Stock Picks

Epure International: Buy (DMG, 15 May)
Epure provides water and wastewater treatment solutions in China. It is involved in engineering, procurement, construction and equipment fabrication and is an integrated solutions provider through its operations management and build-operate-transfer (BOT) projects. With the Chinese government prime-priming the economy, China's infrastructure spending is expected to be boosted with an increase in government spending. We are of the opinion that the water industry will benefit with an increased injection of funds into the sector. With environmental issues remaining as a priority for Chinese government in the long run, we believe the industry would benefit in ways such as with an increase in tariff rates. According to management, China's water tariff rates are significantly lower than the world's, at ~20-25% of the global average tariff rates. This implies that there would be plenty of room for increase in tariffs going forward. Epure is widely recognised in the PRC as a leading turnkey solution provider. It has successfully completed many large-scale and complex projects with high barriers-of-entry. Earnings visibility from net order books of RMB800m as at Dec 08, with the unfulfilled contract value for existing contracts on hand scheduled to be completed by 2010 -lending visibility to its earnings till FY10. Epure is focusing on securing BOT projects as a means to build up its recurring revenue stream. It currently has four BOT projects on hand. In addition to providing a more stable revenue stream, these BOT investments may help Epure in securing additional EPC projects. With the positive industry outlook, we are expecting the continued growth in revenue from Epure's project wins. We estimate revenue to come in at RMB1.2b in FY09 and RMB1.4b in FY10, translating to ~18% YoY growth in revenue for both FY09 and FY10. We are estimating net margins to remain relatively stable at ~21%, for both FY09 and FY10. As such, earnings is forecasted at RMB252.2m for FY09 and RMB299.8m for FY10. We are ascribing a P/E of 10x to Epure's forward earnings, close to the 9x P/E which is one standard deviation from its historical average of 18x. Hence, we derive a target price of S$0.51. We initiate coverage with a BUY as we like Epure's reputation and track record in China's water industry, its net cash position and strong order books that provides earnings visibility.

Epure International: Buy (Phillip Securities, 29 May)
Epure announced a net profit increase of 32% year-on-year (yoy) for 1Q 2009 with the rise in earnings were due mainly to (1) its existing engineering, procurement and construction ("EPC") projects, (2) contribution from Beijing Hi-Standard Water Treatment Equipment Co Ltd, which the Group acquired last year and (3) a foreign exchange gain of RMB4.7 million due to the Chinese yuan appreciating against the Sing dollar. Gross profit margins declined slightly from 37.8% in 1Q2008 to 35.4% in 1Q2009. Although there is a drop of slightly more than 2 percentage pts for 1Q2009, the nature of turnkey projects and its revenue recognition are based on percentage of completion. This means that on a quarterly basis, we should see fluctuating margins and it would be more appropriate to view the Group's margins on an annual basis. Over the last few years, the Group's gross profit margins have been at a stable 30% or so. Since our report earlier this year, the Group has incorporated a wholly-owned subsidiary to invest in a Build, Operate and Transfer (BOT) project located in Shaanxi province. It has also established a joint venture with BJ Sound Enviro for a BOT project in Lanzhou in Gansu province. These two projects will add to its portfolio of three wholly-owned BOT projects. We believe that in the short term, industrial EPC projects should weaken with the economic downturn still in the background, however, the municipal segment should continue to see growth. We have not made any changes to our EPC revenue forecast, we did however make changes to our equipment fabrication and design service contracts segments to arrive at our upgraded fair value estimate of S$0.55. It is also good to note that we have not forecasted the Group's BOT earnings in our valuation. According to a recent report, the PRC government has intentions to raise water prices in Beijing due to the capital's useable water being only a third of the national rate, along with 110 other cities. This price increase should subsequently be applied across China, which will lead to higher returns for BOT projects in the respective areas. We remain confident of China's water sector and reiterate our BUY rating with a revised fair value estimate of S$0.55.

Biosensors International: Buy (UBS Investment Research, 28 May)
Bioseonsors' FY09 revenues of US$119.0m are marginally ahead of our estimate of US$117.0m. BioMatrix revenues were down 3% qtr-on-qtr (qoq) due to exchange rate fluctuations even though sales volume increased. Full year net loss was US$1.1m, better than our estimate of a US$11.2m loss, due to better gross margins, lower R&D expenses, as well as exceptional write-back from restructuring in USA and Netherlands (US$1.7m) and tax credits (US$1.5m) from withholding taxes paid. Two subgroup analyses of the LEADERS trial presented at EuroPCR in Spain (May 09) continued to demonstrate equal safety and efficacy to J&J's Cypher stent, this time in complex patient populations. Strong clinical data and growing industry acceptance of biodegradable polymer drug-eluting stents (DES) are key positives for Biosensors, in our view. The company reiterated its product revenue guidance for FY10 (US$90m-100m excluding licensing). We believe Biosensors will turn mildly profitable in FY10 as BioMatrix revenues continue to ramp up and margins improve further. In FY09, the company secured regulatory approvals for BioMatrix in Brazil, India, Egypt, Mexico and Venezuela. We expect the company to secure regulatory approval for China in FY10. Maintain Buy with target price of S$0.72/US$0.49

Biosensors International Group: Buy (OCBC Research, 29 May)
Biosensors ended the year with its 4Q09 revenue rising 87% YoY to US$22.4m while gross profit soared 243% YoY to US$15.2m. On a full year basis, gross profit grew 3.3x to US$89.5m. The impressive performance was primarily due to sustained growth in sales of its higher-margin Drug Eluting Stents (DES). Management continues to keep costs under a tight lid as that only rose 27% YoY – paltry in view of sales growth. FY09 bottomline was in the red at US$1.1m compared with losses of US$34.6m the previous year. Management also updated that it is on the right technology track as its larger competitors have recently revealed similar DES programs. The company has indicated that it will be able to repay its US$45m convertible notes but will likely undertake some financing to sustain its strong growth spurt. Our estimates have been refined. We are mindful that this year included licensing revenue of US$40m is likely exceptional in nature. Core product revenue growth will continue to increase at a rate of about 40%. The net result will show FY10F registering flattish total revenue but better margins will see a stronger bottomline. We are maintaining our medtech discounted model with a raised fair value of S$0.74 (prev. S$0.71). Maintain BUY.

Tat Hong Holdings: Sell (OCBC Research, 29 May)
Tat Hong has reported a 39.7% year-on-year (yoy) slide in 4Q09 revenue to S$110.7m accompanied with a 48.5% fall in net profit to S$14.6m. Stripping away the impact of non-recurring items such as forex and impairment of investments, core net profit would have fallen by a smaller 35.4% to S$19.8m, in line with our estimates. For the full year, revenue contracted by 1.3% to S$631.8m while net profit declined by 23.3% to $68.9m. Core net profit grew by 11.9% to S$94.2m thanks to a stronger 1H09. A final dividend of 1.5 S cents has been declared, bringing the group's full year payout to 5 cents, or a yield of 4.4%. With the exception of its Tower Crane division, all segments recorded lower revenue and gross profits in 4Q09. In particular, the group's Equipment Sales segment recorded sharply lower sales on lacklustre capital spending among its customers. Revenue from this segment slid by 67.9% YoY, while gross profit registered a 74.3% fall. Management expects equipment sales to deteriorate further. On a brighter note, the Tower Crane division turned in a 119% surge in revenue as well as a 54.2% improvement in gross profit. We expect this division to support the group's performance in FY10 given the strong demand for tower cranes in China. Strength from this division, however, will not be able to offset the overall decline given that it constitutes only 4.3% of the group’s gross profit. While pump-priming activities will cushion Tat Hong from the full impact of the global recession, the group is not immune from the downturn. The outlook of Australia's construction industry, which forms the bulk of its revenue, remains shaky with experts predicting further declines in construction activity (exhibit We are projecting a 24.5% contraction in FY10 core net profit to S$71.1m as we expect revenue to recede. While we are confident that Tat Hong is poised to ride out these challenging times, we are of the view that it shares have run ahead of fundamentals, and are downgrading our rating to a Sell. Our valuation has been rolled over to FY10F NTA and our peg has been raised to 1.3x (from 1.0x) in line with the re-rating of its peers, bringing our fair value estimate to S$0.99 (from S$0.72).

The Hour Glass: Hold (UOB Kay Hian, 28 May)
THG reported FY09 PATMI of S$12.8m, 58% lower than the year-ago period. Revenue fell nearly 10% year-on-year to S$441.9m. It also took an impairment charge of S$14.1m for its stake in Gems TV. Excluding the impairment charge, the results would have been in line with our forecast. The poorer performance was due largely to sharp pullbacks in discretionary spending and an oversupply in the market. Despite this, gross margin improved from 20% in FY08 to 22% in FY09. Excluding one-offs, net margin would have remained at a respectable 6.1%, down a mere 1ppt from FY08. As prices for luxury watches are generally not fixed, THG benefitted from the particularly strong years in FY08-09 that gave way to strong sales and margin growth. Going into FY10, however, margins are expected return to levels achieved prior to FY08 from a curtailing of the wealth effect and the Group's decision to undertake the opening of new stores. As THG enters what is expected to be a challenging FY10, its net cash position of S$26.6m should leave the company with flexibility in terms of inventory management to position itself for an economic recovery. We maintain our earnings estimates for FY10-11 and introduce our forecast for FY12. In spite of its strong balance sheet, we view THG's luxury watch retail business to be extremely vulnerable in light of significant dips in consumer sentiment and cuts in discretionary spending. Maintain HOLD recommendation on the stock but raise the fair price upwards by 44% to S$0.65 based on the revised 0.8x P/B multiple in line with regional peers.

Golden Agri-Resources: Buy (UOB Kay Hian, 28 May)
Golden Agri-Resources (GGR) has announced a renounceable 17-for-100 rights issue at S$0.18/share. The rights issue will be attached with warrants at a ratio of 2-for-5 (two warrants for five new rights shares subscribed) with three-year maturity date and at an exercise price of S$0.54/share. The rights issue will raise about S$311m, or US$214m (after deducting estimate expenses), while the warrants will raise about S$381m, assuming all the warrants are exercised. About 80% of the rights and warrant proceeds would be used to support ongoing organic growth, capital expenditure and external acquisitions, while the remaining 20% would be used for working capital. The rights issue figure of S$311m accounts for about 7% of the current market capitalisation. The Widjaja family, together with nominees and custodians that hold a 48.6% stake in GGR, has undertaken to fully subscribe for its entitlement of rights issue. Though net gearing stood at a lower level of only 9% as of 1Q09, management has chosen to use the rights issue to strengthen the company's balance sheet by raising its equity portion and with the final intent of taking out more long-term loans for upstream business expansion.After the rights issue, GGR's balance sheet is expected to be strengthened. This will create opportunities for the company to take out more long-term loans for business expansion. Although we expect the company's EPS for 2009-11 to decline 8-10%, we maintain our target price at S$0.48 based on a higher target 2010 PE of 12x, which is in line with that for mid-cap and integrated plantation players. Maintain BUY.

Singapore Press Holdings: Buy (UOB Kay Hian, 28 May)
Advertising spending is bouncing back from a depressed level as evident by our page counts of The Straits Times. The Saturday papers, the barometer of advertising spending, point to the beginning of a recovery in advertising spending. Saturday issues typically more than double the average weekday’s pagination as advertisers prefer to advertise on Saturdays. Advertising spending hit a depressed level with The Straits Times' Saturday issues falling to around 190 pages in March compared with 270 pages a year ago and 250 pages six months ago. Pagination bottomed in April and has since rebounded to above 210 pages in May, albeit The Great Singapore Sales started two weeks ago. Nevertheless, monthly data from ACNielsen also points to SPH's advertising revenue (AR) contraction getting smaller from -18% year-on-year (yoy) in March to -9% yoy in April. A similar trend is emerging in our page counts of The Straits Times, which suggest SPH's AR contraction has improved from -22% yoy in March to -16% yoy in April. SPH, trading at a P/B of 2.6x, offers a 36% upside to its long-term P/B mean valuation of 3.6x. The stock will likely be favoured by investors starting to search for value among the laggard defensives that have not rallied as much as the cyclicals. In addition, SPH offers annual dividend yield of 7-8%. Maintain BUY and our target price of S$3.90, which is based on our sum-of-the-parts (SOTP) valuation of S$3.94/share.

SMRT: Neutral (DMG, 28 May)
Five Circle Line (CCL) stations started operations on 28 May 09. The remaining 24 stations of the CCL will open from next year onwards. SMRT is expected to start making profit from the CCL only when it fully opens after 2011. We have already factored in CCL contributions into our earnings model as follows. Our FY10 revenue forecast of S$903m (+2.7% year-on-year) takes into consideration: a 7% rise in revenue from the CCL operations and a reduction in revenue of S$30m arising from bus and rail fare cuts effective 1 Apr 09. Our FY10 net profit forecast of S$167.7m (+S$5m or 3.1% yoy) is largely attributed to lower electricity and diesel costs. We are forecasting FY10 electricity and diesel costs of S$95m (-S$23.8m or 20% yoy) due to the current electricity rate (for Apr – Sep 09) being 20-25% lower than the previous contract, and lower diesel costs. If not for the lower electricity and diesel costs, SMRT FY10 net profit would be lower by S$15m YoY.
Our DCF valuation gives a fair price of S$1.65. We maintain our NEUTRAL call on SMRT.

CitySpring Infrastructure Trust: Buy (Kim Eng, 27 May)
CitySpring's FY09 revenue of S$398.7m was within expectations. The trust will distribute 1.75 cts per unit for 4Q09, representing a yoy growth of 9.4% and no change from 3Q09. Total DPU of 7 cts declared for FY09 was in line with the manager's guidance. The target DPU for FY10F remains to be 7 cts, implying an attractive forward trading yield of 12.6%. 4Q09 revenue was up 1.5% year-on-year (yoy) to S$97.3m and cash earnings increased 7.3% to $21.8m. The better than expected full year cash earnings of $60.9m were mainly attributable to the higher average gross margin at CityGas due to the tariff changes during the year. Lower revenue and cash earnings are expected in 1QFY10 after the tariff reduction in Feb-09. The current slowdown in the Singapore economy is expected to impact CityGas negatively in FY10F, but the effect should be muted due to its large and diversified customer base and even exposure to the residential and commercial segments. SingSpring and Basslink, with long-term availability-based contracts with state-owned entities, will continue to deliver stable revenues. The trust wrote off S$10.8m in intangibles in 4Q09 due to the termination of the telecoms agreement with the Tasmanian government in Apr-09. This paved the way for the commercialization of Basslink's fibre optic cables, which was over-due. A number of customers have signed up and the network is expected to be operational by the middle of this year. CitySpring is committed to deliver a DPU of 7 cts for FY10F. Cash accumulated so far is sufficient to cover a quarterly DPU of 1.75 cts in the next 12 months. Our target price has been raised from $0.84 to reflect the normalization of the equity risk premium.

CitySpring Infrastructure Trust: Hold (OCBC Research, 27 May)
CitySpring saw 4Q09 cash earnings rise 8% qtr-on-qtr (qoq) to S$21.8m. The trust will pay out 1.75 cents in 4Q DPU. The manager guided for an FY10 DPU of 7 cents or a yield of 12.6%, unchanged from FY09. Basslink's plans to commercialize its fiber optic cables are well under way. The network should be operational in the next couple of months and Basslink has already signed up some customers. Several Temasek-linked companies (TLCs) have announced equity issues in recent months. CitySpring is not the most urgent recapitalization on the table. Its cash flows are stable and the trust's first loan maturity is only in 2011. But the situation as it stands is unsustainable, in our opinion. The trust has S$1.6b in debt, which dwarfs equity (compare this to the net proceeds of S$391.2m raised from the 2007 IPO). CitySpring could potentially tie an equity issue to a new acquisition or raise funds opportunistically to capitalize on the equity market's recovery. Maintain Hold with S$0.57 fair value.

Valuetronics Holdings: Buy (OCBC Research, 27 May)
VHL has reported softer FY09 earnings amid a challenging March quarter, consistent with its profit guidance a month ago. Going forward, it is expecting FY10 to remain challenging and the sentiment among its customer to remain cautious. While the group has seen a pick-up in orders in recent weeks, demand patterns stay highly uncertain. As such, VHL said it would continue to strengthen its working capital and cost containment efforts, while carrying on its business development strategies to capture new business opportunities. With healthy balance sheet (HK$153.5m cash with no borrowings), strong operating cash flows and excellent management, we believe VHL is well positioned to take on business opportunities as these arise. However, as the global economy is unlikely to show any dramatic recovery in the near term, we have prudently reduced our FY10F forecasts by 15-27%. Applying 6 times (4x previously) FY10F EPS alongside a re-rating in the sector, our fair value is now raised from S$0.15 to S$0.17, with 36% upside potential.

SGX: Sell (DMG, 27 May)
There has been a sharp pick-up in stockmarket turnover over the past 2-3 months. The average daily turnover (ADT) has risen from S$831m in February to S$1,299m in April. For the first 3 weeks of May 09, ADT has risen further to S$2,286m. The May level is close to the S$2,357m achieved for CY2007, when the stockmarket was at its peak. The futures trading volume has also shown resilience, with trading volume of 4.6m for Apr 09, close to Mar 09’s 4.84m. This is sharply higher than the monthly average of 3.47m for the first two months of CY2009. Separately, SGX has announced this week the launching of a Fuel Oil Futures contract in 2HCY09, which is a positive. However, we are assuming minimal impact in the initial quarters. We have raised our assumptions of stockmarket turnover, given the recent strength. Our FY09 stockmarket ADT forecast has been raised from S$1.10b to S$1.26b and for FY10 stockmarket ADT from S$1.24b to S$1.36b. Correspondingly, we raised our FY09 and FY10 net profit forecasts both by 7% to S$296m and S$332m respectively. As the likelihood of FY10 ADT being greater than FY09 is now much higher, we raise our P/E multiple to 20x, from our previous 13x assumption. This is close to the average 21x that SGX traded at over the past 3.5 years. Hence, based on 20x FY10 P/E, our revised SGX target price is S$6.20 (versus our previous S$3.95). SGX remains a SELL. Our sensitivity analysis shows that SGX target price would be S$7.10 if FY10 ADT hits S$1.71b, or S$7.90 if ADT is S$2.05b.

Hongkong Land: Neutral (JP Morgan, 27 May)
The share price of Hongkong Land (HKL) has risen 25% since the end of April compared to a 10% increase for property investors and 15% for Hong Kong property developers. The stock has rebounded 70% from the trough in early March, in line with other property stocks. From the trough of a 63% discount to NAV and 0.3x P/BV, HKL has reverted to a 23% NAV discount, even narrower than the long-term average discount of 27%. We believe the sharp narrowing of NAV discount was mainly due to expected cap-rate compression in Hong Kong. Ample liquidity, availability of bank lending, and end-users and long-term investors snapping up strata-titled offices were the major underpinning factors. However, the room for a further increase in capital values in Central and hence NAV appears limited. Our major concern remains Central office rentals, which are most affected by the retrenchment of the banking industry. Tenants are still in the downsizing mode and are giving up space when their leases expire. Apart from Credit Suisse and Deutsche Bank, which are moving out of Central in late 2009 and 2010, Citigroup is likely to give up part of the occupied space at Citibank Plaza, which hopefully can be taken up by Barclays targeting expansion. We believe the Central office vacancy rate could peak in FY10 at over 8%, and the expected further rental decline could cap the capital value upside until rents are stabilized. Without a further catalyst but simply liquidity, we expect the stock will perform in line with the broad market, and hence downgrade our rating from OW to Neutral. Our Dec-09 of US$3.2 implies 5.3% share price downside. We would suggest a re-entry below US$3. Risks to our price target include cap-rate changes largely due to liquidity and interest rate changes, and deviations of rental changes from our expectations.

Raffles Education: Buy (Kim Eng, 26 May)
The group had entered into an agreement to adjust the time period for its outstanding payment of RMB 1.5bn for OUC. Instead of servicing the outstanding amount over three instalments till 2011, the group has obtained approval to defer the payment for OUC progressively. According to the new agreement, the group will have to make a payment of RMB 500m by 30 April 2010 and a payment of RMB 105m by 31 Dec 2010. The bulk of the outstanding amount (RMB 895m or 60% of the outstanding amount for OUC) shall be deferred until the recovery of the economy. In any case, the group shall make payment of RMB 500m by 31 Dec 2012 and the payment of the balance RMB 395m by 31 Dec 2013. With a free cash flow of S$ 117m ( RMB 550m) to date for FY09, and no major capital expediture in the next 2 years (estimated normalised capex of S$8-10m), the group is in good shape to service the short-term obligations to fulfil a payment of RMB 605m for OUC by 2010. However, we reckon that dividend payments might have to be hold back in order to conserve cash. To be prudent, we now estimate no dividend payments for the next 3-years as the group strengthens its balance sheet with reduced gearing. The deferment of the OUC payment will remove the cash crunch concerns on the group. Excluding the outstanding due to OUC, the group's net gearing will fall from 0.9x to a mere 0.18x. With the cash crunch concerns evaded, the stock could be due for a re-rating when investors re-focus on its solid defensive earnings from education. Being the cheapest listed education stock and trading near to trough levels, REC offers an attractive investment proposition. Moreover, the group will be a stronger education provider in the next upturn given its strengthened balance sheet and growth catalysts from OUC.

SingTel: Buy (Kim Eng, 26 May)
Bharti Airtel has revived merger talks with South Africa's MTN Group. Similar talks failed in mid-2008 when MTN wanted a deal not favoured by Bharti. The latest proposal, which is not confirmed but which both sides will exclusively negotiate until end-July, involves Bharti taking a 49% stake in MTN in exchange for 36% of itself. Bharti will take 20% in the form of new MTN shares and 29% in vendor shares. In addition to issuing shares, MTN will pay another US$2.9b to get 25% of Bharti while MTN shareholders will get 11% of Bharti along with ~US$7bn in cash. The deal is valued at about US$23bn. Post-deal, SingTel could see its effective 30.4% stake diluted to 25.6%. In the short term, Bharti's EPS may be slightly diluted – at $35b for the whole company, it is valuing MTN at about the same as itself (19-20x earnings). However, we do not view this as negative in the long term as Africa and Middle-east, where MTN is strong in, are the last telecom frontiers and offer strong growth opportunities. According to the media, citing banking sources in India, Bharti will not be making a rights issue of shares but will be raising debt funding instead. To fund the cash portion of the purchase, Bharti may need to raise up to US$7b in debt, which will raise debt ratios to a still reasonable 1.5x net debt/EBITDA and 0.78x net debt/equity. If a merger was struck last year, valuations would have been higher, with estimates as high as US$50b. Valuations are now more reasonable. Also, a merger would allow SingTel to gain more exposure to high growth emerging markets. It had previously been unable to raise its stake in Bharti due to India's foreign investment laws and for Bharti to gain access to more emerging markets through MTN should be good for SingTel.

SingTel: Hold (UOB Kay Hian, 26 May)
Bharti is in talks with MTN to enter a significant partnership where Bharti would acquire a 49% stake in MTN and, in turn, MTN would acquire a 36% shareholding in Bharti. The two parties will be involved in exclusive talks with each other to discuss the deal until 31 Jul 09. MTN is an attractive entity spanning 21 countries across the African and Middle Eastern markets. The potential transaction could see the pooling of strength of two of the leading emerging market operators towards formation of a telecom group serving the large populations of fast-growing and relatively the under-penetrated Asian and African markets. However, it comes at the cost of a 36% dilution to the existing shareholders of Bharti. We estimate the transaction could potentially dilute SingTel's current stake of 30.4% in Bharti to 19.5%. The deal is still under discussion and could undergo further rounds of structuring changes. We expect to get more clarity in August after the exclusive talks come to an end. Maintain HOLD with a fair price at S$2.95 based on the sum-of-the-parts valuation. Our entry price is S$2.40.

Keppel Corporation: Sell (UOB Kay Hian, 26 May)
Keppel will sell its 45.51% stake (234.5m shares) in Singapore Petroleum Company (SPC) to PetroChina International (S), a subsidiary of PetroChina Company Ltd for S$1.47b or S$6.25/share in cash. The purchase consideration is at 24.0% premium to SPC's last Friday’s closing price. Keppel will realise a gain of S$660m, thus increasing its NTA/share from S$2.84 to S$3.26. PetroChina is required and intends to make a mandatory general cash offer for the remaining shares in SPC. Assuming transaction is completed by end-09, our FY09 net profit forecast would rise by 72% from S$920m to S$1.58m, factoring in the S$660m gain. FY10 and FY11 net profit forecasts would be reduced by 18% and 21% respectively to S$707m and S$590.7m. Revised EPS for FY09, FY10 and FY11 at 99.2 cts, 44.4 cts and 37.1 cts respectively with PEs at 8.1x, 18.9x and 23.0x. Our revised sum-of-the-parts valuation for Keppel is S$5.90/share (previously S$4.85/share), factoring in the S$1.47b selling price for its SPC stake. We have also factored in a higher ex-rights target price of S$2.35 for Keppel Land (S$1.70 previously). A special dividend from the divestment proceeds is likely. Maintain SELL on Keppel as its share price is above our revised fair price of S$5.90. With the divestment of SPC, Keppel will become a less compelling oil play.

China Aviation Oil: Sell (DMG, 26 May)
CAO reported revenue of US$655.6m for 1Q09 was 34.8% lower year-on-year (yoy) on the back of lower jet fuel prices, which fell 47.3% during the previous corresponding period. However, the volume of jet fuel procured and supplied, alongside international trading increased by 0.3m tonnes. NPAT also fell 54.6% yoy to US$4.1m for 1Q09, exacerbated by a US$2.6m loss from its associate SPIAFSC. The Group registered a 223.5% yoy increase in gross profit for 1Q09 to US$10.2m. This was due to the addition of new business segments, namely jet fuel trading activities, freight optimisation and hedging activities. We stress however that this increase in gross profit is not sustainable as we estimate around US$5m out of the US$10.2m was contributed by trading activities. Stripping this estimated trading profit would have brought the Group's bottom line to a loss of around US$1m. Our new FY09 EPS estimate has increased 30.2% to 5.6S¢, due to our higher assumption of trading activity gains (S$5.0m versus S$3.0m previously) and increasing the spread per barrel (US40¢ versus US35¢ previously for FY09 and FY10) under its Jet Fuel Procurement and Supply segment. Our FY10 EPS estimate also increased by 5.1% from US6.6¢ previously to US6.9¢ as a result. We have retained our crude oil forecasts at US$51/bbl for FY09 and US$58/bbl for FY10. Without further news of any asset injections, CAO's lacks a clear selling point. With the recent addition of the Tianjin – Beijing Oil Pipeline, we do not foresee any further asset injections in the medium to long term. According to our estimates, the stock currently trades at 22.9x FY09 and 18.3x FY10 P/E (versus 7.7x FY09 and 6.0x FY10 P/E for the FTSE ST China Index), which in our view is rich considering the lack of any strong growth drivers. Maintain SELL with a fair value of S$0.96.

Genting International: Sell (OCBC Research, 26 May)
Genting Singapore's share price, after hitting a low of S$0.41 in mid-February, has been on a winning streak ever since, chalking up gains of nearly 116% despite posting a wider 1Q09 net loss of S$31.9m vs. net loss of S$12.7m recorded in the year ago quarter. One possible reason could be growing optimism from the opening of its integrated resort – Resorts World @ Sentosa (RWS) – in early 1Q10, which should coincide with the expected recovery in the global economies going by most economists’ forecasts. In addition, many investors are probably upbeat about its potential market here in Asia, which industry watchers believe is without doubt the most promising – growing at 15.7% CAGR for the next five years. According to a PricewaterhouseCoopers' (PWC) report, gaming revenue in Asia hit US$15.6b in 2007 and is expected to grow to US$30.3b in 2011. However, PWC noted that competition is also widely expected to heat up, as more countries mull the possibility of either setting up their own casinos (like Taiwan, Japan and even Thailand) or expanding the number of existing ones (South Korea). In tne meantime, Genting's UK operations could continue to languish, given the dismal economy there. Latest official data showed that UK's economy shrank by 1.9% in 1Q09, while household spending fell by 1.2%, the biggest drop since 1980. In line with the recent re-rating of global equity markets as well as the improvement in risk appetite, we have bumped up our FY10 estimates and in the process, raised our fair value from S$0.45 to S$0.76. But realistically, we think that the turnaround would probably come in FY11. In the meantime, Genting may have to also content with higher interest payments as it continues to drawdown its S$4b loan. Maintain Sell.

Ho Bee: Hold (Phillip Securities, 26 May)
Ho Bee reported 1Q FY2009 revenue of S$110.0m (+16.8 year-on-year) and net profit of S$37.3m (+42.8% yoy). Revenue rose mainly because of greater revenue recognition for two residential projects, Vertis and Quinterra. Net profit increased because of higher revenue, increase in rental income from office, industrial, and retail spaces as well as tax write-back from the reduction in corporate tax rate from 18% to 17%. 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$157.6m, S$68.0m and S$65.6m for FY2009F, FY2010F and FY2011F respectively. Ho Bee mentions that it expects to be profitable this year on revenue recognition from its residential projects, The Coast, Paradise Island and Orange Grove Residences, which have been substantially sold. Based on the figures from URA, there was a huge jump in the number of homes sold from 108 units in January 2009 to 1,332 units in February 2009. After that, the number of homes sold declined slightly to 1,220 units in March 2009 and 1,207 units in April 2009. This shows that there is a recovery in the property market with an increase in the number of transactions from January 2009. However, the luxury segment has not recorded any sales for the past three months as there were no sales for homes that are sold above S$2,500 per square foot. In fact, we expect further softening of prices for this segment. We maintain our hold recommendation for Ho Bee as it has not launched its properties for sale recently. Moreover, we are concerned about the possible decline in sale prices of its properties in the luxury segment. However, we raise the fair value from S$0.42 to S$0.68 to reflect the recovery of the property market in Singapore. This is based on a reduction in the discount from 75% to 60% of the RNAV of S$1.71.

Keppel Land: Sell (Citi Research, 25 May)
The stock has almost tripled from its low in March, rising more than 50% and outperforming the market by nearly 30% in the past month. We believe the stock was grossly oversold, but the recent rebound means it is no longer undervalued and is now slightly ahead of fundamentals. We are downgrading the stock to Sell from Buy previously. We remain cautious on the office sector outlook. With no new demand and plenty of subleases available as well as new supply amounting to about 2.4m sqft per annum in 2010-12, we maintain our view that prime grade A office rental will head towards the S$5psf level. Unlike residential, there has been no pick up in demand for office space. Post its rights issue, our RNAV for Keppel Land is S$2.25. This assumes office capital values of S$1,000psf. We attach a discount of 20% in deriving our S$1.80 target price. This is in line with its discount one year after SARs and a 0.5 standard deviation below its mean. Based on our estimates, to justify current share price, prime grade A office capital values need to be valued at S$1,500psf. With the recent transactions of Anson House and Parakou Building at S$1,100psf and S$1,280psf respectively, it might be fair to assume prime grade A office at S$1,500psf. We are not convinced this is the bottom as we have not seen the worst of supply yet.

Frasers Centrepoint Trust: Buy (Citi Research, 25 May)
Some 94% of the enhanced Northpoint are either leased or under advance stages of negotiation, with full works expected to be completed by Jun-09. Management expects full operation of the mall to start in Jul-09 and will boost portfolio's NPI by 7%. Since its listing in Jul-06, FCT has progressively increased the number of leases with Gross Turnover (GTO) component and step-up rent structure, from below 18% to the current 87% and 94% of all leases respectively. Revenue from GTO typically accounts for just 4-5% of total gross revenue (2QFY09 was about 8%). Of its three malls, Causeway Point and Northpoint, which contributes over 90% of NPI, are suburban malls which are resilient during periods of recession. Their occupancies maintain above the 95% mark through previous recessions. Since their respective completions, gross rentals have never dropped more than 3.3% year-on-year (yoy). As at Mar-09, FCT's debt-to-asset ratio is at a comfortable 29.7%, with interest cover at a healthy 4.55x. In addition, it has no major refinancing concerns till Jul-11. All acquisitions are delayed and there are no concerns on capital raising. We like FCT's exposure to the resilient suburban malls and it offers an attractive '09E yield of 10%, higher than CMT's '09E yield of 7%. Reiterate Buy

Keppel Corp: Buy (DMG, 25 May)
Keppel Corp has announced that it had entered into a conditional agreement with PetroChina to sell its entire shareholding in Singapore Petroleum Company (SPC), representing 45.51% of the total issued share capital of SPC for a cash consideration of S$6.25 per share. Upon completion of the deal, Keppel would be paid S$1.47b (or S$0.92/share). Given the supply overhang from new refining capacity coming onstream and declining value of SPC's E&P assets resulting from poor economics at low crude oil prices, the offer price of S$6.25/share – a 24% premium to SPC's closing price of S$5.04/share – is favourable to Keppel, in our view. As an integrated oil producer, SPC's earnings are sensitive to crude oil prices and refining margins. Highly volatile crude oil price movements could exert positive and negative impact on SPC's earnings, which in turn, result in volatility and uncertainty in Keppel's earnings. Hence, the sale of SPC will ensure Keppel's earnings will be less dependent on fluctuating crude oil prices, going forward. Last month, Keppel provided an irrevocable undertaking to Keppel Land to subscribe in full its pro rata entitlement of rights shares (or 52.64% of Keppel Land's issued share capital). Assuming Keppel's share for the total consideration of Keppel Land's new shares subscription is S$373m, we forecast that Keppel will be in a net debt position of S$643m by end FY09. The cash proceeds from the sale of SPC will strengthen Keppel's cash position to S$870m (or S$0.51/share). Our new target price for Keppel is raised to S$8.60 (from S$7.95) still based on sum-of-the-parts valuation, after adjusting for the cash proceeds from the sale of SPC. Maintain BUY.

CapitaCommercial Trust: Neutral (DMG, 25 May)
CCT is proposing to raise S$828.3m through a fully underwritten renounceable 1-for-1 rights issue. A quantum of 1.4b shares will be issued at S$0.59/unit, which represents a 44.3% discount to the last closing price (S$1.06), 60.9% discount to the post-rights NAV (S$1.51) and 28.5% discount to the theoretical ex-rights price (TERP) of S$0.825. CapitaLand, as CCT's sponsor, will fully subscribe for its pro-rata entitlement of 31.4%. The equity fund raising (EFR) exercise chiefly serves to pare down CCT's debt obligations for 2010, in turn bolstering its balance sheet and credit profile. Other secondary objectives include capex, asset enhancements and working capital. CCT's newly-revalued assets reflect a 10.1% decline from Dec 08, which is largely due to the factoring in of significant rental declines for 3.5 consecutive years from now until 2012. Aside from a 0.1% marginal increase for Raffles City, cap rates for CCT's other properties were unchanged. Nonetheless, CCT's gearing would improve to 30.7% (previously 38.3%), assuming S$760m is used to repay the S$650m term loan due in Jun 10 and one MTN tranche due in the same year. We believe this would also fall within the comfortable levels of management (30.0 – 45.0%) and financial institutions for future loan extensions. While we reckon that the EFR will successfully unshackle CCT from credit market dislocations through 2010 and quash any refinancing risks, we believe investors would be concerned over two fronts: (i) ensuing DPU dilution from an enlarged share base and (ii) further slides in rentals and occupancies from a still-correcting office sector. Since our BUY recommendation on 30 Apr 09, CCT has surged 30.1% and exceeded our target price of S$1.00. From current levels, we do not foresee any catalysts for the counter and recommend investors to sell into strength. Downgrade to NEUTRAL, with a post-rights target price of S$0.71.

CapitaCommercial Trust: Buy (OCBC Research, 25 May)
CCT announced that it will be doing a 1-for-1 rights issue at an issue price of S$0.59 per rights unit. Approximately 1.4b units will be offered, raising gross proceeds of S$828.3m from the exercise. Latest valuation report of CCT's properties revealed a sharp decline in the valuation of CCT's assets. Decline in asset value has pushed CCT's gearing level up from the reported 38.3% at the end of 1Q09 to 43.1% now, which is close to the upper band of CCT's target gearing level of 30%-45%. After the rights issue, our DPU forecast for FY09 will be diluted by 46.4% to 6 S-cents, translating to a DPU yield of 7.3% base on theoretical ex-rights price of S$0.825 per unit. With the overhanging concern on its gearing removed, we think that this should be a positive catalyst to CCT's share price. We keeping our fair value of S$1.33 and maintain our BUY recommendation on CCT. Our ex-rights fair value will be S$0.96.

Pacific Andes Holdings: Buy (OCBC Research, 25 May)
Pacific Andes has posted a better than expected net earnings of HK$664m for FY09, up 38% year-on-year (yoy). While revenue was in line with our expectation, up 12% to HK7847m, the better bottomline performance was partly due to deferred tax credit of HK$70m in FY09 versus tax charge of HK$26m in the previous year. This meant 4Q earnings of HK$237m, up 8% year-on-year and 172% qtr-on-qtr (qoq). Revenue also improved in 4Q by 23% yoy and 120% qoq to HK$637m. 4QFY09 margins showed across the board improvement from 3QFY09, but FY09 margins were slightly lower than FY08. The group declared dividend per share of 2.07 cents per share gives an attractive yield of 6.8% based on pre-suspension price of S$0.305. Together with the FY09 results, Pacific Andes also proposed a renounceable underwritten rights issue on the basis of one rights share for every one existing share held and one warrant for every five rights shares at an issue price of S$0.15 per rights share. This is at a 51% discount to the pre-suspension price of S$0.305. The exercise price for the warrants is fixed at S$0.23. Key shareholder Pacific Andes International Holdings (PAIH), which holds a 65.1% stake in PAH, has given its irrevocable undertaking to subscribe for its entitlements. We estimate that net gearing will drop from 91% to 76% with the rights issue. We are maintaining our BUY rating, but are likely to revise up our fair value as the stock has appreciated 74% since our last report.

Rotary Engineering: Outperform (CIMB-GK, 22 May)
Winners of the EPC contract for the US$10bn Saudi Aramco Total Refinery and Petrochemical Co. project are expected to be announced by end-May. Rotary has submitted bids exceeding US$1bn for two of the 15 packages tendered. The Yanbu refinery project that was put on hold in 4Q08 has also been restarted with EPC bid submissions expected by 4Q09. We estimate Rotary's participation at US$1bn. We believe that the gradual climb in oil prices may have spurred the revival of petrochemical projects in the Middle East and South-East Asia. Management notices renewed interest in the region as customers revisit projects postponed last year. While credit availability remains tight, we believe projects which Rotary are eyeing are less susceptible to financing issues as they are generally backed by governments. Given a more optimistic outlook for oil prices and the renewed interest in oil and gas projects, we upgrade our order assumptions from S$300m to S$450m for 2009 and to S$500m from S$400m for 2010. Accordingly, our earnings estimates have been lifted by 12% for FY10-11. We have excluded contracts from the Middle East and our earnings estimates could go up by another 20-40% for FY10-11 if a project (US$1bn) is won. We raise our target price from S$0.66 to S$0.74, still based on 11x CY10 P/E (5-year average), on the back of its stronger order wins and our earnings upgrade. Rotary is trading at 9x CY10 P/E, at a discount to peers’ 14x. Upgrade to Outperform on the back of the 37% upside potential and expectations of a pick-up in its order momentum.

Adampak Limited: Neutral (DMG, 22 May)
Adampak saw a 31.2% drop in turnover during 1Q09 due to inventory rationalisation by its customers (which we believe would include HP, WD and Seagate) that was in turn attributed to lacklustre demand. However, net profit fell a relatively larger 62% as margins were eroded due to a change in sales mix as revenue from the higher-margined electronics sector fell more compared to the non-electronics sector. Even Adampak's bigger peer Brady Corp – whose market cap is at least 40 times larger than the company – was not spared from the slowdown in the tech industry as its recently released 3QFY09 results showed a drop of 28% and 48% for top and bottomline respectively. However, the balance sheet of Adampak remains strong with almost zero debt while it continued to generate positive cash flows – free cash flow per share stood at 1.46 US cents, notably higher than its EPS of 0.24 US¢. As with most hard disk drive (HDD) component suppliers, we expect Adampak's revenue to increase by at least 20% qtr-on-qtr (qoq) in 2Q09 due to inventory restocking activities. Margins should also improve as the company manages to reap economies of scale. We are revising down our top and bottomline estimates even though we are expecting a better 2Q09 as earnings visibility in 2H09 remain low. Additionally, we may also have underestimated the extent of the slowdown in 1Q09 – hence, our previous FY09 forecasts have accordingly been a tad too optimistic. Based on our single-stage dividend discount model on assumptions of a dividend payout ratio of 40% and terminal growth rate of 1%, we maintain NEUTRAL but reduce our target price to S$0.15 (from S$0.165 previously).

Singapore Exchange: Outperform (CIMB-GK, 22 May)
The current global equity rally is looking more sustainable than previous rallies. April's securities average daily value traded (SDAV) was only S$1.30bn/day. That has since doubled in May. We raise our 4Q09 SDAV assumption to S$2bn/day (from S$1.28bn/day) and our FY10 SDAV assumption to S$2bn/day (from S$1.35bn/day). Our higher SDAV assumptions raise our FY09 EPS estimate by 5% and our FY10 EPS estimate by 28%. Derivatives could also recover as rising equity markets tend to sooth most concerns. Tracking the four key index futures contracts in SGX's derivatives stable, March and April volumes have already recovered from Nov 08-Feb 09 levels. Trading has been particularly strong in MSCI Taiwan futures contracts. Activity in Nifty 50 contracts is likely to surge in May as well. Our previous fear was that the slowdown in SGX's derivatives business at the turn of the year hinted at something more structural. That concern seems overblown. Our higher SDAV assumptions have prompt us to raise our target price from S$5.67 to S$7.84 which implies 20 times CY10 P/E and 5% dividend yields. SGX's P/E now looks more attractive than other Asian bourses. Markets are starting to pull back after a strong 10-week rally. Having underperformed somewhat in the past month, SGX looks good for one to position for the next wave. Upgrade to Outperform.

SGX: Buy (Kim Eng, 21 May)
The average daily turnover (ADT) has rebounded sharply from below a billion in mid-March to the current $2b levels. Since May, the ADT has sustained at around $2b and even hitting bull market levels of above $3b on certain days. So far into SGX's final quarter (Apr-June), its ADT has shown a sharp resurgence of 93% qtr-on-qtr (qoq) and 10% year-on-year (yoy) The significant bounce in ADT, which is a key performance indicator of its mainstream securities market revenue, bodes well for a strong earnings recovery ahead. Besides the turnaround of the securities market revenue, the derivatives market revenue has been strengthening as well. Futures volumes rose 6% yoy in April after 3 consecutive months of decline. Further, the group's new product launches such as the Extended Settlement contracts and various initiatives to grow the options market will continue to sustain its fast-growing derivates market segment. As ADT has risen to levels that more doubled of our ADT assumption of $1.2bn for FY10, we are increasing our FY10 ADT assumptions to $2b in line with the market recovery. As such, we have raised our earnings estimates accordingly for FY10 by 21%. Our FY09 earnings estimates remain unchanged as ADT YTD was still within our estimates of $1.2b. We have raised our target price to $8.30, based on 21x FY10 PER (from 19x FY09 PER previously) in line with SGX’s recovery stage PER cycle. With renewed market confidence, we reckon SGX will be a fantastic recovery play given its monopoly status and appeal being the Asian gateway to a diversified range of securities and derivatives products. Upgrade to BUY.

Keppel Land: Sell (OCBC Research, 21 May)
While the property transaction data for April showed a gradual return of buyers towards the high-end property segment, we reckon that a majority of this demand was directed towards projects with small size units which fetched low absolute prices and also projects in which developers had re-launched at lower prices. We believe that the turnaround for high-end property developers such as KepLand has yet to come as buying sentiment still remains fragile in the high-end segment hence limiting the ability of developers to raise selling prices. Earlier in May, KepLand said it had extended the payment due date to an enbloc buyer of 51 units in The Suites at Central by 6 months, while receiving a monthly payment of S$0.5m during the extension period. While we reckon that buyer is committed to complete the purchase, we do see significant risk, given the large quantum of the outstanding payment (estimated: ~S$94m). Despite the recent improvement in sentiment, this incident served as a reminder of the potential default risk that developers are likely to continue to face. If the buyer fails to complete the transaction, KepLand will be able to keep the 20% downpayment, which would effectively lower the breakeven price of the units to S$1,445 psf. However, given that the last transacted for the project was around S$1,500 psf in April, the margin of safety is little and write-down may be needed for the returned units if prices continue to fall over the next 6 months. Since we upgraded our recommendation on KepLand to BUY on 27th April, KepLand’s share price had risen by 40.7%. Although the recent rights issue had removed funding overhang and boosted KepLand’s balance sheet, we believe that the recent optimism had been overdone, given our view that a turnaround for high-end developers and the recovery of the office market will still take some time. We prefer to stay conservative with our fundamental view and maintain our 50% discount to development profits and property valuations. As such, we are keeping our fair value unchanged at S$1.61, and downgrading KepLand from BUY to SELL.

Li Heng Chemical Fibre: Hold (DMG, 21 May)
Li Heng has reported 1Q09 revenue of RMB472.5m, down 41.2% year-on-year (yoy) from 803.7m. Gross margins also fell 21.5ppt from 34.4% in 1Q08 to 12.9% in 1Q09. As a result, net profit slumped 95.5% to RMB10.2m over the year due to a dip in average selling prices (ASP), gross margins and an increase in income tax rate (43.9% in 1Q09 versus 13.1% in 1Q08). The PA chip plant as part of Li Heng’s Phase III expansion plans is almost completed, and trial testing should commence in Jul or Aug 09, which will add an extra 70,000 tonnes of nylon capacity by 1Q10. This new capacity will be used for finer yarns that ultimately go towards making sweaters and lingerie. Order visibility stands at two months, but customers are noticing a sharp fall in orders after July 09, especially for export segments.We have further lowered our gross margin assumptions from 15.1% and 16.7% previously to 13.5% and 15.1% for FY09 and FY10 respectively. ASPs have also been slashed from RMB19,350/t and RMB21,340/t previously to RMB16,590/t and RMB18,480/t for FY09 and FY10 respectively. Our production volume assumptions have remained unchanged as Li Heng is still able to maintain a 90% rate of utilisation. As a result, EPS has been reduced 17.9% to 2.8S¢ for FY09 and 7.9% to 4.4S¢ for FY10. This gives us a new target price of S$0.20 (S$0.22 previously) on the back of lower forecasted earnings. Given the limited upside, we are downgrading the stock to a HOLD.

Wilmar International: Buy (Kim Eng, 20 May)
Wilmar is Asia's leading agribusiness group, and second largest stock by market capitalisation on the SGX. It is the world's largest player in the palm and laurics market. It is also has a market leading position in the edible oils market for both the burgeoning economies of China and India. Wilmar now generates some US$29b in sales and recorded a net profit of US$1.53b in FY08. While we expect lower earnings of US$1.38b in the current financial year from lower commodity prices, the longer term growth story is intact. We are forecasting a relatively staid 3-year earnings CAGR of 5% in the current economic climate, but this is ahead of consensus. We believe the market may raise its outlook on a recovery in China and India. Wilmar has the most profitable and scalable business model amongst its SGX-listed peers. It has an established distribution network that it can use to grow its existing and new businesses. We are therefore assigning a premium valuation of 18x FY09 PER to the company, which implies 25% upside from its current share price level. Wilmar may also unlock further shareholder value by listing its China assets in either Hong Kong or Shanghai, where premiums for good quality consumer businesses are significantly higher. According to our calculations, such a move may value the company at US$28.2b, or S$6.33 per share. We are initiating coverage on Wilmar International with a BUY recommendation and a target price of S$5.70. While Wilmar's share price has outperformed the market, we believe that there is still further upside, with earnings outperformance and unlocking of value by listing its China assets in Hong Kong or Shanghai.

Frasers Centrepoint Trust: Buy (UOB Kay Hian, 20 May)
FCT's suburban malls remain resilient with Causeway Point and Anchorpoint maintaining essentially full occupancy of 100% and 99.5% respectively. FCT achieved positive rental reversion in 2QFY09 with expiring leases renewed at 7% above preceding rental rates. Retail sales index for departmental stores and supermarkets have recovered to +3.8% and +6.8% respectively in Mar 09 after briefly entering the negative territory in Feb 09. However, spending on discretionary items, such as apparel and footwear, continues to contract. Anecdotal evidence suggests that domestic consumption will continue to improve going into 2Q09. Net property income from Northpoint rebounded 31.3% qtr-on-qtr (qoq) to S$4.2m in 2QFY09. Occupancy at Northpoint has thus recovered from 52.2% at Dec 08 to 72.1% at Mar 09. About 94% of Northpoint's net lettable area has been leased as at Mar 09. Management estimated that the enhancement initiative, which will be fully completed by Jun 09, will increase Northpoint's average rent by 20% and net property income by 30%. FCT has a conservative gearing of 29.7% as at Mar 09. 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 cover of 4.6x. FCT reported DPU of 1.86 cents/share for 2QFY09, +6.3% yoy. Our target price of S$1.44 is based on a dividend discount model (required rate of return: 7.7%, terminal growth: 2.5%). FCT provides 2009 distribution yield of 8.8% and trades at a 30.9% discount to NAV/share of S$1.23.

Sing Holdings: Buy (Phillip Securities, 20 May)
Sing Holdings has reported 1Q FY2009 revenue of $12.3m (+2,608.4% year-on-year) and net profit of $1.1m, which was a reversal from a net loss of S$0.1m in 1Q FY2008. Revenue and profit improved due to the recognition of proceeds from the sale of Meyer Residence based on the progress of construction. We are expecting Sing Holdings to report a net profit of S$2m in FY2009F. As its projects are completed progressively in 2010F and 2011F, we would expect greater recognition of revenue and profit based on the progress of construction. This would result in net profit of S$5.3m and S$6.6m in FY2010F and FY2011F respectively. Sing Holdings has launched its "BelleRive" project at Keng Chin Road and has achieved sales of more than 50% of the project. Moreover, it is in the planning stage for "The Laurels" project. URA has reported that 1,332, 1,220 and 1,207 homes were sold in February, March and April 2009 respectively. We feel that the strong sales momentum in recent months has signaled that there is a turnaround in the property market. Moreover, buyers are rushing into the market as they do not want to lose out during the market recovery.We believe that the robust sales in the mass market and mid-end homes will continue for the rest of the year as developers cut prices to attract HDB upgraders. However, the luxury segment where homes are sold above S$2,500 per square foot has not recorded any sales and developers have not launched any properties for the past three months. We are upgrading our recommendation from hold to buy as the stock is trading below its fair value. Sing Holdings has indicated that the price for the units at "BelleRive" project ranges from S$1,325 to S$1,464 per square foot. This is close to our estimate of S$1,380 per square foot for the project. We are adjusting the fair value of the stock from S$0.245 to S$0.21 due to the dilution from the rights issue. This is based on a 50% discount to the RNAV of S$0.42.

AusGroup Ltd: Hold (OCBC Research, 20 May)
Ausgroup is acquiring Modern Access Services, which provides access services to construction and maintenance programs in the mineral resources, oil and gas and industrial sectors. AusGroup will pay A$15m for the company in a combination of cash (A$10m) and new shares (A$5m). Additional payables subject to Modern Access meeting certain EBIT milestones over FY10-12 may bump up the total acquisition cost to A$19.2m. Incorporated in January 2008, Modern Access has a limited track record. We believe AusGroup is paying for the target's A$203m order book, its management, and a client base that includes Woodside, Exxon Mobil and MCC Mining. We have adjusted our earnings estimates. Our S$0.51 fair value estimate (prev. S$0.55) is pegged at 11x FY 10 earnings – down from 13x previously to reflect increased execution risks. Maintain HOLD.

ASL Marine Holdings: Buy (OCBC Research, 20 May)
ASL Marine, a marine services group engaged in shipbuilding, shiprepair, shipchartering and other marine related services. The group specializes in the building and repair of tugboats and barges, though it has moved up the value chain and also builds and repairs other kinds of vessels including offshore support vessels. Even if the offshore market weakens because of the low oil prices, the group may be able to obtain business from domestic infrastructure construction projects. Though its order book is outstanding at S$582m as at 31 Mar 09, new order flow is likely to be minimal going forward due to present tough market conditions. Based on 6x FY10F core earnings, we initiate coverage on ASL with a BUY rating and S$1.03 fair value estimate.

Sembcorp Marine: Sell (Kim Eng, 19 May)
Sembcorp Marine (SMM) has made a statement to address an article by Reuters on 18 May, which refers to an action purportedly commenced in the United States by SMM's customer PetroRig I, which is owned by PetroMena, over the termination of the construction contract for a semisubmersible rig. SMM says that it is not aware of such an action by PetroRig, nor has it received any official notice of such US proceedings. SMM says it has acted properly under the terms of the construction contract. In April, SMM announced that it has terminated the contract for the rig, as final payment was not made under the construction agreement. In accordance to its rights under the contract, SMM will now proceed to sell the rig in the open market. Furthermore, SMM says it would be surprising if the original owners of the rig should go to the US courts when the contract is governed by English laws and any dispute is to be resolved in Singapore by arbitration. However, reports suggest that Petromena is filing for bankruptcy protection for its subsidiaries that contracted the rigs in the US based on US$20m worth of equipment storage in the US, and its therefore seeking a court injunction there. The sale of PetroRig I will proceed as advertised with bids closing at noon on 20th May 2009. SMM is confident that it will be able to sell the rig and to recover all outstanding amounts owed to it. We expect to see more legal wrangling prior to the final sale. This latest development notwithstanding, we maintain our Sell recommendation on SMM, as current share price still exceeds our target of S$2.31 by 11%

Asiatravel.com: Buy (Kim Eng, 18 May)
AST sustained its net profit of $3m in 1H09 despite the weak travel industry. 1Q09 earnings were in line with our expectation. Despite a revenue growth of 8.7% earnings turned in flat due to rising cost of services, depreciation and finance costs. The group declared an interim dividend of 0.9 cent per share, which amounts to a 58% payout. The group's online sales model has proven to be resilient evident in its improved room nights and air tickets growth. AST has achieved a 6% growth in room nights and 227% growth in air ticket sales in 1H09. In fact monthly room nights has been rising, up 10% in 2Q vesus 3% in 1Q, debunking the trend of weakening tourism. This affirms the resilience of the online travel segment and the appeal of AST's fully integrated on-line booking engine where customers get to enjoy exclusive promotions. While the group envisages that demand in the tourism industry could get worse in 2HFY09 amid the possible flu pandemic and political instability in some of its core destinations, it has taken steps to mitigate these adversities. AST will expand its hotel destinations footprint and develop new products. Collaborations with its exclusive hotel partners (near 5000 exclusive hotel contracts) to offer attractive promotions and special rates will also attract visitorships. The group has recently added a video library of more than 7000 hours of travel programmes and destination footages. With this library, it plans to add and produce mini destination videos from the footages to promote awareness of the destinations and its brand. This could be a good source of income in the long haul. In addition, its collaborations with renowned high traffic websites (such as YaHoo and Jobstreet.com) are cost-efficient means to attract new customers. We have reduced our earnings estimates by 8% to reflect lower room rates due to promotions. AST's resilient earnings against the downturn affirm its sound business model that maximises the value of its proprietary, fully-integrated on-line reservation system. In our opinion, AST could be a fantastic recovery play, as its strong online platform is expected to generate significant earnings growth when consumer demand for travel fully recovers. Reiterate Buy!

Singapore Airlines: Buy (Kim Eng, 18 May)
With weak load factors a given in the current economic climate, Singapore Airlines' (SIA) April's numbers were better than expected. SIA showed resilience on both the passenger and cargo side. While both indicators slid by 4.2 pts and 3.7 pts respectively year-on-year (yoy), passenger load factors at 72.2 were a sequential 2.8 pt improvement over April, while cargo load factors at 58.0 was flat. On a yoy basis, passenger loads slid by 17.7%, but was an improvement over the 20% slide seen in March 2009. Cargo's loads slid by 21.6%, versus an 18% decline in March. However, we are encouraged by SIA's response to market conditions through capacity cuts. For April 2009, passenger capacity was cut by 12.9%, while cargo was reduced by 16.5%. This level of reduction is ahead of assumptions. While we warn that April's load factors could be an anomaly rather than a trend, the signs are encouraging. Management's recent indication that forward bookings are showing signs of leveling off are also cause for optimism, but we share management's caution in its outlook. We also note that May's passenger load numbers have a strong likelihood of being weak, which was during the height of the H1N1 flu virus scare. We are maintaining our net FY10 profit forecast at S$865m. We expect SIA to remain profitable, despite lower revenues, due to reduced operating overheads, such as fuel and staff costs. We reiterate our Buy call on SIA, with a target price of S$13.20, based on 1.1x book value.

Singapore Airlines: Sell (UOB Kay Hian, 18 May)
We believe the market has already factored in improvements in earnings for FY10 vis-a-vis 4QFY09 and priced in lower fuel costs. However, with the 12 aircraft to be delivered in FY10, SIA will have 30 surplus aircraft, based on its target of 99 aircraft by end FY10. The key question is whether SIA will be able to dispose of these aircraft and, if so, at what cost. This will have a significant bearing on asset value. Next, there is the question of whether the Influenza A virus will slow down traffic. We have assumed a 12% yoy decline, which appears optimistic. Then, there is the question of effective currency hedges as SIA would be effectively long Asian currencies, the Euro, the US dollar, the British pound, Australian dollar and the yen. FY09 could mark a turning point for SIA. Operating margin fell to 5.6% from 16% previously and the company was free cash flow negative for FY09. We believe SIA should continue to trade at a discount to book value ($11.78) and the stock should be measured on a PE basis as well. At $11.60, the stock is trading at 20.0x our forward estimate and 21.5x consensus estimate. To take into account forward operating earnings, we have introduced a new valuation matrix – EV/EBITDA. At present, the stock trades at 7.3x EV/EBITDA, a level higher than the historical mean of 6.9x. We believe a lower rating is warranted in lieu of the current risk and threats from low-cost carriers. We peg value at 4.2x (-1 STD) EV/EBITDA on average FY10 and FY11 EBITDA estimates. This translates into a fair value of S$9.80 and a 16% discount to book value

Swissco Int’l: Buy (DBS Research, 18 May)
1Q09 results in-line. Swissco reported 1Q09 net profit of S$5.4m (+12% yoy) on revenue of S$14.0m (+32% yoy). Revenue growth was driven mainly by the group's ship chartering business, which grew 33% year-on-year (yoy) to S$12.7m on the back of an expanded and more specialised fleet. This also improved profitability, with gross margins of 56.1% (+3.8ppt yoy, +6.8ppt qtr-on-qtr). However, operating margin of 39.8% was slightly lower yoy due to higher administrative expenses. Net gearing as of end 1Q09 stood at 0.23x, vs. 0.17x as of end FY08. We project it to step up to 0.28x by end FY09 as the group continues to finance its capex programme of another 13 vessels, of which, 9 are expected to be delivered this year. Fleet continues to see meaningful utilisation. Despite ongoing concerns of softening day rates and oversupply of AHTS, Swissco's fleet continues to experience meaningful utilisation while generating sizeable margins. Indeed, the 4 vessels that were taken delivery in 1Q09 have already found employment. These, together with its upcoming vessel deliveries will continue to underpin earnings growth for the year.

Suntec REIT: Hold (OCBC Research, 18 May)
CB Richard Ellis data showed that both prime and Grade A monthly office rents have fallen about 35% from the highs of this cycle achieved in 2Q-3Q08. The market data jibes with Suntec, which reported achieved rents of S$9.96 psf pm for Suntec City Office in 1Q09. Negative drivers for office rents and capital values still persist, in our view: 1) excess capacity concerns; which are exacerbated by 2) a questionable demand outlook. Lender and market appetite for leverage is low and we believe more S-REIT managers may launch equity issues to recapitalize REIT balance sheets. For Suntec, we price in an equity issue of S$500m at an issue price of S$0.70 (up from S$0.60 previously). Our fair value estimate increases correspondingly to S$0.84 (S$0.80 previously) or a 7% discount to our SOTP value of S$0.91. Suntec’s price has increased 32% since our last report just three weeks ago. Downgrade to HOLD on valuation grounds.

STX Pan Ocean: Fully Valued Hold (DBS Research, 18 May)
STX reported a net loss of US$70m in 1Q09, down from a net profit of US$285m a year ago. This is worse than our expectation of a breakeven for the quarter. We believe the losses were due largely to the below cost freight income for the 30-35 owned and long-term chartered-in ships. The greater-than-expected losses have more than offset the profits generated from: (1) the remaining 35-40 owned and long-term chartered-in ships that chartered out at profitable rates under long-term contracts; and (2) the approximately 140 spot charter-ins. Expect performance to deteriorate in 2H after a pick-up in 2Q. We believe the losses should narrow in 2Q, in light of the rebound in Baltic Dry Index (BDI) to an average of 1600 over the past few months. However, we are less optimistic into 2H. We believe current BDI is poised for a retreat to the 1000 level, due to China's de-stocking of iron ore and the delivery of new builds aggravates the oversupply issue. We now expect STX Pan Ocean to make greater losses of US$159m and US$207m in FY09 and FY10 respectively, having factored in bigger losses from the owned and long term chartered-in ships that are chartered out on spot. However, we have raised our valuation multiple from 0.4x to 0.7x P/B. Still, we believe that sustained price catalysts for STX are few, as it faces prolonged industry downturn ahead, and has more exposure to the spot dry bulk market.

STX Pan Ocean: Sell (UOB Kay Hian, 18 May)
As part of the pre-emptive vessel risk management strategy, STX PO has successfully reduced its costs by lowering its number of operating vessels from 486 in May 08 to 272 in Jan 09, and added 34 vessels that were secured at competitive rates to prepare for a market upturn. Management expects earnings to recover in 2H09 in view of a lower operating loss of US$28m vs US$58m in 4Q08. That said, margins of chartered-in vessels remained razor thin. In our opinion, otwithstanding a short-term rally in the Baltic Dr Index (BDI) on China's higher iron ore imports, freight rates will likely be soft when vessel oversupply hits the market from 2H09 onwards. STX PO expects a global fleet growth of 5.4% in 2009 and 7.8% in 2010. This factors in: a) annual orderbook cancellations of 30-40% and delivery delays of 10%, and b) annual vessel scrapping of 20m-25m dwt. With demand projected to grow 3.0% in 2009 and 4.2% in 2010, this implies a relatively balanced demand-supply situation. This is contrary to our view. We believe shipping rates will likely be soft in 2H09 before they get better in 2010 if a significant portion of 2010 deliveries is cancelled or delayed. If oversupply is not averted by newbuild cancellations or delivery delays, 2010 could end up worse than 2009. We forecast the BDI at 2500 in 2009 and 1500 in 2010 before finding relief in 2011. STX PO faces significant downside risk given its paper-thin margins as a result of a large charter-in fleet. While STX share price has risen 55% ytd, we do not think it is sustainable as dry bulk shipping rates will likely be soft as strong vessel deliveries hit the market from 2H09 onwards.

Jaya Holdings: Hold (DBS Research, 18 May)
3Q09 results ahead of expectations. Jaya reported 3Q09 net profit of S$22.2m (-43% y-o-y), which included a net forex loss of S$13.4m. Excluding this, recurring net profit would be S$35.6m (+35% y-o-y), above expectations. Group revenue of S$70.1m (-9% yoy, +86% qoq) improved significantly qoq as the shipbuilding division saw a higher rate of revenue recognition on vessels under construction, but was offset slightly by lower contributions from the chartering division which reported a reduced fleet size, but higher day charter rates of S$11,378 (+36% yoy). Jaya also posted markedly reduced admin costs of S$0.2m, down 91% yoy, which partially buoyed operating margins of 55.8% (+12.6ppt yoy). In-line with its newbuild program, net gearing edged up marginally to 0.66x, from 0.65x as of end 2008. We are raising Jaya's fair value to S$0.54, based on 1.0x FY09F P/BV (prev 0.45x) as we adjust for lower equity risk premium. We are encouraged by Jaya's ability to manage its operating costs well, and its ability to dispose vessels despite the persistent challenging macro conditions. In 9MFY09, the group has received disposal proceeds of c. S$142m which will help towards reducing balance sheet strain. Forex and translation losses should also start to taper off as we understand that the majority of the hedges contracted previously have matured. Hence, we upgrade Jaya to Hold from Fully Valued.

Golden Agri-Resources: Hold (OCBC Research, 18 May)
GAR has posted a dismal set of 1Q09 results with revenue slipping 44.8% year-on-year (-30.3% qt-on-qtr) to US$412.2m, meeting about 17.6% of our full-year estimate. Net profit (excluding fair value adjustments of its bio-assets) plunged 93.7% yoy (-78.3% qoq) to just US$8.6m (2.6% of FY09 estimate). There are three reasons for the shortfall. First, the plunge in crude palm oil (CPO) prices from US$1077/ton in 1Q08 to US$511/ton in 1Q09 with achieved sales price falling to as low as US$482/ton. Secondly, the drop in CPO production (down 17% yoy and 12% qoq) due to heavy rainfall in certain locales. Thirdly, higher fertilizer costs, which raised the cost of production by 10% to US$275/ton, and continued to weigh on margins. Despite the volatile commodity prices outlook, management believes that the demand for CPO, being the cheapest edible oil, is supported by core demand from the edible oil and oleo-chemical markets. Hence, it is keen to both expand its high-margin upstream business and select downstream capabilities and distribution. It expects to spend US$225m in capex this year. Management is also confident that GAR has seen the bottom of its CPO production, as the worst of the tree stress (due to the drought in 2006) has passed and its yields should start to normalize. Nevertheless, it has retained a tinge of caution as it has scaled down its new planting target from 50k hectares to 30k. Separately, on report that GAR has appointed BNP Paribas and Credit Suisse to raise US$200m via a rights issue. Management admits it is in talks with several investment banks on the possibility as it feels that trying to raise funds via debt is still difficult and expensive. Management adds any additional funds would come in handy when "opportunities arise". Assuming that GAR is looking to raise that amount, the potential dilution is at least 7%. Due to the dismal 1Q09 results, we have pared our FY09 earnings by 20.8%, but our fair value remains at S$0.40 based on 10x FY09F PER (vs. 8x previously – in line with the general re-rating of the overall market). Given the potential overhang from the rights issue as well as the limited upside, we have downgraded our rating to a Hold.

Food Empire Holdings: Hold (OCBC Research, 18 May)
FEH missed our estimates as it slipped into a US$2.2m loss in 1Q09 – the group's first-ever loss in its history. This was against a US$6.8m profit in a year ago and a US$3.2m profit in 4Q08. Revenue contracted sharply by 44.8% year-on-year (yoy) to US$28.8m as all its key markets registered lower sales. Russia, its key revenue contributor reported a 55.2% dip in sales, while Eastern Europe and Central Asia turned in a 30.2% decrease in revenue. The weak sales were due to inventory de-stocking by distributors following a build up of stocks in 4Q08, which had turned out to be softer than originally anticipated. Other factors that led to the group's poor 1Q09 performance inlcude: (i) the credit crunch which tightened purchasing power of distributors; (ii) depreciation of FEH’s key markets' currencies against the USD, which had the effect of raising FEH's prices in local terms; and (iii) deteriorating consumer demand in light of the economic recession. While these lingering concerns will continue to create an overhang on the group's sales, management remains optimistic that the worst could be over. We expect demand to return in 2H09 after inventories have been depleted. Poor sales aside, FEH reported a remarkable improvement in balance sheet health. The group emerged to a net cash position of US$18.1m from a net debt position of US$1.1m a year ago, while operating cash inflow tripled to US$19.6m from US$6.7m a year ago. We have lowered our revenue and earnings estimates to account for FEH's weak 1Q09 performance. In light of the group's cash conservation priorities, we have also lowered our dividend assumptions to 0.18 cents per share (previously 0.35 cents), bringing the yield to 0.6% (from 1.2%). As a result of our revised assumptions, our fair value estimate drops to S$0.305 (from S$0.33).

Koda: Hold (OCBC Research, 18 May)
Koda's 3Q09 earnings came in below expectations, with the group slipping into the red with a net loss of US$1m during the quarter vs. a net profit of US$0.5m a year ago and US$0.3m in 2Q09. Losses in 3Q09 alone wiped out its 1H09 earnings and dragged the group's 9M09 bottom line into a net US$0.2m loss. 3Q09 revenue fell 33.3% YoY to US$6.5m on weak consumer demand. Sales in UK and Europe plunged as consumers reined in on spending and property markets remained subdued. On a brighter note, sales from America and Canada have somewhat stabilized and inventory re-stocking has helped to fuel demand. Profit margins deteriorated at all levels in 3Q09 with gross profit margin down by 3.6 percentage points to 26.4% as consumers shunned premium products for more economical alternatives. EBIT swung into a US$1.0m loss from a US$0.7 profit a year ago as operating expenses continued growing despite lower turnover. In particular, administrative expenses grew 14% to US$1.5m as the group incurred additional costs in relation to the setting up of its Vietnam plant. Weak earnings aside, Koda has maintained a healthy balance sheet with net cash position. Operating cash inflow improved to US$0.8m from US$0.2m a year ago on lower working capital investments. Free cash flow turned into a positive US$0.2m inflow from a US$1.2m outflow as the group scaled back on its capital expenditure budget. We have lowered our sales and earnings estimates to take into account Koda's weaker-than-expected 3Q09. Nevertheless, we expect 4Q09 results to improve on inventory replenishment. We have rolled over our valuation to FY10F NTA and keep our peg at 0.5x, deriving an unchanged fair value estimate of S$0.145.

China Fishery: Buy (DMG, 18 May)
China Fishery's net profit grew 8.2% year-on-year (yoy) to US$43.7m in 1Q09 which exceeded our expectations. This was due to an increase in sales volume of Alaskan Pollock by 12.1% to 72,491 MT. The average selling price (ASP) for Alaskan Pollock also increased by 23.3% yoy to US$1,854/MT. Its Peru production volume fell 73.8% to 3,949 MT. Total sales for its fishmeal operation increased by 48% to 39,925 MT due to sales contribution from its fishmeal inventory. Cost of sales increased significantly by 174.9% to US$16.5m despite crude oil prices averaging US$50/bbl for 1Q09 compared to US$93/bbl in 1Q08. The reason for the higher cost of sales was due to more fuel used as the company started fishing earlier in the season as compared to 1Q08. Though margins in 1Q09 were weaker by 9 percentage points, we believe that its cost of sales will improve in the coming quarters as the company will benefit from cheaper bunker fuel costs. As of 31 Mar 2009, China Fishery has a cash position of US$23.7m as compared to US$7.6m in 31 Dec 2008. We however remain concerned that the company has a high gearing ratio of 0.89 times and a sizeable net debt of US$337.8m. However, Management has indicated to us that they will focus on lowering their debt situation in FY09 versus spending more for growth. We believe that if the Company lowers its net debt situation it will attract investors. We have raised our price target from S$0.86 to S$1.15 because of the better than expected performance in 1Q09 and we anticipate its South Pacific operations to bring in further growth long term. Our price target of S$1.15 is based on 5.4x FY09 P/E which is a discount to the FSTC FY09 P/E of 7.2x. Our valuation takes into account its long term growth potential as well as its high gearing.

Parkway Holdings: Sell (DMG, 18 May)
1Q09 net profit was up 9% YoY to S$21.3m, and revenue growth of 4% year-on-year (yoy) to S$237.8m was in line with our estimates. Included in 1Q09 results was impairment loss of S$2.2m for its investment in Auric Pacific. Excluding exceptional items, net profit would have grown 20% for the first quarter. The growth in revenue was largely helped by its International operations (37% and 32% of 1Q09 and 1Q08 Group revenue, respectively), which grew by 20% yoy, thanks to healthy patient volumes. Foreign patient volume at Singapore hospitals expected as the recession continues and the H1N1 virus deter discretionary travelling. This is likely to translate to lower foreign patient volume as patients put off seeking treatments in Singapore. If the H1N1 virus outbreak becomes more widespread, overall patient volumes (both local and foreign) could decline as patients avoid visiting healthcare establishments (e.g. radiology centres). Management's continual implementation of cost-cutting measures across all operations would help to cushion revenue impact from decline in patient volumes at its Singapore hospitals. The growth in its Singapore Healthcare segment (as more patients opt for outpatient treatment) and International operations are also expected to offset the decline in the Singapore Hospital segment. We are maintaining our earnings estimate of S$78.0m for FY09. Our target price of S$0.92 is based on 13x blended forward earnings. The stock is trading at 18x forward PE, which is unattractive compared with its peer average of 12x.

Parkway Holdings: Hold (OCBC Research, 18 May)
Parkway’s 1Q09 results saw its topline inching 4% ahead to S$237.8m while PATMI rose 9% to S$21.3m. Excluding impairment loss of Auric Pacific, Parkway’s bottomline would have risen 20% year-onyear (yoy) to S$23.4m. The group has not resolved the S$34.4m of outstanding debt incurred in 4Q08, but is confident of retrieving the full amount. Parkway is finalising plans with Colliers for the launch of its first tranche of Novena Medical Suites. As such, no sales were booked this quarter. In line with our estimates, Singapore hospital performance started the year with a slide of 9% in topline in view of shorter hospital stays coupled with lower inpatient stays. However, its international hospitals have exceeded our expectations by growing revenue to S$54.8m (+26% yoy, +6% qoq). This growth was primarily due to its Pantai Hospitals and increased patient loads at its cardiac centre in Brunei. In addition, the group also started consolidating revenue of Gleneagles Kuala Lumpur after raising its stake from 30% to 58% in Nov 08 and started recognising revenue from its management project in the Abu Dhabi Hospital. With patients putting off elective surgeries and performing more diagnostic tests, a significant shift to outpatient treatment was seen through an almost double-digit rise in day cases. This boosted the Healthcare segment’s revenue by 13% yoy to S$72.7m. Higher intensity of procedures performed helped to raise productivity and accentuated Parkway’s EBITDAR’s ascent by a greater magnitude of 27%. We have tweaked our estimates to account for Parkway’s successful push for more outpatient treatment along with an anticipated strong performance from its international hospitals. From a core operations standpoint, we raise our estimates to S$83.7m (prev: S$75.6m) in FY09 earnings. Our fair value is raised to S$1.28 (prev: S$1.15) on the same valuation peg of 15x FY09F EPS. Maintain HOLD as uncertainties still exist for its medical suite sales.

First Resources: Sell (DMG, 18 May)
First Resources (FR) has reported 1Q09 revenue of 432.2b Indon rupiaj (IDR), down 41% year-on-year (yoy), which was mainly attributable to a decline in the average selling prices for both CPO and PK and a decline in sales volume of CPO. Gross profit declined 60.3% yoy to reach IDR212.5b, down from IDR535.7b last year as a result of an increase in the cost of sales due to increases in the cost of fertilizers, depreciation expense and changes in CPO and PK inventory. Consequently, gross profit margins have declined from 73% in 1Q08 to 49.2% in 1Q09. PATMI eased 81.6% from IDR311.4b to reach IDR57.4b. A check with management revealed that 4Q08’s average selling price (ASP) for CPO was IDR6,644/kg, versus IDR4,843/kg in 1Q09, despite spot prices trending upwards since Jan 09. Apparently, the 4Q08 CPO’s ASP benefitted mainly from the higher priced forward sales FR did in early FY08. Around 30% of 4Q08's sales volume were locked in at prices significantly higher than spot. Financial expenses was up significantly reaching IDR111.4b in 1Q09. This significant increase is mainly due to translation losses of IDR46.4b arising from foreign exchange translation of US$ notes with the weakening of the IDR. In addition, there was incremental marked-to-market losses of IDR24.6b incurred on a cross currency swap that FR entered into in Nov 07, to swap both the principal and interest payments of its IDR bond into US$ liabilities. Looking forward, management has guided that they expect to continue maintaining a relatively low cost of production of US$200/tonne. We are maintaining our CPO price assumption of RM1,900/tonne for FY09. Using a P/E of 10x forward earnings, our fair value for FR is S$0.42. With the stock trading at S$0.605, we maintain our SELL call on the stock from a valuation perspective.

Singapore Telecom: Buy (Phillip Securities, 18 May)
SingTel has reported an operating revenue of S$14,934m (+0.6% yoy) and net profit of S$3,448m (-12.9% yoy) for FY2009. Although its Singapore and Australian operations posted revenue increases of 13.1% and 7.2% respectively, overall revenue only rose slightly by 0.6% mainly because of the 11.9% decline of the Aussie dollar against the Spore dollar. Its Singapore operations continued to have growth in its data, mobile and IT segments. In Australia, it managed to attract 652,000 new mobile customers and 143,000 new Internet customers. Furthermore, net profit fell as the share of results from the regional associates fell by 19.8% to S$2,051m, due to the depreciation of the regional currencies and the poor performances by Telkomsel, Globe and AIS. SingTel announced a final dividend of 6.9 cents per share. Together with the interim dividend of 5.6 cents per share, the total dividend is 12.5 cents per share for FY2009. SingTel expects the operating revenue for the Singapore and Australian businesses to grow at single-digit level and low single-digit level respectively. Moreover, the contributions from the regional mobile associates are likely to be affected by the fluctuations in the regional currencies. Its dividend policy is to pay 45% to 60% of underlying earnings. As the revenue and net profit of SingTel came in close to our expectations, we maintain our target price of S$3.80 based on the discounted cash flow method. SingTel remains a buy as its business continues to grow in Singapore and Australia with profit contributions from its regional mobile associates.

Swiber Holdings: Underperform (CIMB-GK, 15 May)
Swiber's 1Q09 core net profit of US$7.1m was 26% below our estimate and 12% below consensus due to higher-than-expected depreciation charges from a bigger fleet. Operations were stable with higher revenue and stronger qtr-on-qtr (qoq) margins, thanks to vessels, which came in1Q09. Order book was US$515m with only US$70m of new contracts secured in 1Q09 (1Q08: US$490m). We cut our earnings estimates by 13-14% for FY09-11, to reflect higher depreciation and lower income. Maintain Underperform, albeit with a higher target price of S$0.52 (from S$0.47), now based on 7x CY10 core P/E (previously 5x), in line with its Singapore peers and receding market risks. We are likely to re-rate the stock only if order visibility improves.

Olam: Sell (CIMB-GK, 15 May)
3Q09 core net profit of S$62.4m (+12%yoy) was in line with expectations, forming 34% of our FY09 core net profit estimates and 33% of consensus, with 9M09 core net profit of S$124.8m representing 69% of our FY09 core net profit estimate and 65% of consensus. The result is in line with management's guidance of 9M forming 65-80% of full year profits. We note, however, that the profits were boosted by an S$18m gain from derivatives, which according to management arose from ineffective hedges. Reported net profit of S$87m also includes an exceptional gain of S$25m from the CB buyback. Despite a 6% increase in volume, revenue declined 4.8% to S$2.3bn due to a fall in commodity prices. Food product volumes grew between 8-16% while fibre and wood product sales volume dived 16%. Gross contribution/tonne slid to S$130 from S$137 with declines registered in all segments except Food Staples & Packaged Foods, while net contribution/tonne fell to S$89 from S$102 with declines reported in all segments. According to management, while the rate of price declines appear to be abating and demand for some products such as milk, cotton and some wood products has picked up, it is still too early to conclude whether it is a recovery or merely restocking. However, we lower our FY09 exceptional gain from the CB buyback to S$80.5m as reported by the company, resulting in a 7% decline in forecast FY09 reported profit to S$261.5m. While a recovery is not yet certain, it is likely that the worst is probably past. Hence, we lift our target price for Olam to S$1.20, based on 8.5x CY10 P/E (from S$0.97, 6.4x CY10 P/E). We assign a 15% discount to peer valuations due to Olam's high gearing, poor cashflow and smaller operations. Potential fund raising is one of our concerns. Maintain Underperform.

Singapore Telecom: Buy (OCBC Research, 15 May)
Summary: SingTel reported its 4QFY09 results this morning, surprising on the upside as expected. While revenue fell 5.1% year-on-year (yoy) and 3.7% qtr-on-qtr (qoq) to S$3565.6m, it was 13.4% ahead of our estimates. Net profit was down 17.3% yoy but rose 13.0% qoq to S$903.4m, about 25.1% ahead of our number (also 8% ahead of Bloomberg consensus), aided by stronger associate performance. And if we exclude exceptional items, earnings rose by an even more impressive 13.3% yoy and 48.2% qoq to S$1241.9m. For the full year, revenue edged up 0.6% to S$14,934m, or about 2.9% ahead of our forecast. While net profit slipped 12.9% to S$3,448m, it was still 5.5% above our estimate. SingTel also declared a final dividend of S$0.069 (payable in Aug 09), bringing its total payout to S$0.125 (unchanged from last year), or 58% of its earnings (nearly the top end of its 45-60% guidance). Maintain BUY with fair value of S$3.09.

Genting Singapore: Sell (OCBC Research, 15 May)
Genting has posted a weak set of 1Q09 results last evening, with revenue dropping 37.6% year-on-year (yoy) to S$105.4m; management attributed the drop to several factors, key among which would be poor luck factor (accounted for 20% of the decline), weaker pound against the SGD (16-17%) and reduced patronage volume (2%). Although gross profit improved by 2.9% to S$7.7m, EBITDA tumbled 80.7% to S$2.1m, as it had to incur higher pre-operating expenses of S$7.1m for Resorts World @ Sentosa (RWS). Net profit slipped into the red to the tune of S$31.9m, versus a gain of S$6.0m in 1Q08 (includes fair value adjustments of +S$18.8m). However, if we strip out these adjustments as well as forex impact, Genting would have posted a smaller loss of S$23.9m (24% of FY09 figure), although still wider than the net loss of S$12.7m in 1Q08. The outlook for its UK operations remains uncertain, hampered by both the economic slump there as well as several new measures by the UK government to raise gaming taxes. These measures include a higher license fee for gaming machines and higher tax on the gains from poker games which ranges from 15-50% depending on the magnitude of the win. Management expects these measures to have a marginal £1.2m impact on the profitability of its UK operations, which should be mitigated by its ongoing cost measures. As revenue and net loss met 18% and 24% of our FY09 estimates, we are leaving our numbers unchanged. But we are raising our fair value from S$0.33 to S$0.45 to reflect the improving risk aversion in the overall market. However the recent sharp rally may have run ahead of fundamentals. As such, we maintain our Sell rating.

Pan-United Corp: Hold (OCBC Research, 15 May)
PAN reported 1Q09 revenue of S$128.3m (+10% YoY, -12% QoQ) and PATMI of S$9.9m (-15% YoY, -22% QoQ). The better topline was contributed mainly by greater volume of Ready Mixed Concrete (RMC) sold but softening prices took a toll on PAN's profit margin. Cargo volumes at its Changshu port was reported to crater in Jan 09 but managed to pick up for the rest of 1Q09 in view of China's domestic stimulus efforts. A bright spot was in its shipping division as it took delivery of more tugs and barges. Utilisation and charter rates are reported to have sustained pricing levels. Moreover, the shipping is expected to have a better impact on bottomline as it reaps tax-exemption if the vessels operate in international waters. We have refined our estimates and DDM parameters and fair value is now S$0.52 (prev. S$0.47). Investors have typically piled into the company for its good dividend yields. However, the rise in its share price has caused FY09 yield to fall to ~6.8% while the stock trades at about 8x FY09F PER (above 7.3x FY08 PER where earnings grew at a much faster pace). With the limited upside, we are downgrading our rating to a Hold.

Epure: Buy (UOB Kay Hian, 15 May)
Epure has reported 1Q09 net profit of Rmb40.7m, up 32.4% year-on-year (yoy) Revenue increased 7.6% yoy to Rmb136.0. Beijing Hi-Standard Water Treatment Equipment (Hi-Standard) contributed 83% of the revenue increase of Rmb9.6m. The higher net profit growth (32% vs 8% for revenue) was mainly due to a Rmb2.6m tax credit arising from the reversal of income tax paid in 2008. Pretax profit rose l3.9% yoy, which appeared in line with the 7.6% revenue growth. Epure's 1Q09 results were typically not representative of the company's full-year performance given the nature of the turnkey projects where revenue is recognised based on percentage of completion. A majority of the company's orderbook will be carried out in the following three quarters. The industrial players in China are severely hit by the global economic crisis, as seen in the deteriorating power generation figures and unfavourable industrial production. Hence, water treatment demand from the industrial sector is expected to weaken in the near term. However, demand from the municipal segment arising from the government-sponsored infrastructure projects will remain firm, which we believe could more than offset the adverse impact from the industrial segment. Epure has four Build-Operate-Transfer (BOT) projects currently. The company has also recently taken a 15% equity stake in a Lanzhou BOT project. The company intends to participate in BOT projects whenever attractive opportunities arise. The BOT investments will help Epure build its recurrent income stream and to secure Engineering, Procurement and Construction (EPC) projects. Also, Recent fixed asset investment (FAI) numbers in China were so strong that we expect the strong investments to push up industrial production and boost the industrial recovery, which could in turn lead to a broad resumption in the demand for water treatment projects from industrial players. In addition, the government's increasingly stringent water and wastewater treatment requirements and its aggressive investment in the sector would also drive demand from both the municipal and industrial sectors. We retain our earnings forecasts for Epure, and raise our target price to S$0.60, based on Epure's Hong Kong-listed peers' average 2010F PE of 12x.

People’s Food: Sell (UOB Kay Hian, 15 May)
Net profit plunged 70% year-on-year (yoy) to Rmb42.8m in 1Q09. Stripping out an Rmb8.3m loss from its associate, Pine Agritech, pre-tax profit was down 56% yoy, still lower than our expectation and consensus. In anticipation of further decline in pork prices, several of PFH's commercial customers reduce their purchase volume, and together with lower average selling prices (ASPs), turnover from the frozen pork dropped 32% yoy in 1Q09. Sales for downstream products also fell due to lower ASP amid fierce competition. Wholesale pork price has declined for 15 consecutive weeks to Rmb14.4/kg in mid-May, down 34% yoy. This downward trend will continue in 2Q09, which will further put pressure on PFH's ASP and gross margin. Other than the lower disposable income which has restricted consumers' spending power, several negative news, such as food safety concerns and H1N1 flu, have affected pork consumption too. As such, management guided gross margin in 2Q09 might be even lower than the 6.4% in 1Q09. PFH intends to expand its upstream business by investing about Rmb2b to build several pig farms with a total land area of 4.7m sqm in the next five years. This will offer quality and a stable supply for the company in the long term. However, considering that the ratio of hog unit price to corn unit price has already been lower than 6:1, the breakeven point in 36 big and middle-sized cities has already showed a loss in pig rearing. Hence, we are concerned that the pig farm project might drag down PFH's profit. We cut our FY09-11 net profit forecasts by 43-55% to factor in our lower ASP and lower gross margin assumptions. Downgrade to SELL with fair price of S$0.55.

Olam International: Buy (OCBC Research, 15 May)
Olam's 3Q09 results were in line with expectations. Revenue slipped 4.8% year-on-year (yoy) to S$2.3b and reported net profit surged 56.1% to S$87m, mainly due to non-recurring gains from the buy-back of its convertible bonds. Stripping these away, core net profit would have risen by 12.0% to S$62.4m. The group registered a 6% yoy increase in overall volume in 3Q09, buoyed by robust performance from its food segments. The improvement in volume helped to offset the impact of lower commodity prices on its sales. Olam recorded a significant improvement in 9M09 operating cash flow thanks to commodity price disinflation. The stock has been a laggard in the recent rally, and is now trailing at 13.5x FY10F PER vs. the STI's 15x. We believe that Olam will continue to deliver consistent growth, and are raising our valuation parameter to 15x (from 11x), and fair value estimate to S$2.06 (from S$1.51). We upgrade our rating to BUY.

Olam: Neutral (DMG, 15 May)
Olam reported 3QFY09 net profit of S$87m, up 56% year-on-year (yoy) Excluding the one-time gain of S$24.6m from the buyback of convertible bonds, net profit would have risen 12% and in line with our expectations. Volume expanded 14.8% YoY to 4.3m metric tons for 9MFY09, reflecting continued growth for the business. The food category recorded a 18.5% yoy tonnage growth, whereas the fibre & wood products segment recorded a marginal 1.2% growth. This points to the resilience of the food business even in times of economic recession. However, some signs of de-stocking have surfaced for the cocoa business, and this may augur weakness for the food business going ahead. Although overall volume growth remains strong, we are concerned that the fibre & wood segment weakness i may persist as we progress through the recession. This may also cap the overall net contribution per ton. We raise our FY09 net profit forecast by 4% to S$262.3m, primarily due to the one-time gains recorded in 3QFY09, but partly offset by slower core business. Our FY10 net profit forecast has been cut by 7% to S$215.3m to factor in weaker demand. Target price remains unchanged at S$1.83. Given the recent surge in Olam share price, we therefore downgrade Olam from BUY to NEUTRAL.

Goodpack: Buy (Kim Eng, 15 May)
Goodpack's 3Q09 revenue of US$24.1m was down 6% year-on-year (yoy) and 12.9% qtr-on-qtr (qoq). Revenue to-date was 76% of our full year estimate. Net profit declined 10% yoy and 22% qoq to US$6.6m mainly due to higher depreciation expense from a larger fleet size. Logistics and handling expenses as a % of revenue continued to decline from 32% in 2Q09 to the 30.5% in 3Q09, helped by lower freight costs, better trade lane matches and reduction in cleaning costs with the cleaning depots in operation. Hence, gross margins showed steady sequential improvement every quarter since the start of FY09. Orders for the synthetic rubber segment have picked up from Apr, though the volume had not been able to match what is expected in a normal year. But the orders from the tomato juice segment for the June peak season have so far been encouraging. The management expects sequential earnings growth in 4Q09.Despite the challenging business environment faced by its customers, Goodpack's receivables turnover of 127 days as at Mar-09 was an improvement compared to over 140 days in FY08. EBITDA to-date was strong at US$38.5m and we estimate Goodpack to turn free cashflow-positive in FY10F. The company appears on track to meet our full year earnings forecast. We are keeping our estimates unchanged. Our target price of $1.04 still provides a potential upside of about 20%. We maintain our Buy recommendation.

ComfortDelgro: Buy (DMG, 15 May)
ComfortDelgro's 1Q09 net profit of S$52.5m, up 4.6% year-on-year (yoy) is in line with our expectations. Revenue contracted 4.4% yoy to S$716.6m. If we strip out the negative translation effect of the stering pound and Ausssie dollar of S$50.1m, revenue would have risen 2.3% yoy. Overseas revenue accounted for 40.3% of total revenue, versus 44.5% in 1Q08. Operating profit of S$81.5m was 7% higher yoy. Stripping out the negative foreign currency translation, operating profit would have been 11.2% higher. Singapore bus revenue contracted 0.4% due to a 0.3% fall in 1Q09 average daily ridership. However, operating profit from this segment was up 6% due to lower fuel costs. Whilst London bus revenue and operating profit were down due to the weaker pound, Australia bus operating profit was up 11% due to the acquisition of CDC Victoria since its 23 Feb 09 acquisition. Taxi revenue was down 2% yoy due to weakness for the UK taxi business, but partly offset by increases in the Singapore and China taxi businesses. But taxi operating profit was down 11%. Whilst the Singapore bus fare reduction effective 1 Apr 09 will lower Singapore bus revenue, we expect Australia bus revenue growth and declines in fuel costs to contribute to overall net profit growth. We are assuming FY09 average crude oil price of US$59/bbl, versus FY08's US$105/bbl. After factoring in the hedges made by ComfortDelgro, we forecast a 37% decline in FY09 fuel costs. The weakening of the GBP and the A$ started in Sep/Oct 08 and hence the negative currency translation effect should diminish by 4Q09. Our S$1.78 target price is derived from sum-of-the-parts valuation. Share price catalysts include our forecast 32% recurring net profit increase for FY09, and an attractive FY09 dividend yield of 4.7% (based on a 55% payout ratio).

Singapore Airlines: Sell (DMG, 15 May)
At first glance, SIA's reported headline net profit of SG$1.06b was spot on with our original estimates. However, after excluding the one-off differed tax liability write-back amounting to SG$138m and the surplus on disposal of assets, the company reported a first core net loss (since the SARS epidemic in 2003). While full-year revenue was flat, it was 20.2% lower qtr-on-qtr as traffic, load factor and yield numbers all contracted. SIA's cargo division operating loss of SG$224m also pulled down the other subsidiaries' contributions although SATS Group, SIA Engineering and SilkAir reported decent earnings. While the plunge in jet fuel prices helped to reduce fuel expenditure by S$666m in 4Q, this was offset by losses in hedging of S$543m. These included a $112m loss resulting from the early termination of several fuel hedging contracts before maturity date. While jet fuel price has corrected, but it may be offset by progressive settlement of fuel hedges contracted at higher prices. Advance bookings were lacklustre and there was another setback in the form of uncertainties arising from the Influenza A epidemic. Aggressive promotions, reduced business travel and possible down-trading activities may also worsen the situation. SIA has proposed to distribute in specie 870m SATS shares on the basis of up to 0.73 SATS Shares for every 1 share in the company. While the proposal to distribute SATS shares is net positive to SIA’s valuation, the new fair value of SG$8.80, which is derived from 0.68x FY10 book, or a -2 standard deviation from its historical trading band plus the SATS share entitlement, implies a downside of 26%. Maintain SELL.

SingTel: Buy (DMG, 15 May)
Singtel's earnings in the three months to 31 Mar 09, declined 17% to S$903m, which was in-line with DMG's estimates (S$910m) but above consensus (S$853m). The fall in earnings was due largely to forex (A$ slumped 21% yoy) and operational weakness in Telkomsel and AIS. Strength was seen in the Singapore business, driven by mobile business and effective cost cutting measures (core earnings +32% YoY). Optus also did well, with earnings up 17% on the back of mobile strength. Group free cash flow for the quarter continues to be robust, growing by 5.2% to S$976m due to lower capex from both Singapore and Optus. SingTel was hit by the strength in the S$ in FY09, but the trend is likely to reverse. In particular, we expect A$ to appreciate given the strength in commodities. We estimate that every 10% rise in A$ will result in a 2.3% boost in Group earnings. We estimate earnings will rise 4.6% in FY10 to S$3.61b on the back of weaker S$ and stronger contributions from its regional associates. Its core Singapore and Australia businesses are also expected to be resilient in the face of the downturn. We forecast EBITDA will be flat for domestic operations, and rise 4.2% in S$ terms for Optus. Based on SOTP, we derive a target price of S$3.02 (S$2.67 previously), which represents a capital upside of 10.2%. Coupled with a prospective yield of 4.8%, total return works out to 15%. Upgrade to BUY.

SingTel: Buy (Kim Eng, 15 May)
Despite a 17% year-on-year (yoy) fall, net profit of $904m (+13% qtr-on-qtr) was still above expectations. Excluding exceptional items, net profit of $960m (+15% qoq) fell only slightly yoy despite lower rupiah/A$ as well as unexciting quarters for Bharti and Telkomsel. For the full year, underlying net profit fell 6% yoy to $3455m but it was still above our forecast of $$3359m. DPS was maintained at $0.125 ($0.056 interim, $0.069 final) for the year. In A$ terms, Optus did well in 4Q09 (4Q revenue +9%, EBITDA margin was stable at 27.8% and net profit +17%) but this was negated by the 28% yoy fall in the A$. Associates' contribution fell 18% yoy due to weak results from Telkomsel and AIS as well as a 6-19% depreciation in the relevant currencies. In constant currencies, the decline would have been gentler at 7%. Associates accounted for 44% of pretax profit in 4Q09. SingTel has evaded a funding crisis viz the Singapore OpCo and Australian NBN, hence dividends are likely to stay at the top-end of the 45-60% range. In Australia, competition fears following the merger of Vodafone and Hutchison have eased following objections from the Australian antitrust body that threatens to derail or delay the merger. Also, a Barclays Premier League (BPL) content war with StarHub may be avoided if the MDA intervenes; it is reportedly considering regulatory measures to avoid a major increase in cost. Lastly, regional currencies have stabilised as an economic trough could have passed. SingTel's guidance is reassuring, and points toward an earnings recovery this year. We upgrade the stock to BUY with a target price of $3.17 based on 13x FY10 forecasted earnings.

Singtel: Hold (UOB Kay Hian, 15 May)
Even though the Group delivered strong operational performance in Singapore and Australia, the overall decline in the results was due to the weaker Australian dollar and major regional currencies, and lower operational performance of Telkomsel and Globe. At constant rates, the Group's revenue would have increased 10% and underlying net profit would have been up 11%. The Group declared a final dividend of 6.9 cents per share, bringing total dividend for the financial year to 12.5 cents (58% payout). At the same time, Bharti announced its first dividend of around US$76m (20 % of face value). Management has guided for both the Singapore and Australia revenues to grow by single-digit levels in local currency terms. EBITDA for the Singapore business is expected to remain stable though the EBITDA margin for the Singapore business is expected to decline to around 36-38% due to increased contribution from lower margin IT business. EBITDA is expected to grow by low single-digit at Optus. The capex guidance for Singapore is estimated to be below S$800m and around A$1.1b for Optus. The Group expects its two largest associates Bharti and Telkomsel to grow earnings in local currency terms. In addition, Telkomsel is expected to gain subscriber market share. We have introduced FY12 numbers and revised our FY10-11 earnings forecasts marginally by 2%. The share price has risen by 15% since our upgrade in Nov 08. While we maintain our fair price at S$2.95 based on the sum-of-the-parts valuation, we downgrade the stock to HOLD as we believe there is limited upside. The recommended entry price is S$2.40.

Swiber Holdings: Sell (OCBC Research, 15 May)
Swiber reported a 22.9% year-on-year (yoy) rise in revenue to US$87.1m for 1Q09, while net attributable profit fell 5.0% to US$9.8m, affected by lower gross margin (20% in 1Q09 compared to 26% in 1Q08). This is largely in line with expectations. The lower gross margin is mainly due to the roll-over effect of the delayed deliveries of the group's pipe-lay barge and dive-support work barge in the previous quarter. Swiber has also paid down some of its debt as its net debt to equity ratio has eased from 1x as at 31 Dec 08 to 0.94x as at 31 Mar 09. Separately, the group's order book is now US$515m compared to US$596m as at 31 Dec 08. We are putting our fair value estimate of S$0.35 under review, but are likely to maintain our SELL recommendation as we think the market has run ahead of its fundamentals in the recent surge in share price.

Swiber Holdings: Sell (DMG, 15 May)
Swiber’s 1Q09 revenue grew 23% year-on-year (yoy) to US$87.1m on the back of increased activities in the offshore construction projects in Malaysia, Brunei, Indonesia and India, but declined 15% qtr-on-qtr. Net profit rose 15% yoy to US$11.9m, a turnaround from 4Q08. Adjusting for gain on disposal of assets of US$3.5m, core operating profit was US$11.6 (above our estimates of US$9m). Operating profit margin of 13.3% was a reversal from 4Q08’s margin of -16.7%. This was better than our expectation of 9%. Swiber’s net debt to equity ratio stood at 0.94x as at 31 Mar 09 due to debt repayments and sale-and-leaseback arrangements. Going forward, financing is still our key concern. We note that the repayment of Swiber's non-current bonds would be due in 3Q10 (US$71.2m) and due in 1Q11 (US$72m). Declining orderbook is another worry. Swiber has an orderbook of US$515m as at 31 Mar 09 as compared to US$596m as at 31 Dec 08. Over the past month, Swiber's share price (+76%) has outperformed the STI (+12%) and its peers (+53%). We are currently evaluating our estimates, pending a talk with the management. Our target price is currently under review. We continue to be cautious on this counter, especially on financing concerns and weakness in earnings quality.

Soilbuild Group: Hold (OCBC Research, 15 May)
Soilbuild reported a good set of 1Q09 results that was partly aided by revaluation gains. Revenue jumped 104.3% to S$64.7m, with revenue coming from its residential projects, development of Tuas Lot and rental income from newly completed projects. PATMI jumped 207.5% to S$19.1m. Excluding the revaluation gain, underlying PATMI still remains strong, growing by an estimated 90.3%. Debt level remains stable at the end of 1Q09 but net gearing level declined to 1.7x on the back of higher NAV. For the year to date, Soilbuild launched 1 new residential project, The Mezzo and take-up rate has been encouraging. Our RNAV estimate has now been lowered to S$1.55 per share, after lowering our selling price assumption for The Mezzo. Maintaining a 50% discount to RNAV, our fair value estimate has now been lowered to S$0.77. While current share price still implies an upside potential of 24.8%, we are now downgrading Soilbuild to HOLD, in line with our rating policy for small-cap stocks.

Straits Asia Resources: Hold (OCBC Research, 15 May)
SAR continued to post revenue and earnings gains in 1Q09 thanks to higher coal prices. Sales grew 35.7% year-on-year (yoy) to US$139.6m, gross profit accelerated 67.0% to US$66.1m, and earnings jumped 74.0% to US$35.5m. Profit margins improved at all levels. The increase in coal prices helped to offset lower production brought about by persistent rainfall, which led to a 18% drop in output. Nevertheless, we expect production to gear up in the later part of the year. Coal prices have fallen sharply, in line with the slump in commodity prices, raising the risk of renegotiations. We have lowered our average selling price (ASP) assumptions and earnings estimates on a more conservative outlook. At the same time, we are easing our WACC to 10.26% to reflect lower risk aversion, bringing our fair value estimate to S$1.38 (from S$1.15). In view of the stock's recent appreciation, we reduce our rating to HOLD. An interim dividend of 1.94 US cents has been declared.

Li Heng Chemical Fibre: Hold (OCBC Research, 15 May)
Li Heng has posted a weak set of 1Q09 results. Again, the culprit was the persistent slide in average selling prices (ASPs) as a result of the tumble in raw material prices. However, management noted that the end of the spiral may be near, as the recent rebound in crude oil prices has led to a mild recovery in raw material prices. It had even been able to raise ASPs by 10% in the early part of 2Q09 but remains wary against calling a bottom as yet. Meanwhile, management also updated on its Phase III expansion plan and after much deliberation, it will push back the addition of extra capacity from 2H09 to 2010. Still, in wake of the recent developments, we need to further cut our FY09 estimates for revenue by 8.3% and earnings by 48.5%; FY10 revenue also slashed by 16.9% and earnings by 30.9%. This in turn lowers our DCF-based fair value from S$0.31 to S$0.25. Given the limited upside, we revise our rating to HOLD.

Li Heng Chemical Fibre: Sell (Kim Eng, 15 May)
1Q09 revenue of RMB472.5m was down 41.2% year-on-year (yoy), grossly missing the market's and our house's estimates by about 30%. Net profit declined 95.5% to RMB10.2m due to lower revenue and gross margins, as well as an unrealized forex loss of RMB20.6m. Excluding the forex loss; 1Q09 net profit would still have missed expectations at RMB33.9m. The dismal topline performance was mainly the result of a lower 1Q09 average selling price (ASP) of its nylon yarn products at RMB16,420/ton, down 26% from 4Q08. The negative impact was limited by a stable sales volume, which declined only 9.8% sequentially and was 28.6% higher than in 1Q08 due to an expanded maximum production capacity.Margins may improve in 2Q09, but still stay between 10 and 15%, as the management observed a slight recovery in ASPs in Apr, while cost of PA-6 chips incurred in 2Q should be sequentially lower. There are no signs of a steady pick-up in the customers' orders, not withstanding that tax rebates for exporters further downstream have been increased to 16%. Hence, the ASPs will remain volatile for the rest of the year and the primary trend should be towards south. We have reduced our FY09F revenue and earnings estimates by 20% and 49% due to lower ASP assumptions. LHCF's expansion plans remain on-track, but any positive impact to the bottomline will be slow to surface While a possible share buyback this year may entice, valuation looks stretched at 12x forward PER, albeit at a discount to sector average (regional) of 14x. We are downgrading the stock to SELL with a target price pegged to net cash per share of $0.15.

HL Asia: Buy (DMG, 14 May)
HLA reported 1Q09 net profit of S$23.2m, down 23% year-on-year (yoy), better than our expectations. Its revenue rose a marginal 3% to S$1.09b. Xinfei, the consumer products group, recorded a revenue decline of 15% to S$256m. It had sold 755,000 units of refrigerators and freezers in 1Q09, down 15% yoy. Xinfei had tightened its credit to hypermarket chains and this led to some loss of business. In addition, average selling prices fell 6% to RMB1,451. The industrial products segment (incorporating diesel engines), recorded revenue expansion of 5% to S$665m, with 122,000 units of diesel engines sold in 1Q09, down 5% yoy – due to a 48% fall in heavy duty engine sales to 4,700 units. But this was offset by a 10% increase in light duty engine sales to 62,300 units. As heavy duty engines command higher margin, overall gross margin narrowed. The building materials group recorded revenue growth of 64% yoy to S$146m. Granite sales rose 35% to 581,000 metric tonnes and cement was up 17% to 616,000 mt. Factoring in better 1Q09 net profit and expectations of strong sales, particularly for the white-goods business and continued robustness for building materials, we have raised our 2009 net profit forecast by 74% to S$79m. We maintain BUY and upgrade HLA target price from S$0.73 to S$1.20, based on sum-of-the parts valuation.

Neptune Orient Lines: Sell (Phillip Securities, 14 May)
NOL reported 1Q FY2009 revenue of US$1,543m (+36% yoy) and net loss of US$245m, which was a reversal from a profit of US$121m in 1Q FY2008, due to a decline in container shipping revenue from lower volumes and freight rates. Although there was a decline in costs due to active cost management, this was insufficient to compensate for the fall in revenue.
NOL is likely to face problems of excess capacity and low freight rates in FY2009F and FY2010F. We are expecting NOL to report a loss of US$690m in FY2009F and US$130m in FY2010F. Recovery is likely in FY2011F, with NOL expected to report profit of US$221m. We keep our sell recommendation as we believe that the shipping industry will face challenges due to the global economic downturn in 2009. We are only expecting NOL to start reporting profit in 2011F. Our fair value is maintained at S$1.14, which works out to 0.63 time book value for FY2009. Given that NOL is a mid-size shipping company, it is valued below the average P/B for the industry. NOL is currently valued at 17.67 times P/E and 0.59 times P/B compared to the industry average of 17.86 and 0.88 respectively.

Wilmar: Outperform (CIMB, 13 May)
Wilmar's 1Q09 results were above market and our expectations, making up 32% and 39% of the respective full-year estimates. The outperformance was made possible by better-than-expected pre-tax margins from its merchandising and processing as well as consumer products segments. The group is evaluating the feasibility of listing its China operations in Hong Kong or Shanghai to further unlock shareholders' value. We view this positively as it would help to lift valuations. We are raising our earnings forecasts for FY09-11 by 14-17% to account for the better-than-expected 1Q and higher processing margins for its downstream division. Our target price has been upgraded to S$5.30 from S$4.20 to account for our earnings upgrade and a higher forward P/E target of 18x (from 16x) in view of its plan to list its China operations in Hong Kong or Shanghai.

Kingsmen Creatives: Buy (Kim Eng, 13 May)
The group's 1Q09 net profit rose by 8% yoy to $2.26m in 1Q08. Earnings look on track as 1Q tends to be seasonally weak. Turnover was lower due to the completion of a few large orders for fixtures exports in the previous period. Topline weakness was offset by higher corporate fee income, CPF job credit, forex gains, strengthening gross margins and lower taxes. Despite lower revenue, gross margins improved from 25% to 26.9%. Improving margins reflect the group's capability to assume higher value projects. Net margins improved as higher staff costs (+135 yoy) were mitigated by lower income taxes. The group has secured contracts of approximately $167m as at 11th May 09, 38% higher from a year ago.
$147m worth of contracts will be recognised this year, which have already made up 63% of our full year revenue forecast. Beyond 2010, the group will continue to be preoccupied with recurring orders from its blue-chip customers worldwide and MICE events regionally given its enlarged regional network. The group has secured more projects relating to Universal Studio Singapore and is currently negotiating a few more projects. Numerous fit-out jobs that have been secured for branded boutiques at ION Orchard will be commencing very soon. There will be more fit-out jobs to come along with the two integrated resorts and new Orchard Road shopping malls scheduled for completion in 2009 and 2010. Meanwhile, the group is all set to execute the second F1 Singapore Grand Prix. Kingsmen has been 'recession proof', still delivering fantastic earnings growth momentum. Its strengthening regional network also has shielded it against the downturn. At mere 5x FY09 PER, Kingsmen offers a good value proposition for a growing market leader in communications designs and production with good growth prospects. We project a dividend of 3 cents per share to be paid out this year.
Maintain BUY with a target price of $0.85.

Sembcorp Industries: Hold (Kim Eng, 13 May)
Sembcorp Industries achieved another steady quarter that were in line with our expectations, with net profit rising 8.6% to S$133.6m versus 1Q08 on the back of flat turnover at S$2.1bn. The strength at Sembcorp Marine (SMM) offset the anticipated weakness in utilities, with marine now accounting for 55% of group earnings. Utilities turnover dropped by 38% to S$696m, mainly due to lower fuel prices. Utilities PATMI fell by 16%. The UK business was down 73% with the expiry of a contract on more favourable terms and the depreciation of the British pound. Singapore utilities earnings grew 13%, with a tax writeback of S$5.7m and a one-off fuel sale offsetting a provision made for upcoming unscheduled maintenance.
With regards to its bid for the US$1bn Salalah independent water & power project (IWPP) project in Oman, management said that it is still in the process of locking down financing. With tighter credit markets, it now has to rope in more banks as individual banks have overall reduced their allocation in order to reduce its risk exposure. However, SCI still seemed optimistic on securing the project. We are leaving our FY09 forecasts unchanged, where we expect SCI to post 9.8% growth to S$557m. We are forecasting steady earnings CAGR of 9% p.a. over the next three years, with earnings expected to decelerate in FY11 due to the marine business. Utilities are expected to perform in line with muted GDP growth, while we are not factoring any significant project wins at this point. We are adjusting our SOTP price target upwards from $2.70 to $3.03, in line with SMM and Gallant Ventures' price rises. However, we are reducing our recommendation to a Hold, as SCI's share price is currently in line with this. We do not expect any significant near term catalysts, with a potential win at Salalah possibly to come at the expense of margins.

SembCorp Industries: Buy (DBS Vickers, 13 May)
SembCorp Industries' (SCI) net profit grew 8.6% to S$133.6m in 1Q09, driven by earnings growth in the offshore and marine (O&M) business, lower general & administrative expenses (-20%) and one-off items like deferred tax write backs and sale of strategic diesel. SCI’s revenue was down 0.3% year-on-year (yoy) S$2.1b in 1Q09, as the O&M business (+49%) negated lower turnover from Utilities (-38%) and Environment (-10%). The lower Utilities turnover was due to the drop in high sulphur fuel oil rate for Singapore operations (-33% yoy), and the lower offsite power sales from the expiry of certain favorable supply contracts in the UK (-56%). We estimate that SCI's recurring net profit for both its Singapore and UK utilities operations were relatively stable qtr-on-qtr at about S$21m in 1Q09 (vs. S$22m in 4Q08) and about S$9m (vs. S$10m), respectively. We have upgraded our fair value to S$3.33 for SCI, in line with the higher share prices for its listed entities. For investors buying into the O&M business, SCI can also be seen as a relatively cheaper and indirect investment vehicle to buy into the prospects of listed SembCorp Marine (SMM) [HOLD, S$2.61].

SembCorp Industries: Hold (UOB Kay Hian, 13 May)
In view of weaker-than-expected performance in the non-marine businesses, we have lowered our earnings forecasts by 6-9%. With more than 50% of net profit and valuation from Sembawang Marine (SMM), SembCorp Industries (SCI) is considerably dependent on the performance of its marine division. Performance of its non-marine businesses has been either lacklustre or immaterial. We prefer SMM for exposure to the offshore sector and are of the view that there are better utilities plays elsewhere. Maintain HOLD, but we raise our fair price for SCI from S$2.70 to S$3.20 to factor in a higher target price (revised from S$2.40 to S$2.60) for SMM. Our sum-of-the-parts (SOTP) valuation stands at S$3.20/share. Our fair price for SCI is now at parity to our SOTP valuation compared with a 10% discount previously.

SC Global: Fully Valued (DBS Vickers, 13 May)
SC Global has reported a 1Q09 net profit of S$8.9m, down 53% year-onyear (yoy), which is about 16% of our FY09 forecast and about 19% of consensus. Revenue surged 204% to S$131.2m, though this was due to the inclusion of revenue from AV Jennings (AVJ) for 1Q09, which was consolidated as a subsidiary in Dec 2008. The Group's balance sheet continues to be weighed down by its net debt, though net gearing did improve marginally from 2.84x in 4Q08 to 2.75x in 1Q09. The majority of its short-term debt, however, relates to AVJ, which is in advanced negotiations for the extension of banking facilities which mature end-Sep 09. While it is anticipated that the facilities sufficient for AVJ's normal business operations will be extended, these facilities and liabilities are non-recourse to SC Global itself. It looks likely that Sentosa Beachfront will be the company's next project due for launch, though this is still at the planning stage. At this point, the company has no plans to relaunch any of the unsold units in its launched projects. We believe that unlike the mass or mid-market segments, the luxury segment, which SC Global is most exposed to is unlikely to recover by this year. Nonetheless, we now peg a smaller 40% discount (prev 50%) to its RNAV of S$1.23 (prev S$0.93), in view of a broader macro recovery. We maintain a Fully Valued call, with a new target price of S$0.74. (Prev S$ 0.49)

SC Global: Sell (UOB Kay Hian, 13 May)
While the mass market and mid-tier segments are showing signs of improvement, we expect homebuyer sentiment in the high-end segment to remain subdued. The huge incoming supply of residential properties in the high-end segment could exceed demand significantly over the next three years, starting from this year. As SC Global derives over 90% of its value from the high-end segment, we believe it could take a long time for SC Global to move its inventory. The situation is likely to be exacerbated if cases of non-payment for projects sold under the Deferred Payment Scheme appear. We maintain our cautious stance on SC Global's portfolio, which is heavily skewed towards the high-end segment. In addition, SC Global's net gearing remains high at 2.8x. Maintain SELL with a fair price of S$0.45 at a 50% discount to 2009 RNAV of S$0.94.

Tiong Woon: Neutral (DMG, 13 May)
Robust results for 3QFY09. Tiong Woon's (TWC) turnover for 3QFY09 rose 26% from S$42.1m to S$52.8m. This increase in revenue is attributable to an increase in revenue from its Heavy Lift and Haulage (HLH) and Fabrication and Engineering segments. In line with the robust turnover achieved, PATMI jumped 38% YoY to $7.1m. While gross profit has increased 22% year-on-year (yoy) to S$16.1m on the back of an increase in turnover and higher margins enjoyed from its HLH projects, gross profit margin for 3QFY09 has eased to 30.5% from 31.4% in 3QFY08. We understand this decline is due to the Fabrication and Engineering and Marine segments. Management reiterated that the Pipe Lay Barge's (PLB) construction (currently >70% completed) is on schedule, the vessel is expected to be launched in Jul 09. As such, the full payment for the project would only be in Aug or Sep. Post delivery of the vessel, we estimate net gearing would decline from 77% currently back to more normal levels of about 40%. TWC's capex plan for the next six months will likely be about S$20m for the purchase of cranes and tugboats. This is in line with prior guidance of about S$30-40m that is set aside for fleet renewal each year. Both the Marine and Trading segments could be reflecting signs of a slowdown – PBT for both segments are down, with Marine suffering losses and Trading down 51% yoy. Utilisation rate for the Marine segment was 40% this quarter and management expects it to pick up only next quarter. We are maintaining our fair value of S$0.33 and our NEUTRAL call on the stock, based on 4x FY10F earnings.

UOL Group: Hold (OCBC Research, 13 May)
UOL Group has reported strong 1Q09 results that were aided by its acquisition of UIC shares. Revenue increased to S$196.7m due to progressive recognition of revenue from development projects and higher rental income. Contribution from hotel operations was weak in 1Q09. Reported PATMI jumped 674.3% YoY to S$331.8m but excluding one-offs, we estimate that the underlying PATMI would have increased by 57% year-on-year (yoy). Investments in UIC had been reclassified from available-for-sale assets to associated companies, which contributed to the 13% increase in NAV to S$4.82 per share. Profit contribution from UIC should also increase in the next quarter, when UIC will make its full quarterly contributions. We have revised our FY09 revenue and PATMI estimates to S$818.7m and S$540.8m respectively. Our RNAV estimate for UOL has now been raised to S$3.57 per share and our fair value has also been raised to S$2.91. We are now downgrading UOL from BUY to HOLD on valuation grounds.

ST Engineering: Buy (DMG, 12 May)
STE's hare price has underperformed the broader market. Since our previous downgrade recommendation to NEUTRAL last week, its share price had depreciated by 13% in just five trading sessions which greatly pales in comparison to the 4.4% gains seen in the Straits Times Index (STI) over the same period. In our view, this was due to the poor 1Q09 results, as well as rising investor appetite for high-beta stocks. Fundamental outlook has not changed. Post-results, the newsflow has generally been positive for the conglomerate. It continued to secure additional contract wins in the form of a £9.5m contract with the UK Ministry of Defence only recently, raising its order book to S$11.05b (from S$10.6b in FY08). We believe that STE will continue to build on its orders over the course of the year. Air travel demand sees less severe drop. Furthermore, it was also recently reported that combined passenger traffic on the six biggest US carriers slid 5.1% in Apr yoy, clearly less severe than the 11% decline seen in both Feb and Mar. This was also the smallest drop since Aug 08 where combined passenger traffic had decreased by 1.6%. Notwithstanding the lower than expected 1Q09 earnings (-30.4% yoy), we believe that STE will see a credible performance this year on the back of improving qtr-on-qtr earnings. We forecast earnings to contract 1.8% this year to S$465.2m. Following the recent slump in its share price, STE trades at 14.7x FY09 P/E, compared against its 5-yr historical average of 18.3x. Our DDM-derived target price of S$2.83 implies a 22% potential upside. Coupled with a prospective dividend yield of 6.8% (5-yr average of 5.7%), we upgrade our recommendation to BUY.

Noble Group: Hold (OCBC Research, 13 May)
Noble Group Ltd (Noble) has announced a placement of 84.7m new shares at S$1.52 each. The new shares will enlarge the group's existing share base by a marginal 2.6%, and will raise net proceeds of US$86.2m. Concurrent with the placement, major shareholder Noble Temple Trading Inc will place out 36.3m vendor shares, representing 1.1% of issued capital.
Dilutive impact from the new share placement is insignificant ? our FY09F EPS falls to 11.3 US cents from 11.6 US cents. Looking at Noble's strong balance sheet, it has no pressing need for additional funding, although it has earmarked these proceeds for general working purposes. The stronger capital base will better position Noble for an increase in commodity prices and for potential acquisition opportunities. While we continue to appreciate Noble's resilient performance, the recent rally has sent the stock price ahead of its strong fundamentals. Our fair value estimate has been tweaked to S$1.62 (from S$1.66) to account for dilution. We reduce our rating to HOLD.

Avi-Tech Electronics: Hold (OCBC Research, 13 May)
Avi-Tech Electronics' 3QFY09 revenue came in lower than expected at S$5.4m, due to a scaleback in capital spending among its customers in the face of weakening economic climate. Net profit of S$0.6m, on the other hand, was within our expectation. Despite the soft quarterly results, we feel that Avi-Tech has outperformed its semicon peers (most of which had dipped into the red in this exceptionally weak 1Q09) by staying profitable and being cash-flow accretive. Regarding an improvement in orders from March onwards as cited by industry players, however, we prefer to stay conservative as the global economy has yet to show any real sign of a sustainable recovery. Accordingly, we have again eased our FY09 forecasts by 5.6-12.1% to reflect a protracted slowdown. Due to limited earnings visibility, we now peg our fair value to 0.65x FY10F NTA from 6x FY10F EPS previously, but our fair value remains unchanged at S$0.11 (still ~15% discount to its net cash/share of S$0.13). Maintain HOLD as strong cash position is likely to provide some support for its share price.

ASL Marine: Buy (DMG, 12 May)
ASL Marine's (ASL) 3QFY09 results saw revenue improved 17% year-on-year (but 1% lower qtr-on-qtr)) to S$106.9m, while core operating profit (excluding gains on disposal of ASL Energy and other assets as well as allowance for doubtful debts) was S$15.2m (-18%yoy; -15% qoq).The decline was due to lower profit margins achieved for shipbuilding (as a result of increased cost provisions on selected projects), and shiprepair (from lower volume of shiprepair jobs undertaken during the quarter). 3Q09 net profit was in-line with management’s guidance as well as our expectations. ASL's stock has surged 101% year-to-date outperforming both the STI (+23%) and its peers (+68%). We believe this is justified, backed by ASL's strong orderbook of S$582m (as at 31 Mar 09) with earnings visibility till FY11. Despite the price surge, ASL is still trading relatively lower than the Singapore peers at current levels. We believe ASL deserves a better valuation, given the prudent management and strong balance sheet (net debt-to-equity was 0.1x as at 31 Mar 09). Hence, we ascribe 6x (from 3x previously and in-line with ASL's peers) FY10 recurring EPS, deriving a target price of S$1.07 (from S$0.55 previously). Maintain BUY.

City Developments: Neutral (DMG, 12 May)
CDL posted a 49.6% year-on-year (-16.8% qtr-on-qtr) drop in 1Q09 PATMI to S$83.1m, accounting for 14 to16.5% of DMG's and Consensus' FY09 estimates. The lower-than-expected performance was mainly attributable to a 59.8% yoy plunge in PBT to S$20.9m from Hotel Operations, led by a 37.8% and 30.6% revenue per room (RevPAR) contraction in New York and Singapore respectively (vs. group-wide of minus 18.2%). CDL sold over 60 units of Livia (after a 5% price cut) and more than 250 units (to date) for The Arte. To further ride on the improved mass-mid market buying sentiments, management is expediting the development plans for the former Hong Leong Garden site, targeting for launch in 4Q09. Selected sites within its existing residential landbank would also be readied for potential launch when more signs of recovery emerge. Meanwhile, default risks appears minimal, as almost all buyers fulfilled their purchase prices relating to 439 completed units upon notification. While we view positively CDL’s mass-mid market residential portfolio, we remain wary of its exposure to the weakening office sector and hospitality industry. Therefore, we have reduced topline contribution from hotel operations by 20%, as well as FY09F-10F occupancies for its commercial portfolio to 90-92% (previously 95 – 97%). FY09F – 10F EPS thus fall by 9.1 – 12.8% to S$0.55 and S$0.57 respectively. Given that the domestic residential sector is now entering its mid-downcycle period, we have applied a lower 30% discount (previously 50%) to CDL's residential segment, but sticking to the 50% discount for its office assets due to still-weakening office fundamentals. We have also factored in updated market prices for its listed subsidiaries. The above changes imply a new RNAV-backed target price of S$7.09 (previously S$5.10). On a 1-month basis, CDL (+42.5%) has outperformed both the STI (+18.5%) and its peers (+20.1%). From current levels, we do not anticipate any further catalysts to the counter.

Armstrong: Buy (Kim Eng, 11 May)
Although earnings fell 83% year-on-year (yoy) to $0.7m, it was still above our expectations of $0.5m. Excluding a forex hedging loss of $0.4m, underlying earnings was $1.1m, down 74% yoy. We highlight that 1Q09 results form only 7% of our full year forecast as we expect subsequent quarters to show sequential improvement. Revenue fell 30% yoy to $32.8m as no product segments were left unscathed by the economic slowdown. Office automation, consumer electronics, automotive and data storage revenue fell 40%, 34%, 25% and 23% respectively. Although data storage revenue fell, rubber sales were fairly robust, down 12% yoy as Armstrong had taken market share from a competitor in earlier quarters. We expect 2Q to be better than 1Q, with the automotive and data storage segments likely to take the lead. China's auto market has grown robustly in the past five months as sales were boosted by stimulus policies. April set a new sales record of 1.15m vehicles, up 25% yoy. Armstrong's China auto business posted yoy growth in 1Q despite the slowdown elsewhere. Data storage should also respond to the pickup in consumer sentiment. We are maintaining our full year forecast of $10.5m as we expect sequential improvement for the next three quarters. Armstrong remains a well-run company with ample growth prospects once it gets through the current downturn. Our BUY recommendation stays, with a revised price target of $0.25, based on 12x FY09 P/E.

Fraser & Neave: Hold (Kim Eng, 11 May)
F&N 1H09 profit before one-time items was $158m (-17% yoy) or 49% of our full year forecast. Reported net profit fell 25% to $153m, pulled down by a $31m provision for future losses on development properties and a $16.8m provision for the lower fair value of investment properties (mainly UK hospitality assets) while share of associates fell into the red coupled by negative revaluation of $144m caused by properties in Singapore, Japan and Australia. The fall of the NZ$ and Rupiah also took away $8.8m. F&B accounted for 54% of group profits, up from 40% a year ago, led by a strong profit rebound in Dairy (+40% yoy) and decent performance by Soft Drinks (+8%) and Beer (+9%). The festive season boosted Soft Drinks volume, while Dairy (PBIT +125% yoy in 2Q) in particular saw profits boosted by lower raw material costs. Beer profits would have grown by 16% yoy if not for forex and gestation losses. However, property profits fell 34% yoy to 46% of group profits as several Singapore projects (Raintree, Azure, One Leicester and Infiniti) were completed while $31m in foreseeable losses on overseas projects was provided for. Interim dividend was cut from 5 cents (36% payout) to 3 cents (26% payout) as F&N opted to conserve capital as it still needs to refinance some $600m in borrowings. We maintain a Hold call on F&N while price target has been raised to $3.50 based on 15x P/E. Our RNAV is $3.79 and includes a 30% discount). Dividend yield is also not exciting at just 2.4%.

DBS: Buy (Kim Eng, 11 May)
DBS has recorded 1Q09 net profit of $456m (+19% qoq, -24%yoy), which is above market expectations. Positive surprises come from a $269m gains in trading and sale of investment securities, a 92% surge in loan related fees and better-than-expected cost efficiencies due to lower staff cost. Robust operating profits, including the sharp rebound of its profits from Hong Kong (>100% qoq) offset higher provisions during the quarter. Operating profits were lifted by gains in trading and sale of investment securities and loan-related fees, which could be volatile. Provision risk is likely to remain high on the back of surging NPLs (+129% yoy) in particular from overseas. Charges for Hong Kong SME loans are expected to remain at elevated levels. Gross customer loans rose 3% qoq. Excluding the 2% growth from translation effects, loans growth was due largely to Singapore-dollar corporate borrowing for infrastructure projects. DBS increased its market share of Singapore-dollar loans from 20% to 21%. We expect net interest income to remain resilient in view of its strengthening Singapore franchise and easing margin compression as SIBOR hit historical lows. Sufficient capital also put the group in a good position to expand its market share further. The group maintained its quarterly payout of 14 cents per share. This works out to a dividend payout of above 70% that is way above its past dividend payout of below 50%. With a strong capital strength supported by strong Tier-1 CAR of 12.5% after a $4bn rights issue and a coverage ratio on unsecured NPA of 156%, we believe the group has room to sustain its attractive dividends payout. We have raised our earnings estimates for FY09 by 8% to reflect the strong quarter and increased our FY10 earnings to reflect better cost efficiencies. At 1.16x FY09 PBV, DBS’s valuation is still very attractive relative to its peers which are trading near 1.5x PBV. We are reiterating our BUY recommendation on DBS with a higher target price of $13.90.

DBS: Hold (Phillip Securities, 11 May)
DBS has reported an increase in core net earnings to S$456mil (-24.4% year-on-year; +19.1% qtr-on-qtr to S$383mil) due to higher operating income but negated by higher allowances for credit losses as compared to 4Q08. According to our economist, we are forecasting a contraction in Singapore's GDP growth for 2009 to be -7.2% seasonally adjusted. We think this will impact the bank earnings significantly due to weak demand in loans, depressed margins and higher provisions. We expect loans growth to remain weak for DBS as we expect borrowers to draw down credit lines to tide over liquidity rather than capital expansion. Hence, we are cutting our 2009 earnings by 8.7% from S$1.96bil to S$1.79bil. Together with the recent capital raising done by the Group, we find it difficult to maintain the projected ROE in our financial valuation. As a result, we cut our ROE assumption from 10% to 9.8% and our target price has been adjusted to S$10.30.

DBS: Neutral (DMG, 11 May)
DBS has reported 1Q09 net profit of S$433m, down 28% year-on-year (yoy) This is stronger than our S$345m forecast primarily due to a S$116m yoy improvement in other non-interest income, which was attributed to gains from trading activities. Net interest income grew a marginal 2% to S$1,076m. Other non-interest income recorded a 76% yoy jump to S$269m, primarily due to net trading income reversing from a 1Q08 loss of S$161m to a gain of S$204m. This was due to interest rate and foreign exchange rate activities supported by strong customer flows. This income segment is volatile and we have assumed sharply lower gains in the remaining three quarters of 2009. We are concerned that DBS’ relatively strong loan growth from 2004 till 2008 (15.9% CAGR, versus other peers of 10.7%) will mean more provisions going ahead. We raised our 2009 provisioning assumption by 3% to S$1.6b, which equates to 126 bps of loans. This is 80% higher than 2008’s S$888m provisioning. Our Dec 09 non-performing loan (NPL) forecast of 4.2% is sharply higher than Mar 09’s 2.0%. We raise our target price to S$11.50, (from S$8.50 previously) pegged to 1.1x 2009 book, given the general market expectation that the worst of the US economic growth is behind us. We note that DBS traded at a 6-year average P/B of 1.4x, and its current 1.2x P/B leaves minimal room for share price upside. DBS FY09F dividend yield of 3.5% is also relatively unexciting (after taking into consideration interim dividend of 14S¢/share).

Starhub: Hold (Phillip Securities, 11 May)
StarHub has reported 1Q FY2009 operating revenue of S$530.6m (-0.8% yoy) and net profit of S$82.5m (+3.0% yoy). It also declared an interim dividend of 45 cents per ordinary share, which was the same as 1Q FY2008. Despite the slight decrease in revenue, net profit rose because of the tax credit adjustment due to the reduction in corporate tax to 17%, lower operating costs and lower interest expenses. StarHub reported mixed performances in its business units: mobile revenue was S$264.7m (-3.1% yoy), Pay TV revenue was S$102.0m (+4.9% yoy), broadband revenue was S$62.4m (-2.6% yoy), fixed network service revenue was S$79.1m (+8.7% yoy) and sale of equipment revenue was S$22.4m (-19.3% yoy).
StarHub continued to be successful in attracting new customers to its services. As at 31 March 2009, the number of customers for its mobile, Pay TV and broadband businesses were 1,815,000, 527,000 and 383,000 respectively. However, mobile revenue fell because customers made fewer domestic and international calls. Moreover, consumers were more cautious in their purchases of handsets during the economic slowdown. The company intends to pay a minimum cash dividend per quarter of 45 cents per ordinary share, bringing the total to S$0.18 for the full year. Although StarHub offers its services only in Singapore, it continues to be an attractive stock as it offers dividend yield 9.2%. We kept our Hold recommendation because of limited upside in the share price to our target price of S$2.14.

Sembcorp Marine: Hold (OCBC Research, 11 May)
SMM reported its 1Q09 results with topline came in at S$1.36b (+49% year-on-year , -16% qtr-on-qtr). PATMI registered S$120.2m (+32% yoy, +73% qoq). SMM did well when compared to a weak 1Q08 which had project revenue recognition timing issues. The group also experienced a better gross margin this quarter as it started reaping from the better priced contracts signed during the peak 2007-2008 phase. Net cash was S$1.88b while order book stood at S$8.4b. SMM's repair revenue is starting to look vulnerable as it has started showing signs of hitting a plateau. While knowing the potential of the business with Petrobras, clarity with regards to timing and quantum is unclear at this point. We have upped our estimates in view of a more aggressive recognition of higher valued projects in FY09. However, SMM still has another S$1b worth of wins to catch up with our forecasts for FY09. Oil prices have run up in tandem with equity markets and we bump up our valuation peg to 13x FY09F PER (prev. 11x). While our fair value is now raised in tandem to S$2.65 (prev. S$2.02), we find the hope of the sustained oil price rise of the recent magnitude to lack fundamentals. As such, we are maintaining our HOLD rating.

Sembcorp Marine: Sell (Kim Eng, 11 May)
SMM posted 1Q09 profit of $S$120.2m, up 31.6% versus 1Q08, on the back of a 48.8% rise in turnover to S$1.36bn. This strong showing was despite the shortfall in associate contributions from Cosco Shipyard Group, which reported disappointing earnings earlier in the week. Operational results were in line with expectations. Revenue was driven by the rig-building segment, which posted a 56.9% increase to S$759.5m. Offshore and conversion also rose 80.4% to S$401m. Both segments reflect SMM's strong orderbook for offshore oil and gas. EBIT margin at 10.7% was flat versus 1Q08, but weaker versus FY08’s 12.9%. SMM's current orderbook stands at S$8.4b stretching to 2012, lower than the S$9b as of end-FY08. SMM only secured S$378m in new orders for the quarter, in line with the uncertain credit and economic environment. We do not expect a quick resumption of orderbook growth, despite an improving credit environment. In fact, we expect customer risk to increase further, as evidenced as by the recent bankruptcy of Petroprod and the non-payment by PetroMena. We are adjusting our FY09 net profit forecast down by 4.8% to S$497.0m from S$522.0m previously to factor in the weaker contributions. While 2-yr earnings CAGR is still a healthy 12.7% p.a., we expect turnover to taper off from 2011 onwards, and the risk of more orders being delayed or cancelled. We are adjusting our price target to S$2.31 from $2.07 previously, based on higher shipyard multiples in our sum-of-the-parts valuation. However, we believe that valuations have run ahead of fundamentals in this current liquidity-driven market rally. We are reducing SMM to a Sell, as current share price exceed our target by 19%. With a less attractive dividend yield of 4.7%, shareholders are not fully benefiting from SMM's current earnings strength.

Sembcorp Marine: Buy (DMG, 11 May)
Sembcorp Marine 1Q09 results saw its revenue rising 48.8% year-on-year (yoy) but down 15.7% qtr-on-qtr (qoq) to S$1.4b on the back of higher percentage of completion achieved in the rig building, offshore and conversion projects. Operating profit was S$134.6m, an improvement of 69.4% yoy (but down 22.3% qoq). This was in line with consensus estimates but exceeded our expectation. SCM turned in better-than-expected operating profit margin for the third consecutive quarter. The operating profit margin of 9.9% was an improvement of 120bp yoy, and exceeded our 1Q09 estimates of 9.2%. We opine that this ascertains SCM's capability and efficiency for rigbuilding as the first quarter is a seasonally slow quarter for higher-margin shiprepair and thus, the revenue profile for the first quarter is skewed towards rigbuilding. We expect subsequent quarters to record better profit margins than 1Q09. Therefore, we have raised our FY09F-10F operating margins by 90-110bp. SCM has secured a US$247.3m (S$370m) order to complete topside integration of a semi-submersible drilling rig, with an option for a similar unit, for SeaDragon Offshore in early Apr 09. We expect the option to be translated into a new order win later this year. We also believe there will be more offshore fabrication wins, as we read from trade publication, Upstream, that SCM's wholly-owned subsidiary SMOE, have teamed up with Italian offshore EPCIC contractor, Saipem, to clinch a US$430m contract to build and install the Gajah Baru central processing platform in Indonesia. In addition, the management has also expressed confidence to secure some new order wins from Petrobras. As such, we raise our FY09 and FY10 new order win assumptions of S$1.3b and S$2.0b to S$2.0b and S$3.0b respectively. Our revenue estimates are up by 1% and 6% correspondingly. Consequently, our FY09-10 net profits increase by 11% and 19%. SCM has shown consistent improved results to deserve a re-rating. We use a 3.5x P/B FY10 assumption to derive a target price of S$3.06 (from S$2.07 previously). Upgrade from Neutral to to Buy.

Hyflux: Buy (OCBC Research, 8 May)
Hyflux Ltd's 1Q09 revenue was seasonally weaker as expected; down 50.8% qtr-on-qtr (down 1.6% year-on-year) to S$88.2m, while net profit tumbled 62% qoq down 11.5% yoy) to S$5.1m. Besides the usual disruption due to the long Chinese New Year holiday in China, its industrial sales there were also affected by the economic slowdown. Nevertheless, Hyflux continues to remain upbeat about the water industry, and about its prospects in both Algeria and China. Although management did not provide an update of its order book – EPC jobs last stood at S$1.14b (end Dec 08), the ongoing projects to be completed should ensure that revenue and earnings see a seasonal uptick in 2Q09 and the rest of the year. As such, we are leaving our FY09 estimates unchanged despite 1Q09 revenue and earnings meeting just 14.4% and 8.3% of our full year estimates. And given the recent re-rating of the equity market, we correspondingly raise our valuation from 16x (trough) to 18x FY09F EPS and our fair value from S$1.87 to S$2.11. Maintain BUY.

Hyflux: Buy (Kim Eng, 8 May)
While both 1Q revenue and profit attributable were below our expectations, the underlying profit for the period was encouraging, with EBIT increasing 23% year-on-year (yoy). The two main deviant items from our expectations were China municipal revenue and the effective tax rate. However, 1Q has historically been the weakest quarter and not a good reflection of the full year. We believe the lower than expected China municipal revenue will be rolled forward to the next quarter when a few BOT projects are due to be delivered. All three key desalination projects are running on schedule, with preliminary groundwork on the Magtaa (in Algeria) project underway. With the investments into its projects, net gearing has increased from 0.4 to 0.8, which is within our expectations. We maintain our BUY call on Hyflux and lift our SOTP target price from $2.13 to reflect the higher market value of its stake in Hyflux Water Trust. We believe the Group will remain selective on capital-intensive BOT projects due to the tight credit market. However, if credit markets continue to ease, the Group's appetite for winning new projects may return.

AusGroup: Hold (OCBC Research, 8 May)
AusGroup Ltd has posted a 23.5% qtr-on-qtr decline in 3Q09 revenue to A$99.6m. Despite a higher gross margin of 15.2% (11.8% in 2Q09), net profit fell 17.1% qoq to A$4.1m. Still, the company's results were better than expected as our estimates had provided for additional contract cancellations. With industry capex slowing because of financing difficulties and a steep decline in commodity prices, the size and availability of future projects is a question mark. AusGroup's margins may also be at risk due to 1) increased competitive pressure and 2) negative operating leverage – a fixed cost/falling volume effect. AusGroup is seeing the results of management's overhaul of its execution capabilities. We note: 1) a more realistic revenue booking process; 2) an impressive decline in receivable days from 103 days to about 50 days over 9M09 (our estimate); and 3) the pay down of A$24.3m in debt in 9M09, taking the company to a net cash position. 4Q09 will be a better benchmark of both operating conditions and AusGroup's ability to sustain this improvement in internal processes, in our opinion. Recommend HOLD with S$0.55 fair value at 13x FY10F earnings

Cosco Corp: Sell (DMG, 8 May)
Cosco's 1Q09 revenue declined marginally (0% YoY, -1% QoQ) to S$714m; PATMI fell 70% YoY to S$33m. We are turning slightly positive in our medium-term outlook, as we note of Cosco's capability to undertake offshore conversion projects from its recent award from Modec. Separately, we note that Cosco is finalising two other FPSO conversion projects valued at a total of US$150m. In addition, we think stabilisation in the dry bulk market is likely, considering the demand-supply conditions. Any recovery in the Baltic Dry Index is positive for Cosco as it reduces the possibility of further cancellations and will increase revenue for its dry bulk shipping division as the current rates are based on spot market. Still, we do not deny that the near-term outlook is bleak, with more order cancellations expected and 2Q09 could possibly be the worst quarter. Going forward, we remain concerned over yard execution and potential late delivery penalties as the management has once again reduced their guidance on vessel deliveries from 25 to 15 for FY09. We pared down our FY09 and FY10 topline down by 7% and 3% respectively. FY09 and FY10 bottomline were reduced by 25% and 14% correspondingly as we take into account lower 1Q09 numbers, reduced margins from shiprepair and shipping as well as higher tax rates. We have revised upwards the target price to S$0.92 (from S$0.74) but maintain our SELL call.

Cosco: Sell (UOB Kay Hian, 8 May)
Cosco has reported a 1Q09 net profit of S$33.2m, down 60.5% year-on-year (yoy) due to lower charter-hire rates and higher operational costs. Excluding net fair value loss on forward currency contracts of S$38.8m, earnings would have been S$72m, within our expectation. According to management, gross margin for the dry bulk shipping segment has fallen from 60% in 2008 to 40% in 1Q09 due to weaker dry bulk freight rates. Total borrowings rose from S$520.2m to S$1.2b in 1Q09 to fund the expansion of its shipyards. Cosco has net cash of S$955.6m, the bulk of the gross cash is customers' deposits.The group has 110 dry bulk carriers in its orderbook. Year-to-date, there have been 26 delays and five cancellations. Construction has begun for 31 vessels and Cosco expects to deliver 15, 30 and 49 ships in 2009, 2010 and 2011 respectively. The Group's gross orderbook currently stands at US$7b with progressive deliveries through 1H12. We expect more cancellations and delays going forward. Its clients may face difficulties in securing credit to finance the new builds. This will lead to potential payment and vessel delivery delays, as well as order cancellations.
We estimate shipping earnings made up 55% of Cosco's 1Q09 net profit. The current weak dry bulk shipping market will continue to affect its earnings. Cosco's current share price is trading at a 38% premium to our fair price. In view of more cancellations/delays going forward and a weak dry bulk shipping market, we maintain SELL on COSCO (S) with a fair price of S$0.89.

StarHub: Buy (DMG, 8 May)
Starhub's earnings for the three months to 31 Mar 09, inched up 3% year-on-year (yoy) to S$82.5m on the back of a 0.8% yoy contraction in revenue to S$530.6m. EBITDA margin, at 33%, is flat from a year ago but improved 0.9ppt qtr-on-qtr (qoq). Rising margins for mobile (+0.8 percentage points yoy) and fixed network (+1.6ppt yoy) led to better than expected results. Free cash flow surged almost 4x to S$115.3m (6.7S¢/share) due to improvement in working capital. As a result, Net Debt-to-EBITDA improved to 1.05x, from 1.25x a year ago. Its target is 1.5-2x, which suggests room for capital management. But given the tight credit conditions, this is unlikely to happen. Capex, at 10% of revenue, remains comfortably in check. StarHub, which derives the largest portion of its revenue from broadband among the three telcos, is deemed to be the biggest loser when it comes to the National Broadband Network (NBN). But its OpCo win would have partially alleviated such fears. Moreover, NBN will likely lend a boost to its commercial business, which currently accounts for just 20% of revenue. Investors have also been worried whether StarHub can retain the English Premier League rights for the 2010-12 seasons. When probed, CEO Terry Clontz appeared confident of winning the race, claiming that a bidding strategy is already in place. We have assumed that StarHub would win the rights by paying 50% more than what it paid three years back. We have raised our earnings estimates by 4.2% to S$310.9m in FY09 on the back of improving margins. Dividend yield, at 9.2%, remains the highest among the telcos and the best among the STI components. We derive a target price of S$2.39 based on DCF (previously S$2.35), which implies an upside of 22.5%. StarHub remains our top pick and only BUY in the telco sector.

ParkwayLife REIT: Buy (OCBC Research, 8 May)
1Q09 results were in line with expectations. PREIT achieved 1Q09 DPU growth of 16.6% year-on-year (yoy) to 1.89 S¢. Topline rose 37.6% to S$16.3m, boosted by higher rental from its Singapore properties and contribution from its Japan assets (S$3.7m) which it had acquired in 3Q08. Its Singapore properties enjoyed higher rentals due to the higher rental growth rate of CPI+1% (6.25%) in the second year of the lease. Low gearing of 23% and no immediate refinancing risks. PREIT is cushioned against immediate refinancing risks, as the next refinancing requirement will be in 2H10. Despite the current economic recession and the expected contraction in Singapore's GDP, the long-term prospects for PREIT is positive, underpinned by the expected continued growth in demand for premium healthcare in Asia. We are keeping our DDM value assumptions of no new acquisitions and cost of equity of 8.7%. Although PREIT's dividend yields are not as attractive as the other REITS in the sector (~ 9% vs sector of ~ 11%), we remain positive on PREIT, for its defensive nature and the revenue downside protection that its lease structure offers. Maintain BUY with target price of S$1.01.

Parkway Life REIT: Buy (Phillip Securities, 8 May)
Parkway Life REIT has reported gross revenue for 1QFY09 of $16.3 million (+37.6% year-on-year), net property income was $15.2 million (+36.6% yoy). Distributable income was $11.4 million(+16.6% yoy). DPU for the quarter was 1.89 cents (+16.7% yoy). Results were largely inline with expectations as Plife REIT’s properties have strong and stable cash flow characteristics. Growth in revenue was mainly due to the annual increment in rents of 6.25% of the Singapore hospitals as well as contribution of revenue from the Japanese properties, which were acquired in 2^nd and 3^rd quarter of 2008. Balance sheet remains healthy with gearing ratio of 23.0%, a slight decrease of 0.3%pt from 4QFY08, due to the depreciation of JPY. Correspondingly, asset value registered slight drop of 0.6% from the Japan properties. Plife REIT has total debt of $247.5 million, out of which $34 million denominated in S$ is due in the 2nd half of 2010. The rest are yen denominated and due in the 2011. Share price has run-up 20% since our previous recommendation. We maintain our positive call on Plife REIT and like it for the stable and resilient cash flows. We reiterate the defensive nature of the healthcare sector and the revenue model of the REIT whereby 93% of total portfolio (NLA) has downside revenue protection. We maintain our Buy recommendation with fair value of $0.95.

UOB: Hold (Phillip Securities, 8 May)
UOB has reported a 23.3% increase in core net earnings to S$409 mil (-22.7%yoy, +23.3% qoq, 4Q08: S$332m), which were inline with our estimates. Net interest income fell 0.8% to S$949 mil with net interest margins slightly lower at 2.41% as compared to 2.45% last quarter due to lower loan spread. Singapore total loans contracted 0.54% in the first quarter of 2009 and UOB's loan book remained flat following a contraction in the previous quarter. And as we think that since loans growth is closely tied to the economy and MTI projects that Singapore may contract from –6% to –9%, we fear that it is probable that system loans will contract in 2009 and will impede UOB’s loans growth. Given this unprecedented economic crisis and the factors stated above, we are cutting our 2009 earnings by 13.6% from S$1.92bil to S$1.66bil. Accordingly, we adjust our target price to S$14.60; peg to 1.52x FY09 NAV. Given the strong advancement of the share price within last week, we think upside may be limited. We maintain our Hold rating.

UOB: Sell (OCBC Research, 7 May)
UOB delivered net earnings of S$409m, up 23% qtr-on-qtr (qoq) but down 23% year-on-year (yoy) YoY, ahead of market and our estimates. Net interest income flat qoq at S$949m and with non-interest income of S$434m, total income amounted to S$1384m, up 3% qoq and 9% yoy. As expected, total impairment charges were higher, up from S$89m in 1Q08 to S$378m. Customer loans grew 5.6% yoy (flat qoq) to S$99.7b. Non-performing loans (NPL) increased from S$1602m in 1Q08 and S$2062m in 4Q08 to S$2185m in 1Q09. NPL ratio also rose from 1.6% in 1Q08 to 2.1% in 1Q09. Management expects to be able to price in stable margin in Singapore, but expects challenges in overseas market, especially Thailand. While we continue to believe that UOB's asset quality is healthy, we believe that valuation is high after yesterday’s 13% gain, bringing it to 1.5x book. This could mean the possibility of near-term selling pressure. We raised our fair value estimate from S$9.30 (1x book) to S$11.80 (1.2x) book. At yesterday's price of S$14.88, we maintain our SELL rating.

City Developments: Sell (OCBC Research, 7 May)
Millennium & Copthorne (M&C), the hotel subsidiary of City Developments (CDL) has reported a 1Q09 year-on-year (yoy) revenue decline of 1.9% to £50.7m but on a constant currency basis, it would have fallen 18.2% yoy. Headline operating profit before tax plunged 50% yoy to £11m. On a constant currency basis, it was down 58.6% YoY. For April, Revenue per room (RevPAR) continued to deteriorate sharply, falling by 22.9% yoy. We believe that the weakness in M&C's 1Q09 results could be further compounded on the financials of CDL due to the weakness in sterling pound (GBP) against the Sing dollar.. In a situation whereby the virus outbreak turns for the worse from current status, CDL's earnings could be negatively affected as it has significant exposure to the hospitality segment. We are keeping our fair value of S$5.53 unchanged for now, implying a downside potential of 26.3%. While we still like CDL for its strong balance sheet and prudent management, we are now downgrading CDL from HOLD to SELL on its heightened risk profile and valuation concerns.

ST Engineering: Hold (Kim Eng, 6 May)
ST Engineering's 1Q09 results were slightly below expectations, with net profit at S$85.2m sliding 30% versus 1Q08 and down 17% qtr-on-qtr (qoq). On a PBT basis, however, STE managed to grow by 25% qoq, as 4Q included a tax write-back. However, with a second consecutive quarter of muted earnings, we believe that STE is feeling the effects of the current difficult business conditions, particularly in Aerospace. Group turnover was flat at S$1.3bn, with a shortfall in Aerospace and Land Systems compensated by Marine and Electronics. Aerospace EBIT margins at 9% were lower versus 12% in FY08, due to an unfavourable sales mix. All divisions saw some level of margin pressure, except for Land Systems, whose margins improved from lower operating expenses. Management has maintained its guidance for the full year, and expects FY09 to show comparable turnover and PBT to FY08. Despite the weak quarter, STE has characterised the performance as within their projections, and expects a stronger second half, based on its order flows. We expect this to come from higher deliveries for its Passenger to Freight conversion programme, as well as commencement of Bronco deliveries to the UK Ministry of Defence. STE grew its orderbook to S$11b from S$10.6b at end-FY08. STE will deliver about S$2.9b of this in the next 3 quarters. This puts it on track to deliver our full year turnover estimate of S$5.4b. However, we are cutting our margin assumption further for conservatism, and to bring our estimates closer towards STE's own guidance. As a result, we are cutting PBT by 5.7% to S$545.5m, and net profit by 9.3% to S$436.1m. Reduce to Hold as STE approaches our target price of $2.70 STE still expects to pay out 100% of earnings as dividends. With our cut in forecast, we reduce our FY09 projected dividends from 16.1 cts per share to 14.5 cts. Coupled with STE's 17% price rise over the last 2 months, FY09 dividend yield is 5.5%. We are downgrading our recommendation to Hold, with limited upside to our target price of S$2.70.

ST Engineering: Neutral (DMG, 6 May)
STE saw flat 1Q09 revenue while net profit dropped 30.4% year-on-year (yoy) due mainly to lower contributions from the its aerospace division. However, on a qtr-to-qtr (qoq) basis, profit before tax (PBT) actually increased 25% to 1Q09. Stripping out the S$34.4m tax write-back seen in the previous quarter, net profit would have improved 25.5% sequentially, below our expectations. The company's management highlighted that its 1Q09 results are not reflective of the entire year as they believe that the next nine months would see better margins which in our view is mainly due to its aerospace business. STE also added that based on historical trends, its 2H has usually been better than its 1H – we therefore expect its current record order book at S$11billion (from S$10.6b in FY08) to increase even more going forward. We forecast earnings to contract 1.8% to S$465.2m in FY09, before growing 10.8% to S$516.0m in FY10. At S$2.63, it trades at 17.0x FY09 and 15.3x FY10 P/E. Over the past five years, it has been trading at an average of 19x P/E. Its dividend yield of 5.9%, while above that of the STI’s 3.8%, is not particularly palatable for a high yielding counter. Based on our DDM, we derive a target price of S$2.83. Given the limited 7.7% upside, we are downgrading the stock to NEUTRAL.

ST Engineering: Hold (OCBC Research, 6 May)
STE 1Q09 topline was flat at S$1.32b while PATMI shrunk by 30% year-on-year (yoy) to S$85.2m. The quarter was primarily marred by STE's aerospace division as it did not deliver any MD-11 conversions. STE grew its orderbook to S$11b where S$2.88b (52% of our FY09F revenue) will be delivered over the next three quarters. Management has indicated that the next three quarters should see improvements in margins and better spaced deliveries. STE continues to iterate its guidance for a "comparable" PBT for this year while turnover has been downgraded from "higher" to "comparable". We have rolled our valuation forward to a blended 16x FY09/10F PER and our fair value is bumped up to S$2.46. However, the recent 30% surge with the market rally since our upgrade on the 13 Feb seems to have factored in a growth story vs. our estimates which show a decline for FY09. In view of the limited upside, we are downgrading our rating to a HOLD. Sustained improvements in margins and accretive contract wins will incentivise us to re-peg our valuation.

Noble Group: Buy (OCBC Research, 6 May)
Noble bettered our expectations with its 1Q09 results. Volume grew across all business segments, demonstrating the group's ability to expand market share despite challenging operating conditions. Not surprisingly, revenue and earnings fell as a result of the slump in commodities prices. Revenue slipped 36% year-on-year (yoy) to US$6.1b while net profit contracted 46% to US$90.2m. Stripping away the impact of one-off gains in 1Q08, core net profit would have contracted by a smaller 24.4%. Noble's balance sheet remained healthy with an adjusted net cash position. Lower commodities prices eased working capital requirements, leading to an improvement of operating cash inflow to US$77.4m vs. an outflow of US$120.3m a year ago. Noble's credible showing in 1Q09 reaffirms our view that it is poised to leverage on the global economic recovery. We maintain our BUY rating on the stock, and raise our fair value estimate to S$1.66 (from S$1.33) to account for heightened risk appetite for cyclical recovery stocks.

Raffles Education: Buy (Kim Eng, 6 May)
The group recorded a net loss of $16.5m in 3Q09 as it wrote off the $34.6m allowance of impairment for Oriental Century in the quarter. 3Q09 core net profit after adjustment of exceptional items was $14.65m (-27% yoy, -38% qoq). 9M09 core net profit of $66.2m was below our expectation mainly due to lack of growth in student enrolment, hefty set up costs of new premises, its more prudent bad debt policy and lower forex gains.Rental costs surged in line with the business expansion and additions of OUC, Wanbo and Shaanxi, while personnel expenses rose 27% qoq due to expanded headcount. Meanwhile the lack of student enrolment during the seasonally weak recruitment period (total students 32797 vs 32873 in 2Q09) weighs on its top-line. OUC continues to contribute positively to the group's earnings, as its profit in 9M09 more than doubled yoy to $10.6m. Growth potential from OUC remains huge, while the new colleges in Bangalore, Jakarta, Langfang, New Delhi and Yunan will contribute positively to student enrolment going forward. The group expects student enrolment to pick up by 4Q09, targeting a 15% increase in student population by year-end. No dividends were declared this quarter, the first time since listing, as cash conservation has become the key priority. Positioning to be a stronger education player in the next upturn, the group aims to strengthen its balance sheet by reducing its gearing from 1.1x to zero by 2010. We have reduced our earnings estimates for FY09/FY10 by 27% and 12% respectively as we built in lower student enrolment in FY09 and higher operating costs. However, with the stock trading near to the low of its PER cycle, weak earnings could have been priced-in. Moreover, its strong free cashflows of $117m year-to-date (+189% yoy) supports its value proposition of defensive earnings. Maintain BUY with target price of $0.60.

Raffles Education Corporation: Buy (OCBC Research, 6 May)
Raffles reported a loss-making quarter (-S$16.5m) as it had decided to book in S$33.1m as allowance for impairment charges for its associate Oriental Century (ORIC). Excluding this non-cash charge and land sales (to pay for Oriental University City, or OUC), Raffles' 3Q09 net profit would have come in at S$14.7m. Management also updated on its plans for securitising Oriental University City (OUC) through a listing in early 2011. Executing this securitisation plan with its creditors (mainly the provincial government) will enable Raffles to pay a majority part of the asset through shares. Raffles has terminated its Dividend Re-Investment Scheme due to a poor take-up and will not be paying dividends this quarter to conserve cash. With the ORIC write-down behind it, coupled with a securitisation plan for lesser cash payments for OUC, we think it would more fair to value Raffles from FY10F where earnings are less skewed. We have rolled our valuation forward to 12x FY10F PER and obtain a fair value of S$0.59. Maintain BUY.

Tat Hong Holdings:Buy (Citi Investment Research, 5 May)
Downside risks to TAT's earnings have abated, such as (1) Infrastructure spending plans announced regionally as part of fiscal response to recession provide support to construction equipment rental and utilization rates; (2) Credit markets, while still challenging, are finally thawing – easier access to asset financing could boost sales of construction equipment; (3) Recent Aussie dollar appreciation and yen depreciation vs. Sing dollar lowers risk of forex translation losses. TAT well positioned to benefit as Cranes are some of the first pieces of equipment to be deployed in infrastructure projects. TAT is the market leader in crawler cranes with significant tonnage of larger models, implying greater pricing power. Its Customers prefer to rent large cranes rather than own them during a downturn given financing challenges. Futhermore, there's the potential from M&A activity. Execution risk is low as TAT has M&A experience in Australia while China JVs have begun contributing to bottom line. We maintain our earnings estimates and our assumption of -8% to -15% declines in rental rates in FY10-11E, respectively, about 70% utilization, and 10% annual fleet expansion from M&A. Note that rental business ( about 65% of gross profits) can still break even when rental rates fall 30% from current levels and utilization drops to 50% simultaneously. Our new target price of S$1.10 is based on 7x FY10E P/E (vs. ~0.6x FY10E P/B previously, as investor focus reverts to earnings growth), slightly above historical P/E support of 6x, in line with better earnings visibility.

Ascendas REIT: Buy (DMG, 5 May)
A-REIT has secured from Singtel the purchase of a site at Kim Chuan Road for the development of a 9-storey Built-To-Suit (BTS) hi-tech industrial building. Singtel will lease the entire property for an initial tenure of 20 years with annual rental escalation and an option to renew for another 10 years. Total development cost is estimated at S$175.4m, implying S$496 psf for the 353,727 sqf (in GFA) site. Coupled with three other ongoing development projects, A-REIT now has an outstanding development pipeline worth S$334.1m. The acquisition will be DPU-accretive, given that it is projected to add 0.28¢ per unit to A-REIT's DPU (assuming 100% debt funding). While we estimate the project's initial passing yield of 4.8% is lower than current market cap rates for industrial assets of over 7%, management has guided for an average yield of 9% to 10% over the entire 20-year tenure. We note that this is also higher than A-REIT's current and post-refinancing all-in funding cost of 3.67% and 3.83% respectively. More importantly, A-REIT has again demonstrated its ability to attract tenants with solid credit standing. We have tweaked upwards A-REIT's FY10F gearing to 38.9% to reflect new funding requirements for the project. Full year contribution from the project would only arrive in FY11. As such, FY10F DPU falls by 3% to 13.67¢, while FY11F DPU rises 1.4% to 14.88¢. Currently, A-REIT is trading at FY10F – FY11F yields of 10% to10.9% vs.S-REITs' 10%. We continue to like A-REIT for its well-honed franchise, strong management, ready development pipeline and long lease tenures. We believe its recent S$110m issue of MTN should also help to clear investors' undue worries over usage of unsecured revolving credit facilities. Maintain BUY at fair value of S$1.57.

Cosco Corp: Sell (Kim Eng, 5 May)
Cosco has announced that it has secured a contract to convert an 18-year old Very Large Crude Carrier (VLCC) tanker to a Floating Production Storage and Offloading (FPSO) vessel. The customer is Mitsui Ocean Development & Engineering Co., Ltd (MODEC), and the job will be carried out at its Dalian yard. MODEC is a repeat customer, having previously undertaken a similar FPSO conversion which was completed in 2007. The FPSO is scheduled for delivery around mid-2010. This contract is positive, as there have been no significant new orders for Cosco for more than 6 months. However, a recent chat with management reveals that while there have been no specific cancellations, the risk of re-negotiations and delivery delays remains, in the current tight credit market and difficult operating conditions. We expect Cosco to post sales of around S$700m and net earnings of about S$65m for the quarter. Overall, we still expect Cosco to earn S$357.4m in FY09 on its US$7bn orderbook. The market has been taking these risks in its stride, and the broader marine sector has seen a sharp upward re-rating in the last week, in line with the market recovery. We are pegging Cosco’s target price to current sector price-to-book valuations of 1.5x, or S$0.81. However, our Sell recommendation is maintained, pending more evidence of a stabilization of the business.

Koda: Hold (OCBC Research, 5 May)
Koda has issued a profit guidance, warning shareholders that it expects to slip into a loss in 3Q09 vs. a US$500,000 profit in 3Q08. This warning does not come as a surprise. The company’s management had previously sounded the alarm bell and highlighted that the prolonged global economic recession would hurt its sales, resulting in capacity under-utilisation and thinning profit margins. In addition, its seasonally weak 3Q will be dragged down by shorter working months due to the festive holidays. We believe that Koda's poor earnings outlook has largely been anticipated by the market and reflected in its beaten down valuations. We will instead shift our focus to the group's balance sheet health, gearing and receivables during its upcoming 3Q09 earnings announcement on 15 May 09, which we project should remain relatively robust. For now, we retain our Hold rating and S$0.145 fair value estimate on the stock.

Foreland Fabrictech: Hold (OCBC Research, 5 May)
Foreland Fabrictech has announced that it expects to report a weaker performance in 1Q09 as compared to 4Q08, citing the generally weaker demand in the textile industry. However, it expects performance to improve in 2Q09 as orders have steadily been trickling in. We are not surprised as the writing has been on the wall for some time, given the rapid deceleration in China textile exports since mid-2008. We have also noted in our earlier report that the most textile factories have taken a longer-than-usual break for Chinese New Year of up to one month (as compared to one week previously) due to the lack of orders and it was no different for Foreland. And from our recent meetings with management, we believe that our forecasts have already taken a weaker overall showing for FY09 into consideration and will hold off adjusting our numbers until we see the actual 1Q09 results. For now, we maintain our HOLD rating and S$0.12 fair value.

Cosco Corp: Underperform (Credit Suisse, 5 May)
Cosco has secured its first contract for FY09; when it was awarded a contract to convert a VLCC (crude carrier) to a FPSO vessel by Modec for an undisclosed amount. While the contract win may be positive for sentiment on the stock, Cosco is well shy of our S$1 bn (US$640 mn) new contract assumptions for FY09. We remain concerned about its shipbuilding business due to delayed deliveries and no demand. On our estimates, shipbuilding contributes S$2b (or 47%) to Cosco's FY09E revenues, with ship repair (S$0.9b), conversions (S$1.15b) and shipping (S$0.15b) accounting for the remainder. We would caution that visibility on Cosco's revenues and earnings remains limited. At S$1.10, Cosco is trading at a FY09E P/E of 9.3x and P/B of 2x, at nearly twice the valuation of Yangzijiang, which is executing well and is our preferred exposure on the sector. There is no change in our estimates and rating for COSCO pending 1Q09 management on 7 May. Maintain Underperform with a target price of S$0.51.

Pharmesis International: Sell (DMG, 5 May)
Pharmesis' 1Q09 net profit came in at RMB0.9m, as sales declined 7% year-on-year The results came in below our forecasts, due to lower than expected sales of its ATT brand products and health tonics (namely high quality cordyceps) that were dragged down by increased competition and a slowing economy. This decline was partially offset by growth in its TCM (traditional Chinese medicine) business segment, which unlike its ATT products, is not as widely used in the market yet. Hence, there is still market potential for this segment to grow, as Pharmesis continually makes markets its TCM product to more regions and hospitals in China. Pharmesis has a net cash position of RMB10.3m at end 1Q09. We note that it has not declared dividends since its listing. Management is keeping its cash as it looks out for suitable acquisitions, such as other product manufacturing or distribution licenses to add to its revenue stream. The operating environment for Pharmesis remains challenging, with intense competition and the economic slowdown. Management has reduced its marketing efforts on its health tonic segment, in light of the economic recession. We are lowering our FY09 and FY10 net profit forecasts by 5%, considering the weak sales of its health tonics. Its peers are currently trading at an average of 4x forward P/E. Pharmesis’ products are specialised, non-OTC drugs. Hence, we ascribe a premium to it. Based on 5x P/E, our revised target price is S$0.03, from S$0.035 previously. This stock is rather illiquid. However, volume traded surged over the past two weeks, and the stock price rose by 50%. We think this presents a good opportunity to take profit and are downgrading our recommendation to a Sell.

Oceanus Group: Buy (Westcomb, 4 May)
With concerted efforts to acquire abalone farms, Oceanus's farm size has grown rapidly to 20,500 tanks as of December 2008 and thus emerged as the world largest land-based abalone farmer. The management has a conservative internal target of 10 restaurants in FY09, and 100 restaurants by FY11. To them, the target of first 100 food restaurants is just a milestone marking the beginning of its restaurant chain's journey. The current task for them is to systemize the food chain operation. Its first restaurant in Shanghai is estimated to sell about 5,000 abalones a month, 60,000 a year. The company's processing business offers some compelling advantages. Generally, a processed abalone commands a premium over a live one. On top of that, its selling price is relatively stable, unlike live abalone whereby its price is much more volatile. A processed abalone is shielded from risk arising from disease or natural disaster which is faced by live abalone. Last but not least, a processed abalone can be stored for a longer period which can be readily delivered to meet demands. We find it compelling to recommend BUY as the risk-reward ratio is in the favor of Oceanus. Notwithstanding that uncertainty remains in the downstream business, we believe the risk is low given that (1) encouraging progress shown so far, (2) even if the downstream business does not take off successfully, its abalone farming business is expected to remain profitable. Oceanus is substantially undervalued based on our relative valuation. Based on FY09E book value and sales figure (instead of gain in fair value) and equally weighted P/B and P/S multiples, we derive our target price of $0.44.

CDL Hospitality Trusts: Buy (UOB Kay Hian, 4 May)
CD-REIT's 1Q09 results were in line with estimates. Distributable income per unit (DPU) of 2.18 cents represents 25.3% of our full-year forecast. After working capital deduction of 1.97 cents (-31.1% yoy, +9.4% qoq), DPU implies payout ratio of 90%. Gross revenue declined 19.2% year-on-year (yoy) and 19.9% qtr-on-qtr (qoq) to S$22.5m, and net property income fell 21.2% yoy and 5.3% qoq to S$20.6m. Results were adversely impacted by significantly weaker tourist arrivals during the quarter (-13.7%), cost containment on the part of corporate clients, and the absence of crowd-pulling events such as the Singapore Airshow. CDREIT has successfully secured refinancing for S$297m of outstanding borrowings maturing Jul 09 through a S$350m secured facility from DBS Bank, at an interest rate of the Singapore swap offer rate plus interest margin of 2.6% p.a. The 3-year loan comprises a S$270m term loan and a S$80m revolving credit facility. Drawdown is expected in 3Q09 and no further refinancing is required until 2012. Post-refinancing, debt-to-asset ratio is expected to increase marginally to 19.8% from 18.3% as at end-1Q09. Overall revenue per available room (RevPAR) fell 28% yoy to S$150 in 1Q09 due to a 9.6ppt drop in occupancy and 18.6% decline in average daily rate (ADR). Although tourist arrivals should enjoy a boost from the opening of the integrated resorts in 2009 and 2010, we believe CD-REIT will come under pressure from the substantial supply of new hotel rooms coming on stream in 2009-11. As such, we have cut our RevPAR estimates for 2009-11 by 18.5-22.3%. Our revised RevPAR estimates account for a 21.8-23.3% reduction in ADR and a 5ppt increase in occupancy in FY11. We have lowered our DPU estimates by 22.5-25.6%, factoring in the downward revision in RevPAR. CDREIT offers an attractive yield of 11.1% despite the downward revision to our DPU estimates. Maintain BUY but we lower our target price by 22.5% to S$1.00.

CDL Hospitality Trust: Buy (DBS Research, 4 May)
With gross revenues of S$22.5m (-19% year-on-year, 20% qtr-on-qtr) was in line. Hotel operations were weak on a portfolio basis with revenue per room (RevPAR) declining to S$150 (-27% yoy), which were in line. However, higher than projected net property income margins of 91.5%, were ahead of our projected 88%. This was largely due to successful cost containment measures, which somewhat offset the decline in room revenues. As a result, NPI of S$20.6m (-21% yoy, -5% qoq) was slightly ahead of projections. Distributed income came in at S$16.5m (-30% yoy, +11%qoq), translating to DPU of 1.97 cents. CDLHT has successfully secured re-financing for expiring loans. The new facility amounts to S$350m comprising a 3-year S$270m term loan and an S$80m committed revolving facility with DBS Bank. Interest rate for the new facility is lower than projections. Valuation of 0.4x P/BV is attractive. While short-term newsflow is expected to remain negative, as Singapore's largest hotel owner, we believe CDLHT presents long-term value to investors looking to leverage on the medium term prospects of the local tourism industry. Maintain Buy with target price of S$0.74. CDL HT currently offers a prospective FY09-10F DPU yield of 12%. Risk to earnings would come from a sustained outbreak of swine flu virus impacting regional travel.

Singapore Post: Buy (Kim Eng, 4 May)
Despite a weaker 2H, full year net profit fell only 0.3% year-on-year (yoy) to $148.8m with the benefit of $2.3m in budget aid measures and $1m from the 1% corporate tax reduction. Adjusted for these and $1.9m in winding-up costs of an associate company in FY09 and $9.3m in adjustments from other one-off items in FY08, underlying net profit rose 4.8% yoy to $146.8m in FY09, largely within our expectations of $148.2m. 4Q09 revenue fell 2.9% yoy, reflecting the impact of the economic contraction. As expected, the retail and mail businesses were the most affected, down 7.7% and 2% respectively, with the latter hit by a slump in international mail (-6.7% yoy). However, operating costs fell by a faster 6.3% to offset the decline in revenue. SingPost also declared a final dividend of 2.5 cents, bringing total annual dividend to 6.25 cents, the same as FY08, as cashflow was maintained despite the economic contraction. SingPost recently announced it has increased its stake in G3AP, an associate company that provides cross-border mail services within Asia Pacific with a 10-country network, from 50% to 100%. Following the consolidation, G3AP will increase its mail services to include SingPost's other competencies, such as logistics, warehousing, fulfilment, etc. Although a small move at this stage (costing only $15m), we believe SingPost is likely to speed up its regional agenda given the downturn. Conservatively, we have lowered our FY10 forecast by 7.6% and our dividend forecast to 5.5 cents. However, we still like the relative defensiveness of SingPost’s business model and its robust cashflows. Even though dividend has been lowered, yield is still decent at 7.2%. Maintain BUY with target price lowered from 92 cents to 88 cents due to revision in FY10 forecast.

Singapore Post: Buy (OCBC Research, 4 May)
SingPost reported a 2.9% year-on-year (yoy) fall in revenue to S$115.6m and a 2.5% rise in net profit to S$35.5m for 4Q09, in line with expectations. Mail revenue was lower due to a decline in international mail contribution while logistics revenue was steady against 4Q08. Rental and property-related income improved. The group is likely to undertake gradual capex plans with regards to its mail processing system around 2013 onwards though management has not arrived at a decision yet. The group also attributes most of the slowdown in earnings growth to the economic downturn rather than new competition. True to its relatively defensive nature, SingPost is paying out a final dividend of 2.5 cents/share, meeting our expectations of a full year payout of 6.25 cents/share. This comes at a time when most companies are cutting or avoiding dividends altogether. Maintain BUY with S$0.91 fair value estimate.

Venture Corporation: Buy (Kim Eng, 4 May)
Venture's revenue fell 23% to $725.5m while net profit plunged 51% to $27.7m. Adjusted for a $12.6m CDO mark-to-market provision however, Venture did better than expected with a normalised net profit of $40.3m. This was despite an across-the-board year-on-year (yoy) decline in revenue (about 30-35%) in all segments except Printing & Imaging, and a fall in EBITDA margin to 6.5% (vs 9.3% in 1Q08 and 8.9% in 4Q08). Despite lower revenue in other segments, P&I revenue rose 6% yoy to 35% of sales in 1Q09. We note Venture's inventory fell only 12% yoy compared to the 23% decline in sales). If so, the growth is likely to be a blip. Although sentiment remains weak for the most part, management pointed out that some customers' forecasts improved during the quarter, suggesting that they had overreacted to the economic downturn and are now restocking their channels. In the near term, management reported that monthly orders continue to improve after bottoming out in Jan-Feb. Sequentially, 2Q09 should show improvement over 1Q09. Despite the relatively high inventory levels, balance sheet strength continued to improve qoq and yoy. Net cash rose to $304m or $1.11/share (vs net debt of $25m in 1Q08, net cash of $192m in 4Q08) despite repaying $37m in borrowings during the quarter. There is a significant gap between Venture's share price performance to-date and the tech stocks in Taiwan, suggesting there is room to play catch-up, especially since industry newsflow remains relatively positive. Further, with Venture's balance sheet still on the mend, we reckon the dividend yield of 8.4% at current levels is safe. We therefore maintain BUY on the stock with a price target of $6.64 based on 10x forward EPS.

Venture Corporation: Buy (DMG, 4 May)
Venture's 1Q09 net profit at S$27.7m that equated to a 50.8% decline year-on-year (yoy) was below our forecasts as CDOs losses were greater than we had forecast. While bottomline was also below the consensus forecast of S$34m, topline during 1Q09 at S$725.5m which came in 22.7% lower yoy was nevertheless better than the mean market consensus at S$713m. Venture continued to pare down its debt and has now S$1.11 in net cash per share that translates to 18.6% of market cap. More importantly, despite this current market downturn, Venture had managed to boost its net operating cash flow tremendously from S$5.6m in 1Q08 to S$99.1m in 1Q09 due to effective cash management skills. We therefore continue to believe that our forecasted yearend dividends of S$0.50 are also achievable. Venture had mentioned that its 1Q09 numbers were mainly affected by a dull month during Jan 09. However, it added that a pick-up had happened during Feb and Mar due to the replenishing of inventories. Furthermore, management added that forecasts given by several of its clients have been good and therefore would be expecting a better 2Q. However, Venture also professed that as it does not know how long this recovery can last, it would choose to be cautious. With Venture's strong cash flow generating attributes, sustainable dividend yield of 8.4% and an improvement in its macro-outlook for at least the short-term, we maintain our BUY recommendation with our target price raised to S$6.72, from S$5.92 previously.

Venture: Hold (OCBC Research, 4 May)
Venture Corp 1Q09 results reflected a tough quarter as expected; with revenue down 22.7% year-on-year (yoy) to S$725.5m, while net profit slipped 50.8% yoy to S$27.7m. Although management expects 2009 to remain challenging, it also noted that it has seen some improvements in some customers' forecasts; this has already resulted in monthly improvement in sales since late Feb. We are leaving our FY09 estimates. Our fair value also remains at S$5.64 (8x FY09F PER); but we are downgrading our rating to HOLD as the stock has already risen by 25% since our last upgrade in March and the current share price exceeds our fair value by 4.7%. Nevertheless, we still think that the company remains fundamentally sound and its S$0.50/share dividend payout remains sustainable (8.4% yield).

CapitaCommercial Trust: Buy (UOB Kay Hian, 4 May)
CCT reported a DPU of 3.24 cents, an increase of 25% year-on-year (yoy) and representing an annualised yield of 15.9%. The results were better than our DPU forecast of 3.04 cents.Gross revenue increased 0.3% qtr-on-qtr (qoq) and 36.9% yoy to S$97.5m due to the acquisition of One George Street and Wilkie Edge as well as positive rental reversion for its office properties. CCT has been renewing leases ahead of expiry. It has signed new or renewed leases for 335,800sf of space in 4M09. 89% of forecast rental income for 2009 is already locked in under committed leases. Committed occupancy on a portfolio basis was 97.7% in Apr 09 compared to 96.2% at Dec 08. The average lease term to expiry for CCT's Top 10 tenants is 6.4 years. They account for about 50% of gross rental income and provide some defensive shelter. CCT has obtained a commitment letter for a three-year secured term loan of up to S$160m to refinance S$156m term loan due Jun 09. The facility is secured against HSBC CCT has completed all refinancing for 2009. The next major refinancing is S$650m two-year secured term loan due Jun 10. The office market is affected by concerns over consolidation in the financial services industry, tenants downsizing after retrenchments and new supply coming on stream. We expect rents for Grade A office space at Raffles Place to correct two-thirds from their peak to S$6psf pm. We have factored in a drop in office occupancy to 82% in our forecast. For CCT's retail component at the Raffles City, Golden Shoe and Market Street car parks, we expect occupancy to decline to 90% and rents to drop by 15% from existing levels. CCT focuses on Grade A office space and has a market share of 9% of the private office stock within Downtown Core. Reiterate BUY as CCT provides 2009 distribution yield of 13.9%. Buy with a target price of S$0.93.

CapitaCommercial Trust: Buy (OCBC Research, 4 May)
CapitaCommercial Trust (CCT) delivered a strong set of 1Q09 results that exceeded our expectations. Gross revenue increased to S$97.5m but on a qtr-on-qtr (qoq) comparison, the increase was a marginal 0.3% as higher contributions from the positive rental reversions of the office buildings were offset by the weaker contribution from Raffles City's hotel revenue. DPU for 1Q09 has also increased 25.1% yoy and 19.6% qoq to 3.24 cents, translating to an annualized yield of 15.2%. CCT has now locked in 89% of its forecast gross rental income for FY09, which amounts to S$318m. It had also secured commitment for a 3-year secured term loan of up to S$160m, which completed its refinancing exercise for FY09. We are now raising our FY09 and FY10 DPU forecasts to 11.2 cents and 9.9 cents respectively. Our fair value has now been raised to S$1.33.

CapitaCommercial Trust: Buy (Kim Eng, 4 May)
CCT delivered a 25.1% year-on-year (yoy) jump in its 1Q09 DPU to 3.24 cents (annualised distribution yield of 15.9%), and is on track to deliver its forecasted 12.34 cents for the full year. Despite the challenging business environment, the DPU grew by almost 20% sequentially, aided by lower property operating expenses and borrowing costs. CCT signed on new leases and renewals for 335,800 sq ft of space in the first four months of 2009, leading to a 49% improvement in signed rents. About 89% of the management's forecast gross rental income of $408m has already been locked in with committed leases. The current portfolio committed occupancy is 97.7%. CCT has a buffer against the still-falling market rates, which are relatively higher than the office passing rent of $7.73 psf. The limited percentage of leases expiring for its four key office buildings (Capital Tower, Six Battery Rd, One George Street and Raffles City Tower) also lowers its downside risks associated with the weakening office market. Pursuant to the $580m already refinanced earlier this year, CCT announced that it has obtained a commitment for a $160m, 3-year term loan secured over the HSBC Building. The all-in margin for the loan is 3.0%. This compares favourably against the 3.75% margin obtained by Suntec REIT in the refinancing of $825m in debt. CCT’s gearing level remains at a comfortable 38.3%. Based on our forecasts and the current price, we expect CCT to be able to consistently pay an attractive annual DPU yield of about 14% over the next 3 years. Maintain BUY recommendation with target price of $1.32.