Local Brokerages Stock Call 10 June 2013

From OCBC:
Golden Agri-Resources: Modestly firmer CPO boost
Summary: Golden Agri-Resources (GAR), being one of the largest palm oil plantation owners in the world, should benefit from the recent rebound in CPO (crude palm oil) prices to MYR2450/ton; we note that there is a strong historical correlation of nearly 0.7 between CPO prices and GAR share price. While the general outlook for commodities is still uncertain (as China’s economic growth continues to sputter along), we believe that headwinds appear to be dissipating. Furthermore, management remains fairly upbeat about its prospects as it continues to expand its integrated operation capabilities to benefit from the firm industry outlook. Maintain BUY with an unchanged S$0.63 fair value (based on 12.5x FY13F EPS).

ASL Marine: Ceasing coverage
Summary: Among the various offshore and marine stocks, ASL Marine (ASL) is one of the counters with a more diversified business model. Its shipbuilding operations accounted for 46% of gross profit in 9MFY13, ship-repair and conversion accounted for 22%, while ship-chartering contributed 32%. The group expects the outlook of the offshore and marine industry for this year to be “good”, but margins may be impacted by stiffer competition from Chinese shipyards. The long-term future of ASL looks bright, but more time would likely be needed for significant earnings growth and a re-rating of the stock. In particular, the liquidity of the stock is relatively low, partly due to the free float of ~37.8%. We last rated ASL a Buy with a fair value estimate of S$0.86. Due to a re-allocation of internal resources, we are ceasing coverage on this counter. 
 
Swiber Holdings: More work coming up?
Summary: According to Upstream, PEMEX is preparing to begin a bid process that aims to offer a contract to deliver and install four Ayatsil platforms. The group is in the pre-qualification phase for the contract, and heavy-lift contractors such as Saipem, Heerema and Swiber Holdings are said to be interested. The entire package is estimated to be worth ~US$300m. Swiber recently saw its share price run up about 23% from 14 May (pre-1Q13 results announcement) to its close on Friday, after we upgraded our rating from Hold to Buy. However we still see an upside potential of about 12% over a one-year time frame. Maintain BUY with S$0.86 fair value estimate.

From UOB KH:
Suntec REIT (SUN SP, T82U) –
Rotational play within high-yield stocks
Last price: S$1.71
Target Price: S$2.27
We do not believe the yield plays have run the full course.
Despite worries that interest rates could creep up, we see
selective upside in REITs that have either lagged or have
specific catalysts. The REIT yield spread remains attractive and
will remain attractive even with a further rise in government
bond yields. Yield spreads for S-REITs also remain the most
attractive regionally. In this space, we see superior investment
opportunities in the office segment presented by the yield gap
between office REITs and physical office transactions. We
expect the yield gap to narrow as positive rent reversions gain
momentum and growth expectations start building up with a
turnaround in office rentals. Valuations are attractive at 0.9x
P/B for Suntec, one of the lowest among large-cap REITs.
Forward yields of 5.2% are also attractive. We have a target
price of S$2.27.
Technically, the stock is likely to be supported above S$1.65 for
further upside towards S$1.88.

Overseas Union Enterprise (OUE SP, LJ3) –
OUE REIT and special dividend in sight
Last price: S$2.95
Target Price: S$3.63
OUE H-Trust is imminent with Mandarin Orchard and Mandarin
Gallery confirmed as initial assets. The properties will be
divested to OUE H-Trust at a minimum price of S$1,705m,
comprising gross cash proceeds of S$$1,359.5m and OUE HTrust
units worth S$345.5m. The listing is expected to take
place in 3Q13. We estimate a special dividend of 6-10%,
assuming OUE distributes at least 30-50% of the proceeds. OUE
is expected to retain a 30% stake in OUE H-Trust. OUE’s
gearing will improve to 14.8% post-listing of OUE H-REIT from
62.1% currently. OUE also confirmed that Mr Chong Kee Hiong,
the former CEO of The Ascott Limited, will be the CEO of OUE HTrust.
This choice should be viewed favourably by the market as
he has immense experience in the hospitality industry. We have
a BUY recommendation on OUE with a target price of S$3.63,
pegged at 20% discount to our RNAV. OUE is trading at a steep
35% discount to its RNAV.
Technically, the stock has retraced from S$3.20 and could be
supported near S$2.85 for further upside.

First Resources (FR SP, EB5) –
Quality laggard; strong production growth
Last price: S$1.845
Target Price: S$2.35
We also favour laggard stocks with potential catalysts in the
next 12 months. Within this bucket, we like First Resources for
its hands-on management team, young age profile and
efficiency. It has a balanced age profile with 56% being
immature and young areas, which enables it to post strong
production growth on top of its good earnings base built on its
44% prime production areas. The expectation of strong
production growth will help it mitigate CPO price volatility. Also,
it is likely to post better-than-peers’ CPO average selling price
due to its forward selling activities. We maintain BUY with target
price of S$2.35, based on 14x 2014F PE.
Technically, the stock is likely to be supported above S$1.65 for
further upside towards S$2.10.

Overseas Union Enterprise- OUE REIT and special dividend in sight.
(OUE SP/BUY/S$2.95/Target: S$3.63)
FY13F PE(x): 28.3
FY14F PE(x): 22.5
OUE H-Trust (OUE Hospitality Trust) imminent with Mandarin Orchard (S$1,190m) and Mandarin Gallery (S$540m) confirmed as initial assets. The properties will be divested to OUE H-Trust at a minimum price of S$1,705m (maximum 1.4% discount to
valuations of S$1,730m), comprising gross cash proceeds of S$$1,359.5m and OUE H-Trust units worth S$345.5m. The listing is expected to take place in 3Q13.
Gearing to improve to 14.8% post-listing of OUE H-REIT from 62.1% currently. The lower gearing will provide opportunities for OUE to leverage on its balance sheet to pursue development projects across geographies and property segments.
Maintain BUY, unchanged target price of S$3.63/share, which is pegged at a 20% discount to our RNAV of S$4.54/share. We leave our RNAV unchanged pending confirmation of the successful listing of the hospitality REIT. OUE is trading at a steep 35% discount to its RNAV.

From Maybank KE:
We continue to like the rigbuilders as we see mispricing in the stocks. We have BUY ratings for the duo, but our preference is for SMM (Buy, TP SGD5.40) over Keppel (Buy, TP SGD12.50) for its (1) higher earnings growth profile, (2) better revenue coverage and (3) relative underperformance..
Rig ordering cycle is still on an uptrend. The surprise upside in jackup orders in the first half would only serve to boost the impending cycle. Next in play would be the return of more semisub orders following heightened deepwater activities. We argue that despite the impending competition, rig prices would hold up and even rise in the next 3 years.
We expect margins to trend up (albeit at a moderate rate), not decline as expected by consensus. Better product mix, operating efficiency and incremental price increases could soften risks from execution of Brazil orders. The release of risk contingencies taken upfront at later stages could also add to margin upside.


From DBS:
We believe that STI’s correction that started from May 22 has
ended at 3184 last Friday after US’s May job data alleviate
concerns about an imminent cut back in FED stimulus. At the
same time, STI’s forward PE valuation has now fallen below
the 13.9x (average) 12-mth forward PE level at c.3287 and is
a ‘mere’ 80pts away from touching the 13.1x (-0.5SD) 12-
mth forward PE level at c.3100, which makes local blue chips
attractive. . The rebound has the potential to reach about
3300 eventually with immediate resistance at 3225.
Defensive, yield and interest rate sensitive stocks that rocked
the STI lower in the past 2-3 weeks are likely to lead the index
rebound. SingTel, OCBC, DBS, UOB, Jardine Matheson, HK
Land, Capitaland and GLP are the 8 component stocks that
each had at least a 10pt negative impact on the STI in the
current sell-down.

DBS Research issues a thematic report on Myanmar. Despite
scepticisms and multiple challenges, Myanmar’s sweeping
reforms have resulted in drawing new aids, more visitors and
higher interest to trade and investment in the country.
Foreign direct investments (FDIs) have reportedly jumped
>40% to US$1.4bn in FY2013 while tourist arrivals have
surged 54% to 1m. ADB projected that Myanmar GDP
expanded >6% in FY13 and could grow 7-8% p.a. over the
decade. Beneficiaries are Yoma, Interra Resources, Ezion and
Amara while potential beneficiaries are Yoma, Tiong Seng
and SingTel