Local Brokerages Stock Call 7 June 2013

 From OCBC:
Healthcare Sector: Growth traction still healthy
Companies within the healthcare sector posted relatively decent results during the recently concluded 1QCY13 reporting period. Under our coverage, Biosensors International Group’s (BIG) core earnings growth of 4.1% YoY beat our forecasts, while that of Raffles Medical Group came in within our expectations (+16.0% YoY). Looking ahead, healthcare companies have largely embarked on expansionary plans to capitalise on the still robust industry fundamentals. In our opinion, these plans augur well for the medium-to-long term, but there will likely be some initial start-up costs which may impact near-term margins. We maintain our OVERWEIGHTrating on the healthcare sector. BIG [BUY; FV: S$1.60] remains our top pick, given its strong product pipeline, attractive valuations (FY14F PER of 13.6x is slightly more than 0.5 SD below its 3-year average forward PER) and decision to enhance shareholder value by recently declaring its first ever dividend since IPO.
Frasers Commercial Trust: Development opportunity resurfaced
Frasers Commercial Trust (FCOT) announced that it has successfully exercised its right of redemption in respect of 2.2m Series A Convertible Perpetual Preferred Units (CPPUs). This, together with the redemption of 157.1m CPPUs in Apr, is likely to provide FCOT with further DPU uplift going forward. We also understand that FCOT has been granted a provisional permission (PP) by URA for the proposed additions and alterations to the existing commercial development at China Square Central and erection of a new hotel block on 18 Cross Street, Singapore earlier this week. While FCOT highlighted that it is still in the preliminary stage of exploring all options with regard to the property, we believe FCOT may possibly divest the hotel space or capitalize on its sponsor’s capabilities to develop the hotel. Either way, we are positive on the news as FCOT could use the proceeds from a sale to pare down its aggregate leverage or enhance its growth profile through the development. We continue to like FCOT for its growth potential, proactive management approach and compelling P/B of 0.97x. We are keeping our forecasts unchanged but we now tweak our CAPM assumptions to reflect a higher risk-free rate. Maintain BUY with revised fair value of S$1.60 (S$1.66 previously) on FCOT. 

From DBS:
DBSV Research issues an Equity Explorer on Amara
Holdings with fair value of S$ 0.75 which offers 19%
potential upside to current price. Amara is an Asian
integrated lifestyle group with three key business areas:
hotel investment and management, property investment
and development, and specialty restaurants and food
services. Further to its regional ambitions, the group
intends to grow its hotel business in Myanmar through a
JV to develop and operate a hotel in Dagon Township,
Yangon, with capital of US$50m.

From Maybank KE:
Singapore Developers: China Will Be More Pivotal Than Singapore
We recently advocated switching out of S-REITs into property developers. In particular, we like CapitaLand (CAPL SP, BUY, TP SGD4.20), CMA (CMA SP, BUY, TP SGD2.57) and Keppel Land (KPLD SP, BUY. TP SGD4.82) for their China exposure and diversified businesses.
Singapore now accounts for less than 50% of their respective asset base. Our analysis shows that should higher interest rates lead to a 10% decline in Singapore residential property prices and a 50 bps hike in Singapore commercial cap rates, the RNAVs of CapitaLand, CMA and KepLand are only negatively impacted by 2.3%, 2.8% and 2.2% respectively.
We are also positive of their diversification into China, as the fundamental theses of urbanization and growing affluence remain sound. Having been in the market long enough, these three companies have their individual competitive advantages to hold their own in China, as evidenced by the operational metrics reported in recent quarters.


From UOB KH:
OSIM International (OSIM SP, O23) -
Technical BUY with +9.2% potential return
Last price: S$2.06
Resistance: S$2.25
Support: S$1.93
BUY with a target price of S$2.25 with tight stops placed
below S$1.98. The stock has been trending up and is
currently trading above its rising 35-day moving average with
its mid Bollinger band acting as support. Its MACD indicator is
still trending above its centreline and had formed a bullish
crossover earlier. Watch to see if the stock could continue to
form new 52-week highs.
Our retail research has a fundamental BUY with a target price
of S$2.35.

Super Group (SUPER SP, S10) –
Technical BUY with +12.9% potential return
Last price: S$4.65
Resistance: S$5.25
Support: S$4.05
BUY with a target price of S$5.25 with tight stops placed
below S$4.45. The stock appears to be trading above its
rising 35-day and 50-day moving averages with an
immediate support at S$4.52. Its Stochastics indicator looks
poised to form a bullish crossover and its MACD is still trading
above its centreline. Watch to see whether the stock could
consolidate and break out.
Our institutional research has a fundamental BUY with a
target price of S$5.60.

Vard Holdings Ltd (VARD SP, MS7) -
Technical BUY with +13.5% potential return
Last price: S$1.18
Resistance: S$1.34
Support: S$1.07
BUY with a target price of S$1.34 with tight stops placed
below S$1.11. The stock appears to be trading above its 50-
day moving average, which acted as a resistance previously
and could now turn into a support. Its daily MACD indicator
looks poised to cross above its centreline and its weekly
MACD indicator has formed a bullish crossover. Watch to see
whether its 35-day moving average could cross above its 50-
day moving average.

Kreuz Holdings - Cruising steadily ahead.
(KRZ SP/BUY/S$0.715/Target: S$0.88)
FY13F PE(x): 7.2
FY14F PE(x): 6.6
We recently met up with Kreuz’s management and these are our key takeaways.
Bridging the growth gap. In 2014, management plans to charter one additional third-party vessel on a long-term contract, which will ease the capacity bottleneck and allow Kreuz to bid for additional contracts. We estimate that the chartered-in vessel could lift earnings by 5-15%. Currently, Kreuz charters in three third-party vessels and owns another three vessels, which are expected to be fully utilised till end-13. Variation orders to exceed expectations. In our view, Kreuz is likely to clinch higher than-expected variation orders, which will more than offset the lower-than-forecasted contract wins that will be announced in 2013. As a result, we have lowered our 2013 contract wins forecast from US$200m to US$135m. However, we have raised bothour 2014 and 2015 net profit forecasts by 4% each to account for higher variations orders.

Strong earnings visibility for 2013. Kreuz’s end-1Q13 orderbook stood at US$200m, which will be recognised over 12-18 months. We estimate that Kreuz will be able to achieve 70-75% of our 2013 revenue forecast based on its current orderbook and without any new contract wins. Ytd, we estimate that Kreuz has won contracts totalling US$60m-80m, including smaller contracts which were not announced. In-the-money option for second deepwater subsea vessel. Kreuz has an option with a Chinese shipyard to build a second deepwater subsea construction vessel for US$113.65m. In our view, Kreuz is likely to exercise the option in light of an attractive contract price and buoyant subsea activity. 

According to management, the price of this newbuild is even lower than market prices of vessels that are comparatively inferior. The second vessel is expected to be delivered in 2016, 12 months after the first in 2015, and will be financed by a mixture of operating cash flow and debt. Maintain BUY with a higher target price of S$0.88 (previously S$0.68), pegged to an undemanding 2014F PE of 8.0x (previously 6.5x), which is at a 17% discount to the offshore support vessel owner segment’s long term PE mean of 9.6x. We have raised our target PE to reflect Kreuz’s consistent execution track record, improved balance sheet position and operating cashflow.

Local Brokerages Stock Call 6 June 2013

From OCBC:
Genting Singapore: Upgrade to HOLD on valuation
Genting Singapore (GS) recently saw a pretty sharp tumble in share price, falling some 14% to a recent low of S$1.41, after we downgraded our call from Hold to Sell; this on the company posting slightly softer-than-expected 1Q13 results on 2 May. We have already pared our estimates after its 1Q13 results and we see no need for any revision for now. But we upgrade our rating from Sell to HOLD as the current share price is hovering around our unchanged DCF-based fair value of S$1.41.

Marco Polo Marine: Ceasing coverage
After BBR’s listing on the Indonesia Stock Exchange early this year, Marco Polo Marine (MPM) has been increasingly branding itself as an entity for investors to gain exposure to Indonesia’s growing offshore sector. Demand for larger sized AHTS vessels in Indonesia is expected to increase, benefitting owners such as MPM. Meanwhile, the ship repair business has seen a slow-down, which management thinks is seasonal. The ship chartering business, on the other hand, provides a steady base load of earnings. The long-term future of MPM looks bright, but time would be needed for significant earnings growth and a re-rating of the stock. We last rated MPM a HOLD with a fair value estimate of S$0.51. Due to a re-allocation of internal resources, we are ceasing coverage on this counter.
Midas Holdings: JV NPRT and consortium partners clinches CNY1.1b metro contract
Midas Holdings (Midas) announced that its 32.5%-owned JV company Nanjing SR Puzhen Rail Transport (NPRT) has, together with its consortium partners Shanghai ALSTOM Transport Electrical Equipment and ALSTOM Transport S.A., clinched a CNY1.1b metro contract. This is for the supply of 29 train sets (or 174 train cars) for the Nanjing Metro Line 4 Phase 1 project. Delivery is scheduled from 2014 to 2016. Although NPRT’s percentage share of the contract was not disclosed, we believe that it may be around the 70-75% range, after taking reference from previous contract wins by NPRT and its consortium partners. This would equate to a contract amount of ~CNY770-825m for NPRT, which is a sizeable win, in our opinion. Maintain BUY on Midas, with an unchanged fair value estimate of S$0.54, pegged to 1.1x FY13F P/B. 

From UOB KH:
Telecommunications – Singapore

Comments by Federal Reserve Chairman

triggered a reversal in US$-based

carry trades and a correction for yield

plays. QE3 could be scaled down if

incoming data show substantial and sustainable improvement in the labour

market. We believe recalibration of QE3 would be gradual and expect highly

accommodative monetary policy to be maintained for a considerable period

of time after QE3 ended. Upgrade Star Hub and M1 to BUY. Upgrade sector

to OVERWEIGHT. 

 

From DBS:

Our analyst has raised FY14/15F earnings for Ezion by
3/15% after imputing an additional 4/8 vessels to fleet.
The group is poised to ride on the rising demand for
liftboat/service rigs in Asia and robust activities in United
States Gulf of Mexico (GOM). Ezion offers growth +
visibility. It has a unique business proposition that offers
fascinating growth and high earnings visibility, with about
90% of its revenue derived from long-term contracts,
coupled with an impressive EPS CAGR of 56% in FY12-
15F. Maintain BUY, TP raised to S$3.00 (Prev S$ 2.52).

Midas announced that its 32.5% owned JV company
Nanjing Puzhen (NPRT) and its consortium partners has
won a RMB1.1bn metro train contract to supply 174 train
cars to Nanjing Metro Line 4 Phase 1 Project, for delivery
between 2014 and 2016. This follows a recent win
announced on 29 May that NPRT had also won a 56-train
car supply project to Shenzhen Line 4 worth RMB420m,
for delivery in 2013 and 14. We estimate that these wins
would push NPRT's order book to c. RMB9.5bn, which
should lead to strong earnings for the JV from this year
onwards. At the same time, these recent wins of over 200
train cars for NPRT should also lead to supply contracts for
Midas' core business, which we estimate at RMB100m, to
add to its current c. RMB700m order book, leading the
way for an expected earnings recovery for Midas in 2H13.
Maintain BUY, TP S$0.60.

Free My Internet!

"The blogging community – collectively called Free
My Internet,will be organising a protest and online
blackout next week against the new licensing requirements
imposed by the Media Development Authority, which
requires “online news sites” to put up a “performance
bond” of $50,000 and “comply within 24 hours to MDA’s
directions to remove content that is found to be in breach
of content standards”.

This blog will be joining the online blackout on 6 June 2013.
The motive and purpose of the MDA's stronghand requirement
is obviously an political one, and I don't like it.
司马昭之心， 路人皆知!

You will be directed in 5 seconds..... 

I was just informed that the re-direct did not work on
those readers using mobile devices like smartphone
and tablets, so please go to below website yourself
Free My Internet

Local Brokerages Stock Call 5 June 2013

From OCBC:

Goodpack Limited: A buying opportunity
With the official opening of Lanxess’s synthetic rubber plant in Singapore, we expect production to commence in 1QFY14, and Goodpack will be able benefit corresponding given the additional IBCs that it had procured earlier. In addition, the plant will only reach full capacity utilization by 2015, so that means Goodpack will be able to enjoy incremental earnings until the plant reaches a steady state of production. With another deal in the pipeline (Asahi Kasei), its prospects look positive in the coming quarters. That said, as its share price fell by as much as 4.4% since our last update, we deem that a buying opportunity has emerged for the stock. Therefore, we are upgrading Goodpack to BUYwith an unchanged fair value estimate of S$1.80.

Petra Foods: Time to cool off for summer
A potential inflection point may be emerging for Petra Foods as a result of a possible slowdown in consumer demand growth in Indonesia and a larger-than-expected loss from its cocoa ingredients segment in 2Q13. For the former, the suggested removal of fuel subsidies could adversely affect consumer spending due to the higher level of dependency by the lower-income groups, which make a larger proportion of the population. In addition, Petra could experience greater cost pressures related to distribution, etc. For the latter, a larger-than-expected loss could materialize as other cocoa processors in the industry have issued profit warnings recently, and this could lead to a bigger drag for Petra in terms of its FY13 performance. Therefore, we downgrade Petra to SELL with an unchanged fair value estimate of S$3.88.
Keppel Corporation: Secures US$800m semi-sub rig for the Caspian Sea
Keppel Corporation (KEP), through its subsidiaries, has secured a US$800m contract from Caspian Drilling Company, a unit of the State Oil Company of Azerbaijan Republic (SOCAR), to build a semi-submersible drilling rig which includes owner furnished equipment. Scheduled for delivery in 4Q 2016, the rig will be built to Keppel FELS’ proprietary DSSTM 38M design, which has been customised for the harsh environment in the Caspian Sea. Having operated in Azerbaijan since 1997, KEP has built a strong relationship with SOCAR, and understand the requirements of rigs for the Caspian region. With this win, KEP has secured orders worth about S$3.1b YTD, accounting for 63% of our full year estimate. Maintain BUY with S$12.68 fair value estimate. 

From UOB KH:
Singapore Shipyard- Keppel Corp lands US$800m SOCAR semi order; Samsung muscles into the harsh-environment jack-up space.
Keppel Corp (Keppel) has secured a US$800m (S$1b) semi-submersible rig (semi) order from Caspian Drilling Company Ltd, a subsidiary of State Oil Company of Azerbaijan Republic (SOCAR). The semi will be built using Keppel FELS’ DSSTM 38M design,and is scheduled for delivery in 4Q16. This is the first of two possible semi orders from SOCAR that was highlighted by Upstream and in our shipyard sector report dated 16 Apr 13.

Separately, South Korean yard Samsung Heavy Industries (Samsung) secured its maiden harsh-environment drilling jack-up rig contract. Statoil finally announced the winner of its Cat-J tender (originally due Jan 13). The contract – for two harsh-environment drilling jack-up rigs at an estimated US$600m each - was awarded to the operator-yard alliance KCA Deutag Drilling/Samsung, beating competing consortium Archer/North Sea Drilling Group (NSDG)/Jurong Shipyard. Samsung will be constructing the rigs.
Maintain BUY on Keppel and HOLD on SMM. We believe Keppel stands a good chance of registering higher O&M margins than SMM as the former is building semi-submersible rigs for Brazil. These are not new products to Keppel, while SMM is building drillships for the first time and for Brazil.

Venture Corporation- Value emerges after steep fall. Upgrade to BUY.
(VMS SP/BUY/S$7.38/Target: S$8.05)
FY13F PE(x): 14.7
FY14F PE(x): 12.4
Mild pick-up in 2Q13. Venture experienced a mild pick-up in 2Q13. Revenue mix was relatively unchanged, which led to stable margins. Customers’ forecast for 2H13 has improved slightly although management remains cautious as macro headwinds could
reappear.
Gradual increase in contribution from Oclaro. Run-rate for production of Oclaro’s fibre optics components has improved in 2Q13. The second phase of product transfer from Oclaro’s Shenzhen plant to Venture’s Penang plant started in May and will be completed in November. Full impact of the product transfer would be felt in 2014.
We have lowered our target price for Venture to S$8.05, based on 2013F PE of 16x (Benchmark Electronics: 17.8x, Plexus Corporation: 13.8x), justified by its average forward PE of 16.5x over the past 10 years.
Upgrade to BUY. Venture provides an attractive dividend yield of 6.8%. The stock corrected 14.9% after reporting 1Q13 results that were slightly below our expectations and valuation has become more attractive. 

From DBS:
DBSV Research issues an Equity Explorer report on Interra
Resources with fair value $0.57 and moderate risk return.
Interra is an oil & gas proxy in Myanmar and Indonesia,
with two producing fields in central Myanmar as well as
two producing fields and one exploration site in
Indonesia. Its wells produced close to 1m barrels of oil last
year, and it currently has about 24.6m of 2P (proven +
probable) reserves. Myanmar is the key earnings
contributor, accounting for 86% of FY12 EBITDA. ITRR
has been in Myanmar since 1996, and is currently the
largest onshore oil producer in Myanmar, commanding
c.40% market share. Growth is expected to come from
production ramp up, potential further upside from
exploration assets and bids for new licences.

Keppel Corp has secured a contract from Caspian Drilling,
a subsidiary of the State Oil Company of Azerbaijan
Republic (SOCAR), to build a semisubmersible drilling rig
worth about US$800m. The contract value is slightly
higher than expectations of US$700-750m. This contract
will lift Keppel’s YTD wins to S$2.47bn, forming 41% of
our full year assumption of S$6bn. Maintain BUY, TP:
S$13.00.

From Maybank KE:
Tat Hong Holdings: Two New Twists To An Old Favourite; Buy, TP $1.80
TAT SP | Mkt Cap USD727.6m | ADTV USD1.4m
Tat  Hong,  our  old  favourite  could  be gaining two new tricks. Its
impending  entry  into Myanmar and potential capital gains on sale of land
used  for  crane parking in Singapore are just what is needed to give it a
new investment angle.
 
At the same time, we continue to like Tat Hong for its exposure to the
infrastructure  sector  in  ASEAN  and  the oil & gas sector in Australia,
while  its  China  business  is turning around and is set to become a more
substantial contributor from FY14 onward.
 
We  expect  earnings growth will normalise to 13.4% CAGR over the next
three   years   but  earnings  volatility  to  gradually  fade  on  higher
contribution  from  Crane Rental; in short, enhanced earnings quality. The
stock  is still inexpensive at 10-12x forward earnings. Reiterate BUY with
new TP of SGD1.80, pegged at 14.5x FY3/14F PER.

Local Brokerages Stock Call 4 June 2013

From OCBC:
Singapore REITs: Capitalize on over-reaction
We see two key factors driving the S-REITs price correction over the last two weeks. First, increased expectations that the Federal Reserve could taper its bond purchases as early as 2H13; and secondly, opportunistic profit-taking on the back of a strong performance over 2012-13. At this juncture, however, we see the selling to be overdone. In our view, the odds of the Fed tapering bond purchases in 2H13 are roughly 50-50 and we see fundamental valuations for the S-REITs sector (370bp against the 10Y government bonds) to be undemanding currently. In addition, S-REITs sector would likely continue to deliver, in 2013, firm earnings from asset enhancement initiatives/development projects, yield-accretive acquisitions and active leasing efforts. Maintain our OVERWEIGHT rating on the S-REITs sector. Starhill Global REIT [BUY, S$1.05 FV] is our top pick in the sector due to its growth potential, strong fundamentals and compelling valuations. We also like CapitaCommercial Trust [BUY, S$1.80 FV] and Fortune REIT [BUY, HK$8.64 FV] for the quality of their portfolio assets, positive rental reversion profiles and low gearing.

Nam Cheong: Ride the upcycle!
Nam Cheong Limited recently announced that its Executive Director, Mr. Leong Seng Keat, has been re-designated as the CEO. Mr. Leong, also the son-in-law of ex-CEO Datuk Tiong Su Kouk, has been with the group since 2005. We expect the leadership transition to be smooth. Meanwhile, we continue to like Nam Cheong for its market leadership in the increasingly active Malaysia oil & gas industry. Having seen a healthy pick-up in order wins, Nam Cheong recently expanded its shipbuilding programme to 28 vessels for FY14F (FY13: 19 vessels). Its large order-book of MYR1.3b, for 26 vessels delivered over FY13-15F, helps to mitigate its risk by providing a base level of earnings. Maintain BUY with a higher FV of S$0.35 (previously S$0.30). 

From DBS:
Singapore's PMI advanced higher into growth territory
with a reading of 51.1 in May, up from 50.3 in April. The
electronics sector also signalled a fourth consecutive
month of growth with a reading of 51.4 in May versus
51.2 in April. New orders and new export orders both
grew more strongly in May than in April, as did the
imports and employment sub-indices. Furthermore,
restocking is still in progress within the industry, judging
from the decline in stocks of finished goods as well as the
persistent increase in electronics imports and inventory.
Nonetheless, the key risk to note for the manufacturing
sector in the coming quarters is that the decline in overall
competitiveness due to the rapid increases in business and
labour costs will continue to hamper the performance of
this sector.

From UOB KH:
Dyna-Mac Holdings Ltd (DMHL SP, NO4) -
Technical BUY with +22.7% potential return
Last price: S$0.44
Resistance: S$0.54
Support: S$0.410
BUY with a target price of S$0.54 with tight stops placed
below S$0.415. The stock has formed a potential tweezer
bottom and prices appear to have rebounded from its lower
Bollinger band which is acting as a support and closed above
its mid Bollinger band. Its Stochastics indicator has formed a
bullish crossover and is trending up, and this is accompanied
by another bullish crossover at its MACD indicator. Watch to
see if the stock could move above its 50 and 200-day moving
averages.

 Freight Links Express Holdings Ltd (FLE SP, F01) -
Technical BUY with +27.6% potential return
Last price: S$0.094
Resistance: S$0.120
Support: S$0.08
BUY with a target price of S$0.12 with tight stops placed
below S$0.088. The stock appears to be trending above its
mid Bollinger band which is acting as a support, and prices
also trending above its rising 50-day moving average. Its
Stochastics indicator has hooked up and its MACD indicator
looks poised to form a bullish crossover. Watch to see if the
stock could break above S$0.105, which was its 2010 high.

SGX (SGX SP, S68) -
Take profit from previous technical SELL
Last price: S$7.27
Resistance: S$7.85
Support: S$7.20
The stock was featured as a technical SELL when it opened at
S$7.68 on 21 May 13. Prices did not stop out above S$7.85
and it has since returned 5.3% on closing prices. Some
profits could be taken off the table should the stock continue
to be supported near its rising trendline.

Singapore Property Strategy 2H13
We maintain our OVERWEIGHT call on the property sector, and see superior investment opportunities in the office segment. We expect the yield gap of 150-200bp between office REITs (5-5.5%) and physical office transactions (3.5% yield) to narrow as
positive rent reversions gain momentum and growth expectations start building up with a turnaround in office rentals. Our top picks include Suntec REIT, CapitaCommercial Trust, K-REIT, OUE and Ho Bee.
S-REIT selldown unwarranted; S-REITs are growth vehicles as well, unlike traditional yield plays, and there is ample room for interest rates to rise. S-REITs have corrected 10-17% on worries that interest rates could creep up further (up 40bps mom), especially with the Fed signalling that it could review its easing policy. These concerns are unwarranted as REITs are growth vehicles as well unlike pure yield plays. We expect the interest in REITs to pick up once investors differentiate SREITs from other yield plays as the growth driven by improvement in underlying rents, asset enhancements and acquisitions gathers pace.
Besides, there is a buffer of over 150bps for the interest rates to rise before the yield spread converges to the upcycle average yield spread of 2.3%. The REIT yield spread of 4.1% compares favourably against yield spreads in Malaysia (1.9%), the US (2.1%) and Australia (1.8%).
We prefer selective REITs and diversified developers with exposure to the office sector as rental growth expectations start building up with a turnaround in office rentals and positive rent reversions gain momentum, while residential prices moderate after the seventh round of residential property measures. We expect residential prices to correct by 3-8% as demand slows. Office rentals are anticipated to bottom in 2013, and rise 8% in 2014 as demand accelerates. The rental growths of the business park and high-tech industrial segments will benefit from the spillover from the office segments. Retail rentals are expected to remain resilient, rising 2-4% in 2014, while hospitality Rev PAR is likely to slow to low single-digit growth levels on rising staff costs.

From Maybank KE:
Yongnam International: Waiting on the “East Wind”; Buy TP $0.485
YNH SP | Mkt Cap USD341.9m | ADTV USD3.5m
Based  on  our  latest info, we believe the indicative results for both
Myanmar  airport  bids  will come soon than earlier expected. We reiterate
BUY and will be hosting management on an NDR in Hong Kong in June.
We  now  expect the award for extension of Yangon airport to arrive any
moment.  Estimated  contract value is USD150m. Ascribing a 50% probability
of winning to Yongnam, we add SGD0.045 to our TP.
The  company  announced a new 5-year SGD130m syndicated loan last week.
This  will be sufficient to fund the equity contributions for both airport
projects.  It also implies management is thinking big in terms of contract
wins.  We  believe  the  impending  announcements  of  the Myanmar airport
projects  will  serve  as concrete share price catalysts. We reiterate BUY
with a Street-high new TP of SGD0.485.

Local Brokerages Stock Call 3 June 2013

From UOB KH:
Stock Picks From Market Pullback: Courts, CDREIT, SPH
Courts Asia (Courts) remains an attractive proxy for robust
consumer demand in Southeast Asia as it continues to build up
its presence in Singapore and Malaysia amidst plans to enter
Indonesia in 2014. CDL Hospitality Trusts’ (CDREIT) asset
enhancement will result in an ROI of 8%. The stock is lagging
its sector and now trades at an attractive 6% yield. Singapore
Press Holdings (SPH) will pay a special DPS of 18 S cents
should its REIT listing push through. Enter when the price pulls
back to S$4.20.

Courts Asia (COURTS SP, RE2) –
Attractive proxy for SEA consumerism
Last price: S$1.08
Target Price: S$1.20
Courts expects to open its first megastore in Malaysia in Aug 13
and it will also be adding two new stores in Singapore by end-
13. Its largest store ever will open in Indonesia next year and
management believes sales/sf will be higher than Malaysia’s.
The company has identified Indonesia as one of its key markets,
along with Malaysia, in driving its revenue in the medium to
long term given the growing middle class and fragmented retail
market. Management is comfortable with its current cash &
credit mix and believes this is optimal for controlling risk. We
view the recent profit-taking as an opportunity to accumulate.
Maintain BUY with a higher target price of S$1.20 after we
rolled over valuations. FY14 PE is at 13.5x.
Technically, the stock needs to be supported at above S$0.94
for it to continue to trend higher. We have a technical target of
S$1.45 should the stock retest its recent high at near S$1.20.

CDL Hospitality Trusts (CDREIT SP, J85) –
Renovation to drive organic growth
Last price: S$1.84
Target Price: S$2.36
CDREIT’s makeover of OHSA will add an additional 10,000sf or
a 16% increase to existing NLA. Management expects an
incremental income of S$2m, translating into an ROI of 8%.
Post-AEI, gearing will rise marginally by 1ppt to 29.5%, still
leaving a headroom of about S$400m for acquisitions.
Management emphasised that Singapore will remain its key
focus while other interesting markets include Australia, Japan
and Maldives. Ytd, the stock is up only 2.4%, lagging the REIT
sector growth of 10%. We believe this is mainly due to
misplaced concerns. The stock is currently trading at an
attractive yield of 6%. Maintain BUY and target price of S$2.36
as the loss of income in 2014 will be offset by a pick-up in longterm
yields. Our target price is based on a dividend discount
model.
Technically, the stock has an immediate support near S$1.84
and may move sideways. Resistance is at S$2.10 and the next
support could be around S$1.55.

Singapore Press Holdings (SPH SP, T39) –
Pushing ahead with REIT
Last price: S$4.27
Target Price: S$4.50
SPH REIT will focus on retail malls in Singapore and across Asia-
Pacific, with an ability to finance itself independently. The
Paragon and Clementi Mall will be injected at S$3.1b and SPH
expects to hold 70% of the REIT. SPH REIT is expected to make
an offering of S$540m and take on a S$900m debt. We
estimate the NAV of the REIT units at 88 S cents and FY12 DPU
yield at 5.3%. SPH will pay a special DPS of 18 S cents from the
cash proceeds it stands to receive from the sale of The Paragon
and Clementi Mall. Overall, SPH REIT’s IPO listing is neutral to
our valuation for SPH, but SPH’s earnings and dividend yields
are likely to be reduced by about 7%. Maintain HOLD and target
price of S$4.50 for now as we believe there could still be a risk
of the REIT listing not being pushed through should market
conditions turn unfavourable. We recommend an entry price of
S$4.20.
From a technical standpoint, the stock may do well should it be
well supported above S$4.20/4.05 for further upside towards
S$4.80.

Singapore Strategy 2H13: Grinding Sideways
We have a year-end target of 3,600 for FSSTI but would position defensively and buy on pullbacks. Volatility could remain high as VIX may normalise and markets are trading close to 2-year highs.
Grinding sideways in 2H13 with moderate upside. A valuation matrix of average long-term mean P/B and PE suggests the market could grind towards a year-end target of 3,600. We would buy selective large caps on pullbacks since FSSTI is trading less than 5% off its 2-year high and - 1SD below its mean VIX. This could provide buying opportunities should markets sell off owing to unfavourable newsflows or datapoints
Thematic plays in 2H13. Our investment themes for 2H13 include: a) rotation among high-yield stocks, b) stocks with region/sector-specific growth drivers, and c) quality laggards. We would also urge investors to take profit in stocks that aretrading at stretched valuations, such as the telecom sector.
UOBKH’s recommended list. Large-cap BUYs include DBS, CCT, Suntec REIT, OUE, Keppel Corp, SIA and First Resources. 
Midcap picks: Courts Asia, Ezion, Silverlake, Nam Cheong, OEL and Triyards. Key SELLs include IHH, SMRT, StarHub and SingTel.

From UOB KH:
We believe that STIs’ precipitous decline that started from
3465 should find support soon at 3270 or slightly above.
STI’s current short-term downtrend is likely to turn
sideways from c.3270-3390 in coming weeks.
The current sell-down of S-REITS opens up bargain
hunting opportunities. Our S-REITs picks are Cambridge,
Mapletree Greater China Commercial Trust and Frasers
Commercial Trust. Separately, Ascendas REIT suffered
worst among the S-REITs, down 16% since May 10.
Technically near-term support is at about $2.30 with
rebound resistance at $2.43 and $2.50.
With talk of stimulus cut-back and with that hopes of a
pick-up in economic recovery, we see room for selective
interest among ‘risk-on’ stocks. One area that we have
highlighted is the O&G stocks as the jack-up market has
stayed tight. Our picks are Keppel Corp for large cap,
Nam Cheong and CSE Global for small caps.

SembCorp Industries announced that the Vietnamese
government has approved its 1200 MW coal-fired power
project in central Vietnam to be included in the country's
national power development plan for the 2011-2020
period. SCI will be the owner and developer of this project
under a BOT arrangement. This coal-fired plant in the
Dung Quat Economic Zone will be located in central
Vietnam's Quang Ngai province where SCI is already
developing a 6000 hectares industrial park. Financial
details and contributions are preliminary at this juncture as
SCI is still conducting feasibility studies. Development is
positive but no change to TP of S$4.80 and Hold
recommendation.

From Maybank KE:
Singapore Strategy: Gravity Check | NEUTRAL
As  we  write,  the  market  has  just had its first big correction in
months,  on  fears  that  the  Fed  will  be  closing the taps of economic
stimulus soon as the American economy improves, which would then drive the
US  dollar higher, putting pressure on Singapore companies that earn their
revenue in the greenback.
The  interest  rate sensitive stocks that have done well last year and
this  year have already gone into a tailspin, as markets have been used to
low interest rates for so long it’s become the norm. We have been negative
on  the S-REITs for some time and the yield trade looks like it is finally
coming  to  an  end.  Similarly,  we have sell calls on two of the biggest
names in the telco space – SingTel and StarHub.
A  harder grind ahead in the next six months than the last six months.
Earnings  growth  is lacking, and economic reality has lacked momentum. We
think  the  economy  will really start to stutter in future quarters under
the government’s labour reform policies. Forward valuations are above mean
and only 2% earnings growth is expected in 2013.
While  the  interest  rate  sensitive  plays, namely REITs, telcos and
banks, are at risk, we are positive on the defensive stocks with resilient
earnings,  undervalued  situations  with  asset support, as well as stocks
with  investment  spinoff  angles.  Our  top  picks  are  CapitaLand, CMA,
ComfortDelGro,  Keppel  Land, Osim, OUE, Sembcorp Marine, SIA Engineering,
Tat Hong, Vard, Wing Tai and Yongnam.

From OCBC: 
StarHub Ltd: Upgrade to HOLD on valuation grounds
Summary: StarHub Ltd saw a sharp 15% drop in its share price after we downgraded our call from Hold to Sell on 10 May following its 4Q12 results announcement. Besides a more muted guidance from management, investors were also seen switching out of the defensive stocks like telcos as the yield compression story is starting to lose its appeal. And since we are using a DCF-based valuation methodology, higher bond yields will result in our fair value easing from S$4.00 to S$3.82. Fortunately, as StarHub has maintained its S$0.20/share dividend payout this year (and is likely to continue to do so in our view), its dividend yield has risen back to around 5% (or 5.2% based on our fair value). From a valuation perspective, we upgrade our call from Sell to HOLD.

Ezra Holdings: Long-term growth in the SURF market
Summary: Ezra Holdings (Ezra) announced last week that a pipe-lay vessel (Lewek Centurion) of its subsea division has been contracted for some 60km of pipeline installation work. The new customer is Cecon, and Ezra sees this as a potential platform for both contractors to develop further joint project opportunities going forward. The subsea, umbilicals, risers and flowlines (SURF) market is currently in a growth phase, and a number of subsea units are expected to be incorporated in the coming years. Still, we expect time is required for large project awards to be dished out; this especially after uncertainty in the Eurozone has weighed on sentiment. As at mid Apr, Ezra’s subsea backlog stood at more than US$1.1b vs US$850m in end Nov 2012. Maintain HOLD with S$1.10 fair value estimate. 

Local Brokerages Stock Call 31 May 2013

From OCBC:
Land Transportation sector: Possibility of new entrant?
The LTA recently re-iterated the possibility of introducing competition in the bus services industry. However, as with before, we do not anticipate any changes to the operating landscape in the medium term unless the government decides how it wants to strike a balance between a free-market and government assisted model. For the near-term, the street is awaiting the recommendations from the fare review committee and has already factored in some level of increase. That said, any further delays from this committee could lead to continued losses for both PTOs and even asset impairments for SMRT. We downgrade the sector to NEUTRALin light of this possibility but do not anticipate further deterioration in the share prices for both ComfortDelgro and SMRT at this juncture. Maintain our HOLD ratings on both SMRT [HOLD; FV:S$1.45] and ComfortDelgro [HOLD; FV:S$1.95] although we favour the latter for its more attractive overseas ventures.

Swiber Holdings: Expanding into deepwater
According to Upstream, Swiber Holdings is preparing to invest in its first large deep-water offshore construction vessel for its fleet. In particular, the company is understood to have expressed its intention to purchase a vessel similar to Ezra’s Lewek Constellation. The capex of US$400-500m is huge, but considering that the unit is expected to take up to three years to build and the group has not announced any additional substantial capex plans, this may be a manageable purchase. Meanwhile, we would continue to monitor the group’s cashflow from operations. Pending an official statement from the company, we do not see this as a surprise, as Swiber has expressed its intentions to expand its operations into deeper waters. Maintain BUY with S$0.86 fair value estimate. 

 
Sembcorp Marine: Secures US$220.5m jack-up rig
Sembcorp Marine (SMM) announced that subsidiary PPL Shipyard has secured a contract to build a jack-up drilling rig from BOT Lease Co., Ltd, a leasing company of The Bank of Tokyo-Mitsubishi UFJ which is under the umbrella of Mitsubishi UFJ Financial Group. The contract price is US$220.5m (excluding cost of BOTL’s project management team and pre-operations cost), and is scheduled for delivery at end-Jan 2015. The unit is based on the proprietary Pacific Class 400 design; we note that Oro Negro had ordered a rig of similar design from SMM with a price tag of US$208.5m in Mar and Perisai Petroleum at US$208m in Feb this year. With this latest win, SMM has secured orders worth about S$2.7b YTD, accounting for 67% of our full year estimate. Maintain BUY on SMM with S$5.64 fair value estimate.
Ezra Holdings and Ezion Holdings: Ezra divests remaining shares in Ezion
Ezra Holdings announced that it will divest its holding of 40m shares in Ezion Holdings via a placement that is fully underwritten by DBS Bank. This represents about 4.17% of Ezion’s issued share capital, and was transacted at a price of S$2.25/share (4.9% discount to VWAP over 30 May 2013) for a total consideration of S$90m. Ezra will realize an estimated net gain of ~US$65.7m, and it intends to use the proceeds for working capital needs, lowering debt and fund growth of operations. We are not surprised by this move as Ezra had also previously sold off 60m shares in Ezion in Mar 2012. Maintain BUY on Ezion with S$2.62 fair value estimate and HOLD on Ezra with S$1.10 fair value estimate. 

From UOB KH:

Maxi-Cash Financial Services Corp (MCFS SP, 5UF) -
Technical SELL with +12.5% potential return
Last price: S$0.48
Resistance: S$0.53
Support: S$0.42
SELL with a target price of S$0.42 with tight stops placed
above S$0.495. The stock has gapped down and prices failed
to trade above its shooting star lookalike pattern earlier. Its
upper Bollinger band has acted as a resistance. Potential
support could be near its lower Bollinger band and its rising
trendline. Watch to see if its MACD indicator could form a
bearish crossover.

Adventus Holdings (ADVT SP, 5EF) –
Technical BUY with +34.4% potential return
Last price: S$0.029
Resistance: S$0.039
Support: S$0.022
BUY with a target price of S$0.039 with tight stops placed
below S$0.025. The stock appears to be trending above its
mid-Bollinger band and 50-day moving average. A golden
cross which has formed earlier had not been negated. Watch
to see whether its MACD could move above its centreline.

Suntec Real Estate Investment Trust (SUN SP, T82U) -
Take profit from previous technical SELL
Last price: S$1.74
Resistance: S$1.87
Support: S$1.65
The stock was featured as a technical SELL when it opened at
S$1.955 on 18 Apr 13. The stock has since returned +10.9%
on closing prices. Prices have not been stopped out above
S$2.05 and have exceeded the initial SELL target of S$1.85.
Some profits could be taken off the table should there be a
follow-through buy after the hammer pattern has formed
near its rising 200-day moving average.
Our institutional research has a fundamental BUY with a
target price of S$2.27.

DBS Group Holdings- Uncertainties abound for acquisition of Bank Danamon.
(DBS SP/BUY/S$16.97/Target: S$20.80)
FY13F PE(x): 11.7
FY14F PE(x): 10.5
The deal as originally submitted. To recap, DBS previously proposed to acquire a 67.4% stake in Bank Danamon from Fullerton
Financial Holdings through a swap of 439m new DBS shares. Bank Danamon shares were priced at Rp7,000/share, representing 2011 P/B of 2.6x. DBS will embark on a mandatory tender offer to acquire the remaining Bank Danamon shares for cash at the same price of Rp7,000/share.
Reluctant to own associate stake. Management at DBS has stressed that majority control of Bank Danamon is important for branding and integration of IT systems. The deduction to core capital is also punitive under Basel III if DBS only manages to
acquire an associate stake. Therefore, DBS is unlikely to proceed with the acquisition if it is restricted to acquire only a 40% stake in Bank Danamon.
Maintain BUY. DBS has demonstrated its ability to execute its nine strategic priorities amid doubts by many analysts. It generated organic growth by building up its global transaction service, wealth management and SME businesses on a regional basis. It stabilised NIM and benefitted from growth in fee income in 1Q13.
Our target price for DBS of S$20.80 is based on a P/B ratio of 1.50x, which is derived from the Gordon Growth Model (ROE: 11.4%, required\ return: 8.0% and constant growth: 1.2%).

From DBS:

We believe Yongnam’s consortium is a strong contender
for Myanmar’s airport projects. Yongnam is in partnership
with JGC Corporation and Changi Airport Group to bid
for two airport projects in Myanmar. The tender result for
the Yangon International Airport is expected to be out in
July. Yangon’s airport project win could add a S$0.12
upside to the stock price. Focus on Hathawaddy
International Airport would be less immediate as events
for this project is developing under a longer timeline. The
tender for Hathawaddy International Airport is expected
to close at the end of May with the results of the tender
to be announced at a later date. Current valuations are
compelling, and are not reflecting that Yongnam is a
strong contender for the projects. Upgrade to BUY with a
higher TP of S$0.41 (Prev S$0.33).

Sembcorp Marine’s subsidiary PPL Shipyard has secured a
contract worth US$220.5m to build a jack-up drilling rig
from BOT Lease. The rig is scheduled for delivery by Jan
2015. The new contract brings SMM’s YTD win to
S$2.69bn, forming 54% of our full year expectation of
S$5bn. Maintain Hold, TP: S$4.70.

From Maybank KE:

ComfortDelGro: Growth Through Acquisition; Upgrade to BUY, TP $2.33
CD SP | Mkt Cap USD3.2b | ADTV USD13.3m
CDG  offers  a  unique  defensive  stock  exposure with diversified
earnings  and  geographical  exposure.  With  continued weakness on the
economic  front, we expect sustained preference for defensive stocks in
the  year  ahead. We value CDG using a FY14E P/E of 18X and derive a TP
of SGD2.33. Upgrade to Buy.
Despite  the  diversity  of  CDG’s businesses, three major business
units  (Singapore  Taxi:  23%, Australia Bus: 22%, UK/Ireland Bus: 12%)
would  collectively  account  for  more  than  56% of the group’s FY15E
operating profits.
While  we  have a negative near term view on Singapore’s fare based
businesses,  we  argue  that CDG’s diversification efforts have reduced
their dependency on them. With CDG’s exposure to Singapore’s fare based
at  merely  8%  of  its  market  capitalization,  we believe that their
exposure is limited.