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Friday, June 7, 2013

Local Brokerages Stock Call 7 June 2013

 From OCBC:
Healthcare Sector: Growth traction still healthy
Companies within the healthcare sector posted relatively decent results during the recently concluded 1QCY13 reporting period. Under our coverage, Biosensors International Group’s (BIG) core earnings growth of 4.1% YoY beat our forecasts, while that of Raffles Medical Group came in within our expectations (+16.0% YoY). Looking ahead, healthcare companies have largely embarked on expansionary plans to capitalise on the still robust industry fundamentals. In our opinion, these plans augur well for the medium-to-long term, but there will likely be some initial start-up costs which may impact near-term margins. We maintain our OVERWEIGHTrating on the healthcare sector. BIG [BUY; FV: S$1.60] remains our top pick, given its strong product pipeline, attractive valuations (FY14F PER of 13.6x is slightly more than 0.5 SD below its 3-year average forward PER) and decision to enhance shareholder value by recently declaring its first ever dividend since IPO.

Frasers Commercial Trust: Development opportunity resurfaced
Frasers Commercial Trust (FCOT) announced that it has successfully exercised its right of redemption in respect of 2.2m Series A Convertible Perpetual Preferred Units (CPPUs). This, together with the redemption of 157.1m CPPUs in Apr, is likely to provide FCOT with further DPU uplift going forward. We also understand that FCOT has been granted a provisional permission (PP) by URA for the proposed additions and alterations to the existing commercial development at China Square Central and erection of a new hotel block on 18 Cross Street, Singapore earlier this week. While FCOT highlighted that it is still in the preliminary stage of exploring all options with regard to the property, we believe FCOT may possibly divest the hotel space or capitalize on its sponsor’s capabilities to develop the hotel. Either way, we are positive on the news as FCOT could use the proceeds from a sale to pare down its aggregate leverage or enhance its growth profile through the development. We continue to like FCOT for its growth potential, proactive management approach and compelling P/B of 0.97x. We are keeping our forecasts unchanged but we now tweak our CAPM assumptions to reflect a higher risk-free rate. Maintain BUY with revised fair value of S$1.60 (S$1.66 previously) on FCOT

From DBS:
DBSV Research issues an Equity Explorer on Amara
Holdings with fair value of S$ 0.75
which offers 19%
potential upside to current price. Amara is an Asian
integrated lifestyle group with three key business areas:
hotel investment and management, property investment
and development, and specialty restaurants and food
services. Further to its regional ambitions, the group
intends to grow its hotel business in Myanmar through a
JV to develop and operate a hotel in Dagon Township,
Yangon, with capital of US$50m.

From Maybank KE:
Singapore Developers: China Will Be More Pivotal Than Singapore
We recently advocated switching out of S-REITs into property developers. In particular, we like CapitaLand (CAPL SP, BUY, TP SGD4.20), CMA (CMA SP, BUY, TP SGD2.57) and Keppel Land (KPLD SP, BUY. TP SGD4.82) for their China exposure and diversified businesses.
Singapore now accounts for less than 50% of their respective asset base. Our analysis shows that should higher interest rates lead to a 10% decline in Singapore residential property prices and a 50 bps hike in Singapore commercial cap rates, the RNAVs of CapitaLand, CMA and KepLand are only negatively impacted by 2.3%, 2.8% and 2.2% respectively.
We are also positive of their diversification into China, as the fundamental theses of urbanization and growing affluence remain sound. Having been in the market long enough, these three companies have their individual competitive advantages to hold their own in China, as evidenced by the operational metrics reported in recent quarters.

From UOB KH:
OSIM International (OSIM SP, O23) -
Technical BUY with +9.2% potential return

Last price: S$2.06
Resistance: S$2.25
Support: S$1.93
BUY with a target price of S$2.25 with tight stops placed
below S$1.98. The stock has been trending up and is
currently trading above its rising 35-day moving average with
its mid Bollinger band acting as support. Its MACD indicator is
still trending above its centreline and had formed a bullish
crossover earlier. Watch to see if the stock could continue to
form new 52-week highs.
Our retail research has a fundamental BUY with a target price
of S$2.35.

Super Group (SUPER SP, S10) –
Technical BUY with +12.9% potential return

Last price: S$4.65
Resistance: S$5.25
Support: S$4.05
BUY with a target price of S$5.25 with tight stops placed
below S$4.45. The stock appears to be trading above its
rising 35-day and 50-day moving averages with an
immediate support at S$4.52. Its Stochastics indicator looks
poised to form a bullish crossover and its MACD is still trading
above its centreline. Watch to see whether the stock could
consolidate and break out.
Our institutional research has a fundamental BUY with a
target price of S$5.60.

Vard Holdings Ltd (VARD SP, MS7) -
Technical BUY with +13.5% potential return

Last price: S$1.18
Resistance: S$1.34
Support: S$1.07
BUY with a target price of S$1.34 with tight stops placed
below S$1.11. The stock appears to be trading above its 50-
day moving average, which acted as a resistance previously
and could now turn into a support. Its daily MACD indicator
looks poised to cross above its centreline and its weekly
MACD indicator has formed a bullish crossover. Watch to see
whether its 35-day moving average could cross above its 50-
day moving average.

Kreuz Holdings - Cruising steadily ahead.
(KRZ SP/BUY/S$0.715/Target: S$0.88)

FY13F PE(x): 7.2
FY14F PE(x): 6.6
We recently met up with Kreuz’s management and these are our key takeaways.
Bridging the growth gap. In 2014, management plans to charter one additional third-party vessel on a long-term contract, which will ease the capacity bottleneck and allow Kreuz to bid for additional contracts. We estimate that the chartered-in vessel could lift earnings by 5-15%. Currently, Kreuz charters in three third-party vessels and owns another three vessels, which are expected to be fully utilised till end-13. Variation orders to exceed expectations. In our view, Kreuz is likely to clinch higher than-expected variation orders, which will more than offset the lower-than-forecasted contract wins that will be announced in 2013. As a result, we have lowered our 2013 contract wins forecast from US$200m to US$135m. However, we have raised bothour 2014 and 2015 net profit forecasts by 4% each to account for higher variations orders.

Strong earnings visibility for 2013. Kreuz’s end-1Q13 orderbook stood at US$200m, which will be recognised over 12-18 months. We estimate that Kreuz will be able to achieve 70-75% of our 2013 revenue forecast based on its current orderbook and without any new contract wins. Ytd, we estimate that Kreuz has won contracts totalling US$60m-80m, including smaller contracts which were not announced. In-the-money option for second deepwater subsea vessel. Kreuz has an option with a Chinese shipyard to build a second deepwater subsea construction vessel for US$113.65m. In our view, Kreuz is likely to exercise the option in light of an attractive contract price and buoyant subsea activity. 

According to management, the price of this newbuild is even lower than market prices of vessels that are comparatively inferior. The second vessel is expected to be delivered in 2016, 12 months after the first in 2015, and will be financed by a mixture of operating cash flow and debt. Maintain BUY with a higher target price of S$0.88 (previously S$0.68), pegged to an undemanding 2014F PE of 8.0x (previously 6.5x), which is at a 17% discount to the offshore support vessel owner segment’s long term PE mean of 9.6x. We have raised our target PE to reflect Kreuz’s consistent execution track record, improved balance sheet position and operating cashflow.

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