Beneficiaries/Losers on Jap’s earthquake

Beneficiaries/Losers on Jap’s earthquake: UOB Kay Hian looks at sectors which could benefit from rebuilding Japan. We have also tried to identify SGX related counters within that Sphere.

1) Cement: Rebuilding process will drive strong demand for cement in Jap, however note of high transportation costs. Nonetheless, expect sentiment towards regional cement stocks to be positive in near term.
2) Timber: Japanese use much wood to build houses. According to media reports, many wooden houses in the north-eastern coast of Japan have been destroyed. As such, rebuilding Japan will need a lot of timber and therefore will drive timber prices in the region higher. (Guangzhao Forestry)
3) Steel and non-ferrous metals -Will be heavily used in rebuilding houses, roads, bridges, power cables, and railroads. Japan is likely to increase imports of steel and non-ferrous metal from other Asian countries, particularly China. (XinRen Aluminium)
4) Coal - Rebuilding Japan will drive demand for steel and therefore coking coal. Coking coal prices are likely to move higher in the near term. (Straits Asia Resources)
5) Telecom equipment - The earthquake has caused significant damage to the telecommunications networks. China-based telecom equipment makers, such as ZTE and Comba, may be able to sell more products to Japan, although they currently do not export much to Japan.
6) Insurance - Insurance and Reinsurance Companies will be adversely affected.
7) Auto makers - Auto makers could be adversely affected because the supply of components from Japan may be temporarily affected. Mainland-based auto markers with JVs with Japanese auto makers are more likely to be affected.

Yangzijiang

Yangzijiang: CIMB has Technical Sell Call. Grp fell below its uptrend channel recently, suggesting that the rally from the Feb10 low is at its tail end. If prices fail to swing back above the 50-day SMA soon, expect another round of selling pressure to set in. Deteriorating technical landscape suggests that bears have the upper hands. If 200-day SMA fails to hold, expect prices to dwindle towards $1.60 and $1.50 next….

Recommend to use use any rebound to sell into strength, particularly near the $1.84-$1.90 levels. Others can wait for a break below $1.70 before going short. Always remember to put a buy stop at $1.92, just in case.

SG Banks

SG Banks: BNP Paribas has Banks Report. Note that in 4Q10, DBS and UOB delivered better-than-expected results, while OCBC’s results were in line with expectations. Compensated by stronger loan traction and credit quality, Net interest margin is set to contract further in 1H11 due to depressed interest rate…

Expect a more balanced loan profile for 2011 as business loans return OCBC did the best given its consistent delivery, Reiterate Buy on OCBC, as grp remains house preferred pick for its good track record, differentiated franchise with niches in insurance, retail banking and private banking; and a well-articulated and executed set of corporate strategy.

Cambridge Industrial Trust

Cambridge Industrial Trust: Daiwa maintains OutPerform with $0.64 TP, citing grp’s proposed acquisition of 3 properties for $116.8m and 1 for 8 rights issue at $0.429/unit to raise $56.7m. Note that Rights issue looks accretive, and acquisitions shows that grp’s deal flow remains robust, attractive (at an 8% yield for the largest asset), and disciplined (with triple-net leases of at least 5yrs).

Conglomerates

Conglomerates: Deutsche has Conglomerates strategy report. Note of increasing emphasis on new/high specification rigs and current jackup newbuilding cycle appears to be gaining momentum, with strong demand for high spec rigs from contractors. Tip Jackup fleet replacement to continue….

House maintains OverWeight on O&M sector. Rate KepCorp Buy with $14.20 TP and SemMarine Buy with $7.00 TP. Tip Co’s to benefit from any upgrade or replacement opportunities with increased scrutiny of aged offshore assets. Expect greater demand for high-spec offshore rigs as drill conditions become more challenging and safety standards rise.

GentingHK

GentingHK: Our house initiates with Buy at TP$0.54, highlighting counter is the cheapest gaming stock in the world with half of valuation from gaming ops. Co’s share of gaming license held by 50% owned Travellers could be worth approx US$0.56 when fully utilized and expected IPO of Norwegian Cruise Lines to take place this year which would unlock value for co as well…

The spin-off would offer opportunity to dispose cruise business and allow co to concentrate on gaming business. After 4 yrs of losses, co is expected to turn a profit for FY10 and valuation is based on SOTP with implied FY11F of EV/EBITDA at 13.0x.

MapletreeLogTrust

MapletreeLogTrust: Co's employees are safe in Japan and 13 out of 14 buildings in Japan escaped with no damage or minimal damage. The one property affected is Sendai Centre located along the coastal area. Building is intact but affected area has been cordoned off…

Sendai Centre's latest valuation states that the total cost of reinstating building is estimated at $9.0m but manager expects cost of repairs to be lower. Even at maximum of $9.0m, this is approx 0.8c or 0.8% of current price of $0.91, impact should be minimal. Sendai Centre contributes approx 0.7% to co's revenue. Deutsche maintains Buy TP$1.06, highlights stock has corrected by 3% on Fri and offers attractive yield of 6.9% for FY11e...

MS also maintains Overweight and is positive on counter due to increasing trade flows and income stability (64% of rev composed of single-tenanted leases). Stock at 7.3% yield is reasonable and offers Built to Suit projects which is nxt catalyst for price.