Local Brokerages Stock Call 10 July 2013

From OCBC:
Roxy-Pacific Holdings: Acquiring KL site near upcoming Quill City
ROXY announced that it has acquired, for RM470k, a 47% stake in Macly Equity Sdn Bhd (Macly) which owns a 70k sq ft land site in Kuala Lumpur, Malaysia at Jalan Dewan Sultan Sulaiman. We understand this land site was acquired for RM89.8m by Macly and that ROXY is finalizing a JV agreement whereby it would likely fund the remaining commitment via a shareholder loan with the site valued at cost. This site has a total GFA of 686k sq ft and is strategically located beside the upcoming Quill City (a 7-acre mixed development on Jalan Sultan Ismail), the Sheraton Imperial Hotel and monorail Stations to Bukit Bintang. From our calculations, this acquisition would likely accrete 2.4 S-cents to ROXY’s RNAV. Maintain BUY with a higher fair value of S$0.76 (30% RNAV disc.) from this acquisition, versus S$0.74 previously.

Bumi Armada Berhad: Pipelay contract from Lukoil
Bumi Armada Berhad has signed a MYR567.6m (USD178.5m) contract with OAO Lukoil for pipelay work in the Filanovsky and Korchagin fields of the Caspian Sea. The work will be carried out using Bumi Armada’s derrick pipelay barge, the Armada Installer. Majority of the construction is expected to be carried out and completed in 2015. With the new contract, the group’s T&I order backlog increases to over MYR2b (USD 629.4m). As the new contract already forms part of our previous contract win assumptions, we will be keeping our forecast unchanged. Maintain HOLD with unchanged fair value estimate of MYR3.74. 

From UOB KH:
Mirach Energy (MENR)
Last price: S$0.37
Technically, MENR needs to break and close above
S$0.38 for further upside.
On 6 Jul 13, MENR entered into a convertible loan
agreement with six individuals for a total loan of up to
S$36m. The loan bears a flat interest rate of 7% and
matures two years from the date of the first drawdown.
Under the terms, the lenders shall make available a
total minimum loan of S$18m within a year. Each
drawdown of the loan will be in tranches of S$6m.
MENR intends to use the first tranche of the loan to
repay the S$16.9m 3% senior convertible bonds due
2014 to Legend Luso Investment Company Ltd and
Triple Master Investment Holdings Ltd. It intends to
use the balance of the loan to expand the business,
including the acquisition of new production oilfields. 

Cordlife Group (CLGL)
Last price: S$1.14
Technically, CLGL needs to break above S$1.18 to
test S$1.30 to avoid forming a top. Support appears at
S$1.00.
On 4 Jul 13, Cordlife Group announced that Cordlife
India has obtained the AABB accreditation and is one
of three AABB accredited Cordlife facilities. The group
is confident of gaining further market share in the India
private cord blood bank market, which grew at a 2007-
2011 CAGR of 35%. In our retail research report dated
20 May 13, we maintained CLGL as a HOLD and
raised our target price to S$0.86 as we lifted our net
profit estimates by 30% to reflect the impact of the
latest acquisitions and updated our outlook on the cord
blood and tissue banking business. We applied the
historical average PE of 16.1x to our FY14 EPS
estimate of 5.4 S cents to derive at our fair value. 

CapitaMalls Asia (CMA)
Last price: S$1.845
Technically, CMA is likely to retest S$1.70 should it fail
to trade above its 200-day moving average near
S$1.93.
On 8 Jul 13, CMA announced it will hold a Board
meeting on 23 Jul 13. The Board will, among other
matters, consider and approve the release of its
interim financial results for 1H13 and consider the
payment of an interim dividend. 

Ascendas REIT (AREIT)
Last price: S$2.20
Technically, AREIT could test S$2.06 should it
continue to be resisted by its declining 20-day moving
average near S$2.30/2.40.
AREIT is scheduled to post its 1QFY14 results on 16
July. In our institutional research report dated 11 Jun
13, we upgraded the stock to BUY from HOLD with an
unchanged target price of S$2.86, based on the
dividend discount model (required rate of return: 6.8%,
terminal growth: 2.0%). AREIT has taken advantage of
the low interest rate environment to extend its debt
maturity to 3.9 years, 18% longer than its average
maturity of 3.3 years between 2009 and 2011. Over
50% of its debt is maturing in three years or later, with
debt tenure extended to as long as 2024 (11 years). 

Singapore Aviation Support Services- Adjusting to the new normal.
Raising our risk free assumptions by 80bp and adjusting target prices. We
maintain our neutral stance on Aviation support services sector but lower
our DDM-based target price for the three stocks within our coverage by 8-
13%. The target price adjustment is mainly due to an 80bp upward revision
to our risk free assumptions to 3.0%, on the back of the recent spike in 10-
year Singapore Government Securities (SGS). Despite the downward
revision in target prices, we believe the sector will outperform REITs as all
three are in net cash and with relatively higher ROE. ST Engineering
(STE), which is Triple-A rated by Standard & Poor’s and Moody’s, which
explains why it has the lowest spread to 10-year SGS (excluding the land
transport stocks, which have lower payouts). Our top picks in the sector
are STE and SATS.

STE is our top pick in the sector but lower our target price to S$3.93.
We lower our target price by 13% to S$3.93 after raising our risk free rate
assumption by 80bp. Its dividend yield spread to 10-year SGS stands at
1.7%, the lowest among the aviation support services sector and other
equity yield instruments. The relatively low yield spread is due to the fact
that it has consistently paid out at least 90% of its earnings, strong
government links, strong credit ratings and cash flow as well as record
order book. STE will also benefit from a recovery in the US economy as
implied by the rise in 10-year US Govt Bond yield. About 27% of STE’s
revenue is derived from the US, primarily from the Aerospace and Marine
divisions. Every 1 cent rise in US dollar will lead to approximately S$20m
in revenue and S$2m in PBT. Ytd, the US dollar has gained 4 cents
against the Singapore dollar. At our target price, the stock will offer a yield
of 4.5%. Recommended entry price is at S$3.60 or 4.9% yield.

SATS (HOLD, Target: S$3.13). We had lowered our target price by 8% on
5 July, adjusting for a higher risk free rate. Operationally, food solutions
remain the key business driver accounting for 82% of operating profit with
margins four times higher than gateway services. Key concern is the rising
staff costs and competitive pressures. Maintain HOLD, target price of
S$3.13 based on a discount rate of 7.0% and terminal growth of 1.2%. At
our target price, the stock offers a yield of 5.1%. Entry price is S$2.90.

SIA Engineering (HOLD, Target: S$4.65). We lower our target price by
10.5% to S$4.65 after raising our risk free rate assumption by 80bp.
Operationally, SIA Engineering (SIAEC) is most dependant on line
maintenance revenue as margins from this segment at 20% is almost three
times that of airframe maintenance. Any slowdown in visitor arrivals will
thus impact SIAEC’s earnings. There is also little earnings visibility on third
party maintenance or from its associates. For these reasons, SIAEC
deserves to trade at a higher yield that STE. Currently, SIAEC trades at a
188bp spread to 10-year SGS, vs SATS’ 2.26% and STE’s 1.73% Entry
price is S$4.25. 

From Maybank KE:
Singapore Press Holdings: Another Step Closer to REIT IPO; Buy, TP $4.52
SPH SP | Mkt Cap USD5.3b | ADTV USD21.4m
SPH  REIT  filed prospectus with MAS yesterday after market closed.
Despite  the  recent  market  uncertainty,  it  seems to us that SPH is
getting  closer  to  a  successful  spinoff.  We  continue to like SPH.
However,  due  to  the  rising  interest  rates of Singapore government
bonds,  we adjust our risk free rate assumption in our DCF valuation to
3% from 1.3% before. Maintain BUY but lower TP to SGD4.52.
Limited  free  float could help a successful IPO despite the recent
market  uncertainty.  We  expect  the  IPO process to finish by August,
slightly later than management’s original plan.
Short  term  downside  risk  for  the  stock is mainly the possibly
lower-than-expected 3QFY13 results which will be announced next Monday 

From DBS:
Our analyst sees potential earnings downside for Tat Hong in
1Q14F from weaker AUD and slower mining and
infrastructure spending in Australia. 2H13 revenues from
Australia fell 12% y-o-y, affected by a slowdown in mining
and infrastructure spending. These could result in slower
equipment sales/rental and translation losses for 1Q14F. The
outlook for mining in Australia will likely remain weak with
infrastructure spending expected to slow down over the next
two quarters. Australia will potentially drag earnings growth,
thus FY14F/FY15F earnings cut by 20%/21%. Maintain BUY
with lower TP of S$1.43 (Prev S$ 1.80). The stock has
corrected from S$1.54 since May. In the near term, the stock
looks technically oversold and the support is at S$1.12.

Cosco Corp announced that it has secured contracts worth
US$216m in total, comprising: i) Four 111k dwt tankers, ii)
One 22k dwt tanker and iii) One stinger barge. This brings
Cosco's YTD wins to US$744m, forming 37.2% of our order
win assumption of US$2bn. Maintain FULLY VALUED; TP:
S$0.75.