Local Brokerages Stock Call 2 August 2013

From OCBC:
Sembcorp Marine: New yard opens at a time of record order book
Summary: Sembcorp Marine (SMM) reported a 7.6% YoY fall in revenue to S$1.12b and a 12.5% decrease in net profit to S$124.9m in 2Q13, such that 1H13 figures accounted for about 43% of our full year estimates, which we judge to be largely within our expectations. The last quarter saw fewer projects achieving initial recognition; more are expected in 3Q13. The new Tuas yard should also see revenue contribution in 2H13. Operating margin in 2Q13 was 13.0% vs 13.1% in 2Q12. After securing new orders worth about S$3.5b YTD, the group’s net order book stands at S$14.4b, a record high in SMM’s history. Meanwhile the stock price has appreciated by about 7.3% since our last report on 6 May 2013, and has outperformed the STI by about 11.1% over the same period. Maintain BUYwith S$5.64 fair value estimate.

UOB: Stronger 2Q and modest rise in NIM
Summary: UOB posted 2Q13 net earnings of S$783m, better than consensus estimate of S$699.9m. Net Interest Margin improved modestly from 1.70% in 1Q13 to 1.71% in 2Q13. For the Fee and Commission income, the key outperformers were its Investment-related and credit card operations which showed both YoY and QoQ improvements. Management has declared an unchanged 1H dividend of 20 cents. The group is continuing with its strategy of growing its regional franchise. For its Wealth Management business, AUM has grown from S$48b in 2010 to S$71b as of Jun 2013. We have adjusted our FY13 estimates, lowering impairment charges and increasing operating expenses. We are maintaining our HOLD rating and our fair value estimates of S$22.97, but will turn buyer at S$21.40 or lower.

Roxy-Pacific Holdings: $1.1b of revenues to drive earnings growth
Summary: 2Q13 PATMI is S$19.5m (EPS: 2.05 S- cents) which increased 10% YoY due to higher property development profits. 1H13 PATMI now cumulates to S$31.2m, forming 40% of our full year forecast. We judge this to be within expectations; earnings are likely to be backloaded in FY13, particularly with an anticipated one-time boost from Wis@Changi upon its TOP in 2H13. The group now sits on S$1.1b of yet unrecognized revenues from sold units – this is equivalent to 8 times FY12 property revenues and would underpin a rigorous earnings growth profile ahead in our view. Maintain BUY with an higher fair value estimate of S$0.81 (25% discount to RNAV) versus S$0.76 previously as we update for latest sales datapoints and a reduced RNAV discount. Key catalysts in 2H13 ahead include the launch of LIV on Wilkie and an earnings boost from Wis@Changi’s TOP. We also see a bonus share issue as a possibility in 2H13, which could help the counter’s uneven trading liquidity.

COSCO Corp (Singapore): Another weak quarter
Summary: COSCO Corp (Singapore)’s revenue for 2Q13 declined by 9% YoY to S$890m, while net profit fell by 56% to S$12.0m. For 1H13, the group’s net profit fell by 61% to S$21.8m, forming 45% and 29% of ours and the street’s FY13 estimates respectively. As its operating weakness is more severe than what the street had expected, we think that the street would likely lower its FY13F forecasts. The group’s balance sheet is debt-laden with net debt-to-equity ratio at 1.4x and S$1.3b of loans due within 12 months. Should the credit situation in China deteriorates further, the group may become vulnerable. Maintain SELL with unchanged FV of S$0.60.

Lippo Malls Indonesia Retail Trust: 2Q13 results as expected
Summary: LMIRT posted 2Q13 gross rental income of S$40.1m, up 30.2% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions of 15.5% for the existing malls. Distributable income increased by 19.5% YoY to S$20.5m and DPU climbed 17.7% YoY to 0.93 S cents. Results for the quarter were in line with our and consensus expectations. 1H13 DPU of 1.82 S cent forms 50.6% of our FY13 estimate. We maintain our HOLD rating on LMIRT but place our fair value of S$0.52 under review.

Sembcorp Industries: Investing in its second energy-from-waste plant in Singapore
Summary: Sembcorp Industries (SCI) announced that it will invest over S$250m to build, own and operate a facility capable of producing 140 tonnes/h of steam using industrial and commercial waste collected by its solid waste management operations. This will be SCI’s largest energy-from-waste plant in Singapore to date (also its second one here), and will be located on Jurong Island. The project will be funded by bank borrowings and internal resources, and will be completed in early 2016. SCI has a track record of managing such facilities, and its portfolio includes energy-from-waste, biomass and wind power facilities in the UK and China. Maintain BUY with S$6.48 fair value estimate on the stock. 

From DBS:
UOB’s 2Q13 earnings were slightly above expectations
from lower provisions; pre-provision profits were in line.
UOB is focusing on total customer returns and regional
growth. We raised loan growth to 13%, in line with
guidance of low-to-mid teens. A 20 Scts DPS was declared
but no scrip dividend applied. Our FY13-15F earnings
forecasts are raised by 1-3% after adjusting for higher
loan growth. TP is lifted to S$21.90 (Prev S$ 20.10) as we
roll over our valuation base to FY14. Upgrade to HOLD.

OCBC’s 2Q13 results were inline with ours but below
consensus. Ex- Great Eastern Holdings, non-interest
income was strong. 2Q13 net profit came in at S$597m (-
14%q-o-q; -8% y-o-y) mainly dragged down by GEH nonpar
fund losses (as a result of bond yield volatility in June).
NIM was stable at 1.64%. Provisions were higher mainly
from general provisions which increased with strong loan
growth. An interim dividend of 17 S cts was declared;
scrip dividends are not applicable. More updates after
briefing this morning.

2Q net earnings for SembCorp Marine down 12.5% y-oy,
marginally below. Operating margins declined to
11.8% from 13.7% (1Q13). New orders are on track,
strengthening order book to S$14.4b. We expect stronger
2H from higher order book drawdown and repair
revenue. Upside to earnings could come from the sale of
ARV3, which is now operating on a 5 year charter in
Brazil. We have trimmed FY13F net earnings by 3% as we
have assumed lower EBIT margin of 12% vs 12.4%
previously. Stock is fairly valued at PE of 17.5x (FY13),
maintain HOLD.

2Q13 results for Cosco Corp below due to forex loss. The
group is under pressure to fill yard capacity. We lowered
our below consensus FY13 forecast by a further 12% to
account for the forex loss. Maintain FULLY VALUED; TP
S$0.75
On contract wins, Cosco has secured a contract worth
over RMB590m from a Chinese company to build two
deep water platform supply vessels. Both of them are
scheduled for delivery in the second quarter of 2015. It
also announced contract valued over US$170m from a
European company to build one Jackupdrilling rig. The rig
is scheduled for delivery in the 3rd quarter of 2015. YTD,
contract wins form 60% of our order win assumption of
US$2bn.

Hi-P reported 2Q13 net profit of S$10.9m, in line; formed
39% of FY13F. Outlook is positive, driven by multiple new
product launches in 2H13. Maintain BUY, TP raised to
S$0.97 (Prev S$ 0.88) as valuation is rolled over to
blended FY13/14 EPS.

2Q DPU of 2.63 Scts for Parkway Life REIT was within
expectations. Hedges were in place to counter impact of
weaker JPY. The REIT is on track to meet FY13F earnings.
Maintain HOLD, TP adjusted to S$2.49 (Prev S$ 2.57) on
higher risk-free rate assumption.

Underlying earnings for HongKong Land were 17%
ahead of our estimate due to higher development
earnings and rental income. We expect encouraging
residential sales to add to growth momentum.
Maintain BUY with US$7.94 TP.

From Maybank KE:
DBS Group: 2Q13 In Line, Danamon Off; Maintain Buy TP $20.00
DBS SP | Mkt Cap USD33.1b | ADTV USD64.5m
Maintain  BUY  on  DBS  with  an unchanged Street-high TP of SGD20,
pegged  to  a  rolled  forward  2014  P/BV  1.3x  (1.4x  previously) on
factoring in higher market volatility risk.
DBS’  2Q13  results  were within our expectation and consensus. Our
forecasts are maintained. That the Danamon deal is off is a setback for
the group but it does clear a large overhang issue on the stock.
Near-term  prospects remain robust and the group is well-positioned
to ride steepening yields/rising interest rate trends.
 
Sembcorp Marine: Efficiency Is The Focus; Maintain Buy, TP $5.20
SMM SP | Mkt Cap USD7.5b | ADTV USD14.6m
2Q13 PATMI of SGD125m (-13% YoY, +5% QoQ) was lower than our preview
figure of SGD162m, but can be explained by the lower revenue recognised
which  is  entirely  a timing issue (we forecasted SGD1.4b in revenue).
More  importantly, op. margin of 13.0% was within our expected range of
12-13%.
The  key  focus  of  the  analyst  brief  was  on  SMM’s efficiency
enhancement  plans.  We came away more positive of its well thought-out
plans and believe that these could alleviate the risks in Brazil and be
an added support to sustain overall margins.
Orderbook  momentum remains on track to meet our full-year forecast
of  SGD5.2b  with  YTD  order  win  of  SGD3.5b. Net orderbook breached
another  record high at SGD14.4b. Maintain Buy, SOTP-based TP unchanged
at SGD5.20.
 
UOB: 2Q13 Results Within Expectations; Maintain Sell TP $20.50
UOB SP | Mkt Cap USD27.0b | ADTV USD40.5m
Maintain  contrarian  SELL with an unchanged TP of SGD20.50, rolled
forward  to FY14 on a lower P/BV of 1.2x (1.3x previously) to factor in
higher market volatility risk.
UOB’s 1H13 net profit of SGD1.5b was within our expectations (53% of
full-year) but above consensus (56%).
Results  were  fairly  lackluster  as  bottomline growth was driven
primarily by lower provisions and a one-off associate gain.
UOB’s  higher  exposure to the domestic property sector remains our
primary  concern,  and  for  which  we  believe  a discount to peers is
warranted at this stage.
 
Cosco: The Going Gets Tougher; Maintain Sell, TP $0.65
COS SP | Mkt Cap USD1.3b | ADTV USD1.3m
Cosco  reported 2Q13 PATMI of SGD12.0m (-56% YoY, +24% QoQ), weaker
than  our  below-consensus forecasts. 1H13 net profit makes up only 35%
of  our  previous  FY13F  forecast.  We cut FY13F-15F net profits by by
27-36%. Maintain Sell, with TP of SGD0.65, pegged to 1.1x P/B.
Operating  margins  continue  to  be under pressure, trending lower
sequentially to 4.1% (1Q13:5.7%). We believe that yard underutilisation
in the next few quarters would cap any meaningful margin upside.
We flag the rising debt level which has pushed net gearing higher to
0.86x  (1Q13:0.82x)  as  Cosco  took  on  more  borrowings  to fund its
shipyard operations.

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.

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%.

Local Brokerages Stock Call 30 July 2013

From OCBC:
Telco Sector: Minimal impact on SingTel
SingTel will have to offer its BPL content to rival StarHub customers after the Ministry for Communications and Information (MCI) rejected its appeal for a stay of the Media Development Authority (MDA) ruling for the cross-carriage of the closely followed football content. However, the subscription comes with a price – new subscribers will have to fork out S$59.90 (before GST) for the stand-alone package, while existing mioTV subscribers can continue with the existing pricing of S$34.90 (before GST). While we may see some migration of subscribers from mioTV to StarHub’s cable TV platform, we do not expect a huge number. We maintain our NEUTRALrating on the sector. While we also maintain our HOLD rating on SingTel, we downgrade StarHub to SELL.

StarHub Ltd: Downgrade to SELL; BPL likely non-event
StarHub Ltd will be able to cross carry the widely-followed BPL (Barclays Premier League) live matches for the upcoming 2013 to 2016 seasons. However, with a seemingly steep price point of S$59.90/month (before GST) for new subscribers (while existing mioTV subscribers continue to pay the current S$34.90 (before GST)), we suspect that any migration of subscribers from mioTV to StarHub’s cable TV platform would be quite muted. In light of the likely muted boost from the BPL cross carriage and recent strong run-up in share price (9.5% after our upgrade on 3 Jun), we feel that the stock may have run ahead of its fundamentals. As we are also keeping our DCF-based fair value unchanged at S$3.82 (already accounted for a higher risk-free rate), we foresee more downside risk from here. Hence, we downgrade our call back from Hold to SELL. 
 
First REIT: Contribution from new assets
First REIT’s (FREIT) 2Q13 results were within our expectations. Revenue and DPU (after stripping out a special distribution in 2Q12) rose 43.4% and 16.4% YoY to S$20.1m and 1.85 S cents, respectively. Only 0.86 S cents will be paid to unitholders (on 29 Aug 2013) as FREIT had already made an advance distribution of 0.99 S cents on 26 Jun 2013 (prior to the issuance of new units for part payment of its acquisitions). FREIT is in the process of refinancing ~S$92m of its floating-rate debt to a 4-year fixed-rate unsecured bank loan. Upon completion, its floating rate exposure will be reduced from 72% to 46% of its total borrowings, which we view as a positive development. We retain our forecasts, HOLD rating and DDM-derived fair value estimate of S$1.20 on FREIT.
 
Yoma Strategic Holdings: First take on Yoma 1QFY14 results
Yoma Strategic Holdings (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 – but expect the pace of recognition at development projects to be back-loaded in the year. 1QFY14 topline came in at S$15.2m, up 11.6% YoY due to higher contributions from recognition of residential sales. We highlight the slower pace of sales in Star City over 1QFY14, as the sales status for Buildings 3 and 4 only crept up by 22 units (from 491 units sold as at end Mar-13 to 513 units sold as at end Jun-13). However, we note the group also reported a potential conditional agreement with a third party investor for the sale of LDRs for five buildings (1043 units) in zone B of Star City, which could be a significant catalyst for Star City sales ahead. We would speak with management about this set of results and the outlook ahead and, in the meantime, maintain HOLD with our fair value estimate of S$0.87 under review.  
 
M1: Joins Pay TV fray
M1 Ltd has announced its own Internet TV service – MiBox, which offers video-on-demand entertainment and educational titles, games, e-books and apps. Priced at just S$8/month with a 2-year contract for M1 fibre customers (S$12/month for non-M1 subscribers), customers will have access to MiBox’s library of 18k video-on-demand titles, 116 TV channels, 1.2k e-books and 370 apps. In addition, there is also an extensive selection of chargeable premium video-on-demand, e-learning titles and apps. According to M1, the service offers a new TV experience for everyone, from students to working adults to homemakers to retirees. However, given M1’s small fibre customer base and its relatively new presence in a pretty saturated Pay TV market, we do not expect to see any major impact on earnings. Maintain HOLD with an unchanged fair value of S$3.10. 

From Maybank KE:
Offshore & Marine: KL Marketing - Key Takeaways; Overweight
The  robust  oil  and  gas  activities in Malaysia, led by Petronas
spending,  piqued  interest  in  Singapore  offshore players during our
recent marketing trip to KL. We remain positive on the sector as we see
structural  fundamentals  sustaining  a high level of spending over the
next few years. Key Buys are Keppel, SMM and Ezion.
There  was  a  fair  amount of concern on the impact of Chinese and
Korean competition on Singapore rigbuilders’ margins. Execution risk in
Brazil  was  also  a  key  discussion point. While we acknowledge these
risks, we argue that these concerns may be overblown.
There was still strong interest in Ezion and the key question was if
there  is further upside given the strong run up in share price. In our
view,  forward  valuations  of  7.5x  FY14F  PER still look attractive,
backed  by  strong  earnings  visibility from its liftboat contracts to
support a 40% CAGR in EPS over FY13-15F. 

From UOB KH:
Singapore Airlines (SIA SP)

Analyst Briefing Takeaways

SIA guided that it carried a higher proportion of bellyhold cargo, which

would have lowered its breakeven load. In addition, further impairment

charges on the remaining nine freighters are unlikely. Maintain HOLD and

lower target price to S$10.80.

Suggested entry price is S$9.60.

From DBS:
United Envirotech has signed an agreement to fully acquire
Memstar’s membrane operation for S$293.4m or
S$0.11/share. Of this, S$73m will be settled in cash and the
remaining S$220m by the issue of 200m new shares priced at
S$1.10 a share (~19x FY14 PE). Apart from ensuring
membrane supply, this acquisition enables UENV to be
vertically integrated and to ride on growth potential of
Memstar’s membrane operations. Although this acquisition
could boost FY14/FY15F net profit by 1% and 6%
respectively, new share issues would dilute FY14/FY15 EPS by
18%/14% respectively. We are maintaining our earnings
forecast for UENV pending completion of this acquisition. No
change to HOLD call and TP for now.

2Q13 results for OKP Holdings below; gross margin collapsed
16ppts on higher subcontracting costs and low margin work.
We expect gross margins to remain depressed for at least
another quarter. Project rollout by the government has been
slow in 1H13. Visibility for project wins weak; going forward,
we expect project wins to come from the low value, low
margin maintenance segment. Maintain Fully Valued call.

Local Brokerages Stock Call 29 July 2013

From OCBC:
Golden Agri-Resources: Downgrade to HOLD
Summary: Golden Agri-Resources (GAR), being one of the largest palm oil plantation owners in the world, is likely to remain vulnerable to further pullbacks in CPO prices, which had recently hit their lowest levels since Nov 2009. In view of the more muted outlook for CPO, we deem it prudent to lower our 2013 forecast to US$700/ton from US$750 previously. This results in our FY13 revenue and core earnings estimates easing by 2%. Our fair value also drops from S$0.63 to S$0.57 as we are also lowering our valuation peg from 12.5x previously to 11x. Given the limited upside and still uncertain outlook, we downgrade our call to HOLD.

CDL Hospitality Trusts: 2Q13 results miss street's expectations
Summary: CDL Hospitality Trusts reported a 4.4% YoY fall in net property income in 2Q13 to S$32.6m. Income available for distribution contracted 6.4% YoY to S$29.4m. 2Q13 RevPAR for the Singapore hotels fell 8.5% YoY to S$193, affected by increased competition, weaker corporate demand and the absence of the biennial Food & Hotel Asia event in Apr. The results were in line with our expectations, but missed the street’s. Estimating the financial effect of the planned closure of most of the Orchard Hotel Shopping Arcade for AEI (excluding the Galleria) from late 2013, and adjusting our assumptions for the non-Singapore hotels, our FY13F DPU falls to 10.4 S cents from 10.9 S cents. Incorporating a risk-free rate of 2.5% (versus 2.2% previously) into our model, our FV drops to S$1.73 from S$1.79. We maintain a HOLD rating on CDLHT.

TEE International: FY13 earnings marred by admin expenses
Summary: TEE reported 4Q13 PATMI of S$6.4m, down 45% YoY mostly due to a S$4.1m increase in administrative expenses. Due to this, FY13 PATMI of S$13.1m was judged to be somewhat below our full year expectations. The order book of the Engineering segment now stands at S$215.4m, which remains fairly stable on a YoY basis. We like management’s active stance on seeking accretive acquisitions; note that TEE recently announced an MOU to invest in a waste-water treatment plant in Huzhou, China and also formed a JV for a S$8.6m 3-year contract for a water management project near Chao Phaya River, Thailand. We currently have a HOLD rating on TEE with a fair value estimate of S$0.38. However, given the attractive dividend of 2.50 S-cents ahead, which translates to a yield of 6.8% on the last closing price of S$0.37, we believe the downside may be capped from here.

Telco Sector – SingTel to offer BPL cross carriage Summary: SingTel will have to offer its BPL content to rival StarHub customers after the Ministry for Communications and Information (MCI) rejected its appeal for a stay of the Media Development Authority (MDA) ruling for the cross-carriage of the closely followed football content. However, the subscription comes with a price – new subscribers will have to fork out S$59.90 (before GST) for the stand-alone package, while existing mioTV subscribers can continue with the existing pricing of S$34.90 (before GST). While we may see some migration of subscribers from mioTV to StarHub’s cable TV platform, we do not expect a huge number. For now, we maintain our NEUTRAL rating on the sector. While we also maintain our HOLD rating on SingTel, we are putting our Hold rating on StarHub under review. 
 

First REIT: 2Q13 results within expectations
 Summary: First REIT (FREIT) reported its 2Q13 results which were within our expectations. Gross revenue surged 43.4% YoY to S$20.1m due largely to contribution from its four newly acquired properties in Indonesia (two acquired in Nov 2012 and two in May 2013). Distributable amount to unitholders rose 4.0% YoY to S$12.7m but DPU fell 4.1% YoY to 1.85 S cents. However, if we strip out an exceptional distribution in 2Q12, FREIT’s distributable amount to unitholders and DPU would instead have increased by 26.6% and 16.4%, respectively. As FREIT had already made an advance distribution of 0.99 S cents on 26 Jun 2013 (prior to the issuance of new units for payment of its acquisitions), only the remaining 0.86 S cents will be paid to unitholders. For 1H13, gross revenue rose 34.2% to S$37.6m and constituted 45.2% of our full-year projection. DPU (after stripping out the special distribution highlighted earlier) increased 12.9% to 3.59 S cents, or 45.5% of our FY13 forecast. We expect 2H13 to be stronger on a HoH basis due to a full-quarter of contribution beginning 3Q13 from the two hospitals acquired in May 2013. We will provide more details after the analyst briefing. Meanwhile, we maintain our HOLD rating and S$1.20 fair value estimate on FREIT. 

 
Lian Beng: Construction order book at S$1.3b
Summary: Lian Beng announced FY13 (ended 31 May 2013) PATMI of S$39.4m – down 23.4% – this is mostly due to an absence of a S$7.9m gain from an investment property sale in FY12. FY13 topline, however, increased 13.6% to S$505.6m on higher revenue recognition from its construction and ready-mixed concrete segments. We note that Lian Beng’s construction books as at end May 13 are at a very healthy level of S$1.3b, which is expected to underpin firm revenue numbers over the next 2-3 years. We would speak with management regarding FY13 results later today and, in the meantime, our rating and fair value estimate is under review. 
 
Swiber Holdings: Wins US$435m contracts; sets up Islamic Trust Certificates
Summary: Swiber Holdings announced that it has clinched contracts worth about US$435m, US$330m of which were secured under the Swiber group and about US$105m under a joint venture company. Work will commence immediately and is expected to be completed by 2015. Meanwhile an SPV of the company has also established a US$500m multicurrency Islamic Trust Certificates Issue Programme; proceeds from new issues will be used to refinance existing borrowings and fund capital expenditure, amongst others. Recall that the company had said that it was exploring options to establish Islamic Trust Certificates in Jun. Maintain BUY with S$0.86 fair value estimate. 

From Maybank KE:

ST Engineering: Robust Outlook To Support Lofty Valuations; BUY, TP $4.80
STE SP | Mkt Cap USD10.7b | ADTV USD9.3m
Despite  premium  valuations,  ST  Engineering  (STE)’s defence and
commercial-driven  record  order book of SGD13b, along with a potential
catalyst  in  the  form of a major billion-dollar contract, continue to
justify  a  BUY  rating. As a heuristic gauge of the stock’s valuation,
STE  trades  at  an undemanding market capitalisation-to-order ratio of
1.0x,  below  its  market  cycle  average  of 1.2x. Our target price of
SGD4.80 is based on 23x blended FY13/14 PER.
STE  is in the running for a major contract from the US Coast Guard
(USCG), which could be worth c.USD10b. This could be announced as early
as 3Q13. Closer to home, a recent Singapore Navy patrol vessel contract
could be its biggest since 2008.
ST  Aerospace’s  recent  acquisition  of a 35% stake in EADS EFW, a
Centre of Excellence for freighter conversions, is meant to leverage on
its years of experience in passenger-to-freighter (PTF) conversions. It
plans  to  develop  a  conversion package for two versions of converted
freighters  -  A330-200P2F  and  A330-300P2F  –  where there is a major
market  opportunity,  as  Airbus  estimates that 847 mid-sized aircraft
would be converted into freighters over the next 20 years.
   
 Lian Beng Group: And The Sky Clears; Maintain Buy, TP $0.69
 LBG SP | Mkt Cap USD243.2m | ADTV USD1.1m
 Lian Beng posted a full-year revenue of SGD505.6m (up 13.6% YoY) on
 contributions  from  its construction and manufacturing of concrete arm
 and  net  profit  of  SGD39.4m  (down  24.3%  YoY). Excluding a one-off
 SGD7.9m  gain  from  sale  of investment property in FY5/12, net profit
 would have fallen by 11%
 We expect property development earnings to begin to shine through as
 well  as  ex-Seletar  Garden  and  Changi  Road  sites to launch in the
 following year.
 Maintain BUY with raised earnings on the back of new contract wins.
  
 Economics
 Singapore Industrial Output, June 2013: Slipped Back Into The Red
 Industrial  production  (IP)  in  June  2013  slipped back into the
 negative  territory  with a -5.9% YoY contraction (May 2013: +2.3% YoY)
 following  the  steep drop in biomedical output.  Excluding biomedical,
 IP fell by a smaller quantum of -0.5% YoY (May 2013: -2.2% YoY).
 2Q  2013 IP suggests downward revision to the quarter’s GDP.  IP in
 2Q 2013 was up marginally by +0.2% YoY compared with -6.7% YoY reported
 in  1Q  2013,  and  shrank  -3.2%  YoY in 1H 2013 (1H 2012: +1.5% YoY).
 Assuming  no  drastic  change  in  the  numbers  for  the  services and
 construction  sectors, the 2Q 2013 real GDP growth should be lower than
 the  advanced  estimate of +3.7% YoY as the manufacturing sector turned
 out  to be “flattish” as opposed to the preliminary figure of +1.1% YoY

  growth.
 This  justified  our guarded response to the advance estimate of 2Q
 2013  GDP,  where despite the better than expected figure that resulted
 in  the preliminary 1H 2013 real GDP growth of +2.0%, we maintained our
 +2.3% full-year growth forecast. 

From DBS:

STI has rebounded 210pts over the past month since the June
3066 low. A choppy trend could be in stall for August ahead
of consensus expectation for QE tapering to start in
September. Still, follow the line projection towards 3430 by
year-end positions the STI at 3345 by early October. Thus, we
expect a higher low on the pullback. We currently peg index
support at 3170, which is the 50% downward retracement
level, assuming a short-term high last week at 3277.

We prefer companies that offer good earnings visibility, are in
a net cash position and offer good dividend yield. Our picks
continue to be ST Engineering, Comfort Delgro and
SingPost. For ST Engineering and Comfort Delgro, we prefer
to be buyers on pullback as both stocks have performed well
over the past month.

The 2Q results season that’s currently in progress has been
unable to fire up optimism thus far as most companies have
reported either in-line results or outlook lacked shine.
Singapore banks will be releasing results this week. Shares of
OCBC have continued to lag behind UOB. This is likely
because of concerns about possible mark-to-market losses on
Great Eastern's non-par insurance portfolio in the upcoming
results. Support for OCBC shares is at $10.22. UOB shares
have clearly outperformed, rising to a touch below $22 that
lifted it back to the previous YTD high. Technically, we think
the stock has touched near-touch resistance last week. A
pullback to $20.9 is likely.

Results for Hi-P will be out on Friday. The group reported a
strong set of 1Q13 results. Shares of Hi-P rose 11.4% last
week ahead of its results release. The stock currently offers a
modest 6% upside to our 88cts TP. Technically, immediate
term upside looks capped at $0.85 ahead of earnings release.
Immediate support is at $0.79.

2Q13 results CDL Hospitality Trusts was weak but in line.
Gross revenue and NPI declined by 3% and 4% y-o-y to
S$35.6m and S$32.6m respectively. Looking ahead, the
group is seeing demand stabilizing in 3Q13 with bookings for
the Sept’13 Formula One race looking brighter compared to a

year ago. Thus, 2H13 performance is likely see a sequential
improvement. Acquisitions are likely catalysts. We believe
CDL HT deserves a re-look, Upgrade to BUY, TP S$1.89 (prev
S$ 2.07) (adjusted for higher risk free of 2.8% vs 2.1%).
DPU of 2.43 Scts for Mapletree Industrial Trust in line.
Looking ahead, the manager expects steady earnings
growth backed by decent operational performance and
completion of development projects. Maintain BUY, TP
revised to S$1.52 (prev S$ 1.63) as we raise our risk free
assumption to 2.6% from 1.8%.

From UOB KH:

Pan-United Corporation (PAN SP, P52) –
Largest cement and ready-mixed concrete supplier
(BUY/Target: S$1.25)
Pan-United is Singapore’s largest supplier of cement and readymixed
concrete with a market share of 28%. With a range of quality
products and timely delivery guarantee, the company has
established an impressive track record, supplying ready-mixed
concrete for the construction of both the Circle Line and the
Downtown Line (DTL). The company’s controlling interest in one of
China’s top 10 river ports also provides a steady recurring
alternative source of income that formed 15% of Pan-United’s FY12
net profit. Positive earnings prospects, solid fundamentals (net cash
of 10 cents/share) and a stable dividend payout make Pan-United
one of our top picks for the sector. Our target price is based on a
SOTP model.
Technically, the stock is likely to head higher should it be well
supported above S$0.78. Resistance is at S$1.08.

Kori Holdings (KHLL SP, 5VC) –
Underground specialist
(BUY/Target: S$0.60)
Through its strategic relationships with both foreign and local
contractors, Kori has a stellar track record, securing contracts for all
three stages of the DTL. With Singapore looking to increasingly
utilise its underground space, the outlook for the underground
tunnelling specialist is set to remain upbeat. Even with a remarkable
72% rise in its share price since its IPO last year, valuation remains
undemanding at 4.6x 2013F PE, vs peers’ average of 8.8x, and is
underpinned by a strong net cash of 14 cents/share. We also like its
strong cash flow and earnings that support its dividend-payout
ability. While the company does not have a dividend policy, we
render a conservative 25% payout will offer an attractive dividend
yield of 5.4%. Our target price is based on 5.5x 2014F PE.
Technically, it has managed to break above S$0.43 recently. The
next potential resistance could be around S$0.51.

Yongnam Holdings (YNH SP, Y02) –
Diversifying into infrastructure investments
(BUY/Target: S$0.45)
Yongnam has more than 40 years of experience in steel fabrication
and engineering solutions. The company has worked with
numerous reputable contractors and was also involved in many
major projects that changed the architectural landscape in
Singapore. As part of its diversification strategy, Yongnam has
joined a consortium to evaluate a project tender for the construction
and management of an international airport in Myanmar. We view
this positively as the company will be able to enjoy recurring income
from infrastructure investments rather than lumpy project earnings
recognition. A strong pipeline of projects will keep Yongnam busy
for a while. Management guided that within these two years, the
company has a total tenderbook of over S$1.2b. Our target price is
based on a peers’ average 2014F PE of 9.7x.
Technically, Yongnam could be supported near S$0.325 should
prices retrace further. The stock has been resisted near S$0.40 as
mentioned as our technical buy target on 7 May 13.

Local Brokerages Stock Call 26 July 2013

From OCBC:
CapitaLand Limited: Building competitive scale
CAPL’s 2Q13 PATMI decreased 0.7% YoY to S$383.1m. We judge this to be within expectations; 1H13 PATMI now cumulates to S$571.3m which makes up 65% of our full year forecast. The group sold 736 Chinese residential units in 2Q13, which is respectable but somewhat slower than the 955-unit pace in 1Q13. Management guides that Chinese sales would likely fall to around 3.3k units for FY13, pointing to c.1.6k units in 2H13 – still healthy but below the 1.9k-unit pace in 2H12. In Singapore, residential sales slowed to 139 units in 2Q13 in the aftermath of a blowout 1Q13 (544 units sold) driven by discounts.  Mall subsidiary CMA continues to report firm operating statistics: same-mall NPI in China and Singapore in 1H13 is up 12.1% and 2.0% YoY, respectively. We believe CAPL’s strategy of growing competitive scale in six geographic clusters is sound and well thought out, and we continue to see value in CAPL shares at current levels. Maintain BUY with an unchanged fair value estimate of S$3.77.

Singapore Airlines: No re-rating yet
Excluding one-off items, Singapore Airlines’s (SIA) 1Q14 results came in below expectations. Revenue would have fallen slightly while PATMI was inflated by exceptional items and aircraft/parts disposal gains. ). SIA remains plagued by intense competition within the premium carrier space and passenger yields continue to stay depressed. With the outlook for FY14 still expected to remain lacklustre, we anticipate an extension of selling pressure on the counter for the interim. Based on a peg of 0.8x P/Book, we maintain SELL on SIA with a fair value estimate of S$9.50 (S$10.00 previously). 
 
SATS Ltd: Slightly off the mark
SATS’s 1Q14 results came in slightly under our expectations as revenue slipped 0.8% YoY to S$434.5m following declines in the food solutions segment and EBITDA fell 2.6% YoY to S$60.5m. Qantas’s move to Dubai and lower business volumes from TFK were the main culprits for this decline. Only with a write-back of prior-year’s tax provisions was the group able to record an 11.9% YoY improvement in PATMI to S$46.2m. For the coming quarters, we expect some softness in growth trends for passenger traffic and moderate our forecasts for the remainder of FY14 accordingly. While our fair value lowers to S$3.12 (S$3.15 previously) – suggesting limited upside at this juncture – we expect SATS’s defensive qualities i.e. earnings stability and healthy dividend attractiveness to provide some support for its share price. Maintain HOLD. (Lim Siyi)
Sembcorp Marine: Court of Appeal rules in favour of SMM
Sembcorp Marine (SMM) announced that the Court of Appeal has ruled in its favour with regards to its appeal filed in Jun 2012 relating to the High Court’s decision on SMM’s claims against PPL Holdings. Amongst other rulings, it has been ruled that certain provisions on the JV agreement between SMM and PPL Holdings premised on equal shareholding no longer applied when SMM increased its shareholding from 50% to 85% in PPL Shipyard. SMM is “pleased with the outcome”, and the group will now have complete control of PPL Shipyard’s board. The consortium (involving Yangzijiang Shipbuilding) that owns the remaining 15% in PPL Shipyard is likely to have little say over the management of PPL Shipyard. MaintainBUY with S$5.64 fair value estimate on SMM. (Low Pei Han)
CDL Hospitality Trusts: 2Q13 below street’s expectations
CDL Hospitality Trusts reported a 2.9% YoY decline in 2Q13 gross revenue to S$35.6m and a 4.4% YoY fall in net property income to S$32.6m. Income available for distribution contracted 6.4% YoY to S$29.4m. 2Q13 RevPAR for the Singapore hotels fell 8.5% YoY to S$193, affected by increased competition, weaker corporate demand, the absence of the biennial Food & Hotel Asia event in April, and a mild impact from the haze. The results were generally in line with our expectations, with 1H13 DPU of 5.41 S cents forming 50% of our FY13 estimate. We judge that the 2Q13 results missed the street’s expectations with 1H13 DPU forming only 47% of the mean FY13 estimate. We maintain a HOLD rating on CDLHT but place our FV of S$1.79 under review. 
 
TEE International: FY13 earnings down 32% YoY
Summary: TEE International (TEE) reported 4Q13 PATMI of S$6.4m, down 45% YoY mostly due to a S$4.1m increase in administrative expenses. Tee reported that these expenses were incurred for marketing property development projects and also included administrative expenses for its newly acquired integrated turnkey material handling subsidiary. FY13 PATMI cumulates to S$13.1m which we judge to be somewhat below our full year expectations. We note, however, that FY13 topline increased 51% YoY to S$21.6m as the group recognized higher levels of contributions from engineering and property development projects. We would speak with TEE later regarding these results and, in the meantime, put our rating and fair value estimate under review. 

From UOB KH:
MTQ Corp (MTQ SP, M05) –
Technical SELL with +18.4% potential return
Last price: S$1.57
Resistance: S$1.65
Support: S$1.28
SELL with a target price of S$1.28 with tight stops
placed above S$1.65. The stock appears to turn down
should there be a follow through of the bearish engulfing
pattern formed in the last trading session. Its
Stochastics has formed a bearish crossover and its
MACD indicator looks poised to form one as well. Watch
to see if the stock could break below S$1.40 (near its
rising 50-day moving average) for further downside.

Asiamedic (AMAT SP, 505) –
Technical BUY with +9.8% potential return
Last price: S$0.123
Resistance: S$0.135
Support: S$0.115
BUY with a target price of S$0.135 with tight stops
placed below S$0.117. The stock has been supported
by its mid Bollinger band as prices continue to trend
higher and are above its rising 50-day moving average.
Its Stochastics has formed a bullish crossover and its
positive directional index may rise as its ADX currently
has a reading of 33. Watch to see if prices could break
above S$0.125 for further upside.

CWT (CWT SP, C14) –
Technical BUY with +9.5% potential return
Last price: S$1.46
Resistance: S$1.60
Support: S$1.38
BUY with a target price of S$1.60 with tight stops placed
below S$1.40. The stock has been trading along its key
rising trend line, which acted as a support and currently,
prices closed above its rising 200-day simple moving
average as well. Its Stochastics indicator has formed a
bullish crossover. Watch to see if the stock could break
above its declining 30-day simple moving average for
further upside. Our institutional research has a
fundamental BUY with a target price of S$1.25

CapitaLand- 2Q13: Setting new directions.
(CAPL SP/BUY/S$3.22/Target: S$4.35)
FY13F PE (x): 19.1
FY14F PE (x): 15.0
Results below expectations. CapitaLand reported 2Q13 net profit of
S$383.1m, bringing 1H13 earnings to S$571.3m, up 10.1% yoy driven by
strong revenue contribution from development projects in Singapore and
China, as well as rental income from the shopping mall business. Excluding
the impact of portfolio gains of S$108.5m, revaluation gains of S$232m,
S$10.5m in impairment charges and S$27.7m one-off loss booked in 1H13,
the core 1H13 operating profit of S$269m is below our expectations accounting
for 33.6% of our full-year forecast of S$801.5m (36.5% of consensus forecast
of S$736.7m).
Maintain BUY with a reduced target price of S$4.35 (-2.2% from S$4.45
previously). Our target price is pegged at a 15% discount to its lowered RNAV
of S$5.11 (from S$5.23/share) that mainly factors reduced target prices for its
listed entities on increased risk free rate and debt cost assumptions. The stock
is currently trading at a steep 35% discount to its RNAV (0.9 P/B).
 
SATS- 1QFY14: Earnings in line, but lack of info on TFK is a concern.
(SATS SP/HOLD/S$3.34/Target: S$3.13)
FY14F PE (x): 18.7
FY15F PE (x): 17.9
PBT was flat and in line with expectations. The decline in revenue was
offset by lower operating costs (raw material and depreciation costs). A 47%
decline in tax provision lifted net profit by 12%. Lower-than-expected revenue
due to lower revenue at food solutions, due in part to a 22% decline in TFK’s
revenue. Pricing on unit meals out of Singapore rose 5.8% yoy, offsetting
some of the 6.6% decline in unit meals. Revenue from gateways services rose
8% in line with the 9% rise in unit services.
Maintain HOLD unchanged target price of S$3.13. We continue to value
SATS based on a dividend discount model (required return: 7.0%, terminal
growth 1.2%). At our fair value, the stock will offer a dividend yield of 5.1%.
Entry price is S$2.90.

Singapore Airlines- 1QFY14: Parent airline surprises with profits but
books impairment charges on freighters.
(SIA SP/HOLD/S$10.25/Target: S$11.50)
FY14F PE (x): 37.2
FY15F PE (x): 18.9
Operating profit above expectations, despite weak yields. Parent airline
reported an operating profit of S$89m (+4.7% yoy) despite a 0.3 S cent yoy
decline in pax yields and 1.5ppt decline in pax load factor for the period. This
contrasts with our expectation of S$47m operating loss. The parent airline
profit could be attributable to higher belly hold cargo, which would have aided
profitability, given that two of its cargo freighters were grounded.
We maintain our HOLD recommendation with an unchanged target price of
S$11.50/share valuing the stock at 0.75x P/B (ex-SIAEC). Entry price is
S$10.00.

From DBS:
After a slow 2HFY13 (FYE Jun), Goodpack’s volume growth
momentum is set to accelerate from 1QFY14 underpinned by
additional demand of: 1) 15k boxes /month from new
synthetic rubber (SR) customer, Sibur in Russia; and 2) 8-9k
boxes/month from newly commenced SR plants of Lanxess
and Asahi in Singapore. This lays the ground for 8-10%
volume growth in FY14. In addition, Goodpack stands to
benefit from the lower handling and logistic costs on its
global tender exercise and leasing cost after the buyback of
300k leased boxes in FY13. Furthermore, Goodpack should
not be affected by any potential rate hikes as c.90% of its
debts are fixed rate. The recent price weakness is an
opportunity for long term investors to accumulate. Goodpack
trades at 12x FY14PE and 1.7x P/BV, which are 1 S.D. below
mean. Our DCF-based S$1.90 TP translates to 14.6x FY14F PE
and 2.1x P/BV or 6-19% discount to historical mean. Upgrade
to Buy, TP unchanged at $1.90.

SIA’s 1QFY14 net earnings of S$122m is in-line with
expectations but due mainly to lift from one-off items
amounting to over S$90m. Passenger yields continue to
weaken on a stronger S$ and weak demand, while cargo
operations continue to lose money. While lower fuel prices
should provide some relief for SIA, passenger yields are
expected to continue to be under pressure, with its cargo
operations also struggling for profitability. The risk for our
earnings projection is on the downside if the decline in yield
becomes even more pronounced. The stock is trading at 0.9x
P/B and we see little upside to our TP of S$11.50, which is
based on 1x P/B as its outlook is still weak. A net cash
position of over S$3.80 should however, hold the stock up
around current levels. Maintain HOLD with S$11.50 TP.

Capitaland’s results were slightly below expectations.
Revenue was 37% higher at S$1.18bn while PATMI was flat
at S$383m after factoring in lower portfolio and revaluation
gains and a S$28m one-off charge from repurchase of CBs.
Stripping out these items, operating profits would have been
S$108m, 20% higher than previously, to reach S$240m for
1H13. We expect 2H earnings to be better sequentially.
Another key takeaway was the result of the strategic review
of the group’s operations and its non-core investments. It
aspires to be a growth company underpinned by steady
recurrent earnings, derived from 1/3 development and 2/3
ready assets and would focus on integrated projects in its
core markets in Spore and China to deliver a target ROE of 8-
12%. We are retaining our Buy call with TP of S$4.36,
pegged to a 25% discount to RNAV. The stock is currently
trading at a steep 26% below its TP. We believe that the
share price gap to TP could close as the group continues to
drive ROE improvements towards it’s long term objective.
Maintain Buy with TP $4.36 (prev. $4.44).

Net profit for SATS grew 11.9% to S$46.2m while revenues
dipped 0.8% to S$434.5m. There was a S$3.8m tax
writeback in the quarter and it booked S$1.7m impairment
charge on assets held for sale. Excluding these items, net
profit would have registered lower 6.8% y-o-y growth to
S$44.1m. 1QFY14 earnings were in line at c.22% of our
FY14F profit, similar to the year-ago quarter. There is little
scope for share price upside in view of moderating passenger
traffic growth and declining airfreight volume. However, this
should be mitigated by its commitment to manage costs, as
well as relatively attractive yields. SATS is currently trading at
+1 SD of its historical PE band, in line with regional/global
peers’ average. Our target PE is the average of the values
derived from our DCF model (WACC 7.7%, t=1.5%) and PE
valuation model (16x FY14/15 EPS). Maintain HOLD, TP
$3.29.

Tat Hong issued S$100m 4.5% fixed rate note due 2018.
Funding will be used for working capital, capex and
refinancing of existing debt. This is slight negative to balance
sheet and earnings. Net gearing will increase from 0.6x to
about 0.63x. Interest cost will increase by 7%, resulted in a
1.7% reduction in earnings for FY14F. Consequently, TP is
adjusted down to S$1.41 from S$1.43. Maintain BUY.