Singapore real estate prices jumped to a record high in the second quarter as the city-state’s economic recovery broadened.

Private residential property prices rose 5.2 percent in the April-to-June period to the highest level since the government began the index in 1975, the Urban Redevelopment Authority said Thursday.

Prices leapt 5.6 percent in the first quarter and 7.4 percent in the fourth, bouncing back strongly after diving 25 percent in the 12 months to mid-2009.

Singapore’s low crime rate, good schools and low personal and corporate taxes have helped the island rank near the top of expatriate global quality-of-life surveys and attracted investors to the residential and office property markets. Singapore opened its first two casino-resorts this year, boosting tourist visits.

Singapore has sought to slow price gains by implementing a series of measures this year to discourage short-term speculative investment in property.

The government earlier this year imposed a 1 percent to 3 percent tax on residential properties sold within one year of purchase and lowered the loan-to-value limit to 80 percent from 90 percent on loans for private housing. Officials have also pledged to release more government land this year for real estate development to help boost housing supply.

Policymakers throughout Asia have grappled with balancing low interest rates to spur economic growth and the danger that cheap credit can fuel asset bubbles.

By the end of last year, Singapore prime residential property was selling at $1,500 to $2,000 per square foot — still less than the $2,000 to $2,500 per square foot in Hong Kong, Asia’s most expensive property market, according London-based real estate consultancy Knight Frank.

Investor confidence in Singapore has been bolstered by a soaring economy in the first half, led by a surge in manufacturing. Gross domestic product grew a record 15.5 percent in the first quarter from a year earlier, and DBS Bank said it expects a 16 percent expansion in the second quarter.

DBS raised its 2010 growth forecast Wednesday to 13 percent from 10.3 percent and expects the manufacturing sector to grow 50 percent in the second quarter.

Singapore’s factory output sees record rise in May

Singapore said Friday that manufacturing output surged a record 58.6 percent year on year in May as factories raced to meet robust foreign orders for electronics and pharmaceuticals.

Last month’s factory production, which eclipsed the previous record high of 49.7 percent posted in April, was almost double the 32.1 percent forecast in a Dow Jones Newswires’ poll of analysts.

The monthly data from the Economic Development Board (EDB) said factory production in May was boosted by electronics and biomedical which includes pharmaceuticals.

Electronics output rose an annual 51.8 percent while biomedical manufacturing expanded 117 percent with the main boost coming from a 121.8 percent jump in pharmaceuticals, the EDB said.

For the other sectors, chemicals surged 19.6 percent, precision engineering rose 40.5 percent and transport engineering increased 0.3 percent.

Overall manufacturing output was up 45.1 percent in the January-May period, the EDB said.

Economists said the latest data suggested the government may have to revise its 2010 growth targets of 7.0-9.0 percent amid signs the economy is recovering strongly from last year’s slump.

“Another revision is on the cards despite the uncertainties in Europe and whether the US enters into a period of jobless recovery,” said Song Seng Wun, a regional economist with CIMB equity research house.

“The lion (Singapore economy) is charging ahead… Nine percent will be an underachievement with the kind of numbers we have got,” he told AFP.

Singapore’s monthly factory data is a barometer of how its economy is doing as the bulk of output from the sector is shipped out either as final goods or as components to foreign factories.

The economy shrank 1.3 percent last year as exports declined sharply amid the global downturn, which hit Singapore’s major markets, particularly the US, hard.

Credit Suisse says Genting is ‘one of the most expensive casino stocks in the world’

UK impairment: Genting Singapore’s (GENS) 1Q10 results were hit by a S$478 mn impairment relating to its UK gaming operations, and we have cut our FY10 estimates to a net loss of S$76 mn to reflect this.

■ Boosted by Singapore contributions: GENS’s revenues were boosted by S$335 mn of maiden Singapore revenue, which is largely attributed to the casino and hotels (as the theme park only opened in mid-March). Singapore contributed S$109 mn of EBITDA, thanks to the Chinese New Year festivities (traditionally a peak season for gaming) and GENS was also the sole casino operator in Singapore.

Given the short duration captured in the1Q10 results, the seasonality factor and lack of competition, we caution against relying too heavily on the 1Q10 data as an indicator of sustainable business levels for GENS.
■ Weaker margins ahead?: The 33% 1Q10 EBITDA margin for its Singapore operations is in line to our forecasts but there is risk of weaker margins ahead due to: 1) junket operations beginning in 2Q and 2) higher theme park contributions.

■ Rich valuations: GENS is one of the most expensive casino stocks in the world, trading at FY10E EV/EBITDA of 16.5x. It is also expensive relative to other Singapore large cap stocks. As such, we continue to maintain our UNDERPERFORM rating.

Source: Credit Suisse

Singapore’s SingTel 1Q profit rises 12 percent,singapore stock market, singapore stock market news

Singapore Telecommunications Ltd. said its profit rose 12 percent last quarter, boosted by higher income from its local and Indonesian businesses.

The company, also known as SingTel, said in a statement Thursday that net profit for the January-March period rose to 1.02 billion Singapore dollars ($738 million) from SG$903 million a year earlier.

SingTel’s stakes in telephone companies in Australia, Thailand, Indonesia, India, the Philippines, Pakistan and Bangladesh account for more than half of the company’s profits.

Operating revenue rose 25 percent to SG$4.47 billion from SG$3.57 billion a year earlier.

Singapore ups growth view but may stand pat on policy,singapore stock market news,singapore stock market ,singapore stockmarket news

Govt ups 2010 GDP growth forecast to 4.5-6.5 pct vs 3-5 pct

* Economy shrank annualised 2.8 pct q/q s/adj in Q4

* Economists expect c.bank to stand pat on policy in Apr

* Inflation outlook lowered slightly due to rebasing of CPI

By Saeed Azhar and Fabian Ng

SINGAPORE, Feb 19 - Singapore raised its economic growth forecast for this year after reporting better-than-expected fourth-quarter data, citing a pickup in trade and industrial production and stable financial markets.

The government now expects gross domestic product to grow by 4.5 percent to 6.5 percent in 2010, up from a forecast of 3 percent to 5 percent made only a month ago, the Ministry of Trade and Industry said on Friday.

The economy shrank 2.8 percent in the fourth quarter on a seasonally adjusted, annualised quarter-on-quarter basis, much better than the initial government estimate of a 6.8 percent contraction made last month.

Economists said the central bank will likely keep its monetary policy unchanged at its next scheduled review in April, citing officials’ concerns about the global economy in the second half of 2010 and benign inflation.

“I don’t think there is an immediate push for them to do anything with monetary policy, given they are still concerned about the second-half outlook,” said Selena Ling, head of treasury research at Oversea-Chinese Banking Corp in Singapore.

The Monetary Authority of Singapore sets policy by managing the value of the Singapore dollar <SGD=> against a secret basket of currencies. The current policy calls for a stable currency.

“We expect the MAS to maintain its neutral FX policy in April and to tighten only in October,” said Standard Chartered Bank economist Alvin Liew.

UNCERTAIN OUTLOOK

The government said its upgrade from the earlier 3.0 percent to 5.0 percent GDP growth forecast reflected “increased strength in the near-term growth momentum”. It brings the official forecast in line with private sector estimates.

“The outlook for the second half of the year remains uncertain. Private final demand in the G3 may remain weak, as there are still few indications that non-policy induced private demand is gaining strength,” it said.

Ravi Menon, a permanent secretary at the Ministry of Trade and Industry, told reporters that he was more concerned about private consumption in the United States than sovereign risks in European countries such as Greece and Spain.

Economists expect Singapore Finance Minister Tharman Shanmugaratnam to announce a number of growth-supporting policies in his 2010/11 budget on Monday.

“Even as the government steps away from the ‘emergency’ mode that the 2009 budget was formulated in, they are likely to retain a ‘better safe than sorry’ stance,” noted Robert Prior-Wandesforde at HSBC in Singapore.

The government raised its 2010 trade growth outlook to a range of 9 percent to 11 percent from an earlier forecast of 7 percent to 9 percent. It expects non-oil domestic exports to rise by 10 percent to 12 percent this year.

It lowered its 2010 inflation forecast to 2 percent to 3 percent from the previous 2.5 percent 3.5 percent due to a rebasing of the consumer price index.

For the whole of 2009, Singapore’s gross domestic product shrank by 2 percent following a revised 1.4 percent rise in 2008.

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.

PM Lee identifies 3 areas of priority for govt

SINGAPORE: Singapore’s Prime Minister Lee Hsien Loong on Monday identified three areas of priority for the government: restructuring the economy, addressing the population shortfall and updating the political system.

In a wide—ranging speech to the annual Singapore Perspective Conference organised by the Institute of Policy Studies, Mr Lee said Singapore’s economic policies must enable the country’s economy to perform to its limits and help Singaporeans thrive in the new world.

He said the Economic Strategies Committee will publish its recommendations next week and the government will respond to them in the Budget.

On the population shortfall, Mr Lee said Singapore’s birth rates are not improving despite the government’s best efforts.

Last year, there were about 170 fewer live births than in 2008.

This would mean that the total fertility rate would have gone down further.

PM Lee stressed that while the decline could have been due to the global economic downturn, it was still a grave trend. If left unchecked, Singapore will face not just an ageing, but a shrinking population.

Therefore, he said the government needs to encourage Singaporeans to start families with parenthood benefits and other incentives.

However, he added that the country must also top up the population and talent pool with immigration in a measured and calibrated manner.

Turning to the subject of updating the political system, Mr Lee said that while having a sound system is essential, that in itself is not enough to produce political stability and good governance.

He said that the nation is still dependent on having the right people in charge and an able and committed team coming forward to lead the country.

The Prime Minister said a key task for his predecessors and himself has always been to identify promising people to form the next team.

He said good progress has been made in this area but he does not have a complete next team lined up in Cabinet yet.

He is confident that by the next general election, the People’s Action Party (PAP) will field a team which will consist the core of the next generation leadership.

Mr Lee also stressed that leadership renewal will be a major issue in the next general election.

singapore stock market ,singapore stock market news,singapore shares

ARMSTRONG, kim eng maintain HOLD

CSC HOLDINGS, cimb maintain NEUTRAL $0.22($0.17)

HI-P, csfb assuming coverage OUTPERFORM with target price $0.9($0.59)EPS
for FY09/10 raised by 5% and 3%
HI-P, dbs maintain BUY with target price $0.76($0.79) EPS for FY09/10
lowered by 6.7% and raised by18.2%

HONG KONG LAND, jpm maintain NEUTRAL with target price $3.20

LIPPO-MAPLETREE INDONESIA TRUST, ocbc upgrade to BUY from HOLD with target
price $0.5($0.24)

ROTARY, ocbc maintain BUY with target price $1.26($0.81)

SEMBMARINE, cimb maintain OUTPERFORM with target price $3.48($3.38) EPS for
FY09-11 raised by 1-8%

SEMBCORP MARINE, cl maintain OUTPERFORM with target price $3.25
SEMBMARINE, csfb maintain UNDERPERFORM with target price $2.50($0.95)
SEMBMARINE, daiwa maintain UNDERPERFORM with target price $2.06 ($1.59)
SEMBMARINE, db maintain BUY with target price $3.80
SEMBMARINE, dbs maintain BUY with target price $3.70($3.25) EPS for FY09/10
raised by 4.7% and 5.3%
SEMBCORP MARINE, gs maintain SELL with target price $1.15($1)
SEMBMARINE, jpm maintain OVERWEIGHT with target price $3.75($3.15) EPS for
FY 09/10 raised by 4.7% and 7.9%
SEMBMARINE, kim eng maintain HOLD with target price $2.91
SEMBMARINE, ms maintain UNDERWEIGHT with target price $2.40
SEMBMARINE, ocbc upgrade to BUY from HOLD with target price $3.67($2.65)
SEMBMARINE, ssb upgrade to BUY from HOLD with target price $3.85($3)
SEMBMARINE, ubs maintain BUY with target price $3.15
SEMBMARINE, uob maintain HOLD with target price $2.60

SIA, mac downgrade to UNDERPERFORM from OUTPERFORM with target price $11.20

SMRT, nom maintain BUY with target price $1.96

ST ENGINEERING, cl maintain BUY with target price $3.07
ST ENGINEERING, csfb maintain UNDERPERFORM with target price $2.37
ST ENGINEERING, db maintain BUY with target price $3
ST ENGINEERING, dmg maintain BUY with target price $2.83
ST ENGINEERING, jpm maintain UNDERWEIGHT with target price $2.05($1.80)
ST ENGINEERING, kim eng maintain HOLD with target price $2.70
ST ENGINEERING, nom maintain NEUTRAL with target price $2.72
ST ENGINEERING, ocbc maintain HOLD with target price $2.46
ST ENGINEERING, ssb maintain BUY with target price $3($2.55)
ST ENGINEERING, ubs maintain BUY with target price $2.72
ST ENGINEERING, uob upgrade to HOLD from SELL with target price $2.40
($2.04)

STRAITS ASIA, csfb maintain UNDERPERFORM with target price $1.05
STRAITS ASIA, dbs maintain BUY with target price $2.41($2.26) EPS for
FY09/10 lowered by 30.3% and raised by 6%
STRAITS ASIA, ubs maintain BUY with target price $2.50
STRAITS ASIA, ocbc maintain BUY with target price $2.38

YANLORD, uob maintain BUY with target price $2.99

MORNING MARKET REPORT

Gold is the August contract on the NY Mercantile Exchange. Silver, copper and oil are the September contracts.)

NEW YORK - Wall Street shares drifted to a mostly higher close on Friday as investors mulled disappointing earnings reports.
The Dow Jones Industrial Average rose 23.95 points, 0.26 per cent, to finish at 9093.24.
The technology-heavy Nasdaq composite dropped 7.64 points, or 0.39 per cent, to 1965.96, snapping a 12-session winning streak.
The broad-market Standard & Poor’s 500 index added 2.97 points, or 0.3 per cent, to close at 979.26.

LONDON - European stock exchanges closed narrowly mixed on Friday as a near two-week rally ran into profit-taking ahead of the weekend.
In London, the FTSE 100 index of leading shares was up 16.81 points, or 0.4 per cent, at 4576.61 points.

FRANKFURT - The Dax fell 17.92 points, or 0.34 per cent, to 5229.36.

PARIS - The CAC 40 index slipped 7.27 points, or 0.22 per cent, to 3366.45 points.

TOKYO - Japanese shares rose for an eighth straight day, ending at the highest level in more than three weeks after Wall Street posted its best finish of 2009.
The benchmark Nikkei-225 index climbed 151.61 points, or 1.55 per cent, to 9944.55.

HONG KONG - The benchmark Hang Seng Index closed up 165.09 points, or 0.83 per cent, at 19,982.79.

WELLINGTON - The benchmark NZSX-50 index closed up 42.54 points, or 1.46 per cent, at 2961.17.

SYDNEY - The Australian sharemarket is likely to open higher after a mostly positive lead from the US and the commodity market.
At 0707 AEST on the Sydney Futures Exchange, the September share price index contract was 26 points higher at 4,091.
In company news on Monday, Australian Foundation Investment Co Ltd annual results and Australand Property Group first half results are due.
The case brought by the Australian Securities & Investments Commission (ASIC) against James Hardie Industries NV in the NSW Supreme Court resumes for a penalties hearing.
On Friday, big miners helped drive Australia’s stock market to its highest close since last November.
The benchmark S&P/ASX200 index closed up 25.7 points, or 0.63 per cent, at 4089.8, its highest close since November 10.
The broader All Ordinaries index gained 24.7 points, or 0.61 per cent, at 4097.3 points, its highest close since November 6.

NYMEX

Oil prices rose, powered higher by growing optimism that the US economy is on the mend.
New York’s main futures contract, light, sweet crude for September delivery, climbed 89 cents to close at $US68.05 a barrel.
In London, Brent North Sea crude for September delivery increased $US1.07 to settle at $US70.32 a barrel.

COMEX

Gold for August delivery fell $US1.70 to $US953.10 an ounce on the New York Mercantile Exchange.
September silver gained 10.5 cents to $US13.875 an ounce.
September copper fell 0.2 cent to $US2.522 a pound.

Wilmar eyes $4 bln China unit spinoff in HK -report

HONG KONG, July 20 - Singapore-based cooking oils producer Wilmar International <WLIL.SI> aims to raise US$3 billion to US$4 billion through an initial public offering by its China subsidiary in Hong Kong in the first half of next year, the South China Morning Post reported on Monday, citing an unidentified source.

Wilmar, one of the world largest agribusinesses with operations in Indonesia, Malaysia, China, India and Europe, has hired Bank of China International, Goldman Sachs <GS.N> and Morgan Stanley <MS.N> to advise on the deal.

The IPO would value the company’s China subsidiary at up to US$14 billion, the report said. It gave no further listing details.

Chinese iron ore miner China Vanadium has also revived its plan to raise US$200 million in an IPO by the end of this year or early next year, the newspaper said. Citigroup is handling the deal.

A number of listing hopefuls have revived their listing plans in Hong Kong following a stock market rally and on improving risk appetite.

ASCOTT RESIDENCE TRUST, daiwa maintain HOLD with target price $0.66
-Diversification offset by global downturn. We maintain our 3 (Hold) rating
for ART. The unit prices of hospitality-related S-REITs including ART were
highly resilient in June even though there were no signs, in our opinion,
that the decline in tourism or business travel had stabilised.
- We are cautious on the hospitality sector due to the poor visibility of
revenue-per-available-unit (RevPAU) and earnings during this global
business, investment and tourism slump. Although ART’s serviced-residence
portfolio is diversified by geography, while its customer profile includes
a good mix of industries and purposeof- stay (for business, leisure,
relocation, or project), we believe its operations would be affected
adversely by a prolonged recovery.
-Possibility of equity fundraising. Out of a total share of debt of
S$635.8m as at 31 March 2009, ART had refinancing requirements of S$111.6m
(18%) for FY09, S$10.5m (2%) for FY10, S$398.5m (62%) for FY11, and
S$115.2m (18%) for FY12. With a gearing ratio of 38.7% (based on a
proportionate share of debt and asset value) as at 31 March, we believe an
equity-fundraising exercise cannot be ruled out, given the recent track
record of CapitaLand-related S-REITs.
-Target price S$0.66. We maintain our six-month target price of S$0.66,
based on our RNG-valuation method, derived from capitalising ART’s
projected FY10 operating distribution (at an average RevPAU of S$124/day)
and an effective cap-rate assumption of 7.0%. ART’s target price to latest
(March 2009) book value of S$1.51 is 0.44x.

CAPITACOMMERCIAL TRUST, daiwa maintain OUTPERFORM with target price $0.94
-Maintain 2 rating. We maintain our 2 (Outperform) rating. We still have a
positive view on office-sector S-REITs and believe a stabilisation of the
spot-rent decline could trigger another round of outperformance. CCT’s
rights issue has helped it to recapitalise, but has also diluted the
potentialvaluation upside, based on our forecasts.
-No more overhang. CCT’s S$823m (gross) one-for-one rights issue, announced
on 22 May 2009, at S$0.59 per rights unit, has eliminated effectively, in
our view, the rights-issue overhang. .. With a post-rights issue leverage
ratio of 30.7%, which captures a 10% asset-value decline (based on 22 May
valuations), CCT is now one of the most well-capitalised S-REITs, in our
view.
-Well-positioned for refinancing challenges. CCT has no debt-financing
requirements for 2009, a S$650m (25%) secured term loan and a S$235m (9%)
medium-term note (MTN) for 2010, and S$520m (20%) in CMBS (for Raffles
City), a S$100m (4%) MTN, and S$370m (14%) of convertible bonds for 2011.
-Target price S$0.94. We maintain our RNG-valuation-method-derived target
price of S$0.94, based on capitalising CCT’s estimated FY08 core operating
distribution (at an average passing rent of S$6.84/sq ft/month) at an
effective cap-rate assumption of 6.5%. CCT’s target price to post-rights
(pro-forma) BVPS of S$1.51 is 0.62x.

CAPITALAND, daiwa upgrade to OUTPERFORM from HOLD with target price $4.22
-Rating upgraded to 2 from 3. We have upgraded our rating to 2 (Outperform)
from 3 (Hold) and expect the successful resumption of monetising portions
of its China-mall portfolio into CRCT, possibly with other
capitalproductive announcements, to trigger share-price outperformance.
-So far so good. CapitaLand’s business is diversified across several
property segments and geographic locations. With the possible exception of
the China market, property markets are generally subdued compared with
conditions before the global financial crisis, although the risk of a
property-market collapse has been averted.
-Singapore residential could be a 2010 story. Singapore property risks are
receding rapidly, and the magnitude of possible impairment charges for
certain projects in CapitaLand’s landbank are also diminishing. If the
propertymarket momentum carries strongly into 2010 (we believe this is
highly uncertain), CapitaLand might take significant market share with the
successful launch (or re-launch) of its mid-to-high end projects. Landbank
replenishment is an issue, but this would be adequately addressed if the
company were to acquire attractive sites (part of the capital-productive
announcements).
-Target price S$4.22. We have raised our six-month target price to a 60%
premium to NAV (from NAV and a target price of $$2.43 previously), one
standard deviation above the average premium to NAV, on our revised NAV
estimate of S$2.64.

CAPITALAND, db maintain SELL with target price $2.83
-Capitaland held a preview of Latitude (a 127-unit upper-mid freehold
project in River Valley) over the weekend, reducing prices by >30% to S
$1,600-1,700psf onwards. They previously sold 11 units at end 2007 at S
$2,400-2,800psf. No firm take-up figures have been released as yet (the
showflat had a moderate crowd), but the large unit sizes (2 BR from
1,300sf, 3BR up to 2,000sf) and absolute prices (> S$3.5m for the 3BR)
suggests slower take-up rates. Margins remain comfortable at >30% after the
prices cut due the low land cost. Recall, the group has sold around 90% of
Wharf Residences in May after cutting prices by around 20% to ~S$1,200psf.
Capl may launch Urban Resort in the coming months (est breakeven of S
$1,940psf).
-We see greater risk of landbank provisions for sites purchased later in
the cycle such as Char Yong Garden (breakeven est at S$2650psf) and Farrer
Court (breakeven est at S$1400psf), these could come through in the 2Q
results. In addition, Capitaland will be valuing investment properties
under development half-yearly (due to revisions in FRS40), similar to its
completed investment property portfolio. We see risk of write-downs and
revaluation deficits in the upcoming 2Q09 results, which will be partially
offset by revaluation gain from ION Orchard.
-In the absence of revaluation gains which boost headline earnings,
increasing focus is likely to fall on high multiples on weak recurring
PATMI. We maintain our Sell rating with valuations looking expensive at 8%
premium to RNAV and 41x FY09E PER on core earnings.

CAPITAMALL TRUST, daiwa maintain UNDERPERFORM with target price $1.32
-Maintain 4 rating. We maintain our 4 (Underperform) rating for CMT, and
believe there is still a high degree of uncertainty over how the trend for
retail sales (down 11.7% YoY for April) will play out over the remainder of
the year (we are not so sure that the worst is over), or how the rollout of
new retail supply would affect the operations or pricing power of existing
malls.
-Two major risks. We see CMT’s two major earnings-related risks as 1)
falling market rents and the start of a negative rental-reversion phase,
and 2) the implementation of concessionary rent cuts to keep retailers
afloat under a prolonged retail-sales slump.
-Not totally suburban. Suburban malls make up the core of CMT’s portfolio,
but it also owns The Atrium (an office property on Orchard Road acquired at
the peak of the market and with considerable asset-value downside, in our
view), a 40% stake in Raffles City, and Plaza Singapura. Even though Plaza
Singapura is not high-end, we see a considerable amount of new retail space
on Orchard Road catering to a similar (youth and lifestyle) market,
especially at Orchard Central.
-Target price S$1.32. We maintain our six-month target price, based on our
RNGvaluation method, of S$1.32, obtained from capitalising the estimated
FY09 core operating distribution at an effective caprate assumption of
7.0%. CMT’s target price to latest (March 2009) book, adjusted for the
rights issue, of S$1.66, is 0.80x.

CAPITARETAIL CHINA TRUST, daiwa upgrade to OUTPERFORM from UNDERPERFORM
with target price $1.32($1)
-Rating upgraded to 2 from 4. We have upgraded our rating for CRCT to 2
(Outperform) from 4 (Underperform) and expect a resumption of acquisitions
from CapitaLand’s China-mall pipeline to improve its DPU-growth outlook and
trigger further unit-price outperformance. Based on our new acquisition
assumptions and revised estimates, we forecast CRCT’s industry-leading DPU
CAGR (FY08-11) to increase to 9.0% (from 8.4%).
-Waiting to pull the trigger. We believe the strong unit-price performance
so far in 2009 has allowed the manager to set its sights again on
acquisitions. Assuming that positive unit-price momentum can be sustained,
we now believe CRCT can launch a successful acquisition and
equity-fundraising deal that would be accretive for unitholders.
-Minor refinancing risk. CRCT has a S$65.2m (15.5% of total debt) unsecured
offshore loan due in FY09, a S$288.5m (68.7%) unsecured, fixed-rate,
offshore loan due in FY10, and a S$66.3m (15.8%) onshore loan due in FY11.
-Target price S$1.32. We have raised our target price, based on our
RNG-valuation method, to S$1.32 (from S$1.00). We have capitalised the
portfolio’s estimated FY10 (previously FY09) core operating distribution at
an effective cap-rate assumption of 6.0% (from 7%). CRCT’s target price to
latest (March 2009) book of S$1.24 is 1.06x.

CHINA HONGXING, db maintain BUY with target price $0.22
-We hosted China Hongxing’s management in Singapore last week and continue
to see encouraging signs that the operating environment is improving. Here
our key takeaways from the meetings
-Trend in operating performance continues to improve. Inventory levels have
been reduced to three months in Jun 09, from four months in May 09 and the
peak of five months in Feb 09. In addition, management has a target for
inventory levels to come down to around two months by the 3Q09. While the
company’s SSS for Jun 09 have been flat, we believe this is due to the high
base effect from the Beijing Olympics in Jun/Jul 08. The company is looking
to reinstate its dividend payout this year (historically has paid out both
an interim and final dividend).
-Focus on spending 20% of A&P on sponsorship. The company is starting its
marketing campaign with a five year sponsorship deal with the Shanghai
Masters Series Organising Committee to be the official apparel partner for
the Association of Tennis Professionals (ATP) - Shanghai Masters in the
second half of 2009. This marketing campaign will help profile China
Hongxing’s brand, Erke, and help to increase its brand awareness amongst
Chinese consumers.
-Upbeat on Aug 09 trade fairs sales. If the operating environment continues
to improve, we believe this could lead to possible turnaround in Aug 09
trade fair sales. Signs of an improvement in the cash conversion cycle,
higher operating cash flows, continued repayments from its distributors
could be key catalysts for the stock to rerate.

CITY DEV, dbs maintain BUY with target price $10.67($10.55) EPS for FY09/10
raised by 8.1% and 9.9%
-A Stamp of Confidence. Attracting one of the strongest client interests at
our ‘Pulse of Asia conference, City Dev stamped its confidence in the
demand fundamentals underlying the mass and mid-tier residential market,
even if the high-end segment may take a couple more quarters before seeing
a re-ignition of interest. It continues to be business as usual for City
Dev, as it readies new launches with an array of projects catering to every
market segment.
-Something For Every Appetite. Having already sold 500 units in 1H09, it is
poised to sell another 500 units in 2H09. On the menu are high-end Volari
in Jul/Aug (former Garden Hotel at Balmoral Road), a mass-mid market
project at the former Hong Leong Garden in Sep, and two mass-market sites –
The Gale in July (33% stake, at Upper Changi) and another Pasir Ris project
at year-end. And if buying appetites aren’t sufficiently sated, high-end
Quayside at Sentosa is launch-ready.
-BUY, 27% Upside to TP of S$10.67. After adjusting ASPs for Hong Leong
Garden and marking-to-market its listed entities, our RNAV is revised up to
S$8.90 (from S$8.79). We keep a 20% premium on the stock, which is close to
historical +1SD levels, for a TP of S$10.67 (prev S$10.55) giving a 27%
upside. Reiterate BUY on our top big-cap pick for the property developers.

COMFORTDELGRO, jpm maintain OVERWEIGHT with target price $2
-Earnings pick-up on track We see earnings return to normalized levels in
2009 on lower fuel prices. Earnings contribution has also begun at
ComfortDelgro Cabcharge Victoria (formerly Kefford) post acquisition. This
was faster than expected and the segment’s high operating margin of 23% is
likely to be accretive to the Group’s overall bus business (1Q09 bus EBIT
margin 8.5%) in the long-run.
-Still the market leader in taxis ComfortDelgro continues to maintain its
leadership position in the Singapore taxi business with a market share of
63%. Its idle rate of a low 1.5% also sets it markedly ahead of its close
competitor – SMRT – although we observe keen competition from private
operator TransCab which is fast catching up with the second largest market
share.
- Quiet on the M&A front so far The current economic conditions should have
presented significant M&A opportunities for a wellmanaged land transport
group like ComfortDelgro, as some companies may be facing distress but
still holding potentially lucrative operating concessions. However, we have
yet to see any M&As from the company YTD, possibly attributed to
management’s cautious stance.
- Undemanding valuation, in need of strong positive catalysts There could
be a potential shortage of near-term catalysts for the stock given
management’s conservative stance as far as M&As are concerned. We remove
the stock from the Asia Analysts’ Focus List. Nonetheless, valuation
remains undemanding at 12x FY10E P/E and 1.6x P/B and we continue to
believe that its 75%-owned SBS Transit stands a relatively higher chance in
securing the Downtown MRT line to be awarded early 2010.

OLAM, cl maintain BUY with target price $2.59 EPS for FY09/10 raised by
26.5% and 5.4%
-Our checks with Management suggest improving demand, especially in the
industrials segment, making us sanguine on Olam meeting CLSA’s ahead of
Street expectations for 4Q09. Together with expanding intracountry trade,
we expect this momentum to continue through FY10. The recent share
placement heralds a comeback of the Group’s acquisitions strategy. Hence,
we raise our M&A valuation weighting in our DCF and peer based target price
from 5% to 20% deriving a TP of S$2.59 implying 16% upside to the S$2.24
theoretical ex-placement price. BUY.
-4Q09 on-track to meet our expectations. Olam’s industrial soft commodities
segment saw a 16% volume contraction in 3Q09. Since then, Management is
seeing an improvement in Asian demand. For cotton, the Group is
experiencing higher demand from South and East Asia. In coffee, Olam has
successfully doubled its market share in Brazil. In dairy and cocoa, the
demand profile remains weak with continued de-stocking seen for the latter
in the EU and US. The key here is that the Group managed to grow overall
volumes by 6% YoY in 3Q09 during the worst phase of global demand
destruction. Continued improvement throughout 4Q09 makes us sanguine of
Olam’s ability to meet our ahead of Street earnings expectations.
-Positive momentum to continue through FY10. The Group plans to expand its
intra-country strategy in India and China along with Africa and Latin
America. Add to this a bigger contribution from past acquisitions.
Management reiterates their 16-20% YoY volume growth guidance for FY10. It
must be noted that barring FY07 volume growth has exceeded top-end guidance
by 4-11% hence earnings risk is on the upside.
-Acquisitions for next leg up. Olam’s acquisition strategy is making a
comeback post their Temasek placement. We believe this will result in a
significant (~25% of assets) and imminent acquisition. Historically, the
Group has been successful in exploiting market inefficiencies from
investing in assets with potential for above normal profits. Given Olam’s
global presence we expect this deal to be of similar.
-Upgrading target price to S$2.59. With the launch of their acquisition
strategy we raise the M&A scenario weighting from 5% to 20% in our DCF and
peer valuation based target price to derive a TP of S$2.59. This implies a
16% upside to the current theoretical ex-placement price of S$2.24. Trading
at 20x 12-month forward PE vs. a long term average of 23x, we remain BUYers
of Olam.

OLAM, db downgrade to SELL with target price $2 EPS for FY0910 lowered by
5.6% and 16.9%
-Good news discounted with share price run-up. Olam has outperformed the
STI following its recent placement to Temasek (273m new shares at S$1.60)
and the acquisition of SK Foods (US$39m). We believe much of the good news
has been discounted after the share price surge. At 23x FY10E PER, 3.3x
P/B, and 11.4x EV/EBITDA, Olam is not only trading at a sizeable premium to
its peers, but it is expensive versus itsown trading history. Sell.
-EPS dilution/contribution disconnect; M&A risk. We believe Olam’s share
price strength comes largely from the hope of M&A activities and potential
contributions from Temasek. This anticipation, we feel, has been
overplayed, and the earnings dilution/contribution disconnect (i.e.,
immediate EPS dilution from the placement vs. the earnings lag from new
acquisitions) shows that much has been discounted with the high valuations.
M&A, while exciting, could raise overall risk as the number ofmoving parts
increases.
-Company visit; April/May 2009 volume surge not sustained. Our recent
company visit indicates that the volume surge seen by the group in
April/May ‘09 was due largely to Chinese re-stocking and has not been
sustained. Cotton demand has slightly declined in June, and the outlook is
weak. Wool and rubber remain weak due to continued poor consumer spending.
Cocoa and dairy, which are said to be recession-resistant, are also showing
slight weakness.
-Downgrade to Sell; EPS lowered after factoring in placement. Our target
price of S$2.00 is based on the Gordon Growth method and has been raised
after factoring in the recent share placement. Assumptions ROE of 19%, a
long-term growth rate of 3% and COE of 10%. Upside risks include
better-thanexpected volumes in its products, market share gains and new
products.

SEMBCORP MARINE, kim eng maintain HOLD with target price $2.73($2.31)
-Raising recommendation to a Hold. With the resolution of the PetroRig I
sale, we are raising our recommendation on Sembcorp Marine (SMM) to a Hold.
However, the outlook for rig newbuilds still remains muted at this point,
and we remain unexcited over its medium term prospects.
-SMM recovers amounts due from PetroRig I. On June 8, SMM had announced
that it had sold the semisubmersible PetroRig I to Diamond Offshore in
order to recover monies due to them following the non-payment by the
customer, Petromena. Diamond has disclosed a price of around US$460, of
which SMM will receive its outstanding amount of US$200, plus
administrative costs. The balance of the amount will be returned to the
original bondholders of the project.
-SMM risk controls working. With the healthy reported selling price of
US$460m, this assuages concerns of SMM’s other 2 rigs being built under the
same specifications for Petromena. SMM has collected 50% of these contracts
amounts, and believes that it would be able to dispose of the rigs in a
similar manner at no loss if Petromena should once again default on
payment. The sale also indicates that demand for such deepwater rigs
remains healthy, and that SMM is able to protect itselfagainst such default
contingencies.
-Deepwater interest still not translating to orders. However, despite
continued interest in the deepwater segment, we do not see this translating
to significant orders, despite an improving credit environment. SMM’s last
reported orderbook stood at $8.4b stretching to 2012, and has since
announced orders worth S$230m for an offshore platform contract for SMOE,
as well as US$237m outfitting and completion order for a semisubmersible.
-Raising SOTP target to S$2.73. We are raising SMM’s price target to $2.73
from $2.31 previously, on higher shipyard multiples in our sum-of-the-parts
valuation. Our FY09 net profit forecast of $497m remains unchanged. While
2-yr earnings CAGR is still a healthy 12.7% p.a., we expect turnover to
taper off from 2011 onwards. While we do expect the rig market to pick up,
we are unlikely to see the same strength as in the last boom cycle between
2005 and 2008. However, given its respectable earnings visibility and
decent dividend yield, we raise the stock to a Hold.

SIA, jpm upgrade to OVERWEIGHT from NEUTRAL with target price $14($9.40)
-Upgrade to OW SIA is in its worst earnings cycle in history with a high
probability of reporting losses for the next two quarters which explains
its underperformance versus the market year-to-date. Although we remain
bearish on the near term outlook and the timing and quality of the rebound
remains uncertain, we believe that its potential correction in the upcoming
results and/or the worsening impact from Influenza A would provide a good
opportunity to accumulate in preparation for a cyclical upturn. For more
risk averse investors, SIA is also the “safest” choice in the sector given
its well-capitalized balance sheet, strong track record at managing costs
during downturns and ability to unlock more value from
subsidiaries/associates such as SIE, Tiger Air in the longer term, and M&A
forays that could lift market sentiment even though they may not
necessarily be value-enhancing.
-Potential longer-term value in SATS Stock is effectively trading cum
dividend of S$1.77/share. Buying SIA now entitles shareholders to 0.73 SATS
share for every 1 SIA share. Although shareholders may not necessarily
realize the value of SATS near term due to potential share overhang as free
float would rise from 19% to 45%. However, applying mid-cycle airport
valuations on SATS of c.18x P/E would imply a potential fair value of
c.S$2.40/share longer term.
- Long-term prospects SIA is one of the best-managed airlines with strong
pricing power and a highly efficient cost structure in our view. It is also
the only Asian airline with a net cash balance and has been returning more
capital to shareholders in recent years. However, we believe SIA is a
mature airline with more limited growth prospects than Cathay and its
market share at its home base should gradually diminish as low cost carrier
penetration grows. We see risks entering M&A deals that may not be
value-enhancing.
- PT, valuation, key risks We have raised our PT to factor in SIA’s
improving earnings outlook in the next 12 months. Our ex-div Jun 2010 PT of
S$14 is based on 1.2x P/BV, SIA’s average valuation since 2003 when its
competitive environment intensified with the entry of low cost carriers and
Emirates’ increased presence in Singapore. Key risks 1) WHO issues travel
restrictions due to Influenza A, 2) stagflation, 3) making value-destroying
investments.

SINGTEL, ml maintain BUY with target price $3.33($3.08)
-PO raised 8% on FY11E rollover; earnings raised by 6-7%. We raise our PO
8%, to S$3.33/shr and FY10-12E earnings by 6-7%. The earnings upgrade is
led by margin uplift (~1.5ppt) at Optus & update to FX assumptions. We
expect FY11E earnings growth to accelerate to 7% as steady momentum in core
markets (~4% EBITDA growth) finds support from Assoc earnings recovery.
-Revitalized core mkts., low-price stub to offset M&A jitters. We like
SingTel for its dominance in S’pore & improving subscriber market share of
Optus. Stub valuations are at ~10% discount to int’l peers on FY11E
EV/EBITDA (5.6x). We recognize worries over potential cash outgo towards
Bharti-MTNbut believe this will not stress the balance sheet or dividend
outgo.
-Involvement in Bharti-MTN may rise; FY11E dividend safe. Retention of
SingTel’s current proportion of board representation at Bharti and ease of
equity accounting for the Bharti in a post-MTN transaction scenario appear
to be key issues for SingTel as it evaluates the MTN deal. We think SingTel
could look at ways to raise its stake in Bharti possibly through buy-out of
MTN’s minorities. Assuming SingTel keeps net debt/EBITDA between 1.5-2x and
maintains FY11E dividend payout at 57%, we see room for up to US$3bn outgo
that would raise SingTel’s post-MTN Bharti stake to ~25%. Consequently,
earnings could see a potential ~3% uplift but ROIC would fall ~200bps.
-Optus keen on NBN rollout but equity participation not easy. Rollout of
the proposed A$43bn NBN project would expand Optus’ access to markets &
offers potential business upside. However, equity participation in the NBN
project may be difficult unless the govt. prefers to absorb Optus’ HFC
network in areas that overlap with Telstra’s network. Any equity raising
through relisting Optus also seems unlikely as it could trigger an
impairment charge.

SMRT, jpm maintain NEUTRAL with target price $1.80
- Circle Line ridership could surprise on the upside The Circle Line (CCL)
attracted a daily ridership of about 30,000 – 35,000 during its first week
of operations since the 5-station, phase 3 of the 29-station lines opened
in May 2009. This is better than our estimate of 25,000. The remaining
phases will be opened from 2010. With the CCL being a transfer line”
cutting across the other lines, it should be able to capture a good amount
of ridership share.
- Might be net beneficiary of centralized bus planning SMRT’s bus network
currently spans the less densely populated areas of Singapore. The LTA is
in the process of re-planning the whole bus network under its centralized
bus planning exercise. SMRT could emerge a net beneficiary from this
exercise, as routes get redistributed so that it could have a chance of
securing the more lucrative bus services.
-Retail space rental earnings could see slower growth Retail space rental
experienced phenomenal growth in the past on the back of aggressive
refurbishment of existing stations and the conversion of bigger underground
stations into “Xchanges” housing more retail shops. Going forward, we
believe that the growth from this segment could plateau as the CCL is fully
underground and the stations are smaller, translating to less lettable
retail space. This segment currently contributes about 23% of SMRT’s
operating profits and is the second largest profit contributor after the
core MRT business.
- Valuation, risks At 15.4x FY10E P/E, we believe the stock is fairly
valued, trading above its historical mean forward P/E of 13.5x. Upside
risks could come from the CCL breaking even faster than the FY 2013E in our
assumption.

ST ENGINEERING, uob maintain SELL with target price $2.04
-Listing of the notes could see interest shift to notes at the expense of
the stock. STE pays out 98-100% of its earnings and the higher debt (+92%)
could affect dividend payout.
-Corporate Events. ST Engineering (STE) has announced that it has set up a
financial subsidiary, ST Engineering Financial 1 Ltd (STEF-1), which will
be issuing US$1.2b multi-currency denominated medium term notes and has
applied for listing of such notes on the SGX. The notes have been rated AAA
by S&P. The proceeds will be used to refinance existing borrowings and fund
new capex and acquisitions.
-Stock Impact. A pre-emptive note issue? STE has indicated that it is
taking a pre-emptive measure to diversify its funding options and will be
opting for a multi-currency denominated medium term note. As at 1Q09, STE
had S$913m in debt and S$1.39b in cash and near cash, of which S$599.9m is
placed with Fullerton Fund Management, a wholly-owned unit of Temasek
Holdings. The US$1.2b notes will raise debt by 92%, assuming the new debt
will be used to refinance existing debts. In 2008, the effective cost of
debt was just 4.8% and had eased further in 1Q09. The 6.75% interest cost
is shown net of fair value of an interest rate swap trade. Assuming the
note has a coupon of 4.5%, interest cost willbe S$78.8m, or 84.6% higher
than in 2008.
-Borrowings seem high relative to annual capex requirement.Over the last
three years, maintenance capex amounted to about 131% of depreciation costs
(S$159m in 2008) and slightly more than half of capex was directed towards
the aerospace segment. STE has already made substantial investments in
China, with new hangars coming on stream in Shanghai and Xiamen in 2009.
Thus, the need for further funding comes as a surprise.
-Earnings Risk/Recommendation. The incremental funding will be the largest
in nine years and is expected to raise interest expense and potentially
affect dividend payout. We also believe STE’s dividend yield should reflect
a risk premium over the coupon on the note. Pending further announcements,
we are neutral on the stock. We maintain our SELL recommendation and our
fair price of S$2.04, which is based on 14x two-year forward earnings.

STRAITS ASIA, ubs remains a BUY with target price $2.50(from $2.80)
- We maintain our Buy rating for Straits Asia following our revised coal
price estimate for 2010-13. We lower our price target from S$2.80 to S$2.50
as we increase our 2010 target PE from 8.4x to 12.7x following a lower
risk-free rate from 12.8% to 11.5% but lower our 2010 EPS estimate. We make
the following adjustments to our earnings estimate for Straits Asia.
- Coal price assumption revision. Our revised thermal coal price
assumptions accounts for 95% of the total net earnings revision. We
highlight that the effect on Straits Asia’s earnings is negative relative
to its peers as we have previously factored in a higher coal price to
account for high-priced contracts. This followed SAR’s US$230m refinancing
last year, as lenders required the company to contract future sales in
order to provide earnings security. However, in the meantime it has been
necessary to renegotiate select contracts in order to maintain customer
relationships. Consequently, we reduce our average selling price estimate
by 16% for 2009, while increasing our quality discount assumption slightly
to account for a higher production output from the lower calorific Jembayan
mine.
- Cost assumptions unchanged. We maintain our view that unit costs will
remain largely unchanged as our expected approval to mine SAR’s Sebuku
concession will reduce weighted average costs. The mine is a low-cost
operation due to its lower stripping (overburden) ratio and close proximity
to port.
- Growth in outstanding shares. We increase the total number of shares from
1,094m to 1,129m following a recent issue of warrants, which are now inthe-
money given the shares’ 140% increase since February 2009. The revision
accounts for around 5% of total net earnings changes.

WILMAR, ocbc maintain BUY with target price $5.78-Eyes HK Listing for China Ops. Wilmar International (Wilmar) has confirmed
that it has hired three investment banks to “evaluate” the feasibility of a
HK listing; it had previously unveiled such plans to list 20-30% of its
China operations in either HK or China to tap investor interest in its
biggest market and to raise cash for acquisitions. In an earlier Reuters
report citing unnamed sources, it said that the IPO - worth around US$3b -
is set for a listing late this year or early next year. In FY08, its China
business turned in revenue of US$14.3b (49% of overall sales) and an
estimated US$500m to its bottom line. Assets in China amounted to US$6.5b,
or nearly 40% of its total assets (Exhibit 1).
-Limited impact from lower CPO prices. Meanwhile, CPO (crude palm oil)
futures in KL have recently hit a 13-week low, with the actively traded Sep
contract falling 6.1% last week, unsettled by concerns of more bearish news
on the horizon. The most worrying is the further deterioration of the
fundamentals for the crop - industry watchers warned that the CPO stockpile
could surge going into the high production period as foreign demand has
been poor. However, we do not expect lower CPO prices to have much of a
negative impact on the group although revenue may fall (mainly due to its
palm and lauric business). On the other hand, a significant downstream
player such as Wilmar may benefit from lower feedstock prices as it still
sources around 60% of its requirements from third party plantation
companies. In any case, we note that Wilmar has shown a consistent ability
to manage the price fluctuations (see Exhibit 2), often riding out the
volatility with aplomb.
-Maintain BUY with S$5.78 fair value. The latest news shows that the
proposed HK listing of its China operations is on track. Based on its
estimated US$500m bottom-line contribution, we believe that the US$3b
flotation is not an issue, assuming a valuation of 20x and a divestment of
30%. However, we will hold off adjusting our numbers until we get more
information about the structure and form of the proposed listing.
Nevertheless, we are bumping up our valuations slightly from 18x blended
FY09/10 PER to 18.5x, deriving a fair value of S$5.78. Maintain our BUY
rating.

WINGTAI, dbs upgrade to BUY from HOLD with target price $1.56($1.54)
-Blue or Grey Sky? At our conference, client interest in Wing Tai mainly
centered on its upcoming launch of Ascentia Sky, which is expected to enter
the market this week. Our channel checks indicate ASPs post-discount
starting from around S$1,100 psf onwards for the 373- unit project.
Following recent market trends, the project has been reconfigured to
include a greater proportion (c.40% each) of 2 and 3 bedroom units. Our
current valuation is based on an ASP of S$1,200 psf for Ascentia Sky, which
is close to the 2007 peak achieved at nearby Metropolitan. As Wing Tai only
has a 40% stake, our sensitivity analysis indicates every S$100 psf
increase in ASP translates to a 0.5 Scent increase in RNAV.
-Room With A Vue. Wing Tai’s other 2009 offering for now is Belle Vue
Residences. A total of 79 units out of this 176-unit project have been
launched, with 61 units sold at between S$1,700-1,900 psf. More than 80% of
buyers are local. Around 80% of buyers have taken up the Deferred Payment
Scheme (DPS), possibly eyeing a quick flip as the project obtains TOP in a
year.
-Upgrade to BUY, TP S$1.56 gives 15% upside. Adjusting our ASP assumptions
for Ascentia to S$1,200 psf, our RNAV is revised to S$1.95 (from S$1.93).
We maintain our 20% discount to RNAV (between historical average and +1SD),
for a TP of S$1.56 (prev S$1.54). Upgrade to BUY, with 15% upside.
Accumulate this high-beta, purer residential play on expectations of
recovery filtering up to the high-end.

[ SECTOR ]

HDD by cimb
- Weak start to 2009, but Seagate and WD’s results still ahead of guidance.
Not surprisingly, the slowdown at end-2008 spilt over into early 2009,
resulting in overall HDD shipment contractions of 15% yoy and 8% qoq to
113m units. This marked the second consecutive quarter of qoq decline in
unit shipments for the HDD industry. Nevertheless, the two major drive
makers, Seagate and WD, still managed to deliver 1Q09 results that beat
their original guidance.
- 2Q09 results could be ahead of expectations. Our channel checks and
positive comments by Seagate and WD suggest that 2Q09 could again turn out
better than market expectations. We gather from most HDD component
suppliers that volume has continued to grow mom since end-1Q09 as the
contraction in demand has not been as severe as anticipated. Also, we
believe some rise in orders was due to restocking by OEMs and channel
partners.
- Tight control of production and inventories helps. We believe HDD OEMs’
good discipline in controlling output as well as healthy channel
inventories had helped in the past two quarters. Their proactive moves had
prevented an oversupply that could prolong the downturn.
- Seasonal strength on track? We gather from industry contacts that current
build plans for all major drive makers point to sequential volume growth of
8-17% in 3Q09. This suggests that the traditional seasonal strength in 2H09
is intact, in line with our assumption of a yoy recovery in volume from
4Q08, when orders in the sector nosedived as the global financial crisis
deepened.
- Risk slower-than-expected sell-through in 3Q09. We believe the key risk
for the sector is a slower-than-expected sell-through in 3Q, which may
result in a drop in orders in 4Q09, mirroring the case in 2008.
- Armstrong’s overall business has improved. Our last discussions with the
company suggest that business in most divisions has improved from a weak
1Q, especially HDD components in Singapore and the automotive business in
China. We believe Armstrong could return to yoy profit growth in 3Q09, in
the absence of huge forex losses.
- Broadway to benefit from recovery in HDD demand. Broadway should be the
main beneficiary of a recovery in HDD demand as it derives more than 70% of
its revenue from this sector. The stock is one of the cheapest among peers
and its historical trading experience.
- Cal-Comp’s improved HDD-related businesses may not be sufficient to
offset potential losses in HP printer business. Cal-Comp reported healthy
19% yoy revenue growth in the month of June, its first double-digit yoy
growth this year. Although we expect it to benefit from rising HDD demand,
its earnings could be hurt by changes in HP’s supply chain from 2H09
onwards.
- Upgrade from Underweight to Overweight. We upgrade the sector as we pass
the trough in 1Q09 and enter the seasonally stronger half. We see positive
news flow boosting trading interest in HDD component suppliers like
Broadway and Armstrong.

OIL by ms
-Overweight Cairn India (CAIL.BO), SK Energy (096770.KS), Woodside
(WPL.AU), Oil Search (OSH.AX) Underweight Sinopec (0386.HK )
-Crude Oil. Average prices for WTI for the week rose 0.5%; supply
disruptions in Nigeria supported the prices, however a stronger dollar saw
oil prices tapering off by the end of the week.
-Refining Margins. Complex margins average for the week fell 33% to
US$2.1/bb. Simple margins were negative at US$(0.7)/bbl.
-China has hiked the prices for gasoline, diesel, and kerosene (overall
hike 11%), however we believe this increase means Sinopec’s refining
division only breaks even.
-India also hiked retail prices for gasoline (Rs4/Litre) and diesel
(Rs2/Litre), keeping the prices of cooking fuels unchanged. Key
beneficiaries include the Upstream companies (ONGC and GAIL) and downstream
companies (HPCL, BPCL, and IOCL)
-Petrochemical Spreads. Ethylene-Naphtha gained strength, by 8.5%, however
HDPE-Naphtha fell by 1.4%

PROPERTY by ssb
- Prime office rents fall 19% in Q2 DTZ — Office rents in Raffles Place
fell 19% in the second quarter of this year, after sinking 25% in Q1,
according to a new report from DTZ. The average monthly gross rent for
prime office space in Raffles Place slipped to $9.70 psf pm in Q2. The
figure has now fallen close to the level at end- 2006 - and is 49% below
the Q3 2008 peak. Research from CB Richard Ellis (CBRE) shows the same
trend. Prime office rents averaged $8.60 psf pm in Q2 - an 18.2% qoq fall.
This was a slight moderation from the 18.6% drop in Q1. But CBRE and DTZ
say leasing enquiries are starting to pick up, though take-up is likely to
remain in negative territory for the rest of 2009 and occupancies are
expected to dip further.
- Industrial sector weakens further DTZ — Demand for private industrial
space continued to shrink in the second quarter of this year, says property
firm DTZ. And private industrial rents - in decline since Q4 2008 -
registered steeper falls in Q2 2009 than in the two preceding quarters.
Average monthly gross rent fell 6.8% for first-storey private industrial
space and 8.1% for upper-storey space in Q2 this year. This was the
sharpest contraction since Q3 2003. Amid lower demand in the industrial and
office markets, hi-tech industrial rents posted their biggest contraction
since Q2 2003, falling 12.8% in Q2 2009 to 24.4% below the peak in Q3 2008.
- Mapletree net profits shrink to $210m — Mapletree Investments saw net
profit plunge to $210.3 million for FY 008 ended March 31, 2009 from $1.04
billion a year earlier, on a sharp fall in revaluation gains. The company,
which is fully owned by Temasek Holdings, said in its latest annual report
that revaluation gains from investment properties fell from $1.09 billion
in FY 2007 to $36.1 million in FY 2008. This dragged profit down even
though revenue climbed on the back of higher rental income. Total revenue
rose 21.7% to $444.9 million, from $365.6 million in FY 2007.

Economy shrinks less than expected in Q1 final data

* Singapore sees some signs of bottoming out, no rebound yet

* Central bank comfortable with policy stance

By Nopporn Wong-Anan and Saeed Azhar

SINGAPORE, May 21 - Singapore saw signs on Thursday that its worst-ever recession is bottoming out after its economy shrank less than expected in the first quarter, prompting the central bank to say it is comfortable with its policy stance.

Singapore’s economy shrank at an annualised and seasonally adjusted rate of 14.6 percent in the quarter, less than a Reuters median forecast for a 17 percent fall and also lower than preliminary government estimates of a 19.7 percent drop, final data showed.

The trade-dependent economy has shrunk for four consecutive quarters, but the government said if it started recovering in the second half of the year, full-year GDP could shrink 6 percent, at the high end of its forecast for a 6 to 9 percent contraction.

“It’s not a pretty picture despite the revision. It’s just a less dark picture,” said Song Seng Wun, economist at Malaysian bank CIMB in Singapore.

Singapore’s non-oil exports slipped back in April from March following two months of growth, reinforcing the view that while the worst of the downturn may be over there is no clear sight of recovery.

The Singapore dollar <SGD=>, the central bank’s main policy tool which it manages against a secret trade-weighted basket of currencies, was little changed at 1.4578/91 against the U.S. dollar by 0115 GMT, versus 1.458 before the data.

The central bank said on Thursday the behaviour of the Singapore dollar band was consistent with its policy stance. The currency has strengthened since the bank last month shifted the midpoint of the band lower to the then-weak level of the band, a move less aggressive than some analysts had expected.

The currency’s strength should be seen in the context of the U.S. dollar’s broad weakness against Asian currencies, the Monetary Authority of Singapore’s deputy managing director Ong Chong Tee told a briefing.

GDP in the first three months of the year fell 10.1 percent from a year earlier, also less than expected and a smaller fall than 11.5 percent reported in the earlier April data, but still the worst ever.

Since the advance figures were released [SGGDPA=ECI], manufacturing data for January and February has been revised up, although some analysts had pointed to weakness in services.

“In short, there are some positive signs of a bottoming out. But it is not clear that we have begun to rebound from the bottom,” said Ravi Menon of the ministry of trade and industry at a briefing, pointing to a slide showing green shoots and brown weeds.

Like other exporters, Singapore’s economy has been hit hard by the global downturn following the slump in the U.S. housing market and credit crunch.

It’s not really anything to do with financial markets, but it’s not often that the Australian Financial Review (AFR) gives you a chuckle in the morning.

Today’s AFR has a few quotes by world leaders in reaction to Barack Obama’s inauguration. As you would expect, they are all fawning, and looking forward to Obama’s quest to save the world:

“Your [Obama] election to this high office has inspired people as few other events in recent times have done.” Nelson Mandela.

“We are eager for him to get to work so that with him we can change the world.” Nicolas Sarkozy.

“He’s not only the first black American president but he sets out with the determination to solve the world’s problems.” Gordon Brown.

They are all fawning, bar one. And that of course comes from party-pooper-in-chief Vladimir Putin:

“I am deeply convinced that the biggest disappointments are born out of big expectations.”

There is a tenuous link to the financial markets of course. All these hapless world leaders, having told their loyal subjects that “when markets are broken, government needs to fix it” have slowly realize that they can’t fix it.

So now they are pinning their hopes on anything. Surely the election of the first African-American as president will do it? Of course it makes no difference whether the new president is African-American, Asian ancestry, Jewish, or even another WASP.

But we’ll leave them all in their dream world and let them enjoy themselves in their naivety while they can.

What it does highlight is that government has the upper hand over business. And based on everything we’ve read and heard recently it doesn’t look as though they are in any hurry to give up what they’ve got.

It wasn’t so long ago - in the US and UK especially - that the bail-out packages were being labeled as a good thing for the taxpayer because there was a good chance taxpayers would “make a profit” on the deal.

We’re not sure if anyone really believed that. And sadly for them that idea is getting further and further away from reality as billions of dollars of taxpayer dollars and pounds are thrown into the big black whole of propped up semi-nationalised zombie companies.

We do need to constantly remind ourselves Australia is not entirely immune either to corporate collapses or to government wastage. This morning we heard on the radio calls by the ACTU to hold a “Jobs Summit.” Principally so government, the unions and business can “take action” to solve the crisis through a “fiscal stimulus.”

We’ve had a look at the banks to try and crunch the numbers. If you recall in yesterday’s Money Morning, it seems to us as though Australian banks are in comparatively better shape than US and UK banks, but that they are not as “fundamentally strong” as we have constantly been told.

Is it any coincidence then that the Australian Securities & Investment Commission (ASIC) has decided to extend the ban on the covered short selling of financial stocks? The new date for lifting the restriction is Friday, March 6th.

If the banks truly were in tip-top shape they wouldn’t need the extra protection.

Let’s take another look at one of the banks we mentioned yesterday, Westpac. According to its 2008 annual report it had shareholder equity (the difference between assets and liabilities) of $17.8 billion, goodwill of $2.4 billion and derivatives exposure of $59 billion.

Bearing in mind those were the numbers prior to the takeover of St George Bank. So we can pretty safely assume the amount of goodwill on the books has increased since then. And so for shareholders equity, well that was only marginally higher than Westpac’s.

So with such a small gap between assets and liabilities how can the banks lend more money? They can’t. In fact, when you consider the falling asset values in the property sector, many of the loans that the bank already has on its books are likely to be in negative equity if the underlying asset had to be sold.

If we look at the old St George balance sheet it tells the story. Of the $98 billion of loans outstanding, $75 billion is in mortgages against residential property. Add on top of that the $12 billion of commercial loans.

Therefore with only $7 billion of wriggle room on the books it can’t allow too many of these loans to go bad otherwise it will suffer a similar fate to its US and UK counterparts.

That may explain why the four major banks are so keen for the government to set up and guarantee a ’special purpose vehicle’ to provide government funding to faltering property trusts.

It’s all part of the grand scheme to keep property prices inflated as high as possible. The consequence of making the banks accountable for their past ‘easy lending’ practices by letting property prices fall, repossessions increase and banks going bust is just way too much for the government to let happen.

We assume the government believes it will make a profit on this new scheme to compensate the taxpayer against the risk!

ASL MARINE, dbs maintain BUY with target price $2.07($2.01)
ASL MARINE, uob maintain BUY with target price $1.55($1.90)

CHINA MILK, philip maintain BUY with target price $0.94

CHT HOLDINGS, sias maintain BUY with target price $0.25

CITY DEV, cimb maintain OUTPERFORM with target price $13.05

COSCO, cl maintain UNDERPERFORM with target price $2.20
COSCO, citi maintain BUY with target price $4.15

FERRO CHINA, cimb maintain OUTPERFORM with target price $2.44

KEPPEL LAND, cimb maintain NEUTRAL with target price $5.68

MIYOSHI, ocbc maintain BUY with target price $0.15($0.185)

PARKWAY, csfb maintain OUTPERFORM with target price $3.45($3.40)

QIAN FENG by ocbc

STARHUB, cimb maintain NEUTRAL with target price $3

STRAITS ASIA, dbs maintain BUY with target price $3.49

SWIBER, dbs maintain BUY with target price $3.49

TAT HONG, jpm maintain OVERWEIGHT with target price $2.33($2)

CHINA SUN BIO-CHEM, wc maintain HOLD with target price $0.23

CHINA SUN BIO-CHEM, wc maintain HOLD with target price $0.23
-2Q08 results ? Net profit decreased 52.1% to RMB22.8m. Revenue
increased
33.1% to RMB554.2m in 2Q08, contributed mainly by new ethanol plant in
Shenyang & corn starch plant in Tieling City. Average utilization rates
of
corn starch and by-products decreased significantly mainly due to the
fall
in demand brought about by the temporary halt in manufacturing
activities
of China Sun’s customers ahead of the Beijing Olympic Games. Average
gross
profit margin decreased 14.7ppt to 15.6% in 2Q08 as a result of rising
raw
material prices as well as loss from ethanol plant as it operated below
breakeven point. We understand from management that the ethanol plant
achieved 90% utilization rate towards the end of 2Q08, bringing average
utilization rate to 51% for 1H08.
-Trial run for corn sweetener expected to start in 4Q08. We understand
from
management that trial run for corn sweetener is expected to kick in
4Q08.
However, the contribution, if any, is likely to be small as it will be
overshadowed by the start up cost.
-Earnings cut by 36~53% for FY08~09F mainly due to 1) We have adjusted
our
revenue forecast, taking into account the expected decrease in 3Q08’s
sales
resulting from the temporary halt in China Sun’s customers
manufacturing
activities. 2) Reduction in margin assumptions to 17.8% due to rising
material prices as well as the drop in FY08E’s utilization rate. 3)
Loss
from ethanol plant factored into our forecast.
-Downgrade to HOLD TP of S$0.23. Based on our revised earnings
forecast,
China Sun is currently trading at above 6.6x FY08E Price-to-Earnings
ratio
(”P/E”). We expect earnings to be volatile in the near future with the
Beijing Olympic Games affecting its revenue, high raw material cost as
well
as the low margin of safety for its ethanol plant. Hence, we re-rate
China
Sun based on 0.6x FY08E P/B, taking into consideration the risk of
ethanol
plant which might be subjected to asset impairment in the future,
deriving
our target price of S$0.23.

BIOSENSORS, csfb maintain OUTPERFORM with target price $0.9($1.10)

CAPITAMALL TRUST, cl maintain BUY with target price $3.67

CHINA TAISAN, daiwa initial coverage BUY with target price $0.3

COSCO, ml maintain BUY with target price $5.80

DBS, db maintain BUY with target price $25.60

F&N, cimb resume coverage UNDERPERFORM with target price $4.91

INDOFOOD AGRI, csfb maintain OUTPERFORM with target price $3.28($3.40)

LI HENG, kim eng initial coverage BUY with target price $0.88

SEMBCORP INDUSTRIES, ml maintain NEUTARL with target price $5

SPC by kim eng

SOILBUILD, wc initial coverage BUY with target price $1.23

SWIBER, dbs maintain BUY with target price $3.49

[ SECTOR ]

BANK by gs
BANK by gs

FURNITURE by ocbc

BIOSENSORS, csfb maintain OUTPERFORM with target price $0.9($1.10)
-Biosensors. share price dropped 30% over the last two weeks, as it
became
clear that the Chinese government would most likely not approve
Shandong
Weigao (8199.HK, HK$10.00, O, TP HK$19.00).s sales of a 50% stake in JW
Medical (not listed) to Biosensors.
-We believe the market may have overreacted. Also, the potential
rejection
of the Weigao deal should not affect our estimates, which have been
assuming that Biosensors. ownership of JW Medical stays at the current
50%
level. We also believe the launch of Biomatrix drug-eluting stent (DES)
should be on track even without the Weigao deal. We turn slightly
negative,
however, on the near-term ramp up of Biomatrix sales in Europe and
Asia,
thus slightly reduced our EPS estimates, and lowered our target price
from
S$1.10 to S$0.90.
-Biosensors plans to release the 1,700-patient Leaders trial results
during
the European Society of Cardiology (ESC) Congress (from 30 Aug. to 3
Sep.).
Potentially positive trial results may serve as a near-term catalyst
for
the share price. Maintain OUTPERFROM.

CAPITAMALL TRUST, cl maintain BUY with target price $3.67
-CMT delivered its 1H08 inline with our estimates and consensus with
gross
revenue up 11.8% qoq and 22.5% yoy. DPU for the 1H08 was 7?or 49% of
our
full year forecast. While funding concerns overhang remains on the Reit
sector, we believe the impact CMT will largely be muted given that more
than 90% of total debt are on fixed rates and only 8.4$ are due for
refinancing in the next 12 mths.
-1H08 gross revenue was up 11.8% QoQ and 22.5% YoY lifted by asset
enhancements and higher rental renewals. Organic rental growth
accounted
for 30% of the total S$45.3m increase YoY while asset enhancements in
its
RCS malls and Raffles City Stake contributed the remaining 70% growth.
This
was in line with our forecast at 48% and marginally ahead of consensus
at
50%.
-NPI margins saw a decline of 11.6% QoQ on the back of higher funding
costs
but was up marginally at 2.8% YoY. Diluted DPU for the 1H08 delivered
7?or
49% of our full year forecast and 47% of consensus.
-Rental reversion over the next 2 yrs accounts for more than 43% (Fig.
3)
of total gross revenue should bode well for CMT barring any significant
slowdown in retail activity. From the recent MasterCard survey on Great
Singapore Sales, retail activity was up 33% YoY from locals and up more
than 20% from foreign shoppers.
-Gearing levels reach 43.9% post the acquisition of Atrium@Orchard with
a
total average cost of debt of 3.2%. We find comfort in CMT’s debt
structure
as more than 90% of debt exposure is on fixed rates and only 8.4% of
total
debt due for refinancing in the next 12mths. As a result, we believe
the
impact of DPU erosion from higher funding costs will be muted for CMT.
-Overall portfolio remained robust with occupancy close to 99.9% while
gross revenue and NPI growth was seen across all assets in the
portfolio
averaging >10% with the exception of Other assets which includes
Sembawang
shopping centre, Hougang Plaza and Jurong entertainment centre which
was
undergoing renovations and enhancements.

CHINA TAISAN, daiwa initial coverage BUY with target price $0.3
-We initiate coverage of China Taisan Technology Group (CTTG), a
leading
manufacturer in the PRC of multi-functional fabrics used for sports and
leisure apparel, with a 1 (Buy) rating and a six-month target price of
S$0.30, based on a 5x PER on our FY08 earnings forecast. We expect CTTG
to
trade at above its current peer-average PER of about 4x, due to what we
see
as its robust growth outlook, sound fundamentals, and limited downside
risks. We expect consistent strong earnings growth to lift its
share-price
performance over the next six-to-12 months.
- CTTG’s net profit increased by 389% YoY to Rmb182.7m for FY07, and by
a
further 189% YoY for the first quarter of FY08, on the back of strong
demand for its multi-functional fabrics. As a pioneer in the
manufacturing
of multi-functional fabrics in the PRC, CTTG has recorded rapid sales
growth through the replacement of imports, and strong demand from
leading
brands, such as Umbro, Nike, Puma, Kappa and Anta, due to its quality
and
established track record. We expect the company to maintain its growth
momentum in FY08, and to record a 49.6% YoY increase in net profit to
Rmb273.4m.
-CTTG plans to invest around Rmb280m in new equipment over the next 12
months to increase its production of higher-end products, such as
spandex
and jacquarddesign multi-functional fabrics. We expect this capital
investment to sustain CTTG’s growth over the next two-to-three years,
given
the limited capacity and technological know-how to produce such fabrics
in
the PRC currently. The risk to our call hinges on CTTG’s ability to
stay
ahead of the local competition, while at the same time gain ground on
imports with technological breakthroughs.

COSCO, ml maintain BUY with target price $5.80
-Contract win for 2 drilling units. Cosco Corp. has announced that its
51%
owned subsidiary, Cosco Shipyard Group, has signed a letter of intent
with
Sevan Marine to exercise options secured earlier to build 2 Sevan 650
drilling units. Separate agreements also provide further options for
Cosco
to potentially construct six more Sevan platforms.
-Order value undisclosed. The contract values of the two units are
subject
to negotiations, and as such have not yet been announced. The first
order
for Sevan for a 650 drilling unit (similar design), secured in 2007
(hull
only), was contracted for a value of US$170mn. At a minimum we estimate
that the two new contracts would equate to additional order book wins
of
US$340mn. Cosco has collected a US$7mn prepayment with regards to the
new
contracts.
-Turnkey is a possibility. The first contract secured with Sevan was
for a
hull only project. If negotiations lead to the orders being completed
on a
turnkey basis we estimate contract values at greater than US$500mn.
This
would be the first turnkey drilling project that Cosco has taken on and
would significantly add to the current net order book of S$7.1bn.
-Maintain Buy. We maintain a Buy rating on Cosco with PO of
S$5.80/share.
Cosco is establishing itself as one of the leading shipyards in China.
Given its diversified portfolio, Cosco is well-positioned to mitigate a
potential slowdown in new-builds with additional offshore contracts and
steady ship repair revenues. The stock is currently trading at a 2009E
P/E
of 9.9x with a dividend yield of 4.5%.

DBS, db maintain BUY with target price $25.60
-Benefits from strategic review could provide upside triggers. Buy.
Recent
top management turnover presents an opportunity for a large-scale
strategic
overview of DBS’s operations, which we believe could lead to
initiatives
with the potential to increase future earnings by 17-21%. We expect
such an
announcement on DBS’s future strategy within the next six months. Buy
DBS,
our top pick in the sector.
-Top management changes present opportunities for business improvement.
Recent senior management turnover presents DBS with the opportunity to
implement a large-scale strategic review of its operations and identify
new
revenue opportunities and areas for efficiency improvements. We believe
that the strategic review should be heavily focused on consumer banking
and
expect such an announcement on strategic initiatives to be made within
the
next six months.
-Upside earnings potential of 17-21% of earnings by reaching peer
average.
Our analysis shows that DBS could increase its revenues by up to S$370m
(i.e. 12% of FY08E’s NPAT) and reduce its cost base by S$153m-279m
(i.e.
5-9% of FY08E’s NPAT), should the right initiatives be put in place to
raise key benchmark lending and efficiency ratios to peer group average
levels. With upside potential of 17%-21% of earnings from the
successful
implementation of these initiatives, we see the upcoming strategy
announcement as an upside trigger for its share price.
-DBS appears good value & a beneficiary of rising inflation and
interest
rates. We believe DBS is excellent value at current levels, with its
P/E
still below 2001- 2003 lows. A Gordon Growth model (COE = 7.3%) gives a
12-month target price of S$25.60. Key risks are a prolonged and deep
global
recession and continued bad news on global financials (see p.10 for
details
of valuation and risks).

F&N, cimb resume coverage UNDERPERFORM with target price $4.91
- Assets are attractive in parts. Over 80% of F&N’s consumer-related
businesses rest in its stakes in APB and F&N Berhad. Its brewery
business,
largely operated through APB, has built up a regional presence over the
years but is running into cost pressures from its expansion into
Vietnam.
Price caps for dairy products in Malaysia are also straining profit
margins. We believe their values have been captured in F&N’s share
price.
Properties, which make up over 70% of F&N’s assets, appear undervalued
in
the conglomerate structure, in our opinion. We value its property arm
at
S$4.20-4.50/share.
-Breaking up is hard to do. F&N’s management is unlikely to break up
the
group’s current structure in the near term, in our opinion. We believe
there are few benefits from privatising F&N Berhad at current
valuations
while Heineken and F&N unlikely to relinquish their stakes in APB
easily.
While much value in its property assets appears trapped within the
conglomerate structure, a re-listing of Fraser Centrepoint might not be
timely, given current uncertain markets. There is also no need for the
group to raise funds through a separate listing of the property arm. We
also rule out the possibility of straight sales of the F&B and property
divisions.
- Resume coverage with Underperform and target price of S$4.91. Our
target
price is pegged at a 20% conglomerate discount to our sum-of-the-parts
valuation of S$6.14. A narrowing of the discount in the near term could
come from evidence of streamlining initiatives such as the divestment
of
non-core assets (e.g. printing business) and the redeployment of
capital to
revamp the F&B brand name.

INDOFOOD AGRI, csfb maintain OUTPERFORM with target price $3.28($3.40)
-We tweak down our FY08-10E earnings estimate for IFAR by 4- 5% on the
back
of LSIP.s soft CPO output. LSIP achieved 5.5% YoY 1H08A CPO output
growth
but 2Q08A CPO production dropped 7.3% YoY. IFAR owns 64.4% of LSIP and
the
latter is consolidated into IFAR.
-LSIP.s soft CPO output may be a geographically isolated issue and
thus, we
maintain our CPO output estimates for IFAR.s own plantation. IFAR.s own
plantations are in southern part of Sumatra wherein peers. production
has
been robust so far. LSIP.s CPO outputs are largely contributed from its
North Sumatra estates.
-We tweak down our target price for IFAR by 4% from SGD3.40 to
SGD3.28/share to reflect LSIP.s softer than expected CPO output. Our
target
price for IFAR is based on 14x 09E P/E.
-We maintain our OUTPERFORM rating on IFAR given its positive CPO price
outlook, and at its current share price, IFAR is trading at the second
lowest 09E P/E of all CPO counters under our coverage.

LI HENG, kim eng initial coverage BUY with target price $0.88
-Value is emerging for China’s largest nylon producer. We are
initiating
coverage on Li Heng (LHCF) with a BUY recommendation. Our DCF target
price
of $0.88 is based on 14.7% WACC and 1% terminal growth. Our target
price
implies a FY09 PER of 6.2x which is still at an unjustified discount to
its
sector peers (at 9.7x PER), given its leading market position in China.
-Natural hedge against slowdown in textiles and garment exports. Though
lingering concerns of a slowdown in textile and garment exports cloud
the
entire industry’s outlook, the management is upbeat about the demand
for
nylon. This is because they are banking on strong domestic consumption
and
a diverse customer base which is more inclined towards supplying the
domestic market.
-Earnings boost from capacity expansion. We are seeing topline and
bottomline CAGR of 39.9% and 31.5% over FY07-10F, underpinned by
capacity
growth of 53.8% to 257,000 tons by 3Q09. During this expansion stage,
18
lines of HOY/POY/FDY and 20 DTY will be added, improving the product
mix.
-Maintaining competitiveness by upstream move. Construction is underway
for
a polyamide chips plant at its current Binhai Industrial Zone
facilities.
Production may commence by 3Q09, with initial available capacity of
80,000
tons. We estimate LHCF to be 35% self-sufficient from 3Q09 and cost
savings
could be significant as raw material costs makeup more than 90% of cost
of
sales.
-Nothing to fear but fear itself. Our sensitivity analysis implies that
the
market has discounted LHCF at 20% WACC and assumed 0.5% terminal
growth.
This is way too pessimistic considering that Li Heng is a serious
player in
the premium nylon segment, and its market-leading position will ensure
that
it is here to stay.

SEMBCORP INDUSTRIES, ml maintain NEUTARL with target price $5
-Management expect S$40-50mn from “pure?water. We attended SembCorp
Industries?(SCI) analyst update on the future strategy of its water
business. The key takeaways from the briefing were 1) Management
expects to
grow it total water capacity to 4mn m3/day by 2010 and 6mn m3/day by
2012
from ~3.5mn m3/day currently and 2) Management is targeting its
“pure?water
projects to contribute S$40-50mn to PATMI in 5 years.
-Targeting water stressed regions. China, India, Middle East and North
Africa have been targeted as key regions for SCI to further develop its
water business. These regions have been identified as water stressed
areas
on the back of rising pressure from rapid population growth and
urbanization. Management expects growth in these target water markets
of
between 5.6% and 10.6% from 2007 through 2016.
-Three-pronged water strategy. SCI has three key areas of focus for its
water business: (1) Establish niche in industrial water supply and
wastewater treatment where greater technological expertise and
non-regulated prices support higher margins; (2) Exploit synergies
between
industrial and municipal wastewater treatment and water recycling to
provide total water solutions for cities; and (3) Further develop both
large-scale desalination plants integrated with power(IWPPs) and stand
alone plants.
-Maintain Neutral. We have a Neutral recommendation on SCI with PO of
S$5/share due to a muted outlook for the utilities business with
management
guiding for flat profits for FY08. Potential deterrence to further
growth
includes higher operating costs and currency movements, in particular
those
relating to its UK operations.

SPC by kim eng
-Beneficiary of high oil prices. Singapore Petroleum Company (SPC) has
seen
its earnings grow by leaps and bounds amid the current environment of
high
oil prices, swinging from losses in FY01 to posting a net profit of
$508.4m
in FY07. While earnings may continue to be highly variable because of
volatile refining margins, this will be progressively augmented by its
upstream earnings.
-Upstream is already a major earnings contributor. SPC’s upstream
business
already represented 47% of its operating earnings in 1Q08, not just
from
higher crude oil prices but also a recent boost in output to 10,840
barrels
per day (bpd). SPC expects to achieve some 30,000 bpd by 2011,
primarily
from the Bohai Bay. Furthermore, it is highly possible that SPC can
exceed
this output level as only 4 out of its 9 regional assets are currently
producing.
-Refining margins will be sustainable. Downstream earnings will
continue to
be variable depending on refining margins, which in turn are dependant
on
refinery output and demand mix. However, we believe that the current
shortfall in global refinery capacity will see SPC’s refining margins
stay
around or above the US$7.00 per barrel achieved in 1Q08. SPC’s FY08
downstream earnings could therefore outperform estimates.
-At a discount to its peers. Consensus estimates peg FY08 earnings
growth
at 6.3% to $540.3m (EPS $1.05), which prices SPC at 6.7x PER. This puts
SPC
at a slight discount to the mean of its Asian comparables of 8.6x, and
at a
significant discount to US-based refiners (10.8x PER). However, the key
risks to earnings are lower refining margins and crude oil prices in
the
present volatile economic climate.
-Attractive dividend yield of 9.0%. SPC has been rewarding shareholders
during its current purple patch, having paid out over 60% of earnings
in
the last two financial years. We expect SPC to stick to this payout
level,
which would see a DPS of 63 cts per share in FY08. Dividend yield is a
very
attractive 9%.

SOILBUILD, wc initial coverage BUY with target price $1.23
-We  initiate  coverage  on  Soilbuild Group  Holdings  Ltd
  (”Soilbuild?
with  a  BUY recommendation  and  a  12-month  target  price  of
  S$1.23.
This  represents  a potential upside of about 27.8% to its current
share
price.
-Main catalysts.We view near-term catalyst coming from the over S$400m
of
presold revenue to be recognized progressively over the next 2 years
with
the bulk in FY2009E. This gives  us  strong  cashflow  visibility  and
allows  Soilbuild  to  sail  through  tight financial market going
forward.
Longer  term,  Soilbuild’s  recurring  income  stream  is  expected  to
balloon  in  the next 2-3 years with the completion of its mega
projects
Solaris (NLA of 0.5m sf) and  Tanjong  Kling  (NLA  of  1.4m  sf)  in
1H2010.  Its  stable  growing  business spaces will be able to support
the
more cyclical residential property development and sustain dividend
payout.

-Valuation. Our  target  price  is  based  on  30%  discount  to  its
RNAV  per  share  of  S$1.75 considering current weak sentiments in the
stock market and the lack of liquidity. Trading at some 22% below our
target price, we feel that market is over-bearish on  Soilbuild. We
believe  that  market  has  yet  to  justifiably  price  in
  Soilbuild’s
potential  future profits  from  its almost-fully sold  residential
properties, as well as additional recurring income stream from Solaris
(est. RNAV per share of S$0.17) and Tanjong Kling (est. RNAV per share
of
S$0.14) business spaces ?their new fertile soil.
-Key risks . Downside risks: Although we have factored in slower
take-up
and lower premium in our assumption on Soilbuild’s  lank-banks, further
deteriorating of  the property market might force ASP to trough and
bring
down RNAV. Upside  risks:  On  the  flip  side,  since  Soilbuild’s
land-banks  are  in  the  current uprising  RCR,  potential  higher
  demand
with  better-than-expected  ASP  might trade shares at a premium to
RNAV.

SWIBER, dbs maintain BUY with target price $3.49
-Swiber announced that its Dalihao, a crane barge, has successfully
completed the installation of the Mampak platform for Brunei Shell off
the
coast of Brunei. This is a critical milestone for Mampak Development
under
Phase 2 of Swiber’s US$147m contract with Brunei Shell that was won in
last
February.
-We believe that this piece of announcement is significant; as it gives
clear empirical evidence that Swiber is on target to complete the
Brunei
Shell project on-schedule. Indeed, we have mentioned in our report on
15
July that the next 6 months will be another watershed period in
Swiber’s
corporate history, which is critical to the group’s elevated status as
a
proven offshore EPCIC player and may result in rerating of its share
price.

-The Dalihao, an 8-point mooring crane barge with 2,500 MT lifting
capacity
and 236 men accommodation space, took 45 days to: 1) Install the 900T
Jacket and 1,300T topside in Brunei Shell’s new Mampak oil field. 2)
Install the 650T Magpie module and the 4th loading arm at Brunei
Shell’s
Brunei Liquid Natural Gas terminal. 3) Remove the old Living Quarters
from
the Ampa-6 platform, which was part of the de-commissioning scope of
activities for Brunei Shell.
-Swiber also mentioned that the Dalihao is now being mobilised for
another
offshore project for ConocoPhillips in Indonesia. We believe that
Swiber is
referring to the US$31m project secured in last November for platform
installation works.
-Our fair value stays at S$3.49 for Swiber. Maintain BUY.

[ SECTOR ]

BANK by gs
-Singapore relatively better placed in Asia. We expect persistent
inflation
?driven by rising wealth/infrastructure needs in BRICs/emerging markets
and
fueled by negative real interest rates, oil subsidies and price
controls
?to continue to dominate the macro landscape. This could lead to a
period
of increased P&L headwinds, potentially followed by asset quality
challenges for Asian banks, in our view. Our analysis of inflation
trends,
offsets and impacts on various banking sectors leads us to the
conclusion
that Singapore is relatively better placed vs. the rest of Asia.
-Singapore banks should remain resilient and defensive. Singapore
banks?share prices have outperformed YTD (-8% vs. FTSTI’s -18% and the
MSCI
AC FE ex-Japan Banks index’s -12%), and while current average
valuations of
1.4X and 10.9X 2009E P/B and P/E are not the lowest in the region, we
expect them to continue to outperform as their relative resilience
comes to
the fore. We see the following as key sources of strength: (1) 5.5% GDP
growth and 6% inflation in Singapore for 2008E; (2) little downside
risk to
our modest 2008E earnings expectations of 6% core PPOP growth and only
moderate downside risk to our 2009 outlook; (3) stable-to-improving NIM
for
2008; and (4) stronger capital positions after the recent hybrid Tier 1
issues. We have tweaked up our earnings estimates and rolled forward
our
12-month target prices to 2009, lowering them slightly on a higher COE.
-New NPL cycle: overall impact manageable, more for DBS & UOB. We
expect
the potential impact of a new NPL cycle to be manageable for Singapore
banks as their largest exposure (Singapore and Malaysia, and realestate
sectors) should remain relatively resilient; also, risks are likely to
be
confined to earnings and not book value/capital. By country and sector
exposure, DBSand UOB are likely to face a greater impact, in our view.
-Upgrade OCBC to Buy; selectively add to positions in UOB. We have
upgraded
our top sector pick, OCBC (OCBC.SI), to Buy, with 21% potential upside
to
our 12-m target price of S$9.70, as we believe it is best positioned
among
the three to outperform relatively, if not in absolute terms. We rate
UOB
(UOBH.SI) and DBS (DBSM.SI) Neutral; buy UOB on weakness.

BANK by gs
-Singapore relatively better placed in Asia. We expect persistent
inflation
?driven by rising wealth/infrastructure needs in BRICs/emerging markets
and
fueled by negative real interest rates, oil subsidies and price
controls
?to continue to dominate the macro landscape. This could lead to a
period
of increased P&L headwinds, potentially followed by asset quality
challenges for Asian banks, in our view. Our analysis of inflation
trends,
offsets and impacts on various banking sectors leads us to the
conclusion
that Singapore is relatively better placed vs. the rest of Asia.
-Singapore banks should remain resilient and defensive. Singapore
banks?share prices have outperformed YTD (-8% vs. FTSTI’s -18% and the
MSCI
AC FE ex-Japan Banks index’s -12%), and while current average
valuations of
1.4X and 10.9X 2009E P/B and P/E are not the lowest in the region, we
expect them to continue to outperform as their relative resilience
comes to
the fore. We see the following as key sources of strength: (1) 5.5% GDP
growth and 6% inflation in Singapore for 2008E; (2) little downside
risk to
our modest 2008E earnings expectations of 6% core PPOP growth and only
moderate downside risk to our 2009 outlook; (3) stable-to-improving NIM
for
2008; and (4) stronger capital positions after the recent hybrid Tier 1
issues. We have tweaked up our earnings estimates and rolled forward
our
12-month target prices to 2009, lowering them slightly on a higher COE.
-New NPL cycle: overall impact manageable, more for DBS & UOB. We
expect
the potential impact of a new NPL cycle to be manageable for Singapore
banks as their largest exposure (Singapore and Malaysia, and realestate
sectors) should remain relatively resilient; also, risks are likely to
be
confined to earnings and not book value/capital. By country and sector
exposure, DBS and UOB are likely to face a greater impact, in our view.
-Upgrade OCBC to Buy; selectively add to positions in UOB. We have
upgraded
our top sector pick, OCBC (OCBC.SI), to Buy, with 21% potential upside
to
our 12-m target price of S$9.70, as we believe it is best positioned
among
the three to outperform relatively, if not in absolute terms. We rate
UOB
(UOBH.SI) and DBS (DBSM.SI) Neutral; buy UOB on weakness.

FURNITURE by ocbc
-Market weakness has led to indiscriminate selling. The STI has shed
18% of
its value since the start of the year as global equities came under
selling
pressure. In the midst of the broad market weakness, there are stocks
that,
despite possessing strong investment merits, have been indiscriminately
battered down. The furniture sector is a case in point. Despite their
proven track records, shares of Man Wah Holdings Ltd (MWH) and Cacola
Furniture Int’l Ltd (Cacola) have been watered down to just over 3x
current
year PER. We remain positive on their outlook and are of the view that
downside risk should be limited from here.
-Select stocks with strong fundamentals. As a note of caution, it is
important to exercise discretion as companies within the furniture
sector
have seen contrasting fortunes in recent times. For instance, while HTL
Int’l suffered a 81.2% drop in FY07 earnings and Koda has warned of
lower
profits in FY08, MWH basked in glory with a 107.0% surge in FY08 net
profit, and Cacola enjoyed a healthy 64.0% growth in FY07 earnings. In
terms of the near-term outlook, we are of the view that MWH and Cacola
offer the most compelling growth opportunities as they have both
recently
expanded their production capacities to meet excess orders, enabling
them
to ride on China’s housing boom.
-Consumer sentiment still robust in China. Furthermore, the contrasting
consumer confidence across countries supports our bullish stance on MWH
and
Cacola. Recent figures show that buying sentiment remains robust in
China,
in sharp contrast to the deteriorating sentiment in US and UK (refer to
Exhibits 1-3). As such, we prefer companies that have exposure to the
PRC
consumer market, namely Cacola, which derives 80% of its revenue
domestically, and MWH, which has committed to grow its sales via the
PRC
market from the current 19%.
-Top picks: Man Wah and Cacola. We are projecting double-digit earnings
growth in the range of 22% to 32% for MWH and Cacola for the current
financial year. At current levels, they are trading at just 3.7x and
3.2x
current year PER, respectively, making them attractive investments with
undemanding valuations, coupled with sound growth prospects. We
reiterate
Cacola [BUY, S$0.75 fair value] and MWH [BUY, S$0.51 fair value] as our
top
stock picks within the furniture sector.