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Monday, May 27, 2013

Local Brokerages Stock Call 27 May 2013

From UOB KH:
DBS Group Holdings (DBS SP, D05) –
Scaling new heights; more bang for your buck
Last price: S$17.15
Target Price: S$20.80

DBS reported a splendid set of 1Q13 results with growth in both
interest and non-interest income, which finally triggered a rerating
for the stock. DBS generated organic growth through its
nine strategic priorities and has built up regional operations. It
managed to stabilise net interest margin and benefitted from
market-sensitive sources of fee income. Management has raised
its guidance for loan growth for 2013 from 10% to a low
double-digit. Bank Indonesia has recently approved DBS’
proposal to acquire Bank Danamon but limits the deal to a 40%
stake for now. We view the acquisition to be dilutive to earnings
and ROE for two years but would turn accretive in the third
year. The deal is positive over the longer term by increasing
DBS’ exposure to high-growth emerging markets. Maintain BUY
and target price of S$20.80 until we get more clarity on this.
Technically in the near term, the stock needs to hold above
S$16.80 for further upside towards S$18.20/20.40.

Keppel Corp (KEP SP, BN4) –
Relief in strong O&M operating margin
Last price: S$10.91
Target Price: S$12.80

Keppel’s 1Q13 results were within our expectation, but appear
to be below consensus. 1Q13 earnings were sharply lower yoy
as 2012 had booked in exceptionally large property earnings.
Despite this, the strong O&M operating margin of 14% should
lend support to share price. Furthermore, 2013’s contract wins
could surpass expectations. Ytd, Keppel has won over S$2b of
new contracts, surpassing Sembcorp Marine’s. Our top pick in
the sector continues to be Keppel, given better earnings
visibility. We have a target price of S$12.80 to go with our BUY
Technically, the stock may continue its rebound from S$10.44
to test S$11.65.

Ying Li International Real Estate (YINGLI SP, 5DM) –
1Q13 results in line; new strategy to be unveiled soon
Last price: S$0.485
Target Price: S$0.64

Ying Li’s plans to transfer its retail malls into a REIT looks on
track. We estimate the company could rake in 28 cents/share if
Ying Li dilutes its ownership of these retail assets to 30%. Funds
will most likely be redeployed for future opportunities.
Management believes in the long-term growth prospects of
Chongqing and sees several opportunities there. We are excited
about the company’s new CEO, who has deep experience in
China and could implement new strategies. It has also
appointed three new directors to its board, who come with a
wealth of corporate experience. For 2013, Ying Li will recognise
the entire sales proceeds and profits from one of its commercial
projects. This should drive its share price. Our target price is
S$0.64, pegged at a 23.5% discount to our RNAV/share.
Technically, the stock may continue to trend up towards S$0.62
should it be well supported above S$0.48/0.42.

IHH Healthcare- 1Q13: Net profit below expectations; downgrade to SELL.
(IHH SP/SELL/S$1.63/Target: S$1.33)
FY13F PE(x): 49.9
FY14F PE(x): 40.3

Healthy growth from existing operations. IHH Healthcare (IHH) registered 29% and 24% yoy increases in group revenue and EBITDA from its existing operations. This was mainly attributed to higher inpatient admissions and increased revenue intensity
across its hospitals, ramping up of new hospitals and a full three-month consolidation of Acibadem. Mount Elizabeth Novena (MENH) reported a significantly reduced EBITDA loss of RM3m (4Q12: RM16m loss) after cost-rationalisation efforts by management. Occupancy rate is currently at 35% with 116 beds in operation.
MENH to turn EBITDA positive despite low occupancy. We expect MENH to turn EBITDA positive in 2Q13, earlier than expected,due to efforts in streamlining costs. With occupancy is still low at 35%, MENH and MEH are placed under the same management to allow the group to rationalise the two hospitals' cost structures and to consider MENH as an extension of MEH. However, the slow ramp-up in occupancy and lower bed count slightly dampen our outlook for the new hospital. We think the excess capacity may limit improvement in revenue intensity and hurt margins.
Downgrade to SELL; reduce target price to S$1.33. IHH is currently trading at about 50x 2013F PE. We think there is significant execution risk in the near term. Our revised target price of S$1.33 (previously S$1.42) is based on a SOTP model and implies 41x 2013F PE. We downgrade the stock to SELL.

From DBS:
The US markets have stabilized in the last two trading
days. We believe after last Thursday’s 1.8% drop in STI,
this could be an opportunity to accumulate stocks that we
like. Among our Buy calls that underperformed the
market are value unlocking plays - UOL Group, Keppel
Land and Wing Tai; laggards Oil & Gas stocks - Keppel
Corp, Nam Cheong, CSE Global and Ezion; and other
attractive picks - ComfortDelgro, Kreuz and Del Monte.

For the STI, we maintain our view for it to trade along the
14.7x (+0.5SD) 12-mth forward PE that should lift it to
3650 (14.7x FY14F PE) by year end.

1Q13 results for IHH Healthcare in line, forms 18% of
FY13F earnings. EBITDA margins were weaker on start up
costs of new hospital and other operating costs, but
within our expectations. Novena losses continue to
narrow with breakeven expected in FY13. Maintain HOLD
given its relatively rich valuations; TP revised to S$1.55
(Prev S$ 1.38) on higher EV/EBITDA multiple.

4Q13 results for Global Logistic Properties reflect partial
loss of Japan income. Growth track in China accelerated,
Japan and Brazil expanding through its funds. Maintain
Buy, TP S$3.30. We continue to like GLP for its strong
execution track record and anticipate the group’s
acceleration in its growth track to act as a catalyst for
share price performance.

From Maybank KE:
Midas Holdings: Green Shoots Of Recovery; Buy, TP $0.75
MIDAS SP | Mkt Cap USD464.3m | ADTV USD3.3m

The newly formed China Railway Corp issued Rmb20bn bonds last Thursday. In our view, it is a necessary move to get China’s ambitious railway plans back in gear and could potentially result in more intensive investments in the 2H13.
We continue to like Midas as a major beneficiary of the investments in China railway sector. Maintain our BUY rating and target price of SGD0.75.
The bond sales could help to ease the concern on the funding source for developing China’s rail system.
The RMB20b bonds are just the first batch of the RMB150b bonds that China Railway is expected to issue this year. Total investment in the China rail sector YTD also lags behind the full year investment target of RMB650b due to the restructuring of the Ministry of Railways. That implies more aggressive fund raisings and investments in 2H13.

From OCBC:

Dyna-Mac Holdings: Stay cautious
Summary: Dyna-Mac Holdings reported 1Q13 results that were slightly below our expectations. 1Q13 revenue fell by 19% QoQ to S$60.1m, while net profit fell 24% QoQ to S$6.7m. The group’s order-book continued to fall to S$113m (27 Feb-13: $134m), providing cover for under two quarters. To be fair, delays in the award of contracts is quite common in the industry and Dyna-Mac is currently tendering for a number of large projects. Nonetheless, the low order-book still makes Dyna-Mac vulnerable to potential yard under-utilization should contracts be further delayed. After adjusting our model to incorporate the 1Q13 results, our fair value estimate declined to S$0.44 (previously S$0.50). Maintain HOLD

CDL Hospitality Trusts: AEI for Orchard Hotel Shopping Arcade

Summary: CDLHT has announced asset enhancement plans for Orchard Hotel Shopping Arcade (OHSA). The AEI will comprise an overhaul of the property facade and existing amenities to enhance its user-friendliness. Scheduled to commence in late 2013, the AEI is expected to complete in 12 months, during which the mall will be closed. A soft opening of the revamped mall is expected by end 2014. The AEI is expected to cost approximately S$25.0m, including construction cost which will be fully funded by debt, estimated disruption costs to the adjoined Orchard Hotel, and the loss of rental income during the period of mall closure. Upon completion of the AEI, OHSA will boast an increased NLA of ~10k sq ft. Incremental rental income of OHSA is expected to be more than S$2.0m on an annualised basis, translating into an estimated gross ROI of more than 8.0%. For now, we maintain our HOLD rating and fair value of S$2.05 on CDLHT.  

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