Wednesday, June 30, 2010


The threat of Tropical Storm Alex has shut 25% of oil prodn and 9.4% of natural gas output in the Gulf of Mexico. There are currently 634 prodn platforms and 51 drilling rigs in the US Gulf, which accounts for 1.6m bpd and this will add further strain on the excess rig capacity in the region. According to latest reports, the final round of Petrobras 28-rig tender has attracted 5 bids offering to supply 12 deepwater rigs. This is lower than Petrobras original plan to charter up to 19 units.

What is noteworthy is that 6 (4 drillships & 2 sem-subs) of the rigs will be built at Keppel BraFels yard with none for SembMarine. The tender process will still have to go for a commercial proposal stage before being awarded. Short term technical configuration has broken down with near term support at $8.35.


OCBC starts at Buy with S$0.81 target, based on 12X blended core FY10-FY11 earnings. Says supplier of lift boats, offshore support services will gain from firm demand for its vessels in Asia, Middle East, based on high level of client interest. The group is also looking to cater to offshore wind farms. Forecasts FY10 net profit of S$61m vs S$17m profit in FY09, boosted by gains from disposal of stakes in some lift boats; excluding exceptional gains, tips core profit of S$32m.

SembCorp Industries

SembCorp Industries will develop a new integrated wastewater treatment plant on Jurong Island’s Tembusu district and has secured its 1st customer in German specialty chemicals firm LANXESS even before the facility is completed in 2Q12. The $40m WWT plant is expected to double SCI’s current WWT capacity on Jurong Island. Utilities business currently contributes about 30-35% to SCI’s net profit, of which Singapore accounts for two-third of the earnings.

Over the long term, S'pore plans to triple its current Newater capacity and increase its desalination output by 10x by 2060 to meet the country's future water needs as well as replace the 2 water agreements with M'sia. Given that SCI has built and is operating the largest Newater plant here, it stands in good stead to bid for some of these desal and Newater projects.

MoyaDayen (follow up)

Inks US$36m municipal water treatment contract with Phnom Penh Water Authority (PPWA), to supply some 135k cubic m/ day of portable water for the city’s 1.3m residents. Latest deal follows an earlier US$13.4m Phnom Penh municipal contract clinched several wks ago. Total Group order book now stands at ~S$80m. Co is backed by Bharain's Gulf One Bank and Saudi Arabia's Bushnak Grp, which has extension businesses in the water and wastewater business.


Boustead: subsidiary Salcon, awarded a ~S$21m contract to design, engineer and construct the UAE’s first ever new water recycling plant in Abu Dhabi, with treatment capacity of ~28k cubic m/ day. The contract includes a 5-yr operations and maintenance agreement. The technology will be the same as the one installed by Salcon at its Phase II extension of the Bedok NEWater factory project which it completed last yr. This latest contract takes Salcon's orderbook backlog to over S$50m.

Sound Global

Sound Global: signed a BOT contract to build a wastewater treatment facility (25k ton/day capacity) in Xi’an City, Shaanxi Province. The project comes with a concession period of 27yrs, and is expected to contribute positively to net EPS and NTA for FY10. Deal may help ease recent selling pressure prompted by postponement of proposed dual listing in Hong Kong. SGL’s aggregate BOT portfolio now stands at 11 projects, with total treatment capacity of up to 660k tons/day.


SIA is raising $500m via 10-year fixed rate notes due in 2020. This is the first tranche as part of a $1bn multi-currency medium-term note programme announced several years ago. The notes bear an interest rate of 3.22% p.a. payable semi-annually and will be issued in July. This also coincides with SIA’s $900m 4.15% notes due in Dec 2011 that were issued in 2001. SIA says the funds will be used for general working capital purposes and financing of capital expenditure.

We believe SIA is tapping the market at a time when interest rates are at record lows. SIA has a capital expenditure budget of some $10.2b over the next 5 years, mainly on its new additions to its fleet including 20 A350XWB, 20 B797 and another 19 A380s on order. Our outlook for SIA’s loads also remains positive despite some concerns for an economic slowdown. No change to our house’s TP of $18.90, based on 1.7x P/BV.

CapitaCommercial Trust’s (CCT)

CapitaCommercial Trust’s (CCT) share price has outperformed the FSTREI Index by about 4.5% YTD due to the re-rating of the Singapore office sector. This is mainly buoyed by the government’s forecast of robust GDP growth of 7-9%, as well as the strong pre-leasing commitments announced by landlords of the upcoming office developments. Occupancy rates of existing office developments have been holding up well so far.

In addition, CCT’s management is taking proactive measures to stay competitive. It has sold Robinson Point and will embark on asset enhancement at Six Battery Road to the tune of $92m. It is also reviewing the option of divesting StarHub Centre. These are efforts aimed at reconstituting its portfolio with a greater bias towards Grade A office properties. Based on last closing price of $1.22, the REIT still offers yield of about 6.2%.

CHINA Fishery

CHINA Fishery announced a private placement of 113.5m new shares (@S$1.85) and 26.7m warrants, which carries the right to subscribe to one new share at an Ex price of S$2.10. Factoring in the investment, including exercise of all the warrants, Carlyle Group will hold about 13.62% of the enlarged capital of China Fishery.According to mgtm, the strategic investment of US$190m by the Carlyle Group will help position the Co for further acquisition opportunities and strengthen the shareholder base

We understand the Co is currently looking at possibilities for expanding into Chile, Mauritania & Morocco following its recent acquisitions of 2 Peruvian fishing companies last mth. Notably, mgtm also highlights that the investment has already helped China Fishery to achieve part of its aims to raise capital via its original plans for a dual listing on Norway's Oslo stock exchange. This suggests that the Co may indefinitely postpone or cancel its dual listing plans on the Oslo bourse entirely.


SATS reiterated as Buy with price target of $3.20 at DB, with prospects buoyed by continued growth momentum in air pax and cargo traffic, the full roll-out of the integrated resorts and more MICE and tourist events. Monthly visitor arrivals surged 30.3% in May, Iata has upped its growth forecasts for pax and cargo traffic to 7.1% and 18.5% from 5.6% and 12%, which should underpin demand for SATS airport services.

SATS is a good proxy to the S’pore tourism story given the lack of liquid hotel plays.

Genting S’pore

Genting S’pore target price raised by 45% to $1.45 by DB, pegging it at a revised 14x EV/Ebitda. Notes RWS operations are holding up well and maintaining leading position with >50% market share following opening of Marina Bay Sands level due to its loyalty program and aggressive marketing. It estimates RWS has only lost 10-15% of daily gaming revenue suggesting a much bigger gaming market in S’pore of US$4.1bn vs previous estimate of US$3.6bn.

DB is forecasting daily gaming revenue of $7.7m for RWS in 2Q and is raising its FY10 and FY11-12 earnings by 127% and 45% respectively. Near term catalysts are the upcoming 2Q results, the strong tourism numbers and licensing of junkets.

SG Market

S’pore shares likely to extend yesterday's losses in wake of Wall Street's sharp fall overnight, driven by concerns over health of global economy. Risk aversion evident in 17.7% jump in CBOE Volatility Index to 3-week high of 34. Investors expected to keep close watch on China markets, which triggered selloff in Asian bourses yesterday on lower pricing and take-up of AGBank and weaker consumer confidence. Initial support for STI at 2800, where the 200-day MA sits.

Cyclical, high-beta stocks such as NOL, Noble Group, SembMarine, UOB, CapitaLand may again lead decline among STI components.

Tuesday, June 29, 2010

29 Jun End Day Summary

The STI went down 39.65 pts to close at 2,830.34.
Volumes were at 1.39 bln at a value of S$1.44 bln. This means on average each share is worth $1.036.
Losers outpaced gainers 3 to 1.

Stories of note:
To develop a new integrated wastewater treatment facility in Jurong Island

Announces joint venture with Elevance Renewable Sciences, Inc.

Wins another contract worth US$36.46mln

Boustead Salcon awarded S$21 mln contract for recycling plant in UAE

Lists ‘green’ infrastructure business trust, K-Green Trust

K-Green Trust

K-Green Trust turned lower in tandem with soft mkt sentiment after hitting intra-day high of 1.33 but still higher than the listing price of S$1.13. K-Green is an infrastructure trust that comprises an incineration plant, a waste-to-energy recycling plant and a water treatment plant, based in Singapore. Keppel Integrated Engineering owns 49% of K-Green, with the rest of the units distributed to Keppel shareholders. Current yield is about 7%.


SSE sentiment slumped after Conference Board revised its China leading economic index down to 0.3% in Apr, less than the 1.7% gain reported June 15 due to a `calculation error' Citigroup also warned China's exports face "strong headwinds" in the 2H of the year from policy tightening measures and the European debt crisis


Awarded US$ 36.5m contract by Phnom Penh Water Supply Authority “PPWSA”) in Cambodia for Part B of Phase 1 of the Niroth Water Production Facilities Project. This follows the US$13.4m Part A of the contract, which was announced last week. Total order book from PPWSA now stands at US$50m.


DBS initiates Buy with $1.22 target. Longcheer trades at only 6x FY11 PE, 1.4x NTA plus 5-6% yield, and is 55% cheaper than sector PE of 14x. It also has a strong balance sheet, with net cash of RMB425m (S$86.7m or 33% of market cap). Longcheer is a proxy to the strong handset demand in Asia’s emerging markets. The biggest wildcard is mobile lottery, which is expected to start contributing from 2QFY11.

Indofood Agri

JPMorgan initiates Overweight on Indofood Agri with $2.80 target price, implying 19X FY10 P/E, 13X FY11 P/E. Expects share price to be driven by margin expansion as plantation group ramps up sugar business and higher P/E multiples as more palm oil producers get official certification for sustainable planting practices. If strategy for sugar business well executed, contribution to EBITDA could rise to 11% in FY11 from 3% in FY10.

Notes company has plans to plant 20k-25k ha of oil palm this year (+13% on year) and expects a similar trend for the next 2-3 years, which would support mgmt's annual CPO prodn growth expectation of 5%-10%.

K-Green Trust

K-Green Trust holding above $1.13 listing price on SGX debut, +11.5% at $1.26 after opening at $1.17. While broad market advance supportive, buying not widespread as volume thin for new listing, currently around 3m units. Citing debt-free balance sheet, steady non-cyclical cash flows, lack of counter-party risks (S’pore govt contracts), DBS Vickers, which has Hold call with $1.20 target, reckons KGT could trade between 6-8% target yield, which would imply a share price range of $0.98-1.30.


Sembcorp Industries has inked a MOU to develop and build a new seawater desalination plant in UAE. The US$200m facility, which will be sited on one of the world’s largest desalination plants, Fujarah 1 Independent Water & Power Plant (40% owned by SCI), will boost its water prodn capacity in UAE by 30% to 130 mgd and be operational before the end-2013. Water output of this new facility will be sold to the Abu Dhabi Water and Electricity Company (ADWEC), under a 20-year deal.

This is in addition to a current 22-year deal for the water and electricity output from the Fujairah 1 IWPP to ADWEC. Separately, SCI has also established a 2nd beachhead in the Mid-East to build, own and operate another IWPP in Salalah, Oman. The US$1bn Salalah plant, with a gross power capacity of 490MW and a seawater desalination capacity of 15 mpd, is expected to be fully operational by 1H12.

At the same time, SCI also announced it will develop a new integrates wastewater treatment plant on Jurong Island’s Tembusu district and has secured its 1st customer in German specialty chemicals firm LANXESS even before the facility is completed in 2Q12. The $40m WWT plant is expected to double Jurong Island’s WWT capacity. Utilities business currently contributes about 30-35% to SCI’s net profit, of which Singapore accounts for two-third of the earnings.


Yangzijiang has acquired a 51% interest in Jiangsu Changbo Shipyard Co (JCSC) for Rmb51m and inject another Rmb105m to increase its capital reserves. JCSC is located downstream of Yangtze River, 5km from one of YZJ’s shipyards. JCSC owns shipbuilding facilities with 286k sqm yard space, 926m deepwater coastline and 400k dwt capacity which JCSC owns. In comparison, YZJ has a capacity of 1.95m dwt and Cosco 2.05m dwt.

It currently has a US$338m orderbook comprising 20 vessels, comprising small dry bulkers with deliveries stretching till mid 2012. JCSC has been hampered by high gearing and inefficiencies and YZJ would be able to reap scale economies and operational synergies from this yard. At 0.9x P/B, the cost of investment is also relatively inexpensive. Stock is currently trading at forward P/Es of under 10x.


CapitaLand: to sell entire 50% stake in Sichuan associate (“SZC”) to JV partner for RMB 570m cash, vs NTA of RMB 398m. Sale to be completed in 2Q10. CapitaLand will recognize a net gain of ~S$33m. EPS would increase from 2.7c to 3.5c, based on 1Q10 numbers, with no material change in Group NTA.

Starhill Global Reit

Starhill Global Reit: completes RM1bn (S$444m) acquisition of Starhill Gallery and Lot 10 Property. To be financed by convertible prefs (39%), senior medium term notes (31%), cash (29%), new unit issues to manager (1%). Conversion price fixed at $0.73 (30% premium over $0.555 last traded). Recall this deal would increase DPU by 12.4% to 4.34c/unit (=7.8% yield), based on FY09 figures, and assuming full conversion of convertibles.

Pengion Int’l

Pengion Int’l: received notice of termination from Abu Dhabi National Oil Company (ADNOC) for two Safety Standby Rescue Vessels (SSRV) shipbuilding contracts signed in Aug ’07, and originally scheduled for delivery in 1H10. Contractually, ADNOC may claim refund of progress payment, plus interest. Penguin to potentially take P&L hit in 2Q10, resulting in NAV/sh dropping from 19.2c to 18c, and EPS dropping from 1.13c to -0.06c, based on FY09 numbers. Group is currently seeking legal advice.

Monday, June 28, 2010

28 Jun Summary

The STI went up 18.35 pts to close at 2,869.99.
Volumes were at 894.8 mln at a value of S$893.4 mln. This means on average each share is worth $0.998.
Gainers outpaced losers 2 to 1.

Stories of note:
Signs MOU to expand seawater desalination capacity in UAE

CapitaMalls Malaysia Trust launches IPO, expects to list on Bursa on 16 July

Reveals it is participating in a tender for the acquisition of certain local residential properties through an 80% joint venture

Moody’s changes trust’s rating outlook to positive from stable

FY2010 Revenue: +4% to S$310.2 mln
Net Profit: S$9.5 mln vs S$1.2 mln
Cash From Operations: S$22.9 mln vs S$18.3 mln
Final Dividend: 1 cent

FY2010 Revenue: +14% to S$514.6 mln
Net Profit: S$31.2 mln vs –S$17.5 mln
Cash From Operations: S$48.5 mln vs S$14.3 mln
Dividend: Interim: 0.5 cents, Special: 0.5 cents, Final: 0.2 cents


AusGroup off 1.0% to $0.51 in thin trade as investors remain wary of its prospects following mgmt's guidance for weak earnings in current quarter, margin pressure till at least early next year. Stock down 15.6% since beginning May when coy cautioned about reduced activities in its key Aust, S’pore markets. Despite new Aust PM Julia Gillard's softer stance on controversial mining tax, it is unlikely to be scrapped entirely. The qn is how drastic is the revised tax and how will it affect capex.


The Spore Int'l Water Week kicks off this week, which could lead to potential deals for water-related firms from the Americas, China, Europe, Australia, India, Japan, Mid-East, N Africa, and SE Asia. The China business forum will discuss opportunities in the Rmb1.0tr China water sector, where accelerated water demand resulting from population explosion, rapid urbanisation and increased agricultural and irrigation activities have pushed the demand for sustainable water projects.

One S’pore firm that is signing a contract during this event is MoyaDayen, which is holding an award ceremony with Phnom Penh Water Supply Authority.

CapitaCommercial Trust

DB initiates CCT as Buy with $1.38 target price. Likes CCT for its exposure to S’pore's recovering office market. With the close correlation between spot rents and its share price, improving visibility of the office recovery and the turning of the rental cycle should drive the stock further. Opiones CCT's potential to unlock value via asset divestment is under appreciated by market.


Up 6% at $0.325. With upbeat outlook from TSMC and UMC at their AMGs, the Street expects TSMC and UMC to announce plans to upwardly adjust their capex budgets for 2010 at their upcoming investors conferences on July 29 and Aug 4, respectively. The expectation is TSMC may revise its 2010 capex to US$5.2-5.3 billion, up 8-10% from an original goal of US$4.8 billion. UMC may raise its full-year budget by at least 20% from US$1.2-1.5 billion to US$1.8-2 billion…

Goldman Sachs cites that they also expect that TSMC is likely to further increase capex in 2010 as the company attempts to pull in its capacity expansion scheduled for 2011 into 2010. Capex upside would fuel more growth momentum for semicon equipment vendors such as Applied Material(AMAT), which contributes more than 50% of UMS’s total revenue and hold 5.24% shares of UMS ownership…

AMAT’s rev leads UMS 1Q ahead with 94.11% correlation, and AMAT’ 1Q rev reached new high since 3Q07 and swung to a profit. UMS’ rev will keep growing at least in the coming quarters on the back of sustainable semicon recovery and revenue transmission effects. Currently, only CIMB covers UMS, and it calls to buy with TP of $0.33 based on its latest report in Jan. As of 1QFY10, UMS’s NAV is $47.37 cents. UMS is trading at 6x FY10PE discount to industry average of 12.64x and AMAT’s 14.93x

Top Global

Top Global, 60% controlled by the younger sister of Oei Hong Leong, is looking to raise up to $125m through a 3-for-1 rights issue @ $0.01 plus 3 free warrants to fund new deals in property development and hospitality. In January, Oei Siu Hua took control of Top Global, a roofing and construction outfit listed on Catalist and plans to venture into property markets in S’pore, Indonesia and China with possibility of cooperating with the Sinar Mas Group, controlled by her family.

The rights issue will comprise 8.4bn new shares and 8.4bn warrants, enlarging the share capital base to 10.9bn shares. Group is likely to undertake share consolidation after rights.

Pteris Global

Awarded a $29m contract to design and build Transfer Hold Baggage Screening systems for Singapore Changi Airport Terminals 1, 2 and 3. The project is slated for completion over 22 months. This is Pteri’s second major contract for 2Q10. It earlier secured a $53m baggage handling system contract for Mumbai Int’l Airport. Formerly know as Inter-Roller, Pteri designs and builds airports logistics systems for baggage, air cargo and express courier handling, and for in-flight catering.

China Gaoxian

China Gaoxian: seeking dual primary listing on KRX. Mgt notes higher 12.4x PE avg valuation for similar companies in Korea, vs 6.8x PE avg in Singapore. Gaoxian trades at just 2.6x PE. Gaoxian is a leading supplier of premium differentiated fine polyester yarn and warp knit fabric in the PRC, with operations in Zhejiang and Fujian province. Its products are sold to 1500 textile and garment manufacturers in the PRC under the “HuaGang” and “DaHuaWei” brands.

CH Offshore

PT Bahtera Nusantara Indonesia is buying an AHTS vessel (2001-built 5,400 bhp) from CH Offshore for US$9.5m (about 20% discount to mkt valuation). As the net book value of the vessel is US$7.89m. CHO will still realize a disposal gain of US$0.82m given that it has a 49% stake in the Buyer. We understand the vessel contributed net profit of about US$1.7m. According to mgtm, the net proceeds will be used for capital expenditure for future expansion and working capital.

Otto Marine

Otto Marine said that its wholly-owned subsidiary, Surf Subsea Pte Ltd will be taking a 19.2% stake in the US-based Joint Venture company, SURF Subsea Inc, which procured 292-feet Class 2 DP MSV at a “distressed” price of US$55m. The acquisition will enable Otto to gain a foothold in the North America mkt. The vessel is well-equipped with ROV capability that allows Otto to expand into subsea and offshore construction works, thus creating more growth opportunities for its new biz segment.

Meanwhile, there is no material impact to our FY10-12 EPS forecasts as we await for more concrete details from the mgmt. Despite market concern over potential vessel cancellation, we reckon that Otto’s integrated business model can provide alternative options such as redeploying the vessel for the group’s chartering business. To replenish its order book, management is actively targeting higher-spec newbuild contracts worth betweeen US$100-200m. Reiterate BUY with SOTP target price of S$0.58.

S’pore banks

S’pore banks may be in focus following MM’s comments at a ABS event last Friday they may need to consolidate in bid to make greater headway abroad, reviving hopes for another round of M&A in S’pore's banking industry. However, his allusion to S’pore ideally having just 2 local banks not new. Still, consolidation prospects appear dim in near term as all 3 banks generally still cautious after emerging from last year's global crisis, with Europe's sovereign debt problems remaining a wild card.

OCBC has just completed acquisition of ING's Asian operations while DBS and UOB have been quiet on the M&A front.

CapitaMalls Asia

CapitaMalls Asia will offer units in its Msian Reit IPO at an indicative price of RM1.08 each. The final retail price will be the lower of the retail offer price of RM1.08 per unit or the institutional price less a 2 sen discount. The institutional price will be determined by way of book building. Under the IPO, CMA will offer 786m units to institutional investors in Malaysia and overseas, and to the retail investors in Malaysia.

CMA will retain a stake of 41.74% in CapitaMalls Malaysia Trust. If an over-allotment option of up to 15% of the offering is exercised, CMA's stake will fall to 33%. EPF and GE Life (M’sia) have signed up as cornerstone investors for the IPO to subscribe for 90m units, or 11.4% of the total offering. The offering will close on Jul 5.

Baker Tech/Yangzijiang

Baker Tech shareholders has approved the sale of PPL Holdings to YZJ for US$155m at an EGM held on 26 Jun subject to the completion of the deal on or before the long stop date. To facilitate the purchase and in view of the ongoing litigation between Baker and SembMarine, YZJ has agreed to extend the long stop date by another 6 months to 27 Apr 11.

PPL Holdings hold a 15% interest in PPL Shipyard with the other 85% owned by SembMarine, which is trying to block the Baker’s proposed deal with YZJ, on the grounds that it has preemption rights but is unwilling to match YZJ’s price and offering a substantially reduced offer of $59.4m. However, the completion date extension by YZJ shows that the Chinese yard is not deterred by SembMarine’s court action and is determined to go ahead with its acquisition.

Friday, June 25, 2010

Summary for 25 Jun

The STI went up 4.03 pts to close at 2,851.64.
Volumes were at 991.3 mln at a value of S$1.03 bln. This means on average each share is worth $1.039.
Losers outpaced gainers 2 to 1.

Stories of note:
Extends its specialized offshore services into North America

Raises S$425mln loan from OCBC

Seeks dual listing on the main board of the Korean Exchange

Frasers Centrepoint acquires 13.7 hectares of site in Sydney

Moody’s revises outlook of REIT to stable from negative

FY2010 Revenue: -3% to S$59.6 mln
Net Profit: S$6.3 mln vs S$85,000
Cash From Operations: S$1.2 mln vs -S$1 mln
Final Dividend: S$0.03, Special Divided: S$0.01

FY2010 Revenue: -8% to S$125.8 mln
Net Profit: +73% to S$15.2 mln
Cash From Operations: S$14.2 mln vs S$28.2 mln
Final Dividend: 0.25 cents, Special Dividend: 0.1 cent

KepCorp, SMM

Citigroup opines that while US drilling ban has left 33 rigs idle in Gulf of Mexico, prompting wait-and-see attitude among drillers, demand for rigs unlikely to change over next 1-2 years unless the moratorium stays in place indefinitely. Hence, it expects the impact to be short-lived and will not alter rig supply-demand dynamics. Argues that concerns have masked increased need for more modern rigs with better safety features & more frequent repair and refurbishment activities

Adds S’pore rig builders are best positioned to capitalise in this area, which Chinese and Korean yards do not compete in. Keeps Keppel, SembMarine as Buy with respective targets of $11.10 and $4.60.

Keppel Land

strong momentum at 52-wk high. Resistance at psychological $4.00 level. Breakout beyond that could be positive, with next resistance at $4.20. Previous $3.80 resistance now becomes new support.


OCBC Research downgrades SingPost to Hold from Buy on limited upside to its $1.16 target price, noting that company needs new drivers to sustain growth as S’pore's postal industry has limited prospects. SingPost is looking to expand presence outside Singapore through recently-acquired G3 Worldwide Aspac, which has given company network of offices in 10 countries. Company should continue to offer 6.25¢ dividend given group's healthy cashflow.


According to CBRE, prime office rents finally picked up in the 2Q after a six-quarter slump. The average monthly prime office rent was $6.90 psf, up 3% from $6.70 psf in the previous quarter. The average monthly Grade A office rent was $8.45 psf, rising 5.6% QoQ. Notably, the vacancy rate in the core central business district was 6.7%, which improves from 8.1% a quarter ago. Outside the CBD - in areas such as Orchard, Novena and Alexandra - rents remained stable in the past 2-3 quarters.

In view of the latest data points, we have become more optimistic about the take-up of new office space. There will be around 6.9m sq ft of new offices coming onstream between H2 this year and 2015, and just over 50% of that has been pre-leased. We reckon pent-up demand from MNCs will continue to support leasing momentum. For proxy to office recovery plays, one can consider 1) Fraser Commerical Trust (yield is 7.1%), 2) Suntec REIT (6.6%), 3) Capitacommerical Trust (6.2%) and 4) K-Reit (6%)

SG Banks

According to Credit Suisse, S’pore banks will see stronger loan growth this year as economy improve but margins will remain under pressure given continued low interest rates. Loan growth may reach 15% in 2010 vs previous forecast of 11%-12% with earnings +2% for every +5% in lending. Asset quality should also benefit with possibility of positive surprises on the credit cost front.

On flip side, margin pressure expected to remain as Sibor still near historical lows of 0.55% and unlikely to pick up near term amid view that Fed will start raising rates only from early 2011; This should temper margin expansion expectations for local banks, which continue to suffer from compressing loan and interbank spreads. Keeps DBS, OCBC as Outperform with respective targets of $17.70, $10.25 and UOB at Neutral with $23.00 target.


Kim Eng maintains Sell with $1.90 target. Likely to see upward pressure on costs, in view of higher personnel costs, asset repair and maintenance, and costs of strengthening security following recent breach at one of its train depots. Stock now trading near peak historical multiple of 21x PE, and appears fully valued following recent strong performance. Recommend switch into Comfort DelGro.


KepCorp has secured 4 contracts worth about $50m for the construction of 3 transhipment barges for 3 Indon clients the upgrading of a drillship for Frontier Drilling. 2 barges will be completed by end 10 while the 3rd is scheduled for delivery in 1Q11. So far, the group has only managed to clinch $50m worth of orders in 2Q vs $1.66bn in the 1Q, suggesting a sharp slowdown in orderflow. All eyes will now be on the award of the Petrobras 28-rig tender, where KepCorp is 1 of 5 remaining bidders.


Yangzijiang (YZJ) has submitted an application to the Taiwan Stock Exchange (TSE) and Taiwan Central Bank for the offering and listing of TDRs representing up to 120m shares (which consists of 100m new and 20m vendor). Note that the proposed listing is subject to the approval by the Taiwan Financial Supervisory Commission, Executive Yuan, Securities and Futures Bureau.


Frasers Centrepoint, the wholly owned property arm of F&N has acquired a 13.7 ha site in Sydney from the Royal Rehabilitation Centre Sydney for $97.8m. The site is located 12km NW of Sydney CBD and allows for development some 800 homes and requires the building of roads and other infrastructure. F&N is preparing submissions to the NSW Planning Dept for 1st stage of construction. The acquisition will increase its land bank in Australasia from about 8m sf to 9m sf.

The group is currently planning and developing over 5,800 homes in Australia and NZ. The South Pacific region contributes 10% and 8% to F&N’s FY09 revenue and EBIT respectively.

Thursday, June 24, 2010

Venture Corp

Venture Corp breaks out from recent consolidation on healthy volumes as interest returns after several broker upgrades. UBS latest to upgrade rating, to Buy from Neutral with $10.50 target, citing improved valuations, stronger margin growth as contract electronics manufacturer concentrates on higher-margin businesses. Move follows upgrade by CIMB yesterday to Outperform from Neutral with target at $10.54 on similar grounds.

With share price now above tight $8.50-8.71 band in place since beginning June, chances of near-term rebound to at least $9.00 (last breached in mid-May) looking better, especially if volume continues to pick up in coming sessions. Despite current gains, RSI shows stock still far from overbought levels, with ADX showing trend gaining strength.

Sound Global

Sound Global no apparent changes to the listing plan. In fact, the company just announced it would transfer 335m shares (or 23% of enlarged share base) from SG to HK under the proposed Batch Transfer process. Although about 2/3 of the shares to be transferred are owned by the controlling sh/h, this could still suck some liquidity out of the counter temporarily, as the shares would not be tradeable while in transit over the next two to three weeks.

GMG Global

Asian rubber futures are settling higher on tight physical supply due to continuing rains that have slowed tapping of trees in major growing regions in Thailand and Malaysia. Nov rubber futures on the Shanghai Futures Exchange settled 0.1% higher at Rmb21,520/ton or S$4,380/ton. In comparison, GMG Global’s average selling price in 1Q10 was S$3,900/ton. Empirical evidence shows that GMG’s share price is closely correlated to rubber price trends.


Midas near term, could benefit from reduced raw material costs as aluminum prices have been trending lower, on the back of new supply coming on stream this year, potentially resulting in an aluminum surplus this year and next. Aluminum spot prices in China have dropped ~10% over the past 3 mths. Longer term however (~4-5 yrs), aluminum prices are expected trend back up on structural pick-up in demand. OCBC has a Buy call with $1.58 target.


Kingsmen has recently completed 7 pavilions worth $20m at the Shanghai Expo. We note that these are high margin projects, which will be recognised in P&L in 2QFY10. Looking ahead, we believe Kingsmen is well-positioned to win more contracts. The group is in the process of bidding for several new projects including thematic & scenic works around the region. On the interior front, the group faces overwhelming demand to fit out high-end boutiques at the Marina Bay Sands Shoppes®.

In addition, fast expansion plans of its blue chip retail clients will continue to spur Kingsmen’s order book. The group can capitalise on its solid balance sheet strength and net cash of $21.5m to grow. The group is working on a few trade shows, and possibly some mega theme park projects in China. Kim Eng maintains BUY recommendation as the stock also offers an decent dividend yield of 6%. Positive catalysts include mega contract wins in the region.

EMS Energy

EMS Energy has won a US$22.35m engineering, procurement and construction (EPC) contract from a regional shipyard to design and build a ship transfer system. The delivery schedule is expected to be 14 months. The transfer system is part of a shiprepair facility that will ultimately cost US$250m and will be able to handle 160 vessels a year when fully operational. EMS has built up an order book of S$70m and is pursuing opportunities around the region.

Mtgm expects order wins momentum to continue amid stiff global competition. Recall that in Jan, the company won a S$2.5m contract for an offshore pedestal crane in Vietnam and in May, it announced another contract win for a mobile modular walkover unit worth US$17m. Operationally, we expect the Co to show a sharp turnaround in earnings this year after disposing its loss-making water-treatment business.

CapitaCommercial Trust

According to media reports, CCT could be close to selling StarHub Centre. The transaction price is expected to be above its Dec-09 valuation of $268m but this is still 19.5% below the end-08 valuation of $332.8m. For the FY09, StarHub Centre reaped gross rental income of $18.5m and net property income of $15.2m, which contributed 5% of the trust's net property income. We understand that GuocoLand and Fraser Centrepoint have expressed interest for the property.

A sale of StarHub Centre would not be surprising given that CCT has already said it was reviewing plans for the non-Grade A property earlier this year. Notably, it makes sense for CCT to divest the property rather than redevelop it into a mostly residential project itself as that may stoke concerns about the trust losing its focus on commercial property. Following the divestment, CCT may reinvest the proceeds to reduce debt, purchase new office properties. The REIT still offers yield of 6%.

Wednesday, June 23, 2010

23 Jun End Day Summary

The STI went down 1.25 pts to close at 2,871.05.
Volumes were at 1.2 bln at a value of S$1.05 bln. This means on average each share is worth $0.875.
Gainers and losers were even.

Stories of note:
Revives proposed acquisition of HealthTrend, Subtle (S$26 mln RTO)

Registers patent for new product – Super Durable Zipper

Receives US$22.4 mln EPC contract from regional shipyard

Secures 4-year contract in Sri Lanka

Venture Corp

CIMB upgrades Venture to Outperform from Neutral on attractive valuations and keeps $10.54 target price. Expects gradual recovery in earnings and sustainable dividend yields to drive share price higher. Order momentum for its non-HP businesses likely to continue for the rest of 2010 as guidance by most of its major customers has turned more positive. Current profit margins of 6%-8% sustainable as fallout from loss of HP printer business already captured in 1Q10 results.

Asia Travel

Prudential Asset Management has been reducing its stake in Asia Travel from 5.1951 % To 5.1421 %. As of last announcent date at 18 Jun, the fund still owns 12.1m shares.


DBS cuts target to $0.32 from $0.53, following recent announcement that company will dispose its 75% stake in KM-1 project at loss of US$7.4m. Cites loss of major earnings driver, and major reduction in earnings visibility.

GMG Global

Natural rubber prices in India rose to an all-time high as demand for tyres jumped on increasing auto sales in Asia's 3rd market. Prices of the most-traded RSS-4 grade hit a record Rs17,100/100 kg or $5,100/ton. May's NR output in India, the world's 4th largest producer, rose only 2% yoy while consumption rose about 11%. Tyre makers account for more than 60% of the total rubber demand in India where total auto sales jumped 33.5% to 2.7m units in the April-May period.

This spells good news fro GMG Global even though its main market is in China, the world’s biggest auto market. GMG’s stock price is strongly correlated to NR prices.


Since our alert last wk, stock has gained ~25% on strong volume, rising from $0.335 to $0.425 at last close. Volume dropped off sharply yesterday. Since Dec 09, in each of the 4 occasions where a similar pattern took place, Z-Obee subsequently went into consolidation. If things were to be no different this time, we could see prices drift over the near term, with upside capped at $0.46 (50day MA)…

Price action could return however, if mgt provides further updates on the proposed TDR listing. Charts to follow.

China Minzhong

BNP Paribas initiates vegetable company as Buy with $1.50 target price based on 8X FY11 P/E. Highlights its diversified customer base, demand-driven business model allows it to plan production, cultivation based on customer orders, helps it control input costs. Adds, economies-of-scale, long history of operation make it hard for new entrants to replicate. Forecasts gross margin of nearly 70% in FY10, net profit CAGR of 30% over FY10-12.

Expects China to continue the double-digit processed vegetable export growth given its cost advantages and to position itself as another major consolidator given its strong value proposition. Shares closed down 1.7% to $1.13 yesterday after China reports wholesale vege prices fell 5% from week earlier.

Parkway Updates

Business Times reports that a source close to Fortis Healthcare has dismissed earlier reports that Khazanah could resort to unilaterally buying out Parkway’s 40% stake in Pantai should its partial offer for Parkway fail, as there are no provisions in the JV that allow for that Pantai accounts for almost a third of Parkway’s EBITDA, and owns and manages two lucrative Msia govt health concessions due to expire in 2011/12. Speculation was that Khazanah could opt not to renew them if it fails to secure majority control of PWAY. But given Khazanah owns a higher 60% direct stake in Pantai, such a move would affect Khazanah significantly as well. Fortis continues to keep its options open with regard to a counterbid for Parkway.


Oil companies and contractors are likely to wait out restarting drilling operations until there is more clarity after US judge overturned the 6-month ban on deepwater drilling in the US Gulf, which has affected 33 oil wells. The White House said it would immediately appeal against the court ruling. Already, some companies are eyeing moves to Brazil and Africa but Petrobras indicated that it has not seen any increased rig availability just yet and if the US moratorium lasts 6-12 months, the impact may be limited as rigs are normally contracted on a long term basis.

Meantime, Petrobras has obtained board approval for its 2010-14 business plan, which calls for investments of US$224b or 28% more than the 2009-13 budget and higher than previous estimate of US$200-220b. E&P will account for US$119b or 53% of the total investment and the group plans to have a total of 26 deepwater rigs by 2014 and 53 by 2020 and double its support fleet to 504 vessels by 2020. To fund the massive investment, mgmt has projected US$155b in net cash flow based on US$80/bbl oil price with the rest coming from new equity and debt funding. However, it has postponed a proposed share sale from Sep to Jul.

Both KepCorp and SembMarine are currently bidding for contracts in Petrobras' 28 rig tender.

STX Pan Ocean

STX Pan Ocean announced that it has entered into a shipbuilding contract with a Chinese shipyard, in respect of the construction of Kamsarmax Bulkers at a total price of approximately US$138m. We understand the construction of these new bulkers is to strengthen the competitiveness of the Company’s dry bulk fleet and to secure vessels for the long-term contracts of affreightment(COAs).

Based on last closing price of $13.2, the stock trades at 12.3x FY10 and 11.2x FY11 PER. The Co is participating in UBS Korea Conference in 21-22 Jun 2010.

City Developments

City Developments preparing to launch its latest project, The Concorde@ Thomson, possibly around end June. ASP assumption of $1300 psf would give CDL a 32% pre-tax margin over the est breakeven of $876 psf. CDL could also enjoy up to a 15c/sh accretion to its RNAV should an en bloc sale of Tanglin Shopping Centre go through. KE Research maintains Buy, with target of $13.20, pegged at 15% premium to its $11.48RNAV.

CDLH Trust

CDLH Trust proposed a private placement of btwn 85-117m (10-14% dilution) new units priced at btwn $1.71-1.77 (vs last done at $1.89). Mgt hopes to raise gross proceeds of ~$150m with upside option of additional $50m. Intends to use $116m to repay a bridging facility previously used to finance the acq of 5 Australian properties in 1Q10, and the remainder to partially repay a DBS loan facility comprising a term loan and revolving facility.

However mgt reserves the right to use the net proceeds for other purposes. Purpose of placement is to provide CDLH with greater debt headroom, financial capacity and competitive advantage to capitalize on potential growth opportunities, as leverage expected to drop from 30.9% to 22.7%. To give ~4.8c advanced distribution to current unit holders just before issue of new units, to ensure fairness. Closing of Transfer books and Register of unitholders on 30 Jun.

Tuesday, June 22, 2010

Wilmar Int’l

BoA-Merrill downgrades Wilmar to Underperform from Neutral on concerns that stock will continue to face pressure until alleged tax fraud case in Indon is resolved. Cuts target price to $5.40 from $6.70 based on 20% valuation discount. Cautions that while plantation group has rejected fraud claims, potential impact on its Indon operation, which accounts for 25% of group profit, could be significant. Future dealings with authorities might come under greater scrutiny and operations could slow down, especially on new oil palm planting approval. Adds growth of Wilmar's rice, flour operations in China remains lacklustre, with mgmt expecting meaningful contributions only in 2-3 years.


Yanlord Land off 1.6% to $1.84, surrendering part of yesterday's +8.7% gain triggered by hopes that stronger Rmb will spur demand for China assets, including property. Selling not widespread as volume mere fraction of yesterday's 24.3m shares. 20-day MA $1.68 will lend support. DBS Vickers, which has Hold call with $1.71 target does not see any fund flows into China property arising from Rmb policy shift in near term.

The cooling down of the housing sector in tier-1 and key tier-2 cities remains top on the govt's agenda. For week ended 20 Jun, transaction volumes in 35 major Chinese cities declined 27% from a week earlier , some to levels lower than in 2008.

Noble Group

Independent directors of Gloucester Coal (GCL) have recommended that shareholders accept Noble’s cash offer of A$12.60 for remaining GCL shares. However, they are advised to make their decision closer to the end of offer period on 5 Jul, as the 2 parties are negotiating an alternative deal, which will give GCL shareholders the option to stay on as GCL shareholders but with additional Aust coal assets that GCL will acquire from Noble; or sell their shares to Noble.


Kim Eng recently concluded a non-deal roadshow for Goodpack in the USA where its resilient business model and dominant competitive position has been well-received by several fund managers. The key highlights include: 1) Mgmt believes its strong net profit margins of almost 30% will be sustainable due to the high barriers of entry to its IBC business, 2) CIMC owns 3% of Goodpack, has been on an acquisition spree and may possibly take this strategic alliance further.
3) Goodpack has now secured a minor contract with an unnamed client in the auto-sector, whereby they will ship car seats from Malaysia to Vietnam/ Indonesia. With several other trials underway, we believe the Group could make good progress in this exciting sector over the next six mths. Goodpack is on track to make progress into new product verticals such as chemical and auto parts, which will complement the demand recovery and further mkt penetration.We maintain our BUY rating and TP of $2.18.


QD Pacific, subsidiary of the Qatar sovereign wealth fund, will move ahead with the planned subscription of 83.6m new YZJ shares at $1.295/sh, without needing YZJ to complete an earlier purchase agreement related to the PPL acquisition, but provided other conditions are met by 27 Oct 2010. While QD’s 2.2% stake in the enlarged share capital is small, it is still signals a vote of confidence in the China-based shipyard,and allows YZJ to potentially tap into the Qatari Diar’s network and make inroads into the Middle East. Net proceeds earmarked for potential M&A, but could be invested in financial instruments in the meantime. DMG keeps Buy, but trims target from $1.80 to $1.75 to reflect expected stronger CNY vs USD following China’s call for increased flexibility in its currency.


According to Reuters report, Wilmar is interested to invest US$2bn in the planned Merauke food estate in Indonesia's eastern Papua region. Notably, we understand that its Indonesian unit is looking to develop integrated sugar cane plantations, and is confident on realising part of the plan within the next five years.

Previously, Wilmar wanted to expand by investing at least US$1bn in China, Africa and Indonesia, where it had secured land for sugar plantations although this might take some years to start. In the short-term, we believe the RMB appreciation is positive for Wilmar’s consumer product segment. The stock currently trades at about 14.2x FY11 and 12.0x FY12 PER. Our house still has a BUY rating with TP of $7.20.


COMBINE Will is looking to issue 11m new shares at a minimum offer price of $2.30 in conjunction with its proposed dual listing on the Korean Securities Dealers Automated Quotations (Kosdaq) mkt. The Co has also proposed to consolidate every 10 existing shares into one share. After the consolidation exercise, the 11m new shares will represent about 25% of the company's enlarged share capital.

According to mgtm, the rationale for the dual listing is to enhance shareholder value, widen its investor base and raise additional capital for growth. We understand that 33% of the net proceeds of HK$120m will be used as working capital, 29% will go towards facilities to support expansion, 21% to expand sales and marketing and 17% to enhance its R&D. The new offer price represents about 24% premium to its last traded price of $0.185.

Monday, June 21, 2010


DBS Vickers raises Boustead's target price to $1.10 from $1.00, implying 9X FY11 P/E, after increasing FY11 earnings estimate by 19% to assume increased orders. Expects engineering group to secure $400m worth of new orders in FY11 vs previous estimate of $266m, with bulk coming from industrial real estate segment. Notes existing order backlog worth $650m, more than 60% of which is expected to be recognized in FY11.

Sound Global

SEHK has granted in principle approval for the proposed HK listing, which effectively secures the dual listing, subject to certain conditions being met. Maximum offer price to be HK$5.6 (~S$1.00), which could put a cap on near term prices. Final offer price to be confirmed only closer to 28 Jun.


DBS Vickers Hi-P to a Buy, raises target price to $0.72 from $0.49 on more positive 2Q guidance from mgmt. Apple is a customer of Hi-P and sales of iPAD and IPhone 4 has been flying off the shelves

CapitaMalls Asia

OCBC Research starts CMA as Buy with $2.40 target price, pegged at parity to RNAV estimate. Views retail mall owner cum developer as good proxy to Asia's rising consumer spending story. Notes income stream stable, with sponsorship from parent CapitaLand offering opportunities to participate in non-retail properties, such as integrated developments; adds CMA will appeal to investors who are looking for possible capital appreciation.

Recent proposal to list its Malaysian mall on Bursa Malaysia will speed up its expansion as retail mall ownership in Malaysia is highly fragmented giving it the opportunity to acquire retail malls from individual owners and establish itself as a leading player in the retail property segment in M'sia.

Keppel Corp

A "Continuation Wedge (Bullish)" chart pattern formed on Keppel Corp. This signal indicates that the price may rise to the range of 9.60 - 9.80. The pattern formed over 26 days which is roughly the period of time in which the target price range may be achieved.
Current support near 8.63 ; resistance near 8.87.


A "Symmetrical Continuation Triangle (Bullish)" chart pattern formed on OCBC. This bullish signal indicates that the price may rise to the range of 9.20 - 9.40. The pattern formed over 25 days which is roughly the period of time in which the target price range may be achieved. Current Support near 8.28 ; resistance near 8.80.


Mermaid Maritime downgraded to Underperform by Cimb with TP cut to $0.49 from $0.73, based on CY11 PE of 10x. Expect more headwinds especially for the subsea division as well as negative industry impact from the deepwater Horizon oil spill in the Gulf of Mexico. Forecasts are cut by 14-100% for the subsea segment.


Maintain BUY, TP=$0.57 (from $0.4 , pegged at 10xFY11 EPS. KE Research upgrades FY10-11 forecasts by 11-12% on the back of a more optimistic outlook on margins. We recently visited Armstrong’s automotive components factory in Guangdong, which is one of its seven factories in China and will triple the capacity in the next 3 years. Management remains very positive on the China automotive growth story backed by its customers’ investment plans such as Volkswagen and BMW.

Armstrong’s automotive sector contributes +30% of revenue. We see the impact of hiking wages limited for now, but there could be an impact if work stoppages affecting main customers. A potential acquiring offer from a third party is still preliminary and non-binding, but we see Armstrong worth the kind of deal multiples like Unisteel sold to KKR in 2008 with 16.5x PE.


Secured a RMB 59m contract from long time customer, CNR Changchun Railway, to supply aluminum alloy extrusion profiles for 20 train sets (or 160 train cars) for the intercity high-speed train “CRH5 EMU” project in the PRC. Delivery is slated for 2010and likely to have positive impact on FY10 earnings. Midas’ order book now stands at RMB 1.5bn. Trades at 22.2x PE. DMG has BUY call with $1.28 target.


AFP will be quoted ex entitilement to the distribution-in-specie of 1 BCI share for every 2 AFP shares held today. Applying an industry norm of 45% discount to BCI’s NAV of $0.72, the China-based property stock should be worth $0.40 or $0.20 for every AFP share. Hence, we expect a $0.20 downward adjustment to AFP’s share price on an ex basis. BCI is expected to commence trading on SGX on 30 Jun.

SP AusNet

Thinly-traded SP AusNet (51% owned by S’pore Power) is likely to come under pressure as company's power distribution firm SPI Electricity faces class action lawsuit in Australia for alleged breach of safety regulations related to Feb 09 bush fire that razed parts of Victoria and left 119 people dead. SP AusNet is awaiting findings of investigation by a Royal Commission due end-July on claims that one of its power lines sparked the bush fire, which destroyed more than 1,200 homes.

SP AusNet manages electricity transmission, power and gas distribution in Victoria. Lawsuit expected to add to company's woes in Australia, where energy regulator recently rejected its proposal to substantially raise capex, limiting its plans to enlarge distribution network over next 5 years

Friday, June 18, 2010

Keppel Corporation / K-Green Trust

Keppel Corporation will distribute the KGT Units by way of a dividend in specie to Shareholders as on 22 June 2010 at 5.00 pm. Trading of KGT Units will commence on 29 June 2010.

Indofood Agri

Resistance 2: $2.56
Resistance 1: $2.35
Support 1: $2.01
Support 2: $1.88

Prices are testing the 100‐day EMA near $2.17. If this level fails to hold, prices may ease to the $2.01 level. A negative divergence has formed on Stochastic. 14‐day RSI is reading at neutral.


Resistance 2: $3.29
Resistance 1: $3.16
Support 1: $3.02
Support 2: $2.90

SingTel is trading above the 100‐ and 200‐day EMA. Prices are overextended with Stochastic reading at the overbought territory. 14‐day RSI is rising and is above the equilibrium line.

First Ship Lease Trust

First Ship Lease Trust said that it has the secured the release of its vessel, Verona I on 17 June 2010 after a security deposit of US$1.6m was posted with the Japanese Court. The trust will deploy the vessel in the spot market under the commercial management of United Product Tankers, since the vessel has been withdrawn from the lessee, Mesino Shipping Company and consequently will no longer be employed under the Contract of Affreightment between Mesino and OJSC Rosneft Oil Company.

As an estimation of expected spot market earnings, the current one-year time charter rate for product tankers of similar specification as ‘Verona I’ is about US$13,000 per day. FSLTM is of the view that given the market fundamentals, the product tanker market has more upside potential than downside risk.


Armstrong +3.5% to $0.445 in active trade, extending 16.2% gain since beginning of Jun, on ongoing interest in company's growth prospects and takeover potential. The rubber and foam parts maker for electronics, automotive sectors is expected to benefit from China's booming auto market. Interest driven further by recent disclosure that its major shareholder has been approached by 3rd party keen on company. Continue to enjoy positive newsflow from the hard disk-drive and automotive sectors and possible pleasant surprises in dividend payments. CIMB has Outperform call with $0.56 target.


Credit Suisse raises SIA target price to $18.20 from $17.50 after increasing FY11-12 earnings estimates by 3%-4% to reflect higher cargo yields; citing air freight market has been robust and Taiwanese airlines have reported good QoQ yield improvement in 2Q10 and believes SIA should benefit from the same trend. But notes room for yield to moderate if demand from Europe slows. Keeps Outperform call.

Golden Agri

Asia Food & Properties is selling its wholly owned subsidiary Florentina Int’l to Golden Agri for a cash consideration of Rmb976m. Florentina is a China-based manufacturer of snack noodles and ice sticks and has 8 production plants and 29 production lines in 7 Chinese provinces. AFP will reap a $74.8m gain from the proposed divestment and intends to use the net proceeds to increase its land bank, as general working capital and repay its borrowings.

Meantime, AFP has obtained approval for the demerger of its Chinese property business under BCI via distribution-in-specie to shareholders on the basis of 1 BCI share for every 2 AFP shares held. Books closure is on 21 Jun and BCI is expected to commence trading on SGX on 28 Jun.

The sale of its China food business and demerger of its China property business will transform the group into a property play with interests in Indonesia, S’pore and Malysia and selected mixed developments Chengdu, Shenyang and vacnt land in Zhuhai.

Golden Agri proposed US$142.8m purchase of sister company AFP’s China-based noodles prodn business may be positive as it will give the group greater presence in China, where its distribution business is currently confined to Zhejiang and Guangdong provinces. China market contributed US$118m or almost 19%, to its 1Q10 sales. Florentina Int’l has 8 prodn plants in 7 Chinese provinces with its products sold through 26,500 distributors, 4,600 supermarkets and chain stores, 600 hypermarkets.

Stock has moved up 9% past few days and facing some resistance at $0.55 50-day MA.

*United Envirotech*

United Envirotech has successfully secured credit facilities of up to RMB3bn for 3yrs from China Merchants Bank (CMB) to finance its water-related projects. The credit facilities will help it secure more build-operate-transfer (BOT) and transfer-operate-transfer (TOT) projects in China. Currently, it has a portfolio of BOT and TOT projects with a total designed capacity of 665,000 m3/day, of which 305,000 m3/day capacity is up & running and generated an NPAT of S$7m for FY10 (Mar YE).

The stocks now trades at only 6.3x FY11 and 4.6x FY12 PER, a steep discount to Sound Global. United Env has also announced its intention to do a dual-listing in Taiwan. It has appointed Polaris Securities Co. Ltd to provide advice on the TDR issue and act as the lead underwriter. We understand the proposed issue size will constitute approximately 10% of the existing issued share capital.

CapitaMall Trust

Based on the MTI’s Retail Sales Index (excluding motor vehicle sales), retail sales in April 2010 grew by 1.5% MoM and 7.4% YoY. In particular, F&B as well as wearing apparel & footwear led the way in sales growth. Coupled with the Great Singapore Sale in full steam, we believe all these should bode well for CMT’s portfolio of retail malls.

The acquisition of Clarke Quay for $268m is expected to be completed by end June. Clarke Quay has been a major beneficiary of increased tourist arrivals. The URA will soon be launching a hotel site nearby at Clemenceau Ave for tender, which can yield about 195 rooms. We believe that the strong consumption patterns and the recovering tourism figures in Singapore augur well for CMT going forward. KE is maintaining our BUY recommendation with a DDM-derived TP of $2.23.

Thursday, June 17, 2010


Resistance 2: $0.495
Resistance 1: $0.45
Support 1: $0.38
Support 2: $0.31

Sinotel is trading within a descending channel. Price action may turn negative as the 100‐day EMA crosses below the 200‐day EMA. Stochastic is reading at overbought level and the 14‐day RSI is reading near the neutral level.

*Sound Global*

Sound Global dual listing on SEHK, while not yet approved, seems even more certain now that the company has issued a preliminary offering circular and provided clarity on listing details. Sound Global to sell 261m shares (pricing not confirmed yet). Shares expected to start trading in HK on 6 Jul, assuming no hiccups.


Boustead has struck a deal to buy $42.7m worth of 1% 5-year redeemable convertible notes, which can be converted into 854.2m Biotreat shares representing 20.4% stake in the China-based water treatment company. Boustead views the acqn as complementary and synergistic to its water and wastewater business given Biotreat’s extensive portfolio of BOT and TOT wastewater projects in China with a potential treatment capacity of over 1m tpd.

Ho Bee / Yanlord

Ho Bee / Yanlord to jointly acquire a high-end residential site with GFA of 388k sqm in Tangshan Nanhu Eco-City for RMB 505m (or RMB 1302/ sqm). Likely positive over the longer term as this would allow both companies to tap on the rapid development of the Bohai Economic Region, however we caution that recent months have seen policy changes in China aimed at cooling property demand.

Yanlord: Stochastics has been rising rapidly, with the fast stochastic nearing overbought levels. However, RSI still near neutral range. At close of $1.70, stock seems to be teetering on the verge of a breakout from here. Resistance 1 at $1.80, resistance 2 at $2.00, vs support 1 at $1.60, support 2 at $1.50.

Ho Bee: Stochastic and RSI movements similar to Yanlord. Key resistance at $1.60 (200 MA), vs $1.40 support.

Design Studio

Maintain BUY, TP reduced to $0.90. The co is in sweet spot to benefit from the strong supply of private residential units and hotel rooms in Singapore. Positive catalysts will come from strong overseas demand that could be of multiple times that of Singapore..

With a dividend yield in excess of 5%, PER of just 4x and strong balance sheet - net cash of $42m, the stock is an appealing M&A target that offers deep value. We cut our earnings estimates for FY10 and FY11 by 15.6% and 19% respectively, factoring in slower-than-expected revenue recognition. Our target price thus falls to $0.90 pegged at 7.5x FY10 PER.


Fortis is required by the Securities Industry Council to announce by 30 Jul, whether or not it will be making a general offer for Parkway. Deadline seems redundant however. Sh/h have to decide whether or not to accept Khazanah’s partial cash offer by 8 Jul, and remain caught in a Catch 22 situation. If sh/h accept the partial offer before 8 Jul, they risk losing out on a possible higher bid by Fortis.

If too many sh/h do not accept Khazanah’s offer, and the partial offer lapses, they risk Fortis deciding not to counter-offer. Meanwhile, we think most Parkway sh/h are likely to hold out till closer to 8 Jul before committing to a decision, in the hope that Fortis would make an earlier counter-offer, given its recent fund raising activities.

KS Energy

Co has announced that its land rigs have successfully secured new contracts. KS Discoverer 1 has received a 1-yr renewal contract (transferred to Gulf Keystone Petroleum Int'l Ltd, on the same terms that were prev announced). The value of this extension is worth about US$12m. On the other hand, KS Discoverer 4 has been awarded a contract from Storm Energy for a single well drilling programme. We understand the US$3m contract is for a period of approx 3mths.

However, we contend that KS’s 2Q10 results may come in below mkt expectations as a number of its assets are currently in between charters and in advanced negotiation for new charters. Moreover, the group will also recognize the acquisition costs incurred on the consolidation of its Distribution business in 2Q. Based on Bloomberg estimates, the stock now trades at 12.5x FY10 and 9.5x FY11 PER.

Wednesday, June 16, 2010


CapitaLand +1.9% at $3.82 on broad market strength. Interest has increased since CapitaMalls Asia unveiled plans to list its Malaysian malls on Bursa Malaysia. Before that, sentiment cautious in large part due to concerns over group’s China operations in wake of Beijing's measures to rein in home prices. Goldman Sachs, which has Buy call with $4.96 target opines that a fair amount of risk is priced in and current price does not reflect the assets and earnings potential of its residual biz notes operations in China is more than 60% exposed to more resilient retail/commercial segments. Stock testing $3.82 100-day MA resistance with 200-day MA/61.8% fibonnaci retracement at $3.94.

Golden Agri (GGR SP, $0.545)

Key levels
Resistance 2: $0.60
Resistance 1: $0.56
Support 1: $0.51
Support 2: $0.48

Golden Agri is testing its 100‐day EMA at $0.535. If it fails to break above, support level near $0.51 (200‐days EMA) may be tested. On the daily chart, Stochastic is at overbought level and 14‐day RSI is reading above the neutral level.


Yongnam announced that it has secured its sixth contract valued at S$35.9m for the Marina Coastal Expressway (MCE), bringing total order wins for the MCE to S$363m. According to mgtm, the Contract is expected to complete in May 2012. With this latest contract, we estimates Yongnam's order book stands at about S$524m, with various projects expected to complete till 2012. The stock currently trades at an undemanding valuation of 6.1x FY10 and 5.4x FY11 PER, based on Bloomberg estimates.

*Ascott REIT*

Maintain BUY. Grand opening of MBS on 23 June and the upcoming release of May visitor arrival numbers are potential catalysts for hospitality plays, in our view. Ascott Residence Trust (ART) should benefit from the increase in global travel and strong visitor arrivals in Singapore.

Separately, acquisitions in Vietnam are on the cards. The 206-unit Somerset Hoa Binh in Hanoi could be injected into ART in the next 12 months. Ascott also plans to double its serviced residence units in Vietnam to 1,800 in the next three years. Estimated to cost $142m, these would provide ART a good acquisition pipeline. With gearing at 42.1%, ART has debt headroom of about $250m for acquisitions before hitting its maximum target of 50%. ART has yield of 7% and total return of 28%.


SIA posted another strong set of load factors for the month of May 2010. Load factors for passengers was up 7.9 points to 74.8, while cargo was up 5.4 pts to 66.6. On a MoM basis, the growth was even more significant. Passenger traffic grew by a very encouraging 12.3% YoY, while cargo traffic posted stellar growth of 16.4%. Further, this is the first time that SIA managed to grow its capacity on a YoY basis in 17 months, Passenger capacity was up by 0.5%, while cargo capacity was up 7%.

Looking ahead, our primary concern is that SIA's capacity expansion will not be able to match demand. Given the improved business conditions and higher tourism numbers, this may gives SIA some leeway to raise prices and to generate higher load factors, thereby boosting yields and profitability. Maintaining Buy recommendation with TP of $18.90, based on 1.7x P/BV.


According to Llyod’s, YZJ has recently bagged a US$100m contract to build 4 34k dwt bulk carriers for a Greek owner. If confirmed, this unannounced contract will raise total new orders secured this year to US$296m. Most of the new orders have been won by the larger yards with the financial clout to secure financing and the execution ability to deliver on time. YZJ has been drawing some interest of late and remains one of the cheapest shipbuilding stocks in China.

DB has a price target of $1.75 with forward P/Es of 9.2x and 8.8x for FY10 and FY11 respectively.

Chip Eng Seng

Chip Eng Seng together with NTUC Choice Homes (40/60 JV), emerged the highest bidder for the Executive Condo (EC) site in Punggol, at $224m or $308 psf GFA. Next highest bid was just 4% away, but pricing still seems relatively aggressive. We est breakeven cost to be between $550-600, assuming development cost of $250-300 psf. While est ASP could be $640-690 psf, assuming 15% developer margins. This compares with ECs in nearby Sengkang transacting at $570-640 psf.

Stock trades at 2.5x PE, 0.8x PB. Westcomb has a target of $0.53 vs last close at $0.335.

Keppel Land and CapitaLand

SG Property: May new home sales fell 51% MoM to 1078 units, but were within expectations given the drop in new launches, rapid rise in prices and erosion in sentiment from ongoing macro uncertainty. Mid-segment projects continued to do well, supported by sales from the Minton (204 units at $849 psf), Casa Aerata (all 78 units at $1259 psf) and Cascadia (72 units at $1464 psf). Sales in the high-end segment slowed down somewhat, although prices remained firm.

SG Property: While risk of further govt tightening has eased near term, record incoming supply could cap residential prices. Deutsche sees better prospects in offices with prices and rents still 45% and 57% below peak levels. Top picks Keppel Land and CapitaLand.


Cosco announced that it has signed 11 contracts and 4 letters of intent worth about US$440m with 4 European shipowners to build 11 units of 57,000 dwt bulk carriers and 4 units of 82,000 dwt bulk carriers. Deliveries of the vessels are expected to take place from end-2011 to mid-2013. Together with the US$78m order wins in Apr for two 57,000dwt vessels, YTD total wins amount to US$518m.

Note that these contracts will take time before they become effective, and is dependent primarily on receiving initial deposits from the customers. So far, we understand Cosco has only received deposits for two of the vessels. Moreover, the latest contract value also indicates much lower pricing (and margin) compared to its previous order wins. HOLD rating with TP of $1.44.

Tuesday, June 15, 2010


DBS Vickers upgrades Ezra to Buy from Hold on attractive valuations noting supplier of offshore & marine vessels building up warchest to over US$300m in preparation for possible acquisitions. This could be a positive share price catalyst should any acqn be earnings accretive or enhance the group's capabilities. But trims target price to $2.50 after reducing FY10-11 recurring earnings forecasts by 5% to account for associate EOC's potentially weak 3Q10 performance due to maintenance downtime on 1 of its vessels as well as under-utilization of its barge. Shares trending up at $1.88.

Parkway Life REIT

UBS raises PLife target to $1.56 from $1.46 after increasing FY10-12 EPS estimates to factor in contributions from recent $60.5m purchase of 6 nursing homes in Japan. Tips 5% earnings accretion yearly. Expects PLife to seek another round of acquisition in Japan before focusing on other markets. PLife has about $175m of debt headroom before gearing hits 40% target; gearing will rise to 32.2% from 28.5% after latest Japan acquisition. Keeps Buy call.


Nomura upgrades SIA to Buy from Neutral and ups target price to $16.85 from $13.27, citing current valuation attractive at 1.1X FY12 P/B vs average of 1.5X for peers. Lifts FY11-12 earnings estimates by 30-36% to factor in stronger-than-expected yield recovery. Although SIA is highly geared to the premium traffic, it is more resilient than most regional airlines to any downturn given its flexible staff cost structure, minimal oil hedging and net cash position.

Celestial Nutrifoods

Celestial Nutrifoods has been granted an extension to 15 Sep by SGX to submit a trading resumption proposal. The company had applied on 17 May for a 3-month extension from the earlier deadline of 12 Jun. This will give the company more time to deal with its bondholders on the redemption of its CBs.

RH Petrogas

RH Petrogas announced that it has completed the acquisition of Orchard Energy's sole oilfield concession in South Sumatra from Temasek Hldgs. Under the terms of a 30-year prodn sharing contract, RHP will assume Orchard Energy's balance commitment of US$5.66m to carry out exploration works on 1,402 sq km concession block over 3 years.

The maximum period for exploration and evaluation of the contract area is 6 years with an option to extend a further 4 years provided more funds are committed, after which the PSC shall automatically terminate if no oil is found.

While this acqn may raise RHP’s profile as a regional O&G player, investors need to be reminded that the gestation period of such projects are quite long as the 1st exploration oil well is expected to be spud only in the 3rd year of its work program and prospects of hitting a commercial oil discovery are relatively low.


MCL recently launched its freehold D’Mira on Boon Teck Road in Central Singapore and we understand that about 30% of the 65 units have been sold at about $1,000 psf as we expected. Via the GLS Programme, MCL acquired a 3ha site at Hougang Ave 2 for $456 psf ppr. The site has a GFA of 455,037 sq ft, and assuming a $280 psf cost of construction, breakeven is around $780 psf. MCL intends to build a 450-500 unit condominium on the site.

Based on our assumed ASP of $900 psf, we expect a 10 cent/share accretion to the RNAV. After its latest acquisition, MCL’s landbank now stands at about 1m sq ft in GFA, comprising five unlaunched sites. With attractive en-bloc acquisitions hard to come by these days, MCL has put its cash to work with its latest acquisition, while at the same time, replenishing its depleting landbank. The stock is trading at an attractive 0.8x P/B and an FY10F dividend yield of 7%.


Acquired 51% stake in PT Henrison, which intends to dev ~32.5k ha of land for palm oil pdtn in West Papua Province, Indonesia. Project is Noble’s first in the oil palm sector, and closely follows its recent foray into nuclear refinement via its 5% stake in USEC, bolstering Noble’s position across the energy supply chain. PT Henrison to register as a member of RSPO, which advocates environmentally sustainable pdtn practices.

This could in future allow PT Henrison to export its pdts to the EU, where margins are possibly higher. Transaction not material, but could spur trading interest as mgt could “expand and increase its invmts in this area in the future”. Noble trades at 11.8x PE, vs 15.2x consensus.


Proposed to list Taiwan Depository Receipts, to “further increase liquidity, diversify sh/h base and promote the corporate image in Taiwan”. We find this slightly odd, given that Z-Obee does not currently have any business dealings in Taiwan, and has only just completed its dual listing in HK. Nevertheless, the corporate action could spur short term trading action, and provide a brief respite for the share price, which has fallen ~45% since peaking in late April.

Stock appears to be building a base near last close of $0.335. RSI and stochastics currently in oversold territory, and showing signs off ticking back up. Key support at $0.30, vs resistance of $0.40.

Monday, June 14, 2010

HL Asia

China's Ministry of Commerce will be extending its vehicle replacement subsidy for the trade-in of old, less fuel efficient vehicles for newer more environmentally friendly vehicles from May 31 to end of 2010. This follows the unveiling of new incentives for purchases of fuel-efficient and electric battery cars earlier this month. Most of the vehicles that fall under this replacement scheme are light trucks and utility vehicles.

As a manufacturer of diesel engines, China Yuchai, which is 27.5% owned by HL Asia, will a beneficiary of the subsidy extension.


Citigroup raises M1 target price to $2.50 from $1.65 after changing valuation methodology to discounted cashflow basis from P/E approach to reflect company's free cashflow profile. Cites opportunities to offer bundled services (beyond mobile telephony) arising from S’pore's high-speed national broadband network as potential catalyst for share price. Recent government ruling requiring cable-TV operators to share exclusive content also favorable for M1, which has yet to enter pay-TV market

Eastern Holdings

Eastern Holdings +23% to 6-session high of $0.19 on higher average traded volume as interest in this thinly traded stock driven by proposed $43.5m sale of its exhibition business to SPH. Sale would EPS would boost EPS to 8.86¢ from 1.95¢ and NTA to 23.61¢ from 15.8¢ on pro forma basis. However, prospect of special payout to shareholders dim given weak FY10 earnings (-64.4%) from property business and net gearing of 0.41x.

Allgreen/ Wing Tai

Cimb downgrades Allgreen to Neutral from Outperform, slashed target price from $1.67 to $1.16; raised Wing Tai to Outerform from Neutral but cut target price to $1.92 from $2.01


Today, we are highlighting OKP in our "Hot Stock" column under Sunny Side Up. YTD, OKP has secured three public sector projects totalling about $39.5m. Total orderbook stands at $306.1m as of May 2010. We like OKP for its strong balance sheet given its net cash position of $83.1m, implying about 31.4 cts/share (or 71% of its market cap). The stock currently trades at an undemanding valuation of 7.2x FY10 and 5.9x FY11 PER.

Swiber / Enzer

Swiber proposed to inject one of its subsidiaries, Samson into Enzer in exchange for 176m new Enzer shares at issue price of $0.0375/sh. Deal to be valued at not more than S$6.6m, and will allow Swiber to hold up to 29.4% of Enzer’s enlarged share base. Samson’s only asset is a vessel, to be leased to another Swiber subsidiary for a period of 10yrs. Deal not expected to result in significant financial impact to the group. DMG initiated Swiber with a $1.35 target last Friday.

WBL / Advanced Hldgs

Advanced to buy over WBL’s entire stake in Applied Engg Pte Ltd for $18m, on top of a $3m Applied dividend payable to WBL. This values Applied at ~2.5x P/NTA, and ~4.4x PE vs Advanced which trades at 9.5x PE. Based on FY09 figures, Advanced’s EPS could potentially rise by 50% once Applied is fully consolidated. Advanced to lift trading halt at 9am this morning.

Applied Engg is an engineering and fabrication company specializing in process eqpt such as reactor towers, columns, process units, pressure vessels, and heat exchangers for the chemical, petrochemical and petroleum related industries.

ST Eng

consortium between ST Eng unit, ST Marine & QAF has secured a $66.5m contract to design & construct a waste mgmt facility in Brunei, which will comprise an engineered landfill, a transfer station plus 3 years of operations & maintenance of the facility. The project is expected to commence in late 2010 and completed in 18 months. The group has undertaken waste management projects in S'pore, Wuhan and Dubai previously but this is the largest contract clinched by its environmental arm and could signify renewed efforts to grow this new area of business. The stock currently trades at FY10 P/E of 19x and offer decent dividend yield of 4.7%. Support sits at around $3.08.

Friday, June 11, 2010


CIMB upgrades CWT to Outperform & keeps target price at $1.03. While slower global economic recovery may dull earnings prospects of its freight forwarding business, growth in warehousing operations may mitigate impact as the latter is typically stable through downturns. With warehousing capacity expansion on track, contract logistics will continue to provide a safety net to earnings. Acquisitions of logistics companies dealing in soft commodities are potential share price catalysts.

CapitaMalls Asia

CMA announced that it has received approval from the Securities Commission of Malaysia to list CapitaMalls Malaysia Trust (“CMMT”), which will hold CapitaMalls Asia’s Malaysia shopping malls, on the Bursa Malaysia Securities. We understand that CMA will retain between 33.00% and 41.74% stake in CMMT post listing. Note that CMMT units will NOT be available to retail investors in Singapore.

Assuming listing price of RM1.10, the estimated distribution yields for the FY2010 and FY11 are 6.5% and 6.8%, respectively. For investors of CMA, we believe that mgtm may consider paying out a special dividend payout upon the successful listing of CMMT

HL Asia

Appears to have good upside potential over the near term. Share price has corrected by ~45% since peaking in mid-April, but appears to be building a strong base near the 200MA. RSI and stochastics are coming nicely out of oversold levels, while OBV (an indicator of accumulation) has been rising steadily since bottoming out in late May. Support at $3.00 vs next major resistance at $4.00. This compares with targets by 4 other brokers, at between $4.54 to $5.48.

HL Asia, Concerns due to accounting irregularities at its US-listed subsidiary, China Yuchai should be dispelled now that the company has been effectively let off by the SEC. Bill Singer, a well-known advocate for regulatory reform, notes that Yuchai has since learnt from its mistakes and seems to have moved on.

HL Asia, Fundamentally, there seems a lot going for this stock. 1Q10 saw NPAT to shareholders rise by 54% yoy, driven by growth at its China businesses. This looks set to continue, as the PRC govt extends stimulus programs for purchases of electric appliances and trucks, ultimately benefiting subsidiaries like Xinfei (third largest maker of fridges and freezers) and Yuchai (leading manufacturer of diesel engines.

HL Asia, Stock now trading at undemanding 8.8x PE, with possible rerating if Merrill Lynch’s strategic review of Xinfei results in the company being able to unlock value in this investment.


Recently, a group of analysts went to visit CapLand’s projects in Vietnam, both in Hanoi and Ho Chi Minh City (HCMC) which coincide with the group’s topping out ceremony for its first residential development, The Vista in HCMC, on 8 June. To-date, about 629 of the 850 units have already been sold at US$1,200 - $1,600 psm. In view of its gd location, the mgmt said that it is in no hurry to release the remaining units, which could fetch about US$2,000 psm.

Looking ahead, Group CEO Liew Mun Leong sees more opportunities in Vietnam, such as providing more affordable housing to the masses, as well as retail mall development under CMA. All these will be in-line with the Group’s intentions to increase its asset allocation into Vietnam from the current 1% to 10% over the next 3-5 years. Maintaining our BUY rating with a TP of $5.15, pegged to a 15% premium to RNAV

Thursday, June 10, 2010


Wilmar Int'l: Indon unit of Wilmar, PT Wilmar Nabati disclosed that the country's tax office has started a probe into 12 subsidiaries on its 2007-2008 tax report. The investigation started about 3 weeks ago. According to the tax office, Wilmar managed to get 2007 and 2008 tax refunds worth about Rp2.6tr ($397m). Wilmar has strenuously denied the tax allegations but if the charges were substantiated, the penalty would have a material impact on Wilmar's earnings.

Under Indonesian tax law, the Tax Directorate can impose a penalty of up to 4x times the outstanding amount. Immediate resistance at 20-day MA at $5.80.


Yanlord Land's 75/25 JV with GIC to develop high-end housing in Chengdu may revive interest in the stock, which have been consolidating after sharp pullback in April. The JV will in turn set up a 40/60 subsidiary with Yanlord to undertake the prime residential site with GFA of almost 400k sqm, located along the 2nd ring road, near Chengdu’s CBD district city.

The project is expect to build on Yanlord’s earlier success in Chengdu with several residential, commercial developments including the latest integrated commercial development Yanlord Landmark. Stock is trading at 43% discount to RNAV, a victim of China’s property cooling measures. Support is at 52-week low of $1.52.

Parkway Life REIT

Parkway Life REIT announced the acquisition of 6 new nursing home and care facility properties in Japan for 3.9b yen (S$60.5m) from Kabushiki Kaisha Sawayaka Club and Kabushiki Kaisha Bonheure. According to mgtm, this acquisition is yield-accretive with an 8.08% net property yield vs the current property yield of 6.97% of PREIT's existing Japan portfolio. Each of these properties will have a fresh 20-year master lease/operating lease agreement with Sawayaka.

Parkway Life REIT may gain on acquisition of 6 nursing homes & elderly care facilities in Japan for 3.9bn yen ($60.5m). Assets offer 8.08% net property yield vs current 6.97% yield for PLife’s existing Japan portfolio. On pro forma basis, deal would boost DPU to 8.06¢ from 7.74¢. Purchase cost is below the combined market valuation of 4.04bn yen with PLife funding purchase via 5-year 4.2bn yen term loan at cheap 2.0% interest.

All 6 properties come with average occupancy of 93.9% and rental guarantees on 20-year master lease agreement with existing owner Sawayaka, largest private nursing home operator in Kyushu Island, ensuring long-term income stability. DPU yield expected to rise to 6.3% and gearing to 32.2% vs 28.5% as at Mar 09, giving room for further acquisitions. Stock sitting at $1.33 support with resistance at $1.40 52-week high.

Parkway (Updates)

Fortis Healthcare is planning to raise 27.5bn rupees or S$830m by issuing securities. At an EGM held yesterday, Fortis shareholders approved an earlier plan to issue up to 22.35m shares on a preferential basis to a unit of the GIC, Lathe Investment, to raise 3.8bn rupees. Note that GIC currently has a 6.58% interest in Fortis. Meanwhile, its board has also approved a proposal to raise borrowing limit to 60bn rupees (or S$1.8bn).

The latest move has fuelled speculation that Fortis is gearing up for a takeover battle as the fund raising comes soon after Khazanah made a surprise S$1.18bn partial offer to acquire 313m shares in Parkway at S$3.78 which would then raise its stake from 23.8% to 51.5%. Fundamentally, fair value for Parkway remains at $4.03, based on SOTP valuation.

Wednesday, June 9, 2010


Fortis Healthcare is raising a total of Rs31.3bn or $941m via a Rs27.5bn issue of new shares and a Rs3.8bn share placement of 22.35m shares at Rs170 apiece to GIC. The proceeds will help bolster its warchest should the healthcare group decide to counter-bid for Parkway Holdings, which is currently the subject of a $3.78 a share partial takeover by M’sian sovereign wealth fund Khazanah, which will take its stake uo to 51.4% from 24.1%. Fortis currently holds a 23.9% stake in Parkway.


Key levels
Resistance 2: $20.05
Resistance 1: $19.28
Support 1: $18.05
Support 2: $16.15

Short‐term indicators remain neutral for UOB with the 14‐day RSI and Stochastic reading near their equilibrium lines. While recent price action has turned up, it is still trading within a descending channel.


Key levels
Resistance 2: $9.05
Resistance 1: $8.65
Support 1: $8.05
Support 2: $7.50

OCBC has broken below the 100‐day EMA and 200‐day EMA may be tested. Prices are trading within a descending channel, suggesting price pressure is still to the downside. Stochastic is pointing towards the oversold level and RSI is reading near the neutral level.


Key levels
Resistance 2: $14.50
Resistance 1: $13.90
Support 1: $12.90
Support 2: $12.00

DBS staged a breakdown below the 200‐day EMA last week. Key support levels may be tested in the near term as the 50‐day EMA has crossed below the 100‐day EMA. RSI is reading below neutral level.

Cache Logistics Trust

DBS Vickers initiates a Buy with $1.05 target price as it offers investors highest yield protection among S-REITs, backed by defensive rental income stream derived from master lease agreement on portfolio of modern, high-quality logistics assets with in-built annual rental escalation of 1.5%. Notes weighted average lease expiry of 6.4 years longer than 5 years for industrial peers.

Opportunities for acquisition growth plentiful as CLT has right of first refusal to assets owned by sponsor CWT, which has pool of 11 properties that can be injected into CLT.

Raffles Education

Raffles Education sinks 6.8% to new low of $0.275 since Mar 09 on strong volume of 47m shares, extending yesterday's 3.3% fall, as sale by substantial shareholder prompts other investors to dump shares. Sentiment already edgy following decision by HK-based private equity group AIF Capital not to take 10% stake in the company's Oriental University City. Latest disclosure of Janus Capital Mgm cutting its stake in REC to 5.95% from 6.01% fuelled selling pressure.


Starhub +1.4% at $2.20 is best performer among S’pore telcos. DB, which has Buy rating with $2.62 target backed by 9% dividend yield. Adds 20¢ divd payout sustainable in long term as margins recover on higher mobile revenue, expect decline in costs of acquiring mobile customers. UOBKH, which has Buy call with $2.56 target, also bullish on its corporate data services, citing its 10-year track record in this segment.

StarHub will extend its reach to corporate and SME customers from 800 to 24,000 commercial buildings riding on the next-gen nationwide broadband network. Immediate resistance at $2.28.

First Ship Lease Trust (KEEP OUT)

Just days after its vessel “Verona I” was arrested at a Japanese port, another vessel “Nika I” was arrested yesterday in the PRC, due to non-payment of bunkers supplied. Both vessels, the largest of FSL’s product tanker fleet, are leased to affiliates of Groda Shipping and contribute ~15% of revenue. While FSL has no further exposure to Groda Shipping, stock price likely to remain under pressure, as falling utilization and contract rates expected to drive DPU lower.


According to Global Water Intelligence, Singapore Public Utilities Board has already appointed Black and Veatch as consultant in preparation for the award of a new 320,000m3/day seawater desalination plant. The timing of this award is expected ahead of the 1961 water agreement with Malaysia which expires next year.

Tuesday, June 8, 2010

Otto Marine

Key levels
Resistance 2: $0.44
Resistance 1: $0.425
Support 1: $0.365
Support 2: $0.35

On the daily chart, near‐term support may have been established at $0.365


Key levels
Resistance 2: $3.82
Resistance 1: $3.72
Support 1: $3.30
Support 2: $3.00

A head‐and‐shoulder chart pattern has been validated on Capitaland when the price broke below the neckline at $3.70 last month. The 100‐and 200‐day EMA are poised for a crossover,suggesting more tests of support levels ahead.


Key levels
Resistance 2: $2.80
Resistance 1: $2.65
Support 1: $2.50
Support 2: $2.35

SATS is trading between the 100‐ and 200‐day EMA. Momentum may be weak in the near term with 14‐day RSI reading below the neutral level. Short term trend remains down and previous support near $2.50 may be tested.


Cimb downgrades IndoAgri to Underperform from Trading Buy on concerns European debt crisis may take toll on CPO prices as the potential contagion could lead to slower growth in the European economies and hamper the governments' push to meet the EU’s biodiesel mandate. This would be a big blow to biodiesel demand as the EU is the largest supporter of biodiesel, consuming 50% of global biodiesel production.

Cuts target price to $2.25 from $2.86 after lowering FY10-12 earnings estimates to assume lower CPO selling prices in Indonesia and reduced earnings contributions from London Sumatra. Shares holding up at $2.13 but face resistance at $2.18 with stochastics entering overbought territory.

Sembcorp Marine

MUMBAI (Dow Jones) -India''s Pipavav Shipyard is in talks for a JV with Sembcorp Marine that could aid the Indian company get overseas orders, the Mint newspaper reported Tuesday. The 2 companies are likely to set up a SPV, in which they will hold equal stake, and the SPV will focus on global markets. The report did not give further details as the talks were at an early stage.


Healthway making new month highs on strong volume, despite recent market weakness. We note that Lim Eng Hock (aka Peter Lim) has become a significant shareholder via Kestral Capital, after buying ~20m shares in the open market last week. His stake now stands at 6% from just under 5% previously.

SIA Engineering

Changi Airport was reported to be putting out the third ground handling licence tender in the next few months. It was also reported that SIE is interested in bidding for the licence and has engaged in talks with Changi Airport Group over the new licence. We assume SIE will not offer inflight meals catering as suitable space within the airport grounds to locate an additional inflight catering center will be hard to come by.

Therefore even if SIE clinches the license, the impact on both itself and SATS will be minimal as it will take time for customer contracts to unwind and without inflight catering, the cornerstone of SATS’ ground handling services, only its marginal customers may hop over. We maintain our BUY recommendation and target price for SIA Engineering.

Raffles Education

Raffles Education: AIF Capital, one of the largest Asian-based private equity funds, has abandoned the proposed RMB 350m acquisition of 10% of Raffles’ subsidiary, Oriental University City (OUC). Despite trading at a 52-wk low of $0.305, upside could be limited, in view of the lost opportunity to monetize its assets, and inability to gain the support of a potentially strong institutional investor/ partner.


Olam to acquire the dehydrated and vegetable products business of Gilroy Foods & Flavors from ConAgra Foods for US$250m. Gilroy is one of the largest processors of onion, garlic, capsicum and other specialty vegetable products in the US. We view this investment positively, as it is in line with mgt’s strategy to expand the Spices & Dehydrates portfolio, and is expected to be earnings accretive from the first year of consolidation.

Olam’s combined US dehydrated veg operations is expected to generate US$300-350m revenue annually, on EBITDA margin of 14-15%. OCBC has a Buy call with a $3.61 target.

Otto Marine

Otto Marine announced that its 81.6%-owned Reflect Geophysical (note that the shareholding stake was recently raised from 74.2% for a consideration of S$1.5m) has been awarded a contract worth a minimum of US$8.0m to perform a 3D Seismic Data Acquisition in Block D4 Offshore Gabon (Gulf of New Guinea). Under the agreement, Geokinetics Inc (GOK UA) will engage Reflect to carry out shallow water streamer acquisition survey for the block operator, ENI Oil Holdings BV.

Noble Group

Noble Group took a 5.13% stake in USEC, a US-listed uranium enrichment company for US$30.2m. USEC has the only uranium enrichment facility in the US and is a leading supplier of low-enriched uranium fuel for nuclear power plants with over 50% of US market and more than 28% of the global enrichment market. The enrichment industry accounts for 31% or US$7.8bn of the US$25bn worldwide nuclear fuel business.

Globally, there are currently 438 nuclear reactors in operation with 56 under construction and another 490 planned or proposed. While there may be minimal earnings impact from this investment (+1-2% to Noble’s FY11/12 earnings), Noble’s product range across the energy segment will now span beyond coal, oil and gas to include nuclear footprint and prospects for growth are good with IAEA is projecting a 27% rise in nuclear capacity by 2030. We like the stock for its pro-active mgmt and undemanding valuation of 11.8x FY10 P/E. TP pegged at $2.38.


YJZ share price has corrected by 17% since its peak of $1.50 in April. Stock has been trading in a tight sideways range of $1.20 to $1.28 past two weeks, closing at $1.24 yesterday. In summary, investors had penalized YJZ for its exposure to Europe, which generates 78% of orderbook sales.

What is less known among retail investors is that YZJ’s European orderbook exposure is mitigated by the fact that 43% of total orderbook actually goes to German shipowners - an economy with strong fundamentals unlike Greece, Hungary, Portugal and Spain. Unlike Cosco Singapore, YJZ’s shipyards have not announced any vessel cancellations owing to its disciplined receivables management policy.

20% of cash deposits are required at point of newbuild order placement and an additional 20% banker’s guarantee must be also placed. YZJ also allows its customers some flexibility of swapping orders between bulk carriers and container vessels in case market conditions change. YZJ also hedges its revenue receipts in Euro so the extent of fallout in the cross rates is less than feared. Watch this stock. A move towards $1.28 could signal an impending breakout.

Monday, June 7, 2010

Sembcorp Marine

Resistance 2: $4.50
Resistance 1: $3.93
Support 1: $3.52
Support 2: $3.30
Sembcorp Marine is trading just above its 200‐day EMA of $3.65. A break below this key support level will indicate a continuation of the medium‐term downtrend within the descending channel.

Keppel Corp

Resistance 2: $9.10
Resistance 1: $8.80
Support 1: $8.08
Support 2: $7.74
A base formation may be developing at price levels near $8.45. While near‐term price action may be showing a downward trend, 14‐day RSI is hovering near oversold and downside should be limited.


HPL has a portfolio of international hotel assets which stands to benefit from the recovery in global tourism and the opening of 2 IRs in S'pore. HPL’s Hilton Hotel, Four Seasons Hotel, Forum the Shopping Mall & HPL House form a sizeable enclave along the prime Orchard R. Land for development along this belt is scarce and HPL’s properties together occupy a sprawling 220,000 sq ft of land. Its 3 hotels in S'pore (totalling 1,083 rooms) a/c for about 40% of its FY09 EBIT from hotel operations.

HPL also has investments in three residential projects, enabling it to ride Singapore’s robust property market. With an attributable GFA of 1.2m sq ft and a GDV of about $2b or $3.95/share, our property analyst expect these projects will give a huge fillip to earnings from FY11 to FY14 when fully launched. If its prime properties along Orchard Road are redeveloped, we believe its RNAV could surge to $5.34/share, more than 2x its current share price. TP of $3.33.


OUE is proposing to raise up to $200m via a convertible bond issue and concurrently, its controlling shareholder Golden Concord Asia intends to place out 52m shares representing about 26.5% of the company at indicative price range of $11.50-$14.00. The proceeds of the convertible notes will be used to acquire development sites. Books will close Jun 14 with trading commencing Jun 15.


CIMB raisestarget price to $0.555 from $0.48 pegged at 9x FY11 P/E to account for higher sales. Maker of precision components for automotive, electronic sectors started 2010 on firm footing with all business segments reporting rebound in 1Q10; recent discussions with mgmt suggest that the positive momentum will continue on the back of healthy order indications from major customers as well as the rollout of new projects.

Sound Global *HOT*

Sound Global posted the web proof information pack (WPIP), which is essentially a draft prospectus for the HK dual listing on the SEHK website. This brings soundGlobal one step closer to completing the issue, even though it is not confirmed if SEHK will approve the listing.

We note however that Z-Obee, a recent successful dual listing candidate, received the SEHK approval and launched its prospectus within a week of the WPIP being posted.

Trading halt to be lifted at 10am.

Starhill Global REIT

Recently, an EGM was successfully held to pass the resolution for the acquisition of Starhill Gallery and Lot 10 in Kuala Lumpur for S$441m, which will be DPU accretive from 3Q10. This acquisition came right on the heels of the David Jones in Perth acquired in January for S$146m. Starhill Global currently has a portfolio of 11 prime retail and office properties in S'pore, China, Japan & Australia. Main revenue contributors are Ngee Ann City and Wisma Atria in S'pore.

With a new CEO at the helm, Mr Ho Sing has a clear vision to grow Starhill by at least $3b in assets over the next five years, more than doubling its current size. Starhill’s balance sheet strength and strong sponsor (Malaysian blue chip YTL) will pave the way for acquisition growth. Given the current volatile mkt conditions, Starhill Global may be worth taking a look in view of its enticing yield of more than 7%.


Despite staging an impressive turnaround, the container shipping industry still faces a disconnect between valuations and the underlying demand/supply dynamics. Current sector valuation above 1x P/BV is not justified by the daunting 20% capacity oversupply by the end of 2010.

A combination of peak season demand, transpacific volume recovery and near term container box shortage has fuelled a freight rate increases and a sharp rebound in shipping stock prices, which might lead to continued outperformance in the 3Q. But supply discipline may break down as profits emerge and cap returns. Amongst the shipping stock, OOIL has the most attractive valuationat 0.8x P/BV while NOL appears stretched at 1.2x P/BV.

First Ship Lease Trust

vessel “Verona I” has been arrested at a Japanese port, because of its lessee’s failure to make payment for bunker supplies.
This follows an earlier announcement in May, regarding requests by FSL’s lessees, which are affiliates of Groda Shipping, to terminate their bareboat charter agreements for “Verona I” and “Nika I”, as rates have since dropped from ~ US$20k/day at the time of contract, to ~US$7k/day in May.

Mgt’s DPU guidance under review, given the two vessels are the largest in FSL’s product tanker fleet and contribute ~15% to revenue. Long interest likely to be lackluster, unless FSL can renegotiate new charter contracts.