Singapore
What’s Relevant
Singapore benchmark index, the Straits Times Index closed down 42pts
yesterday. Market turnover amounted to 2.3bn units worth S$1.96bn. The big
drag that constitute to the decline was CapitaLand. Sentiments will
outweigh fundamentals at this point in time. As of writing, the Aussie and
Japanese indices are already down close to 2%, suggesting that more
selling pressure ahead when the Singapore market opens this morning.
 
Corporate news
Parkway Hospitals Singapore has teamed up with Overseas Assurance Corporation, a
wholly-owned subsidiary of Great Eastern Holdings, to create a
post-surgical care insurance policy which is said to be the first of its
kind in Singapore.
SIA Engineering Company Limited (SIAEC) today announced that its special-purpose wholly-owned subsidiary,
SIAEC Global Private Limited, has signed a Memorandum of Understanding
(MOU) with Gulf Technics to set up and operate a facility in Bahrain for
the maintenance, repair and overhaul (MRO) of aircraft. Gulf Technics is a
wholly-owned subsidiary of Mumtalakat Holding Company, the investment arm
of the Kingdom of Bahrain, and a sister company of Gulf Air.
Sinotel Technologies has proposed to place up to 28m new shares at S$0.5755 each. The placement
price represents a discount of about 10% to the weighted average price of
trades done on 20th Jan. The placement shares will represent about 8.3% of
Sinotel’s enlarged share capital. UOB Kay Hian Pte Ltd is the placement
agent.
 
Trades for the Day
Technically?
Ezra Holdings (EZRA SP; S$2.37 ? SELL) ?The long term uptrend for Ezra is still intact but after hitting high of
S$2.63, it formed a bearish engulfing candle.
Marco Polo Marine (MPM SP; S$0.56 ? SELL) ? Technical indicators are calling for more downside first. It could soon
test its S$0.525, its 30-day SMA and S$0.50, its 50-day SMA.
Otto Marine (OTML SP; S$0.49 ? SELL) ? Since the stock rallied in a parabolic manner, this sharp rise is usually
not sustainable in the long term.

Healthway Medical

Market darling Healthway was up another cent (5.7%) overnight on top volume, continuing its steady rise from 13 cents just last week.  That’s a 42% gain in just one week!

At 18.5 cents, the stock still has upside of 51%, based on DMG’s 28-cent target issued on Mon (4 Jan).

Healthway currently operates the largest private network of medical centres in Singapore, providing primary care, dentistry and specialist services, but has clear plans to expand in China all the way to 2015.

By 2013, it plans to double the total number of its clinics in Singapore and China to 120.

The integrated healthcare player is proposing a rights issue to fund its investment in medical centers in China. 

Net proceeds of about S$19.8 million will be raised from a rights issue at 7.5 cents per share on the basis of one new share for 5 shares held.

singapore stock market news,singapore stock market ,RPT-GLOBAL MARKETS-Asian shares edge up, dollar off highs,singapore stock market news,singapore stock market .sgx news,

Asian shares edge up in slow trade, Tokyo closed

* Dollar comes off highs as traders digest recent gains

* Oil slightly up, awaiting weekly inventory data

By Yoo Choonsik

SEOUL, Dec 23 - Asian shares edged higher on Wednesday led by a spurt in Australian stocks to a three-week high, while the U.S. dollar came off highs as traders digested recent steep gains.

Oil prices ticked higher amid expectations in a Reuters poll that U.S. weekly inventory data will show a draw down in crude stocks of nearly 1 million barrels, but the dollar’s rally is keeping a lid on the market’s upside potential.

The U.S. dollar hit a two-month high of 91.86 yen <JPY=> in early Asia trade, before edging back. But the currency remains in demand even after jumping more than 8 percent in less than a month against the Japanese currency. [ID:nSGE5BL0H7]

Australian stocks <.AXJO> rose as much as 0.8 percent to a three-week high, helped by miners such as BHP Billiton Ltd <BHP.AX>, pushing the MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> up by 0.2 percent.

In Australia, Gloucester Coal <GCL.AX> jumped more than 25 percent higher after rival Macarthur Coal <MCC.AX> offered to buy the company in an all-share deal for $591 million. The shares resumed trading on Wednesday after being halted a day earlier pending the bid.

Key stock indexes in Hong Kong <.HSI>, Singapore <.FTSTI>, Taiwan <.TWII> and South Korea <.KS11> were all modestly higher on the day. Tokyo’s stock market was closed for the Emperor’s birthday holiday, dampening activity in the region.

Spot gold <XAU=> was quoted $1,086.65 an ounce at 0232 GMT, bouncing back after touching a seven-week low of $1,074.10 in New York trade overnight.

Singapore stock market news, singapore stock market

Asian stocks mixed in sluggish trade; Europe rises

Asian stocks were mixed Monday in dwindling year-end trade, with Japan’s market rising modestly amid hopes a pickup in regional trade could help the world’s second-biggest economy avoid another recession. European shares were higher.

A number of Asian markets fluctuated in a narrow range, while the dollar was steady against the euro after strengthening last week and higher against the yen. Oil and gold prices were little changed.

Tokyo’s market got a boost after the country’s exports posted their smallest fall in 14 months with the help of robust Asian demand. The news raised hopes that a turnaround in Japan’s export sector, the engine of the country’s economy, is sustainable.

Sentiment in the region was dampened by sluggish sessions in Hong Kong and Shanghai. Investors were spooked by signs China’s government may step up restrictions on the booming real estate sector and the country’s banks may have to raise billions in new capital.

In early trade in Europe, Britain’s FTSE 100 added 0.3 percent, Germany’s DAX rose 0.5 percent and France’s CAC-40 gained 0.3 percent. Futures augured a lackluster Monday on Wall Street. Dow futures were down 78 points, or 0.8 percent, at 10,281. S&P futures rose 0.2 point to 1,097.90.

In Asia, Japan’s Nikkei 225 stock average led gains, advancing 41.42, or 0.4 percent, to 10,183.47. Markets in Taiwan and Thailand also rose.

Hong Kong’s benchmark dropped 227.78 points, or 1.1 percent, to 20,948.10. China’s Shanghai index was down most of the day before closing 0.3 percent higher at 3,122.97.

China’s market made a technical correction after a string of new share sales helped to depress prices last week by draining cash available for stock purchases, analysts said.

“It’s probably just a brief comeback after heavy selling sentiment faded. But there’s still nothing stronger enough to shore it up,” said Zhang Gang, an analyst for Southwest Securities in Beijing.

South Korea’s Kospi fell 0.2 percent, Australia’s market lost 0.3 percent and India’s Sensex was off 0.5 percent.

Friday on Wall Street, the Dow rose 20.63, or 0.2 percent, to 10,328.89, after dropping 133 points Thursday.

The broader S&P 500 index rose 6.39, or 0.6 percent, to 1,102.47, and the technology-heavy Nasdaq composite index rose 31.64, or 1.5 percent, to 2,211.69.

For the week, the Dow fell 1.4 percent, the S&P 500 index fell 0.4 percent and the Nasdaq rose 1 percent.

Oil prices were slightly lower in Asia, with benchmark crude for January delivery down 14 cents to $73.22. The January contract, which expires later on Monday, rose 71 cents on Friday.

The dollar rose to 90.55 yen from 90.33 yen. The euro was little changed $1.4307.

CHINA ENVIRONMENT, uob initial coverage BUY with target price $0.76

CHINA MERCHANT HOLDING, dbs maintain BUY with target price $0.81($0.60)

DBS, cimb maintain NEUTRAL with target price $14.97
DBS by ssb

ELEC & ELTEK by ocbc

GENTING SP, cimb maintain TRADING BUY with target price $1.27
GENTING SP, csfb maintain UNDERPERFORM with target price $0.9

MEIBAN, cimb maintain OUTPERFORM with target price $0.45

NOL, ms upgrade to EQUAL WEIGHT from UNDER WEIGHT with target price $1.50
EPS for FY09/10 raised by 15% and 14%

OLAM, cl maintain BUY with target price $2.979$2.91)

PARKWAY LIFE REIT, cimb maintian OUTPERFORM with target price $1.49
PARKWAY LIFE REIT, dbs maintain BUY with target price $1.37
PARKWAY LIFE REIT, ssb maintain BUY with target price $1.38

RAFFLES MEDICAL, csfb maintain OUTPERFORM with target price $1.65
RAFFLES MEDICAL, db maintain HOLD with target price $1.30
RAFFLES MEDICAL, dbs maintain HOLD with target price $1.41($1.06)
RAFFLES MEDICAL, dmg maintain NEUTRAL with target price $1.43
RAFFLES MEDICAL, kim eng maintain BUY with targe price $1.83($1.35)
RAFFLES MEDICAL, nom maintain BUY with target price $1.58($1.30)
RAFFLES MEDICAL, uob maintain BUY with target price $1.76

SEMBCORP MARINE, ms maintain UNDERWEIGHT with target price $2.80
SEMBCORP MARINE, ocbc maintain BUY with target price $3.85

SINGTEL, gs maintain HOLD with target price $3
SINGTEL, nom maintain BUY with target price $3.45($3.65)

STARHUB, cimb maintain UNDERPERFORM with target price $1.76

Singapore Stock Market ,Singapore Stock Market news

CHINA ENVIRONMENT, uob initial coverage BUY with target price $0.76
-China Environment Ltd, known as Gates Electronics Ltd prior to a reverse
takeover, is a provider of waste gas treatment solutions in the PRC. Based
in Longyan City, Fujian Province, China Environment specialises in the
design and production of air pollution control and waste gas treatment
systems. The Group has been able to establish a firm foothold in the PRC’s
environmental protection industry with its solid sales and marketing
network, research and development efforts, strong track record and
experienced management team.
-The Environmental Protection Industry a major beneficiary of central
government’s policies. The central government is giving more and more
attention to environmental protection as a result of expanding
industrialisation and urbanisation in China. In recent years, the central
government’s policies, such as the 11th Five- Year Plan and the Rmb4t
stimulus package have major emphasis on environmental protection and
pollution control. Other related policies include more energy-saving
projects, investment on pollution treatment and control facilities,
emission reduction of pollutants and ecological construction, all of which
provide growth opportunities for the environmental protection industry in
China.
-China Environment a solid company with proven track record. In 2008, China
Environment undertook the construction of over 150 dust collectors for
contractors or its customers, many of which are large companies in various
industries such as cement, chemical, power and steel industries. To expand
its business and enlarge its customer base, China Environment is in the
process of launching its desulphurisation and De-NOx business.
-Expect strong earnings growth in 2009-11. With China Environment’s
desulphurisation and De-NOx business ready to kickoff, we estimate it will
deliver a net profit of Rmb97.4m in 2009, followed by 64% jump to Rmb160.2m
in 2010 and 29% increase to Rmb206.2m in 2011.
-Initiate coverage with BUY recommendation and target price of S$0.76,
representing 14.8x 2010F PE.

CHINA MERCHANT HOLDING, dbs maintain BUY with target price $0.81($0.60)
-Toll income of Gui Liu Expressway surged 57% y-o-y in 3Q09, due to the
adoption of toll-by-weight scheme from 1 July 2009. Gui Huang Highway
achieved 20% growth in toll income as well, as a result of improved road
conditions after the main upgrading work completed in early July. Yu Yao
Highway’s toll income continued to decline, falling 24% in 3Q09 due to the
traffic diversion caused by change of road network.
-The Group’s top line consists mainly of property sales in NZ, which edged
up 4% y-o-y. The property business’ pretax loss narrowed by 95% to only
HK$0.5m, due to lower opex and interest expenses. However, management is
still cautious on this segment given the uncertain and challenging
prospects of the NZ property market. The Group’s profit sharing ratio in
Gui Liu Expressway will be cut from the current 90% to 40% from Jan 2010,
according to the JV agreement, which will cause a drop in the earnings
contribution from Gui Liu Expressway in FY10.
-Reiterate BUY, TP raised to S$0.81, based on fully diluted forward 12M
target yield of 5%. We are expecting S3.5cts of FY09 final dividend and
FY10 interim dividend of S2.5cts (Payout ratio FY09-56%, FY10-59%), based
on the current share capital. Full conversion of RCPS would increase share
capital by 48%. We remain positive on PRC’s traffic growth and see
earnings-accretive road acquisitions as a further catalyst.

DBS, cimb maintain NEUTRAL with target price $14.97
- Maintain Neutral rating, results above expectations. We are maintaining
our Neutral rating on DBS and our $14.97 (1.34x P/BV) target price, pending
postresults briefing. DBS’s 3Q net profit (S$563m, +2% qoq) was above our
expectations ($450m) and consensus (S$469m) by 25% and 20% respectively,
solely due to lower-than-expected loan loss provisioning. Hong Kong turned
around (3Q profits S$143m, +44% qoq) on lower credit costs. The results do
signal that the credit cycle has peaked for DBS’s Asia consumer and SME
business, but there are still some red flags over DBS’s problematic OECD
loans.
-Core banking revenues in-line, trading lost some gloss. NII was up 2.5%
qoq on flat loans (+0.3% qoq) and 2bp margin improvement. Mortgage loans
was up 3.8% qoq but was surprisingly not the sole driver; manufacturing
loans was also up 4.2%. Fee income was flat qoq. Strong IB fees, wealth
management fees compensated for lower loan fees. Core banking revenue
streams were in-line with our expectations. Trading (3Q S$83m, 2Q $234m)
came in lower-than-expected but this is not an issue to fret about. 2Q
levels were inflated anyway. Cost overheads were flat qoq (+0.6%). Cost
ratio went up to 40% (2Q 35%) as trading gains faded. PPOP was below
expectations because of weaker trading income.
- Credit cycle is a positive, but be watchful on Rest of World NPLs.
Reduced provisioning was the main reason for the beat. Total provisions
(S$265m) slipped 43% lower qoq. As new NPL flow has slowed, SPs came off to
70bp (2Q 83bp) and GPs dwindled to almost nothing (-92% qoq). Overall NPL
ratio did gravitate lower (2Q 2.8%, 3Q 2.6%) but some trends still
warranted caution. Singapore bad debt trend was flat. Improved China, Hong
Kong and SE Asia NPL trends drove down overall NPL. Unfortunately, Rest of
World NPLs were still deteriorating (2Q8.8%, 3Q9.4%); these were Middle
East and shipping loans that posed problems in 2Q. Allowance coverage stays
at 90%. Coverage on unsecured NPL was 128%.
- 16% possible upgrade in FY09 EPS, but target price unlikely to change
much. 3Q ROE was still only at 9.1% (2Q7.9%) after the big drop in
provisions, albeit one has to recognise that this quarter, trading did not
weigh in. We are likely to raise our FY09 earnings later, but this might
not affect our post-cycle normalised earnings and ROE much. Hence, our
target price (based on FY11 ROE) is likely to stay.

DBS by ssb
-Provisions near halve, NPLs fall 3Q09 profit S$563m (vs. Citi 3QE S$508m,
2Q S$552m). 9M09 S$1.55bn is 85% of Bloomberg consensus 2009E S$1.81bn
(Citi 2009E S$2bn). Net interest income +2.5%QoQ, margins 2.03%, fee income
was stable. Revenues S$1.58bn hurt by sharply lower dealing income,
pre-provision profit S$942m down 19%QoQ, stable costs. NPLs fell 7%qoq to
S$3.4bn (NPL ratio 2.6% from 2.8% in 2Q), provisions fell 43%QoQ to S$265m
(83bps of loans). HK 3Q profit S$143m (+44%qoq), lower provisions. Tier-1
ratio 12.5%. 3Q EPS S$0.95, BPS S$10.76 (2Q S$10.45). At S$12.98, DBS is at
13.7x trailing PER and 1.2x trailing P/B vs 9.3% 3Q09 ROE. S$0.14 quarterly
DPS maintained.
-3Q09 profit S$563bn (2Q S$552m), +27%qoq 3Q09 NII S$1,140m +2.5%qoq Loans
+0.4%qoq, NIM 203bps (2Q 201bps). Loan-to-deposit spread 2.56% (2Q 2.53%),
LDR 73%. Non-II S$437m down 36%QoQ, fees S$361m (+0.8%QoQ), other income
S$76m down 76%QoQ, lower dealing profit, investment gains. Total revenue
S$1,577m -12%QoQ. Costs S$635m +0.6%QoQ; cost-inc ratio 40%. Preprov profit
S$941m, -19%qoq. Provisions S$265m (2Q S$466m), 83bps of loans. NPLs
S$3.4bn, NPAs S$3.8bn, NPL ratio 2.6%. Tier-1 ratio 12.5%, CAR 16.1%.
-NPLs down 7.4%QoQ, NPL ratio 2.6%, provision charges fall 43%QoQ NPLs fell
to S$3.4bn (2Q S$3.7bn) on lower Singapore, Hong Kong NPLs, while “rest of
world” problem loans remained high. NPAs S$3.8bn (2Q S$4bn), of which 34%
(2Q 38%) were still current. 3Q09 Provisions S$265m (annualized 83bps of
avg. net loans, 2Q S$466m). S$229m specific loan allowances (-16%QoQ),
other S$ 22m, general allowance S$14m (2Q S$183m). Loan provisions cover
75% of NPLs, total provisions cover 90% of NPAs. DBS has 90% coverage of
its S$152m ABS CDOs and 37% coverage of its S$707m corporate CDO
investments, plus another S$91m CDOs in its trading book for a total of
S$950m (2Q S$1,171m).

ELEC & ELTEK by ocbc
-3Q09 profitability improved significantly. Amid signs of recovery in
global economy, Elec & Eltek (E&E) posted a significantly better set of
3Q09 results. While revenue of US$119.8m was down 15.2% YoY, PATMI grew
15.7% YoY to US$14.2m due to lower operating expenses, reduced material
costs and better usage optimization. This improved performance is more
evident sequentially, where revenue and PATMI jumped 14.9% and 38.5%,
respectively, on increased shipments. Net margin over the quarter also
improved from 8.7% in 3Q08 to 11.8% (2Q09 9.8%). For 9M09, however, revenue
of US$307.4m and PATMI of US$27.9m still represent decline of 26.9% and
25.4% respectively, due largely to comparison with pre-crisis level.
-Segmental breakdown. Proportion of sales from 2-to-6 layered PCBs
increased 2.3ppt YoY to 67.4% in 3Q09, while that from 8-and-above
accounted for 32.6%. In terms of sector, sales from Computer/Peripheral and
Communication/networking segments increased 1.3ppt and 4.7ppt YoY to 53.4%
and 19.5% respectively, whereas the rest (Consumer Electronics, Automotive
and others) collectively slipped 6ppt to 27.1%.
-Visit to HDI plant in Kaiping. Starting from September, management
observed an increased demand due to seasonal factors. To maintain its
competitive edge and cope with anticipated business from a few high
valueadded telecommunication customers, E&E is stepping up its investment
on High Density Interconnect (HDI) capacity. In fact, we recently
participated in the grand opening ceremony of its new HDI plant in Kaiping,
China. This facility, we note, is already running at ~60% utilization rate
on production capacity of 250k sqf/month, and is projected to breakeven by
1Q10. According to management, the plant is currently serving some domestic
handset players. However, upon qualification by international players
(expected to take some time), it will also accommodate these big boys.
-Plans to expand Thailand operations. In parallel to the HDI investment,
E&E is also expanding its capacity on conventional PCBs. During the analyst
briefing yesterday, the group revealed its plans to expand its Thailand
operations due to some potential attractive tax incentive. Approximately
US$120m is expected to be utilized over three years for this expansion. As
for FY10, we estimate group capex to come around US$50-60m.
-Trading below book value. At current price, E&E is trading at 6.9x FY08
EPS and 0.9x FY08 NTA. While the group had skipped its interim dividend
amid privatization talks with its parent Kingboard Chemical, it is expected
to resume dividend payment in 4Q09. We note that its dividend payout ratio
(including special dividend) averaged 95.8% over the last two years. We do
not have a rating on E&E.

GENTING SP, cimb maintain TRADING BUY with target price $1.27
-Maintain Trading Buy. Quoting Genting Group’s chairman Tan Sri Lim Kok
Thay, Bloomberg reported that Resorts World at Sentosa (RWS) is on track to
open in early Jan 2010. While not entirely a surprise, the early opening
will be a positive, in our view, as 1) it falls within the earlier part of
its 1Q2010 guidance; and 2) RWS can fully capture holiday-makers during
next year’s Chinese New Year festivities. Also, RWS’s debut is very likely
to be ahead of its rival’s, Marina Bay Sands (MBS). We continue to
anticipate growing excitement over RWS as we approach its opening date. We
retain our FY09-11 earnings estimates and end-CY10 sum-of-the-parts target
price of S$1.27. Reiterate TRADING BUY with share-price catalysts likely to
come from 1) this concrete opening date; 2) more aggressive marketing
efforts; 3) the award of its casino licence; and 4) a potentially
longer-than-expected monopoly period if MBS opens later.
-Positive development. The early Jan 2010 opening date is not entirely a
surprise. GS has always guided for a RWS debut in 1Q2010. The timing
excites us more as 1) it falls within the earlier part of its 1Q2010
guidance; and 2) RWS would be able to capture the Chinese New Year crowd,
as the Lunar New Year falls on 14 Feb next year. More importantly, an early
Jan 2010 debut is very likely to be ahead of MBS’s expected Jan or Feb 2010
opening date. We note that RWS’s first event would be a ChildAid Concert,
to take place on Dec 19-21 at its Festive Grand Theatre. Although RWS
clarified earlier on that the theatre would be the only property accessible
then, we do not discount the possibility of a soft opening of the resort to
selected guests in conjunction with the concert.
-Expecting more news flow. Besides this opening date, we expect RWS to step
up its marketing efforts in the coming weeks as it seeks to build up
excitement ahead of its opening. Another key event to watch for is the
award of its casino licence, expected before year-end.
-Still positive on RWS’s prospects. We remain optimistic on RWS’s
prospects, especially with a more concrete opening date. Furthermore, RWS’s
competitor appears still quite a distance form the finishing line. A
potentially longer-than-expected monopoly period would be positive for RWS
and could boost its numbers beyond our earlier estimates, especially with
growing anticipation for the debut of Singapore’s two integrated resorts.

GENTING SP, csfb maintain UNDERPERFORM with target price $0.9
- We believe there is downside risk to Singapore’s first year casino
revenues. Our projection of US$2.6 bn of casino revenues for Singapore
implies that its casino market will be 40% of the Las Vegas strip. Market
expectations are even more bullish, ranging from US$3 bn (equivalent to 50%
of Vegas) to a blue sky target of US$6 bn (close to 100% of Vegas).
- In 2008, the Vegas strip’s US$6.1 bn casino revenues were generated by 37
casinos while Macau’s US$13.5 bn of revenues were generated by 31 casinos.
In contrast, the market expects revenues from the two upcoming casinos in
Singapore to be at least half that of the Vegas strip and one-fitth of
Macau’s. Visitor arrivals to Las Vegas and Macau totalled 37.5 mn and 30
mn, respectively, in 2008 compared with 10.1 mn for Singapore.
- We reiterate our UNDERPERFORM rating on Genting Singapore, one of the
most expensive casino stocks in the world. In a worst case scenario, if it
were to trade in line with the Singapore market, this suggests the stock
could halve from current levels.

MEIBAN, cimb maintain OUTPERFORM with target price $0.45
- 3Q09 core results above; maintain Outperform. Excluding a forex loss of
S$1.2m, 3Q09 core net profit of S$5.5m (+27% yoy) was 17% above our
estimate due to higher-than-expected sales and lower-than-expected opex.
9M09 reported net profit forms 71% and 70% of consensus and our full-year
forecasts, respectively. We have reduced our FY09 estimate by 7% to factor
in the slightly weaker-than-expected 3Q09 reported numbers, but have kept
our FY10-11 numbers intact. We continue to rate Meiban an Outperform as we
like its strong free cash flow business, decent yields, and proactive
management. Our target price remains S$0.445, conservatively based on 0.9x
CY10 P/BV.
-Sales contracted 8% yoy, but improved 11% qoq to S$116m, slightly ahead of
our expectation of S$112m. No surprises, given the strength in its HP
printer and Dyson vacuum cleaner businesses.
- EBITDA margins improved 30bp yoy and 10bp qoq as lower gross margins were
offset by lower opex. Unfortunately, the group was hit by a sudden drop in
the US$ at end-3Q09, resulting in a forex loss of S$1.2m. Excluding a
one-off revaluation gain of S$3.1m in 3Q08 and the forex swing, net profit
of S$5.5m was still better than the same period last year, reflecting
successful efforts to lower its cost structure.
- Still generating free cash flow. Meiban generated about S$5m of positive
free cash flow during the quarter, lifting its net cash position to S$30m
from S$26m at end-June. Cash cycle days extended by 12 days qoq as a result
of the higher sales.
-Effects of changes in HP’s supply chain to surface from 4Q09. Our
discussions with management indicate that Meiban will start to feel the
pinch of changes in HP’s printer supply chain from 4Q09. Its Wuxi plant,
supporting mainly Jabil, will be affected as Jabil had been completely
taken out of HP’s inkjet printer programmes at end-Sep 09. Nevertheless,
Meiban is seeking new business from its non-HP customers. It may also
benefit from Dyson’s continuous efforts to roll out interesting new
products, the latest being a no-blade fan.

NOL, ms upgrade to EQUAL WEIGHT from UNDER WEIGHT with target price $1.50
EPS for FY09/10 raised by 15% and 14%
-Upgrade to EW The recent stock price correction on the back of weaker than
expected 3Q09 results and management guidance for significant losses at
least through 1H2010, has been factored into most of the downside for NOL
stock, in our view. We believe that container shipping market fundamentals
remain extremely dire and shipping companies, including NOL, are unlikely
to be profitable over the next 12 months. Conversely, with the magnitude of
losses over the last 12 months being of unprecedented severity and the
balance sheets of all shipping companies deteriorating sharply, we think
that shipping companies are now more likely to be united in raising freight
rates towards covering cash costs. We believe that NOL’s effective cost
mitigation strategies in place since late 2008 well position NOL for
longer-term competitiveness and a return to profitability in 2011.
-Where we differ Our loss estimates for NOL in 2009- 10 are higher than
consensus as we expect freight rates to be capped at below profitable
levels due to the significant order book and latent containership supply.
We expect consensus earnings downgrades on the back of the weaker than
expected 3Q09 results and management’s cautious guidance for 2010.
-What’s next We view the catalyst to own NOL stock is
stronger-than-expected consumer demand over the holiday retail season,
because with inventory at low levels, restocking could result in stronger
1H 2010 volumes and in turn, buoyant sentiment could result in successful
rate hikes in mid 2010.

OLAM, cl maintain BUY with target price $2.979$2.91)
-Improving demand for Olam’s weak sectors such as confectionary and fibre
makes us sanguine of a good 1Q10 result which will set the tone for a
strong FY10. Separately, we estimate Olam’s purchase of almond assets in
Australia will add 3-12% to FY10-12 earnings. With a S$2bn war-chest we
expect M&A momentum to pick up as Olam executes their strategy to double
net margins. We raise our DCF and peer based target price from S$2.91 to
S$2.97. With 21% upside, we reiterate our Conviction BUY.
-Demand outlook positive for FY10. Improving demand profiles amongst Olam’s
weakest segments makes us sanguine of a good 1Q10 result. More importantly
this will set the tone from a strong FY10. The Group’s confectionary
volumes contracted 17% YoY in 4Q09, but with European cocoa grindings up
18% QoQ since, we expect a turnaround. Similarly, our checks with
Management point to improvement in cotton demand from both the US and
China, while Chinese dairy consumption is starting to see signs of recovery
after the earlier Melamine scares. In coffee, the Group’s intra-country
business continues to strengthen, especially in Latin America where Olam is
gaining market share.
-Recent acquisitions are earnings accretive… Once Olam’s acquisition of
Timbercorp’s Australian almond business is complete in 2Q10, we expect this
to add 3-12% to FY10-12CL earnings as the almond plantations progress to
maturity. Similarly, the Group’s SK Foods purchase in the US will be
consolidated in 1Q10 earnings. Management claims one-third of the current
season’s harvest is already pre-sold, which will result in further upside
to 2Q and 3Q10 earnings.
-…more deals to come. Olam has clearly articulated a strategy that will see
them drive growth inorganically. The Group’s past acquisitions generated a
ROI of 6.4% in FY09; a tough year and delivered a net contribution per
tonne that is double of its legacy businesses. Execution risks
notwithstanding, we believe these new acquisitions will drive net margins
from 2% to 4% by FY15.
-Raising target price to S$2.97. BUY. Incorporating Olam’s almond assets
sees us upgrading FY10-12 earnings by 3-12%. This raises our DCF and peer
valuations based target price from S$2.91 to S$2.97 incorporating a
weighted average of a high growth scenario and a organic only scenario.
With 21% upside, BUY

Central banks in South Korea, Singapore and Thailand likely intervened in the foreign exchange market Tuesday to curb the rise of their currencies, reflecting an effort by many Asian countries to keep their exporters competitive as the U.S. dollar swoons.

The interventions, reported by currency traders but not confirmed by the authorities, came as Asian currencies soared, with some hitting 12-month highs against the dollar, as traders worried about the outlook for the U.S. currency.

The dollar has tumbled against a broad range of major currencies in recent months, dogged by concerns that rock-bottom interest rates and soaring government debt in the U.S. will undermine its value, prompting official reserve managers to seek alternatives such as the euro.

Fears of an eventual shift away from the dollar as a benchmark in international trade flared up again following a report Tuesday in U.K. newspaper, The Independent, which said China, Russia, Japan, France and a host of crude oil-producing Middle East nations were quietly planning to end the pricing of oil in dollars, replacing it with a basket of currencies.

Coming to the dollar’s defense, Japanese Finance Minister Hirohisa Fujii said the U.S. currency remains the world’s key reserve currency. He said intervention would be necessary if foreign exchange movements were “outrageously reckless” but added that currency markets were not acting in an “extremely abnormal” manner at the moment.

Save for those in Japan and Malaysia, all of the main central banks in East Asia have been suspected of buying dollars to slow down the rise in local currencies over the last three months.

At 0632 GMT Tuesday, the dollar was at KRW1,167 against the Korean won, down from KRW1,173 at the Asian close Monday. Against the Thai baht, it was at THB33.35, down from THB33.42 over the same period. The U.S. currency was at S$1.4020, falling sharply versus the Singapore dollar from S$1.4101 late Monday.

This latest dollar selloff highlights the difficulties faced by Asian central banks, which hold around a third of the world’s reserves, mostly in dollars, and struggle to find viable uses for them other than buying U.S. Treasurys.

Kim Ik-joo, Director General of the International Finance bureau in the Korea’s Ministry of Strategy and Finance, blamed “foreign players” for the rapid strengthening of the won, which has climbed 8.2% against the dollar over the last three months. He also made the strongest warning on this issue in recent times.

“If fundamentals remain distorted, we will take stronger action than smoothing operations,” Kim said.

Korean traders said the central bank appeared step in since early trade to buy the dollar, possibly with the intention of keeping it above KRW1,170.

In Thailand, dealers said they suspected modest intervention by the Bank of Thailand. Traders say Thailand’s is one of the Asian banks that has intervened most heavily to cap its currency. The Thai baht is up 1.8% against the greenback in the last three months.

In Singapore, the MAS sought to stop the dollar from dropping to S$1.4020 or lower, a person familiar with the situation said.

“The (U.S.) dollar has been down against everything in Asia,” the person told Dow Jones Newswires.

The MAS uses the Singapore dollar as its chief policy tool - managing it in an undisclosed, trade-weighted band - because trade dwarfs the island state’s domestic economy.

With no serious concerns about domestic price stability in the near term, economists say that growth will likely remain the Singapore authority’s main policy concern for now. Government officials have repeatedly warned about a possibility of a “double-dip” in the economy in recent weeks, noting persisting weakness in advanced markets like U.S. and Europe.

Wall Street’s run-up on better-than-expected September U.S. service sector performance, Goldman Sachs’ upgrade of banking industry, expectations of positive corporate earnings may help revive buying interest in Singapore shares. STI closed down 0.8% at 2583.73 yesterday, with market breadth negative at about 6 decliners for every gainer. Technical gap of 2620-2649 formed late last week likely to offer resistance. Despite positive lead from U.S. market, sustainability of any gains in near term remains unclear. With valuations at mid-cycle levels, DBS Vickers says Singapore market needs healthy correction before it can trend higher; “the recent speculative interest pouring into penny stocks while blue chips and mid-caps took the back seat is a sign that investors are running out of ideas - until earnings are revised up further.” Among blue chips, CapitaLand (C31.SG) likely to rise when trading resumes at 0100 GMT on prospect of special dividend payout as developer seeks to list mall business in Singapore; stock last closed at S$3.67.

Phillips Sec upgrades to buy from hold, TP 42. Also appeared in Today’s Stock Calls:

0301 GMT [Dow Jones] STOCK CALL: Phillip Securities upgrades Mercator Lines Singapore (EE6.SG) to Buy from Hold on improved upside potential to its S$0.42 target price following recent share price correction. Stock fell to low of S$0.26 in July from 52-week high of S$0.445 set in June, has since stabilized in S$0.32-S$0.36 range. House expects dry bulk shipper to remain profitable for next three years despite tough operating conditions, with long-term contracts locking in freight rates, helping to mitigate weak spot market rates. Stock off 1.5% at S$0.34.

STI May Head Lower On US Job Market Concerns

Singapore market may face more selling pressure in wake of Wall Street's retreat, triggered by concerns over health of U.S. labor market. STI closed down 1.0% at 2,569.93 yesterday. "Short-term (technical) indicators...suggest the market may not pick up much strength," says AmFraser Securities head of retail research Najeeb Jarhom. Expects STI to continue consolidating in 2,550-2,650 range near term, "with slightly higher downside risk" of index falling to 2,500-2,530. With movement of blue chips closely tied to Wall Street, smaller-cap, penny stocks likely to continue attracting trading interest; FTSE ST Fledgling Index +16.5%, FTSE ST Small Cap Index +4.5% since beginning August vs STI's 3.3% decline over same period.

 STI +0.9%, But Watch For Trend Reversal -Chartist
Relative calm in Shanghai market helps Singapore shares retrace part of yesterday’s losses. STI +0.9% at 2,617.02 midday, market breadth at just over 2 gainers for every decliner, although volume light at 1.34 billion shares. Further upside may be limited amid lack of firm buying cues. Resistance for STI expected at last week’s highest close of 2,642, while immediate support at last week’s low of 2,574. “We have pointed out the possibility that the STI might be in the latter phases of its run up. From a classical technical analysis stand point, we are watching out for any violation of a major trendline (drawn from the start of the March rally),” says Phillip Securities chartist Phua Ming-Weii. Tech shares among best performers on hopes of buildup in demand ahead of year-end festive season, FTSE ST Technology Index +2.8%.

Singapore stocks maintaining positive momentum in post-lunch session. STI +2.2% at 2,599.60, while market breadth at 4.5 gainers for every decliner. Resistance for STI expected at upper end of 2,591-2,610 technical gap set early last week. “We do not believe that the recent high (of 2,700 for STI) forms a major market top because valuations are at average levels and the global recovery story is still continuing,” says DBS Vickers; “we believe interest should swing away from stocks that have performed well in recent months on the back of the V-shaped China recovery to export-oriented themes such as technology and offshore & marine plays that are expected to benefit from a more balanced global recovery.” FTSE ST Oil & Gas Index +2.8%, FTSE ST Technology Index +1.8%.

SINGAPORE (Dow Jones)–Asian stock markets were lower Monday, weighed by losses on Wall Street and weak U.S. consumer sentiment data Friday as well as weakness in the Shanghai stock market. In Australia, Fortescue Metals was higher after it struck a deal with China for iron ore prices.

Japan’s Nikkei 225 was 2.5% lower, Australia’s S&P/ASX 200 was down 1.2%, South Korea’s Kospi Composite was down 1.5% and Hong Kong’s Hang Seng index was 2.9% lower.

The Dow Jones Industrial Average futures contract was down 60 points in screen trade. On Friday the DJIA closed down 0.8%.

Weakness in Chinese shares was hurting sentiment in the region with the Shanghai Composite Index down 2.8%. “There is talk that government-controlled social security funds are withdrawing money from the stock market, which is a bad signal for the market,” said Guosen Securities analyst Wang Junqing.

The rise in Japan’s second-quarter gross domestic product, its first quarterly growth in five quarters, did little for the Tokyo markets, as it was largely in line with expectations. GDP grew 0.9% from the quarter before, compared with a 1.0% rise tipped in a Dow Jones Newswires poll of economists.

JP Morgan senior economist Masamichi Adachi said “the basic contours of the growth is what we had expected: Consumption, exports and public works all contributed to the positive side.”

However, he noted that capital expenditure continued to fall sharply, which raised questions about strength of rebound: “that’s definitely a negative for the future, because it means productivity gains will probably get lower and lower in the medium to long term.”

A stronger Japanese yen against the U.S. dollar was weighing on exporters, while weakness in crude oil prices was weakening oil firms. Inpex was down 3.2% while Sony was down 4.1%.

Taiwan shares were down 1.6% on regional stock markets’ losses. Stocks were also weighed by worries of rising bad debt and insurance payouts because of damage and casualties from heavy floods in the southern part of the island.

Waning optimism over improved trade between Taiwan and mainland China also pulled shares lower. “I think the Taiex is not likely to rise in the short term as investors worry that Taiwan companies may not benefit much from the Chinese market,” where many investors think a bubble is in the making, said Capital Securities assistant vice-president Diana Wu.

Commodity and resource-related counters were lower across the region as LME base metals prices continued Friday’s fall. Jiangxi Copper was down 8.0% and Chinalco was 7.5% lower in China. Philex Mining was down 2.4% in the Philippines. Olam was down 2.0% and Wilmar fell 3.1% in Singapore while BHP Billiton was down 2.1%, and Rio Tinto was 3.1% lower in Australia.

Base metals were extending Friday’s move down, weighed by the U.S. dollar’s gains against the euro and falling equity markets.

LME three-month copper was at $6,088 per ton, down $152 from the London kerb while three-month aluminum was at $1,962 per ton, down $28. Spot gold was at $942.80 per troy ounce, down $4.20 from the New York close.

The Sydney stock market was quiet with Commonwealth Bank of Australia down 0.7% as it went ex-dividend. ANZ Bank was down 2.5%.

Fortescue Metals gained 3.2% after it struck an iron ore price deal with China. The pact is the first China has made in protracted iron ore price negotiations, and the China Iron and Steel Association said that talks are ongoing with other iron ore miners; it hopes the pact with Fortescue will be followed by other miners.

The South Korean market was being pulled lower by weaker-than-expected U.S. consumer sentiment data released Friday, said Lee Sun-yup at Goodmorning Shinhan Securities.

The Reuters/University of Michigan index of consumer sentiment fell to 63.2 in August from 66.0 in July, a disappointment compared to analysts’ consensus expectation for a rise in the index to 69.

“U.S. consumer sentiment has come out weaker than expected for the second-straight month, which seems to have raised some doubts” about the pace of the U.S. economic recovery, Lee said.

KB Financial was down 3.0% and LG Electronics was up 1.4%. Hana Tour lost 6.1% and Korean Air was down 5.2% on news of Korea’s first H1N1 deaths over the weekend; vaccine maker Green Cross was up by its 15% daily limit.

In New Zealand, Freightways was 8.8% lower after its full-year results and muted outlook disappointed the market. Telecom was down 1.5% while Fisher & Paykel Appliances was 3.5% lower.

Singapore’s Straits Times Index was down 1.9% while Malaysia’s Kuala Lumpur Composite Index fell 1.1%. Philippine shares were 3.0% lower while Thailand shares were 1.4% lower. New Zealand’s NZX-50 was 1.9% lower. Markets in Indonesia were closed for a holiday.

In foreign exchange markets, the yen was a little stronger against the euro and the U.S. dollar. Hiroshi Maeba, a senior dealer at Nomura Securities, said Japan’s GDP result had little impact on the yen was it was largely in line with expectations. He expected the dollar to be biased lower against the Japanese currency in thin trade this week, because U.S. consumer sentiment data introduced more uncertainty over the pace of the global economic recovery, to the benefit of the safe-haven yen.

The U.S. dollar was at Y94.62 from Y94.83 in late New York trade on Friday, while the euro was at Y133.91 from Y134.53 and $1.4156 from $1.4190.

Japanese government bonds were higher on the weak stock market and slightly-below-expectations GDP. The lead September JGB futures contract was up 0.39 to 138.37 points while the 10-year cash yield was down 2 basis points at 1.355% and the 20-year yield was down 2 basis points at 2.095%.

The September Nymex crude oil futures contract was down 40 cents at $67.11 per barrel. On Friday, the surprise drop in the latest survey of U.S. consumer confidence triggered a selloff in oil futures, with Nymex crude losing $3.10 to $67.51 per barrel, breaking out of the $68-$70 range it’s held since the start of August.

Singapore shares may retreat in response to Wall Street’s Friday losses triggered by unexpected drop in July U.S. consumer sentiment. With most Singapore-listed companies having already reported earnings for quarter ended June, incentives to buy stocks also few, possibly prompting investors to lighten positions. Commodity, oil & gas plays may underperform given steep fall in Nymex crude prices Friday (down US$3.01 to US$67.51/bbl). STI closed +0.7% at 2,631.51 Friday; initial support at 2,600, followed by last week’s lowest close of 2,571. “I think prices will come off starting from the second half of August, after the end of the earnings season. Unless there are fantastic dividends to be given out, I don’t see any reason to hold on to shares any longer,” says dealer at local brokerage. (FKH)

Singapore Q2 GDP jumps revised 20.7 percent

SINGAPORE - Singapore revised slightly higher its economic growth in the second quarter, but warned U.S. consumption must pick up to sustain the recovery.

Gross domestic product grew an annualized, seasonally adjusted 20.7 percent in second quarter, the Trade and Industry Ministry said in a statement Tuesday. The ministry last month initially reported a 20.4 percent expansion.

Manufacturing surged 49.5 percent, construction jumped 32.7 percent, and financial services rose 22.8 percent from the previous quarter, the ministry said.

“This improvement was largely driven by the spike in output from the volatile biomedical manufacturing cluster and inventory re-stocking,” the ministry said. “Financial services was boosted by sentiment-sensitive segments such as stock market activities.”

“It is uncertain if these can be sustained into the second half.”

Before the April to June period, the economy contracted the previous four quarters as the global recession undermined demand for Singapore’s exports. The government expects the economy to fall up to 6 percent this year.

GDP shrank 3.5 percent in the second quarter from a year earlier, better than the previous estimate of a 3.7 percent contraction, the ministry said.

Non-oil exports, which account for about 60 percent of GDP, rose a seasonally adjusted 7.6 percent in the second quarter from the first quarter, while falling 14 percent from a year earlier, the ministry said. The government expects non-oil exports to contract up to 12 percent this year.

An economic recovery in the second half and next year will likely be muted unless U.S. consumer demand grows more than expected, Ravi Menon, deputy trade ministry, said at a news conference.

“The subdued and weak recovery that we see taking place in the second half of this year is likely to continue to next year,” he said. “That’s not a bad outcome if we continue to avoid financial slippages and double dip recession scenarios.”

ARMSTRONG, kim eng maintain HOLD
-Seagate Technologies announced last night that it will lay off 2,000
workers in Singapore as it is moving its HDD manufacturing operations out
of Singapore to other locations such as Thailand, China and Malaysia, as
part of its move to reduce costs by having fewer manufacturing locations.
Seagate accounts for 12-13% of Armstrong’s group sales, 37% of its rubber
sales and 56% of total hard disk drive sales. However, we do not foresee
any negative impact on Armstrong from this development. The company already
supplies to Seagate across all of its Asian manufacturing sites through its
Ang Mo Kio purchasing hub, which will be retained along with its
administrative headquarters, media operation as well as product
development. Currently, Armstrong supplies 56% of Seagate China’s rubber
and foam part requirements, followed by Thailand 21%, Malaysia 16% and
Singapore only 7%. The last is likely to be reallocated to the rest of
Seagate’s sites.
-However, the automotive side of its business is doing well, especially in
China, which is expected to have posted double digit gains in revenue
during 2Q09, as the impact on Peugeot from political tensions between China
and France has been less severe than expected. Going into 2010, Armstrong
is also gaining traction on new products, specifically a car seat related
part which is worth 10x in value than its highest value part to-date. Going
forward, we foresee upside to earnings if the current strength continues.
-Maintain Hold on Armstrong although this development may dampen sentiment
toward the stock in the short term.

CSC HOLDINGS, cimb maintain NEUTRAL $0.22($0.17)
- Slightly above expectations. 1QFY10 net profit of S$6.0m (-56% yoy) was
slightly above market and our forecasts, constituting 27% of our full-year
estimate. This was on the back of better-than-expected margins through
strong cost management. 1Q10 revenue fell 48% yoy to S$81.4m, on lower
demand for construction services due to the global economic slowdown.
- Gross margins improved to 18.6% from 14.3% in 4Q09 and 18.4% in 1Q09.
This was a reversal from previous quarters on the successful implementation
of stringent cost management, despite falling contract values in tandem
with lower building material prices. The bulk of the revenue was from
public-sector projects while Malaysian operations contributed more with
several projects in the Klang valley, CIMB Tower at KL Sentral and work
done on portions of the double track railway project.
- Outlook. Order book crept up to S$120m from S$110m as at 31 Mar 09,
reflecting the slow start of private residential projects. However,
sentiment among property buyers appears to be improving, which may prompt
developers to launch their projects, creating demand for foundation
engineering services. CSC continues to guide that numerous projects from
this year’s government budget to pump-prime the economy could materialise
in 2HFY10. However, even if CSC secures new contracts, FY10 revenue and
profits are likely to be lower yoy.
- Maintain Neutral. We raise our FY10-12 net profit forecasts by 27-36% to
reflect potential new orders in 2H10. After our earnings upgrade, our
target price for CSC has been lifted to S$0.22 from S$0.17, still based on
8x CY10 P/E, the industry’s mid-cycle valuations. Nevertheless, CSC may
find it a challenge repeating its performance last year. Maintain Neutral.

HI-P, csfb assuming coverage OUTPERFORM with target price $0.9($0.59)EPS
for FY09/10 raised by 5% and 3%
- Hi-P delivered stronger-than-expected June-quarter results, with revenues
at S$177.6 mn (-37% YoY) and core earnings at S$24 mn (-27% YoY). 6MTD
results have achieved 47% and 62% of our full-year revenue and earnings
estimates, respectively.
- Management is guiding for revenue and profits in 3Q09 to decline both
sequentially and YoY, with current programmes at maturity. However, new
projects should kick-off in 4Q09, led we believe by wireless segment
contribution from RIMM.s Bold, and orders from HTC/Apple and Gillette/Braun
within the consumer space.
- Going forward, Hi-P aims to leverage on the recent Jiamao acquisition to
boost its electronics (FPCB manufacturing) capabilities. We have kept
revenue forecasts largely unchanged, but raised earnings by 3-4% on
stronger margin assumptions.
- We favour Hi-P for its undemanding valuations . at 5x P/E, and cashed-up
balance sheet, at 40% of its market cap. We peg our target price at 8x P/E,
a 40% discount to larger and more liquid Venture, or S$0.90 (was S$0.59)
and assume coverage with OUTPERFORM. Key risk would be the
slower-than-expected ramp-up from key clients.

HI-P, dbs maintain BUY with target price $0.76($0.79) EPS for FY09/10
lowered by 6.7% and raised by18.2%
-Further margin expansion & cash generation in 2Q. Core net profit,
excluding impairment charges and forex losses, came in at S$21m (-28% yoy,
+7%qoq), better than our S$18m projection. Sales of S$178m was below our
S$200m forecast but gross margin improved to 22.8%(1Q09 20%; 2Q08 18%),
benefiting from a better product mix, more value-added processes and
effective cost control. Hi-P generated S$70m FCF in Q2 as cash cycle
shortened to 40 days from 56 in 1Q09. Net cash increased to S$251m, c. 40%
of market cap.
-3Q09 expected to be weaker y-o-y & q-o-q. We expect S$15m net profit in
3Q09, a decline of 41% y-o-y and 6% q-o-q. In view of the delay in ramp up
of new programs (smartphones, notebooks and MP3 players) to 4Q09, we have
cut our full year sales forecast by 13% but raised gross margin assumptions
by 1%pt to19% due to stronger margins in 2Q09.
-S$56m flexible printed circuit acquisition. This acquisition (max flex
capacity 300k sqf) is in line with the group’s integrated strategy and
customers are positive on this new expansion. However, FPC will not
contribute till FY10 and management expects start up expenses to be
incurred in 4Q09/1Q10.
-Maintain Buy, only 4.5x FY09 PE if net of cash. Valuations remain
compelling at 6x FY09 earnings vs historical average of 9x PE multiple. If
net of cash, stock is even cheaper at 4.5x PER with 3-4% yield. Maintain
Buy, with slightly lower target price of S$0.76,still pegged at 9x blended
FY09/10 earnings.

HONG KONG LAND, jpm maintain NEUTRAL with target price $3.20
- Headline net profit to increase 36% Y/Y to US$329 million Hongkong Land
will announce its interim results on August 6 (Thursday) after market
close. We are looking for underlying net profit of US$329 million (EPS
US$0.146), up 39% Y/Y. We expect interim dividend at US$0.06, same as 1H08
levels.
- Property development revenue would include MCL and Sail at Victoria We
have incorporated the booking of Tierra Vue, Fernhill in Singapore, and
Sail at Victoria which was completed in Jun-09 with 75 out of 95 units
sold. The swing to earnings is the booking of sales transactions of Sail at
Victoria as the units were mostly sold in Jun-09.
- Expect positive rental reversion despite higher vacancy We expect gross
and net rental income to grow 27% and 19% Y/Y, respectively, despite the
higher vacancy at Exchange Square 3 early in the year. The spaces given up
by Morgan Stanley at end 2008 were largely filled and hence we expect the
portfolio vacancy to be in line with the overall vacancy in Central of
below 5%. And as asking rents are holding up rental reversion is likely to
remain positive, in our view.
- Expect book value to stay at least flat We do not expect book value of
HKL to be cut back by devaluation. In fact, JLL numbers showed that office
capital value was flat in 1H09 thanks to the abundant liquidity in the
region. Added to this is the potential revaluation of MBFC, which is under
development, according to the revised IFRS.
- Dec-09 PT of US$3.2 We have a Neutral rating and a Dec-09 PT of US$3.2
based on 27% discount to NAV, which is the long-term average NAV discount.
Risks to PT are interest rate risks, cap rate changes and retrenchment of
the financial sector.

LIPPO-MAPLETREE INDONESIA TRUST, ocbc upgrade to BUY from HOLD with target
price $0.5($0.24)
-Distributable income falls YoY and QoQ. LMIR Trust reported a 20.3% YoY
fall in 2Q09 revenue to S$19.5m and a 20.6% YoY fall in net property income
to S$18.5m. The manager said about half of the decline was due to the
depreciation of the IDR against the SGD. The rest was attributed to a
reduction in casual leasing income as well as lower car park and
miscellaneous income. Conversely, revenue and NPI rose 4.7% QoQ and 5.5%
QoQ respectively thanks to the appreciation of the IDR in the past three
months. The positive forex effect offset lower revenue from two of LMIR’s
malls undergoing asset enhancement work. Distributable income, which is
hedged, fell 12.5% YoY and 4.3% QoQ to S$13.9m. Unitholders will receive
1.3 S cents per unit, in line with our expectations.
-Occupancy looks to be stabilizing. Mall occupancy was stable at 95%
compared to three months ago, and outperformed the broader market rate of
84% (Jakarta only, Cushman & Wakefield). Mal Lippo Cikarang’s 86.5%
occupancy is the lowest within the portfolio due to the non-renewal of
anchor space. The manager has temporarily leased the space to factory
outlets but is in discussions to secure longer term leases. We understand
rent reversions are on average 3-5% above preceding rents. The manager has
tried to offset any weakness in rents with shorter lease durations or by
incorporating a step-up component.
-Retail outlook still weak. Macroeconomic news on Indonesia has generally
been quite benign. Low inflation and signs of political stability have
boosted consumer confidence. The IMF forecasts growth of 3.5% this year,
the fastest pace in Asia after India and China. However, the retail
property sector is still plagued by weak demand and oversupply,
particularly in Jakarta’s CBD. The manager guided that rental rates could
remain soft in 2H09 but expected LMIR’s ‘middle market’ malls to show some
resiliency.
-But value exists. We have updated our earning estimates to reflect actual
1H performance. We are expecting portfolio performance to stabilize in
2H09, with a slight uplift from completed AEI projects. Our 2H09 DPU
estimate is 2.76 S cents, up 3.9% HoH. We have also adjusted our valuation
parameters to reflect current market and forex conditions. Our fair value
estimate of S$0.50 (prev S$0.24) is at a 25% discount to our SOTP value of
S$0.67 for the trust. Despite the weak near-term retail outlook, we think
LMIR presents value in the medium-term. Upgrade to BUY (total return of
22%).

ROTARY, ocbc maintain BUY with target price $1.26($0.81)
-Better sequential performance. Rotary Engineering (Rotary) posted 2Q09
results with revenue of S$164.2m (+22% YoY, +24.5% QoQ) and bottomline of
S$13m (+11%YoY, +200% QoQ); 2Q results were inline with our bottomline
estimates but a final phase wind-down of its previous tranche of projects
bettered our topline forecasts. Gross margins were at the lower end of its
guided 18-22% range as revenue are recognised from current projects that
were secured in 2008’s “cost conscious environment”.
-Good balance sheet. Historically, Rotary’s projects have largely been
self-financing, even for its previous mega project of the Universal
Terminal. As such, we do not expect Rotary to require additional
significant amounts of debt except for trade financing for intermittent
gaps. While M&As are an option with a net cash horde of S$110m, we think
that Rotary will explore JVs/alliances first to evaluate the partner and
market it intends to penetrate into.
-Competitor listing. PEC Group (Not Rated) - soon to be listed on the SGX
mainboard (priced at 4x FY09F PER) - intends to have a fabrication facility
in the Middle East by 2010 to compete for projects. Currently, we think
that PEC’s presence should not pose a significant challenge until it firmly
establishes its working relationship with its JV partners and facility.
Moreover, we think PEC will need some time to gain reputability in large
EPC jobs as compared to its strength in maintenance.
-Restoring dividends? After its record earnings year in 2007, Rotary
gradually reduced its dividend payout inline with its bottomline
performance. With the anticipated surge in earnings, we have doubled our
dividend forecasts upwards for FY10F to 4 S cents (prev. 2 S cents). This
brings the yield to 3.5%, a respectable return for an industrial-based
company.
-Calculated expansion pays off; Maintain BUY. Rotary arrived at this stage
with much foresight in its manpower training and calculated Middle East
investment. We have adjusted our estimates to cater to the US$745m contract
value (prev. US$700m) along with increased variation orders for its current
tranche of projects. Our previous concerns on the dilutive effects of the
JV have been alleviated with half of the US$745m to be performed directly
by Rotary instead of its JV. Accretion of SATORP earnings is now modelled
over 3.5 years (prev. 4 years). With better clarity on SATORP, more
regional-based projects slated to come online and improved equity risk
appetite, we have re-pegged our valuation to 12x FY10F EPS (prev. 8x).
Iterate BUY for Rotary with a fair value of S$1.26 (prev. S$0.81).

SEMBMARINE, cimb maintain OUTPERFORM with target price $3.48($3.38) EPS for
FY09-11 raised by 1-8%
- Sales inched up 8% yoy to S$1.5bn, underpinned by rig building, with the
initial recognition of two jack-ups and one semi-sub against one jack-up in
1Q09.
- Margin expansion. 1H09 EBITDA margins expanded 2% pts yoy to 11.8%,
thanks to better yard efficiency and the execution of repeat orders. We
believe the strong margins are sustainable in 2H09.
- Ship repair’s near-term outlook challenging. Ship repair revenue dipped
11% yoy to S$173m as average revenue per vessel slid from S$3.2m to S$2.3m.
This was on the back of scaled-back repairs and maintenance expenses by
ship owners given weak shipping sentiment. Only the big docks have been
fully booked till end- 2009 as visibility for smaller docks remains
limited.
- Order wins could swing with Petrobras orders. Order book was S$7.9bn with
YTD wins of S$1.1bn, including the latest FPSO conversion of S$160m
announced for MODEC. As for prospective Petrobras new orders, we believe
SMM is positioned to win some contracts in the near term given its track
record with Petrobas and alliance with the MacLaren yard in Brazil. We cut
our order assumption for 2009 from S$3bn to S$2.5bn, to be more
conservative.
- Strong cash. Cash balance was S$2.1bn, of which S$1.8bn was advance
payments from customers. SMM declared an interim dividend of 5 Scts, the
same as in 1H08.
- Raise earnings estimates by 1-8% for FY09-11, to reflect higher operating
margins from rig building, offset by lower Cosco contributions.
- Maintain Outperform; higher target price of S$3.48 (from S$3.38)
following our earnings upgrade, still based on blended valuations. A surge
in its order-win momentum and further margin expansion could catalyse the
stock, we believe.

SEMBCORP MARINE, cl maintain OUTPERFORM with target price $3.25
-1H09 results were ahead of our, and consensus, estimates. Continued margin
expansion evidences robust execution. A steady stream of order wins even in
a tough 2009 augments a sizeable S$7.9bn orderbook providing earnings
visibility into 2011. Some S$1.8bn of net cash allows the company
flexibility in weighing growth options ?organic as well as M&A. A 6% FCF
yield suggests upside to the 4% dividend yield in 2009. We raise our
earnings forecasts to reflect higher Cosco Corp forecasts, consequently
raising our target price to S$3.25. We retain an Outperform rating.
-A strong harbinger for 2H09. SMM 2Q09 profits grew 8% YoY, and were 16%
above consensus and our forecasts. Operating margin continued to expand to
11.1%, averaging 10.5% for the first half and tracking our 10.6% FY09
forecast. With 4 rigs due for delivery in 2H09 vs. 2 in 1H09, margin
expansion should continue, as should earnings growth. A S$7.9bn order book
offers 1.6 years of earnings visibility. Interim dividend of 5 cents offers
1.6% yield; this is adequately supported by 6% FCF yield in 2009.
-Strong balance sheet = strategic flexibility. SMM can be accused of a lazy
balance sheet with a S$1.8bn net cash position that has steadily grown over
the years. On the flip side, this affords the company flexibility regarding
its growth strategy, be it organic or through acquisitions. In a market
where access to capital commands a premium, SMM has oodles of it. Failing a
significant investment over the next 2 quarters, we would like to see a
greater dividend payoutto shareholders.
-Retain Outperform, prefer SMM to KEP. The 28% share price rally since our
note on 13 July has led to the stock hitting our target price of S$3.06. To
reflect the higher earnings forecasts flowing through from Cosco Corp
(COS), we marginally raise our target price to S$3.25 pointing to 2%
upside. If we mark to market the COS stake, SMM? target price would be
S$3.46, pointing to 8.5% upside. Relative to KEP, SMM offers higher
correlation with oil price, greater earnings visibility, higher earnings
growth (30.2% vs. -1.6%) and more attractive valuation, making it our
preferred pick for exposure to the offshore sector.

SEMBMARINE, csfb maintain UNDERPERFORM with target price $2.50($0.95)
- 2Q09 was better than expected, primarily on improved operating margins at
11%, against 9.9% in 1Q09 and our estimate of 9.7% for FY09. Revenue and
net income for 6M09 came in at 46% and 48% of FY09 estimate.
- Management explained margin improvement resulting from job credits
(fiscal stimuli), product mix and efficiencies. As some of these factors
may be transient, we are increasing FY09 margin estimate to 10.5% relative
to 11% operating margin in 2Q09.
- SMM secured another FPSO conversion from Modec, valued at S$160 mn
bringing its YTD contract wins to S$1.1 bn. We have adjusted our order book
and revenue estimates, but have also lowered our new contract win estimates
from 2009-11E (Fig. 2). Net result is higher short-term estimates, lower
long-term forecast.
- We still have concerns about SMM.s exposure to Larsen Oil & Gas, but also
recognise increased risk tolerance in equity markets. Raising target price
to S$2.5 from S$0.95 based on 2010E P/E of 12x, low end of the order
up-cycle period but maintain UNDERPERFORM rating.

SEMBMARINE, daiwa maintain UNDERPERFORM with target price $2.06 ($1.59)
-SembCorp Marine (SembMarine) announced its 2Q FY09 results on 4 August,
after the market closed. Its net profit rose by 7.6% YoY on an 8.0% YoY
increase in revenue.
-The results exceeded our and the Bloomberg-consensus expectations, due
primarily to better-than-expected rig-building revenue and operating
margins. We have revised up our FY09 net-profit forecast by 11.2% due to
adjustments to our assumptions for the rig-building segment. Our previous
FY09 net-profit forecast was 6.8% above the Bloomberg-consensus forecast.
-SembMarine’s orderbook of S$7.9bn represents 482 days of work left, based
on its 2Q FY09 pace of revenue recognition and assuming no new contract
wins. We do expect more semi-submersible and FPSO/FSO contracts to be won
in 2H09 and in 2010, but not enough to prevent a substantial year-on-year
decline in its FY11 net profit.
-We have raised our six-month DCF-derived target price to S$2.06 from
S$1.59 due to a reduction in our assumed WACC from 15.0% to 10.9% to
account for the market’s greater optimism about the global economic
outlook. However, the 35.2% downside to our new target price reflects our
cautiousness about the fundamentals of the rig-building sector.
-We maintain our 4 (Underperform) rating and reiterate our view that
industry fundamentals should remain weak through 2011 and that SembMarine’s
valuation appears stretched.

SEMBMARINE, db maintain BUY with target price $3.80
-Strong operating performance. Sembcorp Marine’s 1H09 revenues were up 24%
yoy to S$2,861m, while net income grew 17.6% to S$258m (about 53% of our
full-year estimates). Gross margins were up from 9.9% in 2Q08 to 12.9% in
2Q09; on a half-yearly basis; they rose from 10.2% in 1H08 to 11.8% in
1H09. Operating profits surged 58% yoy to S$301m in 1H09 (up 50% yoy to
S$167m in 2Q09). As valuations remain attractive, we maintain Buy.
-Conditions in place for industry to recover. As we have highlighted
before, two key conditions are required for a sustained recovery of the
sector (1) improvement/stability in oil prices, and (2) easing of credit.
At current oil prices, investments previously put on hold are now beginning
to return. We also see incremental signs/examples that suggest substantial
easing of credit in the O&M sector.
-Declining reserves to spur investments; SMM continues to win contracts.
The alarming rate of decline of global oil reserves, as highlighted by the
IEA, is prompting countries such as Mexico to aggressively step up spending
within the industry to halt this decline. We expect more countries to
follow suit in the long term. We believe SMM is well positioned to benefit
from this trend, having built up its branding and execution track record
over the years. SMM has announced a new S$160m FPSO conversion contract,
bringing YTD new orders to S$1.12bn.
-Maintain Buy; sound long-term prospects. SMM has a strong net cash
position of S$1.84bn (S$1.18bn in progress payments), which places it well
for potential M&A activities. Our SOTP-based target price is S$3.80 (target
multiple of 15x FY09E earnings for O&M business; market/implied values for
Cosco). Risks unexpected cost escalation, execution risks, foreign currency
volatility, and a sustained plunge in oil prices.

SEMBMARINE, dbs maintain BUY with target price $3.70($3.25) EPS for FY09/10
raised by 4.7% and 5.3%
-Better than expected 2Q09 results. Sembcorp Marine’s (SMM) revenue in 2Q09
was S$1.5b, in line with our expectation for order book drawdown. SMM’s
strong S$145m recurring net profit in 2Q09, vs. our expectation of S$122m,
was due to higher EBIT margin of 11.1% (vs. our estimate of 9.8%). This was
due to better-than-expected operational efficiency and relatively subdued
margin pressure on variation orders.
-Raising profit estimates. We have raised our recurring net profit
forecasts to S$516m (+6%) in FY09 and S$553m (+5%) in FY10. These are due
to the lower order cancellation assumption of 6% (-6ppt), and the higher
EBIT margin estimate of 10.6-10.8% (+0.8ppt).
-S$1.1b y-t-d order wins. SMM’s S$1.1b y-t-d order win has outpaced its
peers, and is on target to reach our S$3b assumption. This includes SMM’s
latest S$160m FPSO contract win from MODEC. Coupled with more spaced out
order book drawdown, SMM’s order book of S$7.9b is now bigger than Keppel
Corp’s S$7.7b.
-Better quality of project enquiries. SMM guides that the quality of
enquiries for rigbuilding/offshore jobs has improved. We expect the
increasing seriousness of the bids as incentives for equipment suppliers to
potentially moderate their prices lower to move sales.
-Raising target price. Our target price for SMM is raised to S$3.70, as we
roll forward SOTP valuation metrics to FY10 EPS on better margin
visibility. Maintain BUY.