Local Brokerages Stock Call 3 June 2013

From UOB KH:
Stock Picks From Market Pullback: Courts, CDREIT, SPH
Courts Asia (Courts) remains an attractive proxy for robust
consumer demand in Southeast Asia as it continues to build up
its presence in Singapore and Malaysia amidst plans to enter
Indonesia in 2014. CDL Hospitality Trusts’ (CDREIT) asset
enhancement will result in an ROI of 8%. The stock is lagging
its sector and now trades at an attractive 6% yield. Singapore
Press Holdings (SPH) will pay a special DPS of 18 S cents
should its REIT listing push through. Enter when the price pulls
back to S$4.20.

Courts Asia (COURTS SP, RE2) –
Attractive proxy for SEA consumerism
Last price: S$1.08
Target Price: S$1.20
Courts expects to open its first megastore in Malaysia in Aug 13
and it will also be adding two new stores in Singapore by end-
13. Its largest store ever will open in Indonesia next year and
management believes sales/sf will be higher than Malaysia’s.
The company has identified Indonesia as one of its key markets,
along with Malaysia, in driving its revenue in the medium to
long term given the growing middle class and fragmented retail
market. Management is comfortable with its current cash &
credit mix and believes this is optimal for controlling risk. We
view the recent profit-taking as an opportunity to accumulate.
Maintain BUY with a higher target price of S$1.20 after we
rolled over valuations. FY14 PE is at 13.5x.
Technically, the stock needs to be supported at above S$0.94
for it to continue to trend higher. We have a technical target of
S$1.45 should the stock retest its recent high at near S$1.20.

CDL Hospitality Trusts (CDREIT SP, J85) –
Renovation to drive organic growth
Last price: S$1.84
Target Price: S$2.36
CDREIT’s makeover of OHSA will add an additional 10,000sf or
a 16% increase to existing NLA. Management expects an
incremental income of S$2m, translating into an ROI of 8%.
Post-AEI, gearing will rise marginally by 1ppt to 29.5%, still
leaving a headroom of about S$400m for acquisitions.
Management emphasised that Singapore will remain its key
focus while other interesting markets include Australia, Japan
and Maldives. Ytd, the stock is up only 2.4%, lagging the REIT
sector growth of 10%. We believe this is mainly due to
misplaced concerns. The stock is currently trading at an
attractive yield of 6%. Maintain BUY and target price of S$2.36
as the loss of income in 2014 will be offset by a pick-up in longterm
yields. Our target price is based on a dividend discount
model.
Technically, the stock has an immediate support near S$1.84
and may move sideways. Resistance is at S$2.10 and the next
support could be around S$1.55.

Singapore Press Holdings (SPH SP, T39) –
Pushing ahead with REIT
Last price: S$4.27
Target Price: S$4.50
SPH REIT will focus on retail malls in Singapore and across Asia-
Pacific, with an ability to finance itself independently. The
Paragon and Clementi Mall will be injected at S$3.1b and SPH
expects to hold 70% of the REIT. SPH REIT is expected to make
an offering of S$540m and take on a S$900m debt. We
estimate the NAV of the REIT units at 88 S cents and FY12 DPU
yield at 5.3%. SPH will pay a special DPS of 18 S cents from the
cash proceeds it stands to receive from the sale of The Paragon
and Clementi Mall. Overall, SPH REIT’s IPO listing is neutral to
our valuation for SPH, but SPH’s earnings and dividend yields
are likely to be reduced by about 7%. Maintain HOLD and target
price of S$4.50 for now as we believe there could still be a risk
of the REIT listing not being pushed through should market
conditions turn unfavourable. We recommend an entry price of
S$4.20.
From a technical standpoint, the stock may do well should it be
well supported above S$4.20/4.05 for further upside towards
S$4.80.

Singapore Strategy 2H13: Grinding Sideways
We have a year-end target of 3,600 for FSSTI but would position defensively and buy on pullbacks. Volatility could remain high as VIX may normalise and markets are trading close to 2-year highs.
Grinding sideways in 2H13 with moderate upside. A valuation matrix of average long-term mean P/B and PE suggests the market could grind towards a year-end target of 3,600. We would buy selective large caps on pullbacks since FSSTI is trading less than 5% off its 2-year high and - 1SD below its mean VIX. This could provide buying opportunities should markets sell off owing to unfavourable newsflows or datapoints
Thematic plays in 2H13. Our investment themes for 2H13 include: a) rotation among high-yield stocks, b) stocks with region/sector-specific growth drivers, and c) quality laggards. We would also urge investors to take profit in stocks that aretrading at stretched valuations, such as the telecom sector.
UOBKH’s recommended list. Large-cap BUYs include DBS, CCT, Suntec REIT, OUE, Keppel Corp, SIA and First Resources. 
Midcap picks: Courts Asia, Ezion, Silverlake, Nam Cheong, OEL and Triyards. Key SELLs include IHH, SMRT, StarHub and SingTel.

From UOB KH:
We believe that STIs’ precipitous decline that started from
3465 should find support soon at 3270 or slightly above.
STI’s current short-term downtrend is likely to turn
sideways from c.3270-3390 in coming weeks.
The current sell-down of S-REITS opens up bargain
hunting opportunities. Our S-REITs picks are Cambridge,
Mapletree Greater China Commercial Trust and Frasers
Commercial Trust. Separately, Ascendas REIT suffered
worst among the S-REITs, down 16% since May 10.
Technically near-term support is at about $2.30 with
rebound resistance at $2.43 and $2.50.
With talk of stimulus cut-back and with that hopes of a
pick-up in economic recovery, we see room for selective
interest among ‘risk-on’ stocks. One area that we have
highlighted is the O&G stocks as the jack-up market has
stayed tight. Our picks are Keppel Corp for large cap,
Nam Cheong and CSE Global for small caps.

SembCorp Industries announced that the Vietnamese
government has approved its 1200 MW coal-fired power
project in central Vietnam to be included in the country's
national power development plan for the 2011-2020
period. SCI will be the owner and developer of this project
under a BOT arrangement. This coal-fired plant in the
Dung Quat Economic Zone will be located in central
Vietnam's Quang Ngai province where SCI is already
developing a 6000 hectares industrial park. Financial
details and contributions are preliminary at this juncture as
SCI is still conducting feasibility studies. Development is
positive but no change to TP of S$4.80 and Hold
recommendation.

From Maybank KE:
Singapore Strategy: Gravity Check | NEUTRAL
As  we  write,  the  market  has  just had its first big correction in
months,  on  fears  that  the  Fed  will  be  closing the taps of economic
stimulus soon as the American economy improves, which would then drive the
US  dollar higher, putting pressure on Singapore companies that earn their
revenue in the greenback.
The  interest  rate sensitive stocks that have done well last year and
this  year have already gone into a tailspin, as markets have been used to
low interest rates for so long it’s become the norm. We have been negative
on  the S-REITs for some time and the yield trade looks like it is finally
coming  to  an  end.  Similarly,  we have sell calls on two of the biggest
names in the telco space – SingTel and StarHub.
A  harder grind ahead in the next six months than the last six months.
Earnings  growth  is lacking, and economic reality has lacked momentum. We
think  the  economy  will really start to stutter in future quarters under
the government’s labour reform policies. Forward valuations are above mean
and only 2% earnings growth is expected in 2013.
While  the  interest  rate  sensitive  plays, namely REITs, telcos and
banks, are at risk, we are positive on the defensive stocks with resilient
earnings,  undervalued  situations  with  asset support, as well as stocks
with  investment  spinoff  angles.  Our  top  picks  are  CapitaLand, CMA,
ComfortDelGro,  Keppel  Land, Osim, OUE, Sembcorp Marine, SIA Engineering,
Tat Hong, Vard, Wing Tai and Yongnam.

From OCBC: 
StarHub Ltd: Upgrade to HOLD on valuation grounds
Summary: StarHub Ltd saw a sharp 15% drop in its share price after we downgraded our call from Hold to Sell on 10 May following its 4Q12 results announcement. Besides a more muted guidance from management, investors were also seen switching out of the defensive stocks like telcos as the yield compression story is starting to lose its appeal. And since we are using a DCF-based valuation methodology, higher bond yields will result in our fair value easing from S$4.00 to S$3.82. Fortunately, as StarHub has maintained its S$0.20/share dividend payout this year (and is likely to continue to do so in our view), its dividend yield has risen back to around 5% (or 5.2% based on our fair value). From a valuation perspective, we upgrade our call from Sell to HOLD.

Ezra Holdings: Long-term growth in the SURF market
Summary: Ezra Holdings (Ezra) announced last week that a pipe-lay vessel (Lewek Centurion) of its subsea division has been contracted for some 60km of pipeline installation work. The new customer is Cecon, and Ezra sees this as a potential platform for both contractors to develop further joint project opportunities going forward. The subsea, umbilicals, risers and flowlines (SURF) market is currently in a growth phase, and a number of subsea units are expected to be incorporated in the coming years. Still, we expect time is required for large project awards to be dished out; this especially after uncertainty in the Eurozone has weighed on sentiment. As at mid Apr, Ezra’s subsea backlog stood at more than US$1.1b vs US$850m in end Nov 2012. Maintain HOLD with S$1.10 fair value estimate.