14F earnings.

Local Brokerages Stock Call 27 August 2013

From OCBC:
Technology Sector: Slightly improved sentiment
Under our tech sector coverage, Venture Corp (VMS) reported earnings which were in-line with our expectations for the recently concluded 2QCY13 results season. However, core PATMI for ECS Holdings missed due to weaker-than-estimated gross margin. Encouragingly, a number of companies which we spoke to highlighted an improvement in sentiment amongst their key customers, which is in-line with the expected uptick in the global economy. However, we maintain NEUTRAL on the tech sector, as we believe that the economic recovery remains fragile. ECS [BUY; FV: S$0.56] is still our preferred pick within the sector given its cheap valuations (FY14F PER of 5.0x and P/NTA of 0.5x).

Suntec REIT: New city taking shape
Suntec REIT announced on 15 Aug that it has established a US$1.5b Euro Medium Term Note programme. We believe Suntec REIT may use this to address part of its refinancing needs due in 2014. If so, this will lock in part of its debts into fixed rates, enhance its debt maturity profile and improve its unencumbered asset ratio. Looking ahead, we remain positive on Suntec REIT’s performance. While its 2Q13 NPI and distributable income were down 38.5% and 18.7% YoY respectively due to the concurrent execution of Phases 1 and 2 of the remaking of Suntec City, we believe that the worst is likely over given that Phase 1 enhancement works were completed in Jun and the retail space there has since become operational. At current price, Suntec REIT trades at one of the lowest P/B in the S-REITs sector at 0.73x, while offering a compelling FY14F yield of 6.9%. We are revising our fair value from S$1.85 to S$1.80 due to higher risk-free rate. As valuations remain attractive and outlook is positive, we maintain BUY on Suntec REIT.

From UOB KH:
Kori Holdings (KHLL SP, 5VC) –
Technical BUY with +10.9% potential return
Last price: S$0.46
Resistance: S$0.51
Support: S$0.405
BUY with a target price of S$0.51 with tight stops placed
below S$0.435. The stock could continue to trend up
after making a higher low, and has closed above its mid
Bolllinger band. Its Stochastics indicator has also
formed a bullish crossover. Watch to see if prices could
break above its all-time high of S$0.475. Our retail
research has a fundamental BUY with a target price of
S$0.525.

Courts Asia (COURTS SP, RE2) –
Technical BUY with +12.8% potential return
Last price: S$0.78
Resistance: S$0.88
Support: S$0.76
BUY with a target price of S$0.88 with tight stops placed
below S$0.755. The stock may continue its rebound
after prices rebounded from its lower Bollinger band,
and may move towards its middle Bollinger band. Its
RSI indicator has also rebounded from a reading of 20,
with its MACD histogram turning up. Watch to see if
prices could break above S$0.80. Our retail research
has a fundamental BUY with a target price of S$1.14.

Ezion Holdings- Channel check: Key takeaways from company visit.(EZI SP/BUY/S$2.37/Target: S$2.85)
FY13F PE (x): 11.3
FY14F PE (x): 8.7
Competition is still not in sight. Ezion continues to be the only player in the
liftboat market in Asia. Its fleet of liftboats and service rigs has increased to
27 units from 17 a year ago. Ytd, Ezion has won seven new charter
contracts. Given the high ROE of these projects, it is a surprise that thus
far, competition to Ezion has still not emerged. Management gave its
rationale: Liftboats operating in Asia are niche assets as their designs have
been modified from the original American designs. For competition to
emerge, Ezion’s competitors would need to offer designs that are suitable
for Asian waters. For asset investors who are non-oil & gas specialists,
they may not have adequate knowledge of Asian offshore oil & gas market
- and hence the confidence - to invest in these niche assets.
Maintain BUY. Our target price of S$2.85 is pegged at 11x 2014F
fullydiluted EPS (adjusted for dividends on perpetual securities and
preference shares). This is 15% above the long-term 1-year forward PE
mean of 9.5x for the offshore support vessel-owner segment of the
offshore & marine sector.

From DBS:
Silverlake Axis reported FY13 (Jun YE) profit of RM196m,
2% ahead of our estimate due to slightly better gross
margins coming in at 63.7%. Revenue of RM399m, flat yo-
y, was inline. Gross margins improved significantly due
to lower hardware sales and rise in software licensing and
maintenance revenue. Better than expected dividends
with payout ratio of ~80%. Proposed final dividend of
Singapore 1.1 Scts, resulting in total FY13 DPS of 3.1 Scts,
up 63% y-o-y, exceeded our 2.6S Scts forecast. The stock
is trading at FY13 dividend of 4.1% now. We will provide
more updates post discussion with management.

Local Brokerages Stock Call 26 August 2013

From OCBC:
CPO Stocks : Outlook still fairly muted
Summary: Most CPO (crude palm oil) companies reported fairly disappointing 1H13 results recently, no doubt hurt by weaker CPO prices in 2Q13 (CPO prices fell 25% YoY and another 5% QoQ). But going forward, the outlook for CPO prices remains largely muted, given the sluggish economy, as well as the expected rise in production of vegetable oils. While most of the plantation stocks have corrected quite a bit of late, making valuations less demanding, we note that there could still be earnings disappointments for upstream players should CPO prices fall further. We have a SELL on GAR and are reviewing our Hold rating on GPR. While we have a HOLD on WIL, its downstream business may be vulnerable to further economic contraction in China.  


From UOB:
Highlights
We remain selective given limited earnings visibility as we approach
2014.
M1 is our preferred pick among telcos due to its attractive valuation
and sustainable dividend policy
We prefer Keppel Corp (Keppel) over SembCorp Marine (SMM) on
firm offshore & marine (O&M) margins.
Suntec REIT (Suntec) will benefit from an office sector turnaround
and its asset enhancement will boost rentals and property income

M1 (M1 SP, B2F) –
Attractive dividend; potential for special dividend
(BUY/Target: S$3.58)
M1’s management guided a moderate growth in earnings for 2013.
It continues to evolve into a triple-play telco and will invest to further
modernise its 3G network. It recently launched its new internet TV
service, and also expects the adoption of fibre broadband to
accelerate in 2013, which should improve its margins. The company
has a dividend policy of paying out 80% of net profit. The remaining
20% could be paid as special dividends if there is no urgent need
for additional capex. Assuming M1 pays out the 20%, total dividend
for 2013 could reach 18 S cents, and this improves the dividend
yield to 5.6%. M1 remains our preferred pick for the telco sector due
to its attractive valuation and sustainable dividend policy. We have
a BUY and DCF-based target price of S$3.58.
Technically, the stock could be forming another top should it be well
supported near S$3.10. The stock may top at S$3.55. The next
support is at S$2.90.

Keppel Corp (KEP SP, BN4) –
O&M margins appear to be bottoming
(BUY/Target: S$13.50)
We prefer Keppel between the two shipyards after they delivered
differing performances. In terms of margins, Keppel’s O&M margins
appear to be bottoming out at 14% while SMM’s is still at a low
10.5%. We have adjusted our earnings projections on this improved
operating margin outlook for Keppel. In terms of contract wins,
Keppel has won S$4b worth of contracts ytd, on track to meet our
full-year forecast of S$6b. SMM has a ytd contract win of S$3.5b.
We prefer Keppel with a SOTP target price of S$13.50.
Technically, the stock could have a technical rebound with
immediate support at S$10.14 and needs to break above S$10.75
for further upside.

Suntec Reit (SUN SP, T82U) –
Office sector turnaround; successful AEI
(BUY/Target: S$1.95)
In the property space, the main disappointments came from
developers while REITs were generally in line. Most office REITs
reported positive rental reversion, which reaffirms our positive view
on the office sector. On this note, we re-iterate our BUY call for
Suntec. We expect Grade-A office rentals to rise 8% in 2014 and
office demand to rebound, which should bode well for Suntec.
Furthermore, phase 1 of its renovations has progressively opened
since June with rents higher than management’s projections and
existing mall rentals. We have seen good foot traffic despite
minimal marketing efforts. As for phase 2, 70% has been precommitted
with majority of the large anchor spaces taken up. Our
target price of S$1.95 is based on a dividend discount model.
Technically, the stock looks poised for a technical rebound from
S$1.49/1.42 and is likely to be resisted near S$1.62.

Sabana Shari’ah Compliant REIT - Proposed acquisition of AMD
factory for S$68m.
(SSREIT SP/HOLD/S$1.135/Target: S$1.29)
FY13F DPU (S$ cent): 9.6
FY14F DPU (S$ cent): 9.3
Proposed Acquisition Of AMD Factory For S$68m. Sabana is proposing to
acquire AMD’s factory building for S$68m. Although AMD has only
committed to take up 50% of the facility, we anticipate that the well-located
facility will gradually see higher occupancies. We remain cautious in the
near term due to the expiry of the master-leases and potential equity-fund
raising as gearing approaches 40%.
We maintain HOLD with a higher target price of S$1.29 (from S$1.27),
based on DDM (required rate of return: 8.1%, terminal growth:1.8%). Entry
price is S$1.12. We raise our 2014-15 DPU estimates by 3-5% to factor in
the impact of the acquisition and also higher future occupancies for the
acquisition. Key near term risks remain the expiry of the master-leases in
Nov 13 and also potential equity fund raising to fund further acquisitions.

From Maybank KE:
China Minzhong: Earnings Preview; Buy TP $1.36
MINZ SP | Mkt Cap USD520m | ADTV USD2.4m
China  Minzhong  will  publish  its  4QFY6/13 results this Thursday
before  market.  We are looking at revenue of RMB685m and net profit of
RMB164m. Possible YoY and QoQ decline are due to seasonality reason.
In  our  view,  there are two short term catalysts for Minzhong: 1)
supply contracts from Indofood and 2) first dividends payout since IPO,
which could help to argue for a re-rating case for the stock.
Recent developments of the company include the first-time credit
rating (Ba3) given by Moody’s and the issuance of USD150m syndication
loan underwritten by Citibank and Standard Chartered. In our view, this
could help to rebuild investors’ confidence. Maintain BUY and TP
SGD1.36, pegged to historical average of 5x FY6/14 PER.

Economics
Singapore CPI, July 2013 - Up Slightly, To Stay Moderate This Year
Inflation  rate  in  July  2013 increased slightly to +1.9% YoY (June
2013: +1.8% YoY) on higher transport and food costs.
However, core-inflation rate (CPI excluding accommodation and private
road  transport)  moved  in  the  opposite  direction  as it moderated
slightly  to  +1.6%  YoY  (June  2013:  +1.7%  YoY) amid moderation in
accommodation costs.
With inflation rate in the first seven month of 2013 at +2.7% YoY, we
have  adjusted  our  full-year forecast to +2.5% from +2.3% previously
(2012: +4.6%).  Official forecast is 2%-3%.

From DBS:
Asia’s emerging markets sold off last week as the derisking
trend continues. DBS Research says while shortterm
pressure may still persist, a repeat of the 1997 Asian
financial crisis (AFC) is unlikely. The accelerated currency,
bonds and equity market slides accentuated the downside
risks to growth as sentiments weakened. But the bigger
and longer lasting reason behind capital inflows into Asia
has always been structural and it will soon return. In the
context of ASEAN, Singapore looks resilient. But a slow
growth and a tightening environment is unlikely to drive
the index.

For the Singapore market, the reversal in fund flows out
of Asia and emerging markets back to developed
economies, triggered by the anticipation of QE tapering,
rising US 10-year treasury yields and a rebound in the
USD, Euro and GBP had exposed the structural
vulnerabilities of emerging market economies with high
current account deficits. While the Singapore market has
outperformed regional bourses, we expect a rocky ride for
Singapore equities, held hostage by the still developing
emerging markets uncertainties.

STI has fallen 10% to 3088 since May 22 when FED
Chairman first hinted of QE tapering. We are close to the
support level of 3050, at 13.1x PE (-0.5SD). Consensus
has been expecting the FED to start to taper in Sept, a
positive signal that the US is on a firmer footing for
recovery, which could provide some stability to the
market. Recovery names should outperform in this
situation while yield sensitive sectors such as SREITs will
remain under pressure. If tapering of QE is pushed back,
volatility continues, and could push STI to test 2900 (12.9x
PE or -1 SD) if the selldown in emerging economies
continues. 

Growing optimism about the improving US recovery and
Europe’s economy moving past the recession trough
should see a return in interest among recovery names and
companies with significant revenue exposure in both
regions. Technology stocks are early recovery plays – CSE
and Venture have significant exposure to US/Europe and
offer attractive yields of 4.7% and 6.7% respectively.
Selected industrials – Ezion and Goodpack will leverage
on their niche positions in the global arena. Stocks with
earnings visibility supported by yield are likely to remain in
favour - our picks are SingPost, Comfort Delgro, ST
Engineering and Hutchison Port. Avoid stocks with
exposure to emerging markets which are likely to
Underperform - Petra, Acott REIT, Religare, AIT and
SingTel. 

4Q13 core earnings for Amtek Engineering were below
but sequential improvement suggests worst is over for
now. New programmes and continuous cost
management are expected to drive core earnings growth.
Upgrade to HOLD, upped TP to S$0.48 on earnings
rollover to FY14F. 

Local Brokerages Stock Call 6 August 2013

From OCBC:
United Envirotech: Decent 1QFY14 start
Summary: United Envirotech Ltd (UEL) reported 1QFY14 revenue of S$44.1m, +37.5% YoY (but -5.9% QoQ), meeting 14.2% of our FY14 forecast, while net profit slipped 2.6% YoY and 18.9% QoQ to S$5.7m, or about 12.5% of our full-year forecast. We deemed it to be a decent start as its fiscal first quarter tends to be seasonally softer. Going forward, management remains upbeat about its prospects in China, where the Chinese government has a planned investment on CNY4t in water resources by 2020; it adds that China is consistently tightening the effluent discharge standards. But we are tweaking our FY14 estimates slightly lower (revenue by 7.4%, earnings by 5.1%) to account for a likely smaller EPC pipeline. Our fair value also eases slightly from S$1.03 to S$0.975, still based on 13x FY14F EPS. Given the limited upside after the recent outperformance, we downgrade it to HOLD. 

Valuetronics Holdings: Discontinuing coverage 
Summary: Valuetronics Holdings Limited (VHL) will begin FY14 on a fresh page, as it will no longer incur losses on its Licensing business following its decision to terminate operations in 2QFY13. Any recovery in VHL’s earnings will likely translate into higher dividends for its shareholders, in our view, as VHL had a relatively stable dividend payout ratio of 37-42% from FY10-13. This is also supported by VHL’s strong net cash position. Looking ahead, we believe that VHL will focus its attention largely on its LED lighting OEM business, given the robust industry growth prospects and its largest customer’s market leadership position in this field. However, given the continued lack of trading liquidity in VHL’s stock and a reallocation of resources, we are CEASING COVERAGEon the stock. Our last rating was a ‘Hold’ with a fair value estimate of S$0.195.

City Developments Limited: 2Q13 PATMI up 48% YoY
Summary: CDL’s 2Q13 PATMI increased 48% YoY to S$203.8m, mostly due to disposal gains from several industrial property assets. 1H13 PATMI now cumulates to S$341.5m which makes up 49% of our full year forecast. We judge this to be mostly in line with our expectations. Residential sales performances remain firm, with 2013 launches D’Nest, Bartley Ridge and Jewel@Buangkok showing healthy sell-through rates to date. In 2H13, the group expects to launch a mixed use JV project at the junction of Upper Serangoon Rd and MacPherson Rd near Potong Pasir MRT. Hotel subsidiary Millennium and Copthorne Hotels’ (M&C) 2Q13 PATMI decreased 17.7% YoY as 181k net rooms were taken out of the supply due to enhancement works. 1H13 global REVPAR, however, was up 4.1% to GBP71.27; AOR and ARR increased by 0.7 ppt and 3.1%, respectively. The group also announced a special interim dividend of 8 S-cents per share. Maintain HOLDon CDL with our fair value estimate of S$12.04 (15% RNAV disc.) under review. 

From Maybank KE:
 Yongnam Holdings: Still In With A Chance; Maintain Buy, TP $0.465
 YNH SP | Mkt Cap USD305.0m | ADTV USD4.6m
 2Q13  results were mostly within expectations, including a one-off SGD5.1m
 provision. Excluding this item, net profit was up 13% yoy and 19% qoq.
 Profit  growth  was  driven  by  revenue  which grew 48% on recognition of
 projects.   We   expect   gross   margins  to  improve  going  forward  on
 better-priced  contracts  and  a higher revenue mix from civil engineering
 (strutting) which has higher margins.
 Both  the  Myanmar  airport  projects  have  yet to be officially awarded,
 despite  ongoing  speculation.  We  believe current share price represents
 good opportunity to accumulate. Maintain BUY.

 Sarin Technologies: More Potential Rewards Await; Maintain Buy TP $1.86
 SARIN SP | Mkt Cap USD414.0m | ADTV USD0.2m
 2Q13  results  were  ahead  of our expectations with net profit of SGD8.1m
 (+26%  YoY,  +3%  QoQ). 1H13 net profit makes up 53% of our previous FY13F
 forecast.  Sarin  also  declared  higher-than-expected dividends of 4.0 US
 cts/sh.  We see the possibility of even higher dividends in 2H13, implying
 FY13F yield of 6.5%
 Sales  of GalaxyTM were exceptionally high in 2Q13 due to pent-up purchase
 which  was  put  off  in  end  1Q13 by India customers. Sarin is generally
 upbeat  on  long-term  prospects,  but  cites  possible weaker 3Q13 due to
 macroeconomic  challenges  in China and India, as well as the narrowing of
 spread between rough and polished diamond prices.
 We  see  the  possibility of even higher dividends in 2H13, implying FY13F
 yield  of  6.5%.  We  roll  forward  our  valuations  to blended FY13F/14F
 earnings maintaining a 15x PER multiple. Consequently, our TP is raised to
 SGD1.86, implying a 21% share price upside 

From DBS:
Yongnam’s 2Q13 results were below expectations on weak
margins. Delay in Yangon Airport tender results weakens
stock catalyst. Weaker outlook as margins remain muted and
order book shrinks. We have cut FY13F/FY14F earnings by
44%/25%. Downgrade to FULLY VALUED, TP S$0.28 (Prev S$
0.41).

Sales for United Envirotech in line, but net profit fell short due
to lower Treatment margin. Capacity utilization is on track to
meet our full year expectation, but EPC wins are behind
target. We have cut FY14/15F earnings by 13%/15% to
reflect lower Treatment margin and EPC revenues. Maintain
HOLD rating, nudged down TP to S$0.90 (Prev S$ 0.97).

 

Local Brokerages Stock Call 5 August 2013

From OCBC:
Golden Agri-Resources: Downgrade to SELL; poor 2Q13 showing
Summary: Golden Agri-Resources (GAR) saw 2Q13 revenue jumped 25.4% YoY and 17.6% QoQ to US$1682.3m, but weaker margins on the back of softer CPO prices led to core earnings tumbling 52.3% YoY and 50.0% QoQ to an estimated US$55.1m. 1H13 revenue grew 8.8% to US$3112.4m, meeting 49.7% of our FY13 forecast, while net profit tumbled 41.5% to US$158.1m; core earnings slipped 40.9% to US$165.2m, or just 33.7% of our full-year forecast. In view of the worse-than-expected showing and likely more margin compression ahead, we opt to slash our FY13 core earnings forecast by 19%; this in turn drops our fair value from S$0.57 to S$0.465, now based on 11x blended FY13/FY14F EPS. We also downgrade our call from Hold to SELL.

Global Premium Hotels: 2Q13 in line
Summary: The 2Q13 results for Global Premium Hotels (GPH) were generally in line with our expectations. Revenue climbed 1.0% YoY to S$15.m and gross profit rose 1.1% to S$13.m. Administrative expense fell 19.4% to S$5.5m mainly due to one-off recognition of IPO expenses of S$1.4m in 2Q12. Interest expense was 9.8% higher at S$1.9m due to the restructuring exercise undertaken by GPH pursuant to the IPO in 2Q12. 2Q13 net profit climbed 36.2% to S$4.9m. 2Q13 hotel room revenue increased 1.3% YoY to S$15.1m. RevPAR was 2% higher at S$95.7, chiefly due to higher average occupancy rate of 93.1%, up 3.4 ppt. We expect 2H13 to be slightly better than 1H13 because we understand from industry sources that the sector as a whole has seen some stabilisation in Jul and Aug. Using a 10% discount to RNAV, we maintain our fair value of S$0.33 and BUY rating on GPH. 
 
Singapore Post: In Post we still trust
Summary: Singapore Post (SingPost) reported a 32.8% YoY rise in revenue to S$201.3m but saw a 2.0% decrease in net profit to S$37.3m in 1QFY14, such that the latter accounted for 25.3% of our full year estimates. Underlying net profit fell slightly by 0.9% to S$36.2m in the quarter, in line with our expectations. Margins continued to normalise as expected, while the group’s cashflow generation remained strong. In line with its usual practice, SingPost has proposed an interim quarterly dividend of 1.25 S cents/share. We look forward to the group’s transformation as it seeks more growth opportunities, but till then, we see limited upside potential unless earnings growth from its acquisitions proves better than expected. Still, we expect the share price to be supported by investors seeking yield (~4.8% FY14F). Maintain HOLD with S$1.32 fair value estimate. 
 
StarHub – Offers S$300 rebate for new BPL customers
Summary: StarHub Ltd has announced its “Surf & Watch” bundles specifically aimed at welcoming BPL fans home. Priced from S$47.37/month with a 24-month contract, subscribers (new and those without a contract) will get 25Mbps cable home broadband, its Deluxe HD Pack (82 channels) and a S$300 rebate; note that subscribers will have to pay SingTel S$59.90/month directly for the BPL content. According to StarHub, the rebate will be part of its Marketing & Promotions expense, and will not affect the Pay TV cost. However, as the bundle involves its older cable broadband, there could be limited appeal versus the newer NBN fibre network. We also see limited traction for existing SingTel subscribers who can continue to pay S$34.90/month for BPL. For now, we maintain SELLon StarHub with an unchanged S$3.82 fair value.

United Envirotech: Decent 1QFY14 start
Summary: United Envirotech Ltd (UEL) this morning reported 1QFY14 revenue of S$44.1m, +37.5% YoY (but -5.9% QoQ), meeting 14.2% of our FY14 forecast, while net profit climbed 3.5% YoY (down 13.8% QoQ) to S$6.1m, or 12.5% of our full-year forecast. According to management, the higher revenue came from a 23.3% YoY jump in Engineering revenue to S$31.2m, while recurring Water Treatment revenue surged 89.7% to S$12.9m. Note that its fiscal first quarter tends to be seasonally softer. Going forward, management intends to grow its recurring treatment income further and focus on securing more industrial wastewater treatment projects in China. We will speak more with management for further updates. For now, we place our Buy rating and S$1.03 fair value under review. 

From DBS:
Light trading activity is likely in this holiday shortened week
that could exaggerate price action even as the 2Q results
soldiers on. To date, slightly less than half of the stocks in our
portfolio have reported their quarterly earnings. 71% came in
within while 24% was below expectations. However, we
have cut FY13F and FY14F earnings by 1.2% and 0.6%
respectively. Results on tap next week include ARA on
Monday; City Dev, Genting, Wilmar, StarHub and SembCorp
Inds on Tuesday and Biosensors, Ezion, UOL and NOL on
Wednesday.

OCBC reported strong revenues ex-GEH. 2Q13 earnings were
in line with our expectations but below consensus. Loan
growth was strong at 7% q-o-q /15% y-o-y; this prompted
higher general provisions. Indonesian and Malaysian
operations improved q-o-q largely from strong loan growth.
However, guidance remains cautious. We have assumed a
conservative run rate of 1% loan growth per quarter (1H13
YTD: 10%), raising FY13F loan growth to 12% (FY14-15F at
9% per year). OCBC has declared 17 Scts DPS, no scrip
dividend applied. Upgrade to BUY, TP raised to S$12.40 (Prev
S$ 11.50), as we rolled valuation base to FY14.

1Q13 underlying profit for Singapore Post of S$36.2m (-0.9%
y-o-y, +13.8% q-o-q) was slightly below estimate due to
forex losses; declared S$1.25 Scts interim DPS, in line. We
have trimmed FY14F/15F earnings by 3%. SingPost is
transforming into a major E-commerce player in Asia, where
it can ride on last mile delivery network of postal peers in
various countries. Maintain BUY with a revised TP of S$1.50
(Prev S$ 1.56). SingPost has S$146m net cash for more
acquisitions.

Golden Agri (GGR) booked 2Q13 core earnings of US$45m (-
60% q-o-q, -58% y-o-y), significantly below our expected
range of US$110-126m. 2Q13 earnings thus brought 1H13
earnings to US$158m (-41% y-o-y), or 37% of our initial
FY13F earnings of US$423.8m. Compared to FY12 consensus
expectations of US$417mm the group's earnings were also
below on annualised basis. The poor results were dragged by
drop in CPO prices, drop in output and higher than expected
operating expenses. We lowered our FY13F/FY14F/FY15F
earnings by 20%/20%/16% to US$332.5m / US$388.6m /
US$485.4m, respectively. This consequently lowers our DCF
valuation on the stock to S$0.45/share, or 15% lower than
our previous estimate of S$0.53. Counter is NOT RATED.

From DMG:
Hi-P’s strong 2H performance seen. HIP’s 2QFY13 results were
 in line with our estimates as PATAMI swung from negative a year
 ago to SGD10.9m on the back of revenue of SGD285.0m 
(+13.2% y-o-y). As its existing clients are ramping up their new 
programs, Management is upbeat on its 2H performance. 
Management is now guiding for a better 2H performance (compared
 to 1H) in view of the new programs ramp-up by its existing customers.
 As we highlighted in our previous reports, we believe HIP will play 
an important role in the production chain of upcoming mid-end 
smartphones such as Apple’s new lower-priced iPhone. Management
 also said the group is now able to achieve decent yields from these
 projects despite the steep learning curve. In view of HIP’s strong 
operating cash flow and net cash pile of SGD85.2m, we see a 
possibility of the group buying back its own shares, similar to what
 it did a few days after it released its 1QFY13 results. In the last 
buyback, it bought a total of 7.5m shares amounting to SGD6.1m,
 with the highest price being SGD0.845/share. This will provide 
downside support to its share price. Reiterate BUY, with an
 unchanged SGD0.96 TP, based on a blended 13.5x FY13/FY14 P/E,
 -1 SD on the stock’s 3-year historical forward P/E.

Selldown Unwarranted As Share Sale Misconstrued. 
NeraTel’s CEO, Mr Samuel Ang recently sold off all shares under 
his name and the market reacted extremely negatively to the news.
 On the contrary, our checks show Mr Ang effectively increase stakes
 as the parent PE fund Northstar allowed him to hold more stakes 
of the company in order to incentivise and retain the CEO. Northstar, 
the current parent of NeraTel, is an Indonesian USD1.2bn private 
equity firm with a long solid track record, partnering with institutional
 giants such as GIC and TPG. Recent deals include the Indonesian
 national bank TPN’s exit, where sources confirmed that Northstar 
stood to gain a 7x return. Similarly, Northstar also set a target for 
NeraTel to achieve, doubling profits in three years’ time. As such,
we opine that NeraTel’s future is a bright one. Reiterate BUY with
a higher TP of SGD0.93 based on 11.4x blended FY13/14 PE 
(+1 S.D 5-year historical forward P/E).

From Maybank KE:
OCBC: MTM Losses A Drag in 2Q13; Maintain Hold TP $10.90
OCBC SP | Mkt Cap USD28.9b | ADTV USD34.5m
OCBC’s 2Q13 results were below our expectation at 44% of our
full-year forecast, but generally within consensus. The variance was
due primarily to MTM losses for the insurance division.
Expectations are for the yield curve to steepen further and
earnings volatility is likely to persist awhile longer for the group.
Our earnings are cut by about 11-12% for FY13-15.
Our TP is reduced to SGD10.90 from SGD11.30 on rolling
forward valuations to 2014 and on a lower P/BV of 1.4x (1.5x
previously) to factor in higher market volatility risk.
 
Cordlife Group: Rumoured relaxation of China’s one child policy; Buy TP
$1.29 CLGL SP | Mkt Cap USD192.3m | ADTV USD6.8m
According to a Chinese press report, there is a strong rumor
that China may relax its one child policy by the end of 2013 and fully
implement the policy in 2015. China’s baby stocks have reacted
positively on this.
If realized, this will be great news for Cordlife as it holds 10% stake in 
China Cord Blood Corp, the largest cord blood player in China with 
operations in 4 provinces which in aggregate account for 73% of China’s 
newborn population.
To sum up, Cordlife is in a good stead to reap the benefits
of the high potential China cord blood market. We maintain our positive
view on the stock and reiterate BUY with TP of SGD1.29 (23x FY14F PER).
 
Singapore Land: Slow and Steady, But Lacks Catalysts; Hold TP $9.75
SL SP | Mkt Cap USD3.0b | ADTV USD0.7m
SingLand’s 2Q13 core PATMI came in at SGD48.3m (-3% QoQ;
+14% YoY), taking 1H13 core PATMI to SGD97.7m (48% of our full-year
estimate) and in line with expectations.
Recurrent income remained largely stable, but we see little
immediate upside from office rental reversion and hotel operations.
Residential sales have also been weak at Mon Jervois.
SingLand still remains a potential privatisation candidate
(free float down to 11.5%), but it is currently trading close to our TP
of SGD9.75. Maintain HOLD.

Local Brokerages Stock Call 2 August 2013

From OCBC:
Sembcorp Marine: New yard opens at a time of record order book
Summary: Sembcorp Marine (SMM) reported a 7.6% YoY fall in revenue to S$1.12b and a 12.5% decrease in net profit to S$124.9m in 2Q13, such that 1H13 figures accounted for about 43% of our full year estimates, which we judge to be largely within our expectations. The last quarter saw fewer projects achieving initial recognition; more are expected in 3Q13. The new Tuas yard should also see revenue contribution in 2H13. Operating margin in 2Q13 was 13.0% vs 13.1% in 2Q12. After securing new orders worth about S$3.5b YTD, the group’s net order book stands at S$14.4b, a record high in SMM’s history. Meanwhile the stock price has appreciated by about 7.3% since our last report on 6 May 2013, and has outperformed the STI by about 11.1% over the same period. Maintain BUYwith S$5.64 fair value estimate.

UOB: Stronger 2Q and modest rise in NIM
Summary: UOB posted 2Q13 net earnings of S$783m, better than consensus estimate of S$699.9m. Net Interest Margin improved modestly from 1.70% in 1Q13 to 1.71% in 2Q13. For the Fee and Commission income, the key outperformers were its Investment-related and credit card operations which showed both YoY and QoQ improvements. Management has declared an unchanged 1H dividend of 20 cents. The group is continuing with its strategy of growing its regional franchise. For its Wealth Management business, AUM has grown from S$48b in 2010 to S$71b as of Jun 2013. We have adjusted our FY13 estimates, lowering impairment charges and increasing operating expenses. We are maintaining our HOLD rating and our fair value estimates of S$22.97, but will turn buyer at S$21.40 or lower.

Roxy-Pacific Holdings: $1.1b of revenues to drive earnings growth
Summary: 2Q13 PATMI is S$19.5m (EPS: 2.05 S- cents) which increased 10% YoY due to higher property development profits. 1H13 PATMI now cumulates to S$31.2m, forming 40% of our full year forecast. We judge this to be within expectations; earnings are likely to be backloaded in FY13, particularly with an anticipated one-time boost from Wis@Changi upon its TOP in 2H13. The group now sits on S$1.1b of yet unrecognized revenues from sold units – this is equivalent to 8 times FY12 property revenues and would underpin a rigorous earnings growth profile ahead in our view. Maintain BUY with an higher fair value estimate of S$0.81 (25% discount to RNAV) versus S$0.76 previously as we update for latest sales datapoints and a reduced RNAV discount. Key catalysts in 2H13 ahead include the launch of LIV on Wilkie and an earnings boost from Wis@Changi’s TOP. We also see a bonus share issue as a possibility in 2H13, which could help the counter’s uneven trading liquidity.

COSCO Corp (Singapore): Another weak quarter
Summary: COSCO Corp (Singapore)’s revenue for 2Q13 declined by 9% YoY to S$890m, while net profit fell by 56% to S$12.0m. For 1H13, the group’s net profit fell by 61% to S$21.8m, forming 45% and 29% of ours and the street’s FY13 estimates respectively. As its operating weakness is more severe than what the street had expected, we think that the street would likely lower its FY13F forecasts. The group’s balance sheet is debt-laden with net debt-to-equity ratio at 1.4x and S$1.3b of loans due within 12 months. Should the credit situation in China deteriorates further, the group may become vulnerable. Maintain SELL with unchanged FV of S$0.60.

Lippo Malls Indonesia Retail Trust: 2Q13 results as expected
Summary: LMIRT posted 2Q13 gross rental income of S$40.1m, up 30.2% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions of 15.5% for the existing malls. Distributable income increased by 19.5% YoY to S$20.5m and DPU climbed 17.7% YoY to 0.93 S cents. Results for the quarter were in line with our and consensus expectations. 1H13 DPU of 1.82 S cent forms 50.6% of our FY13 estimate. We maintain our HOLD rating on LMIRT but place our fair value of S$0.52 under review.

Sembcorp Industries: Investing in its second energy-from-waste plant in Singapore
Summary: Sembcorp Industries (SCI) announced that it will invest over S$250m to build, own and operate a facility capable of producing 140 tonnes/h of steam using industrial and commercial waste collected by its solid waste management operations. This will be SCI’s largest energy-from-waste plant in Singapore to date (also its second one here), and will be located on Jurong Island. The project will be funded by bank borrowings and internal resources, and will be completed in early 2016. SCI has a track record of managing such facilities, and its portfolio includes energy-from-waste, biomass and wind power facilities in the UK and China. Maintain BUY with S$6.48 fair value estimate on the stock. 

From DBS:
UOB’s 2Q13 earnings were slightly above expectations
from lower provisions; pre-provision profits were in line.
UOB is focusing on total customer returns and regional
growth. We raised loan growth to 13%, in line with
guidance of low-to-mid teens. A 20 Scts DPS was declared
but no scrip dividend applied. Our FY13-15F earnings
forecasts are raised by 1-3% after adjusting for higher
loan growth. TP is lifted to S$21.90 (Prev S$ 20.10) as we
roll over our valuation base to FY14. Upgrade to HOLD.

OCBC’s 2Q13 results were inline with ours but below
consensus. Ex- Great Eastern Holdings, non-interest
income was strong. 2Q13 net profit came in at S$597m (-
14%q-o-q; -8% y-o-y) mainly dragged down by GEH nonpar
fund losses (as a result of bond yield volatility in June).
NIM was stable at 1.64%. Provisions were higher mainly
from general provisions which increased with strong loan
growth. An interim dividend of 17 S cts was declared;
scrip dividends are not applicable. More updates after
briefing this morning.

2Q net earnings for SembCorp Marine down 12.5% y-oy,
marginally below. Operating margins declined to
11.8% from 13.7% (1Q13). New orders are on track,
strengthening order book to S$14.4b. We expect stronger
2H from higher order book drawdown and repair
revenue. Upside to earnings could come from the sale of
ARV3, which is now operating on a 5 year charter in
Brazil. We have trimmed FY13F net earnings by 3% as we
have assumed lower EBIT margin of 12% vs 12.4%
previously. Stock is fairly valued at PE of 17.5x (FY13),
maintain HOLD.

2Q13 results for Cosco Corp below due to forex loss. The
group is under pressure to fill yard capacity. We lowered
our below consensus FY13 forecast by a further 12% to
account for the forex loss. Maintain FULLY VALUED; TP
S$0.75
On contract wins, Cosco has secured a contract worth
over RMB590m from a Chinese company to build two
deep water platform supply vessels. Both of them are
scheduled for delivery in the second quarter of 2015. It
also announced contract valued over US$170m from a
European company to build one Jackupdrilling rig. The rig
is scheduled for delivery in the 3rd quarter of 2015. YTD,
contract wins form 60% of our order win assumption of
US$2bn.

Hi-P reported 2Q13 net profit of S$10.9m, in line; formed
39% of FY13F. Outlook is positive, driven by multiple new
product launches in 2H13. Maintain BUY, TP raised to
S$0.97 (Prev S$ 0.88) as valuation is rolled over to
blended FY13/14 EPS.

2Q DPU of 2.63 Scts for Parkway Life REIT was within
expectations. Hedges were in place to counter impact of
weaker JPY. The REIT is on track to meet FY13F earnings.
Maintain HOLD, TP adjusted to S$2.49 (Prev S$ 2.57) on
higher risk-free rate assumption.

Underlying earnings for HongKong Land were 17%
ahead of our estimate due to higher development
earnings and rental income. We expect encouraging
residential sales to add to growth momentum.
Maintain BUY with US$7.94 TP.

From Maybank KE:
DBS Group: 2Q13 In Line, Danamon Off; Maintain Buy TP $20.00
DBS SP | Mkt Cap USD33.1b | ADTV USD64.5m
Maintain  BUY  on  DBS  with  an unchanged Street-high TP of SGD20,
pegged  to  a  rolled  forward  2014  P/BV  1.3x  (1.4x  previously) on
factoring in higher market volatility risk.
DBS’  2Q13  results  were within our expectation and consensus. Our
forecasts are maintained. That the Danamon deal is off is a setback for
the group but it does clear a large overhang issue on the stock.
Near-term  prospects remain robust and the group is well-positioned
to ride steepening yields/rising interest rate trends.
 
Sembcorp Marine: Efficiency Is The Focus; Maintain Buy, TP $5.20
SMM SP | Mkt Cap USD7.5b | ADTV USD14.6m
2Q13 PATMI of SGD125m (-13% YoY, +5% QoQ) was lower than our preview
figure of SGD162m, but can be explained by the lower revenue recognised
which  is  entirely  a timing issue (we forecasted SGD1.4b in revenue).
More  importantly, op. margin of 13.0% was within our expected range of
12-13%.
The  key  focus  of  the  analyst  brief  was  on  SMM’s efficiency
enhancement  plans.  We came away more positive of its well thought-out
plans and believe that these could alleviate the risks in Brazil and be
an added support to sustain overall margins.
Orderbook  momentum remains on track to meet our full-year forecast
of  SGD5.2b  with  YTD  order  win  of  SGD3.5b. Net orderbook breached
another  record high at SGD14.4b. Maintain Buy, SOTP-based TP unchanged
at SGD5.20.
 
UOB: 2Q13 Results Within Expectations; Maintain Sell TP $20.50
UOB SP | Mkt Cap USD27.0b | ADTV USD40.5m
Maintain  contrarian  SELL with an unchanged TP of SGD20.50, rolled
forward  to FY14 on a lower P/BV of 1.2x (1.3x previously) to factor in
higher market volatility risk.
UOB’s 1H13 net profit of SGD1.5b was within our expectations (53% of
full-year) but above consensus (56%).
Results  were  fairly  lackluster  as  bottomline growth was driven
primarily by lower provisions and a one-off associate gain.
UOB’s  higher  exposure to the domestic property sector remains our
primary  concern,  and  for  which  we  believe  a discount to peers is
warranted at this stage.
 
Cosco: The Going Gets Tougher; Maintain Sell, TP $0.65
COS SP | Mkt Cap USD1.3b | ADTV USD1.3m
Cosco  reported 2Q13 PATMI of SGD12.0m (-56% YoY, +24% QoQ), weaker
than  our  below-consensus forecasts. 1H13 net profit makes up only 35%
of  our  previous  FY13F  forecast.  We cut FY13F-15F net profits by by
27-36%. Maintain Sell, with TP of SGD0.65, pegged to 1.1x P/B.
Operating  margins  continue  to  be under pressure, trending lower
sequentially to 4.1% (1Q13:5.7%). We believe that yard underutilisation
in the next few quarters would cap any meaningful margin upside.
We flag the rising debt level which has pushed net gearing higher to
0.86x  (1Q13:0.82x)  as  Cosco  took  on  more  borrowings  to fund its
shipyard operations.

Local Brokerages Stock Call 1 August 2013

From OCBC:
Fortune REIT: MOU for Kingswood Ginza property
FRT has entered into a non-binding MOU in connection with the acquisition of 100% of the issued share capital of a target company by FRT and assignment of the shareholder loans to FRT. The target company owns Kingswood Ginza Property, which comprises the entire Kingswood Ginza Mall as well as other retail, kindergarten, parking lots and ancillary spaces. The indicative purchase consideration is HK$5,849m. 142,962,000 new units, representing an increase of 8.4% of the total number of units currently in issue (excluding the new units), have been placed out at HK$6.82 each. The net proceeds of ~HK$947m will be used to partially fund the proposed acquisition. The remainder will be funded through new facilities. In our model, we assume that the acquisition will be completed by mid-September. While the acquisition is likely to be accretive, we note the continued increase in bond rates since late June, and hence lift our risk-free rate to 2.3% from 2.0%. Incorporating a higher expected market return of 13.5% as well (13.0% previously), we lower our FV to HK$6.95 from HK$7.51. On valuation grounds, we downgrade FRT to a HOLD. 

DBS Group: 2Q in line; ended Danamon bid
DBS Group Holdings posted 2Q net earnings of S$887m this morning, up 10% YoY and -7% QoQ. This is in line with consensus estimate of S$883m. Net Interest Margin (NIM) eased off from 1.72% in 2Q12 and 1.64% in 1Q13 to 1.62% in 2Q13. Loans grew a decent 5% from last quarter to S$234.8b by Jun 2013. In terms of fee income, the top performers were Investment Banking, up 82% in 1H to S$111m, followed by Wealth Management (+44% to S$214m) and Stockbroking (+29% to S$119m). An unchanged interim dividend of 28 cents has been declared. Stock will trade ex-dividend on 15 Aug and dividend will be paid on or about 7 Oct 2013. Meanwhile, DBS has also announced last evening that the long delayed acquisition of PT Bank Danamon Indonesia has lapsed. However, while this is a slight disappointment for its Indonesian strategy, it is not totally unexpected as this proposed acquisition has been long delayed with no clear outcome. We do not expect the market to have included any possible contribution from this proposed deal and as such do not expect this to impact earnings forecasts for the next two years. Meantime, do note that our pre-results rating was a BUY with fair value estimate of S$18.28. We will provide more details after the media and analysts’ briefings later in the day.

Yoma Strategic Holdings: Key catalyst ahead - the Landmark Project
Yoma reported 1QFY14 PATMI of S$0.4m, which decreased 80.6% YoY mostly due to higher staff costs as the group continues to build up a strong management team in anticipation of future activity. We judge 1QFY14 PATMI to be below view – forming only 3.7% of our full year forecast – due to a slower than anticipated pace of recognition at Star City and higher staff costs. The group announced that it has entered into an agreement with a third party investor for the sale of LDRs for five buildings (1043 units) in Zone B of Star City and would receive incentive fees if certain sales targets to end buyers are met. We continue to await the completion of the Landmark Project acquisition, which would likely be a key catalyst for the share price ahead. Maintain HOLD with an unchanged fair value estimate of S$0.87 (20% premium to RNAV).

Singapore Post: Expecting another steady quarter
Singapore Post (SingPost) will be announcing its 1QFY14 results after market close on 2 Aug 2013. We expect net profit to be around S$35m, which would represent about 24% of our full year estimate. Expenses are likely to remain elevated due to inflationary cost increases, growth in volume-related expenses and other administrative costs and continued investments. Looking ahead, we expect the group to continue to grow inorganically as it will be the fastest way to diversify from the mail business. As the group increases its exposure to faster-growing businesses such as the logistics and e-commerce segments, we increase our terminal growth assumption from 1.5% to 2.0%, thus bumping up our fair value estimate from S$1.23 to S$1.32. Maintain HOLD. 

Far East Hospitality Trust: Rendezvous acquisition – Issue price for new stapled securities
Far East Hospitality Trust (FEHT) has announced the issue price of new FEHT stapled securities to be issued to the The Straits Trading Company (as partial consideration for the proposed acquisition of Rendezvous Grand Hotel and Rendezvous Gallery), the Far East Organization (FEO) group of companies (pursuant to the equity placement to the FEO group), and the REIT manager (as payment for 80.0% of acquisition fee payable in relation to the acquisition). The issue price is at S$0.9302 per stapled security, based on the volume weighted price for FEHT trades done on the SGX for the period of 10 business days commencing from the day on which the existing stapled securities trade ex-distribution i.e. the period from 18 July 2013 to 31 July 2013. The trading of the 148,304,059 in aggregate of new stapled securities is expected to commence today, 1 Aug, at 2pm. Pending the 2Q13 results which will be released next week, we maintain our FV of S$1.01 and HOLD rating on FEHT.

By DMG
DBS issued a statement yesterday that the long-stop date for
the acquisition of Bank Danamon is 1 Aug 2013, and the conditional share
purchase agreement will lapse thereafter. While it is unclear whether official
written notification was received from Bank Indonesia, DBS appears to be taking
the middle ground by allowing the share purchase agreement to lapse, in our
view. We think the more positive outcome would have been BI approving DBS’
acquisition of a majority stake while acquisition of a 40% stake in Danamon could
have led to an overhang due to lingering uncertainties regarding the lack of
control as well as whether DBS would eventually be allowed to hold a majority
stake in Danamon. The latest development does raise some questions with
respect to DBS’ longer term strategy for Indonesia, although DBS said it remains
committed to Indonesia and will continue to invest and grow the franchise there.
DBS also said that it remains open to opportunities as they arise. We are Neutral
on the latest development and await further details from the conference call later
today, which will discuss the announcement and the 2Q13 results. We have a
BUY on the stock with a TP of SGD18.70.

Kreuz: Initiation - Poised, But Not Priced, For Growth (BUY, SGD0.76,
TP: SGD1.14)
Kreuz (KRZ) is a fast-growing subsea services provider with very
strong margins and highly visible medium-term growth as its capacity
is set to more than double by FY16F. Given its very low 6% net
gearing and strong cashflow, KRZ is attractively priced at 7.1x FY13F
EPS and 19% growth. We initiate coverage with a BUY and SGD1.14
TP, based on 10x blended FY13F/14F EPS, and backed by a SGD2.05
DCF value.

Broadway Industrial: Outlook Dims (NEUTRAL, SGD0.275, TP:
SGD0.30)
Broadway Industrial (BWAY)’s 2QFY13 results were below estimates,
with a core PATAMI loss of SGD1.1m on the back of a 8.5% y-o-y drop
in revenue to SGD158.6m. We expect the Group to face an uphill task
in rationalising its HDD operation while garnering new clients to take
up excess capacity. Maintain NEUTRAL, with a lower SGD0.30 TP,
based on 0.6x FY13 P/BV (-0.5SD from the stock’s 5-year historical
mean).

SMRT: Weak 1QFY14 Results (SELL, SGD1.43, TP: SGD1.25
SMRT reported weak 1QFY14 results, with PAT tumbling 55% y-o-y to
SGD16.3m, slightly below our expectation. Positive catalysts in the
form of a new rail financing framework and new bus operational
framework may not be implemented anytime soon. We think that its
share price will continue to be weighed down by its weak earnings
amid persistent cost pressures. Maintain SELL, with DCF-derived TP
of SGD1.25.

Hutchison Ports Holdings Trust: Lower Throughput Hits 1HFY13
Numbers (NEUTRAL, USD0.74, TP: USD0.79)
HPHT’s 1HFY13 earnings missed forecasts due to weaker volume and
higher costs resulting from a strike by its union. Even incorporating
2H’s peak season, trade volume in Hong Kong may at best come in
flat y-o-y while that in Yantian will rise 3%-4% this year. We cut our
earnings estimates on the lower volume, which trims our FV to
USD0.79. Maintain NEUTRAL, as the stock’s yield is an attractive
6.4%.

From UOB KH:
Golden Agri-Resources (GGR SP, E5H) –
Technical SELL with +11.7% potential return
Last price: S$0.525
Resistance: S$0.59
Support: S$0.47
SELL with a target price of S$0.47 with tight stops
placed above S$0.55. The stock is likely to continue to
trend lower as its mid Bollinger band could be acting as
resistance. A break below S$0.52 is likely to see the
stock test S$0.47. Its MACD indicator has hooked
down. Watch to see if its negative DI could continue to
slope downwards with its ADX looking poised to rise.
Our institutional research has a fundamental SELL with
a target price of S$0.55.

GuocoLand (GUOL SP, F17) –
Technical BUY with +10.4% potential return
Last price: S$2.10
Resistance: S$2.565
Support: S$1.915
BUY with a target price of S$2.32 with tight stops placed
below S$2.04. The stock may continue its rebound after
prices broke above its declining 50-day simple moving
average and was supported by its mid Bollinger band
earlier. Its MACD indicator has crossed above its
centreline and its positive DI has crossed above its
negative DI. Watch to see if prices could first break
above its 200-day simple moving average. Our
institutional research has a fundamental HOLD with a
target price of S$2.42.

Freight Links Express Holdings (FLE SP, F01) –
Technical BUY with +33.3% potential return
Last price: S$0.120
Resistance: S$0.160
Support: S$0.105
Maintain BUY with a higher target price of S$0.16 with
trailing/tight stops placed below S$0.11. The stock has
returned 21.2% on closing since 4 Jun 13 and currently
its 52-week high has exceeded our initial technical buy
target of S$0.12. The stock may trend higher as prices
could continue to trend above its 10-day and 50-day
moving averages and have taken out the high during
Nov 10. Its positive DI is sloping upwards with a rising
ADX, which suggests a strong uptrend. Watch to see if
the stock could close above S$0.132 for further upside.

Banking- Jun 13: Slight easing in loan growth.
DBS Group Holdings (BUY/S$16.70/Target: S$20.80)
Oversea-Chinese Banking Corp (BUY/S$10.56/Target: S$12.02)
A slight easing in pace of expansion. Loans grew at a moderated pace of
17.7% yoy and 0.7% mom. Loan growth has eased over the past two
months but the magnitude of easing is mild.
Maintain OVERWEIGHT. We expect loan growth of 10-15% for the
Singapore banks. Economic growth should strengthen gradually in 2H13
driven by externally oriented sectors, which should sustain growth in loans
for businesses. Our top pick is DBS due to strong execution capabilities
and attractive valuation. We also like OCBC for its ASEAN-centric
footprint.

Oil Service- Channel check: Improving OSV utilisation and charter
rates in Southeast
Asia; POSH Semco listing is likely to rekindle investor interest in the
sector.
POSH Semco’s listing in 4Q13 is likely to rekindle investor interest
Singapore oil-service stocks. Reuters has reported that Robert Kuok
group’s offshore support vessel (OSV) provider POSH Semco is seeking a
listing on the SGX. POSH Semco owns and operates a fleet of more than
100 OSVs. Scheduled to be launched in September/October, the company
is said to be looking to raise S$300m-500m, with its market capitalisation
estimated at US$1b. Based on its 2012 financial accounts (which we
secured from the Registrar of Companies), the company posted a net profit
of US$38.1m in 2012 (2011: US$27.9m). At a market capitalisation of
US$1b, this would imply a hefty 2012 PE of 26x. Singapore OSV-owner
segment is currently trading at 13.2x, 11.9x and 10.2x for 2012, 2013 and
2014 respectively, while Malaysian peers are trading at higher PEs of
25.6x, 16.3x and 14.8x.
Top stock picks. Ezion Holdings (EZI SP/Target: S$2.60), Kreuz (KRZ
SP/target: S$0.88, Nam Cheong (NCL SP/Target: S$0.34) and Triyards
(ETL SP/Target: S$1.11).

Wilmar International- 2Q13 Preview: Earnings likely to be lower qoq.
The least price volatility market should lead to more stable earnings
growth on volume expansion.
(WIL SP/BUY/S$3.15/Target: S$3.80)
FY13F PE (x): 11.9
FY14F PE (x): 10.1
Management has guided for a more challenging 2Q13 since 1Q13 results
briefing, ie the poorer results are unlikely to be a surprise to the market.
The main challenges are weaker outlook for soybean crushing, where
utilisation could be affected by the bird flu breakout in China early 2013.
Subsequently, the breakout of The Yellow Canopy Syndrome could affect
the sugar yield in Queensland, Australia. Sugar contribution should be
stronger in 2H vs 1H and to-date there is still no concrete information on
the potential yield impact. Maintain BUY with target price of S$3.80 based
on the sum-of-the parts (SOTP) method, implying a blended PE of 14.5x
2013F and 12.5x 2014F.

From Maybank KE:
StarHub: Catching A Break From 4G & EPL; Upgrade to Hold TP $4.22
STH SP | Mkt Cap USD5.9b | ADTV USD8.4mThe  share price has corrected significantly since our downgrade to
SELL in May to near our DCF-based fair value of SGD4.22. We upgrade the
stock  from  SELL  to  HOLD  with  TP  maintained at SGD4.22. Our telco
preference is M1 followed by StarHub and SingTel.
It is too early to confirm now but catalysts in 2H13 would include a
potential increase in FY14 dividend now that cashflow uncertainties viz
spectrum  auction have cleared up, and we anticipate drumbeats for this
to get louder toward end-FY13.
Recent  reprieves  – the government’s rejection of SingTel’s appeal
for   EPL   not  to  be  subjected  to  the  cross-carriage  rule,  and
lower-than-expected  4G spectrum auction cost – may cause StarHub to be
more receptive toward paying higher dividends, in our view.
  
The Hour Glass: Clockwork Ticking Down As Demand Slows
HG SP | Mkt Cap USD324.1m | ADTV USD0.1m
We recently met the management of The Hour Glass for an insight into
the company and the watch industry.
China’s  efforts  to weed out official corruption has resulted in a
drop  in Swiss watch export levels to Asia. Across the region, in fact,
the luxury sector is facing increasing challenges.
In  the  short  term,  Hour Glass has to contend with weak consumer
sentiment  in  Singapore. It recently cut its dividend payout, bringing
its  yield  of  3.1%  in line with peers. Valuation appears on the high
side at 7.8x hist. P/E vs. its mean of 6.3x.

From DBS:
Maiden numbers for Mapletree Greater China
Commercial Trust ahead of forecast by 8.3%, boosted by
strong reversions at Festival Walk and Gateway Plaza.
Looking ahead, we expect 2H to be better than 1H. There
is a remaining 25% of leases at Festival Walk to be recontracted
in FY14 and another 5% at Gateway Plaza
with an additional 18% and 10% of leases due in FY15.
Maintain Buy, TP S$1.09 (Prev S$ 1.22), after adjusting for
the latest risk free rates. We continue to like MAGIC for
its earnings resilience backed by robust performance at
Festival Walk as well as the growth aspects from organic
positive rental reversions.

Mark-to-market losses dragged Great Eastern Holdings’
2Q13 earnings, as expected. However, underlying
operations remain strong. OCBC will release 2Q13 results
on 2 Aug; earnings are expected to drop q-o-q on weaker
non-interest income. Maintain HOLD rating on OCBC and
S$11.50 TP.