Wednesday, April 30, 2014


CNA: CNA’s share price surged ~20% after the group announced that it has entered into a bond subscription agreement with Pacific Alliance Asia Opportunity Fund (the subscriber), under which subjected to certain terms and conditions, CNA will issue up to $120m worth of redeemable zero coupon convertible bonds in two different series to the subscriber. The first series of Bonds (Initial Bonds) will be issued in two separate successive tranches, while the second series of Bonds (Subsequent Bonds) will be issued in up to 58 separate successive tranches, each tranche having an aggregate principal amount of $2m which may be converted into ordinary shares in the company. The right of a bondholder to convert any Bond into Shares may be exercised, at the option of the holder at any time on and after the date of issue of the Bonds, which has a tenure of five years. The bonds shall be converted into new shares in accordance with the lower of either of the following formulae: i) 125% of the average of the closing prices quoted by SGX for the 15 consecutive trading days before the date of issue of the Bond; and ii) 90% of the lowest average closing prices quoted by SGX for any five consecutive trading day period in the 15 consecutive trading days immediately preceding the conversion date. Provided that if either i) or ii) above is less than the minimum conversion price of $100,000, the initial conversion price shall be the minimum conversion price. The estimated net proceeds from the issuance of the Bonds, assuming full subscription of all the Bonds, is ~$115.7m. It is the intention of the company and the subscriber to issue and subscribe for at least the Initial Bonds and the Subsequent Bonds comprising the Subscriber Option Tranches. Subject to the terms of the bond subscription agreement, the company will raise gross proceeds of $20m (current market cap: $26.5m), assuming that the Initial Tranches and the Subscriber Option tranches are fully subscribed.


CNA has proposed an issue of $120m of zero coupon convertible bonds with Pacific Alliance Asia Opportunity Fund. The first series of Bonds will be issued in two separate successive tranches, while the second series of Bonds will be issued in up to 58 separate successive tranches, each tranche having an aggregate principal amount of $2m which may be convertible into ordinary shares in the Company.

Starhill Global

Starhill Global: 1Q14 results were in-line with expectations, with distributable income at $27.0m (-6.7%) and DPU at 1.24¢ (-9.5%). Excluding the 1Q13 one-time payment of $5.3m in accumulated rental arrears from master tenant Toshin at Ngee Ann City, core DPU would have been up 5.1%. Net property income (NPI) fell 6.7% to $39.1m, in tandem with a 8.3% decline in gross revenue of $49.2m. Excluding the Toshin Payout, 1Q14 revenue and NPI would be 1.8% and 2.5% higher respectively, driven mainly by the strong S’pore portfolio performance and full-quarter contribution from Plaza Arcade in Australia which was acquired in 1Q13. NPI was weighed further by lower contributions from properties in Japan (-10.5%), Malaysia (-6%), and especially China (-34.4%), whose Renhe Spring Zongbei Mall in Chengdu, continues to languish amid stiff competition and the slowdown in the high-end luxury retail segment. Overall, the REIT’s portfolio occupancy stood was robust at 99.4% with a weighted lease to expiry of 6.2 years, while aggregate leverage was a comfortable 29.6% with an average financing cost of 3.24%. Going forward, Starhill is eyeing a ~7.2% increase in rent when the master tenancy with Katagreen Development for Starhill Gallery and Lot 10 is up for review in 2016 in Malaysia. For Australia, it expects rent for the David Jones Building to go up by ~6% in Aug ’14, while in Singapore, there is potential for leasable area expansion when Wisma Atria is linked up with the new Thomson Line Orchard MRT in 2021. Heading into 2014, Starhill guides that the Asian economies should continue its growth as they leverage on the progressive recovery in most advanced economies. Against this backdrop, the REIT will continue to create value for Unitholders through active asset management efforts and source for yield accretive acquisitions of prime assets in its core markets. At current price, Starhill trades at an FY14 yield of 6.2% and 0.87x P/B versus peer’s average of 6.5% yield and 0.98x P/B. Latest broker ratings as follows: Maybank-KE maintains Hold with TP $0.84 OCBC maintains Buy with TP $0.90 UOB Kay Hian maintains Buy with TP $0.93

China Minzhong

China Minzhong: Released 3QFY14 net profit of Rmb133.3m (-47.7%) on revenue of Rmb690.3m (-28.3%). The decrease in revenue was due to decreased sales of Rmb220.9m from the processed business segment and Rmb97.5m from the cultivation business segment, but partly offset by an increase in sales of Rmb46.5m from the branded business segment. Bottom-line was further weighed by a 46.7% rise in admin expenses attributed to depreciations expenses and a rise in property, and a 154.4% rise in other expenses led by impairment allowance for trade receivables, FX losses and loss of biological assets.


SIIC: Announced a robust set of 1Q14 results which was in line with bullish estimates as net profit surged 149.5% to Rmb63.6m on revenue of Rmb297.8m (+50.7%). Gross margins meanwhile dipped 5.5 ppt to 29.1%. The strong top-line was led by a 187% increase in revenue from the construction business segment to Rmb117.1m, higher revenue from the water treatment and water supply business segment to Rmb168.2m (+12%), contribution of Rmb4.1m from the waste incineration business segment and a 37% rise in other revenue to Rmb8.4m. Bottom-line was aided by an almost four-fold jump in other operating income to Rmb10.9m due to foreign exchange gains resulting from the movement of RMB against SGD, and a 16.1% rise in finance income to Rmb55.6m due to contributions from Shanghai Qingpu and Dazhoi Jiajing which were acquired in 1Q14. Going forward, SIIC foresees more opportunities to strengthen and expand its foothold in the environmental protection sector, driven by China’s determination to ameliorate its mounting environmental challenges. The group aims to expand its operations through merger and acquisition as well as through organic growth and hope to break new frontiers and to explore other areas in the environmental protection industry such as soil treatment, renewable energy and air purification.

Super Group

Super Group: Initiation report by Daiwa, with an Outperform rating and TP of $3.95. House notes that the company is a quality instant-coffee play leveraged to 3 structural themes: 1) Asia’s current strong consumption boom, driven by the rising middle class, 2) rising coffee consumption in developing Asia, and 3) strong growth potential in the instant-coffee segment. Superior EBITDA margin relative to regional peers would be underpinned by Super's strong pricing power, cost efficiencies and scalability of operations. Valuation wise, Super Group's current 21x forward earnings multiple, which is in line with regional peers, looks inexpensive given its structural growth story.


Rex: 1Q14 net loss of US$2.5m, attributed to US$1.6m in admin expenses on its rapid expansion in operations and additional headcount in the Singapore office, as well as US$1.5m share of losses from jointly controlled entities predominantly on start-up costs. The loss was partially mitigated by finance income of US$0.3m and fair value gain from mark-to-market investments of US$0.3m. Meanwhile, Rex did not record any revenue as it is still involved in exploration and drilling activities. In the current quarter (2Q), 64.2%-owned, Caribbean Rex, is expected to commence onshore drilling for five wells at the South Erin Block and Cory Moruga concessions in Trinidad. The location of these wells were selected based on the group's proprietary "virtual drilling" technology, of which the group claims to provide a significantly higher success rate of over 50%, compared to global average of 10-15%. Theoretically if claims hold well, investors should expect at least two out of the five wells to be put on production 1-2 months after completion of drilling, assuming the discovered resources are of commercial standards. In addition, the group expects to commence production for a well in Cory Moruga, as well as to pursue early production in Block 50 Oman within the next 12 months.


DBS: DBS released its 1Q14 results this morning which was above estimates. Net profit for the quarter came in at $1,231m, up 30% YoY mostly due to a one-time $223m gain from a stake sale of the Bank of Philippine Islands. Excluding one-time items, 1Q14 net profit of $1,033m is up 9% YoY and constitutes 27.3% of OCBC's full year forecast. OCBC judge this set of results to be above consensus (Bloomberg: 877m) and the house expectations, with the main variance versus our forecast coming from a set of firmer than anticipated Non-Interest Income. 1Q14 Net Interest Income increased 12% YoY to $1,488m, while Non-Interest Income over 1Q14 declined 3% YoY to $963m. The decline in Non-Interest Income was mostly caused by lower contributions from stockbroking (-31% YoY), investment banking (-33% YoY) and net trading income (-11% YoY). Customer loans grew 2% QoQ to $253.3b as at end 1Q14 and NIM increased to 1.66% versus 1.61% in 4Q13. The cost-to-income ratio eased from 47.9% in 4Q13 to 42.5% in 1Q14. OCBC maintains BUY on DBS with an unchanged fair value of $18.08.


Yangzijiang: 1Q14 net profit beat estimates with net profit increasing 11% to Rmb799.2m while revenue rising 24% to Rmb3.5b, on the back of the delivery of 7 vessels, contributing 63% of total revenue. Revenue was also supplemented by the expansion of the trading business (34% revenue). Group wide, gross margins fell to 29.5% from 36%. Shipbuilding business registered 24% gross margins. Other income rose 26% to Rmb 92m, Interest income and charter income from ship finance leasing also buoyed bottomline. YZJ’s latest orderbook amounts to US$5.19b with 125 vessels, which will keep the shipyards fully utilized until FY16. YZJ’s first jack-up rick is on track for delivery mid 2015. The Shipping Logistics is looking to increase fleet size from 4 to 9 by mid 2015, while property segment, the Group is expecting to start recognizing relocation fees as relocation works at the old yard is almost complete. YZJ is currently trading at 6.5x annualized 1Q14 P/E.


OCBC unveiled a robust set of 1Q14 result which was above estimates as net profit came in at $899m (+29%) on total income of $1.89b (+19%), driven by sustained momentum across all customer-related businesses. Net interest income surged to a quarterly high of $1.09b (+19%), driven by broad-based asset growth and a 6 bp widening of net interest margin (NIM) to 1.70%. Customer loans increased 18% to $175b, spread across all customer segments and key markets, while higher NIMs was due to wider loan spreads and increased income from money market activities and gapping opportunities. Non-interest income rose to $800m (+18%), led by a 12% rise in fee and commission income on back of increased contributions from wealth management, loan and trade related activities, and net trading income. The bank also recorded net gains of $52m from the sale of investment securities and once-off gains of $32m from the partial disposal of Great Eastern Holding’s stake in its China JV. Costs were well-managed as operating expenses inched up 5% to $706m, while the cost-to-income ratio improved from 42.3% in 1Q13 to 37.4%. Net allowances were higher at $41m versus $21m y/y, while OCBC’s non-performing loans (NPL) ratio of 0.7% remains unchanged. ROE was at 14.9%, compared to 11.7% last year. The group ended the quarter with total CAR of 15.6% and Tier-1 CAR of 14.4%. Commenting on the results, OCBC CEO highlighted that the momentum across the bank’s customer franchise is strong and sustaining, with increased operating profit from all its key markets, backed by sound quality asset and a robust capital, funding and liquidity base. In regards to its ongoing acquisition of Hong Kong’s bank, OCBC expects the two franchises to complement each other and provide the bank with an expanded platform to deepen and broaden its foothold in the region, while granting it further access to offshore RMB and the ability to capture growing trade, investment, capital and wealth flows between Greater China and other key markets. At current price, OCBC trades at 1.3x P/B.

SG Market (30 Apr 14)

US Market: US stocks climbed, with Internet shares halting a four-day slide, as results from Merck and Sprint Corp beat estimates before the Fed's policy meeting. The Dow rose 87 pts to 16,535 (+0.5%), while the S&P 500 added 9 pts to 1,878 (+0.5%) and Nasdaq Composite tacked on 19 pts to 4,104 (+0.7%). Investors shrugged off subdued economic reports showing consumer confidence dipped in Apr to 82.3 vs expectations of 83.6, while home prices grew 12.9% in Feb, at its slowest annual pace since Aug. Among earnings, both Merck (+3.6%) and Sprint (+11%) topped forecasts, while Coach (-9.3%) tumbled after its 3Q results missed badly on poor store sales and rising competition. Internet stocks rebounded sending the DJ Internet Index up 2.2% with Facebook (+3.6%), Yahoo (+5.4%), TripAdvisor (+4.6%) and Google (+2.6%) scoring solid gains. Twitter (+4.6%) and eBay (+1.7%) climbed during regular trading but slumped 8.7% and 3.1% after the bell on disappointing 1Q growth and forward guidance. In Asian markets, both Nikkei (+0.7%) and Kopsi (+0.3%) had positive starts in early morning trades. S’pore shares are likely to open higher after regaining its footing at the 20-day moving average, taking cue of the advances in Wall Street and the regional bourses, as well as the upbeat results from DBS, OCBC, Yangzijiang and SIIC Environment. Near term topside resistance is at the recent high of 3,285 with underlying support at 3,230, followed by 3,206. Stocks to watch: *DBS: Solid 1Q14 results. Net profit jumped 30% y/y to $1.23b, which included a $223m gain from a stake sale in the Bank of the Philippine Islands. Excluding one-offs, core net profit of $1.03b still beat consensus of $877m. Overall, higher net interest margin, loan volumes and customer non-interest income more than offset a decline in market-related income. Asset quality further strengthened. NAV/share at $14.14. *OCBC: Robust 1Q14 net profit of $899m (+29% y/y), which came in above estimates. Record total income of $1.89b (+19%) driven by sustained momentum across all customer-related businesses. Net interest income surged to a quarterly high of $1.09b (+19%) and non-interest income jumped to $800m (+18%). Costs were well-managed, with operating expenses rising just 5% to $706m. NAV/share at $7.18. *Yangzijiang: 1Q14 net profit of Rmb799.2m (+11% y/y) was ahead of estimates. Revenue climbed 24% to Rmb3.5b, buoyed by increased shipbuilding-related activities (+18.4%) and higher contribution from the investment segment (+59.1%). Income tax fell 24% aided by preferential tax rates for a major unit, which helped offset a decline in gross margins to 29.5% (-6.5 ppt). *Indofood Agri: 1Q14 results missed even though net profit jumped 70.3% y/y to Rp181.9b. Revenue climbed 2.4% to Rp3.2t, driven by higher ASP of palm products and higher sales volume of CPO. Accordingly, gross profit gained 7.4ppt to 28%. *GuocoLand: Makes top bid of $530.9m ($688 psf ppr) for a large residential site in Sims Drive. The 99-year land parcel has a max gfa of 771,775 sf, and can yield ~900 units. Observers say the price was still “relatively high”. Estimated breakeven price of the development tipped at between $1,090 and $1,130 psf, with a selling price between $1,220 and $1,300 psf. *Blumont/LionGold/Annica/Magnus Energy: Requested by the Commercial Affairs Department to provide more information, including access to certain accounting records, minutes of meetings, documents relating to proposed M&A deals, and corporate emails of certain board members and key management personnel. *Ziwo: Conditional agreement to issue an aggregate 59.8m new placement shares at $0.1161 apiece to two individuals - Hong Jianchun (10m shares), MD of United Envirotech (Xiamen) and Hoi Cheng Pan (49.8m), Chairman of Dongshen Enterprises. Net proceeds of $6.9m will be used for general working capital purposes including business expansion.

Tuesday, April 29, 2014

Lian Beng

Lian Beng: Highlights from today's lunch corporate presentation at Maybank-KE - One of the largest local construction firms - Strong net margin track record (10-15%) vs peers (5-7%), attributable to upstream self-sufficiency for its own supply needs, eg. ready-mixed concrete (RMC), cranes and machinery, steel rebars, scaffolds, etc. - Massive construction orderbook of $1.1b stretching till 2017 Financials - At 9MFY14, net profit of $50.3m (+67% y/y), already surpassed FY13 net profit of $39.4m - Current annualized recurring net profit of est. $14.1m comprises: Mandai dormitory (est. $6.4m), ready-mixed concrete (est $7.7m) - Mgt targets to achieve recurring net profit of $20m, underpinned by further organic growth in the dormitory and RMC business, as well as upcoming 40% JV in an asphalt premix business. Catalysts - “On track for record revenue and profit” - “Bonus” fair value (accounting) gains upon revaluation of dormitory business, est. $18m (extrapolating from Centurion’s 4Q13 disclosure) - Paves the way for higher special dividends Valuations - Last traded $0.71 - 5.6x annualized 9M14 P/E - 1.2x P/B Ratings - DMG has a Buy rating with SOTP-based TP of $1.17


GLP: Following the EGM where GLP obtained an affirmative 95.37% of votes in favour of the landmark agreement in China, management released an update on its 4QFY14 operating metrics. Results were impressive. GLP secured a record 1m sqm of new and expansion leases in 4Q. The impact on the stabilised portfolio was visible with occupancy rising 2ppt to 91% on higher rents. 71% of leasing demand was derived from existing customers and suggests stronger momentum ahead as new relationships introduced by the China partners have yet to contribute. E-commerce tenants underpinned demand and now comprise 25% of China leased area. With growing consumption and emphasis on food safety, UBS think demand from the cold chain logistics will also become increasingly significant. GLP targets growth of 30-40% p.a in China development capex for next 3-5 years. Mgmt also provided greater visibility into the growth trajectory by reiterating a capex target of US$1.7b (+40% YoY) in FY15 and 30-40% annual growth in development capex for the next 3-5 years. UBS maintains Buy rating with TP of $3.23.


DBS: During DBS shareholders meeting yesterday, calls for higher interest rates for POSB customers dominated proceedings, with shareholders highlighting that POSB had in the “old days” paid higher interest rates compared to its peers, a stark contrasts to the mere 0.05% interests it pays now to average depositors. Some shareholders went the extra mile by encouraging DBS to offer higher interest rates to POSB pioneer customers or retirees, cautioning that the bank risked losing its loyal customers should it continue to pay low rates. In his response to shareholders, DBS CEO Piyush Gupta guided that the very low interest rates remain a factor of the overall market, and DBS actually absorbs some of the interest reduction, which explains why the Bank’s return on equity stands at 10 to 12%, when it could have been 12 to 13%. Mr Gupta further added that DBS has in place products and services to reward customer loyalty and assured investors on the bank’s commitment to POSB’s customers. Overall, Maybank-KE is O/w on Singapore banking sector, with DBS (Buy: TP $19.60) remaining as the house top pick, as it is best positioned to take advantage of a rising interest rate environment.

Grand Banks Yachts

Grand Banks Yachts: Swings to 9MFY14 profit on further cost cuts; eyes exit from Watch-list Grand Banks Yachts (GBY) recorded its second consecutive profitable quarter in 3QFY14, with a net profit of $0.5m, reversing from a net loss of $0.7m a year ago. Gross profit rose 32% y/y to $1.7m, even as revenue fell 21% to $8.1m, thanks to a decline in operating expenses to the lowest level in nearly five years amid accelerated cost-cutting efforts. These include improving cost-of-sales efficiencies, and realigning sales, marketing and admin expenses through reducing headcount, lowering travel and entertainment expenses and restructuring of its offices in the US and Australia. The group remains committed to its objective of being removed from the SGX Watch-list. Amongst the requirements, GBY has to report a pretax profit in FYJun14; as at 9MFY14, the group had pretax profit of $0.25m – a sharp improvement from the $2.8m pretax loss a year ago. Meanwhile, GBY’s market cap of $39.8m is just shy of the second requirement to achieve an average daily market cap of at least $40m. Management remains optimistic on outlook. Amidst the recovering US luxury boat market, it notes that regional buying interest, especially in S’pore and Japan, has also picked up. Following several boat shows in recent months, the group’s net order book has increased to $10.6m, from $9m a quarter ago. Going forward, the proposed A$10m acquisition of Palm Beach Motor Yacht in Australia could mark a new chapter of growth for the group, with the introduction of Mark Richards, founder and CEO of Palm Beach as the new CEO of the enlarged group that will hold two world-class boat brands. Backed by $23.2m cash ($0.134 per share) and no debt, GBY will have the financial wherewithal to pursue its strategic restructurings. Valuations at 18.5x annualized 3QFY14 P/E and 0.8x P/B look even cheaper on an ex-cash basis, at ~8.3x P/E and 0.4x P/B.

Grand Banks Yachts (technical)

Grand Banks Yachts: rises 2.2% to $0.235 to touch the classical resistance. Rising key indicators suggest positive near term momentum. Watch for potential breakout , if share price action continues to follow through, after yday's good 9MFY14 results.

Keppel Corp (technical)

Keppel Corp: Counter's near term pressure may not see any respite soon even though RSI and Stochastic may seem to be hooking up, given that recent bearish candlesticks (engulfing on 25 Apr and shooting star on 28 Apr) indicate more downside. Next support at $10.40 level followed by $10.20.

Ascott REIT

Ascott REIT: In a post 1Q14 results meeting, management said that it has a remaining debt headroom of about $140m before reaching a gearing level of 40%. It is still evaluating a few acquisitions, mainly in Asia, but also in Europe, and will look for DPU-accretive properties or have a short turnaround period. Its properties still depend on financial institutions, but management has seen some pickup from the shipping industry. The occupancy rates for all of its properties are over 80% and have improved YoY, while demand in 2Q14 looks steady. Daiwa maintains Hold rating and TP of $1.24, citing that a positive risk for Ascott REIT would be the deployment of its remaining debt headroom for a highly DPU accretive property acquisition in Asia, while a negative risk would be a regional slowdown in foreign direct investments or a severe revenue disappointment in one of its major markets in subsequent results.


Aspial: Agreed to acquire 54-64 A’Beckett Street, Melbourne from City Lights Properties, for a consideration of A$26.8m. The Property is freehold with an existing low-rise building with total land area of ~1,295 sqm. The property has an active planning permit for a new 49-storey tower comprising residential apartments, serviced residence and retail shops. Situated in the Melbourne CBD, RMIT is just 100m away from the property, while the Melbourne Central Railway Station is just a stone’s throw away. This is Aspial’s third property in Melbourne, totaling A$110.6m, in addition to an A$18.9m mega-integrated development project in Cairns


Wilmar: Together with First Pacific will continue discussions to acquire Goodman Fielder after it’s A$1.271b joint bid was rejected yesterday. Goodman Fielder’s largest shareholder Perpetual Investment said that while the A$0.65 per share offer does appear opportunistic, it encourages the company to continue dialogue with Wilmar to extract shareholder value. OCBC reckons that Wilmar could use its mature distribution channel in the region, particularly China, to tap the surging demand of quality foods, as a focus group unveiled a generic Chinese preference for imported foods given skepticism over local foods. Another investment house Platypus Asset Management commented while it is not sure of Goodman Fielder’s strategic value, it pointed out that Goodman is a cheap business in the right space.


Midas: Has secured Rmb146m worth of contracts for high-speed train car body components from CNR Changchun Railway Vehicle, which represents the third set of contract wins for high-speed train car body components in six months and brings the group’s year-to-date order wins to Rmb536.9m. Slated for delivery in 2014, the latest contracts will see Midas supply aluminium alloy extrusion profiles and certain fabricated parts for high-speed trains. These contracts are expected to contribute positively to Midas’ financial performance for FY14. To reiterate, Midas is well positioned to benefit from the favourable policy changes that are likely to translate into massive investment in the Chinese railway sector over the next few years. Midas offers a compelling earnings turnaround story, underpinned by a compounded average earnings growth of 73% over FY14-16. According to consensus data, valuations are expected to narrow significantly to 19.2x FY14 P/E, from the current 59.7x Latest broker ratings: CIMB maintains Add with TP $0.71 OCBC maintains Buy with TP $0.66

Vard Holdings

Vard Holdings reported uninspiring 1Q14 results with net profit at NOK92.0m (-51%) on revenue of NOK2.7b (-3%). EBITDA margins ticked upwards for the third consecutive quarter ending at 6.4%, against a high EBITDA margin of 11.1% for 1Q13, resulting in a 55% decline in operating profit to NOK123m. The quarter was characterized by an exceptionally high order intake in respect of new builds (eight vessel contracts worth NOK5.5b), with three of these for the shipyard in Vietnam, improving yard utilization and extending the orderbook there into 2016. Operations in Norway and Romania remained stable, while the Brazil operations continue to be a focus area. Going forward, Vard remains positive on its order activity for FY14, but also considers the order intake in 1Q14 to be exceptional. VARD expects to see continued strong demand from the subsea support and construction vessel segment despite concerns of rising production cost in the O&G industry, and believes there will be incremental growth opportunities from new business developments. Vard’s total order book currently stands at NOK21.8b (vs NOK19.4b as at end FY13), which underpins topline visibility for the next 2 years. At current price, Vard trades at 9.8x forward P/E and 1.46x P/B. Latest broker ratings: OCBC places its Hold rating and TP of $0.84 under review

Ho Bee

Ho Bee: Ho Bee's 1Q14 net profit collapsed 92% y/y to $4.1m on a 72% deterioration in revenue to $17.1m due to the absence on revenue recognition for development projects. Meanwhile, rental income from the group’s investment properties rose 495% to $15.9m mainly contributed by rental income from industrial and commercial properties, The Metropolis in Singapore and Rose Court in London. Management cautioned that the residential property market in Singapore is still facing strong challenges. Over the next few years, the group expects rental income to contribute significantly to earnings. Net gearing doubled to 31%. At $2.31, Ho Bee trades at 33% discount to its NAV/share of $3.47.

HPH Trust

HPH Trust: 1Q14 net profit beat street estimates and rose 47% to HK$558.9m, while revenue climbed 2.7% to HK$2.9b. Container throughput of HK terminals fell 5.5%, mainly due to weaker intra-Asia cargoes but offset by higher transshipment volume. Throughput at Yantian increased 1.8%, due to growth in transshipment and US/EU cargoes but partially offset by lower empty volume. Average revenue per TEU for HK was higher due to favourable throughput mix of containers from liners, whereas that for China was higher than last year, primarily due to fewer concessions granted to some liners and a lower empty container ratio. Bottomline rose mainly due to the gain from the disposal of 60% stake in ACT. Stripping non-recurring items, HSBC estimated that recurring profits actually declined 12% y/y to HK$392m mainly due to cost inflation and higher effective taxes (expiry of Yantian tax concessions) Management had reiterated its guidance of HK$0.41/share distribution supported by proceeds from ACT stake sale. According to management, expansion plans is back on track as it aims to add one berth each year from 2015 to its Yantian port in Shenzhen. The expansion is estimated to cost HK$4.5b. While management indicated that most of the work is done, i.e. land formation, infrastructure; the cranes and other finishing touches have not been put in place. In addition, management does not rule out another round of delay if market conditions is not good. HPHT trades at 0.7xP/B. Latest broker ratings: HSBC maintains Neutral with higher TP of US$0.66 from US$0.62

SG Market (29 Apr 14)

US Market: US stocks ended higher in a choppy session, with the S&P 500 gaining 0.3% after erasing an earlier slide as Internet and small caps pulled back from a selloff amid a flurry of merger activity. But investors remained cautious after US and Europe slapped new sanctions on Russia. Investors welcomed deal news among telecoms and pharmaceutical companies and stronger-than-expected housing data in early trades but heavy selling of Internet stocks dragged the market down in late morning, only to recover by late afternoon. Pfizer (+4.2%) surged after proposing another offer to buy over British drug giant AstraZeneca (+12.2%) for US$100b. But Newmont Mining (-6.7%) dropped after takeover talks with Barrick Gold broke down. Funds continue to switch from the high growth tech plays towards safer and dividend names such as Apple (+3.9%), Microsoft (+2.4%) and IBM (+1.9%). Biggest losers include Amazon (-2.4%), Facebook (-2.7%) and Netflix (-2.4%). BofA (-6.3%) slumped after suspending its planned share buyback and dividend increase because of an error in its capital planning. A busy calendar this week will give investors more clues about the strength of the economy and the pace of the Fed’s stimulus program with the FOMC expected to trim its bond purchases by another US$10b, 1Q GDP likely to expand 1% and nonfarm payrolls forecast to show 200,00 jobs added in Apr. S’pore shares are likely to open mixed but STI maydip towards its near term support at 3,230 with several index components going ex dividend. Upside remains capped at the 3,320 resistance level. Stocks to watch: *Vard: Uninspiring 1Q14 results. Revenue dipped to NOK2.7b (-3% y/y, -14% q/q), and net profit fell to NOK92m (-51% y/y, -19% q/q). Nevertheless, EBITDA margin ticked up for the third consecutive quarter to 6.4% (4Q13: 5.1%). The group recorded an exceptionally high order intake of NOK5.5b with eight vessels secured during the quarter, lifting order book to a five-year high of NOK21.8b (+41% y/y, +13% q/q). Its second Brazil yard Vard Promar is in the final stages of construction. NAV per share of $0.67. *HPH Trust: 1Q14 net profit jumped 47% y/y to HK$558.9m, coming in above street estimates, boosted by a HK$243.8m gain from the disposal of a 60% stake in Asia Container Terminals. Revenue edged up 2.7% to HK$2.9b, as the average revenue per TEU for both HK and China improved. Container throughput at the HK terminals fell 5.5%, due to weaker intra-Asia cargoes, but offset by higher transshipment volume. Throughput at Yantian increased 1.8%, due to growth in transshipment and US/EU cargoes but partially offset by lower empty volume. *Ho Bee: 1Q14 net profit plunged 92% y/y to $4.1m, as revenue collapsed 72% to $17.1m, in the absence of new project sales and revenue recognition for development projects. Rental income from its industrial and commercial investment properties (namely The Metropolis in Singapore and Rose Court in London) rose six-fold to $15.9m. Net gearing doubled to 31%. NAV/share of $3.47. *Top Global: 1Q14 net loss of $0.7m (-65% y/y) despite revenue surging 260% to $4.7m. Top line was boosted by recognition of revenue from sale of development properties from its Braddell and Bartley projects. However higher cost of sales of the two projects led gross margin to halve to 25.5% from 56.2%. *Aspial: Agreed to acquire 54-64 A’Beckett Street, Melbourne for A$26.8m. The freehold property is an existing low-rise building with total land area of ~1,295 sqm, that comes with an active planning permit for a new 49-storey tower comprising residential apartments, serviced residence and retail shops. *Lian Beng: Clarifies that the tender to purchase the property at Leng Kee Road for $46.2m remains subject to HDB’s approval. Through its 80/20 JV with Vincar Leasing, Lian Beng intends to use the property to provide car maintenance, in part for its fleet of cars and commercial vehicles. *OKP: Won a $19.2m PUB contract to improve roadside drains at various locations in S’pore. The contract will commence end Apr, and carried out over 30 months. Group order book stands at $388m. *Midas: Secured Rmb146m worth of contracts to supply high-speed train car body components to a unit of CN, bringing the group’s year-to-date order wins to Rmb536.9m. *F&N: To acquire a 70% stake in Yoke Food Industries for RM54.6m. Yoke manufactures and distributes canned beverages in M’sia, and exports its products to S’pore, Indonesia and Indochina under brands such as Day Day, SoSoy and Juice Secret. *Keppel Corp: Partners Seafox to conduct an engineering study of a purpose-built accommodation jackup rig with well intervention and plug & abandonment features. Seafox may place an order for the rig upon completion of the study in 2H14. *Wilmar: Says it will continue discussions to acquire Australian food firm Goodman Fielder, after it’s A$1.3b joint bid with HK-listed First Pacific Company was rejected.

Monday, April 28, 2014

Sheng Siong

Sheng Siong: During Sheng Siong Group's 1Q14 results briefing, management shared updates on growth strategies and business operations. Measures to grow bottom line are: 1) Renovation of three stores in FY14; 2) Actively increasing the proportion of goods sold from direct sourcing (currently 55%), which will translate into improved GP margins that are sustainable. Management is reportedly in talks for new stores, but would not hesitate to walk away if the price is deemed too high. Finally, the pilot phase in e-commerce has expanded to other areas with a larger base of customers. OCBC think that if this is executed well it will make up for the challenges in opening new stores. OCBC maintains Buy rating with $0.68 TP. Meanwhile, JP Morgan initiated on the counter with Overweight and TP of $0.76.

Roxy Pacific

Roxy Pacific: Voyage reiterates its Invest rating, raises TP to $0.72. Roxy announced the acquisition of an A$90m 28-storey commercial building in the Sydney CBD precinct. The 89% occupied property will raise Roxy's investment property revenue from $1.6m in FY13 to an estimated $4.6m in FY14, and $11.9m in FY15 on full year contribution. The project enhances Roxy's return on its balance sheet, with scope for redevelopment upside at a later date. The property is about 500m away from the billion dollar Darling Harbour Live project - Sydney's new convention, exhibition and entertainment hub - slated to open in late 2016. It is also situated right next to the cross junction with George Street, where part of a major light rail, to be constructed over the next five or six years, will run parallel to it. The location means Roxy is likely to enjoy capital appreciation gains over a three-to-five year horizon.


Yoma: UBS initiates coverage with Buy rating and $0.87 TP, on the group's unique growth potential in an undersupplied frontier market. House view Yoma as a proxy to Myanmar's rapidly growing economy and think the trend of urbanisation will be an important factor driving demand for real estate in Yangon. House think the trend of urbanisation will be an important factor driving demand for real estate in Yangon, where acute undersupply of commercial, hospitality and quality residential assets has led to home rentals more than doubling in the past four years, and hotel room rates soon reaching levels comparable with Singapore. UBS believe Yoma benefits from significant first-mover advantages: management's presence in the country since the early 1990s has helped it understand local demand, and gain unique access to low-cost landbank. A solid reputation has also helped it secure reputable partners such as Mitsubishi, Sumitomo, and International Finance Corporation (a World Bank member). Recent acquisitions and joint ventures for expansion of the non-property businesses are encouraging. House think some of these businesses have significant upside potential if executed well and if Myanmar lives up to its economic growth potential over the next five to 10 years. We note that the TP of $0.87/share includes $0.20/share attributed to Yoma's Landmark Development project, which has not been confirmed at this point.


Goodpack: Goodpack reiterated on 17 April that it is still in discussions with potential bidders and that it does not rule out the possibility of a takeover by private equity firms. StanChart estimates that a high offer price for Goodpack is unlikely, citing that private equity firms aiming for a 15% return could offer $2.51/share- a 9% premium to the current price and a 7% discount to its TP of $2.71. Based on past deal activities and aligned business strategies, house reckons that potential interested parties could include Brambles and China Merchants Group.


CDLHT: 1Q14 DPU rose 2.2% y/y to $0.0275, while distributable income rose 3.0% $26.9m. Revenue increased 15.3% $43.8m while NPI rose 4.1% to $36.7m, mainly due to its Maldives resorts, offset by the weaker trading performance of its Australia hotels and partial closure of Mercure Brisbane for refurbishment. CDLHT expects an additional 2000 rooms opening for the rest of 2014 (2013: 3357). This should provide some relief for hoteliers. Events such as World Club 10s Rugby in Jun and WTA Championships in Oct are also expected to buoy hotel demand locally. For Maldives hotel, despite only being 8% of asset value, it contributes 12% and 20% of CDLHT’s 1Q14 NPI and revenue. Maldives continued to register strong visitor arrivals growth of 11.6% y/y for the first 2 months of 2014. Broadly, Maybank KE expects CDLHT to benefit from growing Asian affluence, underpinned by the growth in Chinese outbound travel to Maldives. Maybank KE reiterates Buy with higher TP of $1.91


GLP: UBS maintains Buy with TP $3.23 TP. The house notes that following the 24th Apr EGM where GLP obtained an affirmative 95.37% of votes in favour of the landmark agreement in China, management released an update on its Q4FY14 operating metrics. Results were impressive. GLP secured 1m sqm of new and expansion leases in Q4, a record. The impact on the stabilised portfolio was visible with occupancy rising 2ppt to 91% on higher rents. 71% of leasing demand was derived from existing customers and suggests stronger momentum ahead as new relationships introduced by the China partners have yet to contribute. E-commerce tenants underpinned demand and now comprise 25% of China leased area. With growing consumption and emphasis on food safety, we think demand from the cold chain logistics will also become increasingly significant. Statistics show China is one of the world’s fastest-growing markets for perishable foods but its per capita refrigerated warehouse space is still significantly less than most developed countries. GLP is currently collaborating with COFCO to develop a nationwide network of facilities and the house believe there will be more developments on that front.

Raffles Medical

Raffles Medical: 1Q14 net profit climbed 8% to $14.6m while revenue increased 8% to $87.6m, with Healthcare and Hospital Services increasing 14.3% and 4.8% respectively. Revenue growth was driven by increase in patient load from the expansion of RafflesMedical clinic network and from more corporate contracts secured in Singapore, higher volume of healthcare insurance series and additional of more specialist consultants to its group practice. Expenses were relatively flat y/y. For Raffles Holland Village, construction work for the 5-storey commercial building on the site of the former POSB Building has begun in early Apr. On the Raffles Hospital Extension, development plans for the additional 220,000 sf of floor area is currently being finalized. The new expansion will include a new Radiotherapy Centre, new medical centres, a healthcare training institute, clinical research centre as well as the additional of more hospital beds. Management guides that this extension will provide significant scope for growth over the next 10 years. NAV at end Mar was $0.8811 translates to P/B of 3.9x. Annualized 1Q14 P/E is 32.9x.


Wilmar: Australian food company Goodman Fielder said that it had received and rejected a takeover offer proposal from Wilmar and Hong Kong’s First Pacific Company but said the offer undervalued the company. The proposed takeover was meant to be a 50:50 JV between Wilmar and First Pacific. Wilmar currently owns 10.1% stake in Goodman Fielder. Under the proposal, Goodman Fielder would receive a cash offer of A$0.65 per share of Goodman Fielder. Had the transaction proceeded, the aggregate consideration would have been A$1,271.1m. This offer, based on trading close at 23 Apr was – 1) A 23.8% premium of the closing price of that date at A$0.525 2) A 27.2% premium over Goodman Fielder’s weighted average share price since 2 April, of A$0.511 The proposed transaction was part of Wilmar’s plans to expand its footprint across Asia Pacific. Goodman Fielder manufactures and markets ingredients, consumer branded foods, beverage and related products.


Micro-Mechanics: 3QFY14 net profit raced 25.4% y/y to $1.8m on higher gross profit margin of 50.4% (+2.7ppts y/y) due to higher capacity utilisation of 53%, compared to 45% in the previous period, on the disposal of legacy machines at the USA factory and a shift in production to the new 24/7 machining line. The bottom line was partially dragged by lower equipment disposal gain of $8k (compared to $378.7k in 3QFY13), partially mitigated by a $200.6k government grant. Meanwhile, revenue improved 15.4% to $10.6m driven by higher sales, mainly from China, in both semiconductor tooling and Custom Machining & Assembly (CMA) divisions.

Grand Banks Yachts

Grand Banks Yachts: Recorded second consecutive profitable quarter since 2009, with 3QFY14 net profit of $0.54m (from net loss of $0.72m), although revenue slumped 20.8% y/y to $8.1m. The bottom line was boosted from its significantly improved gross margin of 21.0% (+8.4ppts) due to higher factory utilization and continued efforts to streamline internal efficiencies- reflected on a 43.5% cut in opex attributed to lower SG&A expenses and boosted by recovery of doubtful debts and forfeiture of a deposit. Group sees the recovery of the U.S. luxury boat market, as well as a pick up in buying interest in Singapore and Japan. Boat shows in recent months increased the group’s net order book to $10.6m from $9m in 2QFY14.

GMG Global

GMG Global: 1Q14 net profit deteriorated 79.9% y/y to $2.6m due to net loss on 35%-owned associate, SIAT SA, resulting from FX losses and lower gross profit margin of 9.4% (-3.6ppts) attributed to a higher proportion of raw materials from an external source on the increased downstream processing. Meanwhile, revenue was eased 3% to $226.5m, as the 23.2% slump in average selling prices of rubber was partially mitigated by higher sales tonnage (+26.2%) of 78,673 tons. Management expect natural rubber prices to fluctuate near current levels in the current 2Q14. The group continues to be in the process of synergizing the business entities it acquired over the last few years.

Nico Steel

Nico Steel: FY14 net loss of US$1.4m from US$0.1m profit, while revenue slumped 28% y/y to US$24.5m mainly on reduced market demand and intense market competition. Accordingly, gross profit margin decreased 0.4ppts to 12.4%. The Group also announced their intention to diversify into the upstream minerals related business and has appointed a qualified independent professional 3rd party to conduct feasibility studies. NAV/share of $0.165.

King Wan

King Wan: Received $45.4m worth of shares (116.3m shares at 10 Baht/share) from the listing of Kaset Thai International Sugar Corporation (KTIS). Post-IPO, King Wan will hold 3.01% of KTIS, following its debut trading on 28 Apr. Management cites that they will monitor the trading price of KTIS’ shares upon its listing and update the shareholders on any future sale of its shareholdings.


Capitaland’s 1Q14 results were broadly in line, with net profit at $182.8m (-1.7%) on revenue of $612.6m (-3.4%). Excluding portfolio and revaluation gains, CapitaLand’s core net profit was at $155.7m (+29.9%). Revenue was weighed by lower contributions from the group’s S’pore operations (-37.7%) as sales contributions from Urban Resort Condominium and The Interlace tapered off after obtaining TOP in 2013. This was mitigated by revenue recognition from Sky Habitat and Bedok Residences, and rental income from CapitaCommercial Trust. The decrease was mitigated by higher revenue from CapitaLand China (+56.2%), higher contribution from CMA (+42.3%), as well as higher sales from development projects in Vietnam. Serviced residences’ revenue increased by 8.2% due to improved operating performance of properties in Indonesia, Vietnam and Europe, as well as contributions from newly acquired properties in 2Q13. Other operating income fell 54.4% to $47.4m, aided largely by a divestment gain of $58.5m from the sale of a subsidiary in Dong Cheng, Beijing in the corresponding period. Meanwhile overall associate and JV contributions were up 9.8% to $140.4m due to higher contributions from two associates in China and a general improvement in operating performance of CapitaLand’s REITs and China funds. Operationally CapitaLand Singapore sold 34 residential units in 1Q14 (1Q13: 544 units), although Apr ’14 saw 106 units of Sky Habitat sold following a marketing campaign. In China, 1,177 residential units were sold in 1Q14 (1Q13: 2,249 units), mainly from La Botanica in Xi’an, The Loft in Chengdu, The Metropolis in Kunshan and The Paragon in Shanghai. The group guides to launch ~8,000 residential units in China over the next nine months in 2014, while its Singapore’s Marine Blue Condominium is expected to be launch-ready in 2014. Going forward, CapitaLand remains positive on its prospects and aims to harness its key strengths across its various businesses to create differentiated real estate projects and enhance overall project returns, with Singapore and China remaining as the group’s core markets. Balance sheet remained sound with net gearing at 37.0% and valuations are undemanding at just 0.84x P/B. Latest broker ratings: CIMB maintains Add with TP $3.83 CLSA downgrades to U/p from O/p with TP $3.18

SG Market (28 Apr 14)

US Market: US stocks slumped on Fri after a dim earnings outlook from Amazon sparked a sell-off on Nasdaq (-1.8%) and heightened tensions in Ukraine, prompted the G7 to prepare new sanctions against Russia and S&P to downgrade its credit rating. Losses were heaviest in technology shares that have posted the biggest gains in the five-year bull rally. Amazon sank 9.9% to its lowest level since Oct after projecting a 2Q operating loss. Other tech names that saw big drops included Facebook (-5.2%), Linkedin (-7.8%), Netflix (-6.4%), Priceline (-4.9%) and and Broadcom (-4.4%) Consumer sentiment for Apr topped expectations but market reaction was dampened by a batch of disappointing results, which saw Visa (-5%) and Ford (-3.3%) slid after revenue and earnings missed estimates. Asian equities mostly lost ground in early morning trades with Nikkei (-0.9%) and Kopsi (+0.1%) and investors looking for more guidance on interest rates when the Fed meets on Tue. S’pore shares are likelt to take cue from the Wall Street’s retreat with the STI expected to find near term support at 3,230, while upside resistance seen at 3,320. Stocks to watch: *CapitaLand: 1Q14 net profit broadly in line at $182.8m (-1.7%), on revenue of $612.6m (-3.4%). All business units recorded higher revenue except for CapitaLand Singapore, due to absence of two residential projects in S’pore which obtained TOP, as well as absence of rental income from TechnoPark@Chai Chee which was divested in Nov '13. Revenue from CapitaLand China jumped 56.2% as more apartment units were delivered to home buyers. NAV stood at $3.86 per share. *Raffles Medical: 1Q14 revenue and net profit both climbed 8% y/y to $87.6m and $14.6m, respectively, driven by an increase in patient load from the expansion of RafflesMedical clinic network and from more corporate contracts secured in Singapore, higher volume of healthcare insurance series and additional of more specialist consultants to its group practice. *Yeo Hiap Seng: 1Q14 net profit slumped 63% y/y to $7.3m, as gross margins shrank 5.2ppt to 36%, mainly due to higher inventory written off. Revenue declined 18% to $111.6m, due to absence of contribution from the property division following the sale of its last property in Dec, while the F&B business fell 0.9%. NAV stood at $1.253. *QAF: 1Q14 net profit fell 15% y/y to $13.5m, while revenue dipped 3% to $243m, mostly due to a stronger SGD relative to the domestic currencies that the group operates in. Excluding currency effects, Rivalea (integrated meat producer in Australia) and Bakery division achieved higher sales. NAV stood at $0.756. *GMG Global: 1Q14 net profit plunged 80% y/y to $2.6m due to net loss on 35%-owned associate, SIAT SA, resulting from FX losses. Gross margin also fell to 9.4% (-3.6ppts), due to a higher proportion of raw materials sourced externally on increased downstream processing. Revenue dipped 3% to $226.5m, as a decline in rubber prices (-23%) offset higher sales tonnage (+26%). Management expects natural rubber prices to fluctuate near current levels in the current 2Q14. *Grand Banks: Second consecutive profitable quarter in 3QFY14, with net profit of $0.54m (net loss of $0.72m a year ago). Revenue however, fell 20.8% y/y to $8.1m. The significantly improved gross margin of 21.0% (+8.4ppts) was driven by higher factory utilization and continued efforts to cut operating and selling costs. Management sees a continued recovery in the US luxury boat market, as well as a pick up in buying interest in Singapore and Japan. Net order book rose to $10.6m from $9m in 2QFY14. *Wilmar: Australian food company Goodman Fielder received but has rejected a takeover offer proposal from Wilmar and HK-listed First Pacific Co, saying that the offer undervalues the company. *Ramba: Received proposals from interested bidders for the acquisition of the minority interest in the Lemang Block, which the group has a 51% working interest in. Management will evaluate the proposals with a view of selecting the best bid. *Sapphire Corp: Will sell its entire PRC steel-making business (including vanadium production) for $70m ($20m cash plus $50m 5% coupon bond) and use the proceeds to propel its push into mining services, while looking out for strategic investments into other value-added engineering-related businesses. Sapphire expects to book a divestment gain of $3.8m. *Chaswood Resources: Secured exclusive rights to develop and operate 4 TGI Fridays restaurants in Shenzhen, China by 2017. The group currently operates 19 TGI Fridays restaurants across M’sia, S’pore and Indonesia, and is the largest TGI Fridays franchisee in South East Asia. *Moya Holdings Asia: The IFC has terminated its financing agreement for Moya's build-transfer-operate project in the Tangerang City area in the Banten province, Indonesia, after a revision on the master construction and business plan of the project. *Kingsmen Creatives: Subsidiary Kingsmen (Beijing) was ordered to pay Rmb7.6m ($1.5m) to Guang Zhou Audio Visual Communication for an accident which occurred during the construction of an exhibition construction project at Chengdu. *UIC/Sing Land: Offer for Sing Land has closed, with UIC receiving valid acceptances that bring its total shareholding to 97.27%. Sing Land will be suspended wef 9am, today.

Friday, April 25, 2014


BreadkTalk continues its charge forward with the counter clocking a new all-time high today at $1.42, extending its two day rally to ~17%. As the only broker in the street who has a Buy call on BreadTalk, Maybank-KE had in recent weeks highlighted the hidden value of property stakes owned by the group that could be monetized in future. This follows the proposed acquisition of assets of Perennial Real Estate Holdings (PREH) by St James, through the issue of new shares at $0.7/share, in a reverse takeover deal valued at $1.56b. BreadTalk holds equity stakes in several real estate assets in partnership with PREH, worth an estimated $159m ($0.56 per share). Yet these stakes are recognized at cost of only $84m on its balance sheet. Going forward, BreadTalk also guides that China will continue being a key driver of its growth, as the company eyes further penetration of its bakery business in Tier 2 and 3 Chinese cities, where a large captive market beckons. Maybank-KE opines that BreadTalk is by far the most successful Singapore F&B company, boasting a solid regional presence for its homemade brands via more than 800 outlets across 15 countries, with plans to raise its store count to 1,000 in 2014. BreadTalk's operational statistics are healthy; and its rapid EBITDA expansion should allay fears about lacklustre profit growth and lift earnings going forward. The house expects BreadTalk’s net profit to grow at 26% CAGR over the next three years along with moderate new store expansion. According, to Maybank-KE’s sum-of-parts valuation on the counter, BreadTalk has an intrinsic value of $1.65, while the house rates the counter as a Buy with $1.54 TP, pegged to a conservative 7x EV/EBITDA.


GSH: to lift halt on 28 Apr , 8.30am GSH refers to the article "Sale of Equity Plaza may be in the works" published in The Business Times today. Confirms that the co has embarked on exclusive negotiations with the owners of Equity Plaza on the proposed acquisition of the property. Given the preliminary stage of negotiations and due diligence, further announcements will be made when definite terms of agreement are finalized in legally - binding documentation. The co makes no assurance that the proposed acquisition will proceed.

Chip Eng Seng

Chip Eng Seng: NRA reinitiates at Overweight with TP $1.04, based on the SOTP of its property development (30% discount to RNAV) and construction business (6x FY14e P/E). Valuation backed by an attractive 5.3% dividend yield. The house notes FY14 will be a watershed year, as the group will recognize ~$850m of revenue for 3 projects which TOP this year – Alexandra Central, Belvia and 100 Pasir Panjang. In Australia, Chip Eng Seng successfully launched its first property back in 2012 with the 33M at 33 Mackenzie Street, Melbourne, and is currently developing Melbourne’s tallest CBD residential building – the Tower Melbourne (99% sold). The group is expected to launch another new development project in Doncaster, Australia this year. Meanwhile the construction business remains stable with healthy order book of $520m as at end 4Q13.


Sarin: Phillip Capital initiates coverage with an Accumulate call and $3.20 TP. Key merit points are a near monopolistic position in diamond planning and manufacturing equipment with superior proprietary technologyHigher installed base of Galaxy family of equipment driving recurring income growth The house sees tremendous further growth potential in bull case of breaking into new segment of the diamond value chain. Overall, initiate coverage with an "Accumulate" rating based on DCF valuation (WACC: 10.3%) with a TP of $3.20.


Guocoleisure: CIMB maintains Add with TP $1.20. Following its meeting with GuocoLeisure during which the house was provided a clearer picture of its refurbishment plan, CIMB revise its FY14-16 earnings forecasts to reflect a more evenly-spread impact of the refurbishment works at its five key London Hotels. FY14’s EPS is adjusted upwards by 62.8% (as had previously incorporated a significant shortfall in FY14 hotel revenue), while FY15 and FY16 numbers are cut by 8.1% and 16.9% respectively. Nevertheless, these adjustments have negligible impact on its RNAV-based valuation. The house reiterate its Add rating with the target price unchanged at $1.20, based on 30% discount to CY14’s RNAV. Key catalysts include value-unlocking activities such as the sale of non-core businesses.


UOB: Giving further insights on the group’s strategy during its AGM yesterday, UOB’s CEO Mr Wee Ee Cheong, guided that the bank’s key focus will still be on organic growth, although the bank would be on the prowl for attractive acquisition targets. Yet, Mr Wee stressed that any acquisition must be the right price and fit, suggesting the bank’s unwillingness to ‘overpay’, while separately highlighting that UOB still has much leeway to grow organically given that its market share in markets they are present in remains relatively small. In regards to what could be a right fit for the bank, Mr Wee guided that the bank’s strength and focus remains Asean centric and would like to see if UOB could extend its whole footprint in the region, adding that while China and greater China presents new areas of opportunity, UOB’s dominance still lies in its own backyard. UOB expects a moderate environment for 2014, plagued by volatile markets on expectations of the Fed tapering. Yet, the bank guides that its overall risks are manageable due to stronger balance sheets in Asia.


SMRT: In response to a query by SGX in regards to its 18.5% jump in its share price yesterday, SMRT has replied that the group is not aware of any news that has caused the price surge. Maybank-KE urges investors to avoid the hype, and cite two possible corporate developments that could have potentially led to yesterday’s spectacular movement: Scenario 1: Nationalisation of SMRT via a general offer – This could allow SMRT to run as a non-profit organisation, although the house think that this is unlikely as Singapore’s Transport Minister had previously argued against nationalisation on ground that nationalisation may lead to higher fares and become a burden on taxpayers. Scenario 2: Favourable transition to new business model for fare-based business – This could be a more likely scenario given that SMRT’s core fare-based business suffered an operating loss of $32m in 2013 and is expected to remain a key drag to profitability in the future. Overall, while a change is imminent, it is highly speculative to conclude that the terms will be favourable to shareholders. In particular, Maybank-KE is concerned over the treatment of the asset purchase obligations under the old rail financing regime (note). In the absence of material announcements, the house advises investors to stay cautious. SMRT trades at a rich valuation of 30x FY15E P/E. The house maintains Sell with TP $0.60.

China Aviation Oil

China Aviation Oil (CAO): Li Runsheng, an oil and gas veteran, joins CAO as an independent director. Li is currently the Vice Chairman of China Petroleum and Chemical Industry Association and is responsible for its business growth. Li He was actively involved in the China-US Fossil Energy Cooperation Protocol, and has contributed significantly to the strategic development of the oil and gas industry in China since 2006. The move is in line with CAO's commitment to becoming a global top-tier integrated transportation fuels provider.

PACC Offshore Services

PACC Offshore Services: PACC Offshore Services, part of the empire of Malaysia richest man- Robert Kuok, debuts this morning with its IPO price of $1.15. The 252m shares that were up for offer were reportedly 3x subscribed, mainly driven by the public offer tranche of 40m shares. We caution investors that while demand in the international (institutional) offer tranche met the available supply, we do not rule out that the relatively larger shareholders may pare down their stake if the allocation given was above their requirements. PACC is the largest Asia-based international operator of offshore support vessels and one of the top five globally. The group has a fleet of 112 vessels that serves the offshore oilfields in Asia, Africa and Latin America. Based on the IPO price of $1.15, PACC is valued at a premium 22.5x P/E compared to the relatively smaller offshore providers' average of 10.2x, while the 1.4x P/B is in line with peers.

Hong Leong Finance

Hong Leong Finance: 1Q14 net profit slipped 5.4% y/y to $14.4m, while revenue dipped 2.6% to $64.1m, mainly due to a 23% decline in fee and commission income, as well as lower interest income and hiring charges (+1.5%). NIM improved 0.7ppts to 59.1% on lower interest payable on deposits resulting from a combination of lower prevailing interest rates and a lower deposits base. Net loan assets grew 1.3% to $9.1b, while deposits and balances of customers decreased 1% to $9.9b. NAV/share of $3.75.

Sheng Siong

Sheng Siong: 1Q14 net profit grew 19.3% to $12.5m while topline increased 5% to $189.7m. Increased sales were from 8 new stores in 2012, as well as a 3% increase on a SSSG basis, result of longer operating hours and increased marketing initiatives. Bottom line was improved by gross margin which climbed 1.3ppt to 23.8%, due to adjustment to rebates received, as well as efficiency gains from the Mandai distribution center. Increase in admin costs arose from higher bonus provision for better performance in 1Q14 vs 1Q13. Sheng Siong did not find a suitable retail space to open stores in 1Q14, this being the same from FY13. It now has 33 stores. The supermarket space competition is likely to continue, while cost pressures on food and manpower would remain the trend. Management will continue its margin enhancement activities. Sheng Siong trades at annualized 1Q14 P/E of 16.5x Daiwa remains O/PF with TP of $0.67

Suntec REIT

Suntec REIT: 1Q14 DPU was in line and flattish at 2.229¢, due to the absence of capital distribution from the sales proceeds of CHIJMES (additional 0.12¢) and income loss following start of Phase 3 AEI at Suntec City. Otherwise, 1Q14 DPU would have been higher by 5.7% y/y. Distributable income inched 1.2% to $50.9m. Revenue rose 32.8% to $66m while NPI shot up 42.7% to $43.8m, mainly due to the opening of Suntec Singapore Convention & Exhibition Centre following AEI. Gross office revenue was 4.1% higher at $33.2m from positive rental reversions but retail revenue fell 4.3% due to ongoing AEI. Portfolio occupancy was 99.4% for Office and 98.7% for Retail. Aggregate leverage stood at 38.4% at end March, but would have dropped to 35.1% upon prepaying the $350 loan facility on 11 Apr using private placement proceeds. Phase 3 AEI commenced Feb’14, and TOP is expected by end FY14, with full opening in 1Q14. NAV at end Mar was $2.076, translating to 0.84x P/B. Annualized 1Q14 yield is 5.1%. Latest broker ratings as follows: Maybank KE maintains Hold with TP increased to $1.70 (from $1.63) Daiwa maintains Buy with TP $1.92 CLSA maintains O/PF with $1.80 Deutsche maintains Hold with TP $1.68

SG Market (25 Apr 14)

US Market: US stocks finished higher in a choppy session with S&P 500 (+0.2%) and Nasdaq (+0.5%) advancing as tech shares rallied, led by Apple, but escalating tensions in Ukraine held the broader market in check. The market had opened higher on stronger durable goods orders, which jumped 2.6% in Mar, ahead of 2% estimate although this was weighed by higher-than-projected rise in weekly jobless claims. Much of the volatility was driven by growling concerns over the violent anti-separatist offensive in Ukraine, which prompted Russia to begin military drills near its border. At the centre of attention, however, was Apple (+8.2%), which lifted the technology sector (+1.1%) after it reported surging iPhone sales, raised dividends and unveiled a 7-for-1 stock spilt and US$30b share buyback plan. Homebuilders (+3.8%) jumped after results from DR Horton (+8.3%) and PulteGroup (+2.3%) beat forecasts. Caterpillar (+1.8%) rose on better-than-expected 1Q results. Limiting the gains was the telecom sector (-1.7%), dragged by earnings concerns of Verizon Communications (-2.4%), AT&T (-3.8%) and Qualcomm (-3.5%). United Airlines (-9.8%) sank after reporting a US$609m loss. After the closing bell, Microsoft (+2.4%) and Amazon (+0.5%) advanced after both posted quarterly results. With both Nikkei (-0.3%) and Kopsi (-0.4%) opening on a weak note, S’pore shares may see some profit-taking with the STI heading towards near term support at 3,230 with upside resistance capped at 3,320. Stocks to watch: *Genting SP: Positive read-across from Las Vegas Sands 1Q14 results last night. LVS’ Marina Bay Sands property saw a rebound in visitors, and S’pore EBITDA jumped 9.7% to US$435m. *SMRT: Replied to SGX’s query that it is not aware of any information which might explain the movement in its share price. Market watchers speculate two possibilities: 1) favorable policy announcement regarding the Railway Financing Framework, and 2) nationalization of SMRT via a general offer. *New IPO – POSH (PACC Offshore Services): Debuts today at 9am with TP $1.15; public offering of 40m shares was 3x subscribed. *Olam: Temasek’s $2.23 per share offer has turned unconditional, after acceptances cross the 50% level. The offer will be extended till 23 May. *Suntec REIT: 1Q14 DPU was roughly flat at 2.229¢, slightly below consensus. Revenue rose 32.8% to $66m, while net property income surged 42.7% to $43.8m, driven by the opening of Suntec Singapore Convention & Exhibition Centre upon completion of asset enhancement (AEI). Office revenue grew 4.1% to $33.2m, aided by positive rental reversions, while retail revenue dipped 4.3% due to ongoing AEI. Full opening of Suntec City retail by 1Q15. Suntec maintained near full portfolio occupancy for both office (99.4%) and retail (98.7%). Aggregate leverage improved to 38.4% from 39.1%. NAV/unit at $2.076. *Sheng Siong: 1Q14 net profit expanded 19.3% y/y to $12.5m, while revenue increased 5% to $189.7m, driven by higher same store sales (+3%), and contributions from 8 new stores. Gross margin improved 1.3ppt to 23.8%. *Hong Leong Finance: 1Q14 net profit slipped 5.4% y/y to $14.4m, while revenue dipped 2.6% to $64.1m, dragged by lower net interest income (-0.5%), and fee and commission income (-23%). Management noted that pricing for lending products remained under some pressure, but was mitigated by an overall growth in the total loan book (+1.3% to $9.1b). Net interest margin improved 0.7ppts to 59.1%, helped by lower prevailing interest rates and a lower deposits base. NAV/share at $3.75. *Hwa Hong: 1Q14 net profit jumped 31.4% y/y to $2.4m, boosted by a $1.4m unrealized FX gain from a UK investment. Revenue however, fell 34.8% to $5.7m, mainly due to a decrease in investment revenue income arising from a decline in share trading activities. *Ascendas India Trust: 4Q13 DPU increased 17% y/y to 1.22¢. Revenue rose 3% to $31.5m, helped by higher rental income from Aviator, but offset by a stronger SGD against the INR (+11%). Net property income grew 14% to $19m as total property expenses declined by 10% in SGD terms. Portfolio occupancy was 97%. Aggregate leverage was 22%. NAV/unit at $0.62. *Union Steel: Proposed to acquire eight parcels of land from Chye Hup Heng Sdn Bhd (CHH) for an aggregate RM41.8m ($14.4m), which includes the buildings, plant, machinery, equipment and vehicles used for CHH's metal recycling business, in line with the group’s plans to expand its current recycling business. The acquisition will be funded by bank loans and internal funds. Pro forma EPS is expected to increase by 6.3% to 1.7¢. *OKP: Won a $37.7m contract from LTA to widen Tanah Merah Coast Road. Expected completion by 2017. *Metech Int’l: Hired to Lim & Tan Securities as the agent for its placement of 160m new shares (6.8% of enlarged share base) at 1.44¢ a piece. The net proceeds of $2.3m will be used for general working capital (60%) and to expand business operations in the US and Asia (40%).

Thursday, April 24, 2014


SMRT: CIMB gives two possible scenarios that could explain the rise in SMRT’s share price today. Scenario 1: Railway Financing Framework in place - Highly possible – The house believes that SMRT is making inroads with regulators regarding the accounting of asset transfers under the new rail-financing framework. This is assume to be very close to a conclusion. In short, the end result will be a predictable cash flows and a more sustainable financing model, which will alter the fate of the company. Under the new rail financing framework, LTA will collect a licence charge that the operator will pay for the right to run and generate returns from the revenue service. The monies received will be pooled together to replace and enhance operating equipment such as trains, signaling systems and other operating assets for operating the Railway Transport System (RTS). The licence charge comprises fixed and variable components. The fixed component is calibrated to take into account factors such as the viability of the line, its long-term operational and maintenance needs, and the benefits and costs that the line is likely to bring to/impose on the rest of the railway network. The variable component ensures the appropriate level of risk-sharing between government and the operator. CIMB modelled in significant amount of service enhancement works that would be completed within the next 24 months, related costs would taper, leading to margin recovery in FY15F. As such, the house sees a 36% yoy improvement on core net profit (FY15 net profit S$84m). The shift/change in business model (to cost-plus model, if indeed this happen) will would also go a long way into reversing SMRT’s bus losses 12-18 months from now and significantly improve margins, earnings and cash flows. This should help mitigate the incremental costs required to improve the other related opex, which are currently causing severe the cost-revenue misalignment. Scenario 2: Nationalization of SMRT? - Lower possibility – Though not ruled out entirely, is the possibility of nationalizing the company. CIMB however do not think it is in the interest of the government to “own” back the company, and subject itself to further abuse from disgruntled commenters whenever trains breakdown, or fare increase is necessitated.

Frasers Commercial Trust

Frasers Commercial Trust: Frasers Commercial Trust (FCOT) 2QFY14 results were largely in line, with distributable income of $13.8m (+5.6%) and DPU at 2.05¢ (+3%), taking 1H14 DPU to 4.1¢ (+15%). Gross revenue and net property income (NPI) fell 3.7% and 5.8% to $28.6m and $21.7m respectively, mainly due to the weaker Australian dollar and the lower occupancy for Central Park. This was however offset by higher gross revenue from the REIT’s Singapore properties (+4.2%), mainly due to higher occupancy and rental rates achieved by Central Square Central. Despite the lower gross revenue and NPI, the higher DPU was a result of higher distributable income arising from savings in the CPPU distribution. Overall, FCOT’s portfolio occupancy as at 31 Mar ‘14 stood at a strong 97.5% with a healthy weighed average lease to expiry (WALE) of 4.1 years and a fairly stable aggregate leverage of 37.8%. Going forward, FCOT expects China Square Central to continue benefitting from the Precinct Master Plan, asset enhancement initiatives and the Telok Ayer MRT station on the Downtown Line which opened in Dec ‘13. The expiry of the master lease at Alexandra Technopark in Aug ‘14 will also provide the Trust with stronger growth going forward. FCOT will also be implementing the distribution reinvestment plan (DRP) for 2QFY14, which will provide unitholders the option to receive their distributions either in the form of Units or cash or a combination of both. This will enable the Trust to enlarge its capital base, strengthen its working capital reserves and improve liquidity. At the current price, FCOT trades at an annualized FY14 yield of 6.4% and 0.83x P/B versus its commercial peers average of 6.3% yield and 0.85x P/B. Latest broker ratings as follows: CIMB maintains Add with TP $1.39 OCBC maintains Buy with TP $1.45

Viking Offshore (technical)

Viking Offshore: Technicals look favourable after counter broke out of its pennant on good volumes two days back, supported by positive momentum on its MACD crossover, rising RSI and Stochastics. Immediate support at $0.132, while resistance levels are at $0.137 and $0.145.


Centurion: has sold its Australian optical disc unit for $1.24m. This is a positive as the business has been incurring losses and eroding margins. With the sale, margins will improve as the company puts greater focus on its accomodation business despite a drop in revenue. OSK-DMG maintains Buy with higher TP of $0.88 (from $0.82), on higher earnings due to lower costs

Cache Logistics Trust

Cache Logistics Trust: 1Q14 results broadly in line. DPU fell 2.4% to 2.14¢, while distributable income fell 5.5% to $16.6m. Revenue and NPI both climbed 8.2% to $20.7m and $19.6m respectively, attributable to additional rental income higher rental and acquisition of an investment property in 2013. Portfolio occupancy was 100%, with WALE of 2.9 years. In the quarter, Cache renewed its master lease at Kim Heng warehouse with Kim Heng Group for another 2 years. Aggregate leverage stands at 29.1%. The most recent event was the announcement to build a BTS warehouse for DHL, consisting 2 blocks, where Block 1 comprises a three-storey ramp-up warehouse and a four-storey ancillary office, while Block 2 is a two-storey ramp-up warehouse, in Tampines. Maybank KE understood that contenders for this bid included GLCs such as the Mapletree group of companies. This new BTS is expected to account for 12% of Maybank KE’s total GAV, which is commendable. Aside, concentration risk is reduced, as CWT/C&P (sponsor), whose master leases are expiring in 2015-16 currently constitutes ~65% of portfolio GFA. Upon completion of the DHL warehouse, this is lowered to ~54%. That said, Maybank KE remains Hold with TP unchanged at $1.15, in light of oversupply of warehouse space could pt pressure on occupancy rates and industrial rents, notwithstanding industrial players adopting a cost-conscious attitude. NAV at end Mar was $0.98, translating to 0.9x P/B, with 1Q14 annualized yield at 7.4%

Mapletree Commercial Trust

Mapletree Commercial Trust: 4QFY14 results in line. DPU was 12.4% higher y/y at 1.953¢, while distributable income rose 17.1% to $40.7m. Revenue climbed 12.9% to $68.6m, while NPI rose 12.2% to $50.9m, on the back of positive contributions from VivoCity, PSA Building and full quarter contribution from Mapletree Anson following its acquisition in February last year. Mapletree Anson delivered a DPU accretion of 1.3%, but its occupancy rate fell 6.2ppt to 93.8ppt q/q as a single tenant moved out upon lease expiry. Management guides the space has been committed. Consequently, portfolio occupancy to be shaved off by 0.5ppt to 98.2%. Given strong operating performances at VivoCity and PSA Building, MCT’s portfolio was revalued upwards by 5.3% to $4.03b. As a result, aggregate leverage inched lower by 2.2% to 38.7%. At VivoCity, shopper traffic rose 1.4% and tenant sales climbed 5.6% in the year. Management added that except luxury watches, all trade categories have shown growth. Leases which expired in the year were renewed at an average fixed rent increase of 37.7%. NAV at end Mar was $1.16, translating to 1.1x P/B, while FY14 yield is 5.9%. Latest broker ratings Deutsche: Maintains Buy with increased TP of $1.53 from $1.47 HSBC: Maintains O/W with increased TP of $1.36 from TP $1.30


Rex: London-based broker, SP Angel Corporate Finance, issues brief report on Rex with TP of $1.19. It is expected that SP Angel would issue a more comprehensive report on Rex International Holding in the coming weeks. Report can be found at


Vallianz: Vallianz announced that its has submitted an aggregate US$1.2b worth in bids for projects in Asia, Middle East, Latin America and Africa. To support upcoming projects, Vallianz intends to further expand its fleet by almost five-fold over the next two years from the current five vessels, comprising a range of vessel types. The expansion will be supported by collaboration agreement with a Chinese shipyard, which Vallianz has the right of first refusal with on the vessels constructed, in exchange for market intel. Revenue over the next five years will be underpinned by its vast order book of US$470m. By simple averaging, this equates to US$23.5m over each of the next 20 quarters, compared to US$20m that Vallianz reported from its latest financial year.


CRCT: 1Q14 results in line as distributable income raced 13.2% to $19.6m and DPU up 3.9% to 2.4¢, mainly from CapitaMall Grand Canyon's (Beijing) first full quarter contribution, partially offset by the absence of contribution from CapitaMall Minzhongleyuan (Hubei), which has been closed for AEI works since Jul '13. Meanwhile, gross revenue increased 22.4% to $48.1m and NPI accelerated 25% to $32.3m, supported by healthy rental reversion of 23% at its multi-tenanted malls. Overall occupancy held steady at 98.4% across its 9 retail malls (excluding Minzhongleyuan), with average lease to expiry of 9.6 years (by NLA). Traffic at its operational multi-tenanted malls dropped 3.3% q/q (+7.3% y/y), in line with tenant sales (-0.9% q/q, +14.3% y/y). Although aggregate leverage ratio lowered 0.8ppts to 31.8% and term to maturity lengthen 0.1 years to 2.46, cost of debt grew a full percentage point to 3.6% from the consolidation of RMB loans arising from CapitaMall Grand Canyon. Investors may be looking forward to Minzhongleyuan's re-opening in 2Q14, which has achieved committed occupancy rate of 90% at gross rental being 11.5% higher than management's initial forecast. At $1.46, CRCT trades at 1Q14 annualized yield of 7% and 1x P/B, in line with the Chinese retail peers' average Mapletree Greater China Commercial Trust, Fortune REIT and Perennial China Retail Trust.


SGX reported 3QFY14 results that were broadly in line, with net profit of $75.8m (-22% y/y, -1% q/q) and revenue of $165.6m (-13% y/y, flat q/q). The result brings 9M14 net profit to $243m (-2% y/y). The slowdown in the securities business segment which made up 32% of group revenue (40% previously) was the main drag, with revenue from the segment down 32% to $52.3m as total traded value of securities fell 35% to $67.4b. The impact of the fall in trading was partially offset by a 5% rise in average clearing fee to 3.1 basis points due to an increase in uncapped trades. Derivatives revenue inched up 2% to $52.3m, despite total volumes declining 5% to 26.3m contracts, largely due to a drop in volume of the Nikkei 225 futures. The corresponding period had previously seen a surge in demand, buoyed by heightened optimism on the Japanese economy. The decline was partially offset by a rise in volumes of the China A50 and iron ore futures and cleared iron ore swaps. During the quarter, a total of five listings raised $0.4b versus the $1.8b raised from six listings a year ago. Total equity funds of $0.7b were raised, compared to $1.5b previously, while $49.7b was raised from 117 new bond listings, versus $48.6b from 107 bonds in 3QFY13. Going forward, SGX remains confident that the securities market will recover over time and in the quarters to come, SGX will focus on a series of transformative initiatives in its securities market. The exchange will also continue to launch new products, expand international distribution, and strengthen its regulatory and risk management capabilities. At the current price, SGX trades at 23.0x annualized 9MFY14 P/E, in-line with its regional peers of 22x. Interim DPS of 4¢ was maintained. Latest broker ratings as follows: OCBC maintains Hold with TP $7.22 Phillip Securities maintains Neutral with TP $7.04

SG Market (24 Apr 14)

US stocks ended lower, snapping a six-day winning streak for the S&P 500 and Nasdaq, dragged by weak new home sales and mixed earnings reports. Sentiment took a hit after new home sales plunged 14.5% in Mar to a 384,000 annual pace - the lowest level since Jul and well below forecast of 450,000. The Markit survey of manufacturing PMI for Apr slipped to 55.4, missing estimates of 56. Boeing (+2.4%), Dow Chemical (+0.9%) and Delta Air Lines (+6.1%) registered strong gains from upbeat results but the impact was offset by poor performances from telecom firm AT&T (-3.8%) and biotech giant Amgen (-5%). Homebuilders lost 1.6% with DR Horton (-2.2%) among the biggest declines. Also weaker were major tech plays Google (-1.5%) and Microsoft (-0.8%). Earnings reports from tech heavyweights Apple and Facebook after the closing bell drew much attention. Facebook (+2.8%) rallied in extended trading after its 1Q profit nearly tripled, while Apple (+7.5%) surged after its quarterly earnings topped estimates and approving a 7-for-1 stock split and US$30b share buyback. S’pore shares finally succumbed to the overbought market situation yesterday, and could see a short term pullback. The STI may look for downside support at 3,230 with possibility of filling the runaway gap at 3,219. Stocks to watch: *MCT: 4QFY14 DPU grew 12.4% y/y to 1.953¢. NPI climbed 12.2% to $50.9m, on the back of positive contributions from VivoCity, PSAB and full quarter contribution from Mapletree Anson (acquired Feb ’13). Portfolio occupancy remained healthy at 98.2%, with a WALE of 2 years. Aggregate leverage improved 2.2% to 38.7%. NAV per unit stood at $1.16. *Cache Logistics Trust: 1Q14 DPU fell 2.4% to 2.14¢, while distributable income fell 5.5% to $16.6m. Revenue and NPI both climbed 8.2% to $20.7m and $19.6m respectively, attributable to additional rental income higher rental and acquisition of an investment property in 2013. Portfolio occupancy was 100%, with WALE of 2.9 years. Aggregate leverage stood at 29.1%. NAV per unit of $0.98. *CRCT: 1Q14 results in line. Distributable income increased 13 y/y to $19.6m, while DPU grew 4%to 2.4¢, driven mainly by CapitaMall Grand Canyon's (Beijing) first full quarter contribution, though partially offset by the absence of contribution from CapitaMall Minzhongleyuan (Hubei) which has been closed for AEI works since Jul '13. Gross revenue jumped 22% to $48.1m and NPI expanded 25% to $32.3m, supported by healthy rental reversion at its multi-tenanted malls (+23%). Overall occupancy rate held steady at 98.4% with WALE of 9.6 years. Aggregate leverage ratio improved 0.8ppts to 31.8%. NAV per unit stood at $1.48. *SGX: 3QFY14 slightly beat bearish street estimates. Net profit fell 22% y/y to $75.8m, while revenue was down 13% to $165.6m, as securities revenue plunged fell 32.4% to $52.3m following a penny stock rout. Derivatives revenue decreased 1.5% to $52.3m, while Issuer Service and Market Data Connectivity revenue recorded slight increases. *Genting HK: Beneficiary of potential recovery of bilateral tourism flows, after HK lifted sanctions against the Philippines. Both governments agreed to resolve the diplomatic dispute over the handling of the 2010 hostage crisis in Manila that involved the deaths of some HK tourists. *Vallianz: Updates that it has participated in bids worth over US$1.2b for projects in Asia, Middle East, Latin America and Africa. To support the potential projects, Vallianz intends to expand its current fleet of five vessels by an additional 24 vessels to be delivered over the next two years. *GLP: Signed five new lease agreements with existing third-party logistics customers, for a total of 155,000 sqm of space in Shanghai and Guangzhou. *Wee Hur: MOU to invest a total of Rmb120m for a 37% stake in two mixed-used development projects in Jiangsu. *Rex Int’l: London-based broker, SP Angel, has initiated coverage on Rex with a TP of $1.19. It is expected that SP Angel would issue a more comprehensive report on Rex in the coming weeks. *City Dev: its 70% owned Millenium & Corpthorne NZ updates that associate First Sponsor Capital has received an eligibility-to-list letter from SGX for its proposed IPO. If successful, the latter, a Chinese property developer, expects the listing to occur in 3Q14. *Sunpower: Hired Stirling Coleman Capital as its agent for the placement of up to 65.8m new shares at $0.14 each. The net proceeds of $8.9m will be used for general working capital. *BRC Asia: To issue up to $10m worth of equity-linked redeemable convertible bonds (CB) to 11 investors, with net proceeds to be used for working capital. The CBs carry a coupon of 5% pa, and have a conversion price of $0.20 per share. Share dilution of up to 5.33% upon full conversion. *Sing Land: UIC has raised its stake to 90.15%. Sing Land no longer meets SGX’s minimum free float requirement of 10%, and the shares will be suspended following the close of UIC’s takeover offer on 25 Apr. *Sinotel: Profit warning. Expects to report a loss for 1Q14 due to lower equipment sales.

Wednesday, April 23, 2014


SCI: Share price hits a 52-week high, coming in tandem with an article by the Business Times yesterday, where Sembcorp Industries (SCI) guides that it is planning to reactivate its property development subsidiary, Sembcorp Properties, in an attempt to develop residential and commercial properties in its existing industrial parks. With 11 industrial park projects in China, Vietnam and Indonesia currently, the group is guiding for its urban development segment to register a three digit net profit by 2020, versus the current $50m in FY13. Historically, SCI sells land to third party property developers after its land master planning, however following a review, the group believes that it is able to undertake selected residential and commercial property developments, which will enable it to drive new projects and set a quality standard in its township settlement, while enhancing its overall earnings. As a start, SCI aims to focus on mid to high end residential developments in the Singapore-Cichuan Hi-tech Innovation Park in Chengdu and the Sino-Singapore Nanjing Hi-tech Island in Jiangxin zhou, led by high demand for houses in Chengdu and Nanjing. The group also does not rule out partnering other developers in these projects going forward, in a bid to latch on their track record and expertise in property developments. Ultimately, SCI aims for its urban development pillar not to function as a standalone unit, but to synergise and complement its power and water management capabilities. At the current price, SCI trades at 11.8x forward P/E versus closest peers Keppel Corp’s 12.4x and ST Engineering’s 19.7x. Overall, the street has 10 Buy, 4 Hold and 1 Sell call ratings with a consensus TP of $5.79.


Noble: Shares have jumped more than 34% since end Jan this year, outperforming the STI’s 8.3% gain. Macquarie Research, which rates Noble at Outperform with TP $1.50, has a positive read on the proposed 51% stake sale of its agriculture division (Noble Agri Limited, NAL) to COFCO, which will be supported by a reduction in gearing and an improvement in ROE post-completion of the deal (long stop date is 31 Dec 2014). Believes the risk-reward is clearly skewed to the upside, given that Noble’s weakest division was sold at attractive valuation. NAL is a highly geared (91%, 2013), low ROE (-10%) business, which will continue to return below its cost of equity in the medium term. Yet, Noble is set to receive 51% of 1.15x on NAL’s 2014 book value in cash. Upon completion of the deal, Noble’s net gearing (avg.14-16E) will drop significantly, by 70ppt (from 99% in 2013), and ROE will improve by 0.7ppt (from 7.7% in 2013) on account of higher interest income, offset by a lower contribution from the expected gradual recovery in NAL’s ROE in 2015/16E. Macquarie’s scenario analysis on SOTP yields -5% to 41% upside for Noble. Meanwhile, Noble has been securing more off-take agreements in Energy/Metals, Minerals and Ores through its partnerships with X2 and Sundance Resources. Depending on the reinvestment amount and returns, MER sees fair values in the range of $1.50-$1.77/sh.

GLP (technical)

GLP: Counter still trading within its mid-term downtrend, although may see more upside in the near-term on continued momentum from the MACD crossover. Support at $2.73 (60 MA) followed by $2.64 (20MA), while key resistance lies at $2.85 level.

Genting SP (technical)

Genting SP: key indicators are positive and rising steadily, coupled with the potential bowl-shaped chart pattern that suggests the stock may carry on its rebound . Risk reward attractive considering the cut loss at $1.30, and technical objective at $1.50.


EuroSports: Counter in top volume today on 6% rise in share price to $0.255. Latest corp update was on 17 Mar when group completed the sale and leaseback arrangement relating to its premises at 30 Teban Gardens Crescent, paving the way for Eurosports to declare a one-time special dividend of between $6m and $8m (2.26¢-3.02¢ a share) for FYMar15. Bloomberg estimates FY14 results may be out on 15 May; Recall earlier in Feb, market watchers noted that luxury car sales have stalled, with sales in 2H13 plunging by 85-92% for top tier brands like Lamborghini, Aston Martin, Rolls Royce and Ferrari. This bodes negatively for Lamborghini distributor, Eurosports, which saw Lamborghini sales plunge from 20 in 1H13 to just 3 in 2H13. The slump came on the back of two measures that rocked the industry: a tiered Additional Registration Fee (ARF) that raised the cost of a high-end car by as much as $450,000; and a loan curb that capped borrowing at 50% of a car's purchase price, to be repaid in five years.

CapitaMalls Trust

CapitaMalls Trust (CMT): 1Q14 DPU rose 4.5% y/y to 2.57¢, in line with consensus. Gross revenue grew 5.8% to $164.7m, while NPI increased 5.3% to $114.3m, driven by higher rent reversions (+6.2%), as well completion of asset enhancements at IMM (Jun ’13) and Bugis Junction Phase 1 (Oct ’13). While portfolio occupancy remained high at 98.8%, 1Q14 shopper traffic declined 1.9% y/y, and tenants’ sales psf decreased 4%, as consumer spending fell across most trade categories. Going forward, management has planned for Phase 2 asset enhancement works at IMM to increase the number of outlet stores, and a reconfiguration of Level 2 of JCube to include more than 50 retail units. By year end, CMT may also be able to recognize a $45m net gain upon obtaining TOP for the office strata units at its Westgate Tower (30% stake). Recall that in Jan this year, the JV comprising CMA, CMT and CapitaLand collectively granted an option to a Sun Venture/ Low Keng Huat consortium, to purchase the Westgate (office component) for $579.4m. CMT’s balance sheet remains healthy with aggregate leverage at 35.1%, and an average term to maturity of 4 years. The counter trades at 1.15x P/B nad offers 5.1% annualized 1Q14 yield.


OSIM: In terms of store-count and heavy expansion, most of the heavy lifting has been done in prior years. Maybank KE estimates by year end, OSIM will be siting on a net cash piled of $300m and generating free cash flow in excess of $100m and counting. Maybank KE expects management to add another valuable brand to its outstanding portfolio. With TWG’s maiden consolidation, OSIM is expected to report revenue growth of 16% y/y in 1Q14 despite muted consumer sentiment in Singapore and Malaysia. Maybank KE also expects net profit to grow 15% y/y to $28.9m. Maybank KE maintains Buy with increased TP of $3.45 from $2.78


Wilmar: With UBS' recommendation to deploy funds elsewhere from Olam, house notes that there are few direct peers with the broad exposure Olam offers. UBS highlighted Wilmar for its exposure to palm oil, sugar, and soy processing, including primary production, processing and downstream operations. UBS believes Wilmar offers better risk/reward following the Temasek takeover offer for Olam. As at 31 Oct, UBS has a Neutral rating with TP of $3.55 for Wilmar.


Olam: UBS remain sceptical of a competing bid for Olam, and with the stock trading in line with Temasek’s offer price of $2.23/share, house believes funds are better deployed elsewhere, and therefore downgrade Olam from a Neutral to a Sell rating. UBS reckons with the limited share price upside, house do see downside risk if Temasek chooses to walk away from the offer, conditional on holding more than 50% of total diluted issued capital in the company and subject to relevant regulatory approvals. Assuming conversion of convertible notes and options, we estimate total diluted issued capital as 2,721m shares. Given Temasek and consortium members account for around 1,255m shares, acceptances or purchases of only 106m shares are required to clear this hurdle. Currently, the last date for acceptance of the offer is 9 May 2014, subject to an extension by Temasek.

Stats ChipPAC

Stats ChipPAC: 1Q14 saw net loss of US$15.8m, reversing net profit of US$3.5m in the quarter a year earlier, while revenue fell 10.1% to US$365.5m on weaker demand in the wireless communications market targeted at the high-end smartphone segment, but partially offset by strength in the low-cost smartphone segment. Gross margins shrunk 5.4ppt to 10% due to Stats ChipPAC’s high operating leverage. There was also US$2.3m impairment in the quarter for a 200mm wafer packing equipment. Management expects next quarter’s net revenue to increase by 9-14%, with EBITDA in the range of 20-25% as a percentage of revenue, based on purchased orders received or expected to receive, taking into account periodic forecast guidance by customers. NAV at end Mar is US$0.43, translating to 0.74x P/B.

Mapletree Industrial Trust

Mapletree Industrial Trust (MINT): 4QFY14 results at the higher end of street estimates, with distributable income of $42.6m (+9.5% y/y) and DPU up 5.9% to 2.51¢, mainly from lower-than-expected operating expenses. Meanwhile, gross revenue rose 4.2% to $75.2m and NPI accelerated 7.5% to $53.3m on the back of higher rental rates secured for leases across all segments except business park, with higher occupancies for flatted factories. Portfolio occupancy declined 1.2ppts q/q to 91.3% due to the exit of a large tenant at a business park, as well as an increase in leasable area (+0.8% of gfa) upon completion of asset enhancement works at Toa Payoh North 1 Cluster. Overall portfolio has weighted average lease term of 2.5 years. Aggregate leverage ratio lowered 1.9ppts to 34.4% on weighted average tenor of 2.6 years and average funding cost of 2%. Over the next three years, MINT's portfolio GFA is expected to increase by 4.3% from the current 19.7m sf. At $1.42, MINT trades at 1.2x P/B and offers an attractive 7.1% yield, in line with industrial REIT peers' average of 6.9%. Latest broker ratings: Deutsche maintains Buy, with slightly higher TP of $1.57 (from $1.48) UBS maintains Neutral with TP of $1.36

Frasers Centrepoint Trust

Frasers Centrepoint Trust 2QFY14 results were in line, with distributable income of $23.8m (+7%), and DPU at 2.9¢ (+6.7% y/y), taking 1H14 DPU to 5.38¢ (+5.5%). Gross revenue and net property income rose 2.9% and 2.0% to $41.0m and $29.3m respectively, mainly attributed to higher revenue contribution from Causeway Point during the quarter. Bedok Point however continued to be the weak spot, with occupancy rate falling to 77% from 80% in the previous quarter, due to the mall undergoing fitting-out works for incoming new tenants. Management expects Bedok Point’s occupancy rate to recover to above 95% in 2H14 upon the lease commencement of the new tenants. Overall, FCT’s portfolio occupancy as at 31 Mar ‘14 stood at 96.8%, compared to 96.7% in the preceding quarter, while the entire portfolio average rental renewals in 2Q14 registered a 9.3% increase over the preceding leases contracted 3 years ago. Aggregate leverage remained comfortable at 27.7% and a weighted average debt maturity of 2.72 years. Performance of FCT’s portfolio is expected to remain stable with the next growth catalyst likely to come from the recent proposed acquisition of Changi City Point for $305m. This will be the sixth mall in FCT’s portfolio and will strengthen FCT’s ability to continue to deliver good and stable distribution returns to its unitholders. At the current price, FCT trades at an annualized FY14 forecast yield of 6.4% and 0.93x P/B versus the retail REIT average of 6.5% forward yield and 0.98x P/B. Latest broker ratings as follows: CIMB maintains Add with TP $2.19 CLSA maintains O/p with TP $2.00 HSBC maintains O/w with TP $1.95

SG Market (23 Apr 14)

US Market: US stocks continued to grind higher, supported by strong corporate and a flurry of high profile deals in the healthcare sector. Both the S&P 500 (+0.4%) and Nasdaq (+1%) extended gains for the sixth straight session. Investors welcomed better-than-expected results from Netflix (+7%), Comcast (+1.9%), Harley-Davidson (+6.4%), Travelers (+0.6%) and United Tech (+0.8%). Healthcare led the gains, boosted by Canadian drug maker Valeant Pharmaceutical’s (+7.5%) US$45b takeover offer for Botox producer Allergen (+15%) and over US$20b of deals involving GlaxoSmithKline (+4%), Novartis (+1.3%) and Eli Lilly (+1.4%). Tech stocks reemerged as leaders after languishing for much of Mar and early Apr with Facebook (+2.9%) and Tesla Motors (+7%). Biotechs also rebounded, sending the Nasdaq Biotechnology Index 3.2% higher. The DJ Transportation Index rallied 0.6% to an all-time high as United Continental (+4.6%) and Delta Air Lines (+3%) advanced as oil prices slumped 2.6%, the most in three months. In the regions, Nikkei (+0.8%) and Kopsi (+0.2%) opened firmer in early morning trades as US President Obama begins his Asian tour from 23-29 Apr making stops in Japan, South Korea, Malaysia and the Philippines. Despite its overbought position, the STI pushed past its 3,267 resistance at 3,267 in a broad-based rally with the mid-caps such as water stocks and and property counters jumping back to life. Next objective is at 3,320 with near term support at 3,230. Stocks to watch: *CMT: 1Q14 DPU rose 4.5% y/y to 2.57¢, implying 5.2% yield, in line with consensus. Gross revenue grew 5.8% to $164.7m, while NPI increased 5.3% to $114.3m, driven by higher rent reversions. Portfolio occupancy remained high at 98.8%. Aggregate leverage at 35.1%, with average term to maturity of 4 years. Next AEIs include works at IMM to increase the number of outlet stores, and reconfiguration of Level 2 of JCube to include more than 50 retail units. NAV/unit stood at $1.74. #Mapletree Industrial Trust: 4QFY14 distributable income rose 9.5% y/y to $42.6m, while DPU climbed 5.9% to 2.51¢. Gross revenue increased 4.2% to $75.2m and NPI accelerated 7.5% to $53.3m, due mainly to higher rental rates secured for leases across all segments (except business parks), higher occupancies in flatted factories, as well as lower operating expenses. Portfolio occupancy declined 1.2ppts q/q to 91.3% mainly due to an increase in leasable area after completion of the AEI at Toa Payoh North 1 Cluster, with overall portfolio WALE of 2.5 years. Aggregate leverage ratio lowered 1.9ppts to 34.4% on weighted average tenor of 2.6 years and average funding cost of 2%. NAV/unit stood at $1.20. *Stats ChipPAC: Swung into a 1Q14 net loss of US$15.8m, from a net profit of US$3.5m a year ago. Revenue fell 10% to US$365.5m, on weaker demand in the wireless communications market which targets the high-end smartphone market, but partially offset by strength in the low-cost smartphone segment. Gross margins shrank 5.4ppt to 10%. The company also recorded a US$2.3m impairment during the quarter for a 200mm wafer packing equipment. *Aztech: 1Q14 net profit jumped 5-fold to $1.7m, albeit from a low base a year ago. Revenue nearly doubled to $85.6m (+93% y/y), primarily driven by the execution of two contracts for the supply of infrastructure materials which boosted the materials supply segment revenue to $43.8m (from $4.2m a year ago). Revenue from the electronics segment (involving the sale of data communication products) remained broadly flat at $39.3m. Going forward, management expects its business activity in 2Q14 to increase, driven by orders from existing customers for data communication products and LED lighting. NAV per share at $0.177. *SATS: 4QFYMar14 operating data. Number of flights handled grew 6.7% y/y, while unit services increased by 3.2%. Cargo throughput improved 4.4%, with express cargo and perishable segments recording the higest y/y growth. Pax handled rose marginally to 10.5m. Gross and unit meals declined 8.2% and 6.3% respectively, due primarily to Qantas Airways moving its hub for European flights away from Changi. *Rex Int’l: Its 64.2% owned subsidiary Carribean Rex has completed the acquisition of the remaining 25% stake in Jasmin Oil and Gas and in turn, now holds a 100% working interest in the South Erin block in Trinidad. *GLP: Signed two lease agreements with RT-Mart, one of the largest hypermarket operators in China totaling 38,000 sqm. Separately, GLP has also leased 11,500 sqm to Tquim in Sao Paulo. *Tritech: Awarded a $10m contract from LTA to provide instrumentation and monitoring for a 1.5km section of the Thomson Line contract. *Ley Choon: Secured $7.3m worth of contracts from PUB to supply and lay NEWater and Industrial water mains, and install water connection works in S’pore over the next 18 months. *Yoma: To hold a 20% stake in a JV with Mitsubishi Corporation (60%) and First Myanmar Investment Co (20%), that will supply and install imported elevators, escalators and related products in Myanmar. *Yanlord: Formed a JV with Haimen City in Jiangsu to develop an ~10 sqkm eco hi-tech city. *Pteris Global: Non-executive director Winston Tan has filed for resignation, with withdrawn his requisition for the removal of the five directors. * China Sky Chemical Fibre:Cautiously optimistic it will be profitable in 1Q14 *LH Group: issued profit warning, expecting a loss for 1Q14.