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Tuesday, April 9, 2013

Local Brokerages Stock Call 9 April 2013


Keppel Corporation  
Top drillers prefer Singapore yards
OUTPERFORM - Maintained | S$11.16 - Tgt. S$13.30
We are convinced that tier-1 drillers still prefer to order their jack-up rigs from the Singapore yards, as testified by Ensco’s latest order of a Keppel FELS B Class Bigfoot for 2015 delivery. We maintain our Outperform rating on Keppel Corp, our top big-cap sector pick. According to Ensco, continued strong demand from customers has spurred the order of rig from Keppel. The construction cost is expected to be approximately US$225m. This brings Keppel’s YTD orders to S$1.87bn or 34% of our S$5.5bn target. No change to EPS and target price, still based on RNAV. Stronger orders and margins are the key catalysts.

Shipping Monitor  
Asia-Europe remains troubled
NEUTRAL - Maintained
Current Asia-North Europe rates, despite carriers’ best efforts at four general rate increases (GRI) since November, are now US$700/teu below their equivalent 2012 levels and US$200/teu lower YTD. The transpacific spot rates are, however, doing better than last year. We remain Neutral on shipping overall, with Pacific Basin staying as our top pick for its compelling valuations and good earnings report card amid weak bulk shipping markets. STX Pan Ocean remains our top Underperform. We also like strong companies with relatively resilient earnings and peer-beating performance like OOIL and SITC, especially after the recent sell-off in the stock markets.

From OCBC:
Biosensors International Group: Challenges apparent, but seeking market share gains
Biosensors International Group’s (BIG) regional peers have faced headwinds in the Chinese drug-eluting stent market, as highlighted in their recent results announcement. We believe that these factors, such as a slowdown in growth of PCI surgeries, would also have an adverse impact on BIG. However, we expect BIG to continue its market share gains in other key markets such as the EMEA region. BIG is also stepping up its collaboration with its licensee Terumo Corp to address the recent decline in licensing revenue from Japan. Nevertheless, we believe that a further depreciation of the Japanese Yen due to stimulus measures by the Bank of Japan could exacerbate this problem. We thus trim our FY14F revenue and core PATMI forecasts by 0.6% and 1.6%, respectively. However, we maintain our BUY rating although our FCFE-derived fair value estimate declines marginally from S$1.63 to S$1.60. 

Fortune REIT: Strong fundamentals
The growth in HK’s retail sales has picked up significantly since 4Q12. Combining the first two months of 2013 to eliminate distortions from the timing of Chinese New Year, retail sales climbed up 15.8% in value. Robust retail sales will continue to underpin the growth in retail rents throughout HK. The media has reported that a group has called for the boycott of Park’N Shop supermarket chain, which is part of Li Ka-shing’s Hutchison Whampoa Ltd, in support of dock workers who are striking for better work conditions. Park’N Shop is FRT’s top tenant, accounting for 8.0% of the REIT’s total gross rental income in Dec 2012. According to FRT management, businesses are running as usual and impact to the Park’n Shop outlets in FRT’s malls has not been seen. Management has indicated that 2013's rental reversions are likely to be in the mid-teen percentages. FRT has a low gearing of 23.4% and no refinancing needs till 2015. We are maintaining our fair value of HK$7.28 and BUYrating on FRT. 

Keppel Corporation: Market for premium jackups is strong
Keppel Corporation (KEP) announced that its O&M arm has secured a contract to construct a KFELS B Class jackup rig from Ensco.  The construction cost, together with the commissioning, systems integration testing and project management is expected to be US$225m. When completed in 1Q15, this will be the fourth KFELS B Class Bigfoot unit in Ensco’s fleet. With this latest order, KEP has won about S$1.85b of new orders YTD, accounting for 37% of our full year estimate. Looking ahead, we expect order flows for such premium jackups to continue. Indeed, Ensco’s Chairman, President and CEO also commented that the market for premium jackups is “very strong”, and “customer demand is broad-based for high-specification jackup rigs”. Maintain BUY with S$12.68 fair value estimate on KEP.   

From UOB KH:
Singapore Property- Industrial: Relaxation of JTC sub-let
rule to benefit industrial REITs.
CACHE SP/ BUY/ S$1.31/ Target: S$1.45)
MINT SP/ BUY/ S$ 1.465/ Target: S$1.66)
MLT SP/ BUY/ S$1.24/Target: S$1.38)
JTC has relaxed its third-party subletting rule to allow for
smaller anchor tenants in industrial space owned by third-party
facility providers such as REITs

Yongnam Holdings- Exciting ventures into Myanmar
(YNH SP/ BUY/ S$0.275/ Target: S$0.40)
Upgrade to BUY with a higher target price of S$0.40, based on
9x 2013F PE, pegged to Singapore-listed peers’ average.

Sino Grandness Food Industry Group (SFGI SP, JS5) –
Technical BUY with +23% potential return
Prices appear to be trending above its 20-day and 40-day
moving averages which could be acting as supports

GuocoLeisure (GLL SP, B16) –
Technical BUY with +22.8% potential return
Prices appear to be trending above its 15-day and 40-day
moving averages which could be acting as supports

JES International Holdings (JES SP, EG0) –
Prices appear to rebound above its potential resistance-turnedsupport
level near S$0.16… 

From DBS:
Keppel Corp announced this morning that it has secured a
repeat jackup order from Ensco worth about US$225m. The
new contract brings Keppel's YTD win to S$1.87bil, forming
31% of our full year assumption of S$6bn. No change to our
earnings forecast, Buy recommendation and $13 TP.



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