Local Brokerages Stock Call 22 May 2013

From OCBC:
Singapore REITs: The burgeoning market
In our latest assessment of the S-REITs sector, we continue to see familiar trends. REIT managers have generally maintained firm growth in their trusts’ rental income, on the back of contributions from past investments and improved operational performance. For 2013, we are maintaining our view that S-REITs are likely to continue to deliver firm performance. Nevertheless, the S-REIT index has been enjoying a good run-up, raking up 36.7% gain in 2012 and another 12.7% increase YTD. Given that the S-REITs are now trading at a 24% premium to book value on average, we feel that it is prudent to be selective on S-REITs. We continue to prefer S-REITs with good growth potential, strong financial position and compelling valuations. In this respect, we continue to pick CapitaCommercial Trust [BUY, S$1.80 FV], Fortune REIT [BUY, HK$8.64 FV] and Starhill Global REIT [BUY, S$1.05 FV] as our preferred BUYs. Reiterate our OVERWEIGHTview on the broader S-REITs sector.
 
Bumi Armada Berhad: A good start to FY13F
Bumi Armada Berhad’s 1Q revenue jumped 46% YoY to MYR489m and net profit to shareholders increased by 22% YoY to MYR110m. The results were roughly in-line with ours and the consensus’ estimates. Segment results were mixed. Although the FPSO, OSV and T&I segments had YoY increases in revenue, only FPSO and OSV showed segment profit improvements. The OFS segment reported no activity for 1Q13. The group also benefited from disposal gain of a subsidiary of MYR9.4m, write-back of doubtful debt of MYR2.0m and a net foreign exchange gain of MYR3.0m. We tweaked our models slightly to reflect 1Q13 results and roll forward our estimates to FY13/14. Accordingly, our fair value increases slightly to MYR3.56 (previously MYR3.74) on 21x PER. Maintain HOLD.

From UOB KH:
Regional Banking- Approval for DBS to acquire Bank Danamon but with conditions.
DBS Group Holdings (DBS SP/BUY/S$17.35/Target: S$20.80)
FY13F PE(x): 12.1
FY14F PE(x): 10.8
The need for reciprocity. Outgoing governor Darmin Nasution said during parliament yesterday that Bank Indonesia has given approval for DBS to acquire up to a 40% stake in Bank Danamon (BDMN). Bank Indonesia would allow DBS to acquire BDMN in its
entirety at a later stage if Singapore reciprocates by granting Indonesian banks more access. Bank Indonesia is said to have sought Qualified Full Bank (QFB) licences for Bank Mandiri, Bank Rakyat and Bank Negara Indonesia.
Management at DBS has stressed repeatedly that majority control is important to DBS for the purpose of branding and integration of IT systems. Deduction to core capital is also punitive under Basel III if DBS only manages to acquire an associate stake in
BDMN.
The acquisition dilutes earnings and ROE for two years and would turn accretive in the third year. The deal is positive over the longer term by increasing DBS’ exposure to high-growth emerging markets. We have not factored in the impact from the acquisition of BDMN in our current target price of S$20.80 given the prolonged delay. Maintain our BUY recommendation and existing target price till we get clarity on the final outcome.

Singapore Plantation: 1Q13 results wrap-up: Results skewed by the large inventory drawdown from 4Q12. First Resources continue to outperform peers on higher ASP.
Mixed set of results, with First Resource continuing to outperform its peers with its better-than-industry CPO ASP and drawdown of inventory while better-than-expected results for Golden Agri Resources (GGR) was mainly supported by better performance
from its Chinese operations and inventory drawdown. Indofood Agri’s (IFAR) and Kencana Agri’s (KAGR) results were mainly dragged by lower CPO ASP, rising cost of production and weak CPO production on less external crop purchases.
Maintain UNDERWEIGHT. As CPO price is expected to trade sideways, plantation stocks are unlikely to outperform. However, some Indonesian plantation companies are better positioned as their estates’ younger age profile translates into stronger production
growth which will be able to mitigate the weaker ASP. SELL Golden Agri-Resources (GGR SP/SELL/Target: S$0.55) and Genting Plantations (GENP MK/SELL/Target: RM6.80). BUY Wilmar International (WIL SP/BUY/Target: S$3.80, First Resources (FR
SP/BUY/Target: S$2.35) and Bumitama Agri (BAL SP/BUY/Target: S$1.12). 

From DBS:
Earnings growth for the Singapore market is at a tepid
2% in 2013 and PE has re-rated to a rolling 12-mth
forward 14.7x (+0.5SD), thus there leaves little room for
upside on earnings potential. We turn our focus to asset
plays. At 1.5x P/BV, valuation for the Singapore market is
not excessive, and lower than 2.3x for South-East Asia
peers. We look for value to be unlocked in selected
property stocks, where the sector is trading at a 27%
discount to RNAV. The low interest rate environment and
significantly compressed yields in the S-REIT sector will
drive asset monetisation. Top picks are UOL, CMA,
Keppel Land and Banyan Tree which have potential for
value unlocking through divestments or REITS. Wing Tai is
a value buy, trading at 36% discount to its RNAV and
we expect upcoming launches to underpin share price
performance.

We continue to hunt for stocks with dividend yield upside.
Top picks are FCOT, Cambridge Industrial, Mapletree
Greater China and Religare Health Trust, Sheng Siong and
Singapore Post. 

Oil and Gas stocks have lagged the STI since April,
triggered by the dip in oil prices and disappointing 1Q
Results, except for Ezion and Kreuz which sparkled amid a
lacklustre reporting season. With oil prices rebounding,
and jack up market tightening, we expect interest in the
sector to return. Our picks are Keppel Corp, Nam Cheong,
CSE Global and Ezion.