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Wednesday, June 12, 2013

Local Brokerages Stock Call 12 June 2013

From OCBC:
Starhill Global REIT: Another positive development
Summary: Starhill Global REIT (SGREIT) announced that the rent review for the Toshin master lease has been concluded, and that a renewal rent at 6.7% higher than the prevailing rate has been secured. This is consistent with our 29 Apr report that SGREIT may again benefit from rental upside following the completion of the review process. We now factor in the increased rents in our forecasts but lower our fair value marginally to S$1.00 on higher risk-free rate (S$1.05 previously). However, we continue to like SGREIT for its growth potential, strong financial position and compelling valuations. For FY13, SGREIT looks set to gain from continued strength from its Singapore portfolio, incremental income from its newly-acquired Plaza Arcade and a 7.2% rental escalation from its Malaysia master leases in Jun. We maintain BUY on SGREIT. Key risks include weaker JPY/AUD and negative impact from a potential CPU conversion.

Tiger Airways: Time for a tiger
Summary: In light of its more than 6% price correction, we are reiterating our BUY rating on Tiger Airways (TGR) with an unchanged fair value estimate of S$0.79 as we believe prospects remain positive for the counter. Its recent May operating statistics revealed its eighth consecutive month of passenger traffic growth for TGR SG, and passenger load factors during the period have also remained fairly resilient, which demonstrates its effective capacity management. In addition, we are hopeful for a better showing from its associate airlines given the propensity for travel in the coming months for Indonesia and the Philippines. On a broader scale, the industry dynamics, namely growth in the Asia-Pacific region, remains conducive for budget carriers as consumers become more affluent and appetite for air travel increases. 

Midas Holdings: JV NPRT secures CNY1.26b metro contractSummary: Midas Holdings (Midas) announced that its 32.5%-owned JV Nanjing SR Puzhen Rail Transport (NPRT) has clinched a CNY1.26b metro contract. This is for the supply of 33 train sets (or 198 train cars) for the Shenzhen Metro Line 3 project. However, delivery is scheduled only from 2015 to 2016. Given that this is the third contract secured by NPRT in two weeks, we believe this highlights the growing momentum of China’s metro industry. In our view, this may also lead to future contract wins for Midas given that it is a supplier of aluminium extrusion profiles for NPRT. Maintain BUY on Midas, with an unchanged fair value estimate of S$0.54, pegged at 1.1x FY13F P/B. 

From DBS:
STI was affected by the sell-down in developing Asian
economies of Indonesia, Thailand and Philippines that
dragged down the Jardine Group of index component stocks
yesterday. There is still a little weakness from the region that
can weigh on the STI but not much in the short-term.
Firstly, China market resumes trading tomorrow, which is
likely to be a down day given the weaker-than-expected data
releases over the weekend. Secondly, the Hang Seng Index
still has a little more downside but should find good support
and has a better rebound at about 21000, which is less than
400pts from yesterday’s close. 400pts pale in comparison to
the 2155pts decline since May 20th.
For the STI, while the downtrend resumes with yesterday’s
move below last Friday’s low, we maintain our view that it
should hold above 13.1x (-0.5SD) 12-mth forward PE at
3100, likely around 3150.

Our analyst raises Genting HK TP to US$0.61 from US$0.55.
Slated for listing in 3Q13, Travellers is valued at US$8.3bil.
Travellers is proposing to raise US$416mil to fund RWM
Phase 3 expansion and Manila Bayshore development by
2017. Based on GENHK's diluted stake of 44.3%, Travellers’
implied valuation alone will dwarf GENHK’s market cap,
which means its other businesses (NCL, SCL) are thrown in for

From UOB KH:
Singapore Strategy- “Yield Impact” From Change In Govt Bond Rate
We analyse the impact of a change in the 10-year Singapore government bond rate on yield stocks and conduct a sensitivity test on target prices.

Yield stocks tumble but not equally. A rise in sovereign bond rates has led to a decline in yield instruments. In Singapore, the benchmark 10-year Singapore government bond (10Y SGS) rate has risen by 64bp to 1.94% since March. Correspondingly, 15 stocks in our yield universe have seen their yields rise by a greater quantum than the Singapore government bond rate. The bulk of these are REITS and telcos. Ascendas REIT and Sabana REIT stand out as having declined the most with their respective yields rising by 124bp and 106bp respectively.

SATS (SATS SP/HOLD/TP: S$3.40) has declined the least within the yield universe as its yield has risen by only 15bp vs the risk-free rate of 64bp. This is followed by SIA Engineering (SIE SP/HOLD/TP: S$5.20). This could be due to the fact that both
stocks are in net cash positions. ST Engineering (STE SP/HOLD/TP: S$4.50) yields have risen by 81bp and thus offer the best upside potential if bond yields stabilise. The underperformance vs SATS and SIE is due to its relatively lower cost of equity as a
lower discount rate will be more sensitive to changes in the risk-free rate. STE is now our top pick in the sector.

REITs have experienced the sharpest correction amongst the different sectors, with average yields falling by 90bp vs an average 75bp fall for all the yield-stocks under coverage. The fall is also more severe than the 64bp correction for 10Y SGS.

Within the SREIT sectors, the correction has been most severe for industrial REITs, with AREIT and Sabana REIT the worst hit as yields fell by 124bp. There may be near-term support for oversold industrial REITs such as Ascendas REIT (AREIT SP/BUY/TP: S$2.86) and Mapletree Industrial Trust (MINT SP/BUY/TP: S$1.75) while ParkwayLife REIT (PREIT SP/HOLD/S$2.70) may be vulnerable to further selldown.

SingTel, StarHub and M1 have corrected 8.6%, 14.1% and 15.1% respectively from their recent peaks. The correction for yield plays offers us an opportunity to accumulate telcos given stable yields and defensive qualities. They generate strong free cash
flow and have low gearing. We recommend accumulating M1 (M1 SP/BUY/TP: S$3.72) and StarHub (STH SP/BUY/TP: S$4.70) due to their more attractive dividend yields.

From Maybank KE:
SMRT Corp: Earnings Weakness Not Priced In; Sell, TP $1.00
MRT SP | Mkt Cap USD1.7b | ADTV USD1.8m

Maintain Sell with TP of SGD1.00. With structurally higher leverage and poor dividend yield support, we argue that SMRT should de-rate structurally from its historical levels. The stock of SMRT currently trades at 25X FY14E P/E and yields merely 1.7%.
We have 3 key concerns on the stock: 1) Structurally higher leverage, 2) Fare revenue and OPEX mismatch and 3) Lack of CAPEX visibility. 

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