Local Brokerages Stock Call 11 July 2013

From OCBC:
Ascott Residence Trust: Cut FV to S$1.31
The unit price of Ascott Residence Trust (ART) has fallen 13.3% since the high of S$1.50 on 22 May 2013 along with the general market pull-back over concerns about an early tapering of the Fed’s QE program. In this context, it is worthwhile highlighting that ART’s gearing has increased from 36% to 41% following the completion of the acquisition of three prime serviced residences in China and a portfolio of 11 rental housing properties in Japan for S$287.4m on 28 June 2013. The new gearing level is high compared to hospitality REIT peers, e.g. 28% for CDLHT and 29% for FEHT, and may be viewed less favorably by investors given an environment of higher interest rates. In addition, we expect fairly mute operational performance for ART’s assets in multiple geographies for the rest of the year. Given the increase in risk-free rates, we reduce our FV to S$1.31 from S$1.35 and maintain a HOLD rating on ART.  
 
Wilmar: No boost from Clariant JV
Wilmar international Limited (WIL) has just announced that it has received the relevant merger clearances for the establishment of a 50-50 JV called “the global amines company” with Clariant International Ltd (CIL), a world leader in Specialty Chemicals. However, WIL’s share price did not show any positive reaction to the news. Instead, sentiments were likely depressed by continued concerns over the slowing economy in China. Nevertheless, we opt to keep our forecasts for FY13 and FY14 intact for now; this as any downside risk is likely to be mitigated by a firmer USD. Maintain HOLD with an unchanged S$3.25 fair value (based on 12.5x FY13F EPS). 

From UOB KH:
Halcyon Agri Corp (HACL SP) 
Stretching Rubber Capacity For More Upside
Halcyon Agri Corp (HACL) operates in the midstream segment of the
natural rubber (NR) supply chain. This involves: a) procuring raw NR, b)
processing raw NR into technically specified rubber (TSR), and c) selling to
vehicle tyre manufacturers. It owns and operates two processing facilities
in Palembang, Sumatra, and is in the process of acquiring another two in
Ipoh, Malaysia. These factories are capable of producing two variants of
TSR – Standard Indonesian Rubber (SIR) and Standard Malaysian Rubber
(SMR) – in various grades.
• Initiate coverage with a BUY; target price of S$1.00 represents
29% price upside. Our target price is pegged at peers’ average of 10x
2014F PE. A medium- to long-term catalyst is its successful venture
into upstream operations, which could lead to better margins.

Overseas Union Enterprise (OUE SP, LJ3) –
Technical BUY with +8.7% potential return
Last price: S$2.85
Resistance: S$3.10
Support: S$2.66
BUY with a target price of S$3.10 (as per weekly watch
on 1 Jul 13) and tight stops placed below S$2.72. The
stock is likely to trend higher after it closed above its
mid Bollinger band and its 200-day moving average. Its
positive directional index looks poised to cross above its
negative pair. Watch to see whether prices could break
above its declining 50-day moving average. Our
institutional research has a fundamental BUY with a
target price of S$3.63.

Global Logistic Properties (GLP SP, MC0) –
Technical SELL with +10.2% potential return
Last price: S$2.84
Resistance: S$3.00
Support: S$2.55
SELL with a target price of S$2.55 and tight stops
placed above S$2.93. The stock could trend down
should the last price action form a lower high with
reference to its previous high near S$3.00 and a
‘bearish engulfing’ of its body of the previous day
candlestick. Its Stochastics indicator has formed a
bearish crossover in the overbought region and could
turn down. Watch to see if prices could break below
S$2.80 for further downside.

Vard Holdings (VARD SP, MS7) –
Take profit from previous technical SELL
Last price: S$0.83
Resistance: S$1.00
Support: S$0.83
The stock was featured as a technical SELL when it
opened at S$0.955 on 2 July. The stock has since
returned +13% on closing prices and has exceeded our
SELL target price of S$0.85. Some profits could be
taken off the table as the stock should consolidate near
S$0.83.

Overseas Union Enterprise- Lodges preliminary prospectus for OUE
Hospitality Trust.
(OUE SP/BUY/S$2.85/Target: S$3.63)
FY14F PE(x): 22.5
FY15F PE(x): 19.7
Lodges preliminary prospectus for OUEHT. Overseas Union Enterprise
(OUE) has lodged its preliminary prospectus for OUE Hospitality Trust
(OUEHT). OUEHT will be offering 434.6m new units to public and
institutional investors at S$0.88-S$0.90 per unit to raise S$382m-452m,
while a further 247.2m units will be offered to cornerstone investors to
raise S$218m-223m. The total amount of funds raised will range from
S$600m-675m.
Special dividend still substantial with a 5.0-8.3% yield based on the
current share price and a payout ratio of 30-50% of the remaining net cash
proceeds following the offering. This is lower than our initial estimates of a
6-10% payout, although the higher stake retained will generate long-term
dividend income for OUE.
Maintain BUY with an unchanged target price to S$3.63/share which is
pegged at a 20% discount to our RNAV of S$4.54/share. We leave our
RNAV unchanged pending confirmation on the successful listing of the
hospitality REIT. OUE is trading at a steep 37% discount to its RNAV.

From Maybank KE:
Singapore Office Sector: Respite May Be Brief | NEUTRAL
The  Singapore office market appears to have stabilized in 1H13, as
the  slide in rents in 2012 has been stemmed by a temporary lack of new
supply.  However,  we  believe  the  respite  could  be brief with more
downside  in  spot  rents  possible  in  2014 as leasing demand remains
lukewarm.
We expect KREIT and CCT to report flattish QoQ DPU growth when they
announce  their  2Q13  results  on  15  and 17 July respectively. Their
prospects for 2H13 will be more important, with the yield protection at
CCT’s  One George Street expiring in July and the completion of KREIT’s
acquisition of 8 Exhibition Street completing in around August.
We  have adjusted our risk-free rate and cost of equity assumptions
and  consequently  lowered  our  target prices for CCT (TP:SGD1.28) and
KREIT (TP:SGD1.15). Our HOLD recommendations are maintained.

ComfortDelGro Corp: Minimal impact from Visa termination; Buy, TP $2.33
CD SP | Mkt Cap USD3.2b | ADTV USD16.3m
According to a channelnewsasia report, commuters will not be able to
pay  for  their  cab fares using Visa cards from July 15. Commuters are
currently charged an extra 10% administrative fee for the use of credit
card payments, which is a breach of contract terms.
Our   analysis   showed   that  cashless  transactions  contribute
approximately  6%  of  profits  for  CDG’s  Taxi business in Singapore.
However,  our  discussion with management suggests that majority of the
contributions  from  cashless  transactions  are  due  to other payment
modes,  such  as NETS, and market penetration for the use of Visa cards
had  been  low.  Hence, the termination of this payment mode would have
minimal impact on the profits for its taxi business in Singapore.
No earnings revision, Maintain Buy. We made no revision to our
estimates and reiterate our positive view on the stock. ComfortDelGro
offers a defensive business exposure and currently trades below its
historical valuation levels at only 15X FY14E P/E (long term average:
16X). 

From DBS:
Malaysia’s Jun13 palm oil stockpile dropped 9% m-o-m to
1.647m MT –c.11% below forecast – as same month output
came in 10% below expectations. Flat Jun13 palm oil exports
were partly compensated by higher domestic consumption.
Given YTD numbers and Ramadan slowdown, we cut Jul13
output forecasts by 3% to 1.656m MT. Jul13 stockpile may
further drop to 1.593m MT. Productivity may deteriorate if
low prices persist. In a weak CPO price environment, we
recommend stocks with young age profile, decent volume
growth, trading at a discount to peers, have relatively low
unit cost of production, and strong balance sheet. For SGX
listed stocks, we believe Bumitama Agri, First Resources and
Wilmar fit these criteria.

From DMG:
Overseas Union Enterprise (OUE) filed its REIT prospectus
yesterday, coming on the back of the SPH-REIT filing on 9-July-13. The OUE
REIT listing is expected to raise at least $600mil with OUE retaining 47.9% of the
issue, 18.9% for Cornerstone, 29.3% for institutional investors and 3.9% offering
to retail. The single asset REIT comprised of the Mandarin Orchard hotel (1,051
rooms) and the retail Mandarin Gallery mall (NLA 125k sqft), both of which sits on
leasehold land with 43years left. At the offer price of $0.88 - $0.9, the implied
FY14E net distribution yield of 7.3% - 7.5% seems relatively attractive (vs SPH
REIT 5.8%-6%, CDL-HT 7% and FE-HT 6.1%) while its gearing of 33% allows
sufficient capacity for future acquisitions. However, the high initial yield offer may
suggest a higher hurdle for future yield accretive acquisitions, while the short
lease duration may compress time frame for acquisitions. We currently have no
coverage on OUE, maintain SELL on SPH.