Local Brokerages Stock Call 4 June 2013

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

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

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

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

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

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

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

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