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Tuesday, April 16, 2013

Local Brokerages Stock Call 16 April 2013

From CIMB:

Keppel Corporation
The prodigal rig
OUTPERFORM - Maintained | S$11.39 - Tgt. S$13.30
Proven design and track record could be the reasons why Singapore-listed Falcon Energy is returning to home ground and ordering a jack-up rig from Keppel instead of adding to the two being built by China’s CMHI. We reiterate our Outperform rating. With about S$2.2bn of new contracts, Keppel has met 40% of our S$5.5bn target for 2013. The latest KFELS super B-class rig from Falcon is valued at US$226m, similar to the last Bigfoot design rig that Keppel secured from Ensco last week at US$225m. We maintain our EPS and target price, which remains based on RNAV. Stronger orders and margins could be the key catalysts.

Singapore Airlines
A slightly anti-climactic end to FY13
NEUTRAL - Maintained | S$10.60 - Tgt. S$11.00
Passenger loads for the mainline fell in Mar after seven straight months of improvement. Loads for SilkAir also deteriorated, while cargo traffic continues to soften. We reiterate our Neutral rating on SIA as we think that competitive pressures will continue to weigh on traffic, while persistent S$ strength will eat into yield growth as well. We leave our target price and estimates unchanged. Our CY14 target price of S$11 is based on a trough multiple of 4.2x CY14 EV/EBITDAR, reflecting the de-rating that we believe SIA is undergoing

Telco - Overall
Cashing in on data
NEUTRAL - Upgrade
We believe the take-up for higher-tiered data plans will boost data monetisation for the Singapore telcos and generate incremental revenues that will fall directly to the PBT. We expect 35% of postpaid users to switch over by end-2013 vs. mid-teens at end-12. M1, our new top pick, should benefit the most as it should experience the highest ARPU uplift. Hence, we upgrade M1 to Outperform while StarHub and SingTel remain Neutral and Underperform, respectively. With M1's upgrade, we raise our sector call from Underweight to Neutral. We up our FY13-15 EPS estimates of Singapore telcos by 0.4-20.2% and target prices by 1.5-24%.

Keppel REIT
Occupancy nudging higher
NEUTRAL - Maintained | S$1.42 - Tgt. S$1.45
Key leasing developments in 1Q came from new take-ups at OFC and pre-commitments at 8 Chifley Square in Australia. KREIT’s headline yields remain its key draw, though we see this balanced by a flattish DPU outlook and its higher asset leverage and income support. 1QFY13 DPUs met consensus and our expectations, forming 25% of our FY13 forecast. We tweak our FY13-15 DPUs higher as we update leases up for rent reviews and renewals. Our DDM-based target price (discount rate: 7.7%) is also higher. Maintain Neutral, with higher headline yields compensating for higher asset leverage and income support. 

From OCBC:
Singapore Residential Property:  Wave of launches driving firm Mar sales
Summary: URA reported that a headline total of 3,072 new private homes (including 279 EC units) were sold in Mar 13, which was up 235% MoM and 1% YoY. These healthy numbers were driven by a wave of new launches after the Lunar New Year, including D'Nest (912 total units, Pasir Ris) 699 units sold at a median S$963 psf, Bartley Ridge (868 total units, Mt Vernon Rd) 367 units sold at S$1296 psf and Urban Vista (582 total units, Tanah Merah) 348 units sold at S$1,503 psf. We see sales reflecting still firm residential demand and an environment of continued liquidity but remain cognizant of potential incremental curbs should the housing sector show excessive activity going forward. Maintain NEUTRAL on the residential property sector and we prefer developers with strong balance sheets and diversified exposure. Our top picks are CapitaLand [BUY, S$4.29], Keppel Land [BUY, S$4.53] and CapitaMalls Asia [BUY, S$2.55].

First REIT: No major impact from possible Siloam Hospitals IPO
Summary: News agency Reuters reported that Lippo Karawaci (Lippo), which is First REIT’s (FREIT) sponsor, is seeking to raise at least US$200m in an IPO of its Siloam Hospitals healthcare division. We do not foresee any major impact to FREIT’s prospects, as we believe that FREIT would remain as an important vehicle for Lippo to implement its asset-light strategy. Moreover, FREIT has a right-of-first-refusal for the purchase of healthcare assets from its sponsor and/or any of its subsidiaries. Meanwhile, FREIT will hold an EGM on 29 Apr to seek unitholders’ approval in relation to its two proposed acquisitions from Lippo. As we expect the acquisitions to be DPU accretive and value-enhancing to unitholders, we expect unit-holders to vote in favour of the proposed conditions. Maintain HOLD and S$1.31 fair value estimate on FREIT.

Ascendas REIT: Strength reflected in price
Summary: Ascendas REIT’s (A-REIT) FY13 DPU totalled 13.74 S cents, up 1.3%. This is somewhat below our and street’s full-year estimates of 14.0-14.2 S cents. Excluding performance fee, however, we note that DPU would have grown 3.6% to 14.05 S cents, closer to our projections. Looking ahead, A-REIT expects the positive rental reversions to persist, albeit at a slower pace. Management also pointed out there is ~10% vacancy in the multi-tenanted portion of its portfolio, which may provide upside if these spaces are leased out. During the quarter, A-REIT announced the development of DBS Asia Hub Phase 2 for S$21.8m and two new asset enhancement projects totalling S$14.0m. These initiatives, together with the announced investments, are likely to maintain its stable performance in FY14, in our view. We incorporate the results into our forecasts and roll over our valuation to FY14. Maintain HOLD with a marginally higher fair value of S$2.63 (previously S$2.60) on A-REIT.

Keppel Corporation: Secures US$226m jack-up rig contract from Falcon
Summary: Keppel Corporation (KEP) announced that its O&M arm has secured a US$226m contract from Falcon Energy to construct a KFELS Super B Class jack-up rig. Recall that KEP won a US$820m contract for four jack-up rigs from Grupo R in Mar (KFELS B Class design) and a US$225m contract from Ensco in early Apr (KFELS B Class design). The latter figure includes the construction cost, commissioning, systems integration testing and project management costs. Meanwhile, the last time Keppel secured a KFELS Super B Class jack-up rig was in Mar 2011 for US$210m. This latest order brings KEP’s YTD orders to about S$2.2b, accounting for about 43% of our full year order win estimate. Maintain BUY with S$12.68 fair value estimate on KEP; the group will also be announcing its results on 18 Apr 2013.

Far East Hospitality Trust: Agreement to acquire Rendezvous Grand Hotel Singapore

Summary: Far East Hospitality Trust (FEHT) has entered into an agreement with The Straits Trading Company Limited (STC) to acquire Rendezvous Grand Hotel Singapore and Rendezvous Gallery (70-year old leasehold estate) for an estimated total cost of acquisition of S$270.1m. The acquisition will be financed by the proposed issue proposed issue of new stapled securities in FEHT to STC (S$68.0m), the Sponsor (S$67.8m), as well as debt facilities (S$132.2m). The pro forma effects of the acquisition for FY12 (27 Aug-31 Dec) would have been an increase in DPU from 2.09 S-cents to 2.12 S-cents. Pro-forma effect on NAV per stapled security as of 31 Dec 2012 would have been an increase from 97 S-cents to 98 S-cents. This is Far East H-Trust’s first acquisition since its initial public offering in August 2012. The master leasee will be a member of the Far East Organization group of companies. We maintain a HOLD rating but place our fair value of S$1.05 under review. 

From UOB KH:
Property – Singapore
Record Monthly Developer Sales Heighten Risk Of New

Monthly developer sales have hit a record high of 2,793 units despite seven
rounds of property cooling measures. This heightens the risk of additional
measures which would weigh down the residential segment. We prefer deep
value and diversified property stocks with exposure to the office and
hospitality segments. OUE, Ho Bee, Suntec REIT and CD REIT are our top

Shipyard – Singapore
Keppel Corp Secures Jack-Up Order And SOCAR Semi Duo
Keppel has won a US$226m jack-up rig order from Falcon Energy. Separately,
Upstream reported Keppel has been selected as the main contractor to build
at least two semi-submersible rigs (we estimate worth >US$1b) for
Azerbaijan’s SOCAR. Keppel’s contract wins ytd could rise to S$3b,
potentially ahead of our expectation. Maintain MARKET WEIGHT on the
shipyard sector, keeping Keppel as a BUY and Sembcorp Marine as a HOLD.

Ascendas REIT (AREIT SP)
4QFY13: Looking Overseas To Offset Slowing Singapore

Results were in line with expectations. Positive rental reversions are
expected to continue in FY14 and FY15 as expiring leases are 9-35% higher
than passing rentals. AREIT continues to see near-term opportunities in
China tier-1 cities while Iskandar Malaysia remains a medium-term
opportunity, especially for light industrial space, as AREIT sponsor Ascendas
jointly develops the industrial park with UEM Land. Maintain HOLD with a
higher target price of S$2.86 (from S$2.73). Entry price is S$2.49.

1Q13: Best Grade-A Office Portfolio In Singapore
KREIT’s results are in line, with the best Grade-A office portfolio in Singapore
continuing to deliver higher occupancies (up 0.3ppt to 98.8%). With office
rentals expected to bottom out in 2013 and to rise 8% in 2014, the key re-rating
catalyst would be an accretive acquisition of MBFC Tower 3. We have raised
our target price to S$1.64 (from S$1.57), mainly factoring in a 50bp reduction
in required rate of return on improving office segment fundamentals adjusted
for the risk of dilutive equity fund-raising. Maintain BUY.

Singapore Airlines (SIA SP)
Decent 6.8% Pax Traffic Growth For FY13
A good year for pax traffic but weak yields at parent airline level and weak
loads at Silk Air could still depress full-year results. Maintain SELL. Target
price: S$10.70.

From Maybank KE:
Yongnam Holdings: Start dancing Yongnam style! Initiate BUY; TP $0.45
 YNH SP | Mkt Cap USD301.3m | ADTV USD1.6m

 Initiate   at   BUY   and   Street-high  TP  of  SGD0.45  on  this
 under-researched  name.  We think a major share price overhang has been
 removed  with  the expiry of 365m warrants in Dec 2012 and the stock is
 ready for a sharp re-rating.
 With  a  leading  and  defensible  position  in  Southeast Asia for
 structural  steel  and  strutting  assets,  we  believe  Yongnam  is  a
 multi-bagger   in   the   making   as  it  rides  on  an  unprecedented
 infrastructure boom in Asia.
 Yongnam  recently announced it has formed a consortium with Japan’s
 JGC  and  Singapore  Changi  Airport,  bidding  to  build  and  own  an
 international  airport  in  Myanmar.  Winning  this project may open up
 further opportunities in the Golden Land.

Singapore Property: The Market Marches On; OVERWEIGHT
Developers  launched  a record 3,489 homes for sale in March, which
resulted  in  an astounding 2,772 homes (excl. ECs) sold barely a month
after the last round of cooling measures.
Projects  in  the  Outside  Central Region accounted for 68% of all
sales.  From the top-selling projects, we reckon that investment demand
remains  fairly  high.  Consequently,  we  believe  that  more  cooling
measures  could  be  in the works, particularly on the back of the weak
1Q13 GDP numbers.
We  reiterate  CapitaMalls  Asia  as  our  top  pick for its retail
exposure.  We  also  maintain  our  BUY  recommendations on CapitaLand,
Keppel  Land and OUE for their diversified exposures and possibility of
significant divestments.

Keppel REIT: Another Steady Quarter; HOLD TP $1.27
KREIT SP | Mkt Cap USD3.1b | ADTV USD1.9m
KREIT  reported  1Q13  DPU of 1.97 cts/unit as distributable income
grew marginally by 1% YoY to SGD52.2m, which was in line expectations.
We expect KREIT’s portfolio performance to remain fairly stable for
the rest of FY13. In addition, the possible acquisition of MBFC Tower 3
could  be  revisited  in  2H13,  should its occupancy rate cross 90% by
Besides  the  risks of dilutive equity fund-raising, we also expect
some  near-term  price  weakness  when Keppel Corp shareholders receive
their  KREIT units as dividend-in-specie come 8 May 2013. Hence, we see
limited  upside  from  the  current  share price. Maintain HOLD, target
price raised marginally to SGD1.27.

Ascendas REIT: FY3/13 results in-line; Reiterate HOLD; TP $2.93
AREIT SP | Mkt Cap USD5.5b | ADTV USD15.1m
FY3/13 revenue at SGD575.8m, was 101% of ours and 103% of consensus
estimate.  FY3/13  DPU  at  13.74  SG-cts  was  97%  of ours and 98% of
consensus  estimates,  dragged  down  a  SGD7m  performance fee charge,
payable to the REIT Manager, as the DPU growth in FY3/13 exceeds 2.5%.
A-REIT  announced  the  development  of DBS Asia Hub Phase II to be
fully leased to DBS Bank Ltd upon completion. It will cost SGD21.8m and
will  increase  GFA  by  7,081  sqm.  AREIT  will  also  be  initiating
enhancement work at Techpoint and the former Freight Links Building, at
estimated costs of SGD7m each, to improve marketability.
Based  on  our  estimates,  A-REIT  has  38%  of its FY3/14F GAV in
business/science parks and 23% in high-tech industrial/data centres. We
expect  these  two  segments to progressively increase in proportion as
Singapore  outsources  its  lower  value-add activities to neighbouring
countries. Reiterate HOLD with a TP of SGD2.92. 

From DBS:
Singapore Exchange 
High volumes, low values
Lowest volume-to-value ratio in 1Q13; trading
volumes at its high but revenues to be weak

Strong derivatives volumes but revenues hurt with
shift to lower yielding products

FY13-15F earnings cut by 10-13% on lower
estimates for derivatives and other revenues

Maintain HOLD, TP lowered to S$7.15 as we roll
forward valuation base to FY14 EPS; 4% dividend
yield should limit downside

4Q13 results for Ascendas REIT in line. A-REIT continues to
keep an active pipeline of development and asset
enhancement projects (AEI), which are expected to drive
earnings growth in FY14-15F. Maintain HOLD, TP raised to
S$2.60 (Prev S$ 2.30) due to higher acquisition assumptions
and slightly lower discount rates.

From Phillip:
Keppel Corporation Ltd
Good news from new customer
Investment Actions?
Keppel is currently trading at 12.7x FY13E, with a dividend
yield of 4.1%. YTD Keppel has achieved approximately
S$2.15bn worth of orders, or 36% of our S$5.9bn order win
target for 2013. We continue to like Keppel, as we believe
that it is well positioned in the O&M sector. We are keeping
our earnings estimate, as the order win has been factored
into our forecast. We maintain our Accumulate rating and
target price of S$12.38, still based on SOTP valuation 

Keppel Corp: USD226m Jackup Order From Falcon Energy (NEUTRAL,
S$11.39, TP: S$11.21)

Keppel has secured a USD226m contract from a subsidiary of Falcon Energy to
build a customised KFELS Super B Class jackup rig. The latest order lifted its
YTD order win to SGD2.2bn and net order book to SGD15bn. The YTD flow of
new orders is within expectations and accounts for 43% of our full-year
forecast. We maintain our FY13-FY14F EPS estimates and NEUTRAL rating on
Keppel, at a TP of SGD11.21. 

AREIT:Another Stable Set of Results (Neutral, S$2.86, TP: S$2.76)
AREIT’s FY13 DPU of 13.74S¢ (+1.3% y-o-y) was in line with our
estimate (-1.2% deviation). Revenue and net property income came in
at SGD575.8m (+14.4% y-o-y) and SGD408.8m (+11.0% y-o-y)
respectively. The increase in revenue was mainly due to additional
contributions of rental income from completed development projects
and newly-acquired properties during the year. We maintain our
NEUTRAL view on AREIT with a DDM-based (COE: 7.3%, TGR: 1.0%) TP
of SGD2.76.


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