Stock Picks

CDL Hospitality Trusts: Sell (Citi Research, 31 July)
For 2Q09, distributable DPU was 2.07 cents, down 5% qtr-on-qtr (qoq) and 32% year-on-year (yoy) due to weaker operating performance. Including 1Q09 DPU of 2.18cents, 1H09 DPU was 4.25cents. However, due to the cut in payout ratio, actual 1H09 DPU was 3.86cents. The results appear ahead of both consensus and our estimate of 7cents and our estimates of 6 cents. Compared 2Q08, avg occupancy in 2Q09 for its portfolio of Singapore hotels fell from 87.1% to 75.5% while ARR fell 30.2% to S$178, translating to RevPar decline of 39.6% vs the decline of 27.7% in 1Q09. Novotel Clarke continues to be the best performer with revenue falling just 24% yoy and Grand Copthorne Waterfront the worst, falling 39%. Although overall occupancy for Singapore hotels improved to 76% in June from 69% in May, average room rate continues to fall to S$179 vs S$184 previously, thus industry wide RevPar rose 6% compared to 1% during the corresponding period last year. The MoM RevPar decline for May-09 was also lower at 4% vs 6% in 08. We have raised our FY09 to reflect the better than expected performance at Novotel and the lower than expected interest expense. We have also raised our estimates for FY10 and beyond given the economic outlook is better than what was previously expected. Our target price is raised to $0.80, from S$0.48 as a result. We, however, remain cautious on stock as it is already pricing in a V-shaped recovery in RevPar while we think it is ahead of its fundamentals.

Suntec REIT: Buy (Citi Research, 31 July)
For 2Q09, Suntec REIT delivered a DPU of 2.977cents. Including the 2.918 cents in 1Q09, 1H09 DPU totaled 5.8 cents, this is above the consensus estimate of 10 cents and our estimate of 10.75cents. Although revenue and NPI were relatively flat from a quarter ago, DPU was up marginally by 2 qoq. Occupancy at Suntec office fell to 92.5% from 96.3% a quarter ago but management indicated that it is closer to 93% now. Given the very weak office market, we have assumed a conservative average occupancy rate of 92% for FY09. Committed retail passing rent at Suntec City Mall was down marginally from S$11.05psf to S$10.98psf and committed overall occupancy for the retail portfolio also declined marginally to 98.1% from 98.8%. Office leases were secured at an average $8.24psf/month for the quarter. Management indicated that lease enquiries had picked up slightly. Although asking rental rates are still falling, the rate of decline has moderated. We upgrade our DPU for FY09 by 6% and that of FY10 by 9% on the better-than-expected performance particularly the retail segment. Hence we upgrade our target price to S$1.13 (from S$0.97). Including the 12mth forward DPU of 11.4cents, we estimate Suntec REIT is worth at least S$1.24. Given the yield of 10% Suntec REIT appears relatively cheap. Buy maintained.

Nera Telecommunications: Buy (DMG, 31 July)
As the various mobile network operators (Globe Telecom, Smart Telecom, Celcom, etc) in their respective countries continue to expand their network infrastructures, management believes that a double-digit growth rate can be sustained within the transmission sub-segment as these operators would not want to lose market share to their competitors. Furthermore, we believe that some of the project delays that took place in 2H08 would be fulfilled in the current year as these operators progressively increase their capex due to the recovering economy. The Service Provider market segment is the most attractive part of the Infocomm business as the various telcos ride on the growth in broadband, Internet and other new services. NeraTel is poised to benefit from this trend as it can provide routers, switches and other related equipment to assist these telcos to lower their capital and operating expenditures. We have increased our earnings estimates due to the improving outlook while the possibility of further project delays also seem to be ebbing as the global economy continues to recover. Assuming that NeraTel trades up to the industry average of 9.9x in 2009, we arrive at a target price of S$0.39 after taking into account NeraTel's net cash per share of S$0.086. Dividend yield of 10% is also highly attractive and should be sustainable given its lower capex requirements and cash flow generating attributes. Upgrade to BUY.

Singapore Post: Buy (OCBC Research, 31 July)
SingPost has reported a 0.7% year-on-year (yoy) rise in revenue to S$121.8m and a 0.1% YoY fall in net profit to S$39.4m for 1Q10, accounting for 25% and 27% of our full-year estimates respectively. Mail revenue was 7.2% lower with a decline in mail volumes while logistics revenue rose due to a consolidation with G3 Worldwide Aspac (G3AP) in May. The group undertook two M&A deals in 1Q09, and it is good to know that SingPost has taken the opportunity to invest during a time when many other cash-strapped companies can only stand by as onlookers. There will be a terminal dues hike in 2010 which will impact from a cost standpoint but there are strategies in place to mitigate the increase in costs. The group will be paying an interim dividend of S$0.0125/share, consistent with its dividend policy. We have raised our fair value estimate for SingPost to S$0.97 as we adopt a lower cost of equity (8.4% compared to 8.8% previously) following reduced risk aversion in the market. Maintain BUY.

Suntec REIT: Hold (OCBC Research, 31 July)
Suntec REIT reported 2Q distributable income of S$47.7m, up 2.9% qtr-on-qtr (qoq). Gross revenue ex-One Raffles Quay slipped 0.6% qoq. The results exceeded our expectations with out-performance both on the revenue and interest expense (average all-in cost of 2.8% in 2Q) fronts. Suntec will pay out 2.977 S cents for the quarter, up 2% qoq. The manager proclaimed that it has delivered 18 straight quarters of DPU growth right since listing. Occupancy at Suntec City Office Towers fell from 96.3% as of March-end to 92.5% as of June-end as two tenants redelivered part of previously-leased space. Average achieved rents of S$8.24 per square foot per month are 45% below the peak S$15 psf pm guidance given for rents renewed a year ago. The manager did not care to express a view on rents beyond 2009 saying that the "crystal ball is murky". We tend to concur here – there are still a lot of unknowns about the shape and path of the overall economic recovery and how this flows down to the demand side of the office equation. If the market continues to be sickly, Suntec's 'under-rented' cushion will diminish as leases fixed close to the peak of the cycle expire. Suntec's retail portfolio was more stable with 98.1% of Suntec City Mall occupied versus 98.6% three months ago. We note average passing rents slipped QoQ at Suntec City and Chijmes, but performed better than expected. Suntec is gearing up for the Circle Line opening next year and revealed plans to improve connectivity and create retail units linking the mall to Promenade MRT station. Expected capex spend is minimal. We have bumped up our estimates for Suntec's retail portfolio through adjustments on vacancy and rent decline assumptions as well as cap rates used. We continue to like the positioning and potential for Suntec's assets. We estimate that the current unit price implies a S$1200-1250 psf value for Suntec City. We see headwinds to future DPU growth however, especially stemming from the office assets. Secondary challenges to DPU stability include increased interest expense on refinanced funds and the enlarged unit base as deferred units kick in biannually. We have adjusted our earnings estimates to reflect our revised retail expectations and also to incorporate 1H results. 2H09F distributable income constitutes 45.5% of our full-year estimate. Our revised fair value estimate is S$1.00.

Suntec REIT: Buy (DMG, 31 July)
Suntec has reported a 6.6% year-on-year (yoy) increase (+2% qtr-on-qtr) in 2Q09 DPU to 2.98¢. Annualised DPU came in at 11.9¢, 20% above our and consensus estimates. Revenue was up 8.9% yoy underpinned by higher rents achieved for Suntec City and Park Mall properties. For 1H09, Suntec renewed and signed 375,000 sqft of office space. With this, the remaining office leases expiring in FY09 amounts to approximately 84,000 sq ft or 4.5% of the total office NLA. Office occupancy fell to 94.8% from 97.4% following the return of spaces by UBS and IDA. With retail contributing to 53% of overall income, we expect earnings prospects to remain favourable compared to CCT. We believe the spectre of higher retail footfall at Suntec City is likely to transpire when the Circle Line becomes fully operational in 2010. The opening of Esplanade and Promenade stations will materially enhance Suntec's traffic footfall, a case that is currently seen in ION Orchard mall, given its connectivity with Orchard MRT. The stock is still undervalued as current share levels appear to still price-in recapitalisation expectations, a case that is unlikely to transpire, in our view. At current prices, Suntec offers investors an attractive dividend yield of 8.2% for FY10. Stock still undervalued at current levels. Trade stock to S$1.24 (~7.1% yield). Suntec will trade ex-2Q09 distribution on 3 Aug 2009. Price target raised to S$1.24 (S$0.80 previously) to reflect a lower of cost-of-equity assumption of 9.6% and a higher terminal growth rate of 3%.

Suntec REIT: Hold (Phillip Securities, 31 July)
Suntec REIT reported gross revenue for 2QFY09 of $64.5 million (+8.9% year-on-year, flat qtr-on-qtr), net property income was $48.7 million(+6.2% y-o-y, flat q-o-q). Distributable income was $47.7 million(+13.5% y-o-y, +2.9% q-o-q). DPU for the quarter was 2.977 cents (+6.3% y-o-y, +2.0% q-o-q).Office portfolio reversionary rent continues to show a downward trend. It has fallen 38.9% from a year ago at $13.50 to 8.24. Occupancy of the office portfolio has also been sliding down from 1Q08 at 99.8% to 94.8% in 2Q09. These reflect the office sector is still reeling from the effects of recession. The retail portfolio is more resilient with occupancy maintaining above 98%. The office portfolio accounts for 47% of total revenue while the retail portfolio contributes 53%. As previously announced, Suntec has no near term refinancing concern. It has successfully secure $825 million of term loan in April 2009. The next loan maturity is in 2011 with loan amount of $532.5 million. The current gearing is 34%.We believe that demand for office space will take time to pick up following the nation's exit from recession in the last quarter. We make no changes to our assumptions and have a FY09F DPU forecast of 10.05 cents which translates to a dividend yield of 9.5%. Fair value remains unchanged at $0.94 and retain our Hold recommendation.

Fraser Commercial Trust: Sell (Phillip Securities, 31 July)
FCOT reported results for 2Q09. FCOT recorded gross revenue of $22.7 million (-17.9% year-on-year, -5.4% qtr-on-qtr), net property income of $17.7 million (-18.0% yoy, -5.2% qoq) and distributable income of $5.6 million (-67.6% yoy, +2.8% qoq). DPU for the quarter is 0.73 cents (-69.6% yoy, flat qoq). FCOT will be paying out a 1H09 DPU of 1.44 cents. Revenue in 2Q09 came off 17.9% from a year ago. We can also observe the trend of revenue. It can be observed that much of the decline came from the Australian properties. From 1Q08, Australia contribution dropped 24.7%, Singapore contribution dropped 17.8% and Japan contribution dropped 14.5%. FCOT will be recapitalizing its balance sheet via: (1) rights issue to raise gross proceeds of $213.9 million (2) acquisition of Alexandra Technopark for $342.5 million (3) Issuance of Convertible Perpetual Preferred Units (CPPU) fAfter the recapitalization, gearing will be reduced to 38.5%. NAV per share is diluted to approximately $0.26. $179 million from the rights issue will be used to repay existing debt. We expect to see a stabilization of revenue from the portfolio. The addition of Alexandra Technopark, which is under a master lease, will provide a stable rental income to FCOT. Together will China Square Central, gross rental income under master leases is approximately 38%. We revise our assumptions to account for the recapitalizationand also make changes to our revenue forecasts. We forecast FY09F DPU to be 2.3 cents and following full dilution in FY10F, DPU falls to 1.2 cents. Our post-rights fair value is $0.125. At the previous day closing price of $0.195, we think market has not factor in the dilution due to the rights units. Maintain sell recommendation.

CapitaLand: Buy (DMG, 31 July)
2Q09 core PATMI marginally under expectations, but maintain BUY on China factor. CapLand's 2Q09 results were mainly dragged by S$280.9m of revaluations and impairments. Although 1H09 core PATMI is marginally under our expectations, we are leaving our estimates unchanged due to expected improved performance across all segments in 2H09. Looking forward, residential and retail segments in China and Singapore should continue to drive CapLand's earnings. Recent successful capital raising activities and asset writedowns have bolstered the balance sheets of all listed subsidiaries, thus removing any overhang of further capital input from CapLand. Management's optimal gearing range of 0.50 – 0.75x (0.43x currently) implies further debt capacity for land acquisitions, on top of S$4.2b cash. Incorporating updated prices for its listed subsidiaries, our target price inches up to S$4.37 (previously S$4.22), pegged at 20% premium to end-FY10 RNAV. Maintain BUY.

CapitaLand: Hold (OCBC Research, 31 July)
CapLand reported its 2Q09 results and PATMI plunged into the red with a loss of S$156.9m. Net revaluations and impairment charges of S$280.9m were recognized in 2Q09. Excluding fair value losses, PATMI would have increased by 163% QoQ to S$124m. 1H09 core PATMI of S$171m met ~35.2% of our revised FY09 PATMI target of S$485.8m but we remain confident that CapLand will be able to meet our full year expectation in anticipation of a better 2H09 performance. We remain optimistic on CapLand's China operations and have now raised our average selling price assumptions for its China projects by 10%. Our fair value has now been raised to S$3.73, pegging to our RNAV estimate. Current macro-economic environment still warrants some cautiousness and we caution against over-pricing the optimism and prefer to accumulate at more attractive valuations. We maintain our HOLD rating on CapLand and will turn buyers at S$3.20-S$3.30.

China XLX Fertiliser: Neutral (DMG, 31 July)
China XLX's third plant commenced operation in Apr 09. Annual production capacities of urea and methanol will increase by 400,000 MT to 1.25m MT and 50,000 MT to 200,000 MT respectively upon full operation of the plant. Also, 600,000 MT of compound fertilizer can be produced with the additional compound production facility in the second plant. As the third plant has better technology then the first two, its unit production cost is expected to be lower than the first two plants. Compound fertiliser and urea prices have been on a decline, and margins are therefore expected to be narrowed. We also suspect that the startup of the third plant may lead to higher cost incurred in 2Q09. As a reflection of the industry trend, Sinofert, a major fertiliser distributor listed in Hong Kong, has issued a profit warning on 16 Jul 09 for their 2Q09 results. We expect urea prices to remain low due to (1) 2009 China national urea production to increase to 60-62m metric tons from 2008's 55m MT, more than the anticipated increase in consumption. (2) The 110% urea export tax for peak season of Sep to Oct 09, which was announced by the Chinese government on 22 Jun 09, will deter export and could lead to oversupply of between 10-20%. However, expectations of dual listing could support share price. We maintain our NEUTRAL call on China XLX while upgrading our target price from S$0.345 to S$0.49. Our target price is based on 11.2x FY09 P/E, a 9% premium to the FTSE FY09 P/E of 10.3x, as we factor in increased earnings for FY10 from the third plant.

Mercator Lines: Hold (Phillip Securities, 31 July)
Mercator has reported 1Q FY2009 revenue of US$35.5m (-31% year-on-year) and net profit of US$10.0m (-54%yoy). Revenue dropped because of the decrease in spot market day rates and the renewal of long term contracts at lower rates. Net profit fell due to lower revenue as well as higher voyage and depreciation expenses. The increase in expenses was the result of the acquisition of three vessels. Due to the downturn in the shipping industry, we expect Mercator to report a much lower profit of US$45.4m in FY2010F. As the global economy is expected to recover in 2010, we anticipate that Mercator will report higher profit of US$48.1m in FY2011F and FY2012F. We maintain our hold recommendation as the share price has risen rapidly in the recent rally and upside may be limited. However, we raise the target price of Mercator from S$0.16 to S$0.42, which works out to 1.0 time book value for FY2010F. The change is an increase from our earlier valuation of 0.4 time book value. This is because Mercator is able to report a profit despite the difficulties faced by shipping companies. In fact, it benefits from having up to 70 percent of its revenue from long term fixed rate contracts of 11 months to five years.

Wilmar International: Buy (UOB Kay Hian, 29 July)
Wilmar is a clear leader in two segments – soybean crushing and edible oil – in China. It enjoys a higher but still sustainable margin than its competitors due to three factors: a) proximity to retailers and customers and hence transport cost savings, b) control over logistics to minimize leakages to third parties and c) business integration to maximise profit from its extensive marketing network. All these factors are likely to lead to cost savings of at least US$40/tonne for its downstream processing businesses. The unlocking of value from the listing of the China operations in Hong Kong could bring in a special dividend of S$0.24 per share, assuming a 40% payout from proceeds of the initial public offering. A listing in Hong Kong would pave the way for a China listing, which would further open up China's domestic market for Wilmar. We have raised our earnings forecasts for 2009-11 by an average of 33% to factor in higher sales volume and better margins for its soybean crushing and consumer pack edible oil segments in China. We now expect EPS of 23.4 US cents, 29.9 US cents and 32.9 US cents in 2009, 2010 and 2011 respectively. Maintain BUY with a target price of S$6.50 based on 15x 2010 PE and in line with Malaysia's big-cap plantation stocks.

CSC Holdings: Buy (DMG, 29 July)
CSC Holdings, Singapore's largest piling contractor, have seen better days. Its order book currently stands at S$110m, which appears to be anaemic compared to a record S$448m during the mega infrastructure boom in 2007. But things seem to be turning around, as the taps for government contracts are being turned on. We estimate orders to more than double by FY11, which should set the stage for a re-rating of the stock. We expect CSC to bag some S$213.5m in piling contracts for at least three major projects, namely the MRT Downtown Line II, Marina Coastal Expressway and the Singapore Sports Hub by FY11. In addition to the public projects, there are many residential projects slated to be offered in the coming two years, a result of a massive number of en-bloc sales done in 2007. Many projects were delayed in 2008 due to the tepid economy, but the recent buying frenzy has prompted developers to launch their projects, opening up opportunities for CSC. We believe that CSC has a better shot at winning the bids, given that it is the region's largest foundation player with a fleet size that is twice that of its nearest competitor in Singapore. It is also the only domestic player to offer the complete range of piling solutions. These give it the advantage of being able to target projects that are more complex, which typically commands higher margins. We believe that the inflow of the government's mega projects would create an upswing in earnings momentum for CSC from 2010. Thus, we have ascribed a P/E of 12x FY11 earnings, the level it was trading at in 2005 just before its earning Moreover, its valuation, at 9.1x FY10 P/E, is attractive compared to its historical average of 16.6x. Initiate with BUY.

Noble Group: Buy (OCBC Research, 29 July)
Global economic trends have improved in recent months and so has the outlook for Noble with the worst of the recession appears to be behind us. Credit markets have also started to thaw, helping to boost global trade flows. Noble, being a global commodities supply chain manager, will be a key beneficiary of the economic recovery. Its Metals and Energy divisions could surprise on the upside given the resurgence of demand and prices in 2Q09 Metals and energy typically display high sensitivity to real economic conditions, and we expect these segments to lead the economic recovery. Going forward, robust demand from emerging economies such as China should continue to fuel demand for commodities. We have raised our FY09 and FY10 estimates marginally to reflect earnings accretion from Australia-listed Gloucester Coal which Noble has a 87.7% stake. This acquisition not only boosts the group's earnings, but more importantly, secures Noble's strategic long term access to coal supplies. The acquisition is in line with Noble's strategy of increasing its assets, forms a good fit with the group's existing product portfolio, and should be easily digestible as we estimate that the acquisition cost formed no more than 2.5% of Noble's 1Q09 cash holdings. Noble has consistently maintained a healthy financial position and managed to grow its volumes despite challenging operating conditions in 1Q09. We rollover our valuations to blended FY09/10 earnings and raise our peg to 13x (from 10x), similar to levels seen in the 2003 recovery, bringing our fair value estimate to S$2.26 (previously S$1.62). We upgrade Noble to Buy on improved economic outlook. While we remain mindful of the risk of a double dip in commodities demand, the expected economic recovery in 2010 provides support for Noble's medium term performance.

Oceanus Group: Buy (OCBC Research, 29 July)
Oceanus has reported its 1H09 results with a 23.7% year-on-year (yoy) decline in sales to RMB138.5m. Net profit, however, recorded a nine-fold surge to RMB187.4m in the absence of one-off expenses and thanks to a larger abalone population. The group recorded a 43.8% yoy fall in 2Q09 sales as a result of lower selling prices brought about by the recession. This was exacerbated by leaner volumes as it set aside a portion of its livestock for future processing. While 2Q09 results were uninspiring, management remains optimistic on its outlook, citing a bottoming out of abalone prices and firm demand for abalone. Its downstream integration remains intact with the expansion of its Ah Yat Tian Xia restaurants and the completion of its new processing plant. Being in the expansion phase of its business life cycle, Oceanus may have to endure a period of high capital intensity and trial-and-error before its envisioned business model gains traction. Nevertheless, its long-term growth plans remain intact. As such, we maintain our BUY rating on the stock. Fair value remains at S$0.40.

Ezra: Buy (CLSA, 28 July)
Ezra's new growth strategy is focused on the drilling market instead of just servicing the exploration market. This is the market where oil majors are spending their additional capex dollar. Ezra plans to grow through the addition of highly specialized vessels that perform installation and maintenance work for drilling projects in the deepwater sub sea segment. While the long term chartering of its current fleet of 25 AHTS vessels, which support exploration rigs, will provide a stable earnings source. By adding new specialized equipment such as drilling towers, ROVs and moon pools to assets that it already has under construction and by providing a highly qualified team of engineers, Ezra is able to bid for contracts in the deepwater sub sea segment that could obtain significantly higher charter rates than if the assets were to be used to in the exploration segment. For example, after converting a pipe-laying barge into a DP3 sub sea construction vessel, Ezra could potentially obtain charter rates of US$250-300,000/day instead of the US$130,000 we had factored in. Our FY11 EPS estimate rose by 11% after taking conservative estimates on the new assets, but could rise by another 20% in a blue-sky scenario. Based on our new earnings estimates, the stock is cheap 7.7 times FY10 PE. We value the stock at S$2.10, which implies a possible 54% upside.

SATS: Buy (Kim Eng, 28 July)
With the full consolidation of SFI, revenue jumped 44% to $352m while net profit rose 17% YoY to $40.4m, in-line with our forecasts. Annualised, this points to $1.4b in full year revenue and $162m in net profit. We are forecasting full year revenue of $1.47b and profit of $170m, which captures $6.5m in annual cost savings from the integration of SFI. Non-aviation accounted for 40% of revenue (up from 2% in 1Q09) as aviation revenue fell 12% year-on-year (yoy). SFI accounted for 38% of sales and an estimated 21% of net profit. Excluding SFI and adjusted for exceptional items, we estimate profits fell 33% yoy to $25-26m. In this aspect, the acquisition has allowed SATS to more than offset the impact of the aviation slump. Although sales fell 20% yoy, we estimate SFI's profits jumped 60% to $8.6m, on the closure of loss-making businesses and market share gains. SATS revealed several new contracts pertaining to the food business, namely the supply of employee and patient meals to Altira Macau casino (formerly Crown Macau) and St Andrew’s Hospital. It also clinched an exclusive contract to launder bed sheets for Resorts World Sentosa. Management is pursuing further deals with several other Macau casinos as well as the two Singapore casinos which could be larger in value. We up our FY10 forecast by 2% to account for the new contracts and also raise our target price slightly to $2.55 (from $2.51 previously). We reckon there will be further upside from additional contract flows, such as the supply of employee meals to the Singapore casinos, which we have not yet factored in.

Raffles Medical Group: Buy (Kim Eng, 28 July)
RMG ha posted a solid set of results for 2Q09, with revenue increasing 6.5% year-on-year (yoy) to a record $53.9m and net profit increasing 13.8% yoy to $8.8m. Revenue from Healthcare Services (clinics) and Hospital Services grew 12.3% and 4.8% respectively during this period. For its hospital, a 7% decline in local patients was offset by a 13% increase in foreign patients. While the recession could have played a role in this decline, management believes the H1N1 pandemic was the major reason, noting that the public hospitals are seeing the same trend of people staying away from hospitals if possible. Management continues to keep a tight lid on operating efficiencies. Staff cost, the major cost component, continues its steady decline from 49% of revenue in FY08 to 48% in 1H09, resulting in increased profits. 1H09 net profit of $16.6m now forms 45% of our FY09 forecast. With the effects of H1N1 now gradually subsiding, we expect stronger performance in 2H09. With the full ownership of its Raffles Hospital since 2007, RMG has been generating stronger cash flow than ever. With a net cash position of $27.5m, management continues to be on a lookout for opportunities. With this stellar set of results achieved against the backdrop of the global recession and the H1N1 pandemic, it is another testament to RMG's brand of consistent incremental growth. We keep our forecasts intact and expect RMG to comfortably surpass the FY09 consensus NP of $33.5m. Our target price of $1.38 implies 20 times FY09 estimated earnings.

Biosensors International Group: Buy (OCBC Research, 28 July)
Biosensors has posted results that beat our expectations. It posted 1Q10 revenue of US$23.8m (+6% qtr-on-qtr, -66% year-on-year) and net profit of US$4.2m (about 10x qoq growth). Stripping out the one-time US$41m licensing fee in 1Q09, gross profit would have grown about 70% yoy. This quarter is especially pivotal as the group's performance was primarily driven by its core business, not through exceptional items. We continue to be encouraged by its topline growth, implying market share acquisition and growing acceptance and product entrenchment within the medical community. Biosensor's 50%-owned Chinese joint venture also outperformed our expectations with strong market penetration of its products. We continue to view JWMS as a key component of the Biosensors' long-term China strategy. Competitors are also starting on the same technology track as Biosensors, creating a positive clinical marketing wake effect for Biosensors to boost future sales. We have retained our estimates and prefer to see sustainability of JWMS performance and a more predictable pattern in licensee royalties prior to refining forecasts. We are maintaining our medtech discounted model with a fair value of S$0.74.

SIA Engineering Co: Hold (OCBC Research, 28 July)
SIAEC posted 1QFY10 revenue of S$244.2m (-2% year-on-year, -1% qtr-on-qtr) and net profit of S$45.1m (-23% yoy, -31% qoq). The quarter's topline and bottomline fulfilled 27% and 21% of our FY10F forecasts, respectively. SIAEC's cost cutting measures with its staff will take effect from Jul 09 onwards, saving the group about S$1m/month. SIAEC's associates and JVs, which confer a significant portion of the group's earnings, performed poorly this quarter with a 26% QoQ drop in contribution. Its associates and JVs earn about 70% outside of the SIA group, implying that MRO business deterioration is broad-based and regional. With SIA scaling back flights, SIAEC will also see less Airframe Maintenance jobs. We are iterating that recovery to previous year's record performance could occur only in 2012 or 2011 if demand experiences a V-shaped recovery. Maintain HOLD rating and a fair value of S$2.95. Accumulating around S$2.60 translates to 5.6% FY10F yield.

SATS: Neutral (DMG, 28 July)
SAT carded a 1QFY10 earnings growth of 17.1% year-on-year (yoy) to S$40.4m, which was in line with our estimates. The improved earnings was largely due to the three-month contribution from SFI's business. Aviation-related revenue declined 12% yoy during the quarter, in line with the slower aviation industry, but seems to have bottomed out as SATS handled 6.4% more flights in 1Q10, compared with 1Q09 though the increased number of passenger flights handled is not enough to offset the declines in cargo handled. With the S$132.9m revenue contribution from SFI, overall Group revenue jumped 44% to S$351.7m. As expected, operating margins were lower (1QFY10: 12.4% vs 1QFY09: 15.7%), due to the lower margin non-aviation-related food business (SFI). While SATS managed to realise some cost synergies from its acquisition (over S$2.6m to date), the revenue synergies may take a while to materialise. We are maintaining our earnings forecast of S$169.2m for FY10 (+15.3% YoY) and target price of S$2.50, based on our DCF valuation.

Raffles Medical Group: Neutral (DMG, 28 July)
Raffles Medical achieved record revenue of S$53.9m (+6.5% year-on-year; +5.7% qtr-on-qtr) in 2Q09, and net profit of S$8.8m (+13.8% YoY; +12.7% QoQ). Although operating costs rose due to H1N1-related costs, its operating margin for the quarter was higher, at 20.4%. Despite fewer visitor arrivals in Singapore, Raffles Medical saw 13% yoy more foreign patients in 2Q09, than 2Q08, reflecting Raffles Medical's success in establishing its brand name overseas. An interim dividend of 1¢ per share was declared. Balance sheet remains strong, with a net cash position of S$27.5m (5.3 S¢ per share) at end 2Q09. Its strong cash hoard has allowed Raffles Medical to remain competitive in the weaker economic climate, which also allowed it to continue to grow. Raffles Medical intends to continue to look out for expansion opportunities, either to grow its network of clinics, or its hospital segment. Besides maintaining growth in top line, Raffles Medical also managed to maintain operational efficiency. Factoring in improved operating efficiency going forward, we raise our earnings estimates by 10% and 17% respectively for FY09 and FY10. Hence, we arrive at a 12-month target price of S$1.06 from S$0.74 previously), based on 14.6x blended FY09/10 P/E (past year's average).

MAP Technology: Sell (DMG, 28 July)
MAP saw 2Q09 revenue drop 3% to US$38.9m while it registered losses of US$21.5m as compared to net earnings of US$1.4m in 2Q08. While the provision for doubtful debts owed by Fujilink (of no less than US$11m) was a factor, other expenses also ballooned by US$16m due to write-offs, allowances and impairment charges. MAP's share price may face further selling pressure from Jurong Tech as the latter – which is currently under judicial management – has already commenced disposal of MAP's shares since last week when it offloaded a 2.3% stake. Additionally, the 4-for-1 rights issue at S$0.01 apiece which represents a hefty 92% discount to its last traded price of S$0.13 is also expected to be a dampener to its share price as existing shareholders whom do not wish to subscribe to the rights may opt to dispose of their shareholdings. MAP has guided that it would record losses for the whole of FY09 and that 2H09 would remain challenging. Given the deteriorating outlook, we would thus prefer exposure to the other hard disk drive (HDD) component manufacturers (Armstrong, Adampak) rather than MAP as these companies under our coverage are expected to experience sequential growth and a pick-up in margins. Our SELL recommendation on MAP therefore remains and we are dropping coverage on this counter.

Pacific Shipping Trust: Buy (UOB Kay Hian, 27July)
PST reported 2Q09 net profit of US$6.7m (+0.8% qtr-on-qtr, -20.2% year-on-year). Excluding losses from interest rate swaps, earnings would have been US$8.7m (+0.5% qoq; +79.6% yoy). PST declared a 2Q09 DPU of 0.99 US cents, similar to 1Q09 DPU of 0.98 US cents, but lower than 2Q08's 1.09 US cents. The trust is reducing payout ratio from 90% of distributable cash flow to not less than 70% for 3Q09. The cash retained will be applied towards funding of acquisition of one or two mid-sized chemical tankers and/or offshore support vessels at US$20m-30m each in the next six to 18 months. While no guidance is given on whether the distribution policy will be maintained at 70% going forward, we do not rule out the possibility that the trust may further reduce payout ratio should the need arise to fund acquisitions. That said, we view this positively as ship prices have fallen sharply from their peaks in 2008. Accretive acquisitions may drive a re-rating of the stock. In view of the change in distribution policy from 90% to 70%, we reduce our DPU forecasts for 2009-11 by 5-22% PST has no loan-to-value (LTV) covenants in its loan documents. All loans are amortised. Its current net gearing stands at 89%, the lowest among the shipping trusts. We forecast 2009 and 2010 dividend yield of 12.7% and 10.0% respectively after adjusting for the reduced distribution payout ratio. Maintain BUY with target price of US$0.37 based on 2010 P/B of 0.9x, higher than the P/B ascribed to the other two shipping trusts given PST’s stronger financial position.

Chartered Semiconductor: Sell (OCBC Research, 27 July)
Chartered Semiconductor: has reported a set of 2Q09 results that exceeded our expectations and its own guidance. As the group progresses into 3Q09, it is also seeing healthy sequential growth in its business, driven mainly by the communications sector and computer sector to a lesser extent. As such, it is expecting its 3Q09 revenue to hit US$382-394m (up 9.5-12.9% QoQ) and its net loss to narrow to US$17-27m. While it is without doubt that Chartered has been making significant improvements in its business operations and financial position, we believe that the group may only reach its breakeven utilization of 75% in 2Q10, as opposed to 4Q09 as expected by management. At current price, the stock also seems to run ahead of its fundamentals. Hence, we keep our SELL rating on Chartered, but revise our fair value upwards from S$1.40 to S$1.46 (0.6x FY09F NTA) on better earnings forecasts.

Cambridge Industrial Trust: Hold (Phillip Securities, 27 July)
CIT has recorded gross revenue of $18.5 million (+2.8% year-on-year; flat qtr-on-qtr), net property income of $16 million (+0.9% yoy, flat qoq) and distributable income of $10.7 million (-13.8% yoy, +0.04% qoq). DPU for 2Q09 is 1.345 cents. Occupancy rate improves slightly from 99.2% in 1Q09 to 99.5% in 2Q09. Distributable income has however decreased since 1Q08 to 1Q09 before improving slightly in 2Q09. The main reason for the decrease is the progressively higher interest cost CIT paid on its loans. CIT has maintained a gross margin of approximately 0.9x. Distributable income margin dropped from 0.7 in 1Q08 to the 0.6x level. We expect it to maintain at this level as interest payment should not varies much for the remaining term of loan. Property portfolio was revalued downwards by 9% from $967.7 million to $880.3 million. Correspondingly, gearing rises from 39.8% to 43.8%. CIT single loan maturity of $390 million is due in 2012. A point of concern is that further portfolio valuation drop may starts to breach bank covenants. CIT needs to maintain a LTV ratio below 0.55 and interest cover above 2.2x. Currently CIT has a LTV of 0.46 and interest cover of 3.2x. We estimate portfolio value will have to fall a further 17% before the LTV covenant is breached. Our revenue forecasts have assumed a portfolio vacancy of 3%. Portfolio performance in the last two quarters was lower than our assumptions. We thus revise our vacancy assumption to 1%, still slightly conservative compared to CIT actual occupancy rate. We have also revised down the management fee following the downward revaluation of the portfolio. We raise our DPU forecast from 4.73 cents to 4.93 cents. Fair value is raised marginally from $0.44 to $0.45. In view of the recent run-up in price, we lower our rating from Buy to Hold.

Frasers Centrepoint Trust: Hold (OCBC Research, 27 July)
FCT has posted S$21.2m in gross revenue, up 1.8% year-on-year (yoy) and 0.5% qtr-on-qtr (qoq). The REIT will distribute S$12.1m to unitholders, up 4.1% yoy and 4.4% yoy. Both yoy and qoq improvements in distributions are due to a 100% payout this quarter versus a 95% payout in 2Q09 and 3Q08. Excluding the payout difference, distributions would have slipped. Results beat our expectations. Causeway Point (CP) and Anchorpoint (AP) registered a 7% and 7.7% qoq drop in net property income (NPI) respectively in 3Q09. Margins fell as revenue recorded smaller qoq changes of -3% and 0.2% at the two properties. AP also saw occupancy fall from 99.5% three months ago to 93% though the manager did say committed occupancy stands at 97.2% there as at June. The erosion in NPI at these two properties was offset by gains at Northpoint, where asset enhancement (AEI) work is finally drawing to a close. The combination of rising occupancy and higher post-AEI rents led to a 35% qoq increase in NPI at the mall. Consequently, NPI was up 0.1% for the overall portfolio. 97% of NP's NLA has already been leased or is in advanced stages of negotiations with tenants. The manager is projecting a 20% increase in average rents at the mall from S$11 per square foot per month to S$13.20 psf pm. This should flow through to 4Q09 results. Meanwhile, FCT issued S$75m 3-year fixed rate notes in June, which it will use to repay short-term debts. Gearing is expected to consequently fall to below 30%. AEI plans at CP, which were postponed, could potentially be resurrected now that the macro picture and credit market look to be stabilizing. Meanwhile, the manager said two malls in the pipeline were "ready for acquisition". Financing and pricing of any acquisition is still a question mark, however, in our opinion. We have increased our earnings estimates to reflect the positive rental reversions achieved in 9M09 as well as the post-AEI support from NP. We still expect declines in achieved rent in FY10, however. Our new fair value estimate is S$0.95 (prev: S$0.75) and we are estimating yields of 7.2% and 7.7% in FY09 and FY10. Maintain Hold.

CapitaMall Trust: Hold ( Kim Eng, 27, July) Target price: $1.530 (maintained)
CMT has posted a 2Q09 gross revenue of $138.6m, increasing 10.4% year-on-year (yoy), 3.1% qtr-on-qtr (qoq). Net property income grew by 12.2% yoy, 1.5% qoq to $93.8m in the quarter, in-line with expectations. DPU for 2Q09 is 2.13 cents, bringing 1H09 DPU to 4.1 cents. CMT has retained $4.8m for distribution in 2H09, or about 0.15 cents per unit.
To-date, CMT has renewed leases for about 12.1% of the total Nett Lettable Area (NLA), enjoying a 1.5% increase in rental rates compared to the preceding rates. Despite having another 302 leases expiring this year, the gross revenue lock-in for FY09 so far already exceeds 98% of FY08's gross revenue. CMT's malls are still operating at nearly full-occupancy (99.7%). As sentiments on the economy improve, CMT has seen shopper traffic in 2Q09 improve by 1.3% yoy, 2.2% qoq on a comparable mall basis. However, actual sales of the tenants have only improved marginally by 0.2% qoq, as consumer spending remained cautious. The management noted that tenants today are more confident of their business outlooks than six months ago. Following the rights-issue to raise about $1.2b, CMT has pared down about $630m of debt, and intends to repay another $335m in Aug 09. Gearing remains a low 30.3% when all intended debt repayments are made, well within CMT’s target gearing range of between 30 – 35%. CMT's DPU growth via asset enhancements will take a while to flow through as enhancement works at JEC and the Atrium will begin only in end-09 and end-2010 respectively. We retain our DDM-derived price target of $1.53. Due to the recent improvement in share price, the current yield of 5.5% appears unattractive. We are downgrading CMT to a Hold.

CapitaMall Trust: Hold (Citi Research, 24 July)
CMT's 2Q09 DPU was 2.13cents, bringing total 1H09 DPU to 4.1cents, lower than consensus and our estimates of approximately 9 cents for FY09. NPI rose 2% qoq compared to the 3% rise in revenue due to higher operating expenses. CMT retained an additional S$1.5m of its taxable income in 2Q09 on top of the S$3.3m retained in 1Q09 although it remains committed to pay 100% of its distributable income. Despite the weak economic environment, CMT is still renewing its leases at 0-5.5% higher rentals than preceding rental rates except at Lot One Shopping, Hougang Plaza and Sembawang Shopping Centre, which recorded declines of 11-15%. Except for Junction 8 (-0.8%qoq) and Funan IT Mall (-1.4%), rental revenue improved in all its malls. However, NPI of Plaza Singapura and Tampines also fell due to higher cost. CMT recognised a revaluation loss of S$276.3m, of which S$93m was due to The Atrium and S$80m due to Raffles City. The decline in pure retail mall is marginal at S$3-16m each (0-4.6%). NAV fell to S$1.58 from S$1.66. We cut our DPU for FY09 by 2% to reflect the higher than expected finance cost but upgrade DPU for FY10 by 8% to reflect the better than expected rental revenue. We are, however, downgrading the stock to HOLD for valuation reasons, albeit with target price raised to S$1.57.

CapitaMall Trust: Neutral (DMG, 24 July)
CMT has posted a 39.5% year-on-year (yoy) decline (+8.1% qtr-on-qtr ) in 2Q09 DPU to 2.13¢, in-line with ours and consensus estimates. The decline was due largely to the rights adjustment. Revenue was up 10.4% yoy mainly from the acquisition of The Atrium@Orchard and completion of asset enhancement initiatives at Tampines Mall, IMM Building, Plaza Singapura, Bugis Junction, Sembawang Shopping Centre and Lot One Shopper's Mall. CMT will trade ex-2Q09 distribution on 30 Jul 2009. Singapore will see an unprecedented increase in retail space of 5.3m sq ft by 2011, up 15% from 2008. Out of which, the Orchard / Marina shopping belt accounts for about half of this new supply. Raffles City and Plaza Singapura malls (30% of CMT's rental income) are situated within this zone. We therefore expect competition within this space to rise, however the spectre of lower retail footfall is unlikely to transpire given the excellent connectivity of most CMT's malls to MRT stations. We are sanguine that the opening of the Circle Line and the two integrated resorts in 2010 will boost shopper traffic. At current prices, CMT offers investors a stable dividend yield of 5.6% for FY10. While we continue to recognize CMT's impeccable mall management expertise, valuations for the counter appear rich following its 60% rally since Mar 09. With a subdued earnings visibility, we view risk-returns on the counter as unfavourable and recommend investors not to accumulate the stock at current levels. Buy on dips. Await entry at S$1.32. Price target raised to S$1.45 ($1.24 previously) to reflect a higher terminal DPU growth assumption of 5% (3.7% previously).

CapitaMall Trust: Hold (OCBC Research, 24 July)
CMT's 2Q09 results that were within expectations. Distributable income for 2Q09 increased to S$67.9m and DPU of 2.13 cents has been declared for 2Q09, translating to an annualized yield of 5.51%. CMT's gearing remains at a conservative level of 30.3% despite the revaluation deficit of S$276.2m in 2Q09. Operating conditions were better than that in 1Q09 and investors' appetite for debt securities had also improved, thus easing concerns on the tight credit market. Encouraging operating performance re-affirmed our view that the worst is over for the retail industry. We are now removing our RNAV discount and pegging our fair value at par to our RNAV estimate. Discount rate used has also been lowered from 9.1% to 8%. Our fair value has now been raised to S$1.53. We maintain our Hold rating on CMT and further clarity on the Asset Enhancement Initiatives for Jurong Entertainment Centre and Atrium could provide catalysts to re-rating. We will turn buyers of CMT at S$1.20-S$1.30.

Pacific Shipping Trust: Hold (OCBC Research, 24 July)
PST's 2Q results were in line with expectations, with DPU increasing 1% QoQ to 0.99 US cents. PST said it is reviewing its distribution payout policy, with a view to reduce payout. The manager guided that 3Q payout will not be less than 70% (versus 90% currently). Discussions with liner CSAV on its request for rate concessions are still ongoing as the two parties try and align mutual interests. Meanwhile, PST claims the retained cash could be used to partially fund acquisition opportunities over the next 12-24 months. On the other hand, this increased conservatism could very well just be insurance cover for a negative outcome on the CSAV discussions. We like the manager's spirit but we would like to see more before we re-rate PST: 1) the CSAV overhang needs to be resolved; 2) a clear path of development needs to be laid out; and 3) further evidence of strength in the portfolio and container market is needed. We have narrowed our discount to our discounted FCFE valuation from 30% to 20% on the higher cash retention. Our new fair value estimate is US$0.27 (previously US$0.24); Maintain Hold.

Chartered Semiconductor: Buy (DMG, 24 July)
Chartered saw 2Q09 revenue and net losses come in at US$349m and US$39.4m respectively, notably better than the company's guidance for turnover of about US$343m and losses of about U$49m. According to Bloomberg data, bottomline had also exceeded market forecasts of losses at US$49.3m. As with the sequential improvement in 2Q over 1Q, Chartered is also expecting a qtr-on-qtr (qoq) pick-up in 3Q09. While management thinks that "signals in the marketplace remain mixed", we believe that they are merely striking a cautious tone in order to keep market expectations low – a pick-up in most of its major customers has already been seen. Chartered has also raised its capex for FY09 by 33% to US$500m.
Several of Chartered major customers have reported results that exceeded analysts' estimates and have also issued positive guidances. Qualcomm commented that it expects a healthy fourth quarter, while Broadcom – which just unveiled its results yesterday – also reflected numbers that surpassed market forecasts where it expects "revenue momentum that was experienced in the second quarter to continue into the third quarter". Given the improving outlook for most of its major customers, we believe that Chartered would resultantly be positively impacted. We have increased our revenue forecasts by 15.1% and 17.8% for FY09 and FY10 respectively. While we do not expect Chartered to turn profitable in these two years, our losses estimates have nevertheless been reduced from US$354m and US$277.7m in FY09 and FY10 respectively. Currently trading at 0.98x FY09F P/B and assuming it trades up to the industry average of 1.2x P/B, our BUY recommendation for Chartered remains while our target price is now increased to S$2.77 (from S$2.66 previously).

Keppel Corp: Hold (Kim Eng, 24 July)
Keppel Corp posted 2Q09 net earnings of S$739.5m, which included an exceptional gain of S$422.2m. Excluding this, earnings for the quarter was $317.3m, which was a 6% increase over 2Q08. Sequentially, earnings grew by 11%. Offshore and Marine contributed 74% of operating earnings, and even managed to improve its EBITDA margin by a further 1.6% qtr-on-qtr (qoq) through improved operating efficiencies. Although Keppel reaped a S$660m gain on the sale of SPC, its overall exceptional gain amounted to S$421.5m. The SPC gain was offset by losses on disposal of investments of around S$46.0m, as well as impairment of assets worth S$189.1m, the lion's share of which were recorded in the infrastructure division. We understand that the infrastructure impairment was taken on its Singapore operations, and presumably on its 500MW power plant on Jurong Island, where lower electricity tariffs are yielding return on assets that are below expectations – hence the impairment. Also disappointing was that Keppel did not declare any special dividend despite the extraordinary gain. However, interim dividend rose to 15 cts per share from 14cts in 1H08, in line with core earnings improvement. Keppel may consider a larger payout at year-end. For now, it rather retain cash for potential M&As, and to offset the cash outflow of converting O&M deposits to sales, with very few new orders to replenish this cash. We are adjusting our FY09 forecast down by 4% to account for impairments and lower infrastructure earnings, while raising O&M on higher margins. We are also cutting our FY10 and FY11 forecasts by 5% and 9% respectively – barring new order flows. Our sum-of-the-parts (SOTP) value of S$7.77 remains unchanged. We are still factoring a special dividend of 20 cts per share at year-end, and together with a 15cts interim and a further final 15cts ordinary, FY09 yield forecast stands at 6.4%. / Target price maintained at $7.77.

Keppel Corp: Sell (UOB Kay Hian, 24 July)
Keppel's 2Q09 net profit rose 6% year-on-year with strong showing in all segments except for the investments segment which was affected by a lower contribution from Singapore Petroleum Company (SPC). Exceptional gains were S$421m instead of the expected S$660m gain from the SPC divestment due to impairment charges. Keppel has declared an interim DPS of 15 cents, marginally higher than last year's 14 cents. Higher property earnings were primarily due to higher contributions from Reflections at Keppel Bay. Infrastructure earnings benefitted from engineering, procurement and construction (EPC) contributions from the Doha North Sewage Treatment and Water re-use plant project in Qatar. Much hope is pinned on Petrobras contracts for the oil & gas (O&M) division. Last week, Upstream reported that 12 groups included Keppel FELS are bidding for the US$4b contracts to fabricate the hulls for eight FPSOs to be used in Brazil’s oil fields. Our assumption of S$2b contract wins in 2009 requires Keppel to win some major contracts in 2H09, in order to avoid an earnings downgrade. We have assumed S$3b contract wins each in 2010 and 2011. We lower our FY09 net profit forecast by 13%, factoring in the impairment charges in 1H09. We however raise our fair price from S$5.90 to S$6.33 based on our revised sum-of-the-parts (SOTP) valuation of S$6.29/share due to a revised target price of S$3.10 for Keppel Land. Our SOTP valuation has imputed sustainable O&M contract wins of S$3b per annum in the longer term, which translates into an annual O&M net profit base of S$250m.

Keppel Corp: Buy (DMG, 24 July)
Keppel has reported a 2Q09 PATMI of S$740m. Excluding one-off gains, core PATMI was S$318m, the highest PATMI ever recorded in a quarter and ahead of ours and consensus’ estimates. Overall, 2Q09 revenue of S$3.2b surpassed our expectation due to better-than-expected contributions from Oil & Marine (Q&M) and Property divisions. Core operating profit was S$351m. Another bright note was O&M's improved operating profit margin of 11.1%, reflecting margin sustainability despite weak macro environment. An interim dividend of 15S¢ was declared. No special dividend was proposed despite the gain from the favourable sale of Keppel's entire stake of SPC to PetroChina as Keppel conserves cash for possible M&As. Thus, we think some investors may be disappointed. Nevertheless, we surmise this is a good set of results and Keppel remains well positioned to ride on secular growth trends in all the core businesses. We have raised our FY09F PATMI by 9% to account for better margins. Our revised target price is S$8.82 (from S$8.60 previously).

Keppel Corporation: Hold (OCBC Research, 24 July)
KepCorp posted 2Q results that beat our expectations with topline growing to S$3.2b (+21% year-on-year, +7.5% qtr-on-qtr). Excluding exceptional items, PATMI grew at a moderate pace to S$317m (+6% yoy, +11% qoq). The stronger results were due to more aggressive accretion of its orderbook as well as better operating efficiencies at its yards in building repeat rig units for its customers. KepCorp did not pay any special dividends arising from the SPC divestment in view of cash required for M&A opportunities in the oil & marine (O&M), environmental, property and water sectors. It declared 15 cents interim dividends. While our estimates have risen with better clarity in its operating margins and its aggressive orderbook recognition, we iterate our concern with its gap in substantial new O&M orders. Fortunately, indications pointing to strong candidacy to win the Petrobras orders have led us to bump up our order wins. We have factored in KepCorp's better operational efficiency at its O&M division as well as a more aggressive recognition of its order book for FY09. We are also assuming that KepCorp wins 3 of the 8 Petrobras FPSOs hull jobs. Consequently, our FY09 and FY10 anticipated order wins are now S$2.5b (prev. S$2b) and S$3.8b (prev. S$3b), respectively. Our sum-of-the-parts (SOTP) valuation is now S$8.20 (prev. S$6.40). Maintain HOLD. Look to accumulate around $7.40.

Frasers Centrepoint Trust: Buy (UOB Kay Hian, 24 July)
FCT reported a distributable income of S$12.1m (+4.1% year-on-year) and DPU of 1.94 cents (+3.0% yoy), 4.9% above our forecasts. This is a good performance despite disruption from asset enhancement initiative (AEI) at Northpoint. Revenue contribution from Causeway Point increased 4.9% yoy to S$14.5m, offsetting an 8.8% yoy decline to S$4.8m for Northpoint. Occupancy at Northpoint registered a slight improvement from 72.1% as at Mar 09 to 75.0% as at Jun 09. Expiring leases were renewed at 14% increments above preceding rental rates, equivalent to an average increase of 4.5% p.a. FCT has aised S$75m through its medium term note (MTN) programme in Jun 09. Proceeds from the fund-raising exercise were utilised to repay revolving credit facilities, thus providing a more stable funding base. FCT had a conservative gearing of 32.7% as at Jun 09. Gearing will be lowered back to 29.7% after proceeds from MTN are used to refinance revolving credit facilities. There is no refinancing risk as its commercial mortgage-backed securities (CMBS) of S$260m will mature two years later in Jul 11. FCT has a healthy interest coverage ratio of 4.5x. FCT focuses on suburban malls located next to Mass Rapid Transit (MRT) stations, which cater to basic necessities and non-discretionary spending by captive populations in HDB heartlands. Our target price for the stock is S$1.39, based on the dividend discount model (required rate of return: 7.7%, terminal growth: 2.5%). FCT provides FY10 distribution yield of 7.7% and trades at a 18.7% discount to NAV/share of S$1.23.

Frasers Centrepoint Trust: Buy (DMG, 24 July) (TP: S$1.17)
FCT reported a 3.2% year-on-year (yoy) gain (+4.3% qtr-on-qtr) in 3QFY09 DPU to 1.94¢. Annualised DPU of 7.3¢ came in slightly ahead of our forecast but in-line with consensus. Apart from its resilient suburban portfolio, FCT stands out among the S-REITs as one of the least aggressive in terms of acquisitions. On hindsight, we think management has been among the most effective in terms of preserving the stock's theoretical valuation through its strong asset enhancement initiatives and cautious acquisition stance. With that, FCT continues to boast commendable financial credit metrics and a strong balance sheet, which does not warrant any dilutive equity capital raising in the foreseeable future. At current prices, FCT offers investors a dividend yield of 7% for FY09 and 7.2% for FY10. Causeway Point and NorthPoint, which contributes to 92% of NPI, are suburban malls which are resilient even during periods of recession. Having locked in 98% of FY09 gross rental income, FCT has essentially secured all of its revenue for the current financial year. FCT recorded positive rental renewals in 3QFY09, with expiring leases renewed at 14% increment above preceding rental rates. Portfolio occupancy remains high at 93.2%, FCT has a strong balance sheet with gearing of 32.7% and interest cover of 4.5x. As all acquisitions are put on the backburner, there is no need for any equity raising in the near-term. Like most REITs, FCT has risen sharply (+75%) since Mar 09, providing a forward yield spread of 470bps above risk-free instruments, 110bps above its historical 360bps average. Despite the sharp increase, we think a forward yield of 7.2% continues to underscore our BUY justification on the counter with a target price of $1.17. This is in view that FCT has one of the lowest betas (0.75x) among S-REITs, which typically average 1.1x. Stock still undervalued at current levels.

Ascott Residence Trust: Hold (Kim Eng, 24 July)
ART declared 2Q09 DPU of 1.79 cts, bringing 1H09 DPU to 3.55 cts, a 21% decline year-on-year (yoy). Annualized DPU is above our forecast by 4.4%. There was qtr-on-qtr (qoq) pick-up in revenue and distributable income in 2Q09, thereby mitigating the yoy decline of 1H09 numbers. Hospitality industry showed signs of stabilizing and the management expects a stronger 2H09. The Singapore and China markets were main contributors to the yoy dip in revenue. However, profitability across the portfolio was maintained. Beijing and Shanghai properties in 1H09 were negatively impacted by travel restrictions due to China communist party’s 60th anniversary. Tianjin was the only bright spot (occupancy ~70%). Vietnam, Philippines and Japan continued its growth. With its marketing efforts, the management expects the average occupancy rate to increase to 80% by year-end from the current high-60%. However, business travellers are signing up for shorter length of stay of 1-3 mths, and ART sees heightened competition due to the presence of newer serviced residences for guests to choose from. Renovations will be done at its Singapore apartments over the next two years, estimated at S$20-30m (debt-funded), with a payback period of 3-4 years.The management re-emphasized its preference for refinancing its loans over a rights issue. With our forecasts largely unchanged, prospective DPU yield of 7.2% is not enticing. However, we still like ART's solid brand and large acquisition pipeline in the longer term. We are downgrading ART to HOLD in view of its spectacular recent surge in share price. Target price has been reduced to $0.75 from $0.77.

Ascott Residence Trust: Buy (UOB Kay Hian, 24 July)
ART reported a distributable income of S$11.0m (-17% yoy) and DPU of 1.79 cents (-18% yoy) for 2Q09. Total DPU for 1H09 is 3.55 cents. DPU for 2Q09 was above our expectations, accounting for 32% of our full-year estimates. Distributable income for 2Q09 fell 17% yoy due to weaker demand from business travellers in Singapore and Japan where revenue contributions fell 39% and 10%. Overall RevPAU for 2Q09 declined 17% yoy to S$119/day. RevPAU from China was down 19% due to oversupply issues in Beijing and Shanghai. Australian RevPAU fell 10% due to the weakening of the Australian dollar. Philippines emerged stronger (+1%) as a result of recent asset enhancements. The 17% yoy decline in overall RevPAU was much better than our expectation of a 33% yoy decline for the full year due to better cost management initiatives and improved sentiments. Overall portfolio occupancy levels for 2Q09 remained above 70% with notably higher occupancy rates at Philippines and Australia. We expect market conditions to improve further from 2H09 onwards. Accordingly, we raise our overall RevPAU assumptions for 2009-11 by 9-18% factoring in a 5-10% increase in the average daily rentals and occupancy levels for 2009-11. We increase our DPU estimates for 2009–11 by 10-20% factoring in higher occupancy rates and better average daily rentals. Maintain BUY and we raise our target price by 33.3% to S$1.20 based on a two-stage dividend discount model (required rate of return: 7.7%, terminal growth rate: 2.5%). ART is offering an attractive yield of 8.2%.

Ascott Residence Trust: Buy (OCBC Research, 24 July)
ART has posted a 1.4% qtr-on-qtr (qoq) increase in distributable amount to S$11m. The 1H distributable amount made up 53% of our full year estimate. Going forward, the manager sees "signs of stability with a slight bias towards an uptrend". ART recorded a revaluation deficit of S$61m, with 2Q NAV down 10% QoQ to S$1.36. The manager maintains it is comfortable within 45% leverage (40.7% now) and 3x interest cover (3.4x now). We believe that the need for, and impact from, any recapitalization-focused cash call has diminished in view of the recent price rally and improved operating outlook. We have increased our earnings estimates, reflecting our expectation of stabilization at current levels. Our new SOTP value for ART is S$1.14 (prev: S$0.82). We are also lowering our "uncertainty discount" to SOTP from 25% to 15%. Our new fair value estimate is S$0.97 (prev: S$0.61). Upgrade to BUY.

Mapletree Logistics Trust: Hold (OCBC Research, 24 July)
Total amount distributable to Mapletree Logistics Trust unitholders in 2Q09 was stable at S$28.7m (up 0.2% QoQ). Results were better than expected due to our fairly bearish occupancy assumptions. Portfolio occupancy was sustained at 98.3%, versus 98.5% three months ago. MLT said the average reversion rate in 1H09 was flat due to "priority in retaining tenants" rather than securing new (higher) leases. The manager guided that despite some stabilization in the economic environment, in 2H09 "the environment remains challenging and occupancy and rental rates may be under pressure". MLT indicated its interest in third-party acquisitions, provided these buys are coupled with an equity issue to at least maintain current gearing levels. In line with the 'retention strategy' and some macro stability, we have adjusted our occupancy estimates (upwards) as well as our achieved rent expectations (downwards). All in, we expect a weaker 2H09 over 1H09 as occupancy slips and any rent declines to flow through. We are still cautious on the industrial sector but like the quality and diversification of MLT's portfolio. Our new fair value estimate is S$0.52 (prev: S$0.45). Maintain HOLD.

CapitaCommercial Trust: Hold (Kim Eng, 23 July)
CCT has announced a 2.6% qtr-on-qtr increment in its gross revenue to $100m, while NPI grew by about 4.9% to $73.3m at the back of improved NPI margins. This brings 1H09 NPI to $143.2m, in line with our expectations. 1H09 DPU now stands at 3.33 cents after the rights-issue, increasing 29.1% yoy on a comparative basis mainly due to the contribution of One George Street and positive rental reversion. With proactive tenant management, CCT signed new leases and renewals for an NLA of 139,380 sq ft in May and June 09, achieving new rents about 45% higher than the previously signed rents. CBRE estimates the average rent for prime Grade A office to be $10.15 psf in 2Q09 – higher than CCT's passing rent of $8.14 psf. This implies that there could still be positive rental reversion for the rest of 2009. CCT has managed to maintain its portfolio occupancy rate above the market average. It has a current Grade A occupancy rate of 97.4%. The management however, warns that there could still be some downside to occupancy rates, but it also noted that some businesses are looking at relocating back into the CBD as rents appear more attractive at current levels. While we still like CCT for the quality of assets and the sound balance sheet following the rights-issue, CCT looks fairly valued and its forward yields of under 9% do not appear particularly attractive, given that the office sector is not completely out-of-the-woods. Maintain HOLD, with a DDM-derived target of $0.88.

Keppel Land: Buy (Kim Eng, 23 July)
KepLand has posted a 2Q09 PATMI of $58.2m – a strong 57.7% qtr-on-qtr (qoq) improvement, due largely to a strong 71.5% qoq improvement in sales to $249.9m, as more revenue has been recognised for projects in Singapore and China. This brings KepLand's 1H09 PATMI to $95.1m, or 60% of our original full-year estimate. KepLand enjoyed strong sales of township homes in China for 1H09, having sold 1,440 units in Chengdu and Wuxi. The management feels that positive sentiment is spilling over to the luxury-end segment. Leveraging on improved sentiments in the Singapore private property market, KepLand managed to reduce its inventory of completed properties, by selling 26 units at Park Infinia in 1H09 (avg $1,400 psf) and 28 units at the Tresor (avg $1,350 psf). The management now targets to launch the Promont at Cairnhill and Madison Residences at Bukit Timah in 2H09, opting to further defer the relaunch of Reflections at Keppel Bay and Marina Bay Suites. With the rights-issue gross proceeds of about $708m, KepLand would be on the look-out for investment opportunities. The management said KepLand would consider opportunities spanning the various segments in the Singapore market. It also recently announced the joint-acquisition of a 36.8-ha site in the Tianjin Eco-City, with total capital investment at around $148.5m. KepLand will own a 55%-stake in the township development, capable of yielding about 5,000 homes. KepLand's local landbank looks set to benefit from the Integrated Resorts and its overseas projects appear to have resumed their sales momentum. We have raised our FY09-10 forecasts by 12.4% and 12.8% respectively. Maintain our BUY recommendation at a target price of $3.19, pegged at a 10%-discount to FY10 RNAV.

Keppel Land: Buy (UOB Kay Hian, 23 July)
KepLand has reported a net profit of S$58.2m in 2Q09 (+10.5% yoy), bringing t1H09 net profit to S$95.1m, -15% yoy. Excluding the S$7.6m write-back of provisions for properties held for sales in 1H09, results are in line with our expectations. The robust earnings for the quarter were mainly due to higher earnings from property trading segment (+69% yoy) as a result of higher revenue recognition from several projects in Singapore and China. The property investment segment also saw a solid 2Q09 growth (+35% yoy) due to increased rentals from Singapore and Vietnam projects as well as a higher share of profit from K-REIT Asia. However, earnings from the fund management segment fell 19% yoy due to unrealised foreign exchange loss. The recent rights issue has lowered KepLand's gearing to 0.23x. Management views 0.5x as a comfortable gearing level in the current times, allowing room for an additional debt of S$1b. We believe the additional funds available and a healthy cash balance of S$1.2b could be used to increase its landbank and for aggressive overseas expansion plans. KepLand is well positioned to capitalise on the improved sentiments in market. Maintain BUY with a target price of S$3.10, pegged at a 10% premium to FY09 RNAV of S$2.81/share.

Raffles Education: Buy (BNP, 23 July)
Rafffles is an education provider that runs private and national schools across Asia, which has displayed phenomenal growth since listing in 2002. Of specific concern is its penchant for equity financing to fuel growth. We often hear about management's aggressive appetite for growth but the conservative streak in preferring equity over debt (to fuel it) is unappreciated just as often. It has been net-cash positive from the time of its listing until FY08. A track record of prudence allowed it to dip into debt when made a large opportunistic acquisition in FY08. We believe this will be pared down quickly. Although equity dilution was 71% from FY02 until FY08, net profit grew 28 times over the same period. Growth potential is limited by capital alone Raffles' latest acquisition of Oriental University City (OUC) gives it the potential for double enrolment. Budding exposure in India is also exciting. We believe that growth will be limited only by the amount of capital it can find. We have initiated coverage with a BUY and target price of SGD0.78.

Armstrong Industrial: Buy (DMG, 23 July)
The restocking activity within the electronics industry that occurred in 2Q09 is an open secret with almost all of our industry contacts having experienced this phenomenon. With the hard disk drive (HDD) space expected to improve after having bottomed out in 1Q09, Armstrong's Data Storage segment would therefore also be given a lift. Management believes that they are currently seeing genuine demand returning beyond the second quarter, with encouraging indicative orders coming through from its HDD clients. Just yesterday, Armstrong's major customer Seagate released its 4QFY09 results that saw both top and bottomline exceed market forecasts. Seagate also noted of "signs of improved visibility" and upped its 1QFY10 sales forecast. We expect Armstrong to be positively impacted by the sequential recovery for its Data Storage and Automotive businesses in 2Q09. We are also forecasting Group revenue and net profit to come in at S$36.5m and S$2.4m respectively in 2Q09, an 11% and 240% jump qtr-on-qtr (qoq). Along with our upward adjustments to our earnings forecast for both FY09 (+26.3%) and FY10 (+25.9%), we upgrade Armstrong to a BUY with target price of S$0.29 (from S$0.18 previously). Our revised TP is based on 10x FY10 P/E, which is the average the stock traded at during recovery periods.

Keppel Land: Buy (DMG, 23 July)
KepLand's 2Q09 results were within expectations. It posted a 10.4% year-on-year (yoy) rise (+57.7% qtr-on-qtr) in 2Q09 PATMI to S$58.2m, chiefly due to a 68.3% yoy (+60.6% qoq) surge in contribution from solid sales of local and foreign residential projects as well as progressive recognition of projects such as Marina Bay Residences, Reflections and Sixth Avenue Residences. Helped by K-REIT’s improved profits, higher renewal rates from Ocean Towers and Equity Plaza, PATMI from Property Investment jumped 33.2% yoy (+4.3% qoq). Looking overseas, over 1,440 homes were sold in China in 1H09 for the Central Park City and The Botanica developments. We believe the strong take-up for these two township projects should inject optimism into KepLand's recent 55% stake in a 36.8 ha site within Tianjin Eco-City. Equipped with 2.97m sqm of saleable area, which spans a good blend of affordable township projects and mid-high end properties, KepLand should continue to benefit from China's improving property sector and rising urbanization. The recent rights issue has improved its net gearing to 0.23x, making it the best-capitalized blue-chip developer. We maintain our BUY rating on KepLand with a target price of S$2.98, pegged at parity to base case end-FY10 RNAV.

CapitaCommercial Trust: Buy (OCBC Research, 23 July)
CCT has reported a set of good results that exceeded our expectations. Distributable income grew by 33.2% year-on-year (yoy) and 5.8% qtr-on-qtr (qoq) to S$48m and DPU of 1.71 cents has been declared for 2Q09, translating to an annualized DPU yield of 7.9%. Operating performance in 2Q09 has remained encouraging. CCT signed new leases and renewals for 139,380 sq ft of spaces and achieved new rents at 45% higher than previously signed rents. We are now raising our FY09 DPU forecast from 6 cents to 6.4 cents and our FY10 DPU forecast has also been raised to 5.9 cents. Our fair value of CCT has now been raised to S$1.07. While the office sector continues to face oversupply issues, we expect CCT to outperform its peers on the operating aspects, given its strong track record. We believe that this will be a justification for the valuation premium of CCT over its peers. We maintain our Buy rating on CCT.

CapitaCommercial Trust: Sell (Citi Research, 22 July)
For 1H09, CCT reported a DPU of 3.33cents, translating to an annualised DPU of 6.72cents. The results were ahead of our estimates of around 6cents but below consensus of 7cents. CCT managed a 4.8% qtr-on-qtr (qoq) rise in NPI and a 5.8% rise in distributable income on the back of a 2.6% rise in rental revenue. Largely lower property tax, utilities and maintenance expenses drove the improvement in NPI. On individual buildings, most buildings record fairly flat rental revenue qoq with the exception of Robinson Point and Starhub Centre, which record 13-14% rise qoq each. 6 Battery Road also registered a 5% qoq rise in rental revenue. Despite flat rental revenue, NPI at Capital Tower rose 18.6% with a significant 30% decline in cost. CCT's portfolio occupancy averaged 96.2%, a slight decline from the 96.7% achieved in 1Q09. Occupancy rate at 6 Battery Rd and Capital Tower held firm at 97.6% and 99.7% respectively. One George Street saw a decline from 100% to 93.4% while Robinson Point and recorded an improvement to 100% (95.9% previously). Occupancy at the newly completed Wilkie Edge continued to improve to 72.6% from 67%. We are revising our estimates to reflect better-than-expected operating performance and to adjust for the impact of the rights issue. Our restated ex-rights target price is now $0.69. However, we maintain our Sell rating given its rich valuation and very challenging outlook.

CapitaCommercial Trust: Outperform (Daiwa Research, 22 July)
CCT’s better-than-expected performance was driven by robust gross-revenue growth (4.4% above our estimate). The properties that outperformed our estimate included Six Battery Road, Starhub Centre and Robinson Point. The overall occupancy rate of 96.2% was marginally lower than the 96.7% for 1Q FY09. CCT has renewed or signed new leases for 139,380 sq ft (4.1% of the portfolio's net-lettable area for May and June), and about 475,000 sq ft for 1H09, with a weighted rental reversion of 45% above previous rentals. We have revised up our DPU forecasts by 1.6% for FY09, 1.7% for FY10, and 2.7% for FY11 after adjusting up our net-property income (NPI) assumptions modestly. We still forecast CCT’s occupancy rate to drop to 90% by FY11. We forecast broad office rentals to decline by 47% for FY09, 30% for FY10, and 20% for FY11 (or a 70% decline from the FY08 level), slightly higher than our previous forecasts. We maintain our Outperform rating for CCT and believe Singapore real estate investment trusts in the office sector offer decent value relative to other segments. We believe a further stabilisation in spot rents and an improvement in occupancy rates could trigger outperformance.

Singapore Exchange: Overweight (JP Morgan, 22 July)
We recommend buying every dip on the stock price as we expect trading velocity to increase, albeit in the midst of continued volatility. The stock has underperformed the STI by 8.4% since our downgrade on 14 May, and we believe the seasonality and consolidation of volumes have played out and that the risk-return has turned positive. In addition to securities trading volumes, we expect increased derivative volumes (23% of revenues) and IPO pipeline to support earnings and re-rating. The exchange continues to deliver product innovation and solid balance sheet and enjoys a monopoly in cash securities clearing. SGX stock price tends to be volatile as both PE and EPS expectations get revised simultaneously. We believe the stock is entering a phase of earnings momentum, and hence will be driven by earnings upgrade and PE rerating. We upgrade SGX to an overweight with a price target of S$10, raised from S$5.60 previously. The revision is driven by a 40% increase in our estimated FY10 EPS to S$0.38, as we revise volume assumptions to S$2b for the year. We expect earnings momentum and re-rating to drive the stock due to sustained revival in trading volumes.

Tech Picks – DBS Research, 22 July
DBS Research is positive on technology companies for the next six months. We expect sequential bounce in 2Q09 after sharp cutbacks in late 4Q08 and in 1Q09, with upside surprises likely. Margin improvement is also expected, as extensive cost reduction should start to show up in bottomline. 3Q09 guidance should be positive on continued buildup for seasonality. By 4Q09, look out for first quarter of positive y-o-y growth. Top picks are Chartered (Target price: S$3.50) and Venture (Upgrade to Buy, TP:S$ 9.40 (Prev S$ 6.50)); Meiban (Upgrade to Buy, TP:S$ 0.35 (Prev S$ 0.17)) and Broadway.are small cap gems. Research also has a buy rating on Hi-P (TP: S$0.79) but 2Q09 results for Hi-P is expected to be subdued. Meiban's technical objective is $0.34, which offers 33% upside. Support is at $0.245. For Broadway, the technical objective is $0.47 (30% upside), with support at $0.345.

Allgreen: Buy (UOB Kay Hian, 22July)
Management believes property prices are sustainable in the near term. While it plans to relaunch Viva at price levels that are below launch prices of S$1,500-1,600psf, it might raise prices if the market remains buoyant. Showflats are also ready for its projects at River Valley, Handy Road, Hup Cheong Mansions and St Michael and the projects are expected to be released soon. The recently-launched One Devonshire project has almost sold out at an average price of S$1,770psf, with locals buying most of the units. However, management has noted a sharp increase in foreign buyers, predominantly from Indonesia, Malaysia and China. Allgreen has an inventory of about 1,009 units from its unsold landbank in Singapore and plans to sell them in the next two years. Management has no plans to acquire land as it believes land prices are high at the moment and that it has sufficient inventory. Allgreen's retail space is fully occupied with Tanglin Mall fetching S$8.60psf pm. The occupancy levels for its office space and serviced apartments are 92% and 80% respectively with average office rentals of S$6.70psf and serviced apartments fetching about S$9,000/month. Hotel occupancy levels were down at 60% but management believes the slowdown is temporary and expects things to improve later this year. We continue to see good value in Allgreen and maintain BUY with a target price of S$1.40 pegged at parity to 2009 RNAV.

CapitaCommercial Trust: Neutral (DMG, 22 July)
CCT's 2QFY09 results were in-line with expectations. It reported a (pre-rights adjusted) 31.5% year-on-year (yoy) increase (+5.6% qtr-on-qtr) in 2Q09 DPU to 3.42¢, in-line with ours and consensus estimates.Adjusted for the rights units, 2Q09 DPU would have been 1.71¢, with an annualised DPU of 6.86¢. Revenue was up 34.4% due to positive rental reversion. According to CBRE, prime office rents averaged S$8.60/sqft in 2Q09, reflecting a 18.2% QoQ decline (1Q09: S$12.90/sqft). Despite the economy being technically out of a recession, it is clearly still a tenants' market and the focus on tenant retention remains paramount for all landlords including CCT. In our view, most office landlords will likely shift their focus on occupancy optimisation at the expense of rental rates. This will likely put further downward pressure on rents in the coming quarters. Post the equity fund raising in Jun 09, CCT's management intends to utilize 80% of its S$828m proceeds (or S$664m) to repay loans comprising the two-year secured term loan maturing in Jun 10 and the bridge loan facility maturing in Aug 09. CCT's gearing is projected to fall to 32% (from 43%) and interest cover to improve to 3.5x (from 2.4x). On the back of these improvements, Moody's has recently upgraded CCT's debt rating to stable while maintaining its corporate rating at Baa2. CCT share price has almost doubled since Mar 09, and now trades at a forward 420bps above risk-free instruments, providing a mere 110 bps cushion over its historical 310 bps average. Premising on our forecast FY10 DPU of 6.24¢, our bull-case scenario implies a 28% upside with a fair-value of S$1.11 (about 5.6% yield at fair-value) should the current market rally continue. In contrast, our bear-case scenario could see the stock retracing 43% to the S$0.50 level, with the stock yielding at 12.5% (1,000bps spread over 10-year bonds yields).From current levels, we view risk-returns on the counter as unfavourable and recommend investors not to accumulate on the stock. CCT will trade ex-2Q09 distribution on 31 Jul 2009. We are reviewing our Neutral Rating on CCT (with a view to downgrade). Our TP of S$0.71 may be adjusted.

CapitaLand Ltd: Hold (OCBC Research, 21 July)
AustraLand, the Autralian subsidiary of CapitaLand announced that it will be recording asset impairment charges of A$235m on its investment properties and A$134m on the carrying values of its development assets for the quarter ending 30th June 2009. The impairment charges are due to the 85-bp increase in average market capitalization rate for the investment properties since 31st Dec 2008 and the further deterioration in the mid-high end residential property market in Australia. The impairment charges represent ~9% of AustraLand's total asset base as at end 1Q09 and CapLand's 2Q09 results will also be affected as a result of the consolidation of AustraLand's results. Nevertheless, the impact on CapLand will be limited as the impairment charges translated to SGD (~S$434m) represents just 1.6% of CapLand's total asset base. We maintain our HOLD rating on CapLand with fair value of S$3.34

Tat Hong: Hold (OCBC Research, 21 July)
Shares of Tat Hong Holdings have fallen by as much as 21% since our downgrade two months ago, bringing the stock to more reasonable valuations. We are upgrading our rating to Hold given that the stock now trades at a less demanding 7.1x FY10F PER and is backed by a decent dividend yield of 5.6% as well as proven management expertise. We believe that Tat Hong will not only tide through the current turbulence, but will also strengthen its foothold in the industry by expanding its fleet via purchases of distressed assets during the current downturn. To recap, Tat Hong posted a 35.4% year-on-year (yoy) slide in its core 4Q08 net profit as the recession weighed on revenue and gross profits across almost all its business segments. In particular, equipment sales recorded a steep plunge as customers scaled back on capital investments in the absence of credit availability. Thankfully, the group's overall performance was supported by rental income, which continued to be fairly resilient despite the downturn. While we are not expecting a marked improvement in its upcoming 1Q10 performance, the brightening economic outlook, gradual pick up in private sector construction activity, as well as the pipeline of projects from government pump priming initiatives suggest that the sector outlook could be stabilising. Furthermore, with rental income forming 73% of the group's gross profit, Tat Hong's earnings will be fairly resilient to volatility stemming from equipment sales. Tat Hong is expected to release its 1Q10 results on 14 Aug 2009. Key aspects to note include its rental rates, utilisation levels and equipment sales. We are projecting a 10% fall in crane rental rates in FY10 as demand has weakened from a year ago. In addition, we expect equipment sales to post a steep YoY drop given its record high performance in 1Q09. While the overall outlook for the construction industry appears to be stabilising, we reiterate that it remains premature to call for a recovery in the near term. Hence we maintain our S$0.99 fair value estimate. We will turn buyers at S$0.90 and below.

Golden Agri Resources: Hold (OCBC Research, 21 July)
GAR will begin to trade its rights shares (up to 1,764m) on 27 Jul and the warrants (up to 705m) on 28 Jul. As a recap, GAR initiated a rights cum free warrant issue to raise S$311m net proceeds to "pro-actively strengthen the balance sheet, financial flexibility and competitive position" of the group to support its growth, both internally and externally. After the issue, we note that its net gearing will drop from 9.1% as at end 2008 to just 2.1%. The recent slide in CPO prices from an average of US$693 per ton in 2Q09 to around US$595 in Jul was due to the fall in crude oil prices below US$60/barrel as well as worries that the global economic recovery could be a long-drawn affair. This has also resulted in a fall in GAR's share price but it comes as no surprise as the group – being one of the largest palm oil producers in the world) – is susceptible to these fluctuations. While CPO prices have rebounded slightly over the past few days, the outlook for the CPO market remains hazy – supply is widely expected to rise in 2H0 while demand remains uncertain. Nevertheless, we do not expect CPO prices to fall below US$500/ton and should average around US$550-570/ton in 2H09.
In any case, given that the average CPO prices have improved from US$538/ton in 1Q09 to US$693 in 2Q09, as well as a very poor 1Q09 showing, we expect GAR results to show relatively good qtr-on-qtr (qoq) growth. On the topline, we are expecting a qoq growth of 20%; however it would still be down nearly 40% year-on-year (yoy), given that the average CPO prices back then were around US$1004/ton. While net profit is expected to surge some 198% qoq, it is likely to be down 82% yoy; again due to the sharply lower CPO prices. Although we are bumping up our FY09 earnings slightly by 1.7%, we are leaving our revenue number unchanged for now. Meanwhile, our ex-right fair value estimate has been adjusted from S$0.40 to S$0.35. Given the limited upside, we retain our Hold rating, and would be buyers below S$0.30.

SATS: Neutral (DMG, 21 July)
We are initiating coverage on SATS with a NEUTRAL recommendation. We cheer its diversification from the challenging aviation industry into the food services business with the acquisition of Singapore Food Industries (SFI). This would provide support for stability, in our view. SATS offers investors exposure to the aviation industry, with near-zero oil price risk. When the economy recovers, the aviation industry is expected to pick up with more passenger traffic and cargo volume. The non-aviation-related food business would also improve as consumer spending rises. SATS will be positioned to ride the wave. Although SATS does not have a fixed dividend policy, it has been paying out between 40% and 70% of earnings as dividends since IPO, with yield averaging 4% – 5%. We believe SATS would be able to continue paying good dividends, as its business generates good cash flows. SIA's divestment of SATS is good news to SATS shareholders, as this could mean more trading liquidity for the stock. Prior to the divestment, the free float for SATS was 19%. Following the divestment, the free float would increase to about 54%. Our DCF valuation assumes WACC of 9.0%, which gives us a target price of S$2.50, implying a forward P/E of 16x. However, given the recent run in share price, there appears to be limited upside for the stock.

Ascendas REIT: Buy (DMG, 20) July)
A-REIT's 1QFY10 results above expectations. It reported a 6.9% year-on-year (yoy) fall (+12.1% qtr-on-qtr) in 1Q10 DPU to 3.62¢. Annualised DPU came in at 14.48¢, 8.8% above our FY10 forecast of 13.3¢ (10.5% above the Street's 13.1¢ estimates). Revenue was up 10.7% due to positive rental reversion and contributions from new acquired properties and development projects.Management confirmed that about 1% of its Nett Lettable Area (NLA) accounting for about S$3m in annual revenue is highly vulnerable to full-fledged default. In any case, A-REIT has already received S$2.1m in security deposits from these tenants. On a portfolio basis, A-REIT is backed by 6 months of security deposits, mitigating downside DPU risks. While earnings impact may be muted, we believe the loss of a single major tenant may be fairly damaging to the perception of A-REIT's stable of assets. Reflecting the slowdown in global demand, occupancy rate for A-REIT's multi-tenanted properties declined marginally to 94.0% from 95.3%. However, overall portfolio occupancy remains high at 97.1% (97.8% in 4QFY09) due to the contribution from single tenanted buildings with long-term leases. We expect positive rental reversion, albeit at a slower pace, for the Business – Science Parks and Hi-Tech Industrial properties as these properties are 30% under-rented. At current prices, A-REIT offers investors a stable dividend yield of 8.5% for FY10 and 8.7% for FY11 – with dividends well supported by the long-term leases on single-tenanted buildings which accounts for 50% of revenue. We recommend buy on dips as stock has rallied 48% since Mar 09. A-REIT will trade ex-1Q10 distribution on 29 Jul 2009. We have raised our DDM-backed target price to S$1.72 (S$1.57 previously). Maintain BUY.

Ezra Holdings: Buy (DBS Vickers, 17 July)
Ezra has unveiled its growth strategy for next next 6-8 years. We view this as generally positive. We believe that the entry to the deepwater subsea market will allow Ezra to move further up the value chain with the provision of higher value services, while leveraging on its competitive strengths of a young, diversified, and mostly deepwater capable offshore support vessels, its established operational track record and blue-chip customer base.Deepwater subsea market seen to have huge potential. The deepwater subsea market is seen as one of the few segments of the offshore market that still has growth potential beyond 2010. According to Douglas Westwood, global spending on subsea equipment, drilling and completion is expected to exceed US$80b over 2009-13. No change to earnings forecasts; maintain BUY. While we maintain our earnings forecasts, we believe an upwards revision of earnings forecast is possible if 1) Ezra secures higher value subsea contracts, vs. current assumption of term charter contracts with lower day rates; and 2) provision of fleet management services.

MobileOne: Buy (DBS Vickers, 17 July)
In 1H09, M1 has exceeded our expectations by arresting market share decline, without hurting the margins and achieving 51% of our FY09F forecast We like to highlight that M1 has negotiated lower network expenses for FY09F, which alone should result into annual cost savings of about S$10m. Management declared interim dividend of 6.2 cents in line with our expectations. It also added 50,000 new subscribers in the quarter, compared to a loss of 12,000 in 1Q09. M1 may not remain undervalued with signs of improved execution. Next year, M1 would benefit from about S$10-15m cost savings from the shifting of traffic to M1's own backhaul network, implying room for earnings growth. Management is also enthusiastic about benefits from National Broadband Network in 2010. Reiterate Buy with target price of S$1.80 for 12% potential share price upside, 9% regular yield and an additional 10-20% yield through potential capital management in FY10F.

MobileOne: Hold (Phillip Securities, 17 July)
For 2Q FY2009, M1 reported operating revenue of S$190.5m (-7.2% yoy), profit before tax of S$45.0m (-11.4% year-on-year) and net profit of S$37.1m (-9.7% yoy). Telecommunication services registered 7.7% decrease in revenue to S$141.6m. Postpaid revenue fell by 8.5% to S$124.0m while prepaid revenue decreased by 2.2% to S$17.5m. Moreover, international call services posted 13.7% drop to S$32.8m while handset sales rose by 12.2% to S$15.6m. Fixed network services was a new segment that contributed revenue of S$0.5m. Operating expenses also decreased to S$144.1m (-5.6% yoy) due to lower staff costs, facilities expenses amd provisions for doubtful debts. M1 benefitted from the Jobs Credit Scheme, paid lower bonus and hired fewer staff. Therefore, net profit decreased due mainly to lower revenue despite lower operating expenses. We keep our hold recommendation on the stock because M1 has a limited focus on the domestic market and does not have Pay TV services. As M1's net profit of S$37.1m only came in 3.6% below our expectation of S$38.5m, we maintain the target price at S$1.67 based on our valuation using the free cash flow to firm model.

MobileOne: Buy (OCBC Research, 17 July)
M1's 2Q09 revenue was down 7.2% year-on-year (yoy) to S$190.5m, or around 24.5% of our full-year estimate; net profit dropped 9.7% yoy to S$37.1m, or around 25.8% of our FY09 forecast. For the first half, revenue slipped 7.9% to S$376.9m, while net profit eased 0.3% to S$78.9m, meeting 48.4% and 54.9% of our FY09 numbers respectively. M1 has also declared an interim dividend of S$0.062/share, or 70% of its 1H09 earnings, unchanged from last year. On the business front, M1 managed to regain lost ground following slightly more aggressive promotions in both the pre- and post-paid segments; overall subscribers rose by 50,000 vs. 12,000 decline in 1Q09. As the economic outlook is still uncertain, we continue to 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 a Buy call at a fair value of S$2.12.)

MobileOne: Sell (DMG, 17 July)
M1's 2Q09 earnings were below expectations. Net profit fell 9.7% to S$37.1m on the back of 7.2% decline in revenue. The fall in earnings would have been more severe if not for lower taxes, as gleaned from the 11.4% year-on-year (yoy) fall in pre-tax profit. EBITDA margin grew 1.2ppt yoy to 44.8%, as operations last year was marred by intense competition in the wake of full MNP. Subscription and retention costs surged 13% and 29% qtr-on-qtr (qoq) respectively, as M1 stepped up promotional activities in 2Q09. Management did not reveal much about its NBN strategy, choosing to stick to a few general comments: 1) It is all geared up to participate in the NBN once OpCo's Nucleus Connect is ready (Apr 2010); 2) Target markets include both retail and commercial; 3) It will not overbid for content, and may partner with shareholders like SPH; 4) It will introduce unique services which may go beyond bundling. The market’s generally expecting the NBN to benefit M1 the most, but we think otherwise. Our view is further cemented with M1's former head honcho joining rival StarHub. Moreover, yields at 7.9% still pales in comparison to our top pick StarHub. Price target remains at $1.52, but stock downgraded to Sell (from Neutral) given lacklustre prospects and recent price rise.

MobileOne: Buy (Kim Eng, 17 July)
Although year-on-year yoy) comparisons are still negative, the critical postpaid mobile revenue stream reversed a five-quarter decline in 2Q09. M1 added 50,000 mobile subscribers in 2Q09 (including 7,000 postpaid subs), reversing 1Q09's 11,000 erosion. As expected, margins improved from a year ago, offsetting the yoy decline in revenue. EBITDA margin on service revenue rose from 43.6% in 2Q08 to 44.7% in 2Q09. This was driven by more customers taking on mid to high-end mobile plans under the Take 3 program as well as higher mobile data usage on its HSDPA network. Net profit fell 12% to $37.1m qtr-on-qtr only because there was a $5.5m tax credit in 1Q09. Adjusted for that, net profit rose 1.5% qoq.
Although subscriber acquisition and retention costs of $301 were higher QoQ, it is still down from $346 a year ago. M1 is guiding for similar levels of spending in future quarters but our forecasts already assume higher customer spending. Further, we do not expect SingTel’s recent iPhone 3GS launch to drive a big jump in defensive industry spending, unlike 1H08, as there are now more smartphone alternatives available. All the telcos will be racing to make sure they get all the high value subscribers they can before NBN comes online. Unlike StarHub and SingTel, which can bundle fixed broadband and Pay TV, M1 is likely to focus on mobile broadband, a growth area due to the profileration of smartphones and netbooks. This could raise costs but we believe M1 has already factored this into its guidance of earnings stability for 2009. Management reiterated its outlook of a stable 2009 in terms of earnings, as well as a commitment to paying 80% of earnings in dividends, which will still yield a very attractive 8% at current levels. (Interim dividend was maintained at 6.2 cents.)
Mainan Buy with target price of $2.01.

Midas Holdings: Buy (OCBC Research, 17 July)
Midas has opted for the equity route to fund two new production lines. Midas will be issuing 100m new shares with a 20m top up option at S$0.755/share. We are assuming the full 120m to be placed out in view of the positive long-term prospects of the company. This translates to 14.2% of the current issued capital. The urgency in getting its two new lines up is primarily to be in the running to obtain a sizable chunk of jobs from the Ministry of Railway's (MOR) ongoing 2nd tender. Contract awards to component manufacturers like Midas will likely be in Oct-Dec 09. The two new lines will be located with its upcoming 3rd line and should be working in 3Q10 and 4Q10. We believe that more machinery for downstream processes will also be purchased. The potential for better earnings and visibility notches the investment profile of Midas up yet again. The dilution is partially buffered by new capacity coming online in 2H10. Our fair value is raised to S$0.93 (prev. S$0.90) on a higher 18x (prev. 16x) FY10F peg. We have not factored in more possible wins from Nanjing Puzhen Rail Transport (NPRT).

Midas Holdings: Buy (DMG, 17 July)
Midas Holdings has announced that it has successfully placed out 120m new shares to a group of unnamed institutional investors at S$0.755 each and has raised net proceeds of S$89.4m. The placement price represents a 9.2% discount to its last traded price of S$0.82 while these new shares represent 12.4% of the enlarged share capital of the company. While the share placement was intended to be at least 100m, reception from the various investors was positive and the option to place out an additional 20m shares was eventually exercised. Management believes that this shows investors' confidence in the company of the total S$89.4m net proceeds, S$8.4m would be for working capital purposes while the rest would be for the expansion of Midas' aluminium alloy production capacity. The company has stated that a portion of the proceeds would be used to purchase two new production lines which we believe would refer to the two new downstream fabrication lines that are slated to come onboard by end-09 and mid-10. EPS dilution would result from this share placement exercise. Currently valued at 22.0x FY09F P/E & 13.8x FY10F P/E and assuming that Midas trades up to the 35% discount of its China-listed peers at 20.1x blended P/E FY09/10. Maintain BUY with adjusted target price to S$0.97 (from S$1.04 previously).

SingTel: Buy (OCBC Research, 17 July)
There are increasing signs that the global recession has probably past its worst point, but the consensus is that the pace of the economic recovery is still expected to remain splotchy. On the other hand, SingTel's suite of services is likely to remain quite resilient as consumers nowadays have deemed them to be near-essential or even a necessity. And should there be a faster-than-expected pick up in the economic recovery, we believe that emerging markets in Asia would be the ones who will benefit the most. We further believe that this would translate into faster growth for SingTel's regional associates, effectively adding a "recovery angle" to its investment thesis. In light of the firmer regional currencies, we have bumped up our FY10 and FY11 estimates slightly; the recent rebound in the global stock markets has also increased our SOTP fair value from S$3.18 to S$3.49. Coupled with an expected 4.5% dividend yield for this year, we maintain our BUY rating.

CitySpring Infrastructure Trust: Hold (OCBC Research, 17 July)
CitySpring has announced the official launch of the Basslink's telecoms network and is now carrying customers' traffic between Hobart and Melbourne in Australia. The Basslink telecoms network uses the fiber optic cable that is bundled together with the electricity transmission cable across the Bass Strait. The manager said a number of telecoms operators have already signed up for services utilizing the network. Publicly announced customers include Internet Service Provider (ISP) Internode which has signed a three-year deal with Basslink. In April, CitySpring terminated a telecoms agreement (TA), which included a revenue-sharing agreement with the Tasmanian government to pave the way for the launch. The manager had guided in May that revenues from already signed-up customers at the time should "more than compensate" for the lost A$2m/year (our estimate) from the TA. This is a major milestone, in our view, as commercialization of Basslink's fiber optic cable represents one of the few viable organic growth opportunities available to the trust. But our concerns on CitySpring’s high level of debt (roughly S$1.56b) and the consequent possibility of a cash call remain. Maintain HOLD with S$0.57 fair value.

Cosco Corp: Sell (Kim Eng, 16 July)
Cosco has announced a rash of new order cancellations, this time more severe – the latest round comes from related companies. China Ocean Shipping and related companies have rescheduled the delivery of three 57,000 dwt bulk carriers and outright cancelled 8 bulk carriers, also 57,000 dwt. The total value of the cancelled orders is S$298.7m. Cosco says that the three rescheduled vessels will be delivered between August 2009 and October 2009 instead of the planned delivery of between June and December 2008. Cosco will refund the deposits paid for the cancelled ships. Prior to this cancellation, interested parties transactions were worth S$579.8m. The cancellation effectively halves that exposure. We estimate Cosco's orderbook at around US$6.5bn Last week, Cosco also announced that it will delay the delivery of 8 bulk carriers (two 79,500 dwt and six 92,500 dwt bulk carriers) to two European ship owners by between 4-9 months. We had been expecting even more delays and/or cancellations for Cosco, given the difficult market conditions for bulk carriers; however, these latest cancellations have exceeded our assumptions. While Cosco says that the latest cancellations are not expected to have a significant impact to earnings in 2009, they will surely be felt in FY10 onwards. We are therefore cutting our net profit forecast for FY10 by 40% and FY11 by 50%, to S$154.3m and S$141.5m respectively. We are also factoring lower margins from cost overruns, which see our FY09 forecast cut by a further 28% to S$185.4m. With earnings expected to be volatile, we had pegged fair value at 1.5x price-to-book, or S$0.81, which remains unchanged. Our Sell recommendation is also maintained.

Cosco Corporation: Neutral (DMG Research, 16 July)
Cosco Corporation (Cosco) announced eight contract cancellations and three deferrals from China COSCO Holdings Company, namely Qingdao Ocean Shipping Co and Cosco (Hong Kong) Shipping Co, bringing to date the current number of bulk carriers cancelled to 13 and deferred to 37. This news does not come as a surprise as we have previously mentioned in our 1Q09 results note that we do expect cancellations and deferrals from Cosco parent. The total estimated contract value of the eight bulk carriers cancelled amounted to US$298.7m. As Cosco has not commenced construction of the eight cancelled vessels, Cosco stated that it would refund the installments.Maintain NEUTRAL, target price remains S$1.12. We are keeping our earnings estimates, which have already factored in 20% of order cancellations, and 50% bulk carriers delivery

Singapore Airlines: Buy (Kim Eng, 16 July)
Singapore Airlines (SIA) posted a sequential rebound for its June 09 passenger load factors, hitting 75.7 versus 66.9 in May. Although year-on-year (yoy), this was below June 08’s 79.2, this is still a strong showing in the current market environment. The load factors were also boosted by SIA's capacity cuts to match demand – passenger capacity has been cut by 14.4% yoy while passenger loads have fallen 18.2%. On a sequential basis, passenger loads were up by 9.1%, partly due to the school holidays – however, the sequential boost this year is higher than the usual seasonal 3-5% of previous years, which probably indicates that passenger loads are picking up off the lows of May, which were impacted by H1N1 fears. Cargo posted a load factor of 62.9, on the back of a 20.8% reduction in loads, matched by a 22.3% drop in capacity, to actually post a yoy improvement of 1.3 ppts. This reinforces the trend that the business may have bottomed out, with a consecutive improvement of 1.7 ppts in load factors. These latest numbers reinforces our belief that the worse of the H1N1 flu scare may be over, as air travel returns to non-crisis conditions. While we reiterate that this may not entirely indicate that SIA is out of the woods, and that the situation remains very fluid, we believe that the signs are encouraging. We are leaving our full year load factor and yield assumptions unchanged, and maintaining our FY10 earnings forecasts at S$865m. We also maintain our Buy call on SIA, with a target price of S$14.70, based on 1.2x book value. Despite weak business conditions, SIA is well equipped to weather the downturn, and investors continue to recognise the quality of this blue chip investment.

Kingsmen Creatives: Buy (DMG Research, 16 July)
We are initiating coverage on Kingsmen Creatives, with a BUY recommendation and target price of S$0.71. Prospects look good as the impending opening of the two Integrated Resorts (IR) in Singapore and the revamp of Orchard Road has sparked a makeover drive by several mid- to high-end retail brands, despite the economic recession. Retail outlets in Singapore have been carrying out refurbishment plans, in order to be ready for the well-heeled shoppers that are expected, when the IRs open and the economy recovers. Besides Singapore, its customers have also engaged Kingsmen to renovate their outlets in the region. As a provider of interiors and fixtures for commercial space, this is a positive development for Kingsmen. With Kingsmen's capabilities in providing fixtures for exhibitions, museums and events, it is likely to be involved behind the scenes for the major exhibitions and events that will be taking place over the next two years. The upcoming major events in the region (such as Shanghai World Expo and Youth Olympic Games, both in 2010) also opened up doors of opportunities for Kingsmen. With its capabilities, Kingsmen is positioned to ride on this wave over the next two years and grow its business. As one of the few in the region to venture into thematic and scenic construction, it is likely to lead to new platforms of growth for Kingsmen. Kingsmen had secured a contract relating to Universal Studios, for its theme park in Sentosa. With this project, Kingsmen will be well-positioned to bid for future theme-park projects in the region, thereby providing more impetus for growth. Although it has no fixed dividend policy, Kingsmen has been paying about 40% of earnings. Assuming the same dividends per share in FY09 as in FY08, the potential dividend yield is 5.4%. Balance sheet is also strong with a net cash position of S$26.1m (13.4 S¢ per share) at end 1Q09.

Rickmers Maritime: Sell (OCBC Research, 16 July)
We have a Neutral rating on the shipping trust sector, which faces falling asset values and counterparty concerns driven by a weak shipping market. These broader issues are compounded for Rickmers Maritime (RMT) because of its high leverage (2.2x debt-to-equity as of 31-March) and sizeable contracted acquisitions that were committed to during the better days. To recap, our concerns include: 1) loan-to-value covenants on existing loans; 2) loan-to-value requirements that affect RMT's ability to draw down committed loan facilities for the US$207m Hanjin acquisitions due in 2H09; 3) a need to repay up to US$154m in loans next year (our estimate); 4) no arranged financing for the US$711.6m in contracted acquisitions due next year; and 5) the likely redelivery of a vessel in February 2010 that could impact cash flows. For the 2Q results, our focus will be on a possible update on ongoing negotiations for waivers on loan-to-value covenants; as well as the distribution amount declared for the quarter. RMT, which does not provide distribution guidance, paid out 2.14 US cents per unit in 1Q09. Coincidentally, this was the floor amount mandated under a subordination structure that expired 01 Apr. We think the 2Q DPU decision may be driven by conflicting forces: it may make sense to cut or freeze distributions entirely to save cash to fund obligations and to appease lenders. But the cash saved is small relative to what is needed. Cutting distributions could also hurt any potential equity-raising efforts, rather than help. Our concern is that RMT is already unsustainably geared as it is; and the committed acquisitions leverage up the risk. Additionally, there is no clear roadmap of what the best solution is in this case: ideally the 2010 Maersk vessels worth US$711.6m would just "disappear" – but that may not be possible. And if an equity issue is required, unitholders will have to ask themselves if they want to fund purchases fixed at boom-time prices. With the high level of risk and no clear path out of the woods, we think it is prudent to maintain our Sell call. The recent price increase impacts the equity issue assumptions underlying our valuation. Our fair value estimate consequently increases to S$0.39 from S$0.29 previously.

FSL Trust: Neutral (OCBC Research, 16 July)
FSLT will announce 2Q results next week on 21 Jul. We do not expect any big earnings surprises, and accordingly our attention will be on DPU. The trust had previously guided for 2Q distributions of 2.45 US cents per unit. Two key pieces of information to look out for: 1) whether the distribution reinvestment scheme (DRS) will apply this quarter; and 2) guidance for 3Q DPU. FSLT changed its '100% payout' model in 1Q09, by scaling back payout and instituting the DRS. We have previously noted that the relative success of the DRS in the last quarter may protect the trust's distribution payout ratio from further cuts. Pre-paying loans may not be enough. Of course, this depends on the trust's lenders reaction to FSLT's attempts to voluntary prepay loans. Last quarter, a total of US$7.8m (roughly 46% of 1Q cash earnings) was earmarked to voluntarily prepay debt. US$3.8m stemmed from DRS proceeds, while US$4m was from retained cash earnings. We note that this amount is still small compared both to total loans and to our expectations of the quantum of the decline in vessel values. We estimate that FSLT's next vessel valuation will be in the Oct/Nov period (but lenders can call for a revaluation at any time). We believe the question here is not really if the loan-to-value (LTV) covenant has been breached but the tolerance level of lenders to such a breach. Peer Rickmers Maritime [Sell, fair value: S$0.39] had previously announced it is negotiating for LTV covenant waivers with its lenders, while US peers such as Danaos [NOT RATED] and Global Ship Lease [NR] have recently announced successful grants/extensions of such waivers. We expect FSLT to also negotiate for the same – in our opinion, it should be able to secure such waivers but our concern is with pricing. A possible cost structure could be a combination of one-time fees along with higher interest margins over the waiver period. While we have a Neutral view on the shipping trust sector, we like FSLT's diversification but the shipping industry is undeniably facing tough times. As such, our concerns on covenants and counterparty health remain unchanged. Securing an LTV covenant waiver could be an important next step for FSLT. Maintain Hold with S$0.58 fair value estimate.

China XLX: Buy (UOB Kay Hian, 15 July)
Fluctuations in urea, methanol and anthracite coal prices would affect XLX's profit. We estimate that a 1% drop in urea price and methanol price would lead to a 5.0% and 0.4% drop in the Group's bottom line. A 1% hike in anthracite coal price would lead to a 2.2% drop in net profit. Recently, the provincial government of Shanxi ordered small coal mines to shut down. This could spur anthracite coal prices in Henan Province. However, despite the poor results expected for 2Q09, we maintain our earnings forecasts for 2009-11. We expect profit to resume growth next year, driven by the full-year contribution from the new plant. A recovery in urea and methanol prices next year could also spur profit growth. XLX is trading at 6.1x 2009F PE and 4.7x 2010F PE, much lower than the average PE for domestic and global peers. Despite the industry headwinds in the near term, we remain upbeat on XLX, given its strong position amid the industry consolidation in the medium to long term. Maintain BUY with a target price of S$0.57 based on 8x 2010F PE.

Frasers Centrepoint Trust: Buy (UOB Kay Hian, 15 July)
Shopper traffic remains healthy in Jul 09 after the Great Singapore Sale (GSS) held in May-Jun 09. Thus, FCT's management expects positive rental reversion to be sustainable, going into 2HFY09. Management is confident that valuation will hold up when investment properties are revalued in Sep 09 due to positive rental reversion. In particular, there is room for the valuation of Northpoint to increase due to Asset Enhancement Initiative (AEI) and subsequent growth in rental income. Gearing will therefore remain below 30%. Suburban malls are resilient and hardly affected by the financial crisis due to a change in behaviour with consumers visibly trading down to stretch every dollar. FCT focuses on suburban malls located next to the Mass Rapid Transit (MRT) stations, which cater to basic necessities and non-discretionary spending by captive populations in HDB heartlands. Our target price for the stock is S$1.39, based on the Dividend Discount Model (required rate of return: 7.7%, terminal growth: 2.5%). FCT provides FY10 distribution yield of 8.6% and trades at 26.8% discount to NAV/share of S$1.23.

UOL Group: Hold (OCBC Research, 15 July)
Following the success of the Double Bay Residences (DBR), UOL will be launching another mass market project – Meadows @ Pierce. Launch price for this project is expected to average around S$900 psf, which is higher than the S$800 psf that we have assumed in our valuation. We estimate the breakeven price of this project to be about S$670 psf, which could potentially yield a healthy profit margin of 26% for UOL. In the high-end segment, sales at Nassim Park Residences are also picking up. We are now raising our RNAV estimate to S$4.11 and the discount rate on our valuation of UOL's development and investment properties has also been reduced from 40% to 30% as the degree of uncertainty in our valuation is lower now. Our fair value has now been raised to S$3.56 (previously S$2.91). We maintain our HOLD rating on UOL and will turn buyers around S$3.00-S$3.10.

StarHub: Buy (OCBC Research, 15 July)
StarHub has announced that Terry Clontz will retire as its CEO in Jan 2010, though he will continue as a director with the group; we understand that Terry wanted to spend more time with his family in the US. Interestingly, Neil Montefiore – former head of rival MobileOne – has been appointed to succeed him. While the move does come as a surprise, we think that Neil is a good replacement as he knows the Singapore mobile market very well – he also has previous experience in HK with Hong Kong Telecom CSL. However, Neil may need time to get up to speed on StarHub's Pay TV and broadband businesses, and time may not be a luxury with the National Broadband Network (NBN) that is coming on stream by 2012. Nevertheless, we do not expect any significant policy changes in the near-term and will keep our estimates unchanged for now. We will review our estimates after its 2Q09 results (due 5 Aug). For now, we maintain BUY with S$2.88 fair value.

DB Top 10: Buy (Deutsche Bank, 14 July)
The DB 10 Singapore Portfolio consists of ten stocks which include one bank, one REIT, two transportation companies, two telcos, two capital goods companies, and two property companies, which we believe will outperform the country benchmark equity index (FSSTI) in absolute return terms.The portfolio is simply an equally weighted selection of ten stocks from our formal country coverage universe that we believe will display superior total return profiles within their country equity market over a 6-12 month forecast period. Near term, we are positioned defensively on de-rated cyclicals with strong balance sheets, sustainable business models, and high dividend yield stocks which have lagged. We are cautious on deep cyclical sectors which have rebounded sharply, and where we continue to see balance sheet and earning risk. DBS (Target: $14.00) has recapitalised its balance sheet and now faces less earnings risk on a short-term basis, and it also benefits from improving NIM trends. We have added two property stocks, Allgreen (TP: $1.05) and Keppel Land (TP:$2.42). Allgreen is a key beneficiary of volume recovery in the uppermid residential segment, with a pipeline of launch-ready projects that enables it to take advantage of windows of opportunity in terms of timing. Following the rights issue, Keppel Land will have one of the strongest balance sheets in the sector (adjusted gearing of 0.22x), with the deterioration in the office sector well reflected in valuations and impairment risk limited vs. peers. AREIT (TP: $1.80) is well positioned to weather the downturn by virtue of its welldiversified portfolio, high quality tenants and balanced lease structure. Concerns over its export-related SME tenants should lift as the economy recovers. We have three capital goods companies – ST Engineering (TP: $3.00), SembCorp Industries (SCI) and Sembcorp Marine (SMM). ST Engineering continues to win government orders and benefits from a weaker S$ and lower wage costs. SCI (TP:$4.20) offers a strong order book as well as relatively steady earnings through its Utilities Divisions. The long-term fundamentals of the O&M industry remain intact, with accelerating reserve depletion and the eventual recovery of global economies, and this should benefit SMM. Starhub (TP:$2.49) has a defensive operational position, high yield, international best practice triple/quad play bundling, predictable cash-flows and a strong management team. As a land transport operator, ComfortDelgro (TP:$$1.75) can benefit from a firm ridership and falling oil prices providing resilience to its earnings. SIA (TP: $15.40) and Singapore Telecom (TP: $3.00) round up the DB Top 10 list.

CWT: Buy (DMG, 14 July)
CWT, the largest Singapore-based logistics company, is a key beneficiary of the Singapore recovery story. It manages 7.1 million sq ft of warehouse space in Singapore and abroad. In particular, it has 5m sq ft of space in Singapore Save for its new mega warehouse, all other facilities are fully utilised and will continue to be in the foreseeable future. We expect rentals to appreciate about 10% over the next 12 months, which augurs well for CWT. Given its size and financial clout, it is able to set the tone for warehouse rental rates, which is likely to increase in the next 12 months as demand returns. With the economy improving, CWT, which has successfully monetised its assets by selling them to REITs, will also have ready buyers for its facilities. Moreover, valuations are attractive from numerous angles – historical and peers' P/E (11.9x and 8x respectively), as well as earnings growth (36% CAGR). We are ascribing a target P/E of 9x to our FY10F EPS, a discount to its 3-year historical average of 11.9x. This works out to a fair value of S$0.66, representing an upside of 33.3%.

Singapore Press Holdings: Buy (Kim Eng, 14 July)
SPH's 3Q09 operating income declined marginally to $131.3m but was up 40% qtr-on-qtr (qoq) mainly due to the stepped-up revenue recognition for Sky@Eleven. An investment gain of $17.6m was recorded, compared to $25.7m in 1Q08. Net profit was 5% lower year-on-year (yoy) at S$126.7m; Overall, a decent set of results with the fall in print ad revenue being cushioned by strong development profits and cost containment measures. Core publishing business could have bottomed as operating profit in 3Q09 posted a sharp rebound qoq. Display ad revenue had reversed the downtrend and the risk of more cutbacks on the budgets of SPH's top ad revenue contributors (telcos, property) seems low given that government's pump-priming measures such as the jobs credit scheme are taking effect. Government ads spending also support the recovery of print ad revenue. Sky@Eleven remains on track for TOP in CY2010. To date, 56% of the project's revenue has been recognised. At Paragon, rental revenue declined 5.4% qoq despite the addition of 40,000 sqf of space in the quarter. We suspect renewal rental rates could have fallen or replacement of commercial tenants could have led to disruptions. Our target price is remains unchanged at $3.90. SPH looks on track to deliver our full year revenue and earnings estimates. With the divestment of the loss-making TOM Outdoor Media Group in May, the Group is focused on positioning itself for the next growth phase which in our opinion may include property development. Prospective PER of 11.3x for its core publishing business does not look expensive. Maintain BUY.

Singapore Press Holdings: Hold (OCBCResearch, 14 July)
SPH’s topline of S$331.2m (-4.8% year-on-year) while bottomline came in at S$126.7m (-5% yoy). Staff salary cuts helped buffer the dive in its core operations performance. SPH's property division performed better than expected with greater recognition of revenue from its Sky@Eleven project. The company's investment income also registered stronger-than-expected gains from a better equity and bond environment. However, we remain concerned by the lack of visibility for its core advertising business that extends only to about 1 month out, along with the current trend for businesses to use cheaper black & white advertising. The only silver lining for advertising lies in the recent acceleration in property launches. We are maintaining our earnings estimates as we expect a limpid final quarter but have bumped up our SOTP valuation in view of a better-than-expected valuation for Paragon at S$1.98b (prev: S$2b valuation). We had estimated S$1.8b. We are retaining our HOLD rating with a SOTP fair value of S$3.31 (prev. S$3.18). Our forecast of 14.5 S cents for SPH's final dividend can yield 4.7% if investors accumulate around S$3.05.

Thomson Medical: Buy (DMG, 14 July)
Thomson Medical continued to achieve better year-on-year (yoy) results. 3Q09 revenue rose 11% yoy to S$17.4m and net profit grew 18.2% yoy to S$3.5m. The results were in line with our estimates. The improved results were on the back of an increased number of baby deliveries. Increased patient loads and healthy patient referrals also helped boost earnings. Balance sheet remained healthy, with a net cash position of S$15.2m. Its new hospital projects in Vietnam are progressing on track and are expected to contribute positively to group earnings from FY10. Management has plans to continue expanding its network of Thomson Women's Clinics, which could boost revenue growth, going forward. We are maintaining our earnings estimates of S$13.0m (+15.7%) for FY09. and our Buy recommendation for Thomson Medical, with a 12-month target price of S$0.63.

SPH: Buy (DMG, 14 July)
SPH’s 3QFY09 revenue and net profit both declined by 5% to S$327.1m and S$126.7m respectively. On a qtr-on-qtr (qoq) basis, however, the company experienced turnover growth of 13.9% while bottomline surged by 45.6%. What was commendable was the print business, which saw revenue rise 8.5% qoq (print ads +9.3%) and suggests the worst is over. Margins showed a general improvement in 3QFY09 with operating margins increasing due to an 18.9% drop in staff costs. We see some life being injected back into the classifieds, with the strong pick-up in the property market. The recent news that firms are starting to hire again should drive demand for recruitment section in the next few quarters. We expect newsprint costs to fall to US$700 per tonne in 4QFY09 and average US$689 per tonne in FY10, which should prop up margins. There were worries that the Sky@eleven project is one-off and would leave a big vacuum when it is completed next year. But based on our estimates, the core print business and Paragon will be able to generate at least S$320m in recurring income. While we maintain our forecast, we have upped our price target to S$3.59 from S$3.40 previously, due largely to higher valuation ascribed to Paragon (S$1.98b, from S$1.69b). Dividend yield of 6.8% remains attractive, and should lend downside support as the market consolidates.

China Fishery: Buy (DMG, 13 July)
China Fishery’s net profit expected to grow by 12.1% year-on-year (yoy) to US$106m in FY09. China Fishery is expected to start their main operations in the South Pacific in Aug 09. For FY09 we assume US$38m addition to revenue and US$19m contribution to gross profit from this operation. South Pacific operations are expected to contribute US$169m in revenue for FY10, which results in a significant 60% yoy boost in net profit in FY10. Management has also mentioned the intention of lowering their debt with their cashflow over the next two years, which we believe will attract more investors. Meanwhile, average selling prices (ASP) for the North Pacific catch is expected to average US$1,750/metric tonne for FY09, compared to US$1,668/mt for FY08. Sales volume is expected to be around 185,000 mt, similar to in FY08. The FY09 cost of fuel for trawling is expected to decrease by US$25m due to lower crude oil prices. Fishmeal ASP has strengthened over the last few months, with FY09 ASP expected to average US$950/MT, versus US$793/MT for 1Q09. Our FY10 net profit has been raised by 14.8% to US$169.2m, as we factor in 225,000 mt of sales volume for the South Pacific. However FY09 net profit has been lowered to US$106m on reduced sales volume for the North Pacific trawling and Peru's Fishmeal operations. Our price target is raised from S$1.15 to S$1.20 based on 4.3x FY10 P/E.

Singapore Telecom: Buy (Kim Eng, 13 July)
The iPhone 3GS was launched last Friday and will run until today. We understand that the pre-launch response is comparable to the 3G launch in Aug 2008, with “several thousand” orders placed online between 6th and 9th July and customers still clamoring to place orders even after the pre-ordering closed. A new Lite price plan has been added, with a $39 monthly fee (vs $56 for the cheapest plan when 3G was launched). Assuming most new users will take up the cheapest plan, we estimate handset subsidies will be significantly lower this time round, e.g. $150 for the 16GB 3GS model vs $505 for the 16GB 3G model, as Apple has cut the price by US$100 but SingTel is actually charging more for the 3GS model ($548) compared to the 3G model ($508). However, it is a trade-off as the monthly fee for the cheapest plan is also lower than before. Typically, carrier margins would be hit if iPhones outsell other handsets as subscriber acquisition costs would soar in the product launch quarter, and contrary to expectations, worldwide demand for iPhone 3GS has not waned. Apple reported 1 million sets sold in the first weekend, the same as 3G. However, due to the estimated lower subsidy, we expect SingTel to maintain its FY10 EBITDA margin guidance of 36-38% when it reports 1Q10 results, which we reckon has already considered the new iPhone, and there may be upside if the economy improves further, unless content costs run out of control. On the M&A front, Bharti is expected to complete its due diligence on MTN by end-July. The deal is reported to have the support of the Indian government. In addition, the Australian dollar and Indonesian rupiah have continued to strengthen in 1Q10. Optus and Telkomsel contribute about 15% and 18% of SingTel's pretax profit, respectively. We have updated our SOTP model incorporating our latest forecasts and market values for the listed associates, and derived a SOTP value of $3.35 (raised from $3.17 pvsly).

ASL Marine: Buy (OCBC Research, 13 July)
From our discussions with several industry players in the offshore and marine industry, the ease of obtaining loans from banks is still nowhere close to pre-crisis levels. Indeed, obtaining bank financing is still a difficulty, especially for relatively smaller firms. On a broader point of view, latest monetary statistics show that businesses have bore the brunt of the credit crunch, as loans growth to firms in Singapore decelerated rapidly to only 3.7% year-on-year in May compared to 37.2% growth in September last year On top of weak demand, unavailability of credit facilities will continue to suppress new shipbuilding orders. Activity will be greatly affected in a downturn when the cost or working capital needed is high. Oil companies have doused their enthusiasm about going into deepwater drilling due to the significant funds and costs involved. Tugs and barges are relatively less costly than most other offshore support vessels, and being a specialist in this area may serve ASL Marine well in this downturn. We were updated by ASL's management that shiprepair activities are still holding up for now, though we note that shipowners may attempt to defer maintenance works that are not mandatory. As mentioned in our earlier report, this business segment is likely to be affected

Keppel Land: Buy (DMG, 13 July)
Keppel Land announced the proposed delisting of Evergro Properties, its 85.4%-owned subsidiary. Under the delisting proposal, KepLand will make an exit offer for the 14.6% of Evergro's share capital which it does not own. KepLand’s exit offer consideration involves either (1) 0.1429 shares in Keppel Land or (2) S$0.29 (16.0% premium to last closing price of S$0.25) in cash for every unowned Evergro share. Management believes the move will help to combine both companies' extensive networks, operational expertise and industry knowledge, thus providing Keppel Land with a stronger platform to maximize the potential of their existing portfolio and collective strengths. Given that the counter is thinly traded (~ 50,000 – 80,000 shares traded per day on a three to six month basis) and its last closing price already represents its 52-wk high trading price, we implore Evergro shareholders to take up Keppel Land’s exit offer. We maintain our BUY rating for Keppel Land at S$2.98, at parity to its end-FY10 RNAV.

Noble Group: Buy (RBS, 10 July)
We reiterate our belief in the commodity boom for several reasons. First, the stimulus measures in India, China, Brazil and Russia should support rising commodity prices. These countries are increasingly the main consumers of commodities. Second, there is a historic under-investment in the supply of commodities. Third, inflation could result from the rise in money supply in the US and other countries. Finally, historical evidence suggests we are roughly at the mid-point of an extended commodity boom. We believe Noble's 45% and 24% discount to peers in terms of PE and EV/EBITDA can no longer be defended. Noble does not deserve the vast discount to the sector. The company's cash cycle has fallen dramatically due to the heavy investments made to improve the efficiency of its supply chain, which suggests that the valuation gap should close. It is an outlier among its supply chain peers. In the past, Noble's heavy working capital burden has diluted its cash flow from operations (CFO). But, recently, its heavy capex programme has improved its cash cycle from 40 days in FY06 to 11 days in 1QFY09. Noble now trades at less than twice its FY08 CFO. We raise our target price to S$2.64 per share, providing 55% potential upside

Ezra Holdings: Sell (Citi Research, 10 July)
Ezra's 9M09 results has come in below consensus – PATMI at US$40mn is only 66% of consensus FY09E of US$61m. Operationally, results were in line with our forecasts with 9M09 EBIT at 73% of our full year forecast. We raise our earnings estimates by 7-16% to reflect lower than expected financing costs and higher than expected associate income. However, we remain concerned over three key issues namely its earnings volatility, balance sheet concerns and cash drain. While we appear bullish with FY10/11E earnings estimates at 11%/31% above consensus and imply 47%/29% year-on-year (yoy) growth, significant part of earnings growth is from i) yard order book fulfillment (lumpy and lacks visibility), ii) energy services division (high operating leverage), and iii) FPSO contribution (delayed since Aug-08). Earnings growth is likely to be volatile. Cash generation has been deteriorating since 1Q09 and working capital adjustment has been negative since 2Q08. As to its balance sheet, the high net gearing at 49%-owned EOC (2.4x) remains worrisome. We note that Ezra and EOC's assets are usually packaged to provide an integrated suite of services. We derive a net gearing of 0.5x after incorporating Ezra's recent share placement and consolidating EOC's balance sheet with Ezra. Gearing is unlikely to improve when considered together with negative operating cash flows for Ezra's We have raise our sum-of-the-parts target price to S$1.00 from S$0.95 based on our earnings revisions. We use 6x FY-Aug-10E P/E (15% below peers) to value the core business. Maintian Sell.

Sino Techfibre: Buy (UOB Kay Hian, 10 July)
We believe the recent strength in the chemical fibre industry indicates at least some restoration in the demand from the end-consumer market of apparel and garments, which would sooner or later make a positive impact on synthetic leather producers such as Sinotech. In addition, the Purchasing Managers Index's (PMI) new export orders index edged up to 51.4 in Jun 09 from 50.1 in May 09 after staying below 50 for 10 consecutive months from Jul 08 to Apr 09, which implies substantially improving external demand. This is a positive sign for export-oriented industries eg the garment and textile sector. As such, we expect a gradual recovery in 2H09 for Sinotech. Our target price for Sinotech remains at S$0.22 based on Hong Kong-listed peers' average FY10 PE of 5x. Maintain BUY.

Rotary Engineering: Buy (OCBC Research, 10 July)
Rotary Engineering's (Rotary) 51% owned subsidiary (49% by Rafid Group), Petrol Steel, has confirmed that it won the refinery tank farm package of SATORP. The contract is officially valued at US$745m, slightly above our prior US$700m estimate. Our previous concerns on the dilutive effects of the JV have somewhat been alleviated with half of the US$745m to be performed directly by Rotary instead of its JV. We are also maintaining our stance to accrete earnings over four years (2010-2013) as we deem mega projects like these will likely experience delays. While SATORP is a key catalyst for Rotary, we have no doubt that the company was and will still be pursuing substantial projects in Singapore and the region. Iterate Buy for Rotary with a fair value of S$0.81. We will be incentivised to re-peg the stock if Rotary achieves better-than-expected margins during execution or wins more regional projects than forecasted.

Midas Holdings: Buy (DMG, 10 July)
Within a span of less than three weeks, Midas announced that it had clinched several projects wins worth a total of RMB 1billion, almost twice the amount of its previous order book of Rmb517m as of end-1Q09. Nevertheless, as we understand from management that some of its previously clinched contracts would be fulfilled in 2Q09, we estimate its order book would currently stand at around Rmb1.4b. While it has historically taken around 24 – 30 months to achieve full utilisation, management revealed that it expects to ramp up utilisation for its third line by a faster pace as its order flow had been very strong. Market rumours for a fourth and possibility even a fifth line are seemingly not unfounded, although management declined to confirm these issues. Nevertheless, we believe that Midas may require some form of funding should they decide to ramp up its production capacity. We have kept our earnings estimates for FY09 intact given that we have already assumed close to full utilisation rates for Midas' two existing AA extrusion lines previously. Also, contributions from its new fabrication business are expected to be very minimal in the current year. We have, however, increased our top and bottomline forecasts in FY10 by 24.6% and 17.9% respectively due to the addition of two new production lines for the fabrication segment and assumptions of higher utilisation rates for the third extrusion line. While earnings growth in 2009 is not expected to be outstanding as its manufacturing lines have long since attained full utilisation, the outlook in 2010 is highly positive due to contributions from its new production lines. Maintain BUY with price target of S$1.04 (from S$0.855 previously) assuming it trades up to 18.8x FY09/10 blended P/E.

Pacific Shipping Trust: Hold (OCBC Research, 10 July)
A new Drewry Shipping Consultants’ report projects a 10.3% market contraction in global box traffic over 2009, and a small 1% growth next year. It estimates that 27m fewer TEUs will be handled for the year than in 2007. Drewry also says "continued unsustainable freight rates" are pushing smaller companies to the brink of financial collapse. The head of Maersk Line said in an interview last week that growth in shipping volumes in 2010 is unlikely – he expects capacity utilization in the industry to fall further over the next 12 months. July is a key month as some major liners implement widely publicized rate increases. Trans-Pacific carriers have also proposed rate hikes starting August to bring freight rates back to 'compensatory levels'. It remains to be seen if these increases take hold in the broader market. In the meantime, PST's negotiations with CSAV, which has chartered two of its vessels, have yet to be formally resolved. However, counterparty risk of default (on CSAV) has certainly moderated and we are more sanguine about how negotiations play out. Nonetheless, the devil is in the details and there is no guarantee that the ultimate deal will be equally favorable to both sides. PST faces uncertainty on two fronts – the CSAV renegotiation and a sickly container industry. Current price levels present deep value but with little evidence of an imminent industry turnaround, we think it is presumptuous to turn buyers. We bump our fair value estimate up to US$0.24 from US$0.16 to reflect moderated risks on the renegotiation. This represents a 30% discount to our 'normal' case discounted FCFE value of S$0.34 (10% discount rate). Our estimates (which assume a 30% cut in charter rates to CSAV) are unchanged. Maintain Hold.

Kingsmen Creatives: Buy (Kim Eng, 9 July) Target price: $0.86
Singapore's retail scene is undergoing a major rejuvenation, including the Orchard shopping belt that is worth some $4.4 billion. Always the first choice in handling the most stringent retail fit out works for high-end retail boutiques, Kingsmen has garnered contracts for 20 shops out of an estimated 50 high-end boutiques at the ION Orchard. Kingsmen is also in sweet spot to benefit from the two upcoming intergrated resorts (IRs). Filled with contracts worth $80m from the Universal Studios, we believe more contract wins are likely, possibly exceeding $100m by year-end. This is in view of a potential retail fit out space of up to 1.26m sqf at the Resorts World, non-mechanical works on the Universal Studios of up to $300m and an expected influx of exhibition space related activities. Armed with powerful and precious experience of delivering contracts for the Formula One Grand Prix, Orchard Shopping malls and the Integrated Resorts, Kingsmen's impressive work will gain visibility worldwide. The group's track record and experience in these high-profile projects will be increasingly sought after in the global arena. This opens doors to boundless opportunities for world-class attractions, particularly in the areas of theme parks, Formula One and the Olympics. Superior quality of its products and services has enabled the group to derive up to 70% of its interiors revenue from repeated customers, which include world-class brands like Apple, Burberry and Chanel. Moreover, its interior division will grow along with the ongoing expansion plans of its blue-chip clients globally. We estimate 30% of Kingsmen's earnings are recurring, which bodes well for its earnings stability ahead. While having superior earnings quality and ROE, Kingsmen is trading at a mere 5.9x forward PER and at a sharp discount to peers. Besides offering a timely exposure to the Singapore IRs, Orchard rejuvenation and boundless regional growth, Kingsmen has been generous in paying dividends. We estimate a FY09 DPS of 3 cents or a yield of about 6%. Our conservative forecasts have yet to factor in possible contracts overseas in the area of theme parks, F1 and major events such as the Shanghai Expo.

Ezra Holdings: Buy (OCBC Research, 9 July)
Ezra has reported 3Q09 topline growth of 9% year-on-year (yoy) to US$59.9m while core bottomline also inched ahead 8% to US$18.8m. On a 9M09 basis, core PATMI (excluding 3Q08 US$136.3m divestment) did better, rising 33% to US$43m. Ezra met our expectations and we think that this is a credible performance in view of the overall difficult operating environment. Ezra will be taking delivery of 2 self-propelled jack-up rigs (liftboats) from Ezion from Oct 09 to Mar 10 to do platform maintenance work. The liftboats will be able to replace 2-3 vessels, granting Ezra greater flexibility in fleet deployment. Management has made no mention of the recent S$89.6m proceeds that it raised in May 09 but we think it could be used for future distressed asset acquisition. EOC did not get earnings accretion from its gas FPSO this quarter and we have assumed for it to start in Jul 09. Ezra remains one of our favourites for the sector with its relatively defensive earnings. In addition, we think its recent placement puts it in good stead to capitalise on any distressed asset situation. We have tweaked our target price to S$1.46 (prev. S$1.42) as we see margin improvements for the group as it drives for internal efficiency

Ezra Holdings: Buy (DMG, 9 July)
Ezra Holdings (Ezra) 3QFY09's topline increased by 9% year-on-year (yoy) but fell 6% qtr-on-qtr (qoq) to US$60m. Core operating profit was US$17m, an improvement of 14% yoy and 4% qoq. The results results came well within expectations, though we raise slight concerns over Ezra's high collection period for the second consecutive quarter. Going forward, we expect 4QFY09 revenue and operating profit to mirror 3QFY09's results. Hence, no change has been made to our earnings estimates.. Ezra's collection period continued to exceed 240 days into 3QFY09 as compared to 185 days in 3QFY08. Management said this was largely due to the longer payment period xtended to STP Energy for Ezra's maiden Energy division's project (completed in 1QFY09). Management noted that it would be enforcing stricter credit terms (eg. request for upfront payment and letter of credits) as Ezra takes on new projects for its Energy division, going forward. We understand that Ezra will be revealing its new growth strategy next week. We believe management is likely to share forward plans of the Energy division, ie. providing construction and maintenance services to existing oil producing wells. If so, this diversification may allow Ezra to enjoy higher value added returns. Meanwhile, Ezra's fleet of chartering vessels will provide a stable recurring income stream, as our industry channel checks reveal that Ezra is bidding for several chartering contracts, including tapping on associate company, Ezion Holdings' recent A$350m win of the A$2.7b Gorgon gas field development project.

CapitaLand: Buy (CLSA, 8 July)
With its target asset allocation for China raised to 45% of total assets, we expect CapitaLand to get more aggressive on asset acquisition. China remains a better market to access growth, than Singapore. Focus will now be on developing the Raffles City brand, and the residential business. Checks also suggest that 31 of CapitaLand's 58 retail asset pipeline have already become operational. Furthermore, the company has emerged as one of the most recognizable foreign property brand in China. We believe CapitaLand will first replenish its residential land bank in China as residential assets now account for only 25% of total Chinese assets (40% target). Expect the focus to be on Shanghai, Hangzhuo and Ningbo. Based on our conservative analysis, every S$1bn spent on land acquisition can add about 1.5% to our CapitaLand RNAV. Our RNAV estimate for CapitaLand is raised by 3.8% to S$3.82, to factor changes in residential prices and investment values. In getting to our new 12-mth target price of S$4.00 (5% higher than RNAV), we now factor the potential upside from new residential land bank acquisition.

SMRT: Buy (UOB Kay Hian, 8 July)
SMRT Corp has, over the last 18 months, been trading at approximately 23.5% over and above the sector average, based on the price-to-earnings metric. Even on a price-to-book basis, the stock is by no means cheap, trading at 3.6x P/B (though this is largely due to its low fixed asset base). However, we believe that the stock is still worth paying for, based on strong margins that outshine that of sector peers, outstanding return on assets, sustainable dividend payouts based on a solid earnings base, and its ability to leverage on the Singapore growth narrative. SMRT's premium to peers is a relatively recent phenomenon that has been brought about by a collapse in valuations of its European-listed peers. Up till mid-05, SMRT was trading below the sector average, and started trading in-line thereafter. The premium over peers, a relatively recent phenomenon, was brought about by a steep slide in valuations of European peers from the onset of the financial crisis. We view SMRT as a play on Singapore's growth trajectory, and the rail system as the biggest beneficiary of the government's push to nudge commuters and peak hour traffic towards public transport. The rail system is, by far, the best alternative transport method to avoid congestion on roads. We ran comparisons between SMRT and sector comparables, and found that the company commanded the highest margins and ROA among listed land transport operators. We have lowered our profit forecasts for FY10-12 by between 5.1% to 6.3% to account for rising fuel expenses in the current financial year, and our assumption that the jobs credit scheme will be halted beyond FY10. We have also changed our valuation methodology from PE to DCF. Our discounted free cash flow to equity places SMRT's value at S$2.00/share.

Midas Holdings & Rotary Engineering: Buy (OCBC Research, 8 July)
Midas and Rotary have both recently won infrastructural projects worth about RMB1b and US$700m respectively. The contracts will underpin earnings and serve to tide the companies through a potentially long drawn recessionary period. The flurry of recent rail-related contract wins for Midas iterates that it continues to distance itself from competition with downstream processing capabilities and clinching high speed rail projects. Rotary's US$700m SATORP project puts it on a new playing field to capture future business in oil-rich Saudi Arabia if it performs well. Contrasted with the uncertain operating environment, along with the still unthawed credit freeze, Midas' and Rotary's net cash positions, good operating cash flows and better earnings visibility in next 2-4 years provide investors a relative safe haven. We have maintained our estimates and Buy ratings for both companies as these infrastructural projects will bring earnings stability. We have upped our fair value for Midas to S$0.90 (prev. S$0.85) based on 16x FY10F EPS (prev: 15x). Our fair value for Rotary remains at S$0.81.

Raffles Medical Group: Buy (Nomura, 7 July)
RMG posted strong 1Q09 results, with net profit up 28% year-on-year (yoy) on improved cost efficiencies. The healthcare services segment (including its primary care network and insurance arm) grew by 10.8% yoy, confirming its defensiveness amid the downturn. Despite the downturn, RMG is still in growth mode, particularly in expanding its primary healthcare network. The group is taking the opportunity to lock in low rental rates and expand its clinic network, while at the same time focusing on organic growth. It has opened four new clinics in the year-to-date, including an integrated outpatient centre at Tampines One offering specialty services such as O&G and paediatric medicine. In terms of hospital capacity, management highlighted that the group is only utilising 200 beds currently, and could expand up to 320 beds if demand arose. Management reiterated its conservative stance on pursuing M&A opportunities in the region. The group highlighted China and Southeast Asia (particularly Malaysia) as the key regions of potential opportunity. Management continues to be wary of the regulatory environment in China. It is currently evaluating potential projects in cities like Beijing, with the aim of doing a greenfield project. One challenge is the selection of a local partner, since Chinese regulations cap foreign ownership of hospitals at 70%. Our price target of S$1.30 (unchanged) is based on a target P/E of 16.4x applied to FY10F earnings.

Parkway Holdings: Buy (Nomura, 7 July)
Parkway will likely continue to position its Singapore hospitals to attract foreign patients while seeking growth in other Asian markets. The group is well positioned regionally, with a footprint in Malaysia, Brunei, India, China and Vietnam. Management said that its healthcare services subsidiary, Parkway Shenton, was awarded the border H1N1-screening contract, with a potential top-line contribution of S$2-3mn/month. The group also has seen minimal impact on patient volume despite the H1N1 situation. Management guided its patient volume has recovered in June, with flat revenue growth year-on-year (yoy) Revenue intensity, however, has not improved. The group's Pantai Hospital is looking to grow its top line by 20% to 30% annually and plans to expand by about 1,000 beds to 3,300 beds in Malaysia. The group is building a new 300,000-sf block at Pantai Hospital in Bangsar, of which 150,000sf will be medical suites for sale. China. Through Worldlink (unlisted) (Parkway Health China), Parkway will add two more clinics to its current six and add three more dental locations in Shanghai. The group is looking to market the Novena medical suites to doctors, who currently do not own their medical suites. Parkway is looking to sell the first phase with 88 units out of a total 200 units when it receives approval, which is slated in 2H09. Maintain Buy with price target at $2.14

Midas Holdings: Buy (DMG, 7 July)
Within a span of less than three weeks, Midas announced yet another set of projects wins as its subsidiary Jilin Midas Aluminium Industries secured contracts to supply aluminium alloy extrusion profiles worth a total of Rmb 86m which are expected to be fulfilled from 2H09 onwards. Out of this amount, Rmb54m would be for the Saudi Arabia Metro project and the Iran Metro project which was secured through its customer Changchun Railway – this also represents Midas’ first foray into the Middle Eastern market. The remaining Rmb32m is slated for the Changchun Light Rail project (also through Changchun Railway) and the Guangzhou Line 3 Airport Line project (through CSR Zhuzhou Electric Locomotive). These new contract wins amount to just 5.7% of Midas' present order book at Rmb1.5b although we believe that they are noteworthy as they represent the company's first foray into the Middle East. Going forward, management has also guided that they would continue to build on its strong track record to capitalise on opportunities seen in the foreign markets. We have previously already assumed such contract wins in our FY09 earnings forecast. While our current BUY ecommendation remains, our target price of S$0.855 is under review.

ST Engineering: Buy (DMG, 7 July)
STE's wholly owned subsidiary ST Synthesis sealed a five-year contract worth S$26.5m by Land Transport Authority (LTA), the second deal from the agency in three weeks. The contract kicks off immediately, and involves the provision of comprehensive maintenance services on the electrical and mechanical systems of Kallang Paya Lebar Expressway (KPE), South-east Asia’s longest underground tunnel. ST Synthesis will also provide facilities management services for the KPE, a first for the Group. ST Engineering has been active snagging contracts, winning over S$200m worth of deals in the past two months alone. The Group has record orders of over S$11b. We estimate earnings will contract 1.8% to S$465.2m in FY09 before growing 10.9% to S$516m in FY10. At S$2.41, it trades at 15.5x FY09 and 14x FY10 P/E, while yields remain attractive at over 6.4%. Our target price of S$2.83 is based on DDM.

ST Engineering: Hold (Kim Eng, 7 July)
STE has established a US$1.2 billion Multi-currency Medium Term Note programme, as part of its long term financing strategy. STE characterizes it as a pre-emptive measure to diversify funding options, and is designed to provide STE with the agility to quickly raise funds to pursue opportunities, should the need arise. The proceeds will be used to fund new capital expenditures, acquisitions, general corporate purposes and/or refinancing existing borrowings. The notes will be unconditionally and irrevocably guaranteed by STE, and is rated AAA by Standard & Poor's Rating Services. Moody's Investor Service is expected to release its rating of the Programme soon. Application has been made for the notes to be listed on the SGX. STE's borrowings Currently stand at around S$900m, which is offset by its cash balance of around S$1.4bn. Combined with the notes, this gives STE a formidable war chest of some S$3.2bn. While STE says that is constantly on the lookout for acquisition opportunities, it has not made a sizeable purchase for over 2 years. However, we believe that it may be looking at further acquisitions in the aerospace sector, particularly in the US, where the current difficult operating environment will present value opportunities. Fundamentally, however, we maintain our Hold recommendation on STE, with earnings expecting to drop by 8% in the current year, with dividend yield at 5.5%.

ST Engineering: Sell (UOB Kay Hian, 7 July)
STE has indicated that it is taking a pre-emptive measure to diversify its funding options and will be opting for a multi-currency denominated medium term note. As at 1Q09, STE had S$913m in debt and S$1.39b in cash and near cash, of which S$599.9m is placed with Fullerton Fund Management, a wholly-owned unit of Temasek Holdings. The US$1.2b notes will raise debt by 92%, assuming the new debt will be used to refinance existing debts. In 2008, the effective cost of debt was just 4.8% and had eased further in 1Q09. The 6.75% interest cost is shown net of fair value of an interest rate swap trade. Assuming the note has a coupon of 4.5%, interest cost will be S$78.8m, or 84.6% higher than in 2008. Over the last three years, maintenance capex amounted to about 131% of depreciation costs (S$159m in 2008) and slightly more than half of capex was directed towards the aerospace segment. STE has already made substantial investments in China, with new hangars coming on stream in Shanghai and Xiamen in 2009. Thus, the need for further funding comes as a surprise. The incremental funding will be the largest in nine years and is expected to raise interest expense and potentially affect dividend payout. We also believe STE's dividend yield should reflect a risk premium over the coupon on the note. Pending further announcements, we are neutral on the stock. We maintain our SELL recommendation and our fair price of S$2.04, which is based on 14x two-year forward earnings.

Sembcorp Marine: Hold (Kim Eng, 7 July)
On June 8, SMM had announced that it had sold the semisubmersible PetroRig I to Diamond Offshore in order to recover monies due to them following the non-payment by the customer, Petromena. With the resolution of the PetroRig I sale, we are raising our recommendation on Sembcorp Marine (SMM) to a Hold. However, the outlook for rig newbuilds still remains muted at this point, and we remain unexcited over the medium term. With the healthy reported selling price of US$460m, this assuages concerns of SMM’s other 2 rigs being built under the same specifications for Petromena. SMM has collected 50% of these contracts amounts, and believes that it would be able to dispose of the rigs in a similar manner at no loss if Petromena should once again default on payment. The sale also indicates that demand for such deepwater rigs remains healthy, and that SMM is able to protect itself against such default contingencies. We are raising SMM's price target to $2.73 from $2.31 previously, on higher shipyard multiples in our sum-of-the-parts valuation. Our FY09 net profit forecast of $497m remains unchanged. While 2-yr earnings CAGR is still a healthy 12.7% p.a., we expect turnover to taper off from 2011 onwards. While we do expect the rig market to pick up, we are unlikely to see the same strength as in the last boom cycle between 2005 and 2008. However, given its respectable earnings visibility and decent dividend yield, we raise the stock to a Hold.

Wilmar: Buy (OCBC Research, 7 July)
Wilmar International has been reported by Reuters as having hired three banks to handle what could be a US$3b flotation of its China business in HK – unnamed sources cited by the newswire said that the IPO is set for a listing late this year or early next year. The latest news (though unconfirmed by the group) shows that the proposed HK listing of its China operations is on track. Based on its estimated US$500m bottomline contribution, we believe that the US$3b flotation is not an issue, assuming a valuation of 20x and a divestment of 30%. However, we will hold off adjusting our numbers until we get more information about the structure and form of the proposed listing. Nevertheless, we are bumping up our valuations slightly from 18x blended FY09/10 PER to 18.5x, deriving a fair value of S$5.78. Maintain our BUY rating.

CapitaLand & CapitaRetail China Trust: Outperform (Daiwa, 6 July)
We think a possible share-price trigger for CapitaLand would be the resumption of monetising its China-mall assets by injecting them into its dedicated Singapore-listed real-estate investment trust (S-REIT) platform, CapitaRetail China Trust (CRCT). We believe this could materialise within the next six months. For CRCT, a sooner-than-expected return to its distribution-per-unit- (DPU) accretive acquisition-growth mode would also be a positive catalyst for outperformance. One benefit for CapitaLand is that the group does not rely solely on the state of the Singapore residential market (9% of assets). If the recovery of the Singapore residential market (in particular, new home sales) were to lose momentum in 2H09, we believe CapitaLand’s shares could still outperform due to its geographic and business diversification, particularly if it announced some capital-productive measures which would indicate that the group was working its way out of the global financial crisis. CapitaLand is one also of the largest (if not the largest) mall owner/sponsor in China. If CapitaLand can continue to increase the pipeline, realise its potential and maintain its leading position for another 10 years, we believe it could become the biggest listed company in Singapore, while CRCT could become the biggest S-REIT. We have raised our six-month target price for CapitaLand from a previous NAV of S$2.43 to one standard deviation (31 percentage points) above the average premium to NAV (29%) since 2004, or a 60% premium to NAV. Applying a 60% premium to our revised NAV of S$2.64, we obtain a six-month target price of S$4.22, providing potential upside of 16.9%. CapitaLand trades currently between its average NAV premium (S$3.40) and one standard deviation above its average NAV premium (S$4.22). We acknowledge that this target appears aggressive, but believe the share price is more likely to reach S$4.22 first if the company gets into a roll securing capitalproductive deals, including the resumption of recycling the China-mall assets. We also believe that the NAV estimates are likely to appreciate (albeit gradually) to reflect the potential dollar-value benefits of these deals. Moreover, NAV estimates would also rise if the Singapore and Asia property-markets continued to stabilize ahead of market expectations. We have also upgraded our rating for CRCT to Outperform and expect acquisitions from CapitaLand's mall pipeline to improve its DPU-growth outlook and increase its industry-leading FY08-11 DPU CAGR to 9.0% (from 8.4%). We have also raised our sixmonth target price to S$1.32 from S$1.00.

Singapore Airlines: Overweight (JP Morgan, 6 July)
SIA is in its worst earnings cycle in history with a high probability of reporting losses for the next two quarters which explains its underperformance versus the market year-to-date. Although we remain bearish on the near term outlook and the timing and quality of the rebound remains uncertain, we believe that its potential correction in the upcoming results and/or the worsening impact from Influenza A would provide a good opportunity to accumulate in preparation for a cyclical upturn. For more risk averse investors, SIA is also the "safest" choice in the sector given its well-capitalized balance sheet, strong track record at managing costs during downturns and ability to unlock more value from subsidiaries & associates such as SIE, Tiger Air in the longer term, and M&A forays that could lift market sentiment even though they may not necessarily be value-enhancing. Stock is effectively trading cum dividend of S$1.77/share. Buying SIA now entitles shareholders to 0.73 SATS share for every 1 SIA share. Although shareholders may not necessarily realize the value of SATS near term due to potential share overhang as free float would rise from 19% to 45%. However, applying mid-cycle airport valuations on SATS of c.18x P/E would imply a potential fair value of c.S$2.40/share longer term. We have raised our price target to S$14, factoring in SIA's improving earnings outlook in the next 12 months.

ComfortDelgro: Overweight (JP Morgan, 6 July)
We see earnings return to normalized levels in 2009 on lower fuel prices. Earnings contribution has also begun at ComfortDelgro Cabcharge Victoria post acquisition. This was faster than expected and the segment's high operating margin of 23% is likely to be accretive to the Group's overall bus business (1Q09 bus EBIT margin: 8.5%) in the long run. ComfortDelgro continues to maintain its leadership position in the Singapore taxi business with a market share of 63%. Its idle rate of a low 1.5% also sets it markedly ahead of its close competitor – SMRT – although we observe keen competition from private operator TransCab which is fast catching up with the second largest market share. The current economic conditions should have presented significant M&A opportunities for a well-managed land transport group like ComfortDelgro, as some companies may be facing distress but still holding potentially lucrative operating concessions. However, we have yet to see any M&As from the company year-to-date, possibly attributed to management's cautious stance. There could be a potential shortage of near-term catalysts for the stock given management's conservative stance as far as M&As are concerned. Nonetheless, valuation remains undemanding at 12x FY10E P/E and 1.6x P/B and we continue to believe that its 75%-owned SBS Transit stands a relatively higher chance in securing the Downtown MRT line to be awarded early 2010. Overweight with target price of $2.00

Olam: Sell (Deutsche Bank, 6 July)
We believe Olam's share price strength comes largely from the hope of M&A activities and potential contributions from Temasek. This anticipation, we feel, has been overplayed, and the earnings dilution/contribution disconnect (i.e., immediate EPS dilution from the placement vs. the earnings lag from new acquisitions) shows that much has been discounted with the high valuations. M&A, while exciting, could raise overall risk as the number of moving parts increases. Our recent company visit indicates that the volume surge seen by the group in April/May '09 was due largely to Chinese re-stocking and has not been sustained. Cotton demand has slightly declined in June, and the outlook is weak. Wool and rubber remain weak due to continued poor consumer spending. Cocoa and dairy, which are said to be recession-resistant, are also showing slight weakness. Olam has outperformed the STI following its recent placement to Temasek (273m new shares at S$1.60) and the acquisition of SK Foods (US$39m). We believe much of the good news has been discounted after the share price surge. At 23x FY10E PER, 3.3x P/B, and 11.4x EV/EBITDA, Olam is not only trading at a sizeable premium to its peers, but it is expensive versus its own trading history.

Sinotel Technologies: Buy (6 July)
Sinotel announced that it has secured an increase in the credit facility granted by DBS, Beijing Branch. This will allow Sinotel access to an additional RMB30m, which brings the total facility to RMB65m. With this increase in facility, there can be additional working capital to fund new and on-going projects, if Sinotel needs. We view this increase in credit facility as a positive for Sinotel. Sinotel typically takes 200 – 300 days to collect the cash from an order (from point when contract is signed, to billing customer, to collecting the receivables). Therefore, additional working capital resources would put Sinotel in a better position to take on more projects, as the Chinese telcos continue to upgrade their 3G networks. The Chinese telcos are expected to spend RMB280b over the next three years (of which, RMB150b in 2009) to upgrade their 3G networks. We estimate earnings will grow over 20% in the next two years. We maintain our target price of S$0.32, based on 3.0x FY09 P/E.

CapitaCommercial Trust: Buy (OCBC Research, 6 July)
CCT had recently completed its rights issue with 1.4b new units listed last Friday. The issue was well accepted, with a subscription rate of 135.4% of the total units available. Post-Rights gearing level of CCT will decline from 43.1% to 30.7%, after the repayment of borrowings using the proceeds. We believe that this provides a sufficient buffer for CCT to tide over the asset devaluation during this downturn without the need to tap on the equity market again. Even though the rate of decline in office rental had decelerated in 2Q09, our fundamental view of a worsening office market going forward remains unchanged. Nevertheless, we continue to like CCT for its quality office assets and strong management. The market is now factoring in a 32.4% decline in asset value, which is over-excessive in our view. We maintain our BUY rating on CCT with fair value of S$0.96

SingTel: Buy (OCBC Research, 2 July)
Singtel has unveiled its pricing plans for the upcoming UEFA Champions League, Europa League and Serie A matches next season. Offered via three platforms on mioTV, online and on mobile, the sign-ups will range from S$15.90/month for access to all three platforms for its subscribers; it also has separate plans for individual platforms should subscribers opt not to take up the all-in-one package. It has not forgotten about non-subscribers who can pay S$13/month to watch these matches online or just S$6 per live match. We think the multi-platform approach is great as it enables SingTel to tap the whole market of football fans well beyond its current mioTV subscriber base of 100,000. Nevertheless, we understand that subscriptions alone are not enough to cover its content cost, Still, the move will allow SingTel to build on its content ahead of the launch of NBN (national broadband network), where we believe content will be a key differentiating factor among the telcos. Maintain BUY with S$3.18 fair value.

Singapore Airlines: Buy (Kim Eng, 2 July)
Since the proposed divestment of SATS as a dividend in specie of 730 SATS shares for every 1,000 SIA shares held, SATS shares have surged by S$0.66, or 44%. This translates to S$0.48 per SIA share. Since then, SIA's own share price has improved by 15% or S$1.70, based both on this factor as well as an improved fundamental outlook. However, we still see further upside to SIA's share price, as SATS still remains undervalued, and the core airlines business looks to have bottomed out. We have recently raised our target price on SATS to S$2.51, which translates to S$1.83 per SIA share. We remain sanguine on SATS prospects post the SFI acquisition, with other potential opportunities such as contracts for the integrated resorts, as well as unlocking value from properties held at cost. SIA remains an excellent proxy to get into SATS. The current effective return for SATS as an in specie dividend is S$1.53 per share or 11.5%. This compares favourably to the expected EPS erosion to SIA of 11.5cts per share, based on our forecasts, while NTA will drop by S$1.4bn, or S$0.63 per share. Notably, SATS currently trades at 2.4x book, versus SIA's current PBR of 1.1x – this variance underscores our view of SIA as an excellent proxy into SATS.We are raising our target price for SIA to S$14.70, based on 1.2x price to book on the back of improving fundamentals. Recent load factors show signs of a bottoming out, while SIA's adjustment of capacity to match demand will yield costs savings. Despite the recent rise in jet fuel prices to US$76 per barrel, this is still below our full year assumption of US$90.

Sembcorp Marine: Sell (Kim Eng, 2 July)
Sembcorp Marine (SMM) has announced that they have secured a second SeaDragon rig order from Oban B Limited to complete and deliver a DP-3 semi-submersible. SMM will outfit, furnish, equip, test and complete the 6-column bare deck hull which was built in a Russian yard. SMM's share of the contract is US$237.3 million, and further excludes equipment supplied by the owner. Delivery is expected in June 2011. SMM expects positive contributions to its earnings from the contract for FY 2010 and FY 2011. Pricing for the contract is decent, as it excludes the cost of the baredeck build and owner-supplied equipment. This announcement should be positive for sentiment on SMM. However, we remain cautious on the outlook for new orders, with no new contracts being won for rigs at either SMM or Keppel recently – this latest contract was initiated at least a year ago. As such, we continue to maintain our muted outlook for SMM's overall earnings prospects, and maintain our Sell recommendation to a target of S$2.31.

Sembcorp Marine: Buy (DBS Research, 2 July)
Sembcorp Marine's (SMM) wholly-owned subsidiary, Jurong Shipyard, has secured a second SeaDragon rig order to complete and deliver a Moss Maritime Full Dynamically Positioned (DP-3) Semi-submersible Drilling unit. This second rig is scheduled for delivery in June 2011. This second SeaDragon contract represents the exercise of the single option that comes with SeaDragon’s earlier award of an uncompleted rig contract (worth US$247m) to SMM on 6 April 2009. This second contract is worth US$237m, excluding equipment supplied by the owner. SMM will work on a 6- column Bare Deck hull, previously built in a Russian yard. Following arrival, SMM will construct, outfit, furnish, equip, test and complete the bare-deck hull into an ultra-deepwater semi-submersible drilling rig. The harsh environment newbuild rig will have a water depth rating of 10,000 ft and maximum drilling of 30,000 ft. This latest contract win from SeaDragon has brought SMM's y-t-d order wins to S$1.0b and is on track to reach our assumption of S$3.0b for 2009, given that rig/offshore contracts tend to be lumpy in nature. Our fair value for SMM stays at S$3.25, using mid-cycle valuation and blended FY09/10 EPS. Maintain BUY.

Midas Holdings: Buy (DMG. 2 July)
Midas Holdings' announced that its Aluminium Alloy Division Jilin Midas Aluminium Industries has sealed two contracts worth Rmb73.8m to supply specialised fabricated aluminium alloy extrusion profiles for the CRH3 high speed train project. These two contracts represent Midas' first foray into the business of downstream fabrication and is inline with the company’s strategy to be an integrated manufacturer to the rail transportation industry. These contracts are expected to be earnings accretive from 2H09 onwards. While we have not factored in these new contract wins for the downstream fabrication business, note that it is rather small as compared to its present order book of Rmb1.43b – these new contracts represent just 5.2%.Within a span of less than 3 weeks, Midas had announced that it had secured S$195.5m worth of contract wins, eclipsing its previous order book value of S$110m. We believe further contract wins are on the pipeline and hence we maintain our BUY recommendation with our target price of S$0.855 under review.

Cambridge Industrial Trust: Buy (Phillip Securities, 1 July)
CIT has no near term refinancing worries, as its single loan maturity of $390 million is due in 2012. The current gearing is 40%. Although it has not mention any plans of acquisition, CIT has a LTV covenant of 50%, which effectively allows it to gear up a further $200 million. However we feel that acquisition using pure debt to push the gearing limit is not a prudent move as seen in the last round of panic refinancing in the REIT sector. Therefore we believe with the three years time frame to the next loan maturity date, CIT will undertake some form of recapitalization measures to fuel its growth plans. Property portfolio continues to perform within expectations. Occupancy rate for 1Q09 was 99.2%. The current focus for management is to actively manage its property portfolio so as to maximize the usage of space and renegotiate leases to dilute expiry profile concentration. Management has also indicated asset rebalancing whereby the REIT divests smaller underperforming assets. We had assumed a 3% vacancy rate for 2009F and 2010F. Demand for industrial space should be buoyant from 2011 as supply is expected to stay flat according to URA schedule of industrial space. We raise the fair value estimate from $0.31 to $0.44 on lower assumption of WACC at 9.96 versus our previous assumption of 11.4. We upgrade our recommendation from Hold to Buy.

Parkway Life REIT: Buy (Phillip Securities, 1 July)
Over 80% of Plife REIT revenue is derived from hospitals in Singapore while the rest are from nursing homes and healthcare facilities in Japan. Plife REIT collects rental from its tenants based on an inflation linked formula. In August 2008, rental for the Singapore hospital was revised up 6.25% (average CPI over the 12 preceding months plus 1%). Although we have seen CPI reading sliding off from 6.7% in Sep 08 to register a negative reading of – 0.3% in May 09, unless CPI continuously register a monthly reading of –9.5% for the next four months to offset the positive readings in the prior nine months, the CPI + 1% formula ensures that rental revenue grows at the minimal rate of 1%. In our forecast, we have assumed a 2% growth and maintain our projections at the moment, though we think surprise may be on the upside. Fitch Ratings downgraded Plife REIT long-term issuer default rating from BBB+ to BBB with a stable outlook. We view the rating cut as a non-issue as fundamentals remain sound. Gearing is currently 23% and Plife REIT has total debt of $247.5 million with interest cover of 6.7. $34 million of loan is due in the 2nd half of 2010 while the rest are due in 2011. We maintained our forecast numbers and reassert our optimism in Plife REIT. Plife REIT is not subjected to the cyclicity of the economic cycle unlike other REITs. We raised our fair value estimate to $1.18 due to lower risk premium input in our DCF model. Risk includes a prolong deflation scenario, which will cause our revenue estimates to be excessive. However the variance is not significant as changes to our forecasted DPU is less than 1%. We think the main risk would be a further credit downgrade as the maturity of the loans draw near and Plife REIT has not announced its refinancing plans. Maintain Buy with fair value at $1.18

Suntec REIT: Hold (Phillip Securities, 1 July)
Our fundamental view of Suntec REIT has not changed. We feel revenue is still being subjected to pressure as Singapore goes through the recession. We feel key issues for the management will be to maintain the rental while keeping occupancy of the portfolio stable. Suntec REIT has 64% of its portfolio NLA exposed to the office sector and 34% exposed to the retail sector. 77% of office leases are expiring over the next 3 years and we are concern about falling reversionary rent achieved by the expiring office leases. Although expiring leases rent is lower than the passing average rent, however average rent for leases secured has peaked out in 2Q08 and has fallen 26% in 1Q09. Furthermore, Suntec REIT office portfolio could come under pressure from the completion of over 9.2 million sqf of office space in the core downtown area over the next five years. Given that our outlook is for a bottoming of office rent in 2010Q4, we would expect the gap between expiring leases and renewal leases to converge with a negative bias. Suntec has no near term refinancing concern. It has successfully secure $825 million of term loan in April 2009. The current gearing is 35%. Although management has not indicated any acquisition plans, we believe that Suntec will build up its equity balance for two reasons; in anticipation of asset devaluation and to ready itself for any opportunities that arise for its next phase of growth. Currently Suntec owns approximately 57% of Suntec City Office Towers, it may resume its program to acquire strata office units not presently owned. We revise our average rent and occupancy assumptions and reduce our DPU forecasts over FY09F-FY11F by 4%-9%. We maintain our Hold rating and raise our fair value from $0.69 to $0.94 mainly on lower WACC assumptions.

Ho Bee: Hold (Phillip Securities, 1 July)
Ho Bee has sold 37 freehold strata retail units at Kovan Centre at Yio Chu Kang Road for S$22.2 million. Ho Bee had bought the retail units from First Capital Corporation (now GuocoLand) in 1999 for S$18.8 million. The sale price of S$22.2 million was below our estimate of S$25 million. In May 2009, Ho Bee sold five units at the Orange Grove at Stevens Road/Orange Grove Road at a median price S$2,320 psf. As Ho Bee recognizes revenue from residential projects that have been sold, it is anticipated to remain profitable for the next three years. We expect it to report net profit of S$174.6m, S$65.2m and S$62.8m for FY2009F, FY2010F and FY2011F respectively. We currently have a hold recommendation on Ho Bee as it has not sold a large number of properties recently and there may be a decline in sale prices of its luxury properties. However, due to the strong sales in the property market recently, we have raised the fair value to S$0.85, which is 50% discount to the RNAV of S$1.70. If Ho Bee launches its properties and the sales prove to be strong, this can be a catalyst to upgrade our recommendation and fair value on the stock.

SC Global Developments: Hold (Phillip Securities, 1 July)
SC Global has started to advertise on local television programmes, but it has not launched its properties for sale. We believe that it is creating awareness of its brand before the luxury market picks up. We are forecasting SC Global to remain profitable because it has achieved large sales of its residential projects in 2006 and 2007. Based on the progress of construction of its projects, we are expecting net profit to increase from S$40.7m in FY2009F to S$203.8m in FY2010F before falling to S$128.5m in FY2011F. We have a hold recommendation as it has not launched any properties recently and it may have to lower the selling prices of its luxury projects to boost sales. We have reduced the fair value of the stock slightly from S$1.13 to S$1.10, which is 50% discount to the RNAV of S$2.21. A catalyst to raise the fair value for the stock is a larger increase in the sales of high-end residential properties. Another catalyst is the return of foreigners to purchase luxury properties in addition to mass market and mid-end properties.

KSH Holdings: Neutral (DMG, 1 July)
KSH won a S$83.4m construction contract from National University of Singapore (NUS), which we believe will strengthen its public sector track record. This brings order books to S$438m, stretching over the next two years. The new contract is for the construction of two blocks of residential colleges and five blocks of common facility buildings for the NUS University Town. We believe that winning this project would strengthen its public sector portfolio. According to Building and Construction Authority's (BCA) forecasts, public sector's construction demand is expected to make up S$17-19b, out of total forecasted construction demand of S$22-28b. Based on Apr's preliminary figures, actual construction demand was S$6.11b, with public sector making up S$5.06b and private sector demand contributing S$1.05b. As such, we believe that having the ability to secure public sector wins is a plus to replenishing order books. With the new contract win, KSH’s order books for its construction business now stand at over S$438m. Construction work on this NUS project has started since 24 Jun and is expected to be completed within 22 months. We understand from management that they have been busy recently tendering for projects, with approximately 60% of the tender projects coming from the private sector. This is in line with the current pick up in private sector sentiment that is reported. We are maintaining our earnings estimates for now, as this NUS contract win has been factored in. Applying a P/E multiple of 5x FY10 earnings (peers' at 7x), we arrive at a target price of S$0.29.