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Thursday, May 2, 2013

Local Brokerages Stock Call 2 May 2013

From UOB KH:
Ho Bee Investment- 1Q13: Watch out for overseas acquisitions.
(HOBEE SP/BUY/S$2.15/Target: S$2.45)

FY13F PE(x): 17.8
FY14F PE(x): 14.9
Results below expectations. Ho Bee Investment (Ho Bee) reported a 1Q13 net profit of S$52.1m, up 230% yoy mainly due to divestment of a stake in Chongbang Holdings Limited (CHIL) for S$48.1m. Core PATMI of S$13m excluding disposal gains came in
below our expectations, accounting for 15% of our full-year forecast of S$85m. This was mainly due to lower-than-anticipated recognition from the Trilight and Parvis projects.
Maintain BUY with unchanged target price of S$2.45/share, pegged at 20% discount to our RNAV of S$3.07/share. The stock is currently trading at 27% discount to its book value and 38% discount to our RNAV.

Hutchison Port Holdings Trust 1Q13: Net income declines 15% yoy on one-off costs.
(HPHT SP/BUY/US$0.83/Target: US$0.96)

FY13F DPU Yld (%): 6.3
FY14F DPU Yld (%): 7.0
Revenue edged up by 1.1% with flat throughput. Container throughput at HIT declined 7.4% yoy due to weaker-than-expected transshipment and EU cargoes. However, throughput at Yantian improved 6.3% yoy due to double-digit growth of transshipment cargoes as well as strong intra-Asia and empty boxes. Average revenue per TEU in HIT remained flat but declined in Yantian, hit by the VAT reform in Shenzhen. Recently-acquired ACT had very limited contribution in 1Q13.
Reiterate BUY and target price of US$0.96, based on a 3-stage DCF model. Despite recent share price strength, we believe 2013F dividend yield of 6.3% is still within the lower range among large-cap trusts/REITs listed in Singapore. There is no asset devaluation risk for HPHT as deep water coastline is a scarce resource.

Oversea-Chinese Banking Corp- 1Q13: Continued pressure on margins.
(OCBC SP/BUY/S$10.85/Target: S$12.02)

FY13F PE(x): 14.3
FY14F PE(x): 12.9
OCBC reported a net profit of S$696m for 1Q13 (-16% yoy, +5% qoq), slightly below our forecast of S$720m. OCBC achieved healthy loan growth of 3.1% qoq, driven by expansion of 3.8% qoq in Singapore. NIM contracted by a severe 6bp sequentially to
1.64% due to refinancing for housing loans. As a result, net interest income fell 4% yoy.
Maintain BUY. We have lowered our target price for OCBC to S$12.02, based on P/B of 1.67x, derived from Gordon Growth Model (ROE: 11.0%, required return: 7.8% and growth: 3.0%).

SMRT Corporation- FY13: Weak FY13 but clouds still looming. Maintain SELL.
(MRT SP/SELL/S$1.48/Target: S$1.26)

FY14F PE(x): 18.4
FY15F PE(x): 18.0
Weak FY13; hit by rising costs. FY13 net profit of S$83.3m (-31% yoy) was broadly in line with our expectations. The loss in 4QFY13 was not surprising as management provided a profit warning on 28 March over the S$17m provision for its associate
Shenzhen Zona. The rising costs in FY13 (+12.4% yoy) overwhelmed the tepid revenue growth of only 5.9% yoy. Key increases in costs include staff (+16.2% yoy), depreciation (+14.2% yoy), repairs & maintenance (+32.7% yoy). Staff costs increased due to
a combination of new hires, salary increments and restructuring of the defined benefit plans.
Maintain SELL; better yield elsewhere. We remain SELLERS with a DCF-derived target price of S$1.26/share (previously S$1.30/share, slight reduction to reflect an updated cost of equity).

Venture Corporation 1Q13: End-market demand remains weak. Downgrade to HOLD due to limited upside.
(VMS SP/HOLD/S$8.32/Target: S$8.58)
FY13F PE(x): 16.0
FY14F PE(x): 13.5
Venture reported a net profit of S$28m for 1Q13, below our expectations of S$32.5m. Venture was affected by contraction in endmarket demand in the Printing & Imaging and Networking & Communications segments. Revenue growth was also hampered by a
2.7% depreciation of the US dollar against the Singapore dollar on a yoy basis.
Downgrade to HOLD. We have downgraded our recommendation for Venture to HOLD given the limited upside. The stock continues to provide an attractive dividend yield of 6%.

From Maybank KE:
Venture Corp: Just Can’t Catch A Break; Cut to Sell, TP $6.70
VMS SP | Mkt Cap USD1.8b | ADTV USD3.2m
Cut  to  SELL  from Buy with TP slashed to SGD6.70. Results were below

expectations  with  net  profit  down  21% YoY and more of the same can be
expected  in 2Q13. Visibility is low until 2H13 as economic conditions are
turning  against  Venture again, and new customer contributions are taking
longer than expected to ramp.
Venture  is  still guiding for full year growth but it is increasingly
difficult  to  see  how  they  will  pull  it off. There are just too many
macroeconomic  uncertainties  and  the company has been too slow in taking
the needed actions for a long-awaited turnaround.
To cap it off, capex will shoot up this year, and with a weak earnings
outlook, dividends could be under pressure as well. We downgrade the stock
to SELL (TP SGD6.70) ahead of the FY12 final dividend payout. Relook below

Bumitama Agri: Sweet Young Trees; Initiate at Buy, TP $1.24
BAL SP | Mkt Cap USD1.4b | ADTV USD0.8m

Initiate coverage with a BUY and SGD1.24 TP on 16x FY14 PER, implying
just 0.9x PEG. Underappreciated and relatively undiscovered, Bumitama
Agri’s (BAL) value will rise organically as its young trees mature.
BAL has figures that can make heads turn. It is the fastest-growing
plantation company in our coverage universe, having planted an average of
~9,700 ha of nucleus area p.a. over the past nine years.
Sizeable (nucleus planted area of 101,182 ha) with young trees (~5
years old) and robust growth (3-year forward FFB output CAGR of 21%), BAL
has it all. It was also the third most profitable planter in our stock
universe in 2012.

Ho Bee Investment: Overseas Expansion Eyed; Buy TP $2.66
HOBEE SP | Mkt Cap USD1.2b | ADTV USD1.1m

Excluding divestment gains, Ho Bee’s 1Q13 core PATMI of SGD18m (+29%
YoY, -66% QoQ) was in line with expectations. We remain sanguine on Ho
Bee’s strong cash position and cheap valuations. Maintain BUY.
With limited acquisition opportunities in Singapore, Ho Bee intends to
cast its eyes overseas. It has already acquired three parcels in Gold
Coast, Australia, at near distressed prices. These site could potentially
add another 11 cts/share to our RNAV estimate.
We relooked at our previously conservative assumptions for Ho Bee’s
investment properties and have raised our target price to SGD2.66, pegged
to a 30% discount to RNAV. Positive deployment of its cash hoard and
further leasing updates at The Metropolis will be near-term catalysts.

OCBC: NIMs to Stabilise in Subsequent Quarters; Hold, TP $11.30
OCBC SP | Mkt Cap USD30.2b | ADTV USD29.6m

OCBC’s 1Q13 core net profit of SGD696m (+5% QoQ, -12% YoY) was slightly
below our expectations on lower-than-expected NIMs, but in line with
Given expectations of stable NIMs over the next few quarters though,
our forecasts are maintained and our TP is raised to SGD11.30 from
SGD10.50, pegging on a higher P/BV multiple of 1.5x (1.4x previously),
taking valuations up to the long-term mean for the group and supported by
ROEs of about 11.9% for 2013.
HOLD – prefer DBS for its more attractive valuations 2013: PER 11.5x,
P/BV 1.2x, ROAE: 10.6%, yield: 3.4%) and the strong growth in its
non-traditional income channels.

From DBS:
1Q13 results for Hutchison Port Holdings Trust lagged
expectations; overall volume growth was flattish. The
disruptions caused by port workers’ protest in Hong Kong will
have an impact on FY13/14 distributions. However, recent
acquisition and fast ramp up of ACT will help mitigate the
impact to an extent. Given the impact of lower capacity
utilisation in 2Q13, and a likely increase in operating costs in
future, we cut our DPU projections for FY13/14 by 9%/7% to
5.74UScts and 6.15SUcts, respectively. This still implies
dividend yield in excess of 7% at current prices. Maintain BUY
with slightly lower TP of US$0.87 (Prev US$ 0.89).

Earnings for OCBC were above consensus but in line with
ours. 1Q13 net profit was 23% of our FY13F.Sustained net
interest margin (NIM) pressure and lower trading gains hit
topline, but earnings were supported by lower provisions.
OCBC is still guiding for high single digit loan growth.
Prospects for wealth management remain positive. Downgrade
to HOLD on valuations; TP unchanged at S$11.50. OCBC still
remains our preferred pick over UOB despite our downgrade.

Broadway’s 1Q13 results below forecast, Foam Plastic/Non-
HDD did well but insufficient to offset HDD weakness.
FY13F/14F earnings cut by 29% and 25%. Restructuring is at
tail-end, and we expect recovery in 2H. TP revised to S$0.30
(Prev S$ 0.26), upgrade to HOLD.

Losses for SMRT in 4Q were larger than expected; FY13 below
expectations. Key negative surprise is the huge cut in dividend
payout and DPS. A final dividend per share (DPS) of 1
Scts/share was proposed, equating to a full-year DPS of 2.5
Scts (interim 1.5 Scts) and yield of 1.7%, substantially lower
than last year’s 7.45 Scts (4.9% yield). We have cut FY14F/15F
earnings by 8%/6% on higher costs. Maintain FV, TP revised
to S$1.20 (Prev S$ 1.30).

From OCBC:
Venture Corp: Disappointing start to FY13
Venture Corp (VMS) reported a sluggish set of 1Q13 results which came in below ours and the street’s expectations. Revenue fell 7.6% YoY to S$530.5m, forming 20.6% of our full-year estimate. PATMI fared worse, dipping 21.1% YoY to S$28.0m, or just 16.9% of our original FY13 forecast. Management sounded cautious during the analyst briefing, given the still uncertain macroeconomic environment. We believe that VMS’s 2H strength would be weaker than our previous expectations. We expect some near term selling pressure on the stock given this lacklustre set of results and also because the stock trades ex-dividend today (2 May, from 9 a.m.). We cut our FY13 revenue forecasts by 5.7% (FY14 by 4.8%) and our PATMI estimates by 11.9% (FY14 by 5.4%). Consequently, our fair value estimate is lowered from S$9.08 to S$8.00 (15x FY13F EPS). Downgrade VMS from Buy to HOLD.

DBS: Stronger-than-expected 1Q
DBS Group Holdings Ltd posted stronger-than-expected 1Q13 net earnings of S$950m, up 2% YoY and -21% QoQ, and this is sharply ahead of market expectations of S$824m (based on Bloomberg poll). Net Interest Income fell 1% YoY to S$1327m, but higher Non-Interest Income, which rose 21% YoY to S$990m, helped to give total income a boost to S$2317m (+7.5% YoY). The key contributors were the strong double-digit increase in Fee and Commission Income, +25% YoY to S$507m, as well as higher Trading Income (+26% YoY to S$410m). With this strong set of 1Q performance, there is likely to be upward revision of its full year 2013 earnings forecast, as 1Q now accounted for 27% of consensus full-year earnings. We will provide more details after the analysts’ briefing later in the day. Meantime, do note that we have a BUY rating on DBS but we are likely to revise our fair value estimate.

OKP Holdings: 1Q13 misses expectations
OKP's 1Q13 revenue grew 28.4% YoY to S$32.0m but gross margin fell to 15.1% from 21.0% in 1Q12, chiefly due to increased subcontracting and labour costs. PATMI dropped 22.2% YoY to S$2.4m. 1Q13 EPS of 0.77 S cents was lower than expected, forming 18% of ours and 15% of the street's FY13 estimates. The effective tax rate fell from 16.0% in 1Q12 to 13.2% in 1Q13 due to tax-deductible purchases under the Productivity and Innovation Credit plan, which will apply through 2015. We have adjusted our forecasts for OKP’s FY13 and FY14 performance. Applying the same P/E multiple of 11x to FY13F EPS, we derive a FV of S$0.46, slightly lower than our previous FV of S$0.48. We maintain our HOLD rating on OKP.

CapitaLand Limited: Capital recycling at serviced residences
CAPL announced that it would divest three serviced residences in China and 11 rental housing properties in Japan for a total of S$165.0m to Ascott Residence Trust. The divestment of these properties, which include Somerset Heping in Shenyang, Citadines Biyun in Shanghai and Citadines Xinghai in Suzhou, would take place by 28th Jun 2013 and result in a net gain of S$15.1m for CapitaLand. We like that management continues to recycle capital steadily for stabilized assets in its serviced residences business segment, which would free up capital for deployment and further consolidate its balance sheet. Maintain BUY on CAPL with an unchanged fair value estimate of S$4.29 (20% discount to RNAV).

Ascott Residence Trust: Proposed acquisition of assets in China and Japan
Ascott Residence Trust (ART) has entered into conditional agreements to acquire three prime serviced residences in China and a portfolio of 11 rental housing properties in Japan for an aggregate purchase consideration of S$165.0m. ART expects to acquire the target properties at an EBITDA yield of 5.4% on a pro forma basis for FY12. On a pro forma basis, these accretive acquisitions are expected to have increased FY12 distribution per unit by 2.9% from 8.76 S cents to 9.01 S cents. The acquisitions will be funded partly by the S$150m recently raised from an equity placement and the balance will be funded by debt. We are placing our Hold rating and S$1.35 fair value UNDER REVIEW pending incorporation of the acquisitions into our model.

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