Local Brokerages Stock Call 17 July 2013

From OCBC:
Ascendas REIT: Apparent growth drivers
Ascendas REIT (A-REIT) reported NPI of S$108.0m and amount available for distribution of S$85.2m, up 6.8% and 11.3% YoY respectively. The increase was driven mainly by contribution from its newly-acquired The Galen and positive rental reversions. On the operational front, A-REIT continued to deliver as well. Despite starting FY14 with 21.4% of its revenue due for renewal, A-REIT has managed to reduce the figure significantly to 14.8%, thanks to its proactive portfolio management. Moreover, positive rental reversions averaging 9.6% were achieved across all its property segments. During the quarter, A-REIT also announced three new asset enhancement works to optimize its yield. In addition, we understand that A-REIT has completed the purchase of its second property in China in Jul, and is actively working to fill the spaces. These efforts, together with continued higher renewal rents and vacancies at its existing portfolio, are likely to provide further upside in its NPI. We are keeping our FY14 forecasts unchanged as the 1Q performance was within view. Maintain BUY and S$2.45 fair value on A-REIT. 

M1: 1H13 results mostly in line - HOLD
M1 Ltd saw its 2Q13 revenue +5.3% YoY (+0.6% QoQ) at S$244.5m, and was just 1.4% shy of our forecast, as smartphone customers and usage continue to drive revenue growth. Net profit climbed 11.2% YoY (-4.5% QoQ) to S$39.2m, or about 3% ahead of our estimate. 1H13 revenue slipped 1.5% to S$487.5m, meeting 42.7% of our full-year forecast (due to lower handset sales in 1Q13), but net profit rose 6.1% to S$80.2m, or 51.8% of our FY13 estimate. M1 declared an interim dividend of S$0.068/share, versus S$0.066 last year. With only very minor adjustments < 0.5 % to our FY13 and FY14 earnings forecasts, our DCF-based fair value remains at S$3.10; we have already factored higher interest rate assumptions in our model. Maintain HOLD for decent dividend yield of 4.7%. 


CapitaCommercial Trust: 2Q13 results within expectations
CapitaCommercial Trust (CCT) reported 2Q13 distributable income of S$59.6m – 1.9% higher YoY. This cumulates to a 1H13 distributable income of S$115.3m, up 2.6% YoY, which is within expectations and make up 50.3% of our FY13 forecast. 2Q13 DPU is 2.07 S-cents which translates to a 5.4% distribution yield based on the last closing price of S$1.50. The growth in distributable income was mainly due to higher revenue contributions across portfolio properties, except Capital Tower, and lower finance costs which dipped S$3.4m QoQ due to reduced interest costs. Portfolio occupancy remained stable at 95.8% as of end 2Q13, versus 95.3% in the previous quarter. As a result of continued rental reversions, CCT’s average committed office portfolio rentals increased from S$7.83 to S$7.96. We will be speaking further with management regarding these results and, in the meantime, put our Buy rating and fair value estimate of S$1.80 UNDER REVIEW. 

From UOB KH:
 Yoma Strategic Holdings Ltd (YOMA)
Last price: S$0.915
Technically, YOMA needs to trade above S$0.98 for
further upside towards S$1.10.
YOMA’s CEO on 15 Jul 13 reported the status on the
use of proceeds arising from its previous rights issue and
private placement exercises. During FY13, the company
allotted and issued 422,117,873 ordinary shares of
S$0.24 each pursuant to a renounceable nonunderwritten
rights issue on the basis of four rights
shares for every five existing shares. Out of the gross
proceeds of S$101.3m from the said rights, the company
had utilised an aggregate amount of S$96.25m. During
FY13, the company allotted and issued 192,853,000
ordinary shares of S$0.525 each, pursuant to a
placement. Out of the gross proceeds of S$101.2m from
the said placement, the company had disbursed
amounts of S$24.55m and US$13.7m each in
accordance with the purposes set out in the
announcement dated 20 Nov 12 in relation to the
placement.

Keppel Corp (KEP)
Last price: S$10.92
Technically, KEP has traded above its 200-day moving
average and prices may continue to trend up towards
S$11.60 should the stock continue to trade above
potential resistance level near S$10.90.
KEP announced on 15 Jul 13 that it secured a US$206m
contract to build a jack-up rig from repeat Mexican
drilling company, Grupo R. Scheduled for delivery in
4Q15. This is the fifth jack-up rig ordered by Grupo R
from KEP this year. In our institutional research email
dated 16 May 13, we maintained our BUY
recommendation with an unchanged target price of
S$13.10 as we maintained our new contract wins
projection of S$6b for 2013 and also S$6b each for 2014
and 2015. Ytd, KEP has won S$3.7b worth of new
contracts. With an extensive global network of more than
20 shipyards, KEP believes its near-market, nearcustomer
strategy is the way to beat competition. 

Noble Group (NOBL)
Last price: S$0.905
Technically, NOBL has been on the downtrend as the
stock is likely to trade lower towards S$0.85 should it fail
to close above S$0.95. We maintain our technical SELL
on 21 Jun 13 with a target price of S$0.85.
Noble Group is considering a bid for Australia’s iron ore
miner as reported on 11 Jul 13. Shares of Western
Desert fell 2.9% in Sydney trading on the same day,
giving it a market value of about A$245m. In our
institutional research report dated 15 Jul 13, we upgrade
to HOLD from SELL with a target price S$0.92 based on
a 30% discount to its long-term mean PE of 15.3x. Noble
is now trading below its book value of US$0.81/share (or
S$1.02/share) as at 31 Mar 13 and is at its historical low.
But further upgrades will have to depend on the
sustainability of its earnings improvement. The
suggested entry price is at S$0.83. 

Golden Agri-Resources (GGR)
Last price: S$0.550
Technically, GGR has been resisted near S$0.60 and
currently a break below S$0.52 could test S$0.47.
On 15 Jul 13, Bloomberg reported that palm oil
inventories in Indonesia, the world’s largest producer,
contracted 7.7% to 2.4m tons from May 13. In our
institutional research report dated 14 May 13, we
maintained our SELL recommendation with a target price
of S$0.55 based on 13x 2014F PE, a mid-cycle valuation
for an integrated player. When CPO prices trade
sideways, we expect plantation stocks to underperform
the market. We expect CPO production growth to slow
down to 5% yoy in 2013 amid weak CPO prices and
China operations to remain challenging on the back of
high soybean cost as well as intense competition
following the Chinese government’s efforts to manage
inflation, which resulted in the inability to pass on higher
input costs to customers. This is despite a recovery in
performance in 1Q13 and a stronger management team. 

Courts Asia- CAL remains an attractive proxy for Southeast Asia
consumerism. Recent correction is an opportunity to BUY.
(COURTS SP/BUY/S$0.925/Target: S$1.20)
FY14F PE(x): 10.3
FY15F PE(x): 9.1
CAL is Singapore’s largest and Malaysia’s second-largest electrical, IT and
furniture retailer in terms of 2011 total sales.The first quarter of CAL’s fiscal
year is typically weaker due to the absence of festive holidays. 2QFY14
should generate stronger sales on the back of the Hari Raya season. We
expect CAL’s FY14 revenue and earnings to grow 23% and 21% yoy
respectively, driven by new store openings and higher sales persquarefoot.
On a three-year horizon, we forecast an earnings CAGR of
15%. Maintain BUY with a target price of S$1.20. We applied a peer
average PE of 13.5x to our FY14F EPS estimate of 8.9 S cents.

Ascendas REIT- 1QFY14: Leveraging on its strong balance sheet.
(AREIT SP/BUY/S$2.24/Target: S$2.73)
FY14F DPU Yld (%): 6.4
FY15F DPU Yld (%): 6.9
Results in line with expectations. Ascendas REIT (A-REIT) reported a
1QFY14 DPU of 3.55 S cents/share, (+0.6% yoy, +5.3% qoq) due to
higher distributable income (+11.3% yoy, +23.7%qoq) stemming from
higher revenues and lower interest expenses offsetting against dilution
from a private placement in 1Q13. The results are in line with expectations,
with 1QFY14 DPU representing 24.8% of our full-year forecast.
Upcoming pre-commitments of business space in 2013 has improved
substantially with 72% and 67% for business parks and hitech industrial
space respectively, up from 57% and 62% in the previous quarter. Total
pre-commitments for industrial space is relatively high at 69%.
Maintain BUY with an unchanged target price of S$2.73, based on DDM
(required rate of return: 6.9%, terminal growth: 1.8%). 

From DBS:
Ascendas REIT reported a set of commendable 1Q14 results,
in line with expectations. New acquisitions and development
projects are expected to drive earnings growth in FY14-15F.
Acquisitions if any, will be a positive surprise. Maintain BUY,
TP adjusted to S$2.50 (Prev S$ 2.60).

M1’s 2Q13 net profit of S$39.2m (+11% y-o-y, -4% q-o-q)
was inline with ours but 7%-8% below consensus estimates.
Half yearly DPS of 6.8 Scts (+3% y-o-y) at 77% payout ratio
was 3% below ours and 10% below market expectations.
We see downside risk to our FY13F earnings due to potential
rise in depreciation expenses with higher capex in 2H13.
Consensus underestimates the impact of fair value
accounting policy of iPhones. M1 follows fair value
accounting policy for iPhones (not for Android phones),
which boosted its net profit hugely in 2010 & 2011 during
iPhone frenzy. Higher sale of Android phones is hurting its
profit due to past burden of accrued handset revenue, which
may last for another two years. M1 is not cheap at 18x FY13F
& 17x FY14F PE while offering < 5 % yield. We maintain HOLD
on M1.

From Maybank KE:
Singapore Airlines: No scope for re-rating, another loss expected; Hold TP $10.50
SIA SP | Mkt Cap USD9.5b | ADTV USD9.9m
We are forecasting flat top line growth and core operating losses of SGD35mn for the quarterly results to be announced on 25th July 2013. Although our FY14F forecast is below street estimates, we maintain our Hold rating as valuations remain cheap by historical standards.
For the quarter, load factors declined substantially for SilkAir and weak airfreight market led to a 5.3% YoY decline in traffic.
While the passenger load factor of 78.0% appears relatively high by historical standards, the weak yield environment is likely to result in breakeven load factors of above 80% for the parent airline.

M1: Bet On M1 At The “Datarat” Table; Maintain Buy, TP $3.69
M1 SP | Mkt Cap USD2.3b | ADTV USD4.2m
Above expectations! 2Q13 net profit rose 11% to SGD39.2m, delivering on the promise we saw in 1Q13 when we said that 2013 had the potential to be a good year for M1. We maintain M1 as our only and strongest telco BUY and raise our TP (DCF) to SGD3.69
It is still early days to bet on M1 for (1) the greatest potential upside from 4G adoption which we believe will happen faster and sooner than expected in 2013 and (2) finally the chance to monetise surging data usage in Singapore now that smartphone users have been weaned off the unlimited data bottle.