Local Brokerages Stock Call 1 August 2013

From OCBC:
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. The indicative purchase consideration is HK$5,849m. 142,962,000 new units, representing 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 net proceeds of ~HK$947m will be used to partially fund the proposed acquisition. The remainder will be funded through new facilities. In our model, we assume that the acquisition will be completed by mid-September. While the acquisition is likely to be accretive, we note the continued increase in bond rates since late June, and hence lift our risk-free rate to 2.3% from 2.0%. Incorporating a higher expected market return of 13.5% as well (13.0% previously), we lower our FV to HK$6.95 from HK$7.51. On valuation grounds, we downgrade FRT to a HOLD. 

DBS Group: 2Q in line; ended Danamon bid
DBS Group Holdings posted 2Q net earnings of S$887m this morning, up 10% YoY and -7% QoQ. This is in line with consensus estimate of S$883m. Net Interest Margin (NIM) eased off from 1.72% in 2Q12 and 1.64% in 1Q13 to 1.62% in 2Q13. Loans grew a decent 5% from last quarter to S$234.8b by Jun 2013. In terms of fee income, the top performers were Investment Banking, up 82% in 1H to S$111m, followed by Wealth Management (+44% to S$214m) and Stockbroking (+29% to S$119m). An unchanged interim dividend of 28 cents has been declared. Stock will trade ex-dividend on 15 Aug and dividend will be paid on or about 7 Oct 2013. Meanwhile, DBS has also announced last evening that the long delayed acquisition of PT Bank Danamon Indonesia has lapsed. However, while this is a slight disappointment for its Indonesian strategy, it is not totally unexpected as this proposed acquisition has been long delayed with no clear outcome. We do not expect the market to have included any possible contribution from this proposed deal and as such do not expect this to impact earnings forecasts for the next two years. Meantime, do note that our pre-results rating was a BUY with fair value estimate of S$18.28. We will provide more details after the media and analysts’ briefings later in the day.

Yoma Strategic Holdings: Key catalyst ahead - the Landmark Project
Yoma reported 1QFY14 PATMI of S$0.4m, which decreased 80.6% YoY mostly due to higher staff costs as the group continues to build up a strong management team in anticipation of future activity. We judge 1QFY14 PATMI to be below view – forming only 3.7% of our full year forecast – due to a slower than anticipated pace of recognition at Star City and higher staff costs. The group announced that it has entered into an agreement with a third party investor for the sale of LDRs for five buildings (1043 units) in Zone B of Star City and would receive incentive fees if certain sales targets to end buyers are met. We continue to await the completion of the Landmark Project acquisition, which would likely be a key catalyst for the share price ahead. Maintain HOLD with an unchanged fair value estimate of S$0.87 (20% premium to RNAV).

Singapore Post: Expecting another steady quarter
Singapore Post (SingPost) will be announcing its 1QFY14 results after market close on 2 Aug 2013. We expect net profit to be around S$35m, which would represent about 24% of our full year estimate. Expenses are likely to remain elevated due to inflationary cost increases, growth in volume-related expenses and other administrative costs and continued investments. Looking ahead, we expect the group to continue to grow inorganically as it will be the fastest way to diversify from the mail business. As the group increases its exposure to faster-growing businesses such as the logistics and e-commerce segments, we increase our terminal growth assumption from 1.5% to 2.0%, thus bumping up our fair value estimate from S$1.23 to S$1.32. Maintain HOLD. 

Far East Hospitality Trust: Rendezvous acquisition – Issue price for new stapled securities
Far East Hospitality Trust (FEHT) has announced the issue price of new FEHT stapled securities to be issued to the The Straits Trading Company (as partial consideration for the proposed acquisition of Rendezvous Grand Hotel and Rendezvous Gallery), the Far East Organization (FEO) group of companies (pursuant to the equity placement to the FEO group), and the REIT manager (as payment for 80.0% of acquisition fee payable in relation to the acquisition). The issue price is at S$0.9302 per stapled security, based on the volume weighted price for FEHT trades done on the SGX for the period of 10 business days commencing from the day on which the existing stapled securities trade ex-distribution i.e. the period from 18 July 2013 to 31 July 2013. The trading of the 148,304,059 in aggregate of new stapled securities is expected to commence today, 1 Aug, at 2pm. Pending the 2Q13 results which will be released next week, we maintain our FV of S$1.01 and HOLD rating on FEHT.

By DMG
DBS issued a statement yesterday that the long-stop date for
the acquisition of Bank Danamon is 1 Aug 2013, and the conditional share
purchase agreement will lapse thereafter. While it is unclear whether official
written notification was received from Bank Indonesia, DBS appears to be taking
the middle ground by allowing the share purchase agreement to lapse, in our
view. We think the more positive outcome would have been BI approving DBS’
acquisition of a majority stake while acquisition of a 40% stake in Danamon could
have led to an overhang due to lingering uncertainties regarding the lack of
control as well as whether DBS would eventually be allowed to hold a majority
stake in Danamon. The latest development does raise some questions with
respect to DBS’ longer term strategy for Indonesia, although DBS said it remains
committed to Indonesia and will continue to invest and grow the franchise there.
DBS also said that it remains open to opportunities as they arise. We are Neutral
on the latest development and await further details from the conference call later
today, which will discuss the announcement and the 2Q13 results. We have a
BUY on the stock with a TP of SGD18.70.

Kreuz: Initiation - Poised, But Not Priced, For Growth (BUY, SGD0.76,
TP: SGD1.14)
Kreuz (KRZ) is a fast-growing subsea services provider with very
strong margins and highly visible medium-term growth as its capacity
is set to more than double by FY16F. Given its very low 6% net
gearing and strong cashflow, KRZ is attractively priced at 7.1x FY13F
EPS and 19% growth. We initiate coverage with a BUY and SGD1.14
TP, based on 10x blended FY13F/14F EPS, and backed by a SGD2.05
DCF value.

Broadway Industrial: Outlook Dims (NEUTRAL, SGD0.275, TP:
SGD0.30)
Broadway Industrial (BWAY)’s 2QFY13 results were below estimates,
with a core PATAMI loss of SGD1.1m on the back of a 8.5% y-o-y drop
in revenue to SGD158.6m. We expect the Group to face an uphill task
in rationalising its HDD operation while garnering new clients to take
up excess capacity. Maintain NEUTRAL, with a lower SGD0.30 TP,
based on 0.6x FY13 P/BV (-0.5SD from the stock’s 5-year historical
mean).

SMRT: Weak 1QFY14 Results (SELL, SGD1.43, TP: SGD1.25
SMRT reported weak 1QFY14 results, with PAT tumbling 55% y-o-y to
SGD16.3m, slightly below our expectation. Positive catalysts in the
form of a new rail financing framework and new bus operational
framework may not be implemented anytime soon. We think that its
share price will continue to be weighed down by its weak earnings
amid persistent cost pressures. Maintain SELL, with DCF-derived TP
of SGD1.25.

Hutchison Ports Holdings Trust: Lower Throughput Hits 1HFY13
Numbers (NEUTRAL, USD0.74, TP: USD0.79)
HPHT’s 1HFY13 earnings missed forecasts due to weaker volume and
higher costs resulting from a strike by its union. Even incorporating
2H’s peak season, trade volume in Hong Kong may at best come in
flat y-o-y while that in Yantian will rise 3%-4% this year. We cut our
earnings estimates on the lower volume, which trims our FV to
USD0.79. Maintain NEUTRAL, as the stock’s yield is an attractive
6.4%.

From UOB KH:
Golden Agri-Resources (GGR SP, E5H) –
Technical SELL with +11.7% potential return
Last price: S$0.525
Resistance: S$0.59
Support: S$0.47
SELL with a target price of S$0.47 with tight stops
placed above S$0.55. The stock is likely to continue to
trend lower as its mid Bollinger band could be acting as
resistance. A break below S$0.52 is likely to see the
stock test S$0.47. Its MACD indicator has hooked
down. Watch to see if its negative DI could continue to
slope downwards with its ADX looking poised to rise.
Our institutional research has a fundamental SELL with
a target price of S$0.55.

GuocoLand (GUOL SP, F17) –
Technical BUY with +10.4% potential return
Last price: S$2.10
Resistance: S$2.565
Support: S$1.915
BUY with a target price of S$2.32 with tight stops placed
below S$2.04. The stock may continue its rebound after
prices broke above its declining 50-day simple moving
average and was supported by its mid Bollinger band
earlier. Its MACD indicator has crossed above its
centreline and its positive DI has crossed above its
negative DI. Watch to see if prices could first break
above its 200-day simple moving average. Our
institutional research has a fundamental HOLD with a
target price of S$2.42.

Freight Links Express Holdings (FLE SP, F01) –
Technical BUY with +33.3% potential return
Last price: S$0.120
Resistance: S$0.160
Support: S$0.105
Maintain BUY with a higher target price of S$0.16 with
trailing/tight stops placed below S$0.11. The stock has
returned 21.2% on closing since 4 Jun 13 and currently
its 52-week high has exceeded our initial technical buy
target of S$0.12. The stock may trend higher as prices
could continue to trend above its 10-day and 50-day
moving averages and have taken out the high during
Nov 10. Its positive DI is sloping upwards with a rising
ADX, which suggests a strong uptrend. Watch to see if
the stock could close above S$0.132 for further upside.

Banking- Jun 13: Slight easing in loan growth.
DBS Group Holdings (BUY/S$16.70/Target: S$20.80)
Oversea-Chinese Banking Corp (BUY/S$10.56/Target: S$12.02)
A slight easing in pace of expansion. Loans grew at a moderated pace of
17.7% yoy and 0.7% mom. Loan growth has eased over the past two
months but the magnitude of easing is mild.
Maintain OVERWEIGHT. We expect loan growth of 10-15% for the
Singapore banks. Economic growth should strengthen gradually in 2H13
driven by externally oriented sectors, which should sustain growth in loans
for businesses. Our top pick is DBS due to strong execution capabilities
and attractive valuation. We also like OCBC for its ASEAN-centric
footprint.

Oil Service- Channel check: Improving OSV utilisation and charter
rates in Southeast
Asia; POSH Semco listing is likely to rekindle investor interest in the
sector.
POSH Semco’s listing in 4Q13 is likely to rekindle investor interest
Singapore oil-service stocks. Reuters has reported that Robert Kuok
group’s offshore support vessel (OSV) provider POSH Semco is seeking a
listing on the SGX. POSH Semco owns and operates a fleet of more than
100 OSVs. Scheduled to be launched in September/October, the company
is said to be looking to raise S$300m-500m, with its market capitalisation
estimated at US$1b. Based on its 2012 financial accounts (which we
secured from the Registrar of Companies), the company posted a net profit
of US$38.1m in 2012 (2011: US$27.9m). At a market capitalisation of
US$1b, this would imply a hefty 2012 PE of 26x. Singapore OSV-owner
segment is currently trading at 13.2x, 11.9x and 10.2x for 2012, 2013 and
2014 respectively, while Malaysian peers are trading at higher PEs of
25.6x, 16.3x and 14.8x.
Top stock picks. Ezion Holdings (EZI SP/Target: S$2.60), Kreuz (KRZ
SP/target: S$0.88, Nam Cheong (NCL SP/Target: S$0.34) and Triyards
(ETL SP/Target: S$1.11).

Wilmar International- 2Q13 Preview: Earnings likely to be lower qoq.
The least price volatility market should lead to more stable earnings
growth on volume expansion.
(WIL SP/BUY/S$3.15/Target: S$3.80)
FY13F PE (x): 11.9
FY14F PE (x): 10.1
Management has guided for a more challenging 2Q13 since 1Q13 results
briefing, ie the poorer results are unlikely to be a surprise to the market.
The main challenges are weaker outlook for soybean crushing, where
utilisation could be affected by the bird flu breakout in China early 2013.
Subsequently, the breakout of The Yellow Canopy Syndrome could affect
the sugar yield in Queensland, Australia. Sugar contribution should be
stronger in 2H vs 1H and to-date there is still no concrete information on
the potential yield impact. Maintain BUY with target price of S$3.80 based
on the sum-of-the parts (SOTP) method, implying a blended PE of 14.5x
2013F and 12.5x 2014F.

From Maybank KE:
StarHub: Catching A Break From 4G & EPL; Upgrade to Hold TP $4.22
STH SP | Mkt Cap USD5.9b | ADTV USD8.4mThe  share price has corrected significantly since our downgrade to
SELL in May to near our DCF-based fair value of SGD4.22. We upgrade the
stock  from  SELL  to  HOLD  with  TP  maintained at SGD4.22. Our telco
preference is M1 followed by StarHub and SingTel.
It is too early to confirm now but catalysts in 2H13 would include a
potential increase in FY14 dividend now that cashflow uncertainties viz
spectrum  auction have cleared up, and we anticipate drumbeats for this
to get louder toward end-FY13.
Recent  reprieves  – the government’s rejection of SingTel’s appeal
for   EPL   not  to  be  subjected  to  the  cross-carriage  rule,  and
lower-than-expected  4G spectrum auction cost – may cause StarHub to be
more receptive toward paying higher dividends, in our view.
  
The Hour Glass: Clockwork Ticking Down As Demand Slows
HG SP | Mkt Cap USD324.1m | ADTV USD0.1m
We recently met the management of The Hour Glass for an insight into
the company and the watch industry.
China’s  efforts  to weed out official corruption has resulted in a
drop  in Swiss watch export levels to Asia. Across the region, in fact,
the luxury sector is facing increasing challenges.
In  the  short  term,  Hour Glass has to contend with weak consumer
sentiment  in  Singapore. It recently cut its dividend payout, bringing
its  yield  of  3.1%  in line with peers. Valuation appears on the high
side at 7.8x hist. P/E vs. its mean of 6.3x.

From DBS:
Maiden numbers for Mapletree Greater China
Commercial Trust ahead of forecast by 8.3%, boosted by
strong reversions at Festival Walk and Gateway Plaza.
Looking ahead, we expect 2H to be better than 1H. There
is a remaining 25% of leases at Festival Walk to be recontracted
in FY14 and another 5% at Gateway Plaza
with an additional 18% and 10% of leases due in FY15.
Maintain Buy, TP S$1.09 (Prev S$ 1.22), after adjusting for
the latest risk free rates. We continue to like MAGIC for
its earnings resilience backed by robust performance at
Festival Walk as well as the growth aspects from organic
positive rental reversions.

Mark-to-market losses dragged Great Eastern Holdings’
2Q13 earnings, as expected. However, underlying
operations remain strong. OCBC will release 2Q13 results
on 2 Aug; earnings are expected to drop q-o-q on weaker
non-interest income. Maintain HOLD rating on OCBC and
S$11.50 TP.