Stock Picks

KSH Holdings: Neutral (DMG, 31 Mar)
KSH Holdings Ltd's (KSH) services include general construction, developing and managing properties in Singapore, Malaysia and China.It has close to 30 years of history, with a strong track record, having been involved in numerous projects across multiple segments for both private and public sectors.With cash holdings of S$65.6m as at end Sept 08 and debt of S$64m (including the convertible notes), KSH would have sufficient cash on hand to continue working on the projects even if there were delays in payments by clients. It will also be able to pay a premium to hire another sub-contractor to ensure timely project delivery should its sub-contractors be unable to complete the specified jobs. The company has an order book of around S$420m as at Mar 09, lending some visibility to its earnings till FY11. The risk of bad debts is minimised as its clients are the more established developers like Ho Bee Group, Lippo and Keppel Land. With the sales in the private property market slowing down, KSH would not be developing its two property projects – at Mergui Road (Mergui) and Lincoln Lodge. There is also a possibility of re-valuation losses for these two projects. Factoring in the weak sentiment in the property market and negative growth in the construction sector, our estimates for revenue and earnings in FY09 are S$329.1m and S$16.3m respectively. In line with KSH’s construction peers, we are valuing KSH at 3x forward earnings. We derive a target price of S$0.11 and initiate coverage with a NEUTRAL call.

Keppel Corp: Neutral (DMG, 31 Mar)
Keppel Offshore & Marine (Keppel O&M), through Keppel FELS Brasil SA (Keppel FELS Brasil), announced the award of contract from new customer, Noble Drilling (Noble), for the completion of an ultra-deepwater semi rig, Noble Dave Beard . Keppel O&M, through Keppel Shipyard has also secured two other contracts. The first contract was from long-standing customer, Bumi Armada, for which Keppel Shipyard would be building a derrick lay barge for pipe laying operations in waters, while the second contract was from Single Buoy Moorings to install four new modules and modify the existing topsides and turret. We have made no changes to our earnings estimates as the three contracts totalled S$300m vs. our Keppel's new contract assumptions of S$2.2b for FY09. Our recommendation stays at Neutral, with a slight revision to our target price to S$4.55 (from S$4.48 previously), following adjustments to our sum-of-the-parts valuation.

Keppel Land: Buy (OCBC Research, 31 Mar)
KepLand has announced the deferment of the construction of Madison Residences. With just 1 unit sold, deferment is a rational move. Holding cost for this Bukit Timah land is low as it was acquired in 1999. We are now removing the revenue and earnings contributions of Madison Residences from our FY09 and FY10 forecasts. Our FY09 and FY10 PATMI estimates have been cut by 3.6% and 7.7% to S$241.4m and S$296.2m, respectively. Our FY09 RNAV estimate has been lowered marginally to S$3.67. Risk for KepLand is relatively higher than its peers but at current RNAV discount of 61.2%, we believe that the bulk of the risk has already been priced in. We maintain our BUY rating on KepLand with fair value of S$1.77.

Midas Holdings: Buy (DMG, 30 Mar)
Midas Holdings, which has investments in aluminium alloy extrusion products and polyethylene pipes, is set to enjoy strong growth on the back of the railway sector. It will also get a boost from 32.5%-owned associate NPRT, being one of the four entities with a licence to assemble/produce Metro train cars in China. Midas' current order book is worth S$120m, with deliveries stretching out over the next two years. NPRT has a much bigger order book, clocking up RMB4.5b worth of orders (784 train cars) for delivery between FY09 and FY11. With many more railway systems to be added in major cities and also connecting various cities, we are confident Midas and NPRT will be adding to their current tallies. Approximately RMB2 trillion is budgeted by the Ministry of Railways (MOR) for expansion of China's existing railway system between FY09 and FY12, mostly for intercity train systems. As much as RMB600b will be spent in FY09 out of this RMB2 trillion. We have estimated that Midas will see a RMB2b surge in orders based on its 80% market share in AA train car body extrusion. From FY04 to FY08, Midas grew its top line 140% from S$60.2m to S$144.5m, a CAGR of 24.5%. Despite the current credit and economic crisis, we believe Midas will continue its path of strong and stable earnings growth with the construction of a third AA production line and higher contributions from NPRT going forward. We derive a 12-month fair-value target price of S$0.73 using our DCF model.

Midas Holdings: Buy (OCBC Research, 30 Mar)
While there could be the possibility of more competitors a few years out due to the need to cater to the sheer magnitude of aluminium profiles needed, we think that Midas is in good stead to hold the market leader position with its established quality track record and expansion plans. Midas will use 2009 to improve current operations while expanding its 3rd line with its 32.5% owned associate, Nanjing Puzhen Railway Transport (NPRT) sizing up be the key deliverer of earnings growth with expected deliveries of 30-35% of its 768 train car order. Margins should be held steady in 2010 when complementary downstream processes start to contribute more substantially. We maintain our BUY call with fair value of S$0.63 based on 14x FY09F PER. In the mean time, Midas is likely to trade in tandem with sentiments of S-chips and share price catalysts could come from contract wins.

Parkway Life REIT: Buy (DMG, 27 Mar)
Parkway Life REIT (PREIT) has a portfolio that consists of three hospitals in Singapore, a pharmaceutical products distribution and manufacturing facility, as well as nine nursing homes in Japan. As the largest listed healthcare REIT in Asia, it is in a good position to ride on the growing demand for healthcare services across Asia. PREIT is the only REIT that has pegs its rental revenue growth to CPI, with a minimum growth of 1%. Hence, PREIT is a beneficiary of rising inflation. In an economic downturn where CPI is negative, PREIT's rental revenue from its Singapore properties (80% of portfolio) would still grow by the minimum 1%. There is no refinancing risk in the next 24 months, as the next refinancing will be in 2011. Its low gearing of 23% at end FY08 puts PREIT in a good position to take on debt to expand its portfolio through acquisitions. At current levels, PREIT is trading at 0.6x P/B and FY09F dividend yield of 10.1%. We initiate coverage with a BUY recommendation, for a REIT with downside protection and relatively defensive nature.

China Fishery: Buy (DMG, 26 Mar)
Aquatic product prices rose 3.3% YoY in Feb, slower than Jan's 11.6% rise. We believe that fish prices will remain stable in China due to continued demand. Alaskan Pollock is the most common type of fish used in fast-food restaurants and as the global economy continues to worsen, we could see more people switching their diets to Alaskan Pollock from other more expensive fishes. In our assumptions we believe that China Fishery’s FY09 revenue will grow by 3% to US$340m from fishing. Management forecasts a total of 200k tonnes/annum of fish to be caught in FY09 with an ASP of US$1,700/tonne. Maintain BUY for China Fishery with a price target of S$0.86 based on 3.9x FY09 P/E. The company is currently trading at 2.8x FY09 P/E and 2.1x FY10 P/E.

Hyflux: Buy (OCBC Research, 24 Mar)
Hyflux is one of Asia's leading environmental companies, offering integrated solutions and services using its proprietary membrane technology in the waste water segment. It has its operations and projects mainly in Singapore, China, the Middle East and North Africa (MENA) and India; this includes one of the world’s largest desalination plants in Algeria. Currently, Hyflux is sitting on an impressive order book of S$1.5b (end 2008), up from the S$1.1b as of end 2007. Going forward, management remains confident that it can continue to grow its order book by some 20% this year. While the outlook for the water treatment industry has improved, we believe that not all companies will benefit equally – only those with superior technology, proven track record and strong financial position would emerge victorious. We see Hyflux as one of these victors. We initiate coverage on Hyflux with BUY and a DCF-based fair value of S$2.03.

CapitaLand: Buy (DMG, 24 Mar)
ION Orchard, a 50% JV between CapitaLand and Sun Hung Kai Properties, is slated for its soft opening in Jul 09 following the completion of structural works. At present, over 80% of the 640,000 sf retail mall has been committed and negotiations are underway for the remaining vacant spaces. In light of the continued weakening economic landscape, we view the more than 80% take-up for a mall of ION's size on a positive note. We believe this is more impressive when compared against other upcoming and existing major malls along the Orchard Road belt. Management did not reveal any details on rents, but we predict it could fall within S$20 – 80 psf pm depending on individual store's location. Using a back-of-the-envelope approach (assuming overall rents of S$20 psf pm and conservative cap rate of 6%), we estimate ION's OMV at S$3,200 psf, which is still above its breakeven cost of S$2,500 psf. While we do not deny that ION's introduction arrives at a challenging time given the uncertain near-term retail outlook, we believe it will form an integral part of the medium-long term goal of Orchard Road as the next shopping paradise and its ongoing rebranding process to attract more shoppers (locals and tourists). We also remain firm believers of its well-honed retail management skill sets. Maintain BUY at RNAV-pegged fair value of S$2.60.

Straits Asia Resources: Buy (OCBC Research, 24 Mar)
Thailand's PTT International (PTT) has made a S$0.807/share cash offer for Straits Asia Resources after purchasing Straits Resources Ltd's 47.1% stake in SAR as part of a strategic alliance. The offer is priced 4.5% below SAR's last transacted price and 7.9% below its six-month VWAP, and values SAR at a modest 2.2x FY09F PER and 1.2x FY09F NAV. This undervalues SAR's strong fundamentals and earnings growth potential, in our view. PTT's takeover offer for SAR appears to be a procedural obligation as a result of it crossing the 30% ownership level. Good dividends and earnings prospects provide little incentive to accept offer. SAR's shareholders may reap better returns in the long term by holding on to their shares, given the group's generous dividends and robust outlook. SAR's dividends yielded a generous 11.5% return in FY08, and we expect FY09 yield to increase to 17.8% on the back of higher earnings. Earnings are expected to more than double in FY09 thanks to higher coal prices secured during the commodity boom in 2008. PTT's takeover offer puts an end to months of speculation over SAR's privatisation. It also rules out any acquisition by Noble Group Ltd (previously reported to be one of the interested bidders) or other strategic investors in the near term. We maintain our BUY rating and S$1.15 fair value estimate for SAR and do not expect PPT to raise its offer price. As for Noble, our BUY rating and S$1.33 fair value estimate remains intact.

SGX: Sell (DMG, 23 Mar)
The stock market average daily turnover (ADT) of S$1,038m and S$831m for Jan and Feb 09 respectively is sharply lower than CY2008's S$1,492m. Jan and Feb 09 futures trading volume of 3.32m and 3.62m respectively is also sharply lower than the CY2008’s monthly average of 5.13m. This is another drag on SGX revenues. This factors in a reduction of FY09 stock market ADT from S$1.19b to S$1.08b, and futures trading volume from 72m to 55m. Consequently, our FY09 net profit forecast is cut by 7.8% to S$291.1m. SGX is committed to an annual base dividend of 14S¢ from FY09 onwards. We are forecasting FY09 dividend of 24.6S¢/share, based on a 90% payout ratio (FY08 payout ratio was 84%). This gives a dividend yield of 5.2%. SGX traded at mid-teens P/E in 2005, when stock market ADT fell 14.5% YoY. We are assuming a FY09 stock market ADT decline of 52%. Our target price of S$3.95 is pegged to 13x FY10 EPS. Our sensitivity analysis shows that a hypothetical S$1.7b stockmarket ADT (including derivative warrants) for FY10 should yield a target price close to current SGX share price of S$4.72. This is double Feb 09's S$831m. We believe the market is over-bullish in this respect. SGX remains a SELL.

Cosco Corp: SGX: Sell (DMG, 23 Mar)
Cosco is reported to have secured a contract from Modec to deliver the hull and marine system of a FPSO at one of Petrobras' oil fields. The contract amount was not disclosed in the article, though we note that Cosco had previously secured a similar contract valued at US$35m from Modec to carry out hull and marine repair and conversion work of an oil carrier to a FPSO in Apr 07. We think any contract win would put Cosco in good standing to explore further working opportunities. As Cosco faces a series of bad news, beginning with cancellation of semi-submersible rig hull from Red Flag AS, followed by MPF Corp's bankruptcy and Sevan's financing uncertainty, we think this news could bring upside relief to Cosco's share price. However, we surmise Cosco's yard execution and credit management still need to improve further before Cosco deserves any re-rating. Hence, we maintain our target price of S$0.740 based on 1x FY10 P/B. Maintain SELL.

SMRT: Buy (OCBC Research, 20 Mar)
We believe SMRT, as one of the key public transport operators in Singapore, is well primed for the opportunities created by the Land Transport (LT) Master Plan. While we acknowledge that SMRT is likely to be burdened by higher labour costs following the commencement of the Circle Line, a higher expected ridership, coupled with lower percentage electricity and diesel costs, are likely to enable the group to uphold its profitability and dividend payout. We like SMRT for its defensive nature, consistently strong dividend payouts and strong operating cash flows. For FY08-12, we expect the group to register an EPS CAGR of 6.6%, thanks to a continued increase in ridership, higher rental and advertising revenue and expanded engineering services. We initiate coverage on SMRT with a BUY rating and S$1.83 fair value which implies a 17.3% upside potential and at 16.9x FY10F EPS, which is still slightly lower than the 17.4x average PER seen in 2008. Key risks include exposure to volatile energy costs and compliance to performance standards set in its License & Operating Agreement.

Singapore Petroleum Company: Hold (OCBC Research, 19 Mar)
SPC is a regional oil and gas company with businesses in oil and gas exploration, refining, terminalling and distribution, marketing and trading of crude and refined petroleum products. Formed in 1969, it is the only independent oil refiner in Singapore. Profits are highly dependent on refining margins which can be pretty volatile but its upstream diversification should help cushion any ill-performance in the downstream sector. Looking ahead, demand for refined products are likely to remain weak with the global economy in doldrums. However, any oil discoveries in its Exploration and Production (E&P) assets should be a positive share price catalyst. Using sum of the parts valuation, we initiate coverage on SPC with a HOLD recommendation and S$2.45 fair value estimate. We will turn buyers of the stock around S$2.20, barring a sudden deterioration in economic environment.

Armstrong Industrial: Buy (DMG, 19 Mar)
Armstrong's 4Q08 revenue fell 15.7% to S$41.9m while net profit decreased 75.9% to S$1.5m although it would have slightly exceeded our S$3.2m forecast should the S$1.9m FX loss be excluded. Except for its Consumer Electronics business, all three other segments had posted negative growth in 4Q08 owing to the unabated economic crisis Armstrong's balance sheet however remained relatively healthy although slower sales had translated to a 39% jump in inventories in FY08. However, its trade receivables and payables were efficiently managed as Armstrong continued to generate positive free cash flows even during the protracted downturn in 4Q08. With Armstrong continuing to leverage on the hard disk drive (HDD) theme and with several of its major customers expected to report lower profitability for the current year, we reckon that Armstrong would not fare any differently. Nevertheless, we continue to like the company's exposure to the rubber business (which commands higher margins) and we also gather that more of Armstrong's HDD customers are switching from the usage of plastic to rubber. Currency fluctuations as one of our key concerns. The strengthening of the yen and the US$ against the S$ during 4Q08 had impacted Armstrong negatively. Should these trends remain, e believe it is inevitable that the company's bottomline would continue to be affected. We continue to like Armstrong for its ability to stay operationally healthy despite the weak macro outlook. Currently priced at 5.3x FY09 P/E and assuming it trades up to its 2-yr historical average of 7x, we cut our target price to S$0.145 from S$0.17. Prospective dividend yield of 9.1% is also reasonable.

Golden Agri: Sell (CLSA, 18 Mar)
An unfavourable supply-demand balance is likely to reduce crude-palm-oil (CPO) prices further – to US$500 in 2009, down 42% year-on-year (yoy). As more than 90% of Golden Agri's profit comes from CPO plantations, we expect core earnings to drop by 63% as the company contends with low CPO prices and high production costs. Some 55% of Golden Agri's book value (US$2.6bn) stems from revaluations of biological assets (plantations) that it has made over the past four years. The company's gearing would be 20% instead of 9% and its ROE 19% instead of 35% if we were to take out the effects of the revaluation gains. Given that the firm is using US$670/tonne CPO prices to value its plantations, versus US$500 09CL, revaluation losses in 2010 are likely. Hence, Golden Agri appears overvalued based on our S$0.21 discounted-cashflow (DCF) derived target price. At 13x 10CL PE, it is also expensive relative to peers. The company's earnings are highly sensitive to CPO prices, and the stock trades closely in line with CPO commodity prices, which we expect to drop another 10% from here. If we were to take the current CPO price of US$555/tonne, our target price would be S$0.28, in line with the current stock price.

Parkway Life REIT: Buy (Phillip Securities, 18 Mar)
Parkway Life REIT (Plife) is the largest healthcare REIT in the Asian region with asset size of S$1047.8 million. At the time of listing in Aug 2007, its initial property portfolio consists of three private hospitals injected by sponsor Parkway Holdings Limited – namely Mt Elisabeth Hospital, Gleneagles Hospital and East Shore Hospital. Plife has since expanded its portfolio to include nine nursing homes and a pharmaceutical products distributing facility in Japan. Japanese properties make up 24% by asset size and contribute 10% to gross FY08 gross revenue. Plife has a revenue model that ensures rental revenue will not erode with rising inflation. The Singapore properties are under a master lease agreement with an inflation-linked formula to calculate rental. For the Japanese properties, part of the rental is also inflation-linked. As such, unitholders are assured that dividend distributions are stable and not subjected to the cyclical economic cycle. We believe Plife's low gearing is a reflection of the management prudence. Current gearing is 24% and it has no near term financing requirement. Total debt is $250 million and the next round of refinancing is estimated to be in 2011. Plife is currently trading at 0.54 times price/book and we have a forecasted FY09F 10.4% yield. Although not the highest among the S-REIT, but resiliency of earnings give it an edge over the rest.

Golden Agri-Resources: Hold (OCBC Research, 18 Mar)
GAR, after the recent correction from a high of S$0.34 in early Feb, has been languishing around current levels, mainly due to the lack of short-term catalysts. In the near to medium term, there is likely limited upside for crude palm oil (CPO) prices – industry experts expect CPO to trade within a narrow range of MYR1500-2100/ton in 2H09. At the recently concluded 20th Palm and Lauric Oils Conference/Exhibition 2009 in Kuala Lumpur, these industry experts believe the pressure on CPO prices will come from an increase in output, weaker soybean oil prices and declining demand from countries such as China and India due to the global economic slowdown. Although crude oil prices appear to have stabilised around US$40-50/barrel, we note it was mainly due to a cut in supply, rather than a pick up in demand. Although we do not see any near-term catalysts, we believe that most, if not all, of the negatives have been priced in. We believe that the worst may be over. For one, GAR should benefit from the easing fertiliser prices. Hence we maintain our HOLD rating and S$0.30 fair value We would still be buyers closer to S$0.25.

Sarin Technologies: Neutral (DMG, 18 Mar)
Sarin's net losses of US$4.6m in 4Q08 was much worse than market consensus and our forecasts while turnover also tanked 72.6% to US$2.5m as the company saw a dramatic drop in demand for diamonds due to the ongoing financial crisis. Coupled with the US$1.8m write-down from its investment in IDEX Online, net profit eventually fell 80.1% in FY08. Management has highlighted that it aims to reduce opex by 15%. Nevertheless, we believe that the commercial launch of Sarin's Galatea system scheduled to take place during late-2Q09 would require additional expenses and therefore have assumed only a 6% decline in opex for FY09. The fortunes of the diamond industry continue to be tied to the health of the US market which accounts for over 40% of the polished diamonds produced globally. Nevertheless, through our discussions with management, we understand that the market share in India and China are expected to equal the US market by 2010. We have slashed our forecasts for FY09 although we note that bottomline is still expected to more than double due to the absence of exceptionals. While the macro picture may not have improved, we are maintaining our NEUTRAL recommendation on valuation grounds while prospective dividend yield of 12% is also palatable. Currently trading at 5.5x FY09 P/E and assuming that it trades up to the 12-mth historical average of 6.5x P/E, we arrive at a target price of S$0.135. However, we also caution that Sarin has been a highly illiquid stock for at least the past six months.

China Hongxing Sports: Hold (Deutsche Bank Research, 17 Mar)
China Hongxing sales at Feb09 trade fair sales fell by 20% year-on-year (yoy) to RMB800m. The drop in trade fair sales – its first decline – is a warning sign of weaker consumer demand and the challenging operating environment in the China sportswear industry. The trade fair sales drop could be a leading indicator for distributors' expectations of declining sales. Product discounts is expected to continue in FY09E if operating conditions worsen. Currently, CHHS is allowing its distributors to increase discounts at the store level on 40% of its products (vs. 20% of its products last year). As a last resort management may have to take over loss-making stores. While CHHS has collected RMB114m in repayments, it did not rule out making an impairment on prepayments to its distributors this year. We cut our earnings by 32% and 36% in FY10E and FY11E, respectively, and have cut our target price to S$0.11, close to the current price. The stock is trading at a 20% discount to its net cash per share of S$0.12.

China Sunsine Chemical: Hold (Phillip Securities, 17 Mar)
FY08 results came in largely in line with our estimates. Revenue for the year grew 28.8% from RMB$619.5m in FY07 to RMB$797.9mn in FY08. Net profit, which amounted to 95.4% of our FY08 forecast, increased 40.4% from RMB$76m in FY07 to RMB$106.7m in FY08. Gross profit margin increased by an impressive 8.2 percentage points (ppts). However, the strong growth registered in gross margin was partially offset by higher administrative and research expenses. There was also a RMB$6.1m impairment of receivables for the year. For the quarter, revenue declined -23.7% year-on-year (yoy) in 4Q07 to RMB$137m in 4Q08, while net profit plunged -64.5% yoy from RMB$22.8m in 4Q07 to RMB$8.1mn in 4Q07
The Company registered gross profit margins of 30.6% for 4Q08 and 28.4% for FY08 on higher average selling prices (ASP). The management had stated that higher ASP were the result of tight supply during the year, and also that the situation should reverse in the current year as the supply crunch untangles on capacity expansion. Consequentially, margins should return to more normalized levels in the region of 20%. We believe FY09 will be more challenging for China Sunsine on account of a distressed auto industry giving way to lower volume growth, and lower margins. As such, we have lowered out FY09F top and bottom line estimates by 28.0% and 36.7%, respectively. Although China Sunsine is cheap on current valuations, we are downgrading the stock to HOLD as we see few catalysts for stock price movements in the near term. We are also lowering our fair value estimate to S$0.18 from S$0.27.

China Sunsine Chemical: Fully Valued (DBS Vickers Securities, 13 Mar)
China Sunsine (Sunsine) is the largest producer of rubber accelerator in the world. The key strengths of the group lie in its market leadership and well-established customer base, which consists of global and China’s top 10 tyre manufacturers. However, operating environment in 2009 is extremely challenging. Price competition is intensifying as demand shrinks in the face of a global recession. We value China Sunsine based on 0.5x P/Bv, arriving at a target price of 13 cents. This is in line with the average trough P/Bv valuation for the three SGX-listed Chinese chemical companies, Jiutian, SP Chemical and China Energy. Our target price is backed by net cash per share of 10 cents as of end FY2008.

Venture Manufacturing Corp: Buy (OCBC Research, 17 Mar)
As with most, if not all, manufacturing companies, 1Q09 is turning out to be a very tough quarter for VMS, given the drastic slowdown in global economy. In any case, we are not too surprised, given that one of its biggest customers – HP – has recently guided for current quarter earnings to come in below estimates. In light of greater uncertainty and the slower orders, VMS has put several measures to contain costs and improve efficiency. Following the recent developments, we have pared our FY09 estimates for revenue by 1.4% and earnings by 7.0% (assuming a further S$12m MTM loss); FY10 revenue estimate pared by 5.8% and earnings by 6.6%. Based on an unchanged valuation of 8x FY09F PER, our fair value eases from S$6.06 to S$5.64. As we also expect VMS to maintain its generous dividend payout (S$0.50/share this year – 11% yield), we retain our BUY rating.

Singapore Airlines: Sell (Citi Investment Research, 17 Mar)
SIA is at risk of turning in its second quarterly loss in history with Feb 2009 passenger traffic falling 17% year-on-year (yoy), and a 7-percentage point (ppt) fall in load factor to 70% (vs. Dec 2008 breakeven 73%), SIA will do well to avoid making losses in its key passenger business. Cargo is likely to face further losses, Feb 2009 traffic fell 15% yoy with a load factor of 57% (vs. Dec 2008 breakeven 63%). Yield pressure should mount as fuel surcharges fall and premium traffic weakens, SIA is fuel-hedged at US$131/bbl vs. spot of US$48 suggesting mounting hedging losses (Dec qtr: S$340m). We view that SIA's prior year DPS of S$1 could be under threat. We retain our Sell rating and S$8.50 target price.

Singapore Petroleum Company: Buy (DMG, 16 Mar)
We initiate SPC with a BUY rating and target price of S$2.95. Based on our free cash flow valuations, the current share price is close to the implied value for SPC's refining business segment alone. This implies that SPC's E&P business unit can theoretically be obtained for free. Buy on SPC's attractive valuation, healthy balance sheet, and potential upsides from new oil and gas discoveries. The Asian economic crisis resulted in weak Asian refining margins that averaged US$1.06/bbl over a sustained period in 1998-2001. We think this situation is unlikely to repeat. Refining margins have rebounded sharply to an average of US$6.60/bbl year-to-date from US$1/bbl in 2H08, due to refinery outages. We are not overly concerned with overcapacity, as start-ups have been pushed back and the breakeven costs of the new refineries are high. Hence, we are comfortable with our refining assumption of US$3.10/bbl in FY09. SPC's Dec 08 balance sheet is clean with only short-term debts of S$574m (net gearing: 0.1x), for working capital. As E&P asset valuations become inexpensive, we believe SPC is well-positioned to acquire assets around the region. According to the management, SPC’s comfortable capital structure is at 1x, which implies the capability to acquire assets valued up to S$1b. We are optimistic that SPC’s E&P healthy operating cashflow at an average of S$350m/year is able to support the increased debt profile. SPC is trading at 8.3x FY09F P/E, compared to refiners' peers of 8.4x and E&P players of 13.5x. We think that the current share price has priced in weakening products demand amid this downturn, but has completely ignored E&P's potential.

Suntec REIT: Buy (OCBC Research, 16 Mar)
The Business Times has that the entire 32nd floor of Suntec City Tower 1 has been sold for about S$1300 per square foot of strata area. However, Suntec REIT's current market value already reflects an implied asset value of S$885 psf for Suntec City Office (our estimate). In our opinion, the refinancing of the S$825m in debt due this year is less of a problem than the potential need for an equity issue. As a non-sponsored REIT, any rights issue by Suntec could require the backing of investment banks or sub-underwriting arrangements with substantial shareholders. The biggest concern today is how deeply earnings – and consequently distributions – will be affected by deteriorating economic conditions. Our new DPU estimates for FY09-10 are 6-10% below consensus. This still translates to reasonable distribution yields of 18.6% and 16.1% in FY09F and FY10F respectively. Maintain BUY with S$0.80 fair value (prev: S$0.90).

SPH: Buy (OCBC Research, 13 Mar)
We are expecting Singapore Press Holdings (SPH) to present lower operating revenue on the basis of falling advertising and classified revenue coupled with rising raw material costs. However, the aggressive wage cuts announced yesterday have boosted our estimates by 6% for FY09F. We do not expect SPH to have changed its equity and bond portfolio with its external managers since last quarter. With equity and bond markets remaining volatile, losses will likely overwhelm the any dividend income it receives. The silver lining for SPH lies in Paragon and Sky@Eleven where rental incomes and progressive revenue recognition will buffer weakness from its core operations. SPH fell 23% since the downgrade in our last report. While we have lowered our fair value to S$2.84 (prev: S$3.13) as we align its valuation peg with its peers, we are upgrading SPH to BUY based on attractive valuations with dividend yield at about 9%. We are also impressed by the swift action taken to contain staffing cost, its highest expense component.

Olam International: Buy (OCBC Research, 13 Mar)
Olam has been delivering consistent revenue and earnings growth since its listing in 2005, and growth momentum is expected to sustain despite the global recession. Earnings are relatively recession-proof given demand inelasticity of food, which forms the bulk of Olam's product portfolio. In addition, growth opportunities are expected to arise from market share gains as well as potential acquisitions of distressed assets. The equity market meltdown has brought Olam down to its trough valuations. We see value emerging at current levels although near-term volatility could persist. We initiate coverage on the stock with a BUY rating and S$1.37 fair value estimate based on 10x FY10 PER. Key risks include high gearing, counter-party risk, and dilution risk from its convertible bonds.

Sing Holdings: Hold (Phillip Securities, 13 Mar)
Sing Holdings has proposed a renounceable rights issue at the issue price of S$0.10 for each rights share on the basis of one rights share for every two existing ordinary shares. The net proceeds are approximately S$13m after deducting fees and expenses. The rights issue reduces the need to acquire bank loans for its development projects. It also improves its net debt to equity ratio from 2.9 to 2.5 for FY2009F. However, the issue dilutes the interests of shareholders and leads to lower earnings per share. We remain cautious on the property sector and apply a 50% discount to the post-rights RNAV of S$0.49. This gives a value of S$0.245 for the stock. We recommend that shareholders subscribe for the rights shares. This is because the rights shares are priced at a discount of 59.1% to the fair value of S$0.245 for the stock. Moreover, with cash from the rights issue, Sing Holdings will be able to continue with the construction of the development projects. We believe that shareholders will benefit from the possible appreciation in share price when the property market recovers in FY2011F. This is likely to coincide with the completion of construction and sale of its existing development projects in FY2011F.

Chartered Semiconductor: Sell (OCBC Research, 11 Mar)
Chartered has announced that it is planning to raise about US$300m via a 27-for-10 rights offering to boost its financial position and fund its operations. In a separate announcement, it also issued its 1QFY09 mid-quarter update, maintaining its revenue guidance of US$232-244m but projecting narrower net loss of US$122-132m (US$142-152m previously). This, it said, was due to due to an improvement in customer orders and subsequent positive impact on the per-unit cost of wafer. While businesses appear to be improving at Chartered (likewise, among foundry peers TSMC and UMC), we have left our FY09 revenue forecast intact in view of the limited order visibility. However, we have changed our gross margin assumptions, which effectively reduce our FY09F loss by 5.4%. As the rights issue is likely to go through (hence alleviating its financing issues), we also raise our valuation metric slightly to 0.4x FY09F NTA (0.3x previously). Accordingly, our ex-rights fair value stands at S$0.06. Maintain SELL on further downside risks.

Noble Group: Sell (CLSA, 9 March)
A trader of industrial and agricultural raw materials, and a corporate and logistics services provider, Noble Group enjoys a formidable position in global commodity supply-chain management. However, with energy resources and metals making up more than 60% of Noble's sales, the current excess in global metal inventories, peaking power demand and a policy shift away from coal towards greener energy sources means the long-term structural demand for these products will come under pressure. While we see a silver lining in public pump-priming efforts, this would not be enough to offset weakness in private consumption. Together with weak prices, 2009 earnings should retreat 64% YoY. We believe the Street has yet to fully reflect this in its estimates, hence our below-consensus forecasts. While Noble's agribusiness volume will grow, we are of the view that agriculture gross-profit margins to return to levels seen before the 2008 commodity bubble (from 4.4% per tonne to 3.3% by 2010). At 13x PE, Noble is trading at a 62% premium to its long-term average. It is also trading at a large premium to the peer average of 10x and in line with higher-yielding Singapore mid caps. To reflect Noble's transformation from a supplier to a producer, we base our target price of 70 cents on a blend of DCF using a 10% WACC and peer valuations, implying 32% downside.

SMRT Corporation: Buy (Phillip Securities, 9 Mar)
SMRT's bread and butter rail business has consistently contributed more than 50% to core revenue. The segment's contribution to EBIT crossed the 60% mark in FY06, and generated 73.3% of the Company's operating profit in FY08. We expect the growth for the segment to sustain, given the progressive roll out of the Circle Line (CCL). In our view, the positive impact from the new line will come in in FY10F, as the first phase of the CCL is put into operation in mid-2009. We believe other LTA initiatives to coax drivers to public transport usage will also work to SMRT's advantage. Initiatives such as the lowering of the annual vehicle population growth from 3% to 1.5% via open bidding, and the increase of transport costs for drivers of private passenger cars through the increase of ERP coverage and charges should do its part to swing at least a portion of drivers to public transport usage, in our view. As an immediate beneficiary to myriad governmental initiatives that benefit bus and rail operators, and a visible earnings catalyst in the near term, we are resuming coverage on SMRT with an upgrade in our recommendation and fair value estimate of S$1.97, representing an upside of 25.5%.

ComfortDelGro: Hold (Phillip Securities, 9 Mar)
While we like ComfortDeldro for its diversified revenue streams, solid balance sheet, and its focus on growing its overseas revenue base, any growth in the near term might be undone by weaker performance of the UK taxi business due to an unfavorable exchange rates and a severely weakened economy since the taxi business in UK is highly dependent on corporate clients. We are also less than enthusiastic about the Singapore taxi business as we hold the view that disincentives for taxi passengers mirror that for drivers, and believe that taxi users will be more inclined to switch to bus and rail. In addition, the group's current stronghold on the Singapore bus market may come under threat as the LTA undertakes the centralized planning of bus routes from 2009. Given challenging operating environment in the near term, we have a HOLD rating. Our fair value estimate of S$1.37 gives the counter an upside of 3%.

China Farm Equipment: Neutral (DMG. 9 Mar)
CFE has reported a net profit decline of 99.5% to RMB377k in FY08, which is tremendously lower than our RMB40.4m forecast (RMB42.3m forecast based on consensus). Lower sales volume for farm equipment, diesel engines, agricultural trucks and driver cabins were the major reasons for the lower net profit achieved. The termination of its leasing and management arrangement with Hunan Juzhou Automobile Manufacturing Co. Ltd during 4Q08 also contributed to the decrease in revenue from the sales of agricultural trucks and driver cabins. Core net profit for FY08 would have been RMB32.4m in FY08, if not for its recent other expenses item in the income statement which include the impairment of receivables and inventories written down of RMB31m pertaining to the termination of leasing and management arrangement entered between CFE and Hunan Juzhou. Management has indicated to us that collection of these receivables has been delayed due to the current economic condition. We have cut our FY09 revenue forecast by 22% to RMB329.5m due to these key reasons. (1) Termination of its agricultural truck leasing and management arrangement with Hunan Juzhou. (2) Lowering our average selling price for farm equipment by 10% to RMB43,000/unit and lower our average selling price for diesel engines by 20% to RMB925/unit due to managements guidance. (3) Lowering our sales volume forecast for diesel engines by 18% to 115k units/annum. Therefore we reduce our FY09 net profit forecast by 10% to RMB36.5m. At S$0.07, CFE is trading at 2.2x FY09 P/E. We have lowered our price target of S$0.14 to S$0.08, based on 2.5x FY09P/E. We believe that demand for farm equipment will strengthen in 2H09. However, given the uncertainty of the global economy, we remain cautious about prospects for CFE.

Ezra Holdings: Neutral (DMG, 5 Mar)
Ezra is expected cut its capex by half to US$325m for FY09-10. In light of the current credit environment, the capex for the Vietnam yard is also likely to be trimmed. We also understand that three of Ezra’s MFSVs would not be constructed. Ezra is currently in negotiations with both Keppel Singmarine and Karmsund Maritime to reach mutual agreements. We think it is unlikely that Keppel would refund the deposit while it is too preliminary to conclude for Karmsund. Ezra would proceed with the construction of the remaining two 30,000bhp MFSVs, currently being built at Dubai Drydocks World. Expected deliveries of the vessels are 1QCY10 and 3QCY10 respectively. We have made no changes to our FY09 earnings, but reduced our FY10 recurring net profit by 6% to take into account the deployment of the two remaining MFSVs at lower charter rates. Our target price is cut to S$0.45 (from S$0.67 previously), based on revisions made to our sum-of-the-parts valuation:

WesTech Electronics: Sell (OCBC Research, 5 Mar)
WTE has posted a dreary set of FY08 results as guided. Despite the positive bottomline from continuing operations, WTE suffered hefty provisions for doubtful debts due to default by major customers in the Display segment. Consequently, FY08 earnings came in at a net loss of S$63.6m, as compared to S$7.5m profit in FY07. This had also inadvertently wiped out its earnings accumulated over the years, dragging the group into a negative equity position of S$18.1m, or negative NTA of 13.2 S cents/share. Our view on WTE's business viability had grown increasingly pessimistic. Its finance costs, which appear seemingly small at S$0.5m in FY08, are likely to balloon to S$2-3m in FY09 when the group assumes all the debt liabilities. In this exceptionally tough global environment, we see difficulty for the group to breakeven at net profit level in FY09. As its equity, hence NTA, is not likely to turn positive even with a successful insurance claim (not forgetting missing all dividend prospects, and uncertain outcome from standstill agreement), we are recommending that investors exit WTE.

Foreland Fabrictech: Hold (OCBC Research, 5 Mar)
Despite posting a better-than-expected 4Q08 results, Foreland Fabrictech is guiding for a more muted 1Q09 showing, mainly due to a longer-than-usual Chinese New Year break of nearly one month; this effectively means only two months of revenue contribution. But for the full year, management believes it should still be able to do all right, as it is cautiously optimistic of a recovery in 2H09, led by domestic demand. It also updated that its expansion plan is on track to be completed by 2H09, although it expects production to kick off closer to 2010. But in view of the tougher 1Q09 outlook and the still anemic demand situation, we see the need to further cut our FY09 estimates for revenue by 20% and earnings by 23%. As we are also lowering our valuation from 4x to 3x FY09F EPS, our fair value eases from S$0.20 to S$0.12. Given the limited upside, we downgrade our rating to a HOLD.

CapitaMall Trust: Outperform (Macquarie Research, 4 Mar)
CT has gone ex-rights after the announcement of a 9-for-10 rights issue to raise S$1.23b. The rights price of S$0.82 represents a 43.4% discount to its last closing price of S$1.45 at the time of announcement, and 28.7% discount to the theoretical ex-rights price (TERP) of S$1.15 per unit. Borrowings of S$956.2m (30% of total debt) due within 2009 will be paid down, with the balance for committed asset enhancement initiatives, likely at The Atrium@Orchard and the Jurong Entertainment Centre. Gearing is expected to be reduced from 43.2% to 29.1% as a result. Portfolio occupancy was a high 99.7% as of 31 December 2008, with 87% of FY09 income secured by renewed leases so far. About 78.6% of gross revenue comes from necessity shopping, which is more resilient in a downturn. Despite a weak 4Q08 in terms of a 17% quarter-on-quarter (qoq) GDP contraction, CT's portfolio showed resilience as shopping traffic rose circa 5–6% qoq and 10.3% year-on-year (yoy). CapitaMall Trust remains one of our top picks in the SREIT space. It has a proven track record of driving DPU through active leasing, asset enhancements and acquisitions. We have revised our target price to S$1.45 (from S$2.95 previously) to reflect the enlarged unit base, and maintain our Outperform recommendation.

DBS: Buy (OCBC Research, 4 Mar)
Taking into account DBS's core exposure to both the Singapore and Hong Kong markets, we have upped the provisions for FY09 and FY10, lowered other expenses, and fine-tuned some of our income estimates. We are now going for FY09 earnings of S$1328m, with a more-than-doubling in provisions to S$1386m (up from S$561m previously), as we expect another 2-3 quarters of high provisions. Since our last report, the stock has dropped 14% to S$7.24. We have already articulated that we prefer to buy at lower levels and with the recent price correction, we are raising our rating to a BUY with fair value estimate of S$8.20 (prev: $8.60) based on same 0.8x book.

M1: Neutral (DMG, 4 Mar)
M1 launched an innovative mobile programme – Take3 – which provide clients with handsets and free them from upfront expenses last week. Clients sign up for a bill plan that is of best fit, take mobile phones of their choice within the eligible bill plan tiers and take them back in exchange for new handsets after as soon as nine months. Given that it lacks bundling capabilities, M1 has to find ways to innovate. This programme appears to be a positive move, as it enables M1 to lock in some of its existing customers and gain new ones. Margins, however, may be slightly affected, as it will have to bear the costs of the new handsets to clients who sign up. We are maintaining our earnings estimates for M1, expecting it to fall 5.6% this year to S$141.6m before growing 4.6% in FY10 to S$148.1m. At S$1.48, it has a prospective yield of 8.6%, which is still a shade below StarHub's 9.1%. Based on DDM, we attain a target price of S$1.52. Maintain NEUTRAL.

Ho Bee: Hold (Phillip Securities, 4 Mar)
Ho Bee reported has reported a 49.3% decline in revenue to S$302m, and a fall in net profit to $100.0m (-65.0% year-on-year) for FY08 due to lower sales from its property development projects. While expecting this year to be challenging due to the global financial crisis, it will still be recognizing revenue from five residential projects, Vertis, Quinterra, The Coast, Paradise Island and Orange Grove Residences, all which were substantially sold. Ho Bee is likely to remain profitable for the next three years as it will record revenue from residential projects that have been sold. We expect it to report net profit of S$160.2m, S$70.5m and S$68.2m for FY2009F, FY2010F and FY2011F respectively. Given the recession, we believe that there is room for property prices to drop further. In particular, we expect the property prices for high-end homes to drop by up to 30%, which is more than the other segments of the market. This will affect Ho Bee's residential projects on Sentosa Cove. Moreover, buyers are cautious and sales transaction volumes are low. As a result, we are applying a 75% discount to the RNAV of S$1.67, which gives a value of S$0.42 for the stock.

Li Heng Chemical Fibre: Buy (OCBC Research, 3 Mar)
Although Li Heng has seen a modest recovery in margins and stronger orders in Jan and Feb, management believes it is still too early to call a bottom yet, given the still sluggish global economy. Instead, management intends to work with both suppliers and customers to ensure the longevity of the whole nylon value chain; this will be at the expense of margins in the near-term. Meanwhile, management is likely to go ahead with the expansion plan of its nylon production capacity, although it does not rule out a slight delay. But funding is not expected to be an issue as it has already budgeted for it with its IPO proceeds. We are assuming that the expansion will go ahead in our earnings model. And in light of the slightly poorer near-term to medium-term business outlook, we cut our FY09 estimates by another 18-29%; this in turn lowers our DCF-based fair value from S$0.44 to S$0.31. Maintain BUY for its long-term potential; value is also emerging as it is trading at just 0.3x its FY08 NTA and at 21% discount to net cash/share.

Swiber Holdings: Hold (OCBC Research, 3 Mar)
Swiber reported a 183.4% rise in revenue to US$428.4m but a 20.6% fall in net profit to US$39.5m for FY08. Though revenue was in line with our expectations, net profit was about 30% lower than market's expectations. The main reason was due to an unexpected delay in delivery of two vessels, meaning that higher costs had to be incurred due to demobilizations and mobilizations of existing vessels for project work. Though we had noted in our earlier report that hiccups in project executions is a risk for the group given its tight schedule, it is still disappointing to see that contingency plans were unable to stem the higher costs. On a positive note, the group won US$70m worth of new contracts in 1Q09, in addition to its order book of US$596m as at 31 Dec 08. Despite that, we are downgrading the stock to a HOLD and lowering our fair value estimate to S$0.35 from S$0.66 previously.

Wilmar: Outperform (Credit Suisse, 3 Mar)
Wilmar continues to be cautiously positive on the prospects for the next two quarters with its management of the view that palm oil prices will be range-bound in the short term. Capex in FY09 is estimated at US$850 mn for the expansion of its current businesses and the company, which has a gross cash pile of US$2.9b s on a lookout for M&A activities. Wilmar.s profitability has shown strong growth during boom times and strong resilience during challenging times. To be prudent, we have assumed that FY09E profit per tonne does not match FY08 record figures. This puts FY09E P/Es at 11x which is below the big cap plantation stocks listed in Malaysia. We revise our FY09 and FY10 earnings forecasts up by 7% and 4%, respectively. As a result, we upgrade our target price for Wilmar to S$3.60 from S$3.30. Maintain OUTPERFORM.

Li Heng Chemical Fibre Technologies: Buy (DMG, 3 Mar)
In FY08, Li Heng's revenue came in at RMB3.7b while NPAT registered RMB814.5m (RMB836.8m). The 34.2% year-on-year growth in top line boiled down to a larger production capacity and a growing customer base, whilst the 10% yoy fall in NPAT was due to lower gross margins and onset of income tax. Due to PA chip prices falling in 4Q08, and nylon yarn prices falling by an even greater extent (as much as 50%), the Group's gross profit margin came in at 9.3%, down 24.7percentage points (ppt) year-on-year (yoy). PA chip prices stood at around US$1,540/t in end Feb 09, achieving a healthy 28% bounce from its US$1,200/t low. However, nylon yarn prices have lost further ground from 4Q08's average selling price (ASP) of RMB22,000/t, by as much as 20%. Management is still fairly certain the company's capacity utilisation can still be kept at least at the 90% level for FY09. Order visibility currently stretches out to end March 09 and management is confident of hitting 11,000 tonnes of sales per month. Management has approved a share buyback mandate (up to 10% of share capital), which will need approval during Li Heng's AGM in late April 09. We have lowered our ASPs and gross margin assumptions for FY09 and FY10 by as much as 20% and 7ppt respectively due to subdued nylon prices and a bleaker outlook. Production volume has also been lowered by 15%. Our updated DCF model gives us a new target price of S$0.235, down from S$0.49 previously. Maintain BUY.

Swiber Holdings: Sell (DMG, 3 Mar)
Swiber's 4Q08 revenue grew 69% year-on-year (yoy) to US$102.9m but cost of sales increased 147% yoy due to the delayed delivery of two vessels as well as higher subcontractor costs. This marks the second consecutive quarter whereby the increase in cost of sales exceeded the growth in revenue, reflecting presence of higher project execution risks as well as the need for greater cost containment, going forward. We estimate Swiber's working capital to be negative by FY10 and view this deterioration with concern, especially if Swiber is faced with earnings erosion. We reduce our FY09 recurring net profit by 62% as we cut our FY09-10 new order assumptions to US$150m/year, trim operating profit margins by 50% and take into account higher operational expenses. We have also introduced our FY10 estimates, and rolled over our valuation based on 3x FY10 recurring earnings. We believe Swiber's share price will continue to be pressured, first by financing concerns, then by signs of weakness in earnings quality.

Allgreen Properties: Hold (Deutsche Bank, 2 Mar)
Allgreen's FY08 results below expectations due to the impact of landbank provisions and slower than expected profit recognition. PATMI fell 86% to S$67.4m due to $7.9m in net impairment loss, which more than offset the S$2m fair value gain. (vs S$405m revaluation gain and write back in FY07) Excluding these one-offs, core PATMI of S$73m fell 17% year-on-year (yoy) . Earnings were underpinned by progressive profit recognition from Cascadia, Blossoms and Cairnhill Residences with rental properties performing better. Although valuations look undemanding at 65% disc to RNAV, we do not see any re-rating catalysts. Further launch delays, limited locked-in sales and concerns over its increasing exposure to China and Vietnam will likely continue to weigh on the stock. Conservative management and its track record do not suggest major value-unlocking initiatives. Maintain Hold.

STX Pan Ocean: Sell (Deutsche Bank, 2 Mar)
STX Pan Ocean has reported a net loss of US$95m in 4Q 2008. Its net profit of US$494m for FY8 is 30% below our forecast of US$702m and consensus of US$777m. The losses that were registered in 4Q 08 were much worse than we expected. Gross profit in 4Q 08 shrank to US$ 11m from US$228m in 3Q 2008 and US$261m in 4Q 2007, primarily caused by the decline in dry bulk shipping rates. Bottomline in 4Q 08 was also hurt by US$50m forex loss and US$29m derivative losses. Net gearing in 2008 has picked up to 19.6%, from net cash at the end of 2007. On the other hand, we applaud STX Pan Ocean's rapid downsizing of its chartered-in dry bulk fleet, from 284 vessels at end Oct 2008 to 166 at the end of Jan 2009. STX’s management has one of the more upbeat forward assessments of the dry bulk shipping market and expects the dry bulk market to rebound in the second half of this year as a result of the stimulus packages around the world. On the supply front, it expects scrapping and newbuild order cancellations will mitigate supply growth. The management expects 10% of dry bulk tonnage scrapped by end 2010 and lack of financing will push up order cancellations. We have a more negative outlook on dry bulk shipping rates and continue to expect supply to outstrip demand in 2009-2010 and hence expect rates to remain subdued. As a result, we expect STX Pan Ocean to register losses in 2009 and 2010. Maintain Sell recommendation.

SC Global Developments: Hold (Phillip Securities, 2 Mar)
SC Global has reported FY2008 revenue of S$129.1m and net profit of S$44.7m (+20% yoy). Net profit rose due to higher selling prices and lower cost of sales. Moreover, there was fair value gain of S$33.1m from the revaluation of its investment property, Newton 200.SC Global is expected to remain profitable because it has achieved large sales of its residential projects in 2006 and 2007 and revenue will be recognized as construction progresses. Net profit is expected to increase from S$46.8m in FY2009F to S$143.0m in FY2010F because of recognition of revenue from the progress of construction of its projects. After that, net profit is likely to fall to S$52.5m in FY2011F as most of its projects have already been completed in FY2010F. SC Global has highlighted that it remains cautious on the property market. It is currently in the planning and design stage for its projects at Ardmore Park and Sentosa Cove. Its Australian subsidiary, AV Jennings, has launched a targeted A$150m to A$200m residential property fund to acquire projects and take advantage of current market conditions. As the property market continues to weaken and property prices are expected to fall, we are downgrading the stock from buy to hold recommendation. By applying a 60% discount to the RNAV of S$1.68, we derive a value of S$0.67 for the stock.

Golden Agri-Resources: Hold (OCBC Research, 2 March)
GAR saw its FY08 revenue rise 59.4% year-on-year (yoy) to US$2985.9m (8.6% above our estimate), and while core net profit (excluding bio-asset fair value gains) rose 32% to US$376.8m (11% above our full-year figure). GAR did not declare a final dividend (versus 0.5 cent in 2007) in an effort to conserve cash in these uncertain times. Instead, it plans to reward shareholders with a bonus issue (1 bonus share for every 25 shares held). Going forward, GAR expects the operating environment to remain challenging in 2009, and it will embark on prudent measures to manage cost, conserve cash and expand cautiously. While we believe that GAR may have seen the worst in 4Q08, and things should cautiously improve in 2009, we think that crude palm oil (CPO) prices may continue to languish around current levels. Weather and its impact on other edible oil crops will probably be the biggest influence this year on CPO prices. For now, we maintain our HOLD rating and S$0.30 fair value. We would turn buyers closer to S$0.20.

UOB: Hold (OCBC Research, 2 March)
UOB has posted below-expectation 4Q net earnings of S$332m (down 30% quarter-on-quarter and down 34% year-on-year) giving full year earnings of S$1,937m, down 8%. The variance between our and actual earnings was largely due to higher-than-expected impairment charges, which rocketed to S$381m, more than doubled 3Q08's level of S$158m. Management has declared a final dividend of 40 cents, bringing full year dividend to 60 cents. Management reaffirmed its market leadership in SME financing, especially in view of the recent Singapore's government moves to help SMEs under the risk-sharing schemes. In view of the protracted and still uncertain economic outlook, we have cut our FY09 earnings forecast to a 13% yoy decline to S$1683m, taking into account lower capital market activities, lower fee income as well as still-high impairment charges. In terms of valuation, we have looked at several estimators (1x book, 9x earnings, >6% yield and DDM) to derive at an average price of S$9.30. We maintain our HOLD rating of this stock and will look to be buyers at S$9.30 or lower.