Local Brokerages Stock Call 19 July 2013

From OCBC:
Keppel Corporation: Group CEO and O&M CEO to retire in early 2014
Keppel Corporation (KEP) reported a 11.7% YoY decrease in revenue to S$3.08b and a 33.4% drop in net profit to S$346.8m in 2Q13. However, excluding the lumpy profits from the sale of Reflections at Keppel Bay and the one-time gain from sale of investment shares, net profit in 1H13 was in line with last year’s results, within our expectations. Operating margin in the O&M segment continued to hold up. The group CEO as well as the CEO of Keppel O&M will be retiring early next year and successors have been identified. An interim cash dividend and in-specie distribution of Keppel REIT units brings the total interim distribution to S$0.208/share. Maintain BUY with a slightly lower fair value estimate of S$12.53 (prev. S$12.68).

CapitaRetail China Trust: Improved debt profile in 2Q13
CRCT’s 2Q13 results were in line with ours and the street’s expectations. Net property income rose by 6.0% to S$26.4m and income available for distribution was 7.5% higher at S$17.9m. NPI would have grown 9.5% YoY excluding CapitaMall Minzhongleyuan, which is undergoing AEI.  CRCT has refinanced the S$150.5m due in June 2013 and significantly improved the average term to maturity of its debt to 2.52 years as at 30 June from 1.30 years as at 31 March. The fixed rate proportion of CRCT's debt is 78%. Apart from the CapitaMall Anzhen unsecured onshore loan maturing next year, all other loans are offshore, and the average cost of debt for 2Q13 was at 2.58%. Gearing stands at 23.5% and all assets are unencumbered. We maintain our BUY rating and fair value of S$1.58.
CapitaMall Trust: Robust growth in 2Q13
CapitaMall Trust (CMT) released its 2Q13 results this morning. NPI grew by 12.2% YoY to S$125.6m while distributable income to unitholders rose by 10.2% to S$87.7m. The completed asset enhancement works at JCube, Bugis+ and The Atrium@Orchard last year, together with the rental rates achieved from the portfolio’s new and renewed leases, were the key drivers for the quarter. DPU was up 6.3% YoY to 2.53 S cents, and was consistent with our expectations given that 1H13 DPU of 4.99 S cents formed 50.9% of FY13F DPU. As at 30 Jun, CMT’s portfolio occupancy stood at 99.1%, representing an improvement from 1Q occupancy of 98.3%. In addition, positive rental reversion of 6.4% was also slightly higher than last quarter’s reversion of 6.2%. We will be attending CMT’s analyst briefing later in the morning. For now, we maintain BUY on CMT but put our fair value of S$2.43 under review.
Mapletree Logistics Trust: 1QFY14 DPU gained 5.9% YoY
Mapletree Logistics Trust (MLT) reported 1QFY14 gross revenue of S$75.4m and NPI of S$65.3m, down 2% and 3% respectively. The decline was mainly due to a weaker JPY against the SGD. Excluding the forex impact, gross revenue and NPI would have increased by 3% and 2%, respectively. The impact of the depreciating JPY on distributable income was mitigated by currency hedges. During the quarter, MLT also benefitted from lower borrowing costs and a partial distribution of the net gain from the divestment of 30 Woodlands Loop. As a result, amount distributable to unitholders rose 6.9% YoY to S$44.0m while DPU grew 5.9% to 1.80 S cents. Stripping out the divestment gains, DPU would be up 4.7% YoY. The results were in line with expectations, as 1Q DPU have met 24.8% and 25.4% of our and consensus full-year DPU projections. We will be attending the analyst briefing later this morning. In the meanwhile, we keep our HOLDrating but place our S$1.15 fair value under review. 

 

From DBS:

2Q13 results for Keppel Corp were slightly below on higher
tax rate. O&M saw a slight uptick in EBIT margin from 14.1%
last quarter to 14.2%, though we had expected it to be
closer to 14.4%. A positive surprise was the dividend-inspecie
of 8 KREIT shares for 100 Keppel shares, equivalent
to10.8 Scents per Keppel share, bringing total interim DPS to
20.8 Scents. Management reiterates confidence in Brazil
operations. We believe over 10 years of operating experience
in Brazil and excellent risk management distinguishes Keppel
from other players that have run into operational issues in
Brazil. We have trimmed our FY13 core profit by 1.5% to
account for the higher taxes in 2Q13. Our TP is thus revised
to S$12.90 (Prev: S$13.00). Reiterate BUY.

Ezion is adding a 12th liftboat to fleet, which is backed by a
5-year charter contract. It may be converted to time charter
with potentially higher contract value of c.US$90m. The
newbuild rig is expected to be delivered to a national oil
company in SEA by late 1Q 2015. The cost of the newbuild -
US$60m - will be funded by the issuance of preference shares
(27%) and bank borrowings (73%). Ezion is issuing 300
redeemable exchange preference shares to five Global
Investor Programme Funds at an issue price of S$100k each
to raise S$29.5m net proceeds. Dilution is minimal at 1.4%
and would be more than offset by 1.6% earnings accretion
from the new liftboat. FY13-15F earnings were trimmed by
0.4-2.2%. Maintain BUY; TP adjusted to S$2.96 (Prev S$
3.00).

 

2Q13 results for CapitaRetail China Trust in line. Upgrade to
BUY, TP adjusted to S$1.75. We believe that market reaction
to CRCT on concerns of the supply glut and the economic
downturn is a tad unwarranted. Share price has fallen c.20%
from its high of S$1.87 in early April, and given its compelling
growth story for FY14 and the still strong underlying
performance of its existing malls, we believe this weakness
presents an opportunity to re-look at the investment case for
the stock.

 

The depreciation of the JPY against the SGD resulted in
Mapletree Logistics Trust (MLT) reporting 2% and 3% y-o-y
declines in gross revenues and net property income to
S$75.4m and S$65.3m, respectively. 1Q14 distribution
includes the payout of gains from the divestment of 30
Woodlands Loop. As with prior divestments, the manager will
distribute gains over 8 quarters. MLT has a defensive
portfolio. Forex weakness is expected to persist but will be
substantially hedged. Maintain BUY with revised S$1.32 TP
(Prev S$ 1.37).

 

From UOB KH:

Hongkong Land Holdings (HKL SP, H78) –
Technical SELL with +6.2% potential return
Last price: US$6.61
Resistance: US$7.09
Support: US$6.22
Maintain SELL with a target price of US$6.22 and tight
stops placed above US$6.84. The stock has broken
below its immediate support at US$6.65 and is likely to
trend lower on the back of a potential bearish crossover
at its MACD indicator and its negative directional index
has turned up. Watch to see if there is a further follow
through after the dead cross (on its 50- & 200-day
moving averages) has formed. Our institutional research
has a fundamental SELL with a target price of US$6.43.

 

Ezion Holdings (EZI SP, 5ME) –
Technical BUY with +13% potential return
Last price: S$2.30
Resistance: S$2.60
Support: S$1.95
BUY with a target price of S$2.60 with tight stops placed
below S$2.20. The stock appears to be trending above
its 50-day moving average, which could be acting as
support. Earlier, the stock was well supported near
S$1.95, which was a support level mentioned on 24 Jun
13. Its Stochastics indicator appears to hook up. Watch
to see if prices could break above S$2.32/2.42 for
further upside. Our institutional research has a
fundamental BUY with a target price of S$2.60.

 

Nam Cheong (NCL SP, N4E) –
Technical BUY with +18.5% potential return
Last price: S$0.27
Resistance: S$0.32
Support: S$0.26
BUY with a target price of S$0.32 with tight stops placed
below S$0.26. The stock continues to trend above its
rising key trendline and appears to be trading above its
rising 50- and 100-day moving averages, which could
be acting as a support. Its MACD indicator is near to its
centreline. Watch to see if the stock could break above
S$0.28 for further upside. Our institutional research has
a fundamental BUY with a target price of S$0.34.

 

Aviation - 1QFY14 results preview: Earnings decline for SIA while
Tigerair returns to the black.
Maintain SELL on Tigerair and target price of S$0.61, valuing the stock
at 1.4x FY14F P/B (excluding perps proceeds and no dilution). Maintain
HOLD on Singapore Airlines and target price of S$11.50 ,valuing it at
0.75x forward book value (ex-SIAEC).
For 1QFY14, we expect SIA to report an 87% yoy decline in core net
profit while Tigerair is expected to report a core net profit of S$5.5m
(1QFY13: S$14m loss). We expect SIA to report an operating loss of
S$38.4m (1QFY13: operating profit of S$72m), mainly from an expected
operating loss of S$47m from the parent airline due to lower loads and
weak yields. Throughout the quarter, SIA had guided that yields were
under pressure due to promotional activities. Key data to watch out for are
the extent of yield decline (we estimate 11.1 S cents, -3% yoy) and the
impact of forex movements (US$ and yen) on yields and bottom line.

 

Keppel Corp - 2Q13: O&M margins appear to be bottoming. Another
round of dividend in-specie of K-REIT units.
(KEP SP/BUY/S$10.90/Target: S$13.50)
FY13F PE (x): 13.5
FY14F PE (x): 13.3
Another round of dividend in-specie of K-REIT shares. Keppel Corp
(Keppel) has declared an interim DPS 20.8 S cents, comprising a) cash
DPS of 10.0 S cents and b) a dividend in-specie of Keppel's remaining
KREIT units (on the ratio of 8 K-REIT shares for every 100 Keppel shares
held) equivalent to 10.8 S cents/share. Keppel has also announced a top
management rejuvenation. CFO Loh Chin Hua is to replace CEO Choo
Chiau Beng from 1 Jan 14. O&M margins appear to be bottoming.
Keppel has reported a net profit of S$703.8m (-45% yoy) for 1H13.
Excluding exceptional and fairvalue items, net profit for 1H13 was
S$677m. Against our earlier net profit forecast of S$1.410b for 2013,
results appear to be in line with our projection, but may be marginally
below consensus net profit of S$1.563b for 2013. Net profit for 2Q13 came
in at S$346.8m (-33%). The dip in 1H13 O&M net profit (-8% yoy in 1H13)
was due to a lower O&M turnover (-13% yoy). 2Q13 O&M operating
margin of 14.2% (1Q13: 14.0%; 4Q12's 12.8%) was firm. O&M margins
appear to be bottoming.

Maintain BUY and raise our target price from S$13.10 to S$13.50, on a
higher sum-of-the-parts (SOTP) valuation, which still values Keppel’s O&M
business at 18x 2014F PE. Besides a higher valuation for Keppel’s O&M
business following our O&M earnings upgrade, we have also imputed
Keppel’s investment (before additional shares from options conversion and
additional cornerstone investor shares) in Kris Energy - as of end-1H13 - at
the latter’s IPO price of S$1.10/share.

 

Mapletree Logistics Trust- 1QFY14: Stable performer.
(MLT SP/BUY/S$1.10/Target: S$1.29)
FY14F DPU (S$ cent): 7.1
FY15F DPU (S$ cent): 7.5
Results in line with expectations. Mapletree Logistics Trust (MLT)
reported 1QFY14 distributable income of S$48.7m (+6% yoy, +16% qoq)
or a DPU of 1.80 S cents (+6% yoy, +4%qoq). 1QFY14 DPU of 1.80 S
cents (inclusive of divestment gains of 0.02 S cent) is in line with our
expectations, accounting for 25.3% of our full-year DPU estimate of 7.1 S
cents. Net S$4.96m gain from divestment of 30 Woodlands Loop will be
distributed over eight quarters. This translates into S$0.6m per quarter or
about 2.5 S cents per unit. Revenue down on yen depreciation but
impact mitigated by hedges. 1QFY14 revenues fell 2% yoy due to the
depreciation of the yen offset by positive rent reversions, while NPI fell 3%
yoy due to higher operating costs from conversion of single-user assets
into multiuser facilities and also higher term contract rates. The impact of
the dip in revenues and NPI was mitigated by income hedges. MLT has
hedged 90% of its FY14 distributable income.
Maintain BUY with an unchanged target price of S$1.29, based on
DDM (required rate of return: 6.9%, terminal growth: 1.5%).

 

From Maybank KE:

Keppel Corp: Passing on the Baton; Maintain Buy, TP $12.12
KEP SP | Mkt Cap USD15.5b | ADTV USD40.9m
Ø   2Q13  results  were  within  our expectations with PATMI of SGD347m
(-33%  YoY,  -3%  QoQ).  The  weaker  YoY  performance was due to lumpy
property  recognition  mainly from sale of Reflections units last year.
Interim  cash  dividend  of  10  cts/sh  was  declared  with additional
dividend-in-specie of Keppel Reit units (~10.8cts/sh). Maintain Buy, TP
SGD12.12.
O&M margin for 2Q13 was sustained QoQ at 14.1%, off the lows of the
13%  levels  seen  last  year.  Our  FY13F forecast is at 14.4%, but we
believe  that  there  are  opportunities  for  upside surprise. Overall
demand  for newbuild rigs from various markets remains encouraging. YTD
order wins have reached SGD3.5b with net orderbook now at SGD13.1b.
What  came  as a bit of an early surprise was the announcement of a
change  in  leadership.  The new successors have nevertheless been with
Keppel  for many years and we believe they have the capability to bring
the company to the next lap.
 

 Mapletree  Logistics Trust: 1QFY3/14 Inline; Growth Drivers Yearned; Hold,
 TP $1.05
 MLT SP | Mkt Cap USD2.1b | ADTV USD4.6m
1QFY3/14 revenue at SGD75.4m (-1% QoQ; -2% YoY) was 24% of ours and
25%  of  consensus  estimate.  The  YoY  decline  was mainly due to the
depreciation of the Japanese Yen. 1QFY3/14 DPU at 1.80 SG-cts (+4% QoQ;
+5.9%  YoY)  was  25% of ours and consensus estimate. The impact of the
Japanese  Yen  depreciation  on  distributable  income was mitigated by
currency  hedges  as the income stream for the quarter was fully hedged
into or derived in Singapore dollar.
1QFY3/14  results included the partial distribution of the net gain
from  the divestment of 30 Woodlands Loop. The SGD4.96m divestment gain
will  be  distributed over eight quarters commencing from this quarter.
This translated to SGD0.6m in amount distributable per quarter or about
0.025  SG-cts  per  unit.  Excluding this gain, 1QFY3/14 DPU would have
been 1.78 SG-cts.
Given the high valuation it is currently trading (1.2x P/B), and the
absence of concrete catalysts, we believe this counter is fairly priced

 at the moment. Reiterate HOLD with TP of SGD1.05.

Local Brokerages Stock Call 18 July 2013

From DBS:
As expected, 2Q13 net profit for Keppel Land was flat y-o-y,
dragged by lower associate income. Looking ahead, there will
be more new offerings in Singapore and China in 2H13, with
balance sheet having room for more investments. Maintain
BUY, TP S$4.66 (Prev S$ 4.68).

2Q13 results for CapitaCommercial Trust in line. The expiry of
yield protection income for One George Street is expected to
negatively impact 2H13 earnings. However, management has
indicated a willingness to utilise a portion of their retained
distributable income from Quill Capita Trust in order to
stabilise the DPU going forward. CCT has also announced
new AEI works at Capital Tower. Maintain HOLD, TP revised
lower to S$1.62 (Prev S$ 1.72).

Cosco has secured a contract worth over US$200m from
repeat Mexican customer – COTEMAR, to build one Harsh
Environment Semi Submersible Accommodation Vessel. This
is an exercise of one of the two options granted to COTEMAR
together with the contract for similar vessel in May 2012. The
vessel is scheduled for delivery in 24 months. The latest
contract takes Cosco YTD wins to US$944m, forming 47% of
our order win assumption of US$2bn. Upstream reported in
early June that Cosco is signing contracts for two drillships
worth US$650-700m each with X-Drill. If this materialise,
Cosco will beat consensus' order win assumption this year.
While the recent slew of order flow is encouraging, we
remain concerned over Cosco's project execution particularly
for the new vessel types. Positive order win momentum will
likely be overshadowed by poor earnings visibility, in our
view. Hence, we maintain our FULLY VALUED call and TP:
S$0.75. Cosco's 1H13 results will be due on 1st Aug.

From UOB KH:
Jardine Cycle & Carriage (JCNC SP, C07) –
Technical SELL with +11.8% potential return
Last price: S$40.85
Resistance: S$44.00
Support: S$36.00
Maintain SELL with a revised target price of S$36.00
with tight stops placed above S$42.60. The stock could
continue to trend lower as its mid Bollinger band could
be acting as a resistance and prices are also below its
declining 50- and 200-day moving averages. Its
Stochastics indicator has formed a bearish crossover.
Watch to see if prices could break below S$40.00 for
further downside.

QAF (QAF SP, Q01) –
Technical BUY with +9.6% potential return
Last price: S$1.04
Resistance: S$1.15
Support: S$0.97
BUY with a target price of S$1.15 with tight stops placed
below S$1.00. The stock may trend higher as prices
appear to be trading above its rising 15- and 35-day
moving averages, which acted a support. Its positive
directional index looks poised to rise correspondingly
with its rising ADX. Watch to see if prices could break
above its recent high near S$1.08 for further upside as
its Stochastics indicator has hooked up.

Rotary Engineering (RTRY SP, R07) –
Technical BUY with +12.9% potential return
Last price: S$0.54
Resistance: S$0.62
Support: S$0.46
BUY with a target price of S$0.62 with tight stops placed
below S$0.50. The stock looks poised to edge higher
and the odds could increase should a golden cross form
on its 50- and 200-day moving averages. Its positive
directional index has risen correspondingly with its rising
ADX. Watch to see if the stock could break above
S$0.55 for further upside.

CapitaCommercial Trust - 2Q13: Stability in the midst of adversity.
(CCT SP/BUY/S$1.48/Target: S$1.74)
FY13F DPU (S$ Cents): 8.0
FY14F DPU (S$ Cents): 8.0
Results in line with expectations. CapitaCommercial Trust (CCT)
reported a 2Q13 distributable income of S$59.6m (+1.9% yoy, +7.0% qoq)
and a DPU of 2.07 S cents (+0.5% yoy, +5.6% qoq). 1H13 DPU is in line
with our expectations, accounting for 50.1% of our full-year DPU estimate
of 8.0 S cents. 1Q13 revenues improved 1.8% yoy to S$97.5m while net
property income dipped 0.5% yoy to S$74.9m, as better performance at 6
Battery Road and higher rental contribution from HSBC Building were
offset by lower occupancy at Capital Tower and higher property tax and
operating expenses. Revaluation gain of S$85.3m from mid-year
revaluation of properties. With cap rates unchanged at 3.75% for Grade-A
offices, gains were achieved primarily from higher signing rentals at CCT’s
properties and lower cap rates at Raffles City (down 15-20bp for retail and
hotel components). Management also highlighted that, as the government
has an option to terminate the state lease for Bugis Village in 2019 with a
minimum payout of S$6.6m inclusive of accrued interest, valuations at
Bugis Village (S$59m) will be trending down towards 2019.

Maintain BUY with a target price of S$1.74 based on DDM (required rate
of return: 7.2%, terminal growth: 2.2%). Share price catalyst includes
positive newsflow on hiring, pre-leasing activity and pick-up in office
rentals.

Keppel Land - 2Q13: Deploys its formidable balance sheet.
(KPLD SP/BUY/S$3.57/Target: S$5.11)
FY14F Dividend yield (%): 3.4
FY15F Dividend yield (%): 3.4
Results in line with expectations. Keppel Land reported 2Q13 net profit
of S$94.7m, down 2.5% yoy due to the lower bumper contributions from
Reflections at Keppel Bay, offset by contributions from The Lakefront
Residences and The Luxurie. 1H13 results were in line with our
expectations accounting for 46% of our full-year forecast of S$417m. Net
profit from property investment was up 32% yoy to S$24.5m with improved
performance from Keppel REIT (KREIT) and higher contribution from
Marina Bay Financial Centre (MBFC) Tower 3. Earnings from property
fund management fell 39% yoy to S$9m due to the absence of KREIT
acquisition fees earned in 2Q12. Geographically, Singapore accounted for
the bulk 74% of profit contributions in 1H13, due to contribution from
associates MBFC Tower 3, KREIT and development properties such as
Marina Bay Suites, with the remaining largely from China residential
projects.

Maintain BUY with unchanged target price of S$5.11/share, pegged at
5% discount to its RNAV of S$5.37/share. Key catalysts include
acquisitions, divestment of its office assets and sustained recovery in
China sales.

Local Brokerages Stock Call 17 July 2013

From OCBC:
Ascendas REIT: Apparent growth drivers
Ascendas REIT (A-REIT) reported NPI of S$108.0m and amount available for distribution of S$85.2m, up 6.8% and 11.3% YoY respectively. The increase was driven mainly by contribution from its newly-acquired The Galen and positive rental reversions. On the operational front, A-REIT continued to deliver as well. Despite starting FY14 with 21.4% of its revenue due for renewal, A-REIT has managed to reduce the figure significantly to 14.8%, thanks to its proactive portfolio management. Moreover, positive rental reversions averaging 9.6% were achieved across all its property segments. During the quarter, A-REIT also announced three new asset enhancement works to optimize its yield. In addition, we understand that A-REIT has completed the purchase of its second property in China in Jul, and is actively working to fill the spaces. These efforts, together with continued higher renewal rents and vacancies at its existing portfolio, are likely to provide further upside in its NPI. We are keeping our FY14 forecasts unchanged as the 1Q performance was within view. Maintain BUY and S$2.45 fair value on A-REIT. 

M1: 1H13 results mostly in line - HOLD
M1 Ltd saw its 2Q13 revenue +5.3% YoY (+0.6% QoQ) at S$244.5m, and was just 1.4% shy of our forecast, as smartphone customers and usage continue to drive revenue growth. Net profit climbed 11.2% YoY (-4.5% QoQ) to S$39.2m, or about 3% ahead of our estimate. 1H13 revenue slipped 1.5% to S$487.5m, meeting 42.7% of our full-year forecast (due to lower handset sales in 1Q13), but net profit rose 6.1% to S$80.2m, or 51.8% of our FY13 estimate. M1 declared an interim dividend of S$0.068/share, versus S$0.066 last year. With only very minor adjustments < 0.5 % to our FY13 and FY14 earnings forecasts, our DCF-based fair value remains at S$3.10; we have already factored higher interest rate assumptions in our model. Maintain HOLD for decent dividend yield of 4.7%. 


CapitaCommercial Trust: 2Q13 results within expectations
CapitaCommercial Trust (CCT) reported 2Q13 distributable income of S$59.6m – 1.9% higher YoY. This cumulates to a 1H13 distributable income of S$115.3m, up 2.6% YoY, which is within expectations and make up 50.3% of our FY13 forecast. 2Q13 DPU is 2.07 S-cents which translates to a 5.4% distribution yield based on the last closing price of S$1.50. The growth in distributable income was mainly due to higher revenue contributions across portfolio properties, except Capital Tower, and lower finance costs which dipped S$3.4m QoQ due to reduced interest costs. Portfolio occupancy remained stable at 95.8% as of end 2Q13, versus 95.3% in the previous quarter. As a result of continued rental reversions, CCT’s average committed office portfolio rentals increased from S$7.83 to S$7.96. We will be speaking further with management regarding these results and, in the meantime, put our Buy rating and fair value estimate of S$1.80 UNDER REVIEW. 

From UOB KH:
 Yoma Strategic Holdings Ltd (YOMA)
Last price: S$0.915
Technically, YOMA needs to trade above S$0.98 for
further upside towards S$1.10.
YOMA’s CEO on 15 Jul 13 reported the status on the
use of proceeds arising from its previous rights issue and
private placement exercises. During FY13, the company
allotted and issued 422,117,873 ordinary shares of
S$0.24 each pursuant to a renounceable nonunderwritten
rights issue on the basis of four rights
shares for every five existing shares. Out of the gross
proceeds of S$101.3m from the said rights, the company
had utilised an aggregate amount of S$96.25m. During
FY13, the company allotted and issued 192,853,000
ordinary shares of S$0.525 each, pursuant to a
placement. Out of the gross proceeds of S$101.2m from
the said placement, the company had disbursed
amounts of S$24.55m and US$13.7m each in
accordance with the purposes set out in the
announcement dated 20 Nov 12 in relation to the
placement.

Keppel Corp (KEP)
Last price: S$10.92
Technically, KEP has traded above its 200-day moving
average and prices may continue to trend up towards
S$11.60 should the stock continue to trade above
potential resistance level near S$10.90.
KEP announced on 15 Jul 13 that it secured a US$206m
contract to build a jack-up rig from repeat Mexican
drilling company, Grupo R. Scheduled for delivery in
4Q15. This is the fifth jack-up rig ordered by Grupo R
from KEP this year. In our institutional research email
dated 16 May 13, we maintained our BUY
recommendation with an unchanged target price of
S$13.10 as we maintained our new contract wins
projection of S$6b for 2013 and also S$6b each for 2014
and 2015. Ytd, KEP has won S$3.7b worth of new
contracts. With an extensive global network of more than
20 shipyards, KEP believes its near-market, nearcustomer
strategy is the way to beat competition. 

Noble Group (NOBL)
Last price: S$0.905
Technically, NOBL has been on the downtrend as the
stock is likely to trade lower towards S$0.85 should it fail
to close above S$0.95. We maintain our technical SELL
on 21 Jun 13 with a target price of S$0.85.
Noble Group is considering a bid for Australia’s iron ore
miner as reported on 11 Jul 13. Shares of Western
Desert fell 2.9% in Sydney trading on the same day,
giving it a market value of about A$245m. In our
institutional research report dated 15 Jul 13, we upgrade
to HOLD from SELL with a target price S$0.92 based on
a 30% discount to its long-term mean PE of 15.3x. Noble
is now trading below its book value of US$0.81/share (or
S$1.02/share) as at 31 Mar 13 and is at its historical low.
But further upgrades will have to depend on the
sustainability of its earnings improvement. The
suggested entry price is at S$0.83. 

Golden Agri-Resources (GGR)
Last price: S$0.550
Technically, GGR has been resisted near S$0.60 and
currently a break below S$0.52 could test S$0.47.
On 15 Jul 13, Bloomberg reported that palm oil
inventories in Indonesia, the world’s largest producer,
contracted 7.7% to 2.4m tons from May 13. In our
institutional research report dated 14 May 13, we
maintained 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 on the back of
high soybean cost as well as intense competition
following the Chinese government’s efforts to manage
inflation, which resulted in the inability to pass on higher
input costs to customers. This is despite a recovery in
performance in 1Q13 and a stronger management team. 

Courts Asia- CAL remains an attractive proxy for Southeast Asia
consumerism. Recent correction is an opportunity to BUY.
(COURTS SP/BUY/S$0.925/Target: S$1.20)
FY14F PE(x): 10.3
FY15F PE(x): 9.1
CAL is Singapore’s largest and Malaysia’s second-largest electrical, IT and
furniture retailer in terms of 2011 total sales.The first quarter of CAL’s fiscal
year is typically weaker due to the absence of festive holidays. 2QFY14
should generate stronger sales on the back of the Hari Raya season. We
expect CAL’s FY14 revenue and earnings to grow 23% and 21% yoy
respectively, driven by new store openings and higher sales persquarefoot.
On a three-year horizon, we forecast an earnings CAGR of
15%. Maintain BUY with a target price of S$1.20. We applied a peer
average PE of 13.5x to our FY14F EPS estimate of 8.9 S cents.

Ascendas REIT- 1QFY14: Leveraging on its strong balance sheet.
(AREIT SP/BUY/S$2.24/Target: S$2.73)
FY14F DPU Yld (%): 6.4
FY15F DPU Yld (%): 6.9
Results in line with expectations. Ascendas REIT (A-REIT) reported a
1QFY14 DPU of 3.55 S cents/share, (+0.6% yoy, +5.3% qoq) due to
higher distributable income (+11.3% yoy, +23.7%qoq) stemming from
higher revenues and lower interest expenses offsetting against dilution
from a private placement in 1Q13. The results are in line with expectations,
with 1QFY14 DPU representing 24.8% of our full-year forecast.
Upcoming pre-commitments of business space in 2013 has improved
substantially with 72% and 67% for business parks and hitech industrial
space respectively, up from 57% and 62% in the previous quarter. Total
pre-commitments for industrial space is relatively high at 69%.
Maintain BUY with an unchanged target price of S$2.73, based on DDM
(required rate of return: 6.9%, terminal growth: 1.8%). 

From DBS:
Ascendas REIT reported a set of commendable 1Q14 results,
in line with expectations. New acquisitions and development
projects are expected to drive earnings growth in FY14-15F.
Acquisitions if any, will be a positive surprise. Maintain BUY,
TP adjusted to S$2.50 (Prev S$ 2.60).

M1’s 2Q13 net profit of S$39.2m (+11% y-o-y, -4% q-o-q)
was inline with ours but 7%-8% below consensus estimates.
Half yearly DPS of 6.8 Scts (+3% y-o-y) at 77% payout ratio
was 3% below ours and 10% below market expectations.
We see downside risk to our FY13F earnings due to potential
rise in depreciation expenses with higher capex in 2H13.
Consensus underestimates the impact of fair value
accounting policy of iPhones. M1 follows fair value
accounting policy for iPhones (not for Android phones),
which boosted its net profit hugely in 2010 & 2011 during
iPhone frenzy. Higher sale of Android phones is hurting its
profit due to past burden of accrued handset revenue, which
may last for another two years. M1 is not cheap at 18x FY13F
& 17x FY14F PE while offering < 5 % yield. We maintain HOLD
on M1.

From Maybank KE:
Singapore Airlines: No scope for re-rating, another loss expected; Hold TP $10.50
SIA SP | Mkt Cap USD9.5b | ADTV USD9.9m
We are forecasting flat top line growth and core operating losses of SGD35mn for the quarterly results to be announced on 25th July 2013. Although our FY14F forecast is below street estimates, we maintain our Hold rating as valuations remain cheap by historical standards.
For the quarter, load factors declined substantially for SilkAir and weak airfreight market led to a 5.3% YoY decline in traffic.
While the passenger load factor of 78.0% appears relatively high by historical standards, the weak yield environment is likely to result in breakeven load factors of above 80% for the parent airline.

M1: Bet On M1 At The “Datarat” Table; Maintain Buy, TP $3.69
M1 SP | Mkt Cap USD2.3b | ADTV USD4.2m
Above expectations! 2Q13 net profit rose 11% to SGD39.2m, delivering on the promise we saw in 1Q13 when we said that 2013 had the potential to be a good year for M1. We maintain M1 as our only and strongest telco BUY and raise our TP (DCF) to SGD3.69
It is still early days to bet on M1 for (1) the greatest potential upside from 4G adoption which we believe will happen faster and sooner than expected in 2013 and (2) finally the chance to monetise surging data usage in Singapore now that smartphone users have been weaned off the unlimited data bottle.




 
 

Local Brokerages Stock Call 16 July 2013

From OCBC:
Singapore Residential Property:  Record launch at J Gateway
A headline total of 2,119 new private homes (incl. 313 EC units) were sold in Jun 13, up 11% MoM and 23% YoY. The highlight of the month was undoubtedly the launch of 738-unit J Gateway near Jurong East MRT station, which saw 737 units snapped up at a median price of S$1,486 psf. Our current base case is for FY13 primary sales (excluding EC) to slow to 16k-18k units sold – an 18% to 27% dip versus 22k units in FY12. With 10k units sold in 1H13, we expect sales to further ease as the market digests the impact of latest curbs. Maintain NEUTRAL on the residential property sector. We prefer developers with strong balance sheets and diversified exposure, such as CapitaLand [BUY, S$3.77] and Keppel Land [BUY, S$4.53]. In the mid-small cap space, we prefer Roxy-Pacific [BUY, S$0.76] which is sitting on a substantially sold development portfolio and has a track record of prudent execution. 
 
Fortune REIT: Solid 2Q13
FRT reported income available for distribution of HK$153.7m (+12.6% YoY), driven by a 10.7% YoY increase in revenue to HK$307.9m and a 11.6% YoY rise in net property income to HK$219.6m. DPU was the same as 1Q13 at 9.00 HK cents (+11.9% YoY). The results were in line with ours and the street's expectations. The portfolio valuation as of 30 June stood at HK$22.2B, up 9.8% from Dec 2012. The increase was mainly driven by improved asset performance, with cap rates of 4.3%-5.1%. The increase in asset valuation pushed the gearing ratio down to 20.9%. FRT is trading at a P/B of 0.71x (NAV of HK$10.01). We maintain our FV of HK$7.51 and BUY rating on FRT.
Keppel Corporation: Secures another Mexican order
Keppel Corporation’s O&M arm has secured a contract to build a jack-up rig worth US$206m from Grupo R, a Mexican drilling company. Scheduled for delivery in 4Q15, the unit will be built to Keppel’s proprietary KFELS B Class design. Grupo R is a repeat customer, having ordered four similar units for US$205m each in Mar this year. With this new contract, Keppel currently has on order nine KFELS B Class jack-up rigs from Mexican customers. We expect more orders as Mexico aims to boost oil production through increased exploration and production activity. Keppel has won contracts worth about S$3.7b YTD, accounting for 73% of our full year estimate. Maintain BUY with S$12.68 fair value estimate. The group is releasing 2Q13 results this Thursday. 

From UOB KH:
Singapore Property- Sales skewed by two projects.
Urban Redevelopment Authority’s (URA) monthly statistics for June
indicates that a total of 1,806 units (24% mom, 32% yoy) were sold (excl
EC’s) compared to a launch of 1,768 units (16% mom, 36% yoy). Including
executive condominiums, a total of 2,119 units were sold. This brings the
total units sold during 1H13 to 10,154 units (-17% yoy).
The pick-up in monthly developer sales was skewed by two projects.
Signs of price moderation are emerging and we anticipate that residential
volumes this year will moderate by 20-40% yoy and prices could correct by
3-8% as investment demand slows. We prefer deep-value and diversified
property developers such as CapitaLand, Ho Bee and OUE as our top
BUYs.

Keppel REIT- 2Q13: Watch out down under.
(KREIT SP/HOLD/S$1.36/Target: S$1.46)
FY14F DPU Yld (%): 5.9
FY15F DPU Yld (%): 5.4
Results in line with expectations. Keppel REIT (KREIT) reported a DPU
of 1.97 S cents/share, (+2.6% yoy, unchanged qoq) due to higher
occupancies at Ocean Financial Centre (OFC) and 77 King Street and
positive reversions at ORQ, offset by minor dilution from the 40m shares
placed in 1Q13. The results are in line with expectations, with 1H13 DPU
representing 50.5% of our full-year forecast. Maintain HOLD with a raised
target price to S$1.46 (from S$1.43), based on DDM (required rate of
return: 7.1%, terminal growth: 2.2%). Entry price: S$1.27.

Singapore Press Holdings- 3QFY13: Core earnings above our
expectation on lower-than-expected costs.
(SPH SP/HOLD/S$4.33/Target: S$4.25)
FY14F PE(x): 20.9
FY15F PE(x): 20.7
3QFY13 core earnings above our expectation. Singapore Press
Holdings (SPH) reported a net profit of S$187.8m (+81% yoy). Excluding
one-off items - namely a) the fair value gain of S$111.4m relating to its
investment properties and b) impairment of S$26.2m on certain
investments, net profit would have come in at S$100.5m (-3% yoy). This is
above our net profit forecast of S$90m for 3QFY13, which we attribute to
lower various costs (eg material, staff, newsprint and depreciation costs).
Newsprint charge-out cost continued to fall, from US$626/tonne in 2QFY13
to US$609/tonne in 3QFY13, while staff cost fell by 2% yoy.
Maintain HOLD and our target price of S$4.25, which is set at a 10%
discount to our SOTP valuation of S$4.73/share. Against SPH’s current
share price of S$4.33, our HOLD call is unchanged. Entry price is at
S$4.00 and below.

First Resources- Weakness in prices could be due to the weaker
1H13 production growth, but based on historical trends, a strong 2H
recovery could still help the company achieve its target.
(FR SP/BUY/S$1.69/Target: S$2.60)
FY14F PE(x): 9.6
FY15F PE(x): 8.9
Investors are concerned that the weak 1H production could lead to First
Resources (FR) missing management’s FFB production growth target of
10%. Alternatively, this target could be missed due to the recent hot
weather and haze in Central Sumatra. As shown in historical trends, a
strong 2H production recovery is still possible. However, the hot weather in
Central Sumatra still remains a concern.
Since production in 1H13 was slower, 2H13 pick-up is crucial. For
1H13, nucleus FFB production was up by 0.6% yoy vs our full-year
expectation of 12-13% yoy (vs management guidance of 10%). Based on
historical trend, a strong recovery in 2H is possible, and this would result in
FR being able to achieve our expectations. Maintain BUY with target price
of S$2.60, based on 15x 2014F PE. We like FR for its hands-on
management team, young age profile and efficiency.

S’pore Telecommunications- Regional mobile associates affected by
currency turmoil.
(ST SP/HOLD/S$3.83/Target: S$3.79)
FY14F PE(x): 17.7
FY15F PE(x): 16.3
Depreciation of currencies in emerging markets. Concern over tapering
of QE3 has led to outflows of funds from emerging markets. SingTel is
affected by the depreciation of the Indian rupee and Indonesian rupiah,
which declined by 10.1% and 2.7% respectively against the US dollar
since end-April. Against the Singapore dollar, the rupee and rupiah
depreciated 7.9% and 0.2% respectively. Both Reserve Bank of India (RBI)
and Bank Indonesia (BI) intervened to stabilise their currencies but were
unable to stem the decline.
The worst could be over. Recent comments by Federal Reserve
Chairman Benjamin Bernanke on maintaining accommodative monetary
policy is expected to calm financial markets. We should start to witness
stabilisation in emerging markets. However, we do not expect a rapid
reversal of the rupee and rupiah as both India and Indonesia have to
grapple with domestic issues.
Maintain HOLD. We updated our sum-of-the-parts (SOTP) valuation for
SingTel based on latest foreign exchange rates and have lowered our
target price from S$3.87 to S$3.79. The Australian dollar has also
depreciated 12.4% against the US dollar and 10.2% against the Singapore
dollar since end-April.

Maybank KE:
Offshore & Marine: Contrasting Yard Fortunes (Overweight)
Recent  industry  developments  reinforce  our  positive  views  on
Singapore  rigbuilders.  Central  to  our  argument is that Chinese and
Korean  competition  will not bring down average rig prices and lead to
future margin decline.
We  see  2  possible  repercussions from Chinese shipbuilder, China
Rongsheng’s  recent  financial  woes:  (1)  Customers  may  become less
willing  to  award  orders  to  Chinese yards for fear that they cannot
deliver,  (2)  Rapid  flushing  out  of excess capacities, accelerating
sector  recovery.  Either way, this would ease competition for offshore
orders.  Korean shipbuilder, Hyundai Heavy also indicated the intention
to  raise  shipbuilding  prices.  A return of shipbuilding orders could
also ease offshore competition.
We see stable earnings outlook for the Singapore rigbuilders (Keppel
Corp & Sembcorp Marine) ahead of 2Q13 results season, but flag possible
downside  risks  for  the  Chinese  shipbuilders (Cosco & Yangzijiang).
Maintain preference for the Singapore Rigbuilders.

Singapore  Press Holdings: Core Business Continues to Weaken; Cut to Hold,
TP$4.50
SPH SP | Mkt Cap USD5.5b | ADTV USD21.1m
SPH  reported a net profit of SGD187.5m for 3QFY8/13, up 80.7% yoy.
However,  the  growth is purely because of change in accounting policy.
Excluding one-off items, core net profit of SGD91.7m was down 12% yoy.
In  our view, the most immediate catalyst, REIT spinoff, is largely
in  price  already  while  the core media business could continue to be
under pressure for more quarters.
Current 5.5% dividend yield would be less attractive as government
bond yields rise. We downgrade the stock to HOLD as there is limited
upside to our target price. Wait for a better entry point. 

From DBS:
We hosted Sheng Siong Group’s CEO and CFO for a
conference in Singapore and a two-day roadshow in Hong
Kong. We like SSG for its stable earnings base, consistent
dividend payout and yield of 4.0%. Population growth, store
expansion, margin improvement and e-commerce will be
SSG’s key growth drivers going forward. Maintain BUY with
slightly higher TP of S$0.78 (Prev S$ 0.76).

2Q13 CPO output for First Resources was 126,797 MT
(+10% y-o-y; +10% q-o-q) or 21% of our full year target of
592,151 MT, weaker than the 24% we were expecting.
2Q13 earnings expectations now reduced to US$45-50m
from US$50-57m previously. Subject to changes to
management guidance for 2Q13 results, we are maintaining
our forecasts, TP of S$ 2.18 and Buy rating for the stock. At
current price, the counter is trading at undemanding 9.4x
FY14F earnings. Any near term weakness would be an
opportunity to accumulate the stock.

Keppel Corp has secured fifth contract to build a jack up
rig worth US$206m for Mexican drilling company, Grupo
R, scheduled for delivery by 4Q15. The first four orders for
similar vessels for Grupo were placed in March 2013 at
similar pricing. The latest contract take Keppel's YTD order
win to S$3,678m, making up 61% of our full year
assumption of S$6bn. No change to our earnings,
maintain Buy, TP S$13.00.

Keppel REIT reported a 6.1% rise in distributable income
to S$52.8m (DUP of 1.97Scts, +1.5% y-o-y) on the back
of a 3.1% increase in net property income to S$32.2m, in
line with expectations. The better performance was
attributable to increased rental income from OFC (through
an increase in its effective stake to 99.9%, improved tax
transparency status) coupled with higher occupancy at 77
King Street. Keppel REIT has also successfully refinanced
borrowings due in 2014 amounting to S$425m (or 60%
of debt expiring) and improved debt maturity profile.
HOLD maintained, TP S$1.36 (Prev S$1.43).

SIA reported June operating statistics that were fairly
weak, with passenger carriage up by 2.5% y-o-y to
8,230.2m p-km, on 4.4% y-o-y increase in capacity,
leading to a 1.5ppt decline in load factor to 81.5%.
Silkair's carriage rose by 8.9% y-o-y to 489.2m p-km but
lagged behind capacity growth of 17.1% y-o-y, resulting
in a 5.5ppt drop in load factor to 75.5%. SIA cargo
meanwhile, reported a 6.3% y-o-y decline in carriage to
550m tonne-km on 5.6% y-o-y decline in capacity, and
load factor dipping to 62.6%. This set of numbers
highlight SIA's difficulty in operating as a premium carrier
in a weak macro-economic environment, with their yields
also likely to be under pressure. The only relief is that jet
fuel prices are slightly lower y-o-y. Maintain HOLD.

Moody's puts Singapore banks
on negative outlook
• Moody's placed Singapore banks on negative
outlook
• Concerns highlighted are not new; keep watch
on unemployment for asset quality risk
• OCBC remains a HOLD; UOB at FULLY VALUED

Local Brokerages Stock Call 15 July 2013

From OCBC:
Technology Sector: PC slump continues
Summary: The worldwide shipment of PCs remained sluggish, falling 10.9% YoY to 76.0m units in 2Q13, according to research firm Gartner Inc. This was the fifth consecutive quarter of YoY decline. Besides the cannibalisation of PCs by mobile devices, we believe that the still uncertain macroeconomic backdrop has also played an inherent role in causing the sluggish demand for PCs. Just last week, the IMF trimmed its global economic growth forecasts for both 2013 and 2014. Although Singapore’s 2Q13 GDP growth managed to exceed the street’s expectations, we remain cautious on the downside risks on the tech sector given heightened concerns over China’s economy and persistent weakness in the eurozone area. Hence, we maintain NEUTRAL on the sector. We replace Venture Corp [HOLD; FV: S$7.37] with ECS [BUY; FV: S$0.57] as our top pick in the sector following our downgrade of the former after its weak 1Q13 results.

Ezra Holdings: Time needed for subsea to deliver sustainable earnings
Summary: Ezra Holdings (Ezra) reported a 19% YoY rise in revenue to US$317.1m but saw a 68% drop in net profit to US$7.2m in 3QFY13, such that 9MFY13 revenue and net profit accounted for close to 75% of our full-year estimates. However, stripping out one-off items, we estimate core net loss of US$54m for the quarter. Gross profit margin was only 1% vs. 17% in 3QFY12. The main reason for the poor performance was the subsea segment, which went into the red with delays in project executions and unforeseen costs. As highlighted in our earlier reports, we have been waiting for evidence of smooth execution in this business before we turn more positive on the company. In view of the lack of sustainable core earnings for now, we value Ezra using a P/B of 0.7x, such that our fair value estimate drops from S$1.10 to S$0.99. Maintain HOLD. 
  CapitaRetail China Trust: Acquiring Grand Canyon Mall in Beijing
Summary: CRCT has announced this morning that it has entered into a conditional call option agreement with CMA to acquire Grand Canyon Mall in Beijing. Including acquisition expenses, the total investment cost for the mall is expected to be about RMB1.82b (S$373.0m), or about RMB26k (S$5,329) psm, based on GFA (excluding the car park). The mall has been valued at RMB1.83b as at 15 April 2013 by CBRE.  The mall currently has an annualised net property income (NPI) yield of about 3.5%, based on the purchase price. The committed occupancy rate (92.7% as of April 2013) is expected to reach close to 100.0% next year. Leases accounting for about 27.0% of the mall’s monthly gross rent are expiring between this month and the end of the year. In management’s view, these leases allow for significant improvement in rental income when their average rent, currently over 90.0% lower than the market rate, is adjusted closer to the market rate. Furthermore, leases accounting for another 25.0% of the mall’s monthly gross rent will be expiring in 2014 and 2015. The proposed acquisition of Grand Canyon Mall is thus expected to be yield-accretive once the acquisition is completed. The target NPI yield is about 7.0% to 8.0% in the longer term. CRCT intends to fund the acquisition using its existing cash and new debt of between S$286.9m and S$327.9m, with the balance from new equity financing. The transaction is expected to be completed by 2Q14. Given that CRCT will release its 2Q13 results soon, we maintain our fair value of S$1.58 and BUY rating for now. 

From DBS:
Ezra Holdings reported disappointing core net loss of
US$58m in 3Q13. Write-offs on legacy projects and project
delays lead to negative contribution from subsea. Order win
momentum sustained but execution risks will likely
overshadow. Our target price is revised down to S$0.90,
based on 0.8x P/BV for Ezra’s core operations, down from
1.15x P/BV earlier, to account for lower margins and ROEs as
well as risks associated with a highly geared balance sheet
amidst a potentially rising interest rate environment in future.
Downgrade to Fully Valued.

From Maybank KE:
OSIM International: First Look At The New Chair; Buy TP $2.53
OSIM SP | Mkt Cap USD1.2b | ADTV USD1.9m
We had a firsthand look at the eagerly awaited new chair, which has
just  been  soft-launched in Hong Kong. The uInfinity has a much better
massage, though design was slightly underwhelming.
OSIM will announce 2Q13 results after market close on the 30th July.
For  the quarter, we are expecting revenue and profit growth of 15% and
18% (SGD26.5m) respectively.
We  trim  our earnings forecast by 2-3% on lower revenue estimates.
Our TP of SGD2.53 remains pegged to 18x FY13F. Maintain BUY. 

From UOB KH:
Noble Group (NOBL SP)
Waiting For Clearer Indicators
The worst for earnings could be over but the turning point remains unclear
with margin under pressure from weak demand and large soybean, sugar
cane and cotton supplies. New capacities could provide buffer and new
investment opportunities could lead to more offtake from miners. Upgrade to
HOLD as share price has corrected since our downgrade in May 13. Target
price: S$0.92. Entry price: S$0.83.

From DMG:
Ezra reported a poor set of operating numbers with a core
net loss of USD52m. Headline net profit of USD7.2m was boosted by USD59m
one-off gains primarily due to sale of Ezion shares. Following the results, we
slash our FY14-15F core EPS estimates by 12-24% on lower margins. In our
view, continued inability to deliver earnings, weak cash generation and industrywide
project delays could add further strain on the balance sheet. Downgrade to
Sell with a TP of SGD0.70 (from SGD1.15).

VARD Holdings: 2Q13 Results Marred By Loss-Making Brazil Unit (BUY,
SGD0.87, TP: SGD1.10)
VARD’s NOK20m net loss in 2Q13 was sharply below estimates,
weighed down by its Brazil yards. At a results briefing, Management
provided little clarity on margins and potential of more losses in
Brazil. As our model now assumes zero profit on all existing jobs in
Brazil, we cut our FY13-15F EPS by 22%-40%. Maintain BUY, with a
lower SGD1.10 TP, based on 10x FY14F EPS. These put the stock at
10.1x FY13F P/E and 7.4x FY14F P/E.

Local Brokerages Stock Call 12 July 2013

From OCBC:

Triyards Holdings: Awaiting new orders
Summary: Triyards Holdings (Triyards) reported a 61% YoY drop in revenue to US$65.7m and a 55% decrease in net profit to US$7.5m in 3QFY13, bringing 9MFY13 net profit to 72% of our full year estimate, and in line with expectations. The fall in revenue was mainly due to lower revenue recognized for the Lewek Constellation – construction progress for this vessel had peaked in 2HFY12. Meanwhile, gross profit margin was higher at 19.2% in 3QFY13 vs 12.5% in 3QFY12. Management reiterated that it is receiving healthy enquiries for the construction of SEUs, and received favourable feedback during its roadshows of its 3^rdgeneration SEU. We await new orders and news of a potential yard acquisition as the group pares down its debt. Maintain BUY with S$1.07 fair value estimate.

Vard Holdings: Continued difficulties in Brazil
Summary: Vard Holdings Limited (VARD)’s 2Q13 results came in below ours and the street’s expectations, despite issuing a profit warning earlier. The group reported a net loss of NOK20m for 2Q, bringing its 1H13 net profit to NOK168m – just 28% and 23% of ours and the consensus FY13F estimate. The poor performance was mainly due to operational challenges in its Niteroi and Promar yards in Brazil, which would likely need more time to stabilize. Its order-book also declined by about 11% to NOK14.0b. Downgrade from Hold to SELL with lower FV of S$0.80 (previously S$0.93). 
 
ST Engineering: ST Aerospace won S$430m of contracts in 2Q13
Summary: ST Engineering (STE) announced that its aerospace arm, ST Aerospace, has secured new contracts worth about S$430m in 2Q13. This includes the exclusive component Maintenance-By-the-Hour contract worth S$32.25m awarded by Spring Airlines Japan, and the five-year Multi-crew Pilot Licence training contract from Qatar Airways announced in June 2013.  In the VIP cabin reconfiguration business, ST Aerospace secured three deals involving Boeing Business Jets (BBJ): a cabin design contract in Eastern Europe, a 12-year maintenance check and interior refurbishment project on a Boeing 737 belonging to a returning Middle Eastern customer, and a maintenance and interior modification contract awarded by a US customer. The magnitude of the contract wins is in line with our expectations. We maintain our fair value estimate of S$3.97 and HOLD rating on STE. 
 
Ezra Holdings: Profit bumped up by one-off items
Summary: Ezra Holdings (Ezra) reported a 19% YoY rise in revenue to US$317.1m but saw a 68% drop in net profit to US$7.2m in 3QFY13, such that 9MFY13 revenue and net profit accounted for 75% and 72% of our full year estimates, respectively. However, if we were to strip out one-off items such as the disposal of Ezion shares which contributed to a US$67.4m gain, we estimate core net loss of US$54m for the quarter. Gross profit margin was only 1% vs 17% in 3QFY12. Meanwhile, the group announced it has won new contracts worth more than US$450m since its last quarterly results, bringing its order book to more than US$2b. Pending details from management, we put our Hold rating and fair value estimate of S$1.10 under review. 
 
Dyna-Mac Holdings: Secures S$135m fabrication orders

Summary: Dyna-Mac Holdings has secured a new order worth about S$135m from a regular client for the fabrication of topside modules, manifolds and flare towers for two FPSOs to be carried out in its Singapore and Guangzhou yards. Production will commence in late 3Q2013. As the group is expected to report its 2Q results in the coming weeks, we put off adjusting our FY13F estimates for now. Maintain HOLDrating with an unchanged fair value estimate of S$0.44.

Singapore Economy: 2Q13 GDP grows 15.2% QoQ, boosted by manufacturing
Summary: Based on advance estimates from the MTI, the Singapore economy grew 3.7% YoY in 2Q13, compared to 0.2% in 1Q13. On a QoQ seasonally-adjusted annualized basis, the economy grew by 15.2%, faster than the 1.8% growth in the previous quarter. This also beat street’s expectations for a 8.1% expansion, based on a Bloomberg survey. Manufacturing expanded by 37.6% QoQ, reversing the 12.7% contraction in 1Q13, mainly due to strong growth in the biomedical and electronics clusters. Construction grew by 9.0% QoQ, moderating from the 14.3% expansion in 1Q13. Meanwhile, services rose 9.0% vs 8.1% in the previous quarter, primarily supported by a robust recovery in the wholesale & retail trade sector and the transportation & storage sector. 

From UOB KH:
Starhill Global REIT (SGREIT SP, P40U) –
Technical BUY with +10.5% potential return
Last price: S$0.85
Resistance: S$0.99
Support: S$0.80
BUY with a target price of S$0.95 with tight stops placed
below S$0.82. The stock is likely to trend higher after it
rebounded from its lower Bollinger band and closed
above its 200-day moving average as well as its mid
Bollinger band. Its MACD indicator has hooked up with
its Stochastics indicator, forming another bullish
crossover. Watch to see whether its potential dead
cross on its 50-day and 200-day moving averages could
be negated. Our institutional research has a
fundamental HOLD with a target price of S$0.92.

Hutchison Port Holdings Trust (HPHT SP, NS8U) –
Technical SELL with +11.2% potential return
Last price: US$0.755
Resistance: US$0.79
Support: US$0.67
SELL with a target price of US$0.67 with tight stops
placed above US$0.79. The stock appears to rebound
in the downtrend and may face resistance near its 200-
day moving average, which acted as a support
previously, and could potentially turn as resistance as
prices have traded below it. Its MACD indicator has
traded below its centreline. Watch to see if its daily 14-
day RSI indicator will fail to move above 50. Our
institutional research has a fundamental BUY with a
target price of US$0.88.

Global Yellow Pages (YPG SP, Y07) –
Technical BUY with +14.4% potential return
Last price: S$0.107
Resistance: S$0.133
Support: S$0.075
BUY with a target price of S$0.125 with tight stops
placed below S$0.10. The stock is likely to rebound
further after prices appear to rebound from its rising 50-
day moving average. Its RSI indicator has turned up
while the positive directional index appears to have
negated its potential negative crossover. Watch to see if
the stock could break above its declining resistance line.

Triyards Holdings- 3QFY13: In line; ramps up ship repair capacity.
(ETL SP/BUY/S$0.74/Target: S$1.11)
FY14F PE(x): 5.2
FY15F PE(x): 5.0
Profit in line. Triyards reported a net profit of US$7.5m for 3QFY13, in line
with our forecast of US$7.3m. 9MFY13 net profit of US$21.1m formed
70.3% of our full-year profit forecast.
Profit dip due to recognition of lumpy contract. 3QFY13 revenue and
profit declined by 61% yoy and 55% yoy respectively, mainly due to lower
revenue recognised for the construction of the subsea construction vessel
Lewek Constellation (Constellation). The Constellation is currently berthed
in Vietnam and is expected to leave the yard in September for final
outfitting work.
Maintain BUY and unchanged target price of S$1.11, pegged at 7.9x
FY14F PE, a 10% discount to peers’ average of 8.8x FY14F PE, due to
Triyards’ shorter operating track record and lumpy profit recognition from
Ezra’s Constellation, which comprises 17% of FY14F net profit.

From DBS:
Vard Holdings reported weak results in 2Q, in line with profit
warning, mainly due to cost overruns at both Brazil yards.
Margins may not recover as early as we had expected earlier.
FY13/14 earnings cut by another 39%/ 19%. Order wins in
2H13 should be within expectations but unlikely to
outperform. Maintain HOLD with lower TP of S$0.88 (Prev S$
1.16).

We hosted SREITs from the industrial, hospitality and
retail sectors. REITs remained generally upbeat about
occupancies and rents, citing still-strong tenant
performance and positive rental reversions as indicators of
organic growth going forward. S-REITs generally expect
Net property income (NPI) growth to drive or support
valuations. In terms of picks, we like Cache Logistics Trust
(BUY, TP S$1.47) for its locked-in earnings growth and
acquisition opportunities, Fraser Commercial Trust (BUY,
TP S$1.69) for its strong capital management and organic
growth from Alexandra Technopark, and Mapletree
Commercial Trust (BUY, TP S$1.53) for its strong
reversionary growth profile, particularly from VivoCity. 

From DMG:
Ausgroup sells its Tuas property for SGD39.4m. Ausgroup 
(AUSG) sold its Tuas waterfront property to Boustead Singapore
 (BOCS SP, NR) for SGD39.4m vs its SGD21.7m book value. 
AUSG valued the property at SGD28.8m based on vacant possession
, excluding all plant and equipment but including the waterfront area.
 This compares with the open market value of SGD44.6m that BOCS
 obtained from its valuer based on income capitalization and discounted
 cash flow. We estimate that AUSG could recognize a profit of AUD5m
 for FY14F from this deal. It will also enter into a leaseback arrangement
 with BOCS for the next 12 years. The estimated annual rent of SGD3.3m
 translates into an attractive unleveraged yield of 8.4% for BOCS but for
 AUSG, the net rent (minus the deferred profits on sale) of about SGD2.2m
 comprises a significant 9% of its FY14F pretax income. We think this is a
 poor deal for AUSG and maintain SELL on the stock, with our TP at 
SGD0.33. 

From Maybank KE:
Vard Holdings: A Writeoff Year; Downgrade to Hold, TP $0.95
VARD SP | Mkt Cap USD808m | ADTV USD5.9m
Vard’s 2Q13 results were lower than our adjusted expectations following the company’s profit guidance on 28 June 13. 2Q13 revenue came in at NOK2.9b (-1% YoY, +7% QoQ) with a net loss of NOK20m (-118% YoY, -111% QoQ).
Vard commented that it has used its best judgement to provide for all the potential losses for the Brazil projects in 2Q13, but also qualifies that it cannot guarantee that no other unforeseen losses may arise. We expect profitability for outstanding projects at Niteroi yard to remain low. Our FY13F EBITDA margin assumption is lowered to 7.8% (from 9.4%).
We cut FY13F/14F/15F earnings by 29%/16%/12%. Expect more consensus earnings cuts which would weigh down on share price. We downgrade to hold with TP lowered to SGD0.95 as we await contract win catalysts to rerate the stock. No change in dividend policy of minimum 30% payout but no interim dividend was declared this quarter.