Strategy by DMG

Strategy by DMG: House issues comprehensive strategy report on impact of Japan’s quake on SGX counters. Note that amongst the STI stocks under coverage, SIA’s (BUY, TP: $17.20) impact probably larger than the rest, with high flight capacity exposure (Nagoya, Osaka, Fukuoka and Narita), which could face a risk of poor load factor ….

For Tiger Airways (BUY, TP: $1.65), do not expect any negative impact from quake as currently does not operate flights to Japan. In fact with catastrophe, tourists could deferring holiday plans there and may likely be an increase in travel to other destinations which Tiger services….

Impact minimal for most other sector:
1) SG banks primarily exposed to the ASEAN and HK markets and have minimal exposure to Japan.
2) Oil & Gas: KepCorp (BUY, TP $13.94) has stake in a Japan unit involved in fabrication and supply of specialized steel parts, but earnings contribution share to Keppel is insignificant.
3) REITS: Saizen REIT likely to face greatest impact. ParkwayLife REIT, which has some exposure in Japan (33% of portfolio value), but most of properties located in regions relatively less affected by earthquake, and none are within the evacuation zones of the nuclear plants.
4) Commodites: Small impact on commodity counters. Noble (BUY, TP $2.5 and Olam (BUY, TP $3.70) have little exposure to Japan. Straits Asia Resources (NEUTRAL, TP $2.49) sells coal to Japan and coal power as an alternative to nuclear could lead to higher coal prices, a positive for SAR.
5) Telcos: Negligible impact. Singtel (NEUTRAL, TP: $3.00) has the largest proportion of mobile revenue coming from roaming at 20-25% but Japan is not a key contributor in terms of outbound roaming revenue.
6) CPO: Imapct on sector should be minimal. Japan buys about 3% of global palm oil. Still catastrophe such as this will probably put some pressure on palm oil price, which is already on the decline.
7) Construction: Minimal impact. Most raw materials not sourced from Japan. Kian Ann Engineering (a heavy equipment parts distributor) whose purchases from Japan form <5% of its total monthly parts purchases, but suppliers in Jap have factories in China, which may help to mitigate any short term disruption in supply.
8) Tourism: Japanese tourists form <5% of visitor arrivals to Resorts World. Impact to earnings is minimal as estimate that Japanese visitors contribute to less than 5% of overall visitor arrivals to RWS, and majority of the 5% Japanese visitor contribution to the resorts emanates mainly from visitors to Universal Studios rather than casino patronage
9) Agriculture: Yamada Green (BUY, TP $0.43) - financial impact minimal. YGR derived 28% of its rev from export of processed agricultural products to Japan. While share price could see near-term weakness, believe possible negative impacts, mainly from supply disruptions, could be mitigated by Japan's greater import needs for agricultural products post-crisis.