Local Brokerages Stock Call 25 April 2013

From OCBC:
Cache Logistics Trust: Promising start to FY13
Cache Logistics Trust (CACHE) reported 1Q13 DPU of 2.234 S cents, up 7.1% YoY. This is in line with our expectations, given that the quarterly DPU made up 26.5% of our DPU forecast. The strong performance was mainly attributable to upward rental adjustments and incremental contribution from its past acquisitions. As at 31 Mar, the portfolio assets remained 100% occupied, with a healthy weighted average lease to expiry of 3.7 years. We also understand that CACHE has secured a new tenant, Agility Logistics, for its lease at APC Distrihub during the quarter. With this, CACHE has fully addressed its lease expiry in 2013, with zero renewals due for the rest of the year. CACHE currently has an aggregate leverage of 29.2% and a stable all-in financing cost of 3.52%. This provides CACHE with ample flexibility and firepower to pursue its growth opportunities. We are maintaining our BUY rating with a higher fair value of S$1.45 (S$1.33 previously) on CACHE.  
CapitaMalls Asia: Sharp execution bearing fruit
CMA’s 1Q13 PATMI came in at S$73.2m – up 9.6% YoY mostly due to contributions from Star Vista, four malls in Japan and Queensbay Mall, a S$6.6m gain from warehousing of two assets sold to CCDFII, better performance from CMT, ION Orchard and the China Funds, and a sale at The Orchard Residences. Excluding one-time items, we judge 1Q13 results to be somewhat above expectations. Given the H7N9 bird flu outbreak, shopper traffic for CMA’s Chinese malls showed a decrease of -0.9% YoY. On a same mall basis, however, tenant sales were up +15.9% YoY. We see worsening H7N9 fears potentially reducing retail traffic over the nearer term but a sustained long-term business impact, in our view, is unlikely. Maintain BUY with an unchanged fair value estimate of S$2.55. 
 
Telecom Sector: StarHub to get BPL on cross carriage basis
Summary: StarHub Ltd (STH) will be able to broadcast “live” matches of the much-coveted Barclays Premier League (BPL) for the upcoming 2013-2016 season. This after the MDA (Media Development Authority) asked SingTel to cross-carry the matches over the next three seasons even though SingTel had earlier secured the rights on a non-exclusive basis. Understandably, SingTel said it was “gravely disappointed” with the decision, adding that “it disadvantages both consumers and the industry”. SingTel has also said it intends to appeal the decision and seek legal recourse if necessary. The decision came as a bit of a surprise, given that SingTel had earlier secured the rights on a non-exclusive basis. However, the MDA has ruled that the agreement between SingTel and FAPL (content owner) had restrictions that prevent other Pay TV retailers from offering the same content, thus triggering the cross-carriage ruling. It is also unclear as to how FAPL would respond to the decision. We will be speaking further with both companies to get a clearer picture on this. In the meantime, we put our ratings on SingTel [BUY, S$3.68 fair value] and StarHub [HOLD, S$4.00 fair value] under review. 

From CIMB:

Telco - Overall
SingTel directed to share BPL
NEUTRAL - Maintained

In a surprising move, the regulator has directed SingTel to cross-carry the 2013-16 seasons of the Barclays Premier League. This is despite SingTel having non-exclusive rights to the BPL, which allows it to not share its content. This raises the question of MDA over-ruling again. StarHub stands to gain a little as this lowers the likelihood of churns and generates revenues from providing cross carriage. It is a setback for SingTel in its efforts to build up a pay TV franchise. All in, this development does not change our forecasts and views on SingTel and StarHub. The sector remains a Neutral with M1 (Outperform) as our top pick. 

Cache Logistics Trust
Awaiting acquisitions
OUTPERFORM - Maintained | S$1.38 - Tgt. S$1.50 Mkt.Cap: US$858.9m | Avg.Daily Vol: US$1.71m | Free Float: 87.90%

1Q13 was a steady quarter, led by organic growth from rental step-ups within the portfolio master leases. We look forward to the rest of FY13 as contributions from Precise Two kicks in and expect debt headroom to be utilised for accretive debt-funded acquisitions. 1Q13 DPU met our and consensus estimates at 26% of our FY13 forecast. We lower FY13-15 DPUs, factoring in Cache’s recent equity issuance, offset partially by a higher acquisition assumption. Our DDM-based target price, however, is raised on a lower discount rate of 7.1% (previously 7.7%). Maintain Outperform, with accretive acquisitions as catalysts.

Midas Holdings
On the road with Midas
OUTPERFORM - Maintained | S$0.50 - Tgt. S$0.70 Mkt.Cap: US$485.8m | Avg.Daily Vol: US$4.50m | Free Float: 79.20%

Feedback during our Midas roadshow covering five US cities in as many days was generally favourable, with investors anticipating a positive price performance due to potential order book momentum. Sceptics were concerned about potential order delays and debt levels. We continue to rate Midas an Outperform. The catalyst is the likelihood of orders commencing in 2H13 from China, which is committed to its Rmb130bn plan for rolling stocks. Midas is also gaining traction on the international stage. Its diversification into cold rolling could provide earnings growth from 2015 onwards. We raise our target price to S$0.70, now based on 1.29x P/BV (prev. 17x CY14 P/E) to smooth out earnings volatility.

From Lim and Tan:
STATS
As expected, STATS 1Q13 sales declined 15.4% qoq
to US$406mln, impacted by seasonal weakness, tight
inventory control in the wireless handsets, tablet and
consumer markets as well as continued softness in the
PC market.
Due to the weaker revenues, gross margin fell to 15.4%
against 18.3%.
But net profit improved to US$3.5mln against
US$1.7mln due to absence of litigation settlement
charges, otherwise, net profit would have declined 80%
sequentially due to dis-economies of scale.
The good news though is that looking ahead,
management is more optimistic expecting sales to
increase between 2-6% sequentially to US$422mln
with EBITDA margin improving to 21-25% range, up
from 1Q 13s guidance of 20-25% range (actual was
23%).
And to prepare for a stronger 2H13 for advanced
packaging and test turnkey services, management is
expecting capex to be increased from 1Q 13
US$92mln to US$100-120mln range in 2Q 13.
The recent refinancing of 7.5% to 4.5% bond issue will
help the company in annual interest savings of
US$13.2mln.
At 0.8x price to book against its historical average of
1x, we maintain our BUY recommendation. 

From UOB KH:
Cache Logistics Trust (CACHE SP)
1Q13: Building Up To Further Acquisitions
Results in-line as Cache completes private placement of 70m units and
S$57m acquisition of Precise Two in 1Q13. We believe that a S$90m-190m
acquisition is increasingly likely in the year ahead following the private
placement. Maintain BUY with a higher DDM-based target of S$1.52 (from
S$1.45) after factoring in a S$90m acquisition in 2014.

Mapletree Industrial Trust (MINT SP)
4QFY13: Feedback From Management Luncheon
Key topics from post-results luncheon included expiring leases, overseas
acquisitions, Iskandar, upcoming supply concerns and the future of
Singapore industrial space. Results were above expectations, driven by
higher temporary rentals from Credit Suisse and positive rental reversions.
Key forward drivers include AEIs and BTS completing over the next 2 years.
Maintain BUY with a higher DDM-derived target of S$1.75 (from S$1.66). 

From Maybank KE:
Sembcorp Marine: From The Bottom Looking Up; Maintain Buy TP $5.40
SMM SP | Mkt Cap USD7.2b | ADTV USD18.3m
SMM  will report 1Q13 results after trading hours on 3 May 2013. We
expect  PATMI  for  the  quarter to rise by 29% YoY to SGD146m. The low
base  performance a year ago would not be difficult to beat. SMM is our
preferred  rigbuilder  for  direct  exposure  to  the  offshore sector.
Maintain Buy and TP of SGD5.40.
A  sequentially  higher  EBIT  margin  this  quarter would not be a
surprise.  SMM  may continue to be conservative for some projects which
led  us to forecast EBIT margin of 12.6% for 1Q13. To elicit a positive
market  reaction,  EBIT margins would need to be above 13%. Regardless,
we believe that margins have passed the trough.
SMM’s  orderbook  of  SGD13.6b  still  offers strong visibility and
better  revenue coverage than Keppel. We think that margin concerns are
overdone  and  stock  is  at  an  unjustifiably low level. The relative
underperformance should see some reversion to mean.  

Cache  Logistics  Trust:  No  Surprises  In 1Q13 Results; Maintain Hold TP
$1.39 CACHE SP | Mkt Cap USD860.2m | ADTV USD1.8m
1Q13  revenue  at  SGD19.1m was 24% of ours and consensus estimate.
1Q13 DPU at 2.234 SG-cts was 25% of ours and consensus estimates. CACHE
retains  its  pole  position  in the ramp-up logistics warehouses space
(~4.7m sqft) with ~20+% market share in Singapore.
During the quarter, Cache signed on a new lease within APC Distrihub
with Agility Logistics. With this letting, Cache has no remaining space
due to expire in 2013.
The  warehouse  rental  in Singapore remain challenging with 18% of
available  stock  of  warehouse space (private sector; 14m sqft) coming
onboard  in  2013-2015.  CACHE has 36% and 33% of GFA up for renewal in
2015   and   2016   respectively.   We  remain  wary  of  its  inherent
concentration  risks  on  its main master lessee (CWT/C&P). At FY13 DPU
Yield  of  6.1%  and  P/B  of  1.4x,  we think valuation appears on the
high-side.   Pending   further   acquisitions   and  asset  enhancement
initiatives,  we  see  limited near-term upside for now. Reiterate HOLD
with a TP of SGD1.39. 

From DBS:
Mobile One (M1)
Our analyst believes that the street is overly bullish on
FY13F/14F earnings for M1 due to tiered data plans. He thinks
that tiered data plans may merely offset Average revenue per
user (ARPU) decline due to over-the-top (OTT) applications like
Whatsapp & Skype and lower roaming contribution. The rising
popularity of Android phones will benefit peers but may hurt
M1 instead. M1’s use of fair value accounting for iPhones
(heavily sold in 4Q12) will have a lingering impact on service
revenue in FY13F. In addition, while M1 has raised its monthly
service pricing, it also raised its handset subsidy. M1 offers
4.9% yield with mid-single digit growth. We do not see room
for M1 to raise dividends. M1 is the least preferred in the
sector due to downside risk to street’s estimates. Maintain
HOLD with revised TP of S$3.00 (Prev S$ 2.60).

F&N shares are due for a rebound after the 17% sell-down
that started just 3 days ago. The stock’s removal from the
MSCI standard and large cap Indices at the end of market
close yesterday had prompted the increased selling pressure in
recent session. Index related selling had increased since the
stock resumed trading this week and ended in a crescendo
yesterday during the pre-close matching period with 17.5mil
shares done in the final 5 minutes. Index related selling has
ceased. We believe this paves the way for a short-term
technical rebound. The Elliot-wave pattern of the stock’s
decline in the past 3 days supports this view. The immediate
support is at $7.85. Technically, we see the stock heading to
the 23.6% upward retracement level at $8.20 first, and then
towards the 38.2% level at $8.44.

Cache Logistics Trust reported a solid set of 1Q13 results.
100% of the income is already locked in for the rest of 2013,
providing clear visibility with minimal downside. Going
forward, given that its gearing remains conservative at 29.4%
and below management’s long term target of 35%-40%,
acquisitions will be a re-rating catalyst. BUY maintained with
TP S$1.47 (Prev S$ 1.40).