Stock Picks

SPH: Buy (DMG, 30 Apr)
Visibility for SPH's print ads remain very limited, down to a week. This compares against 2-3 weeks in the previous corresponding period. Out of the 12 segments, transport was the only sector which saw growth. Looking ahead, we believe that telco sector would see stronger contributions in the second half of the year as the telcos slug for market share prior to the National Broadband Network. SPH has traditionally raised its ad rates during tough times to ensure stable revenue growth. It is able to do so given its near monopoly of the print ad space. Domestic print adex account for more than half of the total pie, compared to 20% for TV. The majority of Sky@eleven was sold on the deferred payment scheme (DPS) at an average of S$975 psf. While the media has been playing up fears on default risk relating to DPS, we believe it is unlikely for this project given that given that prices would have to dive another 13% before buyers fall into negative equity. With revenue falling, management has targeted to cut costs through two of the biggest cost items – salaries and newprint (account for over 60% of operating costs). Our sensitivity analysis suggests that every 10% fall in wages will raise FY09’s earnings by 8.2%, while every 10% fall in charge-out rates will see a 3.2% increase in earnings. We have maintained our earnings estimates – 15% fall to S$370.4m in FY09 and 13.8% growth to S$421.6m in FY10. Dividend yield remains attractive at about 7.5% for FY09 and FY10, while SOTP-derived target price of S$3.40 implies a capital upside of 15.6%. Maintain BUY.

China Farm Equipment: Buy (DMG, 30 Apr)
CFE's net profit for 1Q09 decreased by 52.9% year-on-year (yoy) to RMB2.2m while revenue fell 8.3% to RMB56.6m due to the absence of revenue from the sale of agricultural trucks and drive cabins. The revenue decrease was inline with our expectations for the quarter after getting rid of its truck business. However, 1Q09 improved compared to 4Q08's loss of RMB44m. This quick recovery came as a surprise, as the overall gross profit margin improved from 21.5% in 1Q08 to 27.0% in 1Q09. Removing its loss making agricultural trucks business has helped restore CFE's future. The company's strategy going forward is attractive from our point of view. CFE's plough machines, combine harvesters, and new products are well suited to make an impact not only in Hunan, but in the Asia Pacific region where farmland are similar in make-up. Malaysia, Vietnam, Thailand, and Cambodia are potential export markets and the negotiation process has already begun. Management have indicated to us that three planting machines are currently in the R&D and testing phase. They are targeting these products to come on stream in 2H2010. The possibility of making a machine that can harvest tea leaves is in the works, we believe that these products could be a major catalyst for CFE if successful. We believe that CFE has been oversold due to market concerns. CFE's quick recovery and more attractive future business developments are a positive. We upgrade our NEUTRAL call to BUY and raise our price target from S$0.08 to S$0.10.based on 3.0x FY10 P/E.

Longcheer Holdings: Buy (DMG, 30 Apr)
Longcheer is a leading Chinese mobile handset design house, specialising in providing design solutions for telecommunications companies. It has grown its mobile handset design capabilities over the years, and is gunning for the 3G-related business to drive growth. According to iSuppli Corporation, Longcheer is the leading mobile handset design house in China by handset shipment count as of end 2008. Having the dominant market share in a relatively fragmented market gives Longcheer the edge in terms of branding, pricing and quality of customers that it attracts. We anticipate that Longcheer’s earnings will receive a stronger boost from the full deployment of the 3G network in China in FY10 and FY11, and will be driven mainly by strong growth in handset shipment volumes as the three mobile operators should step up their tenders and orders for handsets to quickly satisfy consumer demand. The export business for Longcheer continues to be an important one and revenue contribution from emerging countries takes up 60% of the export pie, and should further grow its share going forward. Based on 4.5x FY10 P/E (30% discount to HK-listed SIM Technology), we attain a target price of S$0.56. Initiate with Buy.

Jardine Cycle & Carriage: Sell (DMG, 30 Apr)
The group's 1Q09 net profit fell 31% year-on-year (yoy) to US$88.2m, in line with our forecasts. Revenue declined 23% yoy, as key business segments reported a slowdown. Net profit contribution from automotive sales declined 28%, while lower crude palm oil (CPO) prices dragged down agribusiness earnings by 79%. Business activities across all its business segments are expected to be weak, as the global economic recession continues, and we expect FY09 earnings to be lower. Slowing inflation in Indonesia and potential interest rates cuts could help to slow down the decline in automotive unit sales, but we do not expect a growth in FY09 automotive unit sales, given the weakening economy. Our target price of S$10.28 is a 22% downside from current price, and with FY09F dividend yield of 3%, the stock is not attractive. We maintain our SELL recommendation.

China Zaino: Buy (Kim Eng, 29 Apr)
China Zaino has recorded a better-than-expected net profit of RMB 101.5m (-4% year-on-year;, -5% qtr-on-qtr) in 1Q09. Earnings exceeded our expectations due to lower-than-expected selling and distribution costs. Falling average selling prices (ASPs) and higher tax rate resulted in a decline in earnings from 4Q08. The seasonally weak 1Q09 earnings accounted for 28% of our full year forecasts. 1Q09 ASP of backpacks and luggage recorded a decrease of 11% and 8.2% respectively over 4Q08. The group reduced its ASP in order to maintain its market share amid slowdown in consumer discretionary spending. Further, the lack of TV advertisements in 1Q09 has reduced its product appeal. Falling ASPs has led to margin erosion to below 30%. While the group is sitting in a net cash of RMB 997m, more than half would be deployed in FY09. The group plans to set aside RMB 150m on advertising and billboards and RMB 170m for the construction of its new plant. In addition, we estimate the group to pay RMB 80m for dividends given its commitment to a 20% dividend payout for FY09. To maintain its market dominance, the group plans to resume store expansion by 4Q09 when it targets to add 500 stores in Fujian, Jiangsu and Shandong progressively. We have reduced our earnings estimates for FY09 and FY10 by 7% and 14% respectively to reflect lower gross margins in line with the management's target of 30-31%. Our target price is cut to 35 cents (pegged to 5x FY09 PER), a 50% discount to its HK peers. Despite the lack of catalysts in the near- term, the group looks undervalued at 3x PER considering its dominating market share (36%) in the PRC

Indofood Agri Resources: Buy (Kim Eng, 29 Apr)
IFAR's 1Q09 results that were slightly ahead of our expectations, but significantly stronger than consensus. Revenue fell by 30% to Rp 2 billion versus 1Q08 on the back of a 50% downturn in crude palm oil (CPO) prices from an average of US$1,156 a tonne in 1Q2008 to US$577 a tonne in 1Q2009, and also fell sequentially by 20% due to seasonal factors. Similarly, net profit fell 55% versus 1Q08 to Rp.240.2b. However, the 13% rebound of CPO prices from 4Q2008 has lifted selling prices in 1Q2009 and enhanced IFAR's margins, with gross margins at 41%, up from 35% in 4Q08. CPO prices rose from an average of US$512 a tonne in 4Q2008 to US$577 a tonne in 1Q2009. Additionally, sales volume of cooking oils increased 2% to 97,890 metric tonnes in 1Q2009 while margarine volume grew 24% to 45,387 MT. IFAR also benefited from lower foreign currency losses of Rp95 billion versus Rp247 billion in 4Q2008. Going forward, IFAR expects CPO prices to remain volatile for the rest of 2009, which may impact plantation profitability. However, on a longer-term outlook, the fundamental demand for palm oil remains strong, both within Indonesia and globally. IFAR's leading position in the Indonesian branded cooking oil market makes it a prime beneficiary of this. We are unlikely to change our forecast following this morning's analysts briefing, as our net profit expectation of Rp.1,071.8 bn is still 25% ahead of consensus estimate of Rp. 852m. However, we will be reviewing our target price as sector valuations have moved up strongly over the past few weeks, in tandem with a 25% rise in CPO prices over the past month. We maintain our Buy recommendation.

Ezra Holdings: Buy (DBS Research, 29 Apr)
Ezra's future revenue growth is expected to be less capex driven given the tight credit market and uncertain outlook. It plans to leverage on its existing capabilities and assets to secure higher value contracts going forward. In our opinion, it is still too early for investors to expect contract awards for the MFSVs in the near term, given that delivery of the group's first MFSV is expected in the first half of 2010, and the second in 2H2010. Ezra would typically enter into a contract 3 to 6 months prior to the delivery of the vessel to reduce exposure to potential yard delays. We have introduced our FY11 numbers, projecting net profit of US$89m, which represents a 13% year-on-year increase, which will be driven mainly by full-year contributions from the newbuild AHTS; its first MFSV; and two chartered liftboats. FY11 will also benefit from the expected commencement of contributions from Ezra's second MFSV in 2Q11. We have raised Ezra’s target price to S$1.45 based on 10x FY09 PE (prev 8x) for its core businesses.

SMRT: Buy (Phillip Securities, 29 Apr)
SMRT has announced growth in revenue of 9.6%, from S$808.12 million in FY2008 to S$878.95 million in FY2009; and registering growth in net profit after income tax of 8.5% of S$162.73 million in FY2009 on the back of higher operating profits coupled with government budget measures. It attributed the growth in revenue to mainly higher train and bus ridership, higher rental and advertising revenue, increased consultancy revenue and higher project management fees. MRT ridership increased 8.7% to 510.2 million together with a full year ridership growth of 3.9% to 288 million for buses. The taxis segment however, suffered a full year operating loss due mainly to higher loss on disposal of taxis. The rental segment achieved a growth of 37% from S$41.98 million in FY2008 to S$57.53 million in FY2009 due mainly to better yield and increased space following the redevelopment of commercial spaces at various MRT stations. Advertising revenue increased 13.8% from S$19.81 million in FY2008 to S$22.54 million in FY2009, mainly due to increased advertising on buses, taxis, trains and at MRT stations. Revenue from Engineering and Other Services increased as well from S$23.54 million in FY2008 to S$36.46 million in FY2009 due mainly to increased consultancy revenue, higher diesel sales and higher project management fees from the Palm Jumeirah Project in Dubai. The rolling out of the circle line in May this year should seek to increase ridership further although we do also believe that this should lead to higher expenses in the coming first quarter 2010 due mainly to higher staff and related costs. The results for FY2009 were largely inline with our estimates with a final dividend of 6 cents per share. The final dividend, if approved, will bring the total dividend per share to 7.75 cents for the year. We have adjusted our operating expenses slightly thus our discounted free cash flow to equity model eased our fair value estimate to S$1.92 (previously S$1.97).

Suntec REIT: Buy (DBS Research, 29 Apr)
Suntec has secured a club loan with 7 banks to refinance the entire $825m maturing this year, underlining the strength of its portfolio and credit standing. The deal comprise of $725m 3-year loan and $100m 7-yr fixed rate loan at a blended all-in interest spread of less than 375bps. With this, the group has no further existing debt due till 2011. Its 1Q09 results largely in line as the group renewed 300,000 sq ft of office space and 71,000 sq ft of retail space, representing 13% of its portfolio NLA. This was partially offset by lower office occupancy of 97.4%. Office rents achieved average $9.98 psf, 11% lower qtr-on-qtr while retail rents remained largely stable. Looking forward, we expect office rents to remain weak owing to slowing demand. The group has a remaining 13% of office and 32% of retail NLA to be renewed in 2009. The office leases are likely to enjoy positive rental reversion, although much smaller than before, as the average level of the expiring contracts are at a low $6.64psf/mth. Share price is likely to react positively to the removal of the refinancing overhang. The stock is currently trading at 0.34xP/bk NAV and gearing of 34%. Our 2009/10 DPU projections of 10.7cts and 9.3cts have assumed a 50% drop in peak/trough office rents and a vacancy level of up to 15%. Yield is at an attractive 16.2% and 14%. Upgrade to Buy with a target price of $0.82.

Suntec REIT: Buy (DMG, 29 Apr)
Suntec REIT has secured an S$825m club loan facility from four foreign and three domestic banks, comprising of a S$725m 3-yr loan and another S$100m 7-yr loan at a fixed rate. Blended all-in spread has been estimated at less than 3.75%. Aside from addressing its current debts of S$825m, the successful refinancing exercise would also unencumber parts of Suntec Office Towers (SOT). Suntec notched a 15.9% year-on-year (yoy) jump (+2.1% qtr-on-qtr) in 1Q09 DPU to 2.918¢, exceeding both our estimates and the Street’s (33.7% of DMG's and 30.7% of Consensus' FY09 projections). Revenue rose 16% yoy (+2.3% qoq) to S$64.9m, chiefly boosted by higher achieved rents for SOT and Park Mall, as well as additional contribution from newly-acquired strata space within the former asset. Amidst the office downcycle, we note that Suntec still managed to successfully renew about 289,500 sq ft of office space (majority within SOT), albeit at an 11.1% qoq lower rent of S$9.96 psf pm. On the retail front, occupancy levels and committed passing rents (we estimate at S$9.81 psf pm) for Suntec's three malls were largely flat qoq. We believe the S$825m debt refinancing will not only effectively eradicate the possibility of a potentially-dilutive EFR, but also re-affirm the quality of its assets. This is best justified by the more competitive rates offered to Suntec, compared to other S-REITs which have refinanced during the past six months Gearing also remains acceptable at 34.4%, with its next major loan only due in 1Q11. Upgrade to a Buy at S$0.80.

Suntec REIT: Buy (OCBC Research, 29 Apr)
Suntec REIT recorded a 2.3% qtr-on-qtr (qoq) and 16% year-on-year (yoy) increase in 1Q09 revenue to S$64.9m. Unitholders get 2.918 cents for the quarter (up 2% qoq and 15.9% yoy). Results were better than expected. With 3.7% of Suntec City office vacant, up from 1.8% a quarter ago. we note the margin of safety between achieved rents (down 11% qoq) and average rents on expiring leases (up 25%) has narrowed quite dramatically – but is still adequate, in our opinion. Suntec has secured a S$825m term loan facility to refinance the S$125m in MTN and S$700 in CMBS loans maturing this year. The cost of debt is significantly higher, but a fair reflection of the current lending environment, in our view. This announcement takes care of one "elephant in the room" but it does not change our view on Suntec's potential need for an equity issue. Suntec is up 31% since our last report in March. We still see some room on the upside, with current price levels 21% below our fair value, along with a 14% FY09F yield (35% total return). Maintain BUY with S$0.80 fair value.

Suntec REIT: Buy (Goldman Sach, 29 Apr)
Suntec REIT has announced a 1Q09 DPU of 2.92 cents (+16% yoy, +2% qoq), slightly above expectations on the back of higher rental reversions. For the quarter, Suntec city office achieved rents of S$9.96 psf, down 11% qoq, for some 300,000 sq ft of expiring office space, though still +50% above expiring rates of S$6.64 psfpm. Of note is Suntec's gradually falling occupancy, 97.4% for the REIT's office space (down from 98.7% qoq), reflecting the weakening rental outlook. Results were lifted by Suntec’s S$825mn new term loan to refinance borrowings with all-in interest margin of about 3.75% that is well below recent refinancing tranches of 4.5%-5.0%. Suntec has no more debt maturing until 2011. Gearing is 34.4%. Maintain Buy with a 12-month target price of S$0.88, as we view the refinancing as a near-term catalyst for the shares by removing the short-term cash call overhang the market appeared to expect.

Suntec REIT: Sell (UOB Kay Hian, 29 Apr)
We have previously rated the probability of Suntec REIT securing refinancing as high in a report dated 13 Mar 09. The all-in interest cost for the package is only marginally lower than our previous assumption of 4.8%. We have previously assumed successful refinancing, and thus are not too surprised by the positive development. However, there is no significant impact on our earnings forecasts and fair price. Suntec REIT's 1Q09 results within expectations, and it reported DPU of 2.92 cents/share for 1Q09, representing annualised distribution yield of 17.7%. Gross office revenue increased 31.8% year-on-year (yoy) to S$30.2m. Office occupancy moderated to 97.4% compared with 99.8% last year. Gross retail revenue increased 5% yoy to S$34.7m. Retail occupancy was stable at 98.8%. Leases for 12.7% of office space and 32.0% of retail space will expire in 2009. There is only marginal room for positive rental reversion for office space as average rent for leases expiring is S$6.64psf pm. The large amount of retail space up for renewal is a concern. The ongoing outbreak of swine flu compounds the problem by putting further downward pressure on renewal rates for retail space. The office market is affected by concerns over consolidation in the financial service industry, tenants downsizing after retrenchments and new supply coming on stream. According to CB Richard Ellis, average prime office rents corrected 19.9% qoq to S$12.90psf pm in 4Q08 and fell another 18.6% qoq to S$10.50psf pm in 1Q09. We have assumed average occupancy tapering to 82% for the office portfolio and 90% for the retail portfolio by 2Q11. We expect office rentals to fall to S$4.80psf pm for Suntec Office Towers (previous: S$7.00psf pm) and S$4.08psf pm for Park Mall (previous: S$5.95psf pm). We expect retail rentals to fall 15% from existing levels. The stock faces key risks from the deteriorating outlook for the office market and lumpy lease renewal for the retail portfolio. Downgrade to SELL. Our fair price is S$0.66 is based on a two-stage dividend discount model (required rate of return: 9.0%; terminal growth: 2.5%).

Suntec REIT: Underweight (JP Morgan, 29 Apr)
Suntec has announced that it had refinanced its entire S$825 million borrowing due this year through a three-year term loan of S$725 million and a seven-year fixed-rate loan of S$100 million from a panel of seven banks. The margin, including upfront costs for the facility, is less than 3.75% with no particularly onerous debt covenants put in place, according to the trust management. The trust will have no upcoming refinancing until FY11. The trust reported 1Q09 DPU of S$0.02918/unit, up 2.1% qtr-on-qtr (qoq) and is substantially above our and consensus forecasts. However, occupancy and renewal rents for office started to show signs of weakness with 96.3% occupancy for Suntec City Office and renewal rents of S$9.96 psf per month for 1Q09. Management acknowledged the challenging operating environment; and with the increase in borrowing cost, we expect DPU for the trust to decline for the next three years. We believe that a potential equity fund-raising would be the likely means to strengthen the trust's balance sheet, which would be an overhang on the stock performance in the medium term. The stock price has largely reflected the negative outlook on operations, in our view, but has yet to fully price in a potential dilution should the trust raise equity.We reiterate our Underweight rating with a reduced Dec-09 price target of S$0.60/unit (S$0.64/unit previously) which assumes a potential 1-for-2 rights issue. Key risks to our rating and price target include a worse-than-expected deterioration in operating fundamentals and a prolonged capital market downturn.

Allgreen Properties: Buy (Citi Investment Research, 28 Apr)
Allgreen has reported a net profit of $29.2m for 1Q09, ahead of both our (36%) and consensus estimates (33%). Despite the slight 8% year-on-year (yoy) fall in revenue, due to lower revenue from development properties and hotel segments, PBIT improved 31% yoy while PATMI rose 67% from $17.5m in 1Q08. We believe this is attributable to better margin for the Allgreen investment properties and progressive recognition of higher margin projects such as Cairnhill Residences and Cascadia. Effective tax in 1Q09 was lower due to the write-back of deferred tax of approximately S$2m as a result of the lower income tax rate of 17% vs. 18% previously. As at Mar-09, gearing improved slightly to 0.43x with net borrowings of $1.12b vs. 0.45x and net borrowings of $1.14b as at Dec-09. NAV is $1.44 as at Mar-09. Traders Hotel suffered lower revenue as a result of lower room rates and occupancy. According to the latest hotel stats by Singapore Tourism Board, islandwide occupancy fell to 74% in Mar-09 compared to 87% a year ago, and RevPar has fallen 29% yoy. We raise our 2009E-2011E earnings by 9-29% on faster recognition of its development properties and improved revenue from its investment portfolio, offset by lower contribution from hotel properties. Our RNAV of $1.27 and target price of $0.70 remain unchanged. We maintain our BUY rating with a target price $0.70 based on what we view as Allgreen’s cheap valuation, a 67% discount to NAV of $1.44 and a 62% discount to RNAV of $1.27.

Ascendas India Trust: Overweight (JP Morgan, 28 Apr)
AIT, which 4QFY09 earnings were in line with estimates reported a DPU of S$0.0205/unit up 1% qtr-on-qtr. For full year FY09 DPU at S$0.075 was 10% ahead of management guidance. Portfolio performance remains steady with weighted average portfolio occupancy at 98%. Further the trust has only 14% leases expiring in FY10 giving high visibility on DPU estimates ahead. Despite a challenging operating environment, NPI increased marginally by 2% as increased costs were offset by higher rents and operating income. Its valuations remain cheap as AIT is trading at a 44% discount to its revised book value and FY10E dividend yield of 11.6%. This is at a 600bps+ spread over the 10 year Indian government bond yield. Over the next one year, we think this spread should narrow. However, a relatively small market cap (US$250MM) and limited trading liquidity could prevent a material stock re rating, in the near term. We are reducing our FY10/11 DPU estimates by 12% and 31% to factor in 1) We have lowered our Mar-10 DDM based price target to S$0.72/unit (S$0.85 previously) as we factor in new earnings estimates. In our view, AIT remains one of the best proxies for gaining office property exposure in India given a strong management, resilient cash flows and high quality office assets. Key risks to price target includes an increase in vacancy given continued deterioration of office leasing environment and sharper than anticipated depreciation of the Indian rupee against the Sing dollar.

China XLX: Neutral (DMG, 28 Apr)
The group's net profit for 1Q09 decreased by 47.6% year-on-year (yoy) to RMB59m, which is inline with our expectations. Reasons for the decline: (1) first quarter is usually weaker taking into consideration the seasonality of its business; (2) 1Q08 base was high due to the sale recognition of about 14,000/tonnes consignment stock of urea which was sold at the end of Dec 07. Management believes that they could exceed our FY09 net profit forecast of RMB199.1m due to its third plant coming on stream earlier than expected. However, we maintain our conservative net profit forecast as we foresee an oversupply of urea in China. 1Q09 revenue remained flat decreasing by 0.4% to RMB480.3m which was inline with our expectations due to average selling prices (ASP) for methanol and compound fertiliser (CF) falling by 35.4% and 10.8% respectively yoy. Sales volumes were also down by 21.9% and 8.5% respectively. The declines were partially offset by a urea service income of RMB37.9m. We maintain our Neutral call and raise our target price from S$0.29 to S$0.345 based on 4.8x FY10 P/E. We believe its stronger FY10 earnings (due to full utillisation of third plant and better ASP for urea) will limit share price downside, although FY09 will be a tough year.

Micro-Mechanics: Hold (OCBC Research, 28 Apr)
MMH reported its first-ever quarterly loss of S$1.4m in 3QFY09, as the ongoing global financial turmoil and economic recession had led to an unprecedented drop in customer orders across all its worldwide manufacturing locations. For 9MFY09, however, MMH remained in the black with net profit of S$873,000 on revenue of S$26m. While MMH has seen some improvements in orders in March, it is maintaining a cautious view on its 4QFY09 performance. On our side, we have also conservatively adjusted our FY09F earnings to reflect a possible loss for the fiscal year. However, as earnings and business activity is likely to remain uncertain and volatile, we are now switching our valuation to 0.8x FY10F NTA from 7x FY10F EPS. This pares our fair value to S$0.19 from S$0.24 previously. Nevertheless, we are keeping our HOLD rating on MMH as negatives seem to be priced in.

Cambridge Industrial Trust: Neutral (DMG, 28 Apr)
CREIT reported an 18.7% year-on-year (yoy) slide in 1Q09 DPU to 1.29¢, in line with our estimates and the Street's. Topline was up 4.2% yoy to S$18.4m, but recurring income dropped 16.3% yoy to S$9.7m as a result of a 94.5% surge in funding costs. Portfolio occupancy remained healthy at 99.2%. Given CREIT's relatively stable income and fixed funding cost at 5.9% for three years, we are less concerned about the interest cover covenant. While we draw comfort from CREIT's lower-than-spot average rent (< S$0.90 psf pm), the worsening manufacturing sector and macroeconomic environment could place further downside risks to its current asset value, in turn increasing its already-high gearing of 40%. While we are impressed by CREIT’s pro-active approach, we believe its present debt covenants, still-constrained credit environment and weakening economy could hinder the progress of the initiatives. We have adjusted our projections to reflect the lower funding cost of 5.9% (previously 7.2%), as well as the swap cost of S$18.4m to be paid over the next three years. FY09F – 10F DPU thus fall by 10.7 – 12.2% to 3.85¢ and 4.05¢ respectively, while fair value drops to S$0.30 (previously S$0.32).

Cambridge Industrial Trust: Hold (Phillip Securities, 28 Apr)
On a quarter-on-quarter basis, gross revenue for 1QFY09 was flat at $18.4 million (+4.5% yoy), net property income increased 6.6% to $16.1 million(+3.2% yoy), distributable income decreased 5.5% to $10.3 million(-18.2% y-o-y). DPU for the quarter is 1.291 cents. CIT's gross revenue for 1QFY09 registered flat growth, which was in-line with expectations, given there wasn't any catalyst to earnings. Portfolio occupancy remains at a high 99.2%. However distributable income fell 5.5% and DPU fell 6% mainly due to higher interest expense incurred on the new loan. CIT refinanced its loan in Feb 2009 and has no refinancing worries for the next three years. The refinancing comes at substantially higher interest of 5.9% and is the main reason for the decrease in DPU. Our previous estimate was an interest cost of 5% Current gearing is 39.9%. Without the overhang of refinancing worry, the only concern is whether CIT can maintain its portfolio occupancy. We continue to assume a portfolio vacancy of 3%. Revenue growth is supported by fixed rental escalation built into leases. We tweaked our assumptions to account for lower property expenses due to government rebates and also higher interest expenses vs our previous assumptions. CIT is currently trading at 60% discount to NAV. We have a forecasted FY09F DPU of 4.73 cents, which translates to 16.6% dividend yield. Fair value is raised from $0.27 to $0.31.

SMRT Corp: Buy (OCBC Research, 27 Apr)
SMRT announced its 4QFY09 results last Friday, with revenue growing 4.1% year-on-year (-1% qtr-on-qtr) to S$216.9m and net profit rising 13% yoy (-6.2% qoq) to S$38.7m. This brings the total FY09 revenue to S$879.0m (+9.6%) and net income to S$162.7m (+8.5%). The strong top line performance came mainly from increased train and bus ridership, growth in rental and advertising revenue, and increased consultancy revenue and project management fees, whereas the bottom line was helped partly by Singapore Budget measures. For 1QFY10, SMRT is expecting revenue from train and bus operations to be lower. Operating expenses are also likely to trend higher, while the outlook for taxi is expected to remain challenging. However, revenue from rental is projected to be higher due to increased lettable space and better yield. As the results and outlook were largely in line with our expectations, we have left our FY10F revenue unchanged. However, to reflect a lower tax rate and slightly lower-than-expected dividend payout, we have made minor changes to our income tax and dividend assumptions. This in turn eases our DDM-derived fair value to S$1.81 (S$1.83 previously). Despite this, we continue to like SMRT for its defensive nature, consistently strong dividend payouts and strong operating cash flows. Seeing that the share price has eased somewhat in recent weeks, we believe the stock has an even more attractive entry point now. Maintain BUY.

Chartered Semiconductor: Sell (OCBC Research, 27 Apr)
Chartered Semiconductor has reported a set of 1Q09 results that were above consensus and our expectations. For 2Q09, it is seeing a significant increase in orders, mainly from its leading-edge 65nm technology node followed by 0.11 and 0.18-micron nodes. As such, the group is guiding revenue to improve by about 32-37% qtr-on-qtr to US$321-333m, while its net loss to narrow to US$54-64m for 2Q09. In view of the better-than-expected results and recent ramp-up seen among the foundry players, we have readjusted our FY09 forecasts to reflect an 11.9% improvement in revenue and a narrower loss of US$299.8m from our previous projections. Our fair value estimate is in turn raised to S$0.08 (S$0.06 previously) for the same reasons. Despite this, we note that Chartered may not be able to return to sustainable profitability in FY10 and that its re-financing issues continue to be a concern. Seeing a sharp rebound in the share price lately, we believe significant downside risks lurks. Maintain SELL.

CapitaLand: Buy (Kim Eng, 27 Apr)
CapitaLand posted a PATMI of $42.9m in 1Q09, down sharply by 83% year-on-year (yoy), 42% qte-on-qtr (qoq). It was off the mark from full-year consensus estimate of $479.4m. While 1Q08 PATMI was boosted by divestment and forex gains, core earnings still fell by 65.5% yoy. Its topline also showed a 23% yoy-decline. No writedowns of its landbank has been made this quarter. EBIT from the Singapore residential SBU fell by 50% yoy to $20m, with the rate of profit recognition from sold projects being slower than expected, and hardly any new units sold in the first quarter. For the rest of FY09, income will be predominantly contributed by The Seafront on Meyer and The Orchard Residences. CapitaLand's fund management business was the only unit to improve yoy, with the EBIT up by 58% to $29.2m. The Ascott Group's core EBIT declined by 27% while its China SBU plunged by 67% yoy in the absence of fair value and divestment gains, but core earnings remained relatively flat. In fact, CapitaLand China managed to sell a total 460 units in 1Q09, including about 60% of 546 newly launched units sold. The ability to sell 460 residential units in China in 1Q09 could signify that the property market there is picking up. With the proceeds raised from the recent rights issue, CapitaLand is in the position to capitalize on the current market condition to replenish its landbank in China. We have slashed our FY09 and FY10 forecasts by 44% and 38% respectively. We still like the management's business acumen, and the current downturn could provide CapitaLand with lots of opportunities for growth in the next cycle. Maintain BUY, with a target price of $2.93, pegged at a 10%-discount to RNAV.

CapitaLand: Hold (OCBC Research, 27 Apr)
CapLand's 1Q09 results fell short of our expectations. Revenue declined to S$487m due to slow sales, completion of projects and lower rental revenue. Contributions from AustraLand were also below our expectations. Reported PATMI plunged 82.7% YoY and 45% qtr-on-qtr (qoq) to S$42.9m due to the lack of significant sale of investments in 1Q09. Property sales in Singapore remained slow in 1Q09 as CapLand's unsold inventories are aimed at the mid-high segments. Nevertheless, geographical diversification paid off as CapLand launched four projects in China and managed to sell a total of 460 units there in 1Q09. We are now cutting back our take-up rate assumptions for CapLand's development projects for FY09 and FY10. Our FY09 revenue and PATMI forecasts have now been lowered to S$1,990.4m and S$410.7m, respectively. Our RNAV estimate is now reduced to S$2.95 and fair value estimate is now pegged at S$2.43.

Singapore Land: Hold (Kim Eng, 27 Apr)
SingLand's 1Q09 net profit of $73.2m (inclusive of a $26.4m writeback of deferred income tax) was a 117% year-on-year (yoy) increment. Core profit of $46.7m was a 39% yoy and 14% qtr-on-qtr (qoq) improvement, at the back of higher rental income, in line with expectations. Total revenue improved by 4% yoy, but declined by 8% qoq, as revenue from hotel operations declined. Gross rental income of $63.5m grew by 22% yoy, but only 1% qoq. As Grade A office spot rates plunged to an average of $12.30 psf as of the end of March, the rate of positive reversion has slowed down tremendously. Some tenants at the Singapore Land Tower have reportedly been offered rents of $7 psf. Besides lower rental reversions, we believe that occupancy rates are likely to fall further. Revenue from Pan Pacific Hotel decreased by 28% yoy and 27% qoq to $21.3m, due to lower room and occupancy rates as well as lower F&B revenue. Based on the Singapore Tourism Board's statistics, we believe that contributions from the hotel operations may remain weak for the rest of 2009. Given the weakness in the property market, we have lowered our average selling prices assumption for The Trizon (formerly known as Himiko Court) to $1,100 psf. At an estimated breakeven price of $1360 psf, SingLand may have to make a writedown of about $106m to its holding cost. SingLand continues to recognise associated profits from One Amber and the Sixth Avenue Residences, which are expected to be completed this year. With the pace of positive rental reversions slowing, coupled with the likelihood of a substantial writedown for The Trizon, there appears to be few positive catalysts in the near-term. We are downgrading it to a HOLD recommendation, with a target price of $3.90 at a 50%-discount to RNAV.

Raffles Education: Buy (Kim Eng, 27 Apr)
Raffles is one of the cheapest education stocks among its listed peers, trading at more than 50% discount to its US-listed peers. Such steep discounts are unwarranted and points to deep undervaluation of the stock considering its superior earnings track record over the decade, outstanding margins and remarkable growth momentum. Its commitment to generous dividend payout (>85%) adds to its appeal. Despite the dearth of acquisitions, the management expects enrolment to grow 20-30% per annum by focusing on its enlarged education network. We estimated rising student enrolment to sustain organic earnings CAGR of 24% for the next 3 years. This works out to a recurring annual earnings stream of at least S$100m. We see great potential in the recent acquisition of OUC given its strategic location at Langfang Development Zone and potential to boost student enrolment by over 70%. We estimate net profit contributions from OUC to amount to at least $30m, which could potentially boost the FY10 earnings by more than 20%. The recent share price correction to trough levels of 7x forward PER presents an unprecedented opportunity to invest in the stock. Raffles education offers a good mix between growth and attractive dividends. We are initiating coverage on the stock with a Buy with a target price of $0.60.

SMRT Corp: Hold (Kim Eng, 27 Apr)
4Q09 benefited from the 1%-pt reduction in corporate tax rate to 17% announced in the 2009 budget measures. Reported net profit rose 13% from 4Q08 to $38.7m (-6% qoq). Adjusted for the tax effect in both periods however, net profit was $31.8m (+0.5% yoy, -22% qoq). For the full year, adjusted net profit of $154.1m was slightly below our forecast of $157.7m which have not factored in the tax savings. A final DPS 6 cents was declared, unchanged from FY08. As a result, full year DPS of 7.75 cents were slightly below our forecast of 8.1 cents. Nevertheless, payout of 72% is still above its dividend payout policy minimum of 60% of earnings. Rental revenue grew faster than guidance of a $10m rise. Tenants are relatively unaffected by the recession as train stations are high traffic locations. The loss-making bus business turned around on lower fuel prices in 4Q09, while Palm Jumeirah (Dubai) boosted engineering profits. But trains profits fell, the first decline in years, while taxi losses were aggravated by the disposal of unhired vehicles at a loss. We forecast a 8% earnings decline in FY10 as the headwind builds. Loss of revenue from fare cuts and higher rebates will exceed Budget-derived savings, Circle Line Stage will not break even until FY11 when more stages are opened and only a marginal rise in rental income is expected. However, SMRT will see higher O&M revenue as Palm Jumeirah becomes operational and taxi losses should reduce. Management is also still pursuing the possibility of overseas M&A. Present valuations and yield do not justify a more positive call on SMRT. At the same time, its relative stable business should ensure earnings remain resilient and limit downside.

Keppel Land: Buy (OCBC Research, 27 Apr)
KepLand has announced that it will be raising gross proceeds of ~S$712.3m through a renounceable 9-for-10 Rights issue at a subscription price of S$1.09 per Rights shares. Even though we did not anticipate this fund raising exercise from KepLand, we are viewing this move positively. The rationale for undertaking the Rights issue is to further strengthen KepLand's balance sheet and also to pursue strategic opportunities in core markets. In light of its lower balance sheet risk, we are now lowering our discount on KepLand's investment and development properties to 50% (prev. 60%). We believe that developers with stronger balance sheets will continue to be favored by investors. Our fair value of KepLand has now been raised to S$2.07 and our ex-Rights fair value will be S$1.61. We are now upgrading KepLand from HOLD to BUY.

Rickmers Maritime: Sell (OCBC Research, 27 Apr)
RMT's 1Q results were in line with expectations, with revenue up 46% year-on-year (yoy) and 10.1% qtr-on-qtr (qoq) to US$32.5m. DPU fell 4.9% qoq to 2.14 US cents and we think it may be at further risk for cuts, or frozen entirely, from 2Q09 on. The manager is asking lenders for waivers on loan-to-value covenants. RMT is committed to buy three Hanjin vessels for US$207m over the next nine months. It may not be able to fully draw down the committed loan facilities due to falling market values. Additionally, we estimate that RMT needs to repay up to US$154m in loans next year. RMT is also contracted to buy four Maersk vessels, due 2010, at US$711.6m. No financing has been arranged so far. As of 31st March, RMT is geared at (in our view, unsustainable) 2.2x debt-to-equity. The committed acquisitions leverage up the risk. Other high risk events include counterparty default or a loan prepayment call. Downgrade to SELL with S$0.29 fair value.

Singapore Post: Buy (OCBC Research, 27 Apr)
SingPost has announced that it has acquired the remaining 50% stake in G3 Worldwide Aspac Pte Ltd (G3AP), an associate company, through a share swap agreement. At the same time, it will exit from G3 Worldwide Mail (G3/Spring Global Mail), a joint venture with TNT and Royal Mail. A major reason behind this development is for SingPost to focus on Asia Pacific operations. Both G3 and G3AP provide cross-border mail and value added mail services, but the former focuses on Europe and North America while the latter caters to the Asia Pacific region. SingPost would like to go beyond cross border mail and extend its product range in Asia Pacific and full control of G3AP will enable it to do so. According to management, G3AP is also the only network in Asia Pacific that covers 10 countries though there are many other players that cover only two to three points. For 9M09, SingPost's G3AP contributed S$3.7m to Singpost while G3 was S$1m. We also note that Spring undertook a review and sold its USA business to Pitney Bowes in 2007 to focus on Europe and Asia. Moreover, in SingPost's FY08 annual report, it was also mentioned that Spring "continued to operate in a challenging and competitive environment" for FY08. We therefore think that SingPost is planning for the future and wants to obtain full control of G3AP as it may continue to be more profitable than Spring. We like SingPost for its stable operating cash flows and relatively defensive business which is attractive in a time of uncertainty. The acquisition arrangement, however, may include a premium, considering SingPost's previous cost of investment in G3AP was S$2.45m only. This is probably because the group believes in the cashflow generation ability of this investment and values G3AP much higher. We have tweaked our estimates for FY10 and beyond and our fair value estimate eases to S$0.91 as we roll our valuation into FY10 and have also taken a more conservative view for G3AP at least the first year despite our belief that it will boost SingPost's net income in the future. Maintain BUY.

Olam International: Hold (OCBC Research, 27 Apr)
The group is unfazed by the global recession and remains confident of growing its volumes. It projects robust demand for edible agricultural commodities, and highlighted cashew as one of its key growth drivers. It is setting up a new cashew processing plant in Vietnam, which will double its capacity by 2H CY10. Olam has differentiated itself from its peers by creating strategic advantages, such as obtaining internationally-accredited food safety certifications, customizing its products according to customer specifications, and delivering consistency. These should help it to gain market share from weaker competitors. We are keeping our estimates intact ahead of the group's 3Q09 results which will be released on 14 May 09. While we see merit in Olam's resilient earnings growth amid a recessionary environment, we believe that positives have been priced in at current levels. As such, we maintain our HOLD rating and S$1.51 fair value estimate.

HL Finance: Buy (DMG, 27 Apr)
HLF reported 1Q09 net profit of S$25.7m, down 15.8% year-on-year (yoy), in line with our expectations. The decline was primarily due to 1Q09 allowances of S$4.8m, versus 1Q08's recovery of S$2.5m. Pre-provisioning operating profit, which is a better measure of core earnings, was up 5.3% yoy to S$36.7m. Net interest income rose 10.5% to S$53.1m. HLF has been cautious in its loan book – net loans contracted 3.7% year-to-date to S$7.1b, after the 7.8% yoy contraction in FY08. Our assessment is that this cautiousness will enable HLF to minimise its asset quality deterioration in the quarters ahead. We have revised our 2009 loan contraction forecast from the previous 2.1% to 5.4%. We expect loan loss provisioning to rise in the quarters ahead. Having said that, HLF's conservative stance – evident from its loan contraction – should help to minimize the rise in its non-performing loans (NPL) ratio. We are assuming FY09 net profit provisions of S$38m. This is higher than the estimated S$10m for FY08 – though overall provisions was S$55m, a significant S$45m was due to the Lehman Minibond Notes, which is one-time. We lowered FY09 net profit by 3% to S$88.8m. HLF is trading at a P/NTA of 0.6x (based on NTA of S$3.16/share). We maintain our S$2.65 price target, which is pegged to 0.8x of 2009 NTA. Assuming a 49% payout ratio, 2009 dividend yield is a fairly respectable 4.8%.

SMRT: Neutral (DMG, 27 Apr)
SMRT has reported a net profit of S$162.7m, up 8.5% year-on-year (yoy) for FY09, which is in line with our S$160.6m forecast. MRT revenue rose 8.6% to S$474m, and accounted for a 54% revenue share. MRT average daily ridership was up 9% to 1.40 million rides. However, electricity costs surged 39% yoy to S$65.9m, and consequently, MRT operating profit only rose a mild 3.5% yoy, though this accounted for a sizeable 71% share of total operating profit. MRT ridership growth has slowed to 4% yoy for 4QFY09, and we are assuming the operation of the Circle Line will help ridership rise faster in the quarters ahead. Average daily ridership for buses grew 4.1% to 789k rides. Diesel costs of S$52.9m is 25% higher, hence bus operations recorded an operating loss of S$4.5m, versus the S$1.5m gain in FY08. Commercial space rental remains a star performer with revenue surging 37% to S$58m, despite lettable space falling 2% yoy to 27,303 sqm. Though this accounts for only 7% revenue share, its share of operating profit is a sharply higher 23%. We are forecasting FY10 lettable space of 28,200 sqm (+3%), due to the redevelopment of various MRT stations, and flat rental revenue. We lowered our FY10 net profit forecast by 1% to S$167.7m (from S$168.9m), as we cut our MRT ridership growth rate from 9.5% to 8.5%, and our bus ridership growth rate from 2.5% to 1%. Based on a 75% payout ratio (72% for FY09, which factors in final dividend of 6S¢/share), we are forecasting FY10 dividends of 8.3S¢, which gives a relatively attractive dividend yield of 5.5%. However, we maintain our Neutral call as our DCF valuation gives a fair value of S$1.65.

Chartered Semiconductor: Neutral (DMG, 27 Apr)
Chartered saw 1Q09 net loss and revenue come in at US$98.8m and US$243.9m respectively, notably better than the company's guidance for losses of US$122 – 132m while topline was on the upper band of the US$232 – 244m range. Utilisation rates and average selling prices (ASPs) of wafers at 38% and US$928 respectively were roughly inline with the company's expectations. Chartered generated negative free cash flows of US$88m, hardly a surprise given the company's poor track record. In the past eleven years, there were ten instances that the company had failed to churn out any positive free cash flow on a full-year basis. Our stand that Chartered would require additional funding by FY10 would stay – the US$300m obtained from its recent rights issue may not be sufficient to cover its US$542.2m long-term debt due in 2010 and our forecast that the chip foundry would incur negative free cash flows of US$251m in the next two years. However, short-term outlook seems to be improving with Chartered anticipating an increase in orders for 2Q09 which is in turn attributed to the introduction of new products by its customers and inventory re-stocking. For the next quarter, Chartered is guiding for an approximate 35% increase in revenue quarter-on-quarter (qoq) while net losses are forecasted to be lower at around US$59m. Utilisation rates are expected to improve by about 20 percentage points while ASPs are seen to be rather flat. Currently trading at 0.7x FY09 P/B and assuming that it trades up to the industry average of 0.8x P/B, we arrive at a target price of S$0.18 (from S$0.11 previously). Our recommendation is therefore accordingly upgraded from Sell to Neutral.

Keppel Corp: Sell (UOBKayHian, 24 Apr)
Keppel Corp's net profit rose 9% on the back of strong contributions from the offshore & marine (O&M) and infrastructure segments and was boosted by a S$14m tax write-back following the reduction of Singapore corporate tax rate by 1 ppt to 17%. O&M net profit rose 38% while lower property earnings were primarily due to Keppel Land (net profit – 33%) on slower completion of several projects and weaker residential sales. Infrastructure earnings (+150%) came in better than expected because of maiden engineering, procurement and construction (EPC) contributions from the Doha North Sewage Treatment and Water re-use plant project. Poor investment earnings (-41%) due to Singapore Petroleum Co's (SPC) weaker earnings on lower refining margins and an impairment charge relating to the Jeruk discovery. While 1Q09 posted a good performance, it was backward looking. Current orderbook stands at S$9.5b with progressive deliveries into 2012. However, contract wins, the key share price catalyst, remain low at S$315m year-to-date (2008 total: S$5.2b). Globally, apart from Mermaid Drilling's tender rig KM-2, there have been no new rig orders. Rig investment has been halted by the credit crunch and a collapse in oil prices. We assume contract wins would average S$2b in 2009 before recovering to S$3b in 2010 and 2011, which is our long-term sustainable annual O&M contract win assumption. We raise our fair price from S$4.50 to S$4.80 based on our revised sum-of-the-parts (SOTP) valuation of S$4.76/share. Current share price is at a 25% premium to our fair price. Maintain Sell.

Keppel Corporation: Sell (OCBC Research, 24 Apr)
KepCorp's topline grew 34.7% to S$2.98b while PATMI rose 9% to S$285m. The results exceeded our expectations in view of a strong show from the Offshore and Marine business. The other divisions performed largely in line with our expectations. A key highlight for KepCorp was an improvement in margins in all the divisions. KepCorp's property arm kept on sliding due to the poor outlook and we have lowered our estimates for this division. The Infrastructure division performed well with contributions from the Doha North project as well as an increase in market share of its Singapore Cogen plant. However, we remain cautious on the 50% share price run since its recent low on 4 Mar 09 as fundamental positive changes in the industry have yet to be seen. Oil remains at sub-50 US dollars per barrel while new rig orders have largely been absent. We are also priming investors on a possible disappointment in dividends with our interim dividend forecast of 11 cents (vs consensus 17 cents). Our SOTP valuation has been bumped up to S$4.90 (prev. S$4.40) due to the run up market value of its associates plus an improvement in margins leading to better earnings. However, the 19% downside to our fair value underpinned by weak industry fundamentals causes us to downgrade KepCorp to a Sell.

Keppel Corp: Neutral (DMG, 24 Apr)
Keppel has reported a credible set of 1Q09 results with revenue of S$3.b (+36% YoY, -19% QoQ) and core recurring 1Q09 operating profit of S$314.4m (+20% YoY, -19% QoQ) in line with our estimates. Improved EBIT margins from O&M and Infrastructure (10.4% and 5.7% respectively) were the quarter's positive highlights. This was negated by property contributions, which recorded a decline in revenue as a result of dismal sales. Keppel O&M's improved margin of 10.4% (vs. FY08's average of 9.8%) was a positive surprise for we expected repair margin to face pricing compression and drag overall O&M margin down. Keppel's Infrastructure delivered operating margin of 5.7%, more-than-doubled 1Q08's 2.6% and higher than 4Q08's 4.5%. We think this could be due to improved operational efficiencies and a result of gains in market share.While management has not provided any guidance on Infrastructure's margins, going forward, we believe a margin of 4% is sustainable, and thus have ramped up our margin assumptions by 200bp for FY09F and FY10F. Keppel's share price has surged 17% over the past month, though the fundamentals have not improved significantly. While Keppel's credible 1Q09 results do provide investors comfort to its well-fortified portfolio and quality management, we remain concerned over the near-to medium term outlook. Keppel is currently trading at 10.4x FY09F P/E and 10.6x FY10F P/E, similar level to 1H04, and that period coincided with the onset of the O&M cyclical boom. We opine that investors could be too overly-optimistic, as the current levels of E&P activities are comparable to those during the FY02-03 period (according to industry sources). We also caution that the days of easy credit have not emerged yet for a turn-around in this capital-intensive industry. We maintain our price target of S$5.24 and out Neutral stance.

Frasers Centrepoint Trust: Hold (OCBC Research, 24 Apr)
FCT posted S$21.1m in 2Q09 revenue, down 2.4% year-on-year (yoy) but up 8.3% qtr-on-qtr (qoq). It will pay out 1.86 cents per unit, or an annualized yield of 10.7%. The results were slightly better than expected: 1H09 revenue and distributed income make up 52% of our full-year estimates. In recent quarters, the trust's earnings have been distorted by planned enhancement works at Northpoint and actual occupancy is continuing to climb in line with progress on the works (expected completion by June 2009). The manager re-affirmed its guidance for post-enhancement rents at the mall. FCT's other two properties did well, achieving qoq increases in NPI. We still like FCT's relatively "safer" suburban portfolio and think FCT is an attractive proposition for investors seeking yield stability. However, from a value perspective, we think there are better deals out there in the sector. The lack of critical mass in the current portfolio, with growth plans on hold, is also a concern. Maintain Hold with S$0.62 fair value.

Mapletree Logistics Trust: Hold (OCBC Research, 24 Apr)
MLT posted S$53.3m in 1Q09 revenue, up 24.9% year-onyear (yoy) and 1.7% qtr-on-qtr (qoq). It will pay out 1.47 cents/unit, down 22.6% yoy (because of an enlarged units base post last year's rights issue) but up 0.7% qoq. 1Q results outperformed our expectations by 5-8% due to our fairly bearish occupancy assumptions. While the overall dip in portfolio occupancy was small, some pockets of weakness emerged in the Hong Kong and China markets. The manager re-affirmed its commitment to paying out 100% of distributable income, and announced significant progress in arranging refinancing for the S$151m in loans maturing this year. We believe MLT's diversified and high quality portfolio will allow it to deliver reasonably stable income to unitholders over the next two years. MLT's share price has increased 15.4% since our re-initiation in February. However, we have not seen enough corresponding positive signals for the industrial market. As our fair value estimate of S$0.45 has been achieved, we are downgrading the stock to a Hold.

Pacific Shipping Trust: Buy (UOBKayHian, 23 Apr)
PST has reported a higher net profit of US$6.6m for 1Q09 (4Q08: US$6.4m) due to full quarter contribution from four vessels delivered in 2008. Excluding the losses from interest rate swaps, earnings would have been US$8.7m (+94.7% yoy; 7.2% qoq). The current distributable profit of US$5.8m is 76.8% higher than that of the US$3.3m distributed in 1Q08. PST is paying DPU of 0.98 US cents, or 90% of distributable cash flow for 1Q09, which represents 29% of our 2009 DPU forecast of 3.3 US cents due to lower-than-expected interest expense. On 16 Apr 09, PST announced that one of its two charterers, Compania Sud Americana de Vapores S.A. (CSAV), indicated it would require ship owners to offer a temporary 30% reduction of charter hire payment as part of its restructuring plan to raise US$750m. Based on a DPU forecast of 3.2 US cents for 2010, PST offers a dividend yield of 19.5%. However, if one were to exclude the CSAV vessels’ earnings completely, PST’s 2010 DPU would be 1.9 US cents, or 11.5% yield. PST has no loan-to-value covenants in its loan documents. All loans are amortising. All of its vessels are fully financed and there are no further financial commitments. Its share price has discounted a major risk. Reiterate BUY on PST with a target price of US$0.22, based on discounted cash flow at a discount rate of 11%, 2010 DPU would be 3.2 US cents, or 19.5% yield. Excluding charter contributions from these two CSAV vessels, DPU would be 1.9 US cents, or 11.5% yield in 2010.

China Civil Aviation: Sell (DMG, 23 Apr)
CAO has announced that its 33%-owned Shanghai Pudong International Airport Aviation Fuel Supply Company (SPIAAFSC) had incurred yet another net loss for 1Q09 of US$8.8m. This was due largely to higher procurement costs of jet fuel inventory while revenues were adversely affected by falling crude oil prices in 4Q08 and early 2009. The group also revealed that it had entered into a cooperation agreement with China National Offshore Oil Cooperation Marketing Company (CNOOC) that would last till 31 Dec 2012 that will allow CAO to expand its jet fuel supply and trading business beyond the PRC, mainly by selling oil and petrochemical products in the international market. We have lowered CAO’s forecasted associate contribution for FY09 by 22.5% from US$13.3m to US$10.3m. This is mainly due to our lower crude oil assumption of US$51/bbl, as well as 1Q09 losses. However, we have increased our FY10 associate contribution estimate by 44.3%, from US$14.2m to US$20.5m. This is on the back of a higher crude price target of US$58/bbl for FY10 assuming it does not get caught out again by higher procurement costs of inventory amid falling oil prices. We have set a required return from the market of 15%, in line with other S-shares we cover. Our target price has been raised from S$0.665 to S$0.72, but we downgrade the stock to a Sell given the stock’s strong run-up over the past month.

Keppel Land: Buy (UOBKayHian, 23 Apr)
Keppel Land reported 1Q09 net profit of S$36.9m, down 39% year-on-year (yoy). The results are within our expectation, excluding imputed provisions. The decline in earnings was mostly due to lower contribution from the property trading segment (-35%) as a result of slower completion of several projects in Singapore and overseas and weaker residential sales in difficult market conditions. The property investment segment reported robust 1Q09 earnings growth (+25%) due to increased rental income from Singapore and Vietnam as well as a higher share of profit from K-REIT Asia. Keppel Land has benefitted from the recent improvement in homebuyers' sentiment, selling 15 units each at average selling prices (ASP) of S$1,200 psf and S$1,300 psf for its Park Infinia and The Tresor projects respectively. It plans to launch the next phase of Reflections at Keppel Bay during the year. Also, Keppel Land has deferred the construction of Marina Bay Suites and Madison Residences with an estimated capital expenditure of S$140m to preserve capital and take advantage of falling construction costs. The Group has cheap Singapore landbank bought early in the cycle prior to 2006. The investment properties’ write-downs are likely to be low as the carrying values are at the lower end of the market range. Keppel Land has strong holding power with 0.52x gearing, healthy cash balance of S$627m and unutilised credit facilities of S$1.8b. We maintain our BUY recommendation with a target price of S$2.10, pegged at a 15% discount to 2009 RNAV of S$2.48/share.

Keppel Land: Neutral (DMG, 23 Apr)
KepLand posted a 38.8% year-on-year (yoy) decline in 1Q09 PATMI to S$36.9m, below our estimates and the Street's, mainly attributable to a 35.4% plunge in income to S$31.7m from Property Trading, where increased contribution from associate-level developments (Marina Bay Residences and Reflections) failed to offset the completion of several projects (The Seasons, Villa Riviera and Park Infinia) in FY08. Geographically, both Singapore and foreign markets turned in subdued earnings, down 36% and 45.7% respectively. On the bright side, its other three businesses registered yoy gains in topline. KepLand has sold year-to-date an impressive 420 units across four projects in Wuxi, Chengdu, Changzhou and Tianjin. We believe the positive take-up resulted from the inception of an RMB4 trillion stimulus package, on top of affordability-boosters such as reduced mortgage rates, decreased down-payments and tax incentives. Aside from these cities, we observe that transaction volumes have also begun to gradually improve in other lower-tier cities, as the Chinese government seeks to boost a sector which accounts for about 10% of GDP. With 3 million sqm of China-based residential landbank (24,420 units across mass to prime projects), KepLand should be well-positioned to ride on an earlier return in sentiments within the country's property market. More importantly, we reckon this would help to mitigate the current tepid interest in domestic prime properties, of which KepLand's portfolio is most exposed to. KepLand has soared 26.6% over the past month, outperforming the wider property index (+18.7%) and STI (+10.8%). While we are in favor of KepLand's healthy balance sheet (low net gearing: 0.5x, reasonable cash: S$0.6b), we think catalysts for further share price upside remains scarce given its relatively higher exposure to high-end properties and the still-correcting office sector. We are leaving our estimates and fair value unchanged at S$1.80, 50% discount to base case RNAV of S$3.60.

Keppel Land: Buy (Citi Investment Research, 22 Apr)
Keppel Land has reported 1Q net income of $36.9m, about 15% of our estimates and 20% of consensus. Revenue of $145.7m came in ahead of our estimates while operating profit was in-line, but associate income of $29.3m was lower than expected. Attributable profit for the property trading segment fell 35% yoy due to completion of several projects last year – namely The Seasons in China, Villa Riviera in Vietnam and Park Infinia in Singapore. Despite the fall, property trading was still the main driver of net income, contributing some 86%. Both property investment and fund management segments managed improvements both on a yoy and qoq basis. Recognition of profit from Marina Bay Residences and Reflections led to the higher profits from associates. Keppel Land guided that it had recognized $15.6m for the fully sold Marina Bay Residences (48.4% completed) but only $3.7m for the 55%-sold Reflections (22.6% completed) in 1Q09 alone. We expect progressive contribution from both projects over the next 9 months. While we remain negative on the office sector, we see value in Keppel Land. The stock is trading at a 44% discount to our 09E RNAV of $3.19 and 1.5 standard deviations from its mean on a 6-month forward basis. Even during the 2003-2004 period when both residential and office sectors were depressed, the stock reverted back to its mean valuation of a 16% discount. Maintain Buy.

Keppel Land: Sell (Goldman Sach, 22 Apr)
KepLand posted a PATMI of S$36.9m for 1Q09 (-39% yoy, -40% qoq), 16% below our expectation which is at the low end of Reuters consensus. Profits from investment properties were in line, with the shortfall largely due to weaker-than-expected residential sales, down 35% yoy and 16% qoq. Contributions from Singapore continued to disappoint, with only 30 units sold year-to-date (15 units each in Park Infinia and The Tresor averaging S$1,250 psf), as it failed to meaningfully participate in the first quarter's pickup in developer sales. To put this in perspective, Keppel sold around 60 units (CY08) and 760 units in (CY07) in Singapore. China appears to be its only bright spot with 420 units sold so far this year (overseas sales was 1,200 units in 2008 and 2,800 units in 2007). While Keppel has saved S$140mn in capex from deferring high-end residential projects Marina Bay Suites and Madison Residence, we estimate it has a pre-financing cash flow shortfall of S$638m over 2009E-10E, which may be exacerbated by some S$160m and S$758m in loans due in those respective years. Despite it being highly leveraged to Singapore's prime office and residential segments, Keppel's share price has risen 77% since its low on Mar 11 and is now trading at our 2009 NAV of S$1.77, implying 40% downside.

Suntec REIT: Hold (Phillip Securities, 22 Apr)
Our optimism in Suntec REIT is partly deflated with the weak economic outlook as its revenue hinges heavily on the broad macroeconomic conditions. With its properties located in the core downtown area, rents and occupancies are subjected to greater variability as compared to the outlying areas and are most prominent during upswing and downswing. The current downswing will have a decelerating effect on Suntec REIT. Approximately 74% of office leases are expiring over the next three years and we believe there are potential uplifts in average passing rents when the leases are renewed. Barring the weak outlook, we think there will still be positive rental reversion because most of Suntec REIT properties have passing rents that are lower than the current spot rates. Suntec REIT is currently trading at 65% discount to NAV. This represents the trough valuation the market ascribe to it from its listing in Dec 2004. We feel the overhang of this market valuation stems from the refinancing concerns surrounding the REIT and believe that once clear indication is announced, there should be a re-rating. We have a DCF derived fair value of $0.69 and forecast FY09F DPU of 10.44 cents, which translate to 15.6% dividend yield. We have a Hold recommendation, which will be subjected to a review after the REIT has announce its refinancing plans.

SSH Corp: Hold (OCBC Research, 22 Apr)
SSH services the oil and gas, marine and petrochemical industries. The industry diversification will help cushion underperformance in any one sector, such as shipbuilding which has seen minimal new order flow. Shiprepair, though not immune in a recession, is likely to be less affected given that ships typically have to come in for repairs every 2.5 years. On the oil and gas front, though the EIA forecasts lower oil demand this year, there are still companies such as PT Perusahaan Gas Negara (Persero) Tbk that expect to raise capital expenditure by 33% to US$200m this year. Finally, if SSH is able to increase its exposure to the infrastructure industry (one of the few sectors left in Singapore that is enjoying robust growth), the more support it will have during this recession. Market sentiment has improved, but we note that economic indicators are pointing otherwise. As such, the recent rally in smaller-cap stocks is unlikely to be fundamentally driven, and signs of a sustained recovery have to be present before we turn more bullish on the stock. SSH has a good business model and its tripartite relationship with KS Energy and Aqua-Terra Supply should result in synergies and increased business opportunities compared to a stand-alone stockist. Though there are early signs that demand in China may be picking up, SSH’s main industries still require a sustained recovery in other parts of the world. We maintain our Hold rating and fair value estimate of S$0.11.

CapitaCommercial Trust: Buy (OCBC Research, 22 Apr)
We are re-initiating coverage on CCT, the largest SGX-listed office REIT by market cap, with a Buy rating. Tenancy risk for CCT is well-managed, with a wide base of 540 tenants. CCT's maximum exposure to a single tenant is about 13% of its monthly gross rental income. Strong landlord-tenant relationship has also helped to minimize tenant turnover. Income visibility remains very healthy as it had already locked in about S$282.3m of gross rental income for FY09. While we do not foresee major issues with refinancing in FY09 and FY10, chances of an equity fund raising appear to be higher in FY11 with the significant liquidity needs. We advise investors to look beyond the weak office market outlook and focus on the quality of CCT's assets and the DPU yield of CCT over the next 2 years. For FY09 and FY10, we still expect CCT to deliver DPU yields of 12.3% and 10.5%, respectively. Having a strong sponsor in CapitaLand could also provide support to CCT if there is any need for fund raising. We derive a RNAV estimate of S$1.06 per share for CCT and we peg our fair value estimate at S$1.06, which is at par to its RNAV.

China XLX Fertiliser: Neutral (DMG, 21 Apr)
Prices for grain rose 5.5% year-on-year (yoy) for the month of Mar 09 and 4.4% yoy for the month of Feb 09. We believe that the continued rise in higher prices for grain is a positive for China XLX as there are more negatives than there are positive for China XLX. Its management has indicated that the first application for fertiliser is already over and its average selling prices (ASP) for urea has fallen to about RMB1,700/tonne due to international prices of urea falling to US$290/tonne (RMB1,982/tonne) as of 17 April 2009. In our analysis, if food prices continue to deflate in FY09 and if international prices of urea continue to remain at its current level this could negatively affect China XLX. On 20 April 09, China XLX announced the completion of its third plant was ahead of schedule, commencing operations on 14 April 2009. Originally they were expecting operations to begin in early 3Q09. The third plant will increase its urea and methanol annual production capacities by about 400k tonnes/annum and 50k tonnes/annum respectively. In our FY09 forecast, we believe that China XLX will be able to achieve a 45% increase in urea sales to 870k tones/annum. Long term prospects for China XLX remains positive. However, we believe that FY09 will be a difficult year; hence our Neutral call for China XLX. We have a price target of S$0.29 based on 6.5x FY09 P/E.

China XLX: Buy (UOBKayHian, 21 Apr)
We expect XLX's net profit to remain flat at Rmb45m in 1Q09 vs Rmb45m in 4Q08 and Rmb113m in 1Q09. Although urea price soared from 4Q08 to 1Q09, anthracite coal prices also rebounded from end-08, thinning the profit for the urea and methanol segments. The compound fertiliser would be squeezed by the fall in phosphorous fertiliser prices and substantial high-cost phosphate inventory. We expect gross margin for the urea segment to increase from 18% in 4Q08 to 26% in 1Q09, based on higher urea price and flat coal cost. According to industry source, the Group's average selling prices (ASP) for urea should increase from Rmb1,670/tonne in 4Q08 to Rmb1,800/tonne in 1Q09. Methanol price in China rose from the trough of Rmb1,400/tonne at end-08 to Rmb1,900/tonne currently, driven by the recovery in oil & gas prices. However, the Group's methanol segment is still loss making due to high coal cost. We anticipate gross margin for the compound fertiliser segment to drop from 30% in 4Q08 to 6% in 1Q09, due to lower ASP for the product and a probable impairment for high-cost phosphate inventories. We maintain our earnings forecasts on XLX for 2009-11F. We expect net profit to grow 27% yoy in 2010 after falling 19% yoy in 2009, dragged by a loss in the methanol segment. However, the removal of urea price cap, rebound in urea prices and earlier-than-expected launch of the new plant will drive the Group's earnings going forward. We remain upbeat on XLX given its strong position as the consolidator in the urea market in northern China. XLX is trading at 7x 2009F PE, much lower than its peers 12x for China BlueChem and 14x for Sinofert. Maintain BUY with a target price of S$0.57 based on 8x 2010F PE.

China Fishery: Buy (DMG, 21 Apr)
Aquatic product prices rose 6.4% year-on-year (yoy) in Mar, better than Feb's 3.3% rise. Fish prices are expected to remain stable in China due to continued demand especially for Alaskan Pollock which is the most common type of fish used in fast-food restaurants. In our assumptions we believe that fish prices will remain positive despite China's economy in deflation mode. Our forecast for China Fishery's FY09 revenue from fishing is US$340m which is a 3% yoy growth.
Management forecasts a total of 200k tonnes/annum of fish to be caught in FY09 with an ASP of US$1,700/tonne. Maintain BUY for China Fishery with a price target of S$0.86 based on 3.9x FY09 P/E. The company is currently trading at 3.5x FY09 P/E and 2.7x FY10 P/E.

Kian Ann Engineering: Neutral (DMG, 21 Apr)
Kian Ann is an independent distributor of heavy machinery and diesel engine parts. Its products are used for excavators, bulldozers, trucks, trailers, power generation sets and marine engines. We caught up with Kian Ann's management for an update recently and were informed that the company experienced stable demand in Mar 09 against the preceding month. Demand in Jan declined due to the Chinese New Year holidays but picked up in Feb. We were informed that negotiations for a portion of its term loans due in Jun 09 are almost finalised. Kian Ann is currently negotiating for refinancing of approximately S$6m of its term loans. Historically, Kian Ann's payout ratio is around 25%. Companies are likely to remain prudent and focus on liquidity management while conserving cash, during the present tight credit environment. As such, we are maintaining our forecasted dividend payout ratio of 21% in FY09 for Kian Ann. We are adjusting our earnings upwards by S$2m due to the tax refund the company had obtained. With demand for Kian Ann’s products seen stabilising and the stock trading at S$0.13, we upgrade the stock to a NEUTRAL with a fair value of S$0.12 .

OCBC: Sell (Phillip Securities, 21 Apr)
OCBC's efforts in improving margins via innovative saving products are commendable as net interest margins improved significantly from 2.14% to 2.47% in 4Q08. The Group provided net allowances of S$447mil for loans and other assets. Although this amount is more than 10 times last year, we note that this was due to successful efforts in loan recoveries, repayments and upgrades in 2007. However, we expect allowances to remain elevated in 2009 through 2010 due to the weak economic conditions. We forecast the non-performing loan (NPL) ratio to rise to 2% in 2009 and 2.4% in 2010. As with lower operating profits and higher allowances, we are trimming our 2009 earnings by another 5% from S$1.53bil to S$1.45bil and cutting our long term ROE assumption from 10% to 9.5%. Accordingly, our target price has been reduced to S$4.61We think the 42.3% run up within 30 trading days is a little excessive, as economic turnarounds do not happen within such a short span of time

Singapore Petroleum Co: Neutral (DMG, 21 Apr)
SPC has reported a 1Q09 PATMI of S$55.5m (-43.7% year-on-year), exceeding our estimates and the Street's of S$33.6m. SPC's better-than-expected refining margins of US$4.50/bbl (vs. our forecast of US$3.10/bbl) was the quarter's main positive highlight, which led to a turnaround in operating profit of S$118.6m after two quarters of consecutive losses for its downstream activities. The negative drag – though not unexpected – was the decline in average realisation achieved by SPC as a result of the steep drop in oil prices. This was, however, partially offset by a stronger US dollar. SPC made a non-cash impairment provision that amounted to S$43.3m for drilling costs incurred from 2003 to 2006 at the Jeruk field. This suggests that the Jeruk discovery, once believed to contain over 170 million barrels of oil resources, would not proceed into oil production. SPC's current share price implies overly-optimistic refining margin assumptions of US$4.50/bbl and US$4.60/bbl for FY09 and FY10 respectively, which we think would be difficult to achieve given the challenging outlook. Due to the lack of catalysts and no improvements in the leading indicators, we keep our forecasts and price target unchanged. As share price has surged 44% since our initiation, we have downgraded SPC to NEUTRAL.

Neptune Orient Lines: Sell (OCBC, 21 Apr)
The IMF has warned that the ongoing recession could be a protracted one, painting a bleak outlook for consumer demand and global trade. The weak industry outlook is exacerbated by supply overhang and economically unviable freight rates. Having incurred a US$149m net loss in 4Q08, NOL expects net loss to widen to US$240m in 1Q09. We expect the group to incur losses for both FY09 and FY10, implying the absence of dividend payouts. A recovery of the real economy and resumption of trade flows are prerequisites for NOL's revival. We see no near-term catalysts for the stock and initiate coverage with a SELL rating and S$0.815 fair value, based on 0.4x FY09F NTA. Risks to our assumptions include a speedier-than-expected global economic recovery and positive macro news flow which could lift sentiment.

Ascendas REIT: Buy (DMG, 20 Apr)
A-REIT registered a 12.6% YoY drop in 4Q09 DPU to 3.23¢, slightly under our estimates and the Street's. However, FY09 DPU of 15.18¢ came within expectations (96.4% of DMG's and 101.9% of Consensus' projections). NAV slipped 12.5% YoY (-11.5% QoQ) to S$1.61 per share, due to revaluation losses of S$115.4m (from 50bps increase in cap rate to ~ 7%) and dilution from Jan 09's EFR. A-REIT has flagged out a handful of highly vulnerable tenants, who currently occupy 19,000 sm in NLA. Nonetheless, we believe the impact of default is minimal, as they account for merely 1% of A-REIT's portfolio NLA and are backed by ~ seven months of security deposits. On that note, we reckon tenant retention would be A-REIT's near-term agenda. 14.1% of income is up for renewal in FY10, of which ~ 10% has already been renewed to date. Management's worst-case scenario assumes a retention ratio of ~ 70% (more conservative than the 80 – 85% experienced in the previous downturn), on top of flat reversion rental rates. Assuming this and our previous average portfolio rent forecasts (~ S$1.50 psf pm), A-REIT still offers a reasonable FY10 – 11 yields of 9.6 – 10.0%, at last trading price of S$1.47. Gearing of 35.5% remains acceptable, with next major debt (S$300m) only due in 2010. Further, its level of susceptibility to interest rate volatility is low as 90% of interest rate exposure has been fixed for 3.4 years at 3.67%. While A-REIT's 0.8x P/B is above the sector’s 0.6x, we believe this premium is justified, given its strong sponsor-backed stature, established track record, low refinancing risk, long lease tenures (5.1 yrs), diversified clientele and good access to capital. Reiterate BUY at a fair value of S$1.57.

Ascendas REIT: Buy (UOBKayHian, 20 Apr)
A-REIT's DPU of 3.23 cents for 4QFY09 was in line with expectations. Performance fees for Ascendas Funds Management were previously paid with new units but the manager had elected to receive performance fees in cash for FY09. DPU for the quarter would be 3.80 cents if performance fees were paid with new units. Distribution of 2.50 cents/share will be paid on 29 May 09 as advance distribution of 0.73 cents/share was already paid on 27 Feb 09. Portfolio occupancy has improved from 97.2% in 3QFY09 to 97.8% in 4QFY09. The bulk of the increase came from logistics, where occupancy improved from 96.2% to 98.7%. A-REIT has shifted its focus from maximising rental reversions to maintaining occupancy due to the dismal economic outlook. Leases representing only 14.1% of gross revenue are due for renewal in FY10. Management expects net property income to be maintained in FY10 and plans to maintain payout ratio at 100%. A-REIT has a diversified portfolio and is able to attract tenants from a wide range of industries. Our target price is S$1.62 based on a dividend discount model (required rate of return: 9.0%; growth: 2.5%).

GuocoLand: Sell (UOBKayHian, 20 Apr)
GuocoLand's 3Q09 PATMI rose 91% year-on-year (yoy) to S$4.9m while revenue increased 21% yoy to S$126.1m over the same period. The earnings were mostly contributed by development profits from sales at The Quartz project in Singapore. The reported profit includes unrealised net foreign exchange loss of S$24.6m. The results are in line with our expectation, with 9M09 earnings representing 78% of our full-year forecast, excluding land writedown provisions and unrealised translation losses. GuocoLand has yet to make any provisions for its landbank, especially that related to the Leedon Heights and Sophia Court sites, or book revaluation losses related to the Tung Centre. We estimate overall asset writedowns and revaluation losses could top S$500m and expect the bulk of these provisions to come towards the latter half of this year as the property price index begins to reflect the actual price declines. Net gearing, which is already high at 1.24x vs average of 0.6x for Singapore property developers, could come under further pressure in case of further asset writedowns. There is still no clarity on the timeline for the resolution of the legal proceedings related to the troubled Dongzhimen project in Beijing. GuocoLand derives nearly 15% of its value from the project and prolonged legal proceedings are negative due to an increase in holding costs. We maintain our SELL recommendation with a fair price of S$0.80 pegged at a 50% discount to 2009 RNAV of S$1.64.

CapitaMall Trust: Sell (UOBKayHian, 20 Apr)
CMT's gross revenue grew 11.1% year-on-year (yoy) to S$134.5m due to the acquisition of The Atrium@Orchard and completion of asset enhancement initiatives at Sembawang Shopping Centre and Lot One Shoppers’ Mall. Portfolio occupancy was relatively unchanged at 99.5% as at Mar 09, compared with 99.7% as at Dec 08. Average growth in rentals for renewal and new leases slowed to 0.4% in 1Q09 compared with 3.9% in 2007 and 3% in 2008. Muted growth in rentals reflects retailers' apprehension concerning future outlook.Net proceeds from the 9-for-10 rights issue of S$1.2b will be used to repay borrowings due in 2009. Gearing was reduced from 43.2% as at Dec 08 to 29.2% as at Mar 09. Interest cover was 3.1x in 1Q09 but is estimated to have improved to 4.4x post-rights issue. Dilution from the rights issue resulted in a 46% quarter-on-quarter contraction in DPU to 1.97 cents. CMT has retained a distributable income of S$5.9m, including income of S$2.6m from CapitaRetail China to be distributed in 2Q09. Management has stated its intention to maintain 100% distribution payout. We have updated our forecasts based on information disclosed in CMT's 1Q09 results announcement. We have not factored in any contribution from asset enhancement initiatives as detailed plans have not been finalised. Maintain SELL as CMT provides limited upside potential. Our fair price is S$1.17 based on a dividend discount model.

MobileOne: Hold (Phillip Securities, 20 Apr)
M1 has reported an operating revenue of S$186.4m (-8.6% yoy), profit before tax of S$44.1m (-5.8% yoy) and net profit of S$41.9m (+10.3% yoy) for 1Q FY2009. Its telecommunication services registered 8.4% decrease in revenue to S$140.3m. Postpaid revenue fell by 9.9% to S$122.6m while prepaid revenue increased by 3.5% to S$17.7m. International call services posted a 5% drop to S$32m while handset sales fell by 18.7% to S$13.9m. Fixed network services was a new segment that contributed revenue of S$0.3m. Operating expenses also decreased 9% to S$141.3m due to lower handset costs and staff costs. Despite the drop in revenue, net profit increased mainly due to the 75% decrease in provision for taxation from S$8.8m in 1Q FY2008 to S$2.2m in 1Q FY2009. This was a result of the reduction in corporate tax rate from 18% to 17%. M1 saw a decrease in the number of prepaid and postpaid customers from 748,000 and 882,000 in 4Q FY2008 to 740,000 and 879,000 in 1Q FY2009 respectively. Its market share for the prepaid and postpaid segments has also decreased from 24.4% and 27.2% in 4Q FY2008 to 23.9% and 26.8% in 1Q FY2009 respectively. As M1 does not have Pay TV, it is unable to offer bundled services to customers. This is a concern as it is likely to lose market share to SingTel and StarHub. M1 expects 2009 to be a challenging year due to the global financial crisis. Despite the economic downturn, it expects operations to remain stable. Moreover, its dividend policy for 2009 is to pay 80% of net profit after tax as dividend. Based on our valuation using the free cash flow to firm model, the target price is at S$1.67. M1 remains a HOLD due to its limited focus on the domestic market and the lack of Pay TV services. The dividend yield of M1 is 8.8%.

CapitaMall Trust: Neutral (DMG, 20 Apr)
CMT posted a 1Q09 DPU of 1.97¢, slightly under our estimates. Distributable income was up 8% year-on-year (yoy) to S$62.6m. Topline rose 11.1% YoY to S$134.5m, boosted by improved contributions from five malls, as well as introductions of Sembawang Shopping Centre and The Atrium@ Orchard. Improved operating margins in 13 of its 14 malls helped NPI to head up 7.5% quarter-on-quarter (qoq). Since its listing in 2002, CMT's portfolio occupancy has outperformed the nation's malls, even during previous recessions, averaging above 99%. Looking ahead, we believe CMT will place greater emphasis on tenant retention to maintain healthy occupancies amidst the current economic downturn. We reckon this would come at the expense of rental deductions especially for its urban malls which could also be subjected to supply-side pressures. In view of the above, we are keeping our current occupancy rate at 96 – 97% from 2009 – 11, while assuming negative rental reversions of 4% to 8% for the same period. FY09 and FY10 DPU would thus fall by 4.1 – 10.1% to 8.6¢ and 8.9¢ respectively. Taking into account our refined rental assumptions, our new DDM-predicated fair value has now been tweaked downwards to S$1.24 (previously S$1.26), with FY09-10 yields of about 7%. While we continue to recognise CMT's impeccable mall management expertise, valuations for the counter now appear rich on a peer-to-peer basis (0.8x P/B) in the wake of a 30.7% 1-month rally. Given its lower P/B of 0.6x and forward yields of ~ 10%, we believe FCT (S$0.72 BUY TP: S$0.82) could offer more value for investors to unlock from.

Parkway Holdings: Sell (DMG, 20 Apr)
Parkway's revenue from Singapore operations lower, but that from International operations higher. Management indicated that revenue from its Singapore operations may be lower for the early part of the year due to declining number of visitor arrivals. This decline is likely to be offset by the growth in revenue from its International operations, especially Malaysia. Parkway had expanded the capacity at its Malaysian hospitals and would continue expanding, to meet the growing demand for its services. International operations accounted for 33% of Group revenue in FY08. Meanwhile, piling works are expected to be completed at Novena hospital by end- Sep09. Construction costs are expected to decline further to about S$400m (initial budget was for S$500m). The Novena hospital is targeted for completion in 2011. While it has not started pre-selling its medical suites (minimum S$3,500 psf) Parkway has received quite a number of enquiries from doctors. As the only private hospital with a Malaysian arm, Parkway is likely to benefit from the government's recent policy change to allow Medisave to be used for elective treatments overseas. The impact from this policy change is likely to be minimal, as it is usually price-sensitive patients (i.e. these patients are usually not key customers) who would be attracted by it. We maintain our earnings estimate of S$78.0m for FY09. We have a target price of S$0.92, based on 13x blended forward earnings. Maintain SELL.

Raffles Medical: Buy (Nomura, 17 Apr)
Raffles Medical (RMG) post 1Q09 net profit growth of 28% year-on-year (yoy) beating our full-year forecast of 12.6%. Net profit in 1Q09 reached 23% of our full-year forecast, which is laudable considering the Lunar New Year holiday. Historically, RMG's 1Q net profit makes up 18-19% of its full-year earnings. Despite slower revenue growth of 7.6% yoy, we believe RMG has demonstrated its ability to control costs and grow earnings with operating leverage.The group also managed to contain its staff costs in line with revenue, despite having increased its headcount by 50. Revenue growth has visibly slowed from 17-29% yoy in the past four quarters, to 7.6% in 1Q09. The healthcare services segment grew by 10.8% yoy, confirming its defensiveness. Foreign patient volume grew by 8% yoy, while local patient volume was flat. Management remains cautiously optimistic on the outlook, and emphasised that 1Q is usually the weakest quarter of the year.
The strong 1Q09 results signal potential upside to our full-year forecasts.

Raffles Medical: Neutral (DMG, 17 Apr)
Raffles Medical has recorded a 27.7% year-on-year (yoy) growth in 1Q09 net profit to S$7.8m, on the back of a 7.6% yoy growth in sales to S$51.m, despite the current economic recession. Improved operating efficiencies also contributed to the improved net profit. Operating margin was higher, at 19% in 1Q09, compared with 16.9% in 1Q08. On a quarter-on-quarter basis, revenue declined 0.8% in 1Q09, while net profit was 18.3% lower. The subsequent quarters are expected to be better, as the first quarter is usually the weakest quarter for Raffles Medical. Patient volume remains steady. Despite the declining number of visitor arrivals in the first two months of the year, Raffles Medical saw an 8% yoy increase in its number of foreign patients, while it managed to maintain the number of local patients. Balance sheet remains strong, as Raffles Medical achieved a net cash position of S$21.8m at end 1Q09. This was boosted by the operating cash flow of S$4.7m that it generated during the quarter. With its continued focus on curative healthcare services, coupled with its healthy balance sheet, Raffles Medical is in a position to ride out the challenges in the current operating environment. We are keeping our forecasts for FY09. We maintain our target price of S$0.74, based on 12x FY09 P/E. Maintain NEUTRAL.

MobileOne: Neutral (DMG, 17 Apr)
M1's 1Q 09 revenue declined 8.6% to S$186.4m while earnings rose 10.3% to S$41.9m. The improved net margins were largely a result of tax adjustments for reduction in corporate tax rate. Taking out the tax impact, the results would be within our expectations. Balance sheet improves further. Due to strong cash flows, M1's key leverage ratios have improved. Net gearing now stands at 0.68x, against 0.85x a year ago. EBITDA/Interest, at 45.2x, is the highest among the telcos, and an improvement over the 37.6x it recorded in the previous corresponding period. M1’s post-paid market share fell from 27.2% in 4Q08 to 26.8% in 1Q09. While the level of competition tapered off in 4Q08, it intensified again in the past few months. From the tone of the management, we gather that should its market share continue to fall, it will retaliate aggressively. M1 has already introduced innovative programmes like Take3 to win over new customers. One other concern investors may have is the vacuum at the top after the departure of Neil Montefiore in Jan 09. Acting CEO and CFO Karen Kooi indicated that the new CEO will be unveiled "very soon". M1 believes it will benefit from the NBN when it becomes operational in 2Q10. In our view, it may not be as rosy. We expect SingTel and StarHub to launch aggressive campaigns to lock in customers later this year, pushing market penetration past the 90% mark by then. Moreover, the low wholesale prices will attract new players, which will place pressure on broadband prices We are maintaining our earnings estimates for M1, with a 5.6% contraction to S$141.6m in FY09 and a growth of 4.6% to S$148.1m in FY10. We have a target price of S$1.52. Given the limited upside, we maintain NEUTRAL on M1.

MobileOne: Buy (OCBC Research,17 Apr)
M1's 1Q09 revenue fell 8.6% year-on-year (yoy) and 4.3% quarter-on-quarter (qoq) to S$186.4m, meeting 24% of our FY09 forecast. Meanwhile, net profit jumped 10.4% yoy and 14.5% qoq to S$41.9m, or around 29.1% of our full-year estimate, aided by a sharp drop in taxes. On the business front, M1 felt both the impact of the economic slowdown – leading to lower roaming revenue – as well as stiffer competition. M1 saw a nearly 12,000 qoq drop in subscribers in 1Q09, where its post-paid segment lost nearly 4,000 subscribers, which reduces its market share from 27.2% in 4Q08 to 26.8%; no surprises here as we had previously articulated that M1 faces a slight disadvantage due to its lack of bundling abilities as compared to the other telcos. M1 continues to expect 2009 to remain challenging, mainly due to the economic downturn, but it maintains its guidance of stable operations; management later clarified that the stability will be in terms of profitability. Despite the uncertain economic backdrop, we still like M1 for its defensive and strong free cash flow-generating business, and dividend paying ability (80% payout ratio). We also see M1 as one of the biggest beneficiaries of the NBN initiative. As such, we maintain BUY and S$2.12 fair value.

Ascott Residence Trust: Buy (OCBC Research, 17 Apr)
ART owns a portfolio of serviced residence and rental housing properties in the pan-Asian region. We like its parentage, strong brand reputation and geographical diversification. We expect revenue per available unit (RevPAU) to remain volatile and on a downtrend with demand for corporate travel impacted by the current macroeconomic turmoil. We estimate that DPU will decline 24% year-on-year (yoy) in FY09F and 7% yoy in FY10F to 6.6 cents and 6.2 cents respectively. In our view, current share prices reflect a belief that business conditions deteriorate to a certain extent and then stay that way. We believe ART is a viable investment option for investors who can accept the near-term yield volatility and judge ART on the basis of its long-term prospects which we think are sound. Our fair value estimate for ART is S$0.57, at a 25% discount to our SOTP estimate of S$0.76.

Pacific Shipping Trust: Hold (OCBC Research, 17 Apr)
PST customer CSAV is asking ship owners (such as PST) for a temporary reduction of charter hire payments. Charters to CSAV contribute 30% of the trust's annual revenue. We expect PST to agree to the renegotiation request. Details are still unclear on 1) whether the reduction will be accepted by all the ship owners, 2) the exact quantum of the discount; 3) the size and type of compensation granted to owners; 4) the reaction of PST's lenders to these events. PST derives the rest of its annual revenue from its sponsor and 59.2% stakeholder, Pacific International Lines (PIL). PST said it has not received any indications from PIL regarding rate reductions, but we believe PIL may follow suit, especially if the operating landscape continues to worsen. We have reduced our revenue forecasts for FY09-10F by 7% and 9%, and slashed DPU estimates by 17% and 22%. We may need to make further revisions as more details emerge. PST's 1Q09 results will be out next week. PST already has a fairly conservative distribution payout policy but the Board may have to be even more prudent in light of recent events. Maintain HOLD with US$0.16 fair value

Singapore Exchange: Sell (DMG, 16 Apr)
SGX's 3QFY09 net profit fell 46% year-on-year (yoy) to of S$55.3m, which is in line with our expectations. Operating revenue was down 31% to S$119.8m, with securities market revenue down 43% to S$55.3m. Securities market trading value fell 52% to S$55.8m, with average daily turnover (ADT) falling a similar percentage to S$0.91b. Net derivatives clearing revenue also contracted by 20% to S$31.2m, with futures clearing revenue accounting for 95% share and the balance 5% from structured warrants clearing revenue. SGX is committed to an annual base dividend of 14S¢ from FY09 onwards. We are forecasting FY09 dividend of 23.4 cents/share, based on a 90% payout ratio (FY08 payout ratio was 84%). We are assuming a FY09 stockmarket ADT decline of 51%. Our target price of S$3.95 is pegged to 13x FY10 EPS. The counter remains a SELL.

Singapore Exchange: Hold (Kim Eng, 16 Apr)
SGX's 3Q09 earnings dive 45% year-on-year (yoy) and 26% quarter-on-quarter (qoq) to $55.3m, dragged by weak revenue from all categories. However, this weak set of results was within our expectations with 9M09 net profit at 70% of our full year forecast. The recent market rally has revived average daily turnover (ADT) to above $1bn consistently, even hitting a high level of $1.7b for some trading days. This signals that the worst quarter could be over and what lies ahead is a good start for the 4th quarter that could see a potential 40% qoq increase in ADT. Besides, product diversification into extended settlement contracts, ETFs and OTC clearing are showing encouraging results. Next, the group will be looking into growing the options market. Although we have raised our FY09 ADT estimate to $1.27b in view of higher volumes in recent weeks, our earnings estimates remain largely intact as we factored in the weaker derivatives income. While there are bright spots, SGX's sharp price rally of 55% within a month and premium valuations to its peers look overdone. Our sensitivity analysis shows that even a sustainable increase in ADT to $1.7b does not justify a share price above $6.15. Maintain Hold.

Singapore Exchange: Hold (UOBKayHian, 16 Apr)
SGX's 3QFY09 net profit dropped 45.5% year-on-year to S$55.3m (-25.9% quarter-on-quarter). Future clearing revenue registered the second qoq decline since 1QFY07 while average daily turnover (ADT) fell from S$1.03b in 1QFY09 to S$0.91b in 2QFY09. We do not expect any impact on the stock in the near term as the results are largely in line with market expectations. We have lowered our FY09 earnings forecasts by 6%, but raise our ADT assumption for FY10 from S$0.7b to S$1.4b. It's our view that the stock market has bottomed Thus, we As a result, we have raised our FY10 earnings forecast by 70% and our fair FY10 PE from 16.9x (bear market PE) to 23.6x (upcycle market PE). While the downtrend for ADT and share price persisted on a quarterly basis, we believe market activity should pick up in FY10. Upgrade from SELL to HOLD, with re-entry level at S$5.80.

Singapore Airlines: Sell (UOBKayHian, 16 Apr)
SIA's passenger traffic fell 22% in March vs a 17% decline in February. While capacity cuts have accelerated, it nonetheless failed to match the decline in passenger traffic. This has led to lower load factors. Cargo traffic fell 18% in March vs 15.2% in February. It is worth noting that Cathay Pacific in contrast, reported just a 4.5% decline in passenger traffic, a mild improvement from previous month's 4.9%. SIA has already instituted heavy price cutting on 82 routes and this will lower yields.Passenger traffic in absolute terms for Jan-Mar 09 is at the FY05-06 levels and if it averages FY05 numbers, passenger traffic could potentially fall by 14% in FY10. We believe SIA will report a loss in 4Q08. Passenger and cargo load factors for 4QFY09 are substantially lower than breakeven load factors in 3QFY09. Maintain SELL with a fair price of S$8.20, which translates to a 27% discount to book value. Trough valuation during the Asian financial crisis was 0.7x. We believe the current environment is considerably riskier and the discount is warranted.

Singapore Airlines: Buy (UBS, 15 Apr)
SIA's passenger traffic was down 22% year-on-year on a 9% capacity cut. Passenger load factor was down 11 percentage points (pp). All route groups recorded significant falls in loads, with Europe (-18pp), SW Pacific (-13pp) and West Asia (-11pp) the worst. In contrast, its closest peer, Cathay Pacific reported a 4.5% March traffic decline on a 1% capacity cut.
SIA's March cargo traffic was down 18% on a 12% capacity cut. Volumes were worse than February, but load factor declines abated while Cathay Pacific which has delivered flat cargo load factors for the past two months and traffic was down 10% in March.SIA is not overly focused on market share, but the scale of recent traffic declines is concerning. Our observations is that SIA's management may have attempted to sustain an overly steep pricing premium; the network mix is skewed to Australia & Europe, routes that have lagged the North American downturn; and the recent fleet reconfiguration appears unsuited to the current market. However, its balance sheet ensures that SIA has time to react to the challenging market but this strength also increases the risk of management complacency. That said, SIA's valuation remains at historical lows and we expect the global economy to start recovering in H209. Buy with price target of $S14.00

Tat Hong Holdings: Hold (OCBC Research, 15 Apr)
We expect Tat Hong to post a 28.9% year-on-year (yoy) decline in 4Q09 earnings to S$20.2m when it announces its results on 28 May 09. While equipment sales are likely to remain sluggish, we expect rental income to buoy the group's earnings. We are hopeful that the group may reverse some of its previously recognised unrealised forex losses in the coming quarters. Sentiment for construction stocks has improved after the sector impressed with a 25.6% yoy growth despite Singapore's 11.6% GDP contraction. However, we caution that while robust demand from Singapore could pick up some of the slack, it will not be able to completely cushion Tat Hong from the slump in global demand given the group's diverse geographical exposure. We prefer to adopt a cautious stance ahead of the group's 4Q09 earnings, and are keeping our S$0.72 fair value estimate intact. In view of the recent rally, and the 38% gain since our last upgrade, we downgrade our rating to a Hold

Keppel Land: Buy (Kim Eng, 15 Apr)
The Singapore property market has recently been experiencing a stir of activity, with interest seen in mass market projects and studio-sized mid-end projects. The key factor for the attraction of these units is affordability, which we think brings little cheer to KepLand, whose projects are predominantly mid-to-high end. KepLand has announced that it is deferring the construction of Madison Residences. We also think that sales progress of the remaining 494 units at Reflections @ Keppel Bay will remain slow in 2009. KepLand is likely to withhold new sales of units at Reflections rather than drastically slash prices. However, we have lowered our average selling price (ASP) assumption for the remaining units to $1500 psf, and $1350 psf for the remaining Keppel Bay sites. Concerns over KepLand’s exposure to the office sector remain, as prime Grade A office rents slid to an average of $10.75 psf in 1Q09. However, we believe that no impairment is necessary for MBFC, even at a capital value assumption of $1,700 psf, due to the low land costs of $381 psf and $485 psf for the two phases (breakeven estimated at $1,050 psf). We still like KepLand's long-term strategy in emerging markets, which are based on sustainable growth factors, and it will be a beneficiary of recoveries in China and Vietnam. We have further pushed back our launch assumptions for its projects, reducing our FY09 and FY10 forecasts by 28.3% and 38.1% respectively. Maintaining our BUY recommendation, target price $2.62 pegged to a 50% discount to RNAV.

Sembcorp Marine: Hold (Kim Eng, 15 Apr)
Sembcorp Marine has said that it has received notice that one of its rigbuilding customers, Petorprod Ltd, has been placed under provisional liquidation, due to default on an outstanding bond. Its subsidiaries had contracted SembMarine to build an MSC CJ70 jack up drilling rig, and to convert an existing tanker into an FPSO. The CJ70 rig was secured in May 2007 at a contracted price of US$442m for delivery in mid-2010. The FPSO conversion contract is relatively small at US$20m. SembMarine says it will make updates as and when necessary, but believes it is unlikely that the liquidation will have a material impact on the two contracts. SembMarine has collected 50% of payment on the jack-up contract, while it has completed about 30%, and hence it feels to be well protected. In the case of liquidation. SembMarine, also believes that another buyer for the rig can be found quite easily. Overall, the full financial impact is yet to be ascertained, as the situation is still panning out, Certainly, however, the news will not be good for sentiment on the stock. We are not adjusting our forecasts at this time. We maintain our Hold recommendation with our target price of S$2.07.

Sembcorp Marine: Hold (OCBC Research, 15 Apr)
It has been revealed in an industry newsletter, TradeWinds, that SembMarine's customer, PetroProd has been served notice for liquidation by its bondholders in view of a default on the bonds. PetroProd currently has two projects with SembMarine, namely a harsh environment jack-up rig (contract value US$442m) and a FPSO conversion. While the SembMarine management has refrained from making an opinion about the outcome thus far, we are assuming the worst case with PetroProd going into judicial management. In such a scenario, we take the stance that SembMarine finish the rig with its own cash flow and within its stipulated timeline of mid-2010 while initiating the process to sell it off in the secondary market. Even if sold at 50% discount to the contract cost of US$442m, SembMarine should be able to cover costs. However, we think that such a steep discount is unwarranted. We will be awaiting more clarifications from management. In the meantime, we maintain our HOLD rating with a fair value of S$2.02.

Sembcorp Marine: Underperform (Merrill Lynch, 14 Apr)
SembMarine has rallied 50% over the past month, outperforming the STI by 29%. While we continue to view SMM as one of Singapore's long-term gems, we see valuations as fully priced (2.9x P/B vs. trough of 1.0x). We highlight that the oil price is unlikely to lend support to the stock in the near term and potential upside from Petrobras wins is already reflected in share price. We increase our price target to S$2.10 (from S$2.00) but downgrade our rating from Buy to Underperform. We recommend switching from SMM to SembCorp Industries (SCI), where we expect the earnings stability created via the utilities division (45% earnings contribution) will see the stock outperform relative to peers. After we strip out the value of SembMarine and other business from the valuation of SCI, we derive an implied utilities P/E of 9x (vs. the historical implied P/E of 13x); hence, we believe the market is discounting the true value of SCI's utilities business.

Sembcorp Marine: Neutral (Macquarie Research, 14 Apr)
The Sembcorp Marine stock is trading about our S$2.10 target price, owing to a 39.6% rally in the share price over the past three weeks. After taking into account Cosco Corp's current share price, SembMarine fair value would be S$2.13 vs the S$2.15 share price. We have pencilled in S$1.5bn in new orders, mainly owing to the P-62 contract, which we expect will materialize later this year. If anything, the risk is that new order wins may undershoot our forecast. Meanwhile oil continues to trade in the US$45–50/bbl range. A US$60 level is psychologically important to spur E&P spending in terms of return of investment. A number of rig owners, particularly the smaller ones, continue to face financing issues on their committed capital spending plans, let alone new plans. International Maritime Associates (IMA), a leading industry consultant, said the order backlog for the number of production floaters has dropped 30% since this time last year due to the global economic downturn and that the market for new FPS units "has frozen", noting that "over the past quarter no orders have been placed for production floaters", the first time since 1996. Any expectation that Petrobras will launch tenders for 28 drilling units in May 2009, we believe, is wishful thinking. Petrobras has only incorporated these rigs into its strategic plan post-2012, suggesting there is no rush to order these rigs. As Sembcorp Marine has handily outperformed parent Sembcorp Industries (SCI) and Keppel Corp since its FY08 results. we do not believe this outperformance will continue. We recommend taking profit on SMM above S$2.35 and revisiting the stock below S$1.80.

Singapore Press Holdings: Buy (DMG, 14 Apr)
SPH’s net profit for 2QFY09 fell 13.5% to S$85.9m on the back of a 3.7% drop in revenue to S$287.2m due to a dip in advertisement revenues, as well as losses in investment portfolio and associates despite stronger contributions from the property division. The recession hit print ads hard, falling 20.1% year-on-year (yoy). Display ads (57% of ad revenues) and classifieds (34%) slumped 16% and 26.1% YoY respectively. Newsprint charges rose 44% yoy to US$827/MT.
We are looking at a 25% increase in newsprint charges to US$750/MT in FY09 due to the low base a year ago. Our sensitivity analysis suggests that every 10% fall in newsprint charges will lead to a 3.2% rise in earnings. The majority of Sky@eleven was sold on the deferred payment scheme (DPS) at an average of S$975 psf. So far, only two units have been sold below the launch price despite falling property prices. We believe defaults for SPH's project to be limited and the impact, negligible. SPH will be dishing out dividends of 7 cents /share. We have lowered our dividend payout from 100% to 90%, which works out to 22.2 cents for the year, or a yield of 7.7%. We have cut our revenue growth projections for the print ads from -8% to -12%. However, this is partially mitigated by wage cuts and lower newsprint prices. Correspondingly, earnings estimates have been lowered from S$380.1m to S$370.4m. Coupled with a higher cap rate applied to value Paragon (6.5% vs 6%), our SOTP valuation for SPH has been reduced from S$3.88 to S$3.40. Maintain BUY.

Singapore Press Holdings: Hold (OCBC Research, 14 Apr)
SPH delivered a sluggish 2Q09 topline of S$289.5m (-4.1% yoy, -18.6% qoq) while PATMI declined to S$87m (-12.6% yoy, +19.2 qoq). PATMI would have fallen by a greater magnitude had SPH not written back S$4m in taxes this quarter. SPH's core operations declined at a faster pace than we expected with Classifieds and Display advertisement revenues falling 26% and 16% yoy, respectively. Of its twelve industry segments for Display ads, only the transport segment (new car model launches) registered an uptick in revenue while the fashion, telco and finance segments suffered marked declines. Advertisers are also opting for smaller advert spaces to save costs. Our FY09F overall print advertising now assumes 8.3% contraction (prev. -6.2%). SPH’s Recruit section only had 20 pages on the weekend of 11 April. With expectations of economic recovery still afar off and hiring largely frozen like the credit situation; we have now factored a greater shrinkage of 18.8% (prev. -9.7%) for its classified section. Our only bright spot is SPH's magazine segment where increases in this first half will give this segment a positive or at worst, flat showing for the year. SPH's two property plays continue the counter intuitive move against a declining property market. Paragon sustains almost full occupancy with a modest increase in rentals while Sky@Eleven put forth about S$41m in revenue this quarter. Subsequent to its S$33m write down in 1Q09, SPH also managed to breakeven for its Investments in 2Q09 as it exited out of externally managed funds and channeled funds for in-house management.While our estimates have been lowered, we have rolled forward our core operations to a blended FY09/10 valuation. As such, our SOTP fair value rises to S$3.18 (prev: S$2.84). Riding the recent market rally, SPH rose 23% since the upgrade in our last report, but the bleak outlook for its earnings may take the legs from its current run. We are downgrading its rating to a HOLD. Interim dividends of 7 S cents were declared.

Industrial REITs: (DBS Vickers, 13 Apr)
AREIT: Buy (Target Price – S$1.56) ½ MLT: Buy (Target Price – S$0.44),
Occupancy levels at the portfolios of Ascendas REIT (A-REIT) and Mapletree Logistics Trust (MLT) have remained stable at around 99% over the past year, with strong retention rates of over 80% in FY08. Looking ahead, strong rapport with tenants and proactive leasing strategies established by MLT and A-REIT will likely sway tenants' decisions toward continuing staying put at their properties. For business parks space and hi-tech industrial space, asking rents have dipped slightly, since the peak, to S$2.80 –S$3.50 psf per month. However, this is still above their respective average passing rents of about S$2.55 psf pm to S$2.09 psf pm (as of reported in 3Q09). We continue to like an exposure to industrial space given its longer lease profile and more resilient earnings moving forward. Both A-REIT and MLT has 40% and 50% of its earnings locked in through long term sales and leaseback contracts. We roll forward our valuations for A-REIT to FY10, resulting in our adjusted target price of S$1.56. We also maintain a BUY on MLT, with a target of S$0.44. A-REIT and MLT are are trading at FY10-11DPU yields of 9% and 14% respectively.

SingTel: Outperform (CIMB, 13 Apr)
We believe SingTel's outlook and risk profile continue to improve across the board. The Australian government's decision to build the country's broadband network has lifted concerns about Optus possibly being awarded the project, which would stretch the group's finances. Also, the proposed merger between Vodafone and Hutchison Australia should rein in competition. In Indonesia, Telkomsel had added users at a faster clip in the first two months of 1Q09 despite seasonal weakness. Also, industry tariffs are creeping up, supporting our view that competition continues to pull back. We do not believe competition in India, which heated up in January, is sustainable. In fact, there are signs of easing price competition. In addition, the market is expecting the Singapore government to allow the S$ to depreciate to support the ailing economy. This should benefit SingTel as it derives 72% of its pretax profits from overseas operations. The A$ and Indian rupee have appreciated 8% and 6% against the S$ in the last two months. Though we have lowered our FY09-11 core net profit estimates by 0.1-2.5% and sum-of-the-parts target price by 5 cents to S$3.05, we maintain our Outperform rating. Key re-rating catalysts could include improvements in core net profits at its key units, strengthening regional currencies and further signs of an easing price war in India.

Swiber: Sell (OCBC Research, 13 Apr)
According to an article by upstreamonline, Thai contractor CUEL is planning to buy Swiber's derrick pipelay barge, Swiber Chai. The purchase will reduce Swiber's leverage ratio if the group channels the proceeds to pay off some of its debt. Although this is positive news, it is worth noting that Swiber's 1Q09 earnings may continue to feel the impact of previous delays in vessel deliveries which leads to higher operating costs and may affect earnings. The group's net debt-to-equity ratio stood at 1x as of 31 Dec 08 but management expects it to fall with the delivery of vessels under its sales and leaseback transactions. It is therefore imperative that deliveries of vessels under the sales and leaseback agreement are on time so as not to impact its cashflow The group has a S$15m bond maturing in 8 May 09, on top of its existing bank loans There are also remaining medium term notes that will mature in 2010 and 2011. We are keeping our FY09/10 estimates and fair value estimate of S$0.35 but are downgrading the stock to a Sell purely based on valuations. At current price, the market appears to have run ahead of Swiber’s fundamentals which have benefited from the recent rally in oil and gas stocks.

Willas-Array Electronics: Hold (OCBC Research, 13 Apr)
WAE had encountered a very soft 2HFY09 amid a fall-off in the global electronics demand. The worst was seen in Jan-Feb 2009, where the group suffered not only from a seasonally weak quarter but also from long holidays during Chinese New Year. Among the components, the industrial segment had held up the best. However, WAE is not expected to withstand the broad-based downturn in other segments and its management warns that 2HFY09 may not be profitable. In addition, it believes that the recovery, if it occurs in FY10, is likely to be slow and gradual. On a brighter note, WAE assures that its financial position is still healthy. To keep its costs down, the group is also embarking on a four-day week and other cost-cutting measures such as salary reduction and no pay leave. In the near-term, WAE is looking to benefit from the economic stimulus package rolled out by the Chinese government (for example, 3G telecommunications), and a strong, major customer who is taking the opportunity to expand its market share in China amid the downturn. We have adjusted our FY09F earnings to reflect a possible loss for the fiscal year. Due to the uncertain outlook, we now deem it inappropriate to base our fair value on earnings forecasts. As such, we adopt a price multiples based on NTA and peg it to 0.25x FY10F BV, near to its lowest-ever 0.24x P/BV since listing. This in turn yields a fair value of S$0.06 (S$0.04 on 4x blended FY09/10F EPS previously). As the share price has maintained around its current level lately, we believe the bulk of negatives have been priced in. Hence, we upgrade WAE from a Sell to Hold

Keppel Corp: Neutral (DMG, 13 Apr)
Keppel Seghers, the environmental technology division of Keppel Integrated Engineering (KIE) has secured an Engineering, Procurement and Construction (EPC) contract worth 233m pounds sterling (or S$518m) to build an Energy-from-Waste Combined Heat and Power Plant to serve the Greater Manchester region in the UK. The plant which is expected to be completed in 2012, will boost a capacity to treat up to 420,000 tonnes per year of solid recovered fuel and supply 270,000 MWh of electricity and 500,000 tonnes of steam per year at full operating capacity. We believe this award is positive for Keppel as it opens doors to securing more contracts from municipal clients We see opportunities in Europe as there are currently more than 20 waste management contracts up for tender. The current economic downturn may affect the progress of these high capital intensive projects in the short term, but we note that the UK government has recently announced the provision of up to 3b pounds of funding for waste PFI contracts that are facing financing difficulties. Securing this contract also signifies the UK government's acknowledgement of Keppel Seghers' technological strength, especially in meeting stringent EU environment targets. We estimate that this contract would only contribute to Keppel's revenue from FY10 onwards. Thus, we have raised our FY10's topline by 1% and bottomline by 0.6%. Our recommendation stays at Neutral, with a revision to our target price to S$5.24 (from S$4.55 previously).

SMRT: Neutral (DMG, 13 Apr)
SMRT has signed a Strategic Partnering and Support Agreement with Vibrant Partnership to provide services in rail asset management, customer experience, system and infrastructure development and business management systems for the Melbourne Metropolitan Train Franchise. The Strategic Agreement will only take effect if Vibrant is successful in its bid for the Melbourne Metropolitan Train Franchise and its estimated revenue is AUD5m (S$5.4m) annually. This represents a small 0.6% of our forecast FY09 SMRT turnover. The impact of this is thus minimal. We maintain NEUTRAL on SMRT, with a price target of S$1.65.

Ezra Holdings: Buy (OCBC Research, 9 Apr)
Ezra, which reported a 30% year-on-year (yoy) rise in topline to US$63m and a 21% increase in bottomline to US$14.9m for 2Q09, is on track to deliver earnings growth for FY09. Ezra announced new/extension of contracts for three of its vessels with rates holding firm. This implies that Ezra's young and deepwater capable assets have a stickiness in its rates unlike older and/or shallow water assets. The Marine Division, while likely to display continued lumpiness in revenue contribution, has a US$145m order book to keep it busy for the next 24 months. Its fledgling Energy Division will only see more exciting prospects when it takes delivery of two self-propelled jack-ups in FY10. Ezra remains one of our favourites for the mid cap Oil & Gas sector for its earnings resilience despite industry difficulties. Our fair value is tweaked slightly to S$1.00 (prev. S$1.01) as we refine our model.

Ezra Holdings: Buy (CLSA, 9 Apr)
Ezra reported strong 1H09 core profits, up 34% year-on-year (yoy) due largely to addition of 7 new vessels and higher contribution from marine and energy services division. Average charter rates were up; from US$1.80-1.90/bhp/day to US$1.95-2.00bhp/day as they were able to renew charters at higher rates. With the transition from mainly a vessels chartering company to a service and offshore construction provider, Ezra's cash conversion cycle has extended from 100 to 130 days. Hence, to be conservative, the company did not declare dividends for 1H09. Not something we are concerned, management is just trying to conserve cash and they have said they will pay some form of dividends for this financial year. In any case, we are not concerned about their balance sheet especially after the cancellation of the two MSFV recently. Operating cashflow remains strong. Ezra is one of the few companies in the Singapore universe that is seeing growth in FY09 and FY10. Valuation is still very attractive, trading at 4x FY10PE, close to historical low. Our DCF-derived price target of $1.40 implies an 11x FY10 CL PE, with 76% upside.

Ezra Holdings: Neutral (DMG, 9 Apr)
Ezra's 2QFY09 results saw its topline increased by 30% year-on-year (yoy) but fell 44% quarter-on-quarter (qoq) to US$63m, largely due to a decline in contribution from Energy Services (from US$39.9m in 1QFY09 to US$6.4m in 2QFY09) as the previous contract with STP Energy had been completed. Ezra's collection period gapped up to 271 days on an annualised basis for 1H09 as compared to 127 days in FY08. As a result, Ezra's cash conversion cycle increased from 100 days as at end FY08 to 130 days as at 1H09. In addition, Ezra announced new and renewal contracts of three AHTS vessels with charter periods of up to two years valued at US$47m. Our back-ofthe- envelope calculations suggested that the chartering rate was at an average of US$2.22 per bhp/day. This rate is slightly higher than the guided US$2 per bhp/day, suggesting that there is still demand for Ezra's higher capacity AHTS. We are leaving our FY09 and FY10 estimates intact for now. Given Ezra's exposure to contingent liabilities arising from sale-and-leaseback financing and a fleet comprising high capacity vessels, our view s that Ezra's greatest risk is a reduction in chartering rates. Our target price is revised up to S$0.72 (from S$0.45 previously) based on revisions to our SOTP valuation. As Ezra share price has risen 61% in the past month, and given that our assumptions remain intact, we do not find further upsides from current levels justifiable by fundamentals.

Thomson Medical: Buy (DMG, 9 Apr)
Thomson Medical achieved a 6.7% year-on-year (yoy) growth in revenue to S$15.6m in 2QFY09, despite the economic recession. The improved revenue was attributed to increased referrals from all its clinics, more baby deliveries and higher utilisation of its ancillary services. Net profit for the quarter grew 4.8% yoy to S$3.1m. Its balance sheet remains strong, with a net cash position of S$11.3m (3.9¢ per share). An interim dividend of 1¢ for 2QFY09 was declared Meanwhile, Thomson Medical's 260-bed hospital project in Bing Duong province in Vietnam is expected to commence operations in 1Q10. According to the contract, Thomson Medical will receive management service fees, which is based on 50% of the hospital's revenue and a retainer fee (for the first two years of operations). This would contribute to earnings in FY10. The Thomson Women Cancer Centre (TWCC) started operations in Feb 09 and is expected to contribute to growth, especially with the group looking to extend its TWCC services in Vietnam and Indonesia, where there is demand for oncology services. Should this plan take off, this would enhance Thomson Medical's reputation in the region, and would be a positive for the Group’s business. We are keeping our earnings estimate of S$13.0m (EPS: 4.4¢) for FY09 and target price of S$0.55, based on 12x FY09/10 earnings. While the operating environment is challenging, given the economic recession, we believe Thomson Medical is less vulnerable, as it is in a niche segment. Assuming management pays out the same amount of final dividend this year (1.5¢), it would translate into a dividend yield of 5.7%.

Li Heng Chemical Fibre Technologies: Buy (DMG, 8 Apr)
Li Heng's existing 167,200 tonnes of production capacity are still currently operating at around 90%. Order visibility remains reasonably clear, stretching six weeks out to mid-May 09. On the flip side, average selling prices (ASP) and gross margins remained suppressed. ASPs for Mar 09, at RMB15,000/tonne, is down slightly from Feb 09's ASPs. This compares against RMB19,000/tonne in Jan 09. Gross margins may have fallen to around the 6 – 7% mark for Mar 09, from 10% in Feb 09. In addition, a change in product mix also resulted in shrinking margins. The chemical fibres/textile sector in China has been one of the hardest hit due to its strong reliance on exports to the West. With no visible signs of a global economic recovery, we believe that ASPs of the nylon value-chain will remain subdued. In anticipation of ASPs remaining flattish in the short term, we have lowered our ASP assumption from RMB21,500/tonne to RMB19,350/tonne by reducing selling prices across the board by 10% each for FY09. We have left our gross margin and utilisation numbers unchanged for FY09 at 15.1% and 71.9% respectively. The changes in assumptions have led to our EPS estimates coming off by 8.2% and 7.9% for FY09 and FY10 respectively. Given the revised earnings, we have lowered our target price from S$0.235 to S$0.22, based on our DCF model. This is equivalent to 5x FY09 P/E. Maintain BUY.

China Fishery: Buy (DMG, 8 Apr)
Part of China Fishery's core business is in fishmeal, which accounted for 25% of revenue (US$116.8m) in FY08. Fishmeal is the best form of animal feed used for pigs because of its high protein content. Management have indicated to us that the most likely reason why livestock owners are not using proper animal feed to feed their pigs is because of high cost for animal feed. Average selling prices (ASP) for China Fishery's fishmeal in FY08 was US$890/tonne (RMB6,088/tonne).As the Chinese government continues to clean up the agriculture sector, we believe that the simplest and most effective solution would be for the government to provide subsidies to livestock owners. This will make fishmeal more affordable for livestock owners and will insure that owners will not use poisonous chemicals to give impression of high protein quality.
We maintain our price target at S$0.86 which is based on 3.9x FY09 P/E. We have given China Fishery a discount to the FSTC P/E of 4.8x because of its high gearing ratio of 0.92x. However, we believe that demand for fish, fishmeal, and fish oil will continue to strengthen which will mitigate any concerns of debt issues.

Keppel Land: Hold (OCBC Research, 7 Apr)
Property sale for KepLand is expected to remain slow as its unsold properties and landbank are catered more towards the high-end segment. Nevertheless, earnings in the property development segment will continue to be driven by the progressive profit recognition of sold projects in Singapore and overseas. Risk for KepLand is relatively higher than its peers, given its higher RNAV exposure ( about 38% of RNAV, inclusive of K-REIT) to the office sector in Singapore and limited scale of diversification in its operations. Our RNAV estimate of KepLand has now been raised to S$3.70 (previously S$3.67), due to the improvement in valuation of K-REIT and Evergro. To reflect its higher risk profile, we have pegged a 60% discount to our valuation of KepLand's development profits and investment properties and no discount has been ascribed to its listed investments. Our fair value of KepLand has now been raised to S$1.79. As upside potential looks limited now, we are downgrading KepLand to HOLD.

CapitaLand: Hold (OCBC Research, 7 Apr)
CapLand had just completed its rights issue last month and raised gross proceeds of S$1,835.5m. After taking into consideration of CapLand's subscription in CapitaMall Trust's Rights issue, CapLand now has a cash hoard of S$5,698m and its net gearing has fallen from 0.46x to 0.3x. Focus will now be on the deployment of the funds raised, which could be a potential catalyst to the re-rating of CapLand's shares. Its acquisition of Char Yong Garden (at S$1,788 psf ppr) and Farrer Court (at about S$780 psf ppr) could be at risk of write-down. Taking into consideration CapLand's effective stakes in these two acquisitions, its total exposure is about S$877m or only 6.3% of CapLand's book value. Our RNAV estimate of CapLand has now been raised to S$3.06 (previously S$3.00) to account for the increase in market valuation of its listed REITs and investments. We maintain our 30% discount on our valuation of CapLand’s development profits and investment properties and no discount for its listed investments. Our fair value of CapLand has now been raised to S$2.51. As upside potential looks limited now, we are downgrading CapLand to a HOLD.

Raffles Education Corporation: Buy (OCBC Research, 7 Apr)
We are forecasting Raffles to grow its bottomline at a of 28% clip in FY09F. Although long-time investors have been used to higher growth trajectories, we think that Raffles will be using this year to refine its operations in its schools instead of focusing on acquisitions. In our view, OUC is Raffles' prized asset with the land bank, possibility of setting up more private colleges, land sales and ready pool of current students to recruit into its own programs as holding tremendous potential. In a bid to preserve cash, we are forecasting that Raffles will reduce its dividends to 0.75 cents/quarter (vs 1 cent currently). We peg our valuation to a blended 12x FY09/10F PER, close to its lower trading band. Our fair value is S$0.60 (46% upside). Dividend yield for FY09F is attractive at ~8% despite our 0.75 cent/quarter assumptions. Sustained margins that trump our estimates and continued ability to grow student population beyond our forecasts will incentivise us to edge our valuation upwards.

Sembcorp Marine: Hold (OCBC Research, 7 Apr)
SembMarine has secured a rig order from UK-based SeaDragon Offshore Limited to complete and deliver a semi-submersible drilling unit with an option for an additional unit. The contract value is worth US$247.3m. With a firm five-year contract with Pemex, Mexico's national oil company, this is not a speculative build. We are optimistic about this contract for several reasons: 1) SeaDragon is a new customer and this is a new build; 2) SembMarine has received a deposit and a "favourable schedule" for regular payment; 3) SeaDragon has secured financing for this rig; 4) The equipment is provided by the rig owner, thus reducing SembMarine’s equipment supplier liabilities and 5) In performing this ultra deepwater build on a new design, SembMarine will have another build model experience under its wings. This win puts some ease into our estimates but SembMarine still has another S$1b worth of wins to catch up with our forecasts for FY09. We have bumped up our valuation peg to 11x FY09 PER (prev. 10x) as positive sentiments on oil and gas stocks have somewhat returned. While our fair value is now raised in tandem to S$2.02 (prev. S$1.85), we remain cautious on the 68% rise in share price since its bottom on 3 Mar 09. As such, we are downgrading our rating to HOLD, purely based on valuations.

Sembcorp Marine: Sell (Goldman Sachs, Apr 6)
SembMarine secured a US$247m semi-submersible drilling rig order from start-up UK-based SeaDragon Offshore. The rig hull, which has been built in a Russian shipyard, will be shipped to Sembcorp Marine’s shipyard by this month, and Sembcorp Marine will complete the topside rig construction by end-2010. The SeaDragon Offshore semi submersible rig had been chartered to Mexico's national oil company, Pemex for a period of five years, now delayed vs. the original target starting 1Q10. While the market may view the order win favorably, especially given that Sembcorp Marine had none in 1Q, we remain cautious. Little is known about the start-up SeaDragon, other than its rig contract win by Pemex, as well as another rig hull under construction. Bloomberg also reported in early Sep 08 about an aborted sale of SeaDragon to Indian-listed Great Offshore. We are concerned about order quality, as we see potentially higher order book risk with the start-up order win and believe that financing could be an issue. Retain Sell; our 12m P/B-based TP of S$1 implies 53% downside. Valuation appears rich at 2009E P/BV of 2.9X, vs. historical avg of 2X, trough of 1X, and est. forward 3-year earnings CAGR of -12%. We remain negative, as we see sharply lower new orders this year (forecast US$500m), given weaker industry fundamentals.

Yanlord: Neutral (JP Morgan, 7 Apr)
Yanlord has outperformed the China developers and FTSE STI Index by 13% and 40% year-to-date on the back of a much stronger contract sales. Our latest conversation with management indicated that the group has achieved almost RMB2bn contract sales so far, up 62% year-on-year (yoy) and represents 48% of our previous estimates. We have therefore increased our FY09 contract sales and earnings estimates up by 40% and 61% respectively. Yanlord's financial flexibility, especially its ability to repay the convertible bond in Feb 2010 should no longer be a concern in our view. Assuming a contract sales of RMB5.9bn this year, we estimate a rather flat gearing of 63% by end 2009. With upcoming launches in Tianjin and Nanjing in May and July, and continuous encouraging sales in Shanghai, contract sales momentum would still be on the uptrend in our view. We remain Neutral on Yanlord with Dec-09 price target of S$1.40/share (S$1.10/share previously), based on 40% discount to our RNAV estimates.

ComfortDelgro: Buy (DMG, 7 Apr)
The weakness in crude oil prices is a positive for ComfortDelgro's operating margin. Crude oil prices has dipped below US$50/bbl in 1Q09, sharply lower from the high of US$134/bbl in Jun 08. This will lower operating costs and widen ComfortDelgro’s operating margins. While bus ridership was flat for the first two months of 2009, rail ridership rose 8.4%. We have conservatively assumed flat 2009 bus ridership and a respectable 7.4% rail ridership growth. Management indicated that its Singapore fleet of 15 thousand taxis has a low idle rate of 1%. For the 300 odd taxis mothballed in the LTA yard (which will be exempt from special diesel taxes), none of them are ComfortDelgro taxis. Th group's Australian operations accounted for 7% turnover share in 2008. Growth in Australia is likely to come from acquisitions. ComfortDelgro will consider further acquisitions if the IRR is at least 7%. China accounted for 8% turnover share in 2008. ComfortDelgro currently operates in 12 Chinese cities, with Beijing taxi operations accounting for a sizeable 48% revenue share. ComfortDelgro runs 5100 taxis in Beijing. There is scope to expand the taxi operations in China via acquisitions of more taxi licences. ComfortDelgro sees China as attractive given its operating margins of 20%+ and ROA of 8-9%. Our S$1.78 target price is derived from sum-of-the-parts valuation. Share price catalysts include our forecast 32% recurring net profit increase for FY09, and an attractive FY09 dividend yield of 4.5% (based on a 55% payout ratio).

StarHub: Buy (DMG, 6 Apr)
As the operating company for the Next Generation National Broadband Network (NBN), StarHub will design, build and operate the active infrastructure for the broadband initiative. It will also provide wholesale broadband connectivity to other operating companies and retail service providers (RSPs). StarHub will set up a wholly-owned subsidiary Nucleus Connect to run the OpCo. The latter will have a separate Board, staff and office, as stipulated by IDA to prevent preferential pricing for affiliated RSPs. StarHub will be charging S$21 per month for 100 Mbps for residential line and S$75 per month for non-residential line. Currently, StarHub is offering a residential package with the same speed at S$87 per month. We estimate that the introduction of NBN will allow customers to enjoy savings of up to 30% from current levels. Nucleus Connect expects to spend approximately S$1b over the next 25 years. The deal comes with a government grant of S$250m from IDA, and StarHub expects the initial investment to be about S$100m. For this year, we expect StarHub to dish out its guided S$0.18 per share, which works out to a yield of 9%. We believe that the capex will be incremental and hence will not impact payouts in FY10 (which we assume to be maintained at FY09's level). StarHub remains our top pick in the telco space.

StarHub: Buy (OCBC Research, 6 Apr)
Starhub has won the bid to build and manage the OpCo for the NBN – the telco will invest S$100m to set up Nucleus Connect (NC) and plans to spend S$1b (includes S$250m government grant) on the active network over the 25-year period of the license. Based on our estimates, we do not believe that StarHub will have any issues funding the S$100m NC investment using its internal funds. In the near-term, we do not see any impact on its earnings – we expect meaningful OpCo contribution to come in from 2011 onwards. We have raised our FY10 estimates by less than 0.5%. We also do not expect any change in its capex spending this year although we can expect an increase of S$30m from 2010 onwards. Nevertheless, based on our DCF valuation model, the win is positive for StarHub and that bumps up our fair value from S$2.78 to S$2.88. Maintain BUY.

Golden Agri-Resources: Buy (OCBC Research, 3 Apr)
GAR, after the recent correction from a high of S$0.34 in early Feb, has been languishing around S$0.29-0.30, where we believe that the current share price should have captured most, if not all, of the negative news. Although there is still some uncertainty about the global economy, we believe that the worst may be over. In the recent run-up in the market, most plantation stocks have also been re-rated, as investors cautiously shift towards early-cycle recovery plays such as commodities. With the sector average is now hovering around 8.9x FY09F EPS, we have raised our valuation multiple from a very conservative 6x to 8x FY09F EPS, which in turn bumps up our fair value estimate from S$0.29 (adjusted for the recent bonus issue) to S$0.40. Given the 40% upside potential, we also raise our rating from Hold to BUY.

Olam International: Hold (OCBC Research, 2 Apr)
Olam stands out in the current recessionary environment for its resilient earnings growth profile. These positives have been well-recognized by investors, and the stock has surged by over 21% since we initiated coverage on the company with a BUY rating on 12 Mar 09. At current price levels, it is trading at a substantial premium to its peerm Noble Group as well as to the broad market. We continue to see merit in Olam's defensive earnings trait and ability to grow profits amid a recessionary environment, but are of the view that price valuation could have run ahead of its strong fundamentals. We raise our fair value estimate to S$1.51 (from S$1.37) on 11x FY10 PER (previously 10x) as we realign our valuations with the STI. Given the limited upside to our fair value estimate, we are downgrading Olam to HOLD. We will turn buyers again at lower entry levels of around S$1.37.

Healthcare: Neutral (DMG, 2 Apr)
Parkway: Sell \Target S$0.92
Raffles Medical: Neutral \Target S$0.74
Thomson Medical: Buy \Target S$0.55
The Singapore government has allowed Medisave to be used to pay for elective hospital treatment or day surgery in approved hospitals overseas. With the liberalization of the Medisave, there may be a shift in the demand for elective treatments and day surgeries, from the private hospitals to overseas hospitals, as patients look for cheaper alternatives. This may have some negative impact on private hospital revenues. We remain NEUTRAL on the healthcare sector. Our top BUY for the sector is Thomson Medical. Its niche in O&G makes it less vulnerable to the economic downturn. Parkway and Raffles Medical may be more affected by the government's latest policy as both offer elective treatments and day surgeries, on top of their range of curative treatments. Day surgery patients account for about 40% of Parkway's total patient admissions in FY08. While Raffles Medical does not release figures on the number of elective treatments it carries out, its focus has always been on core curative services rather than on elective treatments. The potential impact from the new policy may be mitigated through partnerships or tie ups with overseas hospitals. Parkway has regional presence through its international hospitals, whereas Raffles Medical's operations are largely in Singapore. We maintain NEUTRAL on Raffles Medical, and SELL on Parkway

China XLX: Neutral (DMG, 2 Apr)
The company's management have updated us with the current situation in China. These include expected slower demand from April onwards with domestic prices predicted to fall substantially due to weak demand. The Chinese government stated that they will leave the export duty unchanged at 110% from February to June. We believe the high 110% tax will restrict urea exports. Hence we have cut our earnings for FY09 by 21% to RMB199.1m, for China XLX due to several factors. (1) Lower urea selling prices – We have lowered our FY09 ASP by 5% to RMB1,800 because we believe that international prices of urea will continue to remain low in FY09 causing prices of Chinese urea to fall in tandem. As of 31 Mar 09 international price of urea was US$313/MT (RMB2,141/MT). (2) Higher cost of sales for compound fertiliser – We have increased our unit cost of compound fertiliser by 13% to RMB1,970/tonne due to higher cost for raw materials. Management have indicated to us that they purchased phosphorus at about RMB4,000/tonne at the end of Dec 08 and this will flow into P&L for FY09. Prices of phosphorus have recently fallen to RMB2,000/tonne. We have lowered our price target from S$0.47 (based on 8.5x FY09 P/E) to S$0.29 based on 6.5x FY09 P/E. We have still given China XLX a premium to the FSTC 4.4x FY09 P/E despite the negative developments for China XLX, because we believe that China’s agriculture sector is expected to outperform the other sectors in the midst of the current economic downturn.

Adampak Limited: Neutral (DMG, 1 Apr)
Adampak saw FY08 net profit dip 5.5% to US$6.7m although sales improved 16.2% to US$55.6m, which was below our forecasts of US$7.2m and US$64.7m respectively. Net margins were little changed as Adampak managed to keep its costs in check. While the recognition of Aident Corp's full 12-mth contributions had boosted Adampak's financials, utilisation rates at its factories were affected due to fluctuations in demand that was in turn attributed to the current economic slowdown. Management also cautioned that the macro picture could be even more challenging in 2009. Adampak continued to generate positive free cash flows due to effective management while its cash conversion cycle also improved from 116 to 100 days in FY08 despite the difficult market conditions. Net cash per share at S$0.046 also equates to a reasonable 31.7% of current market cap. Our main draw to Adampak points to the fact that it has managed to outperform its bigger peer. Brady Corp, a US-listed label producer which is at least 30 times larger than Adampak in terms of market cap which half-yearly financials experience was hit more severely despite its bigger size. We have lowered our earnings forecast in light of the deteriorating macro outlook. However, our conservative single-stage dividend discount model based on a dividend payout ratio of 35% and terminal growth rate of 1% remains. While we like the company for its strong fundamentals, our revised target price of S$0.165 (from S$0.18 previously) offers limited upside. Hence, the downgrade to Neutral.

GRP Ltd: Neutral (DMG, 1 Apr)
We revised our earnings estimates following a discussion with GRP's management and cut our topline by 5% for FY09 owing to slowing demand from all divisions amid the poor economic condition. Our operating margins are reduced by 290bp due to the deflationary cost environment. These would reduce our net profit estimates by 8% for FY09. We have made no changes to our FY10 estimates. As GRP imports a majority of equipment for its measuring instruments business division from Japan, we estimate that 50% of GRP's cost is subjected to exchange rate fluctuations. The yen has appreciated 21% against S$ since Jun 08. We note that GRP does not adopt any hedging of the net exposure on its products. GRP is currently debt-free and in a cash position of S$12.2m (or cash of 8 S¢/share). Operating cashflow for 1HFY09 was lower at S$1.3b compared to S$1.8b in 1HFY08. This was mainly due to increased inventory from S$8.4m in 1HFY08 to S$9.1m in 1HFY09 as well as longer payable turnover days (from 89 days in 1HFY08 to 93 days in 1HFY09). We maintain our valuation methodology for GRP based on 0.7x FY09 P/B, deriving a target price of S$0.13.

Z-OBEE Holdings: Hold (OCBC Research, 1 Apr)
Z-OBEE Holdings has announced that it had entered into a Sale and Purchase Agreement with an independent third party for the disposal of the entire interests in two of its wholly-owned subsidiaries for a total cash consideration of US$458,000. The disposal would not only save the group from recurring administrative costs, amortization charges/possible write-offs, but also enable it to use the proceeds for working capital. However, as these assets were valued at US$905,000 on its books, Z-OBEE expects to incur a loss of US$447,000 from the disposal. We have made several adjustments to our FY09 estimates to reflect the anticipated changes. For FY10, however, we are keeping our estimates intact as we await clearer direction on the China handset marketplace via its upcoming full-year results. Accordingly, our fair value remains unchanged at S$0.03, based on 2x FY10F EPS. As the stock appears to be fairly priced, we maintain our HOLD rating on Z-OBEE.