Local Brokerages Stock Call 31 July 2013

From OCBC:
OSIM International: To uInfinity and beyond!
Despite challenging economic conditions in China, OSIM International Ltd (OSIM) managed to record a 15.9% YoY jump in its 2Q13 PATMI to S$26.1m on the back of a 7.0% increase in revenue to S$165.5m. The former was 4.4% ahead of our forecast while the latter was 2.4% below. An interim DPS of 2 S cents was declared, in line with expectations and brings YTD dividends to 3 S cents/share. As a continuation to its innovative product drive, OSIM launched its new high-end massage chair named uInfinity in Hong Kong. This will also be sold in its other key markets in the coming weeks. We raise our FY13 and FY14 PATMI estimates by 2.5% and 2.4%, respectively, largely to account for higher share of profits of associated companies (mainly from TWG-Tea). Rolling forward our valuation to 16.5x blended FY13/14F EPS, our fair value estimate is raised from S$2.21 to S$2.40. Maintain BUY.

SMRT Corporation: Disruptions continue
SMRT's 1Q14 results came in below our expectations as revenue growth slowed while higher staff and depreciation expenses caused operating and net profit to decline 49.4% YoY to S$22.2m and 55.2% YoY to S$16.3m respectively. In the coming quarters - and in the absence of fare adjustments - we expect this trend to persist as higher operating expenses continue to compress margins. In addition, recurring service disruptions suggest elevated repair and maintenance expenses. With the lack of any immediate catalysts (a switch to the new rail financing framework within FY14 is unlikely in our view), we lower our FY14 forecast figures yet again and our DDM-derived fair value estimate falls to S$1.30 (S$1.45 previously). Downgrade to SELL. 
 
Fortune REIT: MOU for Kingswood Ginza property
FRT has entered into a non-binding MOU in connection with the acquisition of 100% of the issued share capital of a target company by FRT and assignment of the shareholder loans to FRT. The target company owns Kingswood Ginza Property, which comprises the entire Kingswood Ginza Mall as well as other retail, kindergarten, parking lots and ancillary spaces. Kingswood Ginza Mall is the largest shopping center in HK’s Yuen Long district. The proposed acquisition, a connected party transaction, is expected to be yield accretive. The indicative purchase consideration is HK$5,849m. 142,962,000 new units, which is an increase of 8.4% of the total number of units currently in issue (excluding the new units), have been placed out at HK$6.82 each. The issue price represents a discount of 4.4% to the volume weighted average price of HK$7.1356 per unit for trades done on the SGX-ST and the SEHK for 29 July 2013. The net proceeds of ~HK$947m will be used to partially fund the proposed acquisition. We place our Buy rating and FV of HK$7.51 under review. 

From DBS:
2Q13 net profit for Hutchison Port Holdings Trust declined
26% y-o-y to HK$420.5m, which was within expectations
given the impact of the port workers’ strike in HK earlier in
April 2013. On a positive note, 1H13 DPU of 2.4UScts was
slightly ahead of expectations. We expect higher DPU in
2H13, in line with seasonal patterns. Maintain BUY with
unchanged TP of US$0.82. There could be potential earnings
upside from lower refinancing costs as the Trust has been
evaluating refinancing options for its US$3bn term loan.

Osim’s 2Q13 results in line, driven by sales of uAngel.
Sustainable growth ahead as new uInfinity chair will be rolled
out in 3Q13. DPS of 2 Scents was declared, exceeding our
estimate of 4 Scts for FY13F or 1 Sct per quarter. As such, we
raise our FY13F DPS to 5 Scts. Maintain BUY, TP raised to
S$2.50 (Prev S$ 2.21) as we roll over our 16x PE valuation to
FY14F earnings.

Yoma’s 1QFY14 profit tumbled 82% y-o-y to S$0.4m,
missing expectation. Sales were below forecast due to slow
construction and weaker sales at Star City. We expect
improvements in 2QFY14 and beyond. Given visible revenue
drivers, we are maintaining our sales assumptions but
trimmed FY14F/15F earnings on weaker margins and higher
expenses. Maintain BUY rating and S$1.02 TP.

2Q13 net profit of S$0.16m for Broadway Industrial Group
came in below forecast, partly due to higher marketing
expenses. FY13/FY14F earnings cut by 44-48%. More
restructuring is needed to optimise operations and lift
margins; recovery is pushed back to 4Q13. Maintain Hold and
TP of S$0.30 (~0.6x P/BV).

1QFY14 results for SMRT were below expectations, net
profit tumbled 55% y-o-y to S$16.3m. Soaring costs
remained the main culprit, and is expected to continue to
rise. Changes in operating model and fare review is key to
profitability, but timing of government move is uncertain.
Maintain Fully Valued and S$1.20 TP.

From UOB KH:
CapitaLand (CAPL)
Last price: S$3.25
Technically, CAPL may continue to trend up towards
S$3.40 should it be well supported by its mid Bollinger
band.
On 26 Jul 13, CAPL’s CEO Lim Ming Yan said the
company may alter the sizes of its apartments as it
seeks to improve affordability to combat government
measures aimed at curbing speculation and lowering
prices. In our institutional research report dated 26 Jul
13, we maintain our BUY recommendation with a target
price of S$4.35, based on a 15% discount to our RNAV
of S$5.11/share. We have adjusted our 2013-15 net
profit forecasts by -10.4% to +3.5%, mainly deferring
recognition of its residential projects. Despite recent
developments in China, CAPL continues to see buoyant
demand due to urbanisation and income growth in
China. CAPL China’s residential sales surged 43% yoy
to 3,157 units in 1H13 and new launches, such as The
Loft (Chengdu) and The Metropolis (Kunshan) continued
to be well received.

OKH Global (OKH)
Last price: S$0.515
Technically, OKH may test S$0.60 should it be well
supported at above S$0.48.
On 16 Jul 13, OKH signed a memorandum of
understanding for a joint venture with Pan Asia Logistics
Singapore (PAL). The JV company, Pan Asia Logistics
Investment Holdings Pte Ltd, will develop, own and
manage modern logistic buildings. OKH and PAL will
own 40% and 60% of the JV company respectively.
Upon formation of the JV company, it shall acquire Pan
Asia Logistics Investment Pte Ltd, a wholly-owned
subsidiary of PAL which holds three properties in
Singapore, Malaysia and Korea.

Keppel Corp (KEP)
Last price: S$10.37
Technically, KEP looks poised to trend lower to retest its
previous low near S$10.20.
Reported on 22 Jul 13, KEP, the world’s largest oil-rig
maker, will focus on building more offshore production
and support vessels in Brazil as competition from China
cuts prices for its main product. In our institutional
research report dated 19 Jul 13, we maintain our BUY
recommendation and raise our target price from S$13.10
to S$13.50 on a higher sum-of-the-parts valuation, which
still values KEP’s O&M business at 18x 2014F PE. We
raise our blended O&M operating margin assumption
from 13.0% to 13.5%. As a result, we raise our 2013-15
net profit forecasts by about 3%. Our earnings forecasts
have factored in contract wins of S$6b p.a. Ytd, KEP has
won contract wins worth S$3.7b.

Golden Agri (GGR)
Last price: S$0.545
Technically, GGR needs to be supported at above
S$0.52 and needs at least to break above S$0.60 to
negate its bearish outlook. The next support could be at
around S$0.47.
Reported on 24 Jul 13, the Industry Ministry of Indonesia
is keeping August palm oil export tax at 10.5%. In our
institutional research report dated 14 May 13, we
maintain 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 despite a
recovery in performance in 1Q13 and a stronger
management team.

From DMG-OSK:
Scoop of the Day: Osim’s 2Q13 net profit of SGD26m (+16% y-o-y, +4% q-o-q)
met expectations on margin gains and higher contribution from associates.
Management attributed the growth amidst a tough operating environment to
product innovation and competitive positioning. For instance, its attempt to
segmentise the affordable luxury market hit resonance with uAngel, priced at
SGD2,000 per chair. Favourable product mix and operating efficiency lifted
operating margin by 1.2ppt to 20.8%. Despite their low bases, we note that share
of profit from associates – namely from JV factory DT-OSIM and TWG Tea –
jumped 213% to SGD1.5m. Net cash ballooned to SGD94m and an interim
dividend of 2.0 cents was proposed. Its highly anticipated uInfinity massage
chair, priced at SGD6,988, will be launched in 3Q and is expected to give
earnings a boost in coming quarters. To capture the highly cash-generative
nature of Osim’s branded business and a SGD94m cash pile, we are switching to
a DCF-based valuation Maintain BUY, with a higher TP of SGD2.38.

Lian Beng Group: Expecting a Strong FY14 (BUY, SGD0.57, TP:
SGD0.70)
LBG recorded 4QFY13 PATMI of SGD9.3m (-19.3% y-o-y), on the back
of a 39.1% revenue growth. It expects to book profits from the sale of
its industrial development – M Space – in FY14, which should boost
its earnings growth. LBG’s orderbook of SGD1.3bn would keep it busy
till FY16. The Group’s outlook remains positive, as LBG is set to
secure more contracts on robust construction demand. Maintain BUY.

OKP: 2Q13 Results Hit By Lower Margins (NEUTRAL, SGD0.41, TP:
SGD0.35)
OKP recorded 2Q13 PATMI of SGD0.7m (-77.0% y-o-y), even as
revenue was 27.5% stronger y-o-y at SGD30.1m, due to higher costs
incurred on a project. Gross margins are expected to remain low until
the project is completed towards end-3Q13. With our margin
assumptions lowered, we adjust our estimates and arrive at a TP of
SGD0.35. OKP has strong balance sheet, with net cash of
SGD0.15/share.

From Maybank KE:

SMRT: Another Weak Set Of Numbers; Sell, TP $1.00
MRT SP | Mkt Cap USD1.7b | ADTV USD1.3m
Maintain Sell with TP of SGD1.00. With structurally higher leverage and
poor dividend yield support, we argue that SMRT should de-rate from its
historical  levels. The stock of SMRT currently trades at 25X FY14E P/E
and yields merely 1.7%.
SMRT  reported  a weak set of results with net income of SGD16.3m (-54%
YoY).  Profitability of the group remains poor with EBIT margin of only
7.8%  (1QFY13:  16.0%). Higher staff cost (+1% QoQ, +23% YoY), incurred
as  a  result of larger headcount and wage revision, was a key pressure
point.
SMRT  recorded  negative  FCF  of  more  than SGD400mn and finished the
 quarter with a net debt position of SGD505mn (net gearing: 0.64x).
 
OSIM International: Strong Foundations For Future Growth; Buy, TP $2.34
OSIM SP | Mkt Cap USD1.2b | ADTV USD1.9m
Maintain  BUY  with  reduced TP of SGD2.34 to account for dilution from
convertible  bond,  now that share price is firmly above exercise price
of  SGD1.90.  We  see  further  room  for better operating leverage and
expect TWG contribution to become more meaningful going forward.
2Q13  results  were  broadly  within  expectations.  Net profit for the
quarter   came   in  at  SGD26.1m  (up  16%  yoy)  versus  our  preview
expectations of SGD26.5m.
Revenue  grew  7% yoy, driven mostly outside North Asia. We believe the
new  uAngel  was also a major contributor. EBIT margin grew from 19% to
21%.