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Tuesday, June 11, 2013

Local Brokerages Stock Call 11 June 2013

From OCBC:
CapitaLand Limited: Expanding serviced residence presence
Summary: CapitaLand (CAPL) announced yesterday that it has secured a contract to manage a serviced residence in Manila, Philippines. We note this is the sixth contract acquired over the last month by its serviced residence unit, the Ascott Ltd (Ascott). We note Ascott has been actively expanding its presence (an impressive 13% CAGR of units owned/managed since 2000) and is the world’s largest international owner-operator with 31,770 units in 78 cities as at end 1Q13. We see this continued growth extending its competitive edge in terms of scale and branding and, with about S$0.9b of assets under development (on an effective stake basis), it enjoys a good pipeline for capital recycling ahead. We continue to favor CAPL for its diversified real estate portfolio across asset classes, its strong balance sheet and management focus on improving shareholder ROE. Maintain BUY with an unchanged fair value estimate of S$4.29 (20% discount to RNAV).

Karin Technology: Dropping coverage
Summary: Our recent conversation with Karin Technology’s (Karin) management revealed that its Components Distribution business has continued to pick up momentum. This is due to the proliferation of lower-end smartphones in China, resulting in stronger distribution volume of connectors used in these smartphones for Karin. Management is also focusing on growing its higher-margin IT Infrastructure segment. This has been boosted by robust demand for network security solutions and enterprise software products. Meanwhile, we expect Karin’s Consumer Electronics Products segment to remain as its largest revenue contributor, as Apple is still one of the most dominant players within the mobile devices space despite growing concerns over slowing iPhone sales. While we like Karin’s solid dividends payout track record as a means of rewarding its shareholders, we are CEASING COVERAGE on the stock due to a reallocation of resources and a lack of trading liquidity in its shares. 

From UOB KH:
Sarin Technologies (SARIN SP, U77) –
Technical BUY with +9.3% potential return

Last price: S$1.46
Resistance: S$1.70
Support: S$1.40
BUY with a target price of S$1.70 with tight stops placed
below S$1.38. The stock appears to have rebounded above
its lower Bollinger band and is still trending above its rising
75-day moving average. Its Stochastics has formed a bullish
crossover in the oversold region and could trend up. Watch to
see whether its MACD indicator could also form a bullish
crossover above its centreline.

Dukang Distillers Holdings (DKNG SP, GJ8) –
Technical SELL with +15.7% potential return

Last price: S$0.605
Resistance: S$0.65
Support: S$0.51
SELL with a target price of S$0.51 with tight stops placed
above S$0.655. The stock appears to form a tweezer top and
it appears that there was a follow through sell after the
potential bearish doji was formed on 7 Jun 13. Its Stochatics
indicator has formed a bearish crossover and could be turning
down. Watch to see whether its MACD indicator forms a
bearish crossover as well.

Innopac Holdings (INN SP, I26) -
Technical SELL with +20.3% potential return

Last price: S$0.182
Resistance: S$0.225
Support: S$0.145
SELL with a target price of S$0.145 with tight stops placed
above S$0.19. A break below S$0.18 is likely to see more
selling pressure. The stock appears to be resisted by its mid
Bollinger band and its 20-day moving average has formed a
dead cross with its 50-day moving average. Its ADX has a
reading of 31.9 which looks set to rise as its negative
directional index could also rise correspondingly. Watch to
see whether its MACD indicator would continue to trend
below its centreline.

Ascendas REIT- Oversold on interest rate concerns. Upgrade to BUY.
(AREIT SP/BUY/S$2.31/Target: S$2.86)

FY14F DPU Yld (%): 6.2
FY15F DPU Yld (%): 6.7
Sharpest share price correction of 19% from its recent 3-month high, the largest drop amongst the S-REITs under coverage, and is substantially higher than the 11% correction for the property REITs index (FSTREI).
Valuations looking attractive. Forward yield of 6.7% is attractive relative to large-cap industrial peers (MINT: 7.0%, MLT:6.3%) while AREIT is trading at 120bp discount to office REITs forward yield of 5.5%. P/B of 1.2 for AREIT is lower than the 1.3 for large-cap industrial REITs.
Upgrade to BUY (from HOLD) with an unchanged target price of S$2.86, based on Dividend Discount Model (required rate of return: 6.8%, terminal growth: 2.0%). 

From Maybank KE:
Lian Beng Group: Ready For A Ground Breaking Year; Upgrade to Buy, TP$0.68
LBG SP | Mkt Cap USD221.0m | ADTV USD1.0m

 Upgrade to BUY with a revised TP of SGD0.68, indicating upside of 30%. At current levels, Lian Beng is trading at 3.1x FY14F P/E, verses peers at between 5x and 7x P/E. We peg Lian Beng construction earnings at 6x, on par with its construction peers.
We caught up with Lian Beng’s management for updates on ongoing construction and property launches, and are now convinced that FY5/14 will be a record breaking year with earnings surpassing its 2012 peak of SGD51.4m.
The recent Poh Lian construction scandal offered Lian Beng the opportunity to take-over the Goodwood Residence construction contract, which is scheduled for completion in October 2013. Lian Beng’s orderbook currently stands at SGD1.2b.

From DBS:
SREITs - Our analyst believes that fear about the impact of
rising bond yields on S-REITs is an over-reaction at this
point as our economists do not expect QE to taper off
anytime soon. Over the medium term, a rise in long bond
yields is likely to be more gradual than abrupt and S-REITs’
continued ability to grow distributions (estimated at 4.0%
y-o-y) is a compensating factor. SREITs’ yield spread of
3.9% based on current share prices have factored in long
bond yields of > 2.5% and the impact from higher interest
cost is manageable at < 3%. But we are watchful of
translation losses from currency swings as the INR, AUD &
Yen weakened against SGD although we note that most
companies have taken hedges. We like MGCCT (BUY, TP
S$1.22), MCT (BUY, TP S$1.53), FCOT (BUY TP $1.69) and
Cache (BUY, TP S$1.47) for their better than peers’
growth prospects. We have also upgraded A-REIT (BUY,
TP S$2.60) and MINT (BUY, TP S$1.63) to Buy from Hold
on valuation grounds.

Data released by Malaysian Palm Oil Board (MPOB)
revealed a flat May13 palm oil output of 1.384m MT that
is 10% below our forecast. As at end May13, China’s
port-based palm oil inventory further expanded by 9% mo-
m to 1.386m MT. Our analyst believes the persistently
high port-based palm oil inventory is a strong indication
that China’s palm oil imports will probably remain flat
ahead of this year’s mid-Autumn festival. Hence, subject
to stronger exports elsewhere, we expect Malaysian palm
oil inventories to pile up again from here (to 1.825m MT
in Jun13) and peak in Dec13 (to 2.14m MT). CPO prices
are likewise expected to remain under pressure for the
remainder of the year. We are currently reviewing our
CPO price forecasts with downside bias and generally
expect planters to continue to underperform regional
indices. For the Singapore CPO stocks, our analyst
currently has HOLD ratings for Bumitama Agri (TP: $1.12),
Indofood Agri (TP: $1.14) and Wilmar Int’l (TP: $3.72)
except for First Resources (Buy, TP: $2.14). 

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