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Thursday, July 25, 2013

Local Brokerages Stock Call 19 July 2013

From OCBC:
Keppel Corporation: Group CEO and O&M CEO to retire in early 2014
Keppel Corporation (KEP) reported a 11.7% YoY decrease in revenue to S$3.08b and a 33.4% drop in net profit to S$346.8m in 2Q13. However, excluding the lumpy profits from the sale of Reflections at Keppel Bay and the one-time gain from sale of investment shares, net profit in 1H13 was in line with last year’s results, within our expectations. Operating margin in the O&M segment continued to hold up. The group CEO as well as the CEO of Keppel O&M will be retiring early next year and successors have been identified. An interim cash dividend and in-specie distribution of Keppel REIT units brings the total interim distribution to S$0.208/share. Maintain BUY with a slightly lower fair value estimate of S$12.53 (prev. S$12.68).

CapitaRetail China Trust: Improved debt profile in 2Q13
CRCT’s 2Q13 results were in line with ours and the street’s expectations. Net property income rose by 6.0% to S$26.4m and income available for distribution was 7.5% higher at S$17.9m. NPI would have grown 9.5% YoY excluding CapitaMall Minzhongleyuan, which is undergoing AEI.  CRCT has refinanced the S$150.5m due in June 2013 and significantly improved the average term to maturity of its debt to 2.52 years as at 30 June from 1.30 years as at 31 March. The fixed rate proportion of CRCT's debt is 78%. Apart from the CapitaMall Anzhen unsecured onshore loan maturing next year, all other loans are offshore, and the average cost of debt for 2Q13 was at 2.58%. Gearing stands at 23.5% and all assets are unencumbered. We maintain our BUY rating and fair value of S$1.58.

CapitaMall Trust: Robust growth in 2Q13
CapitaMall Trust (CMT) released its 2Q13 results this morning. NPI grew by 12.2% YoY to S$125.6m while distributable income to unitholders rose by 10.2% to S$87.7m. The completed asset enhancement works at JCube, Bugis+ and The Atrium@Orchard last year, together with the rental rates achieved from the portfolio’s new and renewed leases, were the key drivers for the quarter. DPU was up 6.3% YoY to 2.53 S cents, and was consistent with our expectations given that 1H13 DPU of 4.99 S cents formed 50.9% of FY13F DPU. As at 30 Jun, CMT’s portfolio occupancy stood at 99.1%, representing an improvement from 1Q occupancy of 98.3%. In addition, positive rental reversion of 6.4% was also slightly higher than last quarter’s reversion of 6.2%. We will be attending CMT’s analyst briefing later in the morning. For now, we maintain BUY on CMT but put our fair value of S$2.43 under review.

Mapletree Logistics Trust: 1QFY14 DPU gained 5.9% YoY
Mapletree Logistics Trust (MLT) reported 1QFY14 gross revenue of S$75.4m and NPI of S$65.3m, down 2% and 3% respectively. The decline was mainly due to a weaker JPY against the SGD. Excluding the forex impact, gross revenue and NPI would have increased by 3% and 2%, respectively. The impact of the depreciating JPY on distributable income was mitigated by currency hedges. During the quarter, MLT also benefitted from lower borrowing costs and a partial distribution of the net gain from the divestment of 30 Woodlands Loop. As a result, amount distributable to unitholders rose 6.9% YoY to S$44.0m while DPU grew 5.9% to 1.80 S cents. Stripping out the divestment gains, DPU would be up 4.7% YoY. The results were in line with expectations, as 1Q DPU have met 24.8% and 25.4% of our and consensus full-year DPU projections. We will be attending the analyst briefing later this morning. In the meanwhile, we keep our HOLDrating but place our S$1.15 fair value under review. 
From DBS:
2Q13 results for Keppel Corp were slightly below on higher
tax rate. O&M saw a slight uptick in EBIT margin from 14.1%
last quarter to 14.2%, though we had expected it to be
closer to 14.4%. A positive surprise was the dividend-inspecie
of 8 KREIT shares for 100 Keppel shares, equivalent
to10.8 Scents per Keppel share, bringing total interim DPS to
20.8 Scents. Management reiterates confidence in Brazil
operations. We believe over 10 years of operating experience
in Brazil and excellent risk management distinguishes Keppel
from other players that have run into operational issues in
Brazil. We have trimmed our FY13 core profit by 1.5% to
account for the higher taxes in 2Q13. Our TP is thus revised
to S$12.90 (Prev: S$13.00). Reiterate BUY.

Ezion is adding a 12th liftboat to fleet, which is backed by a
5-year charter contract. It may be converted to time charter
with potentially higher contract value of c.US$90m. The
newbuild rig is expected to be delivered to a national oil
company in SEA by late 1Q 2015. The cost of the newbuild -
US$60m - will be funded by the issuance of preference shares
(27%) and bank borrowings (73%). Ezion is issuing 300
redeemable exchange preference shares to five Global
Investor Programme Funds at an issue price of S$100k each
to raise S$29.5m net proceeds. Dilution is minimal at 1.4%
and would be more than offset by 1.6% earnings accretion
from the new liftboat. FY13-15F earnings were trimmed by
0.4-2.2%. Maintain BUY; TP adjusted to S$2.96 (Prev S$
2Q13 results for CapitaRetail China Trust in line. Upgrade to
BUY, TP adjusted to S$1.75. We believe that market reaction
to CRCT on concerns of the supply glut and the economic
downturn is a tad unwarranted. Share price has fallen c.20%
from its high of S$1.87 in early April, and given its compelling
growth story for FY14 and the still strong underlying
performance of its existing malls, we believe this weakness
presents an opportunity to re-look at the investment case for
the stock.
The depreciation of the JPY against the SGD resulted in
Mapletree Logistics Trust (MLT) reporting 2% and 3% y-o-y
declines in gross revenues and net property income to
S$75.4m and S$65.3m, respectively. 1Q14 distribution
includes the payout of gains from the divestment of 30
Woodlands Loop. As with prior divestments, the manager will
distribute gains over 8 quarters. MLT has a defensive
portfolio. Forex weakness is expected to persist but will be
substantially hedged. Maintain BUY with revised S$1.32 TP
(Prev S$ 1.37).
From UOB KH:
Hongkong Land Holdings (HKL SP, H78) –
Technical SELL with +6.2% potential return

Last price: US$6.61
Resistance: US$7.09
Support: US$6.22
Maintain SELL with a target price of US$6.22 and tight
stops placed above US$6.84. The stock has broken
below its immediate support at US$6.65 and is likely to
trend lower on the back of a potential bearish crossover
at its MACD indicator and its negative directional index
has turned up. Watch to see if there is a further follow
through after the dead cross (on its 50- & 200-day
moving averages) has formed. Our institutional research
has a fundamental SELL with a target price of US$6.43.
Ezion Holdings (EZI SP, 5ME) –
Technical BUY with +13% potential return

Last price: S$2.30
Resistance: S$2.60
Support: S$1.95
BUY with a target price of S$2.60 with tight stops placed
below S$2.20. The stock appears to be trending above
its 50-day moving average, which could be acting as
support. Earlier, the stock was well supported near
S$1.95, which was a support level mentioned on 24 Jun
13. Its Stochastics indicator appears to hook up. Watch
to see if prices could break above S$2.32/2.42 for
further upside. Our institutional research has a
fundamental BUY with a target price of S$2.60.
Nam Cheong (NCL SP, N4E) –
Technical BUY with +18.5% potential return

Last price: S$0.27
Resistance: S$0.32
Support: S$0.26
BUY with a target price of S$0.32 with tight stops placed
below S$0.26. The stock continues to trend above its
rising key trendline and appears to be trading above its
rising 50- and 100-day moving averages, which could
be acting as a support. Its MACD indicator is near to its
centreline. Watch to see if the stock could break above
S$0.28 for further upside. Our institutional research has
a fundamental BUY with a target price of S$0.34.
Aviation - 1QFY14 results preview: Earnings decline for SIA while
Tigerair returns to the black.

Maintain SELL on Tigerair and target price of S$0.61, valuing the stock
at 1.4x FY14F P/B (excluding perps proceeds and no dilution). Maintain
HOLD on Singapore Airlines and target price of S$11.50 ,valuing it at
0.75x forward book value (ex-SIAEC).
For 1QFY14, we expect SIA to report an 87% yoy decline in core net
profit while Tigerair is expected to report a core net profit of S$5.5m
(1QFY13: S$14m loss). We expect SIA to report an operating loss of
S$38.4m (1QFY13: operating profit of S$72m), mainly from an expected
operating loss of S$47m from the parent airline due to lower loads and
weak yields. Throughout the quarter, SIA had guided that yields were
under pressure due to promotional activities. Key data to watch out for are
the extent of yield decline (we estimate 11.1 S cents, -3% yoy) and the
impact of forex movements (US$ and yen) on yields and bottom line.
Keppel Corp - 2Q13: O&M margins appear to be bottoming. Another
round of dividend in-specie of K-REIT units.

(KEP SP/BUY/S$10.90/Target: S$13.50)
FY13F PE (x): 13.5
FY14F PE (x): 13.3
Another round of dividend in-specie of K-REIT shares. Keppel Corp
(Keppel) has declared an interim DPS 20.8 S cents, comprising a) cash
DPS of 10.0 S cents and b) a dividend in-specie of Keppel's remaining
KREIT units (on the ratio of 8 K-REIT shares for every 100 Keppel shares
held) equivalent to 10.8 S cents/share. Keppel has also announced a top
management rejuvenation. CFO Loh Chin Hua is to replace CEO Choo
Chiau Beng from 1 Jan 14. O&M margins appear to be bottoming.
Keppel has reported a net profit of S$703.8m (-45% yoy) for 1H13.
Excluding exceptional and fairvalue items, net profit for 1H13 was
S$677m. Against our earlier net profit forecast of S$1.410b for 2013,
results appear to be in line with our projection, but may be marginally
below consensus net profit of S$1.563b for 2013. Net profit for 2Q13 came
in at S$346.8m (-33%). The dip in 1H13 O&M net profit (-8% yoy in 1H13)
was due to a lower O&M turnover (-13% yoy). 2Q13 O&M operating
margin of 14.2% (1Q13: 14.0%; 4Q12's 12.8%) was firm. O&M margins
appear to be bottoming.

Maintain BUY and raise our target price from S$13.10 to S$13.50, on a
higher sum-of-the-parts (SOTP) valuation, which still values Keppel’s O&M
business at 18x 2014F PE. Besides a higher valuation for Keppel’s O&M
business following our O&M earnings upgrade, we have also imputed
Keppel’s investment (before additional shares from options conversion and
additional cornerstone investor shares) in Kris Energy - as of end-1H13 - at
the latter’s IPO price of S$1.10/share.
Mapletree Logistics Trust- 1QFY14: Stable performer.
(MLT SP/BUY/S$1.10/Target: S$1.29)

FY14F DPU (S$ cent): 7.1
FY15F DPU (S$ cent): 7.5
Results in line with expectations. Mapletree Logistics Trust (MLT)
reported 1QFY14 distributable income of S$48.7m (+6% yoy, +16% qoq)
or a DPU of 1.80 S cents (+6% yoy, +4%qoq). 1QFY14 DPU of 1.80 S
cents (inclusive of divestment gains of 0.02 S cent) is in line with our
expectations, accounting for 25.3% of our full-year DPU estimate of 7.1 S
cents. Net S$4.96m gain from divestment of 30 Woodlands Loop will be
distributed over eight quarters. This translates into S$0.6m per quarter or
about 2.5 S cents per unit. Revenue down on yen depreciation but
impact mitigated by hedges. 1QFY14 revenues fell 2% yoy due to the
depreciation of the yen offset by positive rent reversions, while NPI fell 3%
yoy due to higher operating costs from conversion of single-user assets
into multiuser facilities and also higher term contract rates. The impact of
the dip in revenues and NPI was mitigated by income hedges. MLT has
hedged 90% of its FY14 distributable income.
Maintain BUY with an unchanged target price of S$1.29, based on
DDM (required rate of return: 6.9%, terminal growth: 1.5%).
From Maybank KE:
Keppel Corp: Passing on the Baton; Maintain Buy, TP $12.12
KEP SP | Mkt Cap USD15.5b | ADTV USD40.9m

Ø   2Q13  results  were  within  our expectations with PATMI of SGD347m
(-33%  YoY,  -3%  QoQ).  The  weaker  YoY  performance was due to lumpy
property  recognition  mainly from sale of Reflections units last year.
Interim  cash  dividend  of  10  cts/sh  was  declared  with additional
dividend-in-specie of Keppel Reit units (~10.8cts/sh). Maintain Buy, TP
O&M margin for 2Q13 was sustained QoQ at 14.1%, off the lows of the
13%  levels  seen  last  year.  Our  FY13F forecast is at 14.4%, but we
believe  that  there  are  opportunities  for  upside surprise. Overall
demand  for newbuild rigs from various markets remains encouraging. YTD
order wins have reached SGD3.5b with net orderbook now at SGD13.1b.
What  came  as a bit of an early surprise was the announcement of a
change  in  leadership.  The new successors have nevertheless been with
Keppel  for many years and we believe they have the capability to bring
the company to the next lap.
 Mapletree  Logistics Trust: 1QFY3/14 Inline; Growth Drivers Yearned; Hold,
 TP $1.05
 MLT SP | Mkt Cap USD2.1b | ADTV USD4.6m

1QFY3/14 revenue at SGD75.4m (-1% QoQ; -2% YoY) was 24% of ours and
25%  of  consensus  estimate.  The  YoY  decline  was mainly due to the
depreciation of the Japanese Yen. 1QFY3/14 DPU at 1.80 SG-cts (+4% QoQ;
+5.9%  YoY)  was  25% of ours and consensus estimate. The impact of the
Japanese  Yen  depreciation  on  distributable  income was mitigated by
currency  hedges  as the income stream for the quarter was fully hedged
into or derived in Singapore dollar.
1QFY3/14  results included the partial distribution of the net gain
from  the divestment of 30 Woodlands Loop. The SGD4.96m divestment gain
will  be  distributed over eight quarters commencing from this quarter.
This translated to SGD0.6m in amount distributable per quarter or about
0.025  SG-cts  per  unit.  Excluding this gain, 1QFY3/14 DPU would have
been 1.78 SG-cts.
Given the high valuation it is currently trading (1.2x P/B), and the
absence of concrete catalysts, we believe this counter is fairly priced
 at the moment. Reiterate HOLD with TP of SGD1.05.

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