Local Brokerages Stock Call 16 July 2013

From OCBC:
Singapore Residential Property:  Record launch at J Gateway
A headline total of 2,119 new private homes (incl. 313 EC units) were sold in Jun 13, up 11% MoM and 23% YoY. The highlight of the month was undoubtedly the launch of 738-unit J Gateway near Jurong East MRT station, which saw 737 units snapped up at a median price of S$1,486 psf. Our current base case is for FY13 primary sales (excluding EC) to slow to 16k-18k units sold – an 18% to 27% dip versus 22k units in FY12. With 10k units sold in 1H13, we expect sales to further ease as the market digests the impact of latest curbs. Maintain NEUTRAL on the residential property sector. We prefer developers with strong balance sheets and diversified exposure, such as CapitaLand [BUY, S$3.77] and Keppel Land [BUY, S$4.53]. In the mid-small cap space, we prefer Roxy-Pacific [BUY, S$0.76] which is sitting on a substantially sold development portfolio and has a track record of prudent execution. 
 
Fortune REIT: Solid 2Q13
FRT reported income available for distribution of HK$153.7m (+12.6% YoY), driven by a 10.7% YoY increase in revenue to HK$307.9m and a 11.6% YoY rise in net property income to HK$219.6m. DPU was the same as 1Q13 at 9.00 HK cents (+11.9% YoY). The results were in line with ours and the street's expectations. The portfolio valuation as of 30 June stood at HK$22.2B, up 9.8% from Dec 2012. The increase was mainly driven by improved asset performance, with cap rates of 4.3%-5.1%. The increase in asset valuation pushed the gearing ratio down to 20.9%. FRT is trading at a P/B of 0.71x (NAV of HK$10.01). We maintain our FV of HK$7.51 and BUY rating on FRT.
Keppel Corporation: Secures another Mexican order
Keppel Corporation’s O&M arm has secured a contract to build a jack-up rig worth US$206m from Grupo R, a Mexican drilling company. Scheduled for delivery in 4Q15, the unit will be built to Keppel’s proprietary KFELS B Class design. Grupo R is a repeat customer, having ordered four similar units for US$205m each in Mar this year. With this new contract, Keppel currently has on order nine KFELS B Class jack-up rigs from Mexican customers. We expect more orders as Mexico aims to boost oil production through increased exploration and production activity. Keppel has won contracts worth about S$3.7b YTD, accounting for 73% of our full year estimate. Maintain BUY with S$12.68 fair value estimate. The group is releasing 2Q13 results this Thursday. 

From UOB KH:
Singapore Property- Sales skewed by two projects.
Urban Redevelopment Authority’s (URA) monthly statistics for June
indicates that a total of 1,806 units (24% mom, 32% yoy) were sold (excl
EC’s) compared to a launch of 1,768 units (16% mom, 36% yoy). Including
executive condominiums, a total of 2,119 units were sold. This brings the
total units sold during 1H13 to 10,154 units (-17% yoy).
The pick-up in monthly developer sales was skewed by two projects.
Signs of price moderation are emerging and we anticipate that residential
volumes this year will moderate by 20-40% yoy and prices could correct by
3-8% as investment demand slows. We prefer deep-value and diversified
property developers such as CapitaLand, Ho Bee and OUE as our top
BUYs.

Keppel REIT- 2Q13: Watch out down under.
(KREIT SP/HOLD/S$1.36/Target: S$1.46)
FY14F DPU Yld (%): 5.9
FY15F DPU Yld (%): 5.4
Results in line with expectations. Keppel REIT (KREIT) reported a DPU
of 1.97 S cents/share, (+2.6% yoy, unchanged qoq) due to higher
occupancies at Ocean Financial Centre (OFC) and 77 King Street and
positive reversions at ORQ, offset by minor dilution from the 40m shares
placed in 1Q13. The results are in line with expectations, with 1H13 DPU
representing 50.5% of our full-year forecast. Maintain HOLD with a raised
target price to S$1.46 (from S$1.43), based on DDM (required rate of
return: 7.1%, terminal growth: 2.2%). Entry price: S$1.27.

Singapore Press Holdings- 3QFY13: Core earnings above our
expectation on lower-than-expected costs.
(SPH SP/HOLD/S$4.33/Target: S$4.25)
FY14F PE(x): 20.9
FY15F PE(x): 20.7
3QFY13 core earnings above our expectation. Singapore Press
Holdings (SPH) reported a net profit of S$187.8m (+81% yoy). Excluding
one-off items - namely a) the fair value gain of S$111.4m relating to its
investment properties and b) impairment of S$26.2m on certain
investments, net profit would have come in at S$100.5m (-3% yoy). This is
above our net profit forecast of S$90m for 3QFY13, which we attribute to
lower various costs (eg material, staff, newsprint and depreciation costs).
Newsprint charge-out cost continued to fall, from US$626/tonne in 2QFY13
to US$609/tonne in 3QFY13, while staff cost fell by 2% yoy.
Maintain HOLD and our target price of S$4.25, which is set at a 10%
discount to our SOTP valuation of S$4.73/share. Against SPH’s current
share price of S$4.33, our HOLD call is unchanged. Entry price is at
S$4.00 and below.

First Resources- Weakness in prices could be due to the weaker
1H13 production growth, but based on historical trends, a strong 2H
recovery could still help the company achieve its target.
(FR SP/BUY/S$1.69/Target: S$2.60)
FY14F PE(x): 9.6
FY15F PE(x): 8.9
Investors are concerned that the weak 1H production could lead to First
Resources (FR) missing management’s FFB production growth target of
10%. Alternatively, this target could be missed due to the recent hot
weather and haze in Central Sumatra. As shown in historical trends, a
strong 2H production recovery is still possible. However, the hot weather in
Central Sumatra still remains a concern.
Since production in 1H13 was slower, 2H13 pick-up is crucial. For
1H13, nucleus FFB production was up by 0.6% yoy vs our full-year
expectation of 12-13% yoy (vs management guidance of 10%). Based on
historical trend, a strong recovery in 2H is possible, and this would result in
FR being able to achieve our expectations. Maintain BUY with target price
of S$2.60, based on 15x 2014F PE. We like FR for its hands-on
management team, young age profile and efficiency.

S’pore Telecommunications- Regional mobile associates affected by
currency turmoil.
(ST SP/HOLD/S$3.83/Target: S$3.79)
FY14F PE(x): 17.7
FY15F PE(x): 16.3
Depreciation of currencies in emerging markets. Concern over tapering
of QE3 has led to outflows of funds from emerging markets. SingTel is
affected by the depreciation of the Indian rupee and Indonesian rupiah,
which declined by 10.1% and 2.7% respectively against the US dollar
since end-April. Against the Singapore dollar, the rupee and rupiah
depreciated 7.9% and 0.2% respectively. Both Reserve Bank of India (RBI)
and Bank Indonesia (BI) intervened to stabilise their currencies but were
unable to stem the decline.
The worst could be over. Recent comments by Federal Reserve
Chairman Benjamin Bernanke on maintaining accommodative monetary
policy is expected to calm financial markets. We should start to witness
stabilisation in emerging markets. However, we do not expect a rapid
reversal of the rupee and rupiah as both India and Indonesia have to
grapple with domestic issues.
Maintain HOLD. We updated our sum-of-the-parts (SOTP) valuation for
SingTel based on latest foreign exchange rates and have lowered our
target price from S$3.87 to S$3.79. The Australian dollar has also
depreciated 12.4% against the US dollar and 10.2% against the Singapore
dollar since end-April.

Maybank KE:
Offshore & Marine: Contrasting Yard Fortunes (Overweight)
Recent  industry  developments  reinforce  our  positive  views  on
Singapore  rigbuilders.  Central  to  our  argument is that Chinese and
Korean  competition  will not bring down average rig prices and lead to
future margin decline.
We  see  2  possible  repercussions from Chinese shipbuilder, China
Rongsheng’s  recent  financial  woes:  (1)  Customers  may  become less
willing  to  award  orders  to  Chinese yards for fear that they cannot
deliver,  (2)  Rapid  flushing  out  of excess capacities, accelerating
sector  recovery.  Either way, this would ease competition for offshore
orders.  Korean shipbuilder, Hyundai Heavy also indicated the intention
to  raise  shipbuilding  prices.  A return of shipbuilding orders could
also ease offshore competition.
We see stable earnings outlook for the Singapore rigbuilders (Keppel
Corp & Sembcorp Marine) ahead of 2Q13 results season, but flag possible
downside  risks  for  the  Chinese  shipbuilders (Cosco & Yangzijiang).
Maintain preference for the Singapore Rigbuilders.

Singapore  Press Holdings: Core Business Continues to Weaken; Cut to Hold,
TP$4.50
SPH SP | Mkt Cap USD5.5b | ADTV USD21.1m
SPH  reported a net profit of SGD187.5m for 3QFY8/13, up 80.7% yoy.
However,  the  growth is purely because of change in accounting policy.
Excluding one-off items, core net profit of SGD91.7m was down 12% yoy.
In  our view, the most immediate catalyst, REIT spinoff, is largely
in  price  already  while  the core media business could continue to be
under pressure for more quarters.
Current 5.5% dividend yield would be less attractive as government
bond yields rise. We downgrade the stock to HOLD as there is limited
upside to our target price. Wait for a better entry point. 

From DBS:
We hosted Sheng Siong Group’s CEO and CFO for a
conference in Singapore and a two-day roadshow in Hong
Kong. We like SSG for its stable earnings base, consistent
dividend payout and yield of 4.0%. Population growth, store
expansion, margin improvement and e-commerce will be
SSG’s key growth drivers going forward. Maintain BUY with
slightly higher TP of S$0.78 (Prev S$ 0.76).

2Q13 CPO output for First Resources was 126,797 MT
(+10% y-o-y; +10% q-o-q) or 21% of our full year target of
592,151 MT, weaker than the 24% we were expecting.
2Q13 earnings expectations now reduced to US$45-50m
from US$50-57m previously. Subject to changes to
management guidance for 2Q13 results, we are maintaining
our forecasts, TP of S$ 2.18 and Buy rating for the stock. At
current price, the counter is trading at undemanding 9.4x
FY14F earnings. Any near term weakness would be an
opportunity to accumulate the stock.

Keppel Corp has secured fifth contract to build a jack up
rig worth US$206m for Mexican drilling company, Grupo
R, scheduled for delivery by 4Q15. The first four orders for
similar vessels for Grupo were placed in March 2013 at
similar pricing. The latest contract take Keppel's YTD order
win to S$3,678m, making up 61% of our full year
assumption of S$6bn. No change to our earnings,
maintain Buy, TP S$13.00.

Keppel REIT reported a 6.1% rise in distributable income
to S$52.8m (DUP of 1.97Scts, +1.5% y-o-y) on the back
of a 3.1% increase in net property income to S$32.2m, in
line with expectations. The better performance was
attributable to increased rental income from OFC (through
an increase in its effective stake to 99.9%, improved tax
transparency status) coupled with higher occupancy at 77
King Street. Keppel REIT has also successfully refinanced
borrowings due in 2014 amounting to S$425m (or 60%
of debt expiring) and improved debt maturity profile.
HOLD maintained, TP S$1.36 (Prev S$1.43).

SIA reported June operating statistics that were fairly
weak, with passenger carriage up by 2.5% y-o-y to
8,230.2m p-km, on 4.4% y-o-y increase in capacity,
leading to a 1.5ppt decline in load factor to 81.5%.
Silkair's carriage rose by 8.9% y-o-y to 489.2m p-km but
lagged behind capacity growth of 17.1% y-o-y, resulting
in a 5.5ppt drop in load factor to 75.5%. SIA cargo
meanwhile, reported a 6.3% y-o-y decline in carriage to
550m tonne-km on 5.6% y-o-y decline in capacity, and
load factor dipping to 62.6%. This set of numbers
highlight SIA's difficulty in operating as a premium carrier
in a weak macro-economic environment, with their yields
also likely to be under pressure. The only relief is that jet
fuel prices are slightly lower y-o-y. Maintain HOLD.

Moody's puts Singapore banks
on negative outlook
• Moody's placed Singapore banks on negative
outlook
• Concerns highlighted are not new; keep watch
on unemployment for asset quality risk
• OCBC remains a HOLD; UOB at FULLY VALUED