Stock Picks

Adampak Ltd: Buy (DMG, 28 Nov)
Adampak Limited is a manufacturer of high-quality labels, radio frequency identification (RFID) tags, seals and other die-cut components that mainly serves the electronics industry. Despite the current economic crisis that has affected the electronics industry, the respective financial performances from some of Adampak's main customers have generally been positive. HP had recently released its 4Q results that had topped analysts' forecasts, helped by its strong laptop sales. The company's bottomline has been on an uptrend since FY03 with net earnings growing at a CAGR of 32.5% for the last five years. Net margins have also generally remained above the 11% mark – considered to be relatively high as compared to the other HDD-related players. We also estimate gross margins of Adampak's die-cut component business to be above the 30% mark, higher than MAP Technology's 10 – 20%. For our valuation methodology, we have opted to use the dividend discount model on Adampak due to its high dividend yield and the lack of locally-listed comparables. We initiate coverage with a BUY recommendation on a target price of S$0.18 although we do highlight that one of the trading risks pertaining to this stock would be its illiquid nature

Ezra Holdings: Neutral (DMG, 28 Nov)
Ezra has announced that it is currently reviewing its orders for five ultra-deepwater Multi-Functional Support Vessels (MFSVs) in view of the current financial turmoil. The first on its list is a 30,000 brake horsepower (bhp) MFSV to be built in Keppel Singmarine. The newbuild contract, valued at S$69m, excluding the cost of certain owner-furnished equipment, was placed in May 2008 with delivery expected in 2010. We understand that this MFSV has not secured any back-to-back chartering contracts yet. Ezra has a committed capital expenditure (capex) of US$750m over the next two years, of which US$650m would be used for five ultra-deepwater MFSVs and one AHTS. We understand this would be funded through internal cashflow (20%) and bank loan financing (80%). Another US$100m, which has already secured debt financing, would be set aside for the Vietnam Yard, Academy and Energy Services business division. Based on our projected forecast estimates, Ezra's debt to equity ratio would increase from 0.5x in FY08 to 0.6x in FY10. Thus, we believe revisiting its capex objectives and financing plans would be prudent for the company. We maintain our views that overly-aggressive growth companies that are highly leveraged are at the highest risk in this current market condition. The declining demand for E&P activities – brought about by weak oil prices, together with an expected increased supply in the offshore transportation/support vessels, would inevitably lead to falling utilisation and chartering rates of these offshore vessels. We maintain our Neutral rating and target price of S$0.67, still based on sum-of-the-parts valuation.

Ezra Holdings: Buy (OCBC Research, 28 Nov)
Ezra has announced that it will be reconsidering the purchase of one Multi Functional Support Vessel (MFSV) worth S$69m at Keppel's Singmarine shipyard, one of the six vessels to be added over the next two years in its new build program. While we understand discussions are ongoing, we are going to postulate and assume not one but two vessel cancellations (one each in 2HCY10 and 1HCY11) as we deem Ezra will pace out its expansion with its other four vessels to be delivered over the next two years. Overall, gearing will be reduced and earnings impact for FY10 is small. We continue to like Ezra for its focus on the deepwater arena. While new capex plans by the Oil Majors and NOCs are hazy, there are still a record number of deep water rigs that will be delivered in 2009. This will incur the need for deep water capable support vessels. Our SOTP valuation moderates slightly to S$1.17 (prev: S$1.20). Maintain BUY.

AusGroup Ltd: Hold (OCBC Research, 28 Nov)
A new report says planned capital expenditure on advanced energy and mineral projects in Australia fell 4% in the last six months to A$67.3b. The minerals resources sector in Australia has been hit by global economic woes, difficult credit conditions, and a commodity price collapse. This week, AusGroup's customer BHP Billiton finally pulled the plug on its bid for Rio Tinto, citing unacceptable risks. The new energy/minerals resources sector capex data and BHP's latest move reinforces our concern that capital expenditure may not materialize according to plan. We have similar concerns on the oil & gas front. Across the board, we expect the focus to be on cash preservation – at the expense of capital expenditure. Our FY10F revenue estimate for AusGroup implies zero YoY growth, but a contraction is not outside the realm of possibility. Maintain HOLD with S$0.24 fair value (6x FY09F PER).

Keppel Corporation: Hold (OCBC Research, 28 Nov)
Keppel reported that it was in talks with clients (Scorpion Offshore, Seadrill and Ezra) to review four projects worth about S$1.2b due to the recent unprecedented dislocation in the oil industry. Non-refundable deposits of 5-20% have been paid to Keppel and work has not started on any of these projects. While discussions are still in progress, we make some postulations that: 1) Scorpion will delay (vs. cancelling) as the semisub under review was to be chartered out to Petrobras; 2) Seadrill will cancel its 2 Jackups thus forfeiting its 15% deposit in view of over supply and; 3) Ezra will likely cancel the vessel to preserve cash. Keppel has appreciated about 10% since our resumption of coverage report last week, but with the likely scenarios above, our SOTP falls to S$5.05 (prev. S$5.24) as we think earnings will be affected. There is also the concern that this might spark a cascade of cancellations in the industry. As such, we downgrade Keppel to a HOLD (<10% upside).

Keppel Corp: Neutral (DMG, 28 Nov)
Keppel Corp has announced that it has received notifications from Seadrill Limited (Seadrill), Scorpion Offshore Limited (Scorpion) and Lewek Shipping Pte Ltd (Lewek, a wholly owned subsidiary of Ezra Holdings) that they would be reviewing the newbuilding contracts signed earlier this year. The values of these contracts totalled US$875.4m, or 10% of its existing orderbook of S$12.5b. While Keppel O&M has received downpayments for these newbuilds, construction work has not started yet. Keppel O&M is currently in talks with them to arrive at mutually accepted arrangements for these contracts. We note that the four newbuilds under review do not have a back-to-back drilling contract with any major oil companies, which implies that these vessels could be speculative builds. We also observe that the three companies affected have balance sheets that could be too aggressively stretched - both Seadrill and Scorpion Offshore have relatively high net gearing of 1.35-1.70x, while Lewek Shipping has net gearing of 0.6x. (Refer to Appendix 1). These companies may have difficulty financing given this financial turmoil. We believe that the newbuilds without drilling contracts could be at the highest risk for contract cancellations. Hence, we are revising our earnings model and revenue recognition schedule. Correspondingly, our FY09 topline is reduced by 9%. We have also factored in lower contributions from Keppel’s associated companies, hence paring down net profit by 13%. Our calculations show that in the worst-case scenario whereby all the contracts mentioned above were to be cancelled, that would constitute about 6% and 5% of our FY09 revenue and net profit respectively. Our target price remains at S$4.52

Aqua-Terra Supply Co Ltd: Neutral (DMG, 28 Nov)
Aqua-Terra is well-positioned as an integrated one-stop shop solution provider, providing both hardware and customised engineering solutions. It has currently more than 30 authorised distributorships for over 160 types of consumable products such as high pressure flow control equipment, fluid connector assemblies, professional heavy-duty hand tools, oil country tubular goods, wellhead lubricants and offshore cargo nets. With cash and cash equivalent of S$18.2m and net gearing of 0.38x as at 30 Sept 08, Aqua-Terra is well-positioned for any acquisition, especially when its peers are relatively undervalued. The fragmented market of suppliers and procurement specialists presents Aqua-Terra an opportunity to grow through acquisitions. This form of expansion is the fastest mode of market share penetration, synergising Aqua-Terra's business products and broadening sales platform. Since 2004, Aqua-Terra’s growth-through-acquisition strategy has been relatively aggressive, averaging two per year. The company recently delivered a healthy set of 3Q08 results. Revenue increased by 25.3% year-on-year (10.1% quarter-on-quarter) to S$79.2m, thanks to higher sales achieved by subsidiaries. This flowed down to PATMI, which increased by 67.5% yoy (35.1% qoq) to S$4.8m. We believe Aqua-Terra is on track to meet our FY08's topline forecast of S$273m. However, we are projecting constant revenue growth in FY09 and FY10. In addition, we believe that Aqua-Terra would be facing margins compression, especially from the marine business sector as competition becomes more aggressive in the face of this economic crisis. Taking into account flat topline growth and declining margin trend, we expect net profit to be trending down. Aqua-Terra is currently enjoying the fruits from favourable industry conditions from Oil & Gas and Marine sectors. Hence, we believe Aqua-Terra is on track to attain net profit of S$15.4m for this year. However, net profit is expected to decline in FY09 and FY10, recording S$13.4m and S$12.8m respectively. We value Aqua-Terra based on P/E 3.0x FY09 earnings to derive a target price of S$0.12.

Bright World: Buy (OCBC Research, 27 Nov)
Bright World's share price plunged 14.0% after the company on Tuesday announced that it had received a letter from MAS regarding a possible breach of disclosure obligations under section 203 of the Securities and Futures Act. With this uncertainty hovering over the MAS issue, it is likely to further damp mood about the viability of the pre-conditional cash offer by CHAC, which has already seen a number of hurdles. On a brighter note, we believe Bright World is likely to fulfill the profit's targets as stipulated in the cash offer (barring steep deterioration in manufacturing activity), as it would require its 4Q08 earnings to drop significantly by 67.0% YoY and 52.7% QoQ to RMB16.3m to miss the target. Moreover, despite the slowdown and higher costs, the group's fundamentals remain sound (comfortable net gearing of 8.4%, feasible long-term growth prospects). As such, we maintain our BUY rating and S$0.41 fair value, with view to accept offer if pre-conditions are satisfied. Key risk lies in long annualized cash conversion cycle of 219 days in 3Q08 (151 in 2Q08).

BBR Holdings: Neutral (DMG, 27 Nov)
BBR is one of the players in Singapore's construction industry. Its services include general construction, specialised engineering and more recently, property development. BBR has been involved in numerous large scale infrastructure and building projects, as well as piling works for both private and public sectors. These include the Khoo Teck Puat Hospital, International Business Park and the Common Service Tunnel (CST) Phase 3A at Downtown Core. With its strong track record and sound financial standing in the industry, we believe BBR would continue to win projects despite the prevailing challenging economic conditions. Given that the bulk of BBR's projects (approximately 76% as at 11 Nov 08) are attributed to the public sector, we are of the opinion that the probability of its receivables turning uncollectible is low for now. With slow sales in the private property market, BBR still has nine of the 16 units for the Nassim Hill project unsold. On the bright side, we learnt from management that BBR has recouped its cost for the project and any units sold going forward would be pure profits for the company.Factoring in the weak sentiment in the property market and slower growth in BBR's construction order books, our estimates for revenue and earnings in FY09 is S$139m and S$23.3m respectively, down 34.1% (due to smaller order books) and up 123.6% (attributable mainly to the Nassim Hill project) yoy respectively. In line with BBR's construction peers, we are valuing the company at 3x its forward earnings. We derive a target price of S$0.045 and initiate coverage with a neutral stance.

Pan Hong Property Group: Neutral (DMG, 27 Nov)
Based in Southeastern China, namely the provinces of Jiangxi, Zhejiang and Guangdong, Pan Hong is a niche residential property developer which targets middle to upper class-middle income level residents. Its strategy is to focus on China's developing cities, or lower- tier cities with immense growth potential. Since 1999, Pan Hong has completed the construction of eight residential cum commercial developments in the cities of Huzhou and Hangzhou, covering total GFA of 477,000 square metres (sm). To date, all of these projects have been fully sold. These historically healthy take-up rates reflect the quality of and consistent demand for Pan Hong's developments. In the same vein, this has boosted Pan Hong's reputation, in turn giving it the confidence to venture beyond Zhejiang province.
At present, Pan Hong has a substantial landbank of 2.9m sm in GFA, spanning across seven different cities. A total of nine residential projects would be borne out of Pan Hong's landbank, of which 59% are already in the development stages, while the remaining 41% are still undeveloped. We deduce that these nine developments would be completed and realisable within the next two to four years, implying a visible run of projects over the short to medium term for Pan Hong. Using its historical projects' take-up rates (90 – 100%) as a benchmark, they should serve as an evident source of Pan Hong's headline numbers until 2012. While we are confident of China's medium-long term real estate fundamentals, especially within its lower tier cities, we admit that the sector's near-term outlook is plagued with unfettered challenges and uncertainty. In view of this, we have taken on a conservative stance in deriving our base case RNAV for Pan Hong, assuming a further 5% decline in selling prices for the remaining of 2008, 20% dive in 2009, with a slight recovery of 2% in 2010 and steady growth of 4% p.a. for the subsequent three years. Applying a further 50% trough discount, we arrive at our RNAVpegged fair value for Pan Hong at S$0.25. Initiate with NEUTRAL. Share price catalysts include further expansionary policies in China and recovery of global and China's property sector.

China Aviation Oil: Neutral (DMG, 25 Nov)
CAO was brought to its knees by rogue trading of jet fuel derivatives that amounted to more than US$550m in losses in 2005, but was given a new lease of life in 2006 through restructuring and a subsequent re-listing. Since then, it had totally done away with its trading arm and focused on its core business activities, which are mainly the jet fuel procurement business and investments in complementary businesses. CAO has announced that it will resume its petrochemicals trading business from 4Q08 onwards. Products traded will be substances such as Benzene, Styrene and Toluene through the inheritance of BP's Asian petrochemicals and trading team. The group has also recorded a gain of S$4.8m on a close-out of a swap deal backed by underlying physical cargo (jet fuel) with a customer in 2Q08. Management has stressed that such activities are all carried out with the strictest supervision of its newly established risk-management committee. Any expansion of its current operations will revolve around its three main business segments: Jet fuel supply & trading; Oil-related assets; and Trading of other oil products. We have derived a 12-month fair-value target price of S$0.705 using our DCF model, applying a WACC of 14.8%, a beta of 1.2 and a terminal growth rate of 1%. At the last traded price, the stock is trading at 6.8x FY08 and 7.9x FY09 P/E, offering a yield of 4.8% and 1.1x P/B.

Singapore Banks: Neutral (DMG, 25 Nov)
In our earlier reports, we have highlighted that DBS was the most aggressive in loan expansion since Dec 04. Its 17.3% loan CAGR since then towers over OCBC's 11.5% and UOB's 11.6%. Our analysis shows that UOB was the most aggressive in housing loan expansion over the period, with a 11.2% housing loan CAGR. This greatly exceeds DBS’ 4.9% and OCBC's 3.5%. Is this a negative for UOB? We do not think so. During the late 1990s Asian Financial Crisis, non-performing loans (NPL) peaked in 1999, and systemic housing loan NPL was 5.5% in 1999, sharply lower than that for corporate loans of mid-teens to low-twenties. In our view, UOB's aggressive housing loan expansion over the past four years will help it contain its NPL ratio rise going forward the next few quarters. For manufacturing loans, DBS recorded a 25.6% loan CAGR since Dec 04. This is higher than OCBC's 20.5% and UOB’s 9.6%. Recent industrial production figures showed that Singapore's manufacturing sector remains weak, with electronics exports hurt by the sluggish global economy – non-oil domestic exports contracted 8.5% year-on-year (yoy) in 3Q08. We therefore see manufacturing sector loans facing risk of severe asset quality deterioration. Looking back to the late 1990s, systemic manufacturing loan NPL ratio was 22.9%, sharply higher than that for housing loans. We downgrade the Singapore banking sector from OVERWEIGHT to NEUTRAL, and lower the price target for all three banks, given the uncertainties in the global markets.

• DBS' price target is cut from S$11.30 to S$10.30, which is pegged to 0.8x 2009 book.  Although the recent staff retrenchments will lower DBS expenses, risk of more provisions is very real. Maintain NEUTRAL.
  
  
• OCBC price target is cut from S$6.80 to S$5.30, pegged to 1.1x 2009 book. We like OCBC for its strong capital position, but we believe provisioning could be a concern. Downgrade to NEUTRAL.
  
  
• UOB price target is cut from S$16.00 to S$14.30, pegged to 1.2x 2009 book. We like UOB for its recent focus on housing loans, which we believe will cap its NPL increase going forward. UOB is our top pick within the sector. Maintain BUY.

Straits Asia Resources: Buy (OCBC Research, 25 Nov)
SAR has upgraded its available resources at the Jembayan mine to 254 metric tonnes (Mt) from 138Mt as continued exploration efforts had bore fruit. On top of this, its exploration target for in-situ coal at Jembayan has been raised to 600Mt – 700Mt, substantially higher than the 200Mt it had originally targeted. The resources upgrade puts SAR in the position to raise its output in the long run. However, we do not expect any impact on the group's near-term earnings as capacity constraints remain. On a separate note, SAR announced that it has fully repaid its bridge loan, and has another US$50m of untapped facilities available to it. The stock has experienced volatility in recent weeks, possibly triggered by liquidation among funds, and we suspect that this could persist in the near future. Nevertheless, the company's fundamentals remain intact. As such, we reiterate our BUY rating and S$1.35 fair value estimate.

Sinwa Limited: Buy (Phillip Securities, 25 Nov)
Sinwa Limited reported a 12.13% growth year-on-year (yoy) in revenue from S$89.77 million in 9MFY2007 to S$100.66 million in 9MFY2008. In addition, net profit grew by 10.82% from S$7.18 million in 9MFY2007 to S$7.95 million in 9MFY2008. On a quarterly basis, revenue grew approximately by 13.84% from S$30.33 million in 3QFY2007 to S$34.53 million in 3QFY2008. However, net profit fell by 12.38% yoy from S$2.15 million in 3QFY2007 to S$1.91 million in 3QFY2008. The decline in the quarterly net profit was mainly attributed by the increase in the Group's financial expenses.We have revised our estimates and revalued our fair value estimate to S$0.25 per share. This is derived from a 1x pegged to the Group's FY2008 net tangible asset per share, translating to 150.00% upside. In view of the global economic sentiments and the slowdown in the shipping industry, we remain cautious and conservative of the Group's growth and earnings from their main core business, supply and logistics in the year ahead. However, we believe that the Group's earnings would be bolstered by the contribution from their joint venture projects.

SPH: Buy (DMG, 25 Nov)
SPH has completed the acquisition of ShareInvestor.com. It will be paying S$12m upon completion, with two tranches of S$3m each payable in 2009 and 2010 subject to meeting previously stipulated financial targets. The entire senior management of ShareInvestor, including founder Dr Michael Leong, CEO Christopher Lee and IT Director Lim Dau Hee, will stay on. Earlier in the year, SPH spelled out its intentions to grow its Internet business, earmarking some S$150m to be spent in the next 3-5 years. ShareInvestor, with its established brand name and an army of 7,000 subscribers, will be an important part of SPH's growth strategy within this space. There are considerable synergies with its subsidiaries like Business Times (particularly businesstimes.com) and investor relations (IR) websites AsiaOne and zaobao.com. ShareInvestor has one of the biggest customer base in the IR business over the Internet. This acquisition will not have a near term impact on the SPH's financials, but we believe it will reap long-term benefits. We continue to maintain our earnings forecast of S$487.1m in FY09 (+11.7%) and S$502.2m in FY10 (+3.1%) for SPH. At S$3.39, it is currently trading at 11.3x FY09 and 10.9x FY10 P/E, with a prospective yield of 8.0% and 8.3% respectively.

Sinotel Technologies: Buy (DMG, 24 Nov)
China's restructuring of its telecommunication operators (telcos) is expected to benefit Sinotel, brought on by the expected capex spending by China Unicom and China Telecom. Both companies have announced capex budgets of RMB100b and RMB80b respectively, over the next two to three years, for their wireless networks. A portion of these budgets are likely to be allocated to the enhancement and expansion of existing wireless network infrastructures. As a provider of wireless network applications and products, and given its good relationship with the telcos, Sinotel is in a good position to ride on the positive effects of the restructuring. With the impending launch of the 3G network, Sinotel has also started selling 3G network cards (through China Unicom) in July 2008. Demand for 3G cards is expected to continue to be strong, going forward, as the network matures. Sinotel remains in a net cash position. Sinotel has a net cash position of RMB7.9m at end 9M08. This works out to RMB2.8¢ per share or S 0.63 ¢ per share. There are no comparable companies listed on the SGX. Therefore we compare Sinotel with similar companies listed in Hong Kong. Its peers are currently trading at an average of 2.2x forward P/E or 0.4x P/B. At the current price of S$0.085, Sinotel is trading at 0.9x forward P/E or 0.2x P/B. We peg our valuation of Sinotel to its peers, and arrive at a target price of S$0.20, based on 2.0x FY09 P/E.

China Sports International Limited: HOLD (Phillip Securities, 21 Nov)
The Group reported revenue growth of 57.9% year-on-year (yoy), while net profit grew by 28.16% from RMB 121 million in 9MFY2007 to 154.70 million in 9MFY2008. On a quarterly basis, revenue grew by 44.6%, from RMB 336 million in 3QFY2007 to RMB 486 million 3QFY2008. Net profit on the other hand, grew marginally by 5.28% yoy from RMB 47 million in 3QFY2007 to RMB 49.6 million in 3QFY2008. In view of the Group's 9MFY2008 financial results and the global economic climate, we have since moderated our estimates lower for FY2009, forecasting revenue growth of 5.56%, with gross profit margins of 22.40% in FY2008 and 22.90% in FY2009. However, with the Group's continuous focus in brand building and aggressive advertising and marketing, we are expecting net margins to decline slightly to 11.20% in FY2008 and 11.49% in FY2009. Slightly higher net profit margin in FY2009 is forecasted due to the Group's tax incentive that is expected to kick in by 3QFY2009. We have since reduced our estimates and revised our fair value estimate to S$0.16 per share, derived from 1x pegged to China Sports' FY2008's net cash per share. This implies a 6.66% upside. Our conservative view is based on the global economic climate and Group's business environment in China.

MobileOne: Buy (DMG, 21 Nov)
Since our last note on M1 on 20 Oct 08, the stock has dived 26% on the back of weak sentiments in the market, as well as negative newsflow from the telecommunications industry. The other two telcos, particularly SingTel, painted a bleak outlook for the next few quarters. Consequently, despite the fact that the industry is largely seen to be defensive, the telco index FSTTC fell by 8% in the past month. Before the recent slump, M1 has been one of the most resilient stocks. It only fell 4% for the first nine months of the year, far outperforming the STI's 32% slump. While M1's revenue fell a mere 1.7% to S$196.7m in 3Q08, earnings took a bigger 21.1% knock to S$34.4m due to higher acquisition and retention costs, following the introduction of mobile number portability in Jun 08. EBITDA margin came in at 42.5%, down from last year's 45.2%. Gearing, at 128.2%, is seemingly high for M1. But this is not very much of an issue, considering that it has strong operating cash flows that will enable it to comfortably pay off its debts and reward shareholders. Looking back at the past recessions, management revealed that the bad debts are quite insignificant – less than 0.5% of revenue. We have left our earnings estimates at S$160.1m for FY08 (-6.8% yoy) and S$149.1m for FY09 (-6.9% yoy). At S$1.25, it is trading at 7.0x FY08 and 7.5x FY09 P/E, which compares favourably against the industry average of 9.4x. The yields, at 12.2% for FY08 and 11.4% for FY09, are also the best among the three telcos. We have downgraded our target price for M1 from S$1.89 to S$1.58 but upgrading the stock to a BUY despite cutting the target price, as it is looking attractive after the recent fall with a potential upside of 26% from current levels.

SGX: Sell (DMG, 21 Nov)
The average daily stockmarket turnover value was S$1.06b for the first 12 trading days of Nov 08 – a sharp 20% plunge from the S$1.40b for Oct 08. Concerns on global economic weakness and lack of investor interest have contributed to this trend. The average value per share traded has also fallen sharply from S$1.24 in Sep 08 to only S$0.78 in the first part of Nov 08 – we attribute this to the recent sharp fall in share prices which lowered market capitalization from end-Sep 08's S$506b to end-Oct 08's S$383b. We expect stockmarket turnover value to remain weak over the next few months, and have therefore cut both our FY09 and FY10 average daily turnover (ADT) assumptions by 11% to S$1.19b and S$1.24b respectively. Oct 08 futures trading volume of 6.84m is however 86% higher year-on-year (yoy) driven by the Nikkei 225 Index & the CNX Nifty Index futures trading. We believe this strength can persist and have raised our assumption of FY09 & FY10 futures turnover volume both by 7% to 72m & 75m respectively. Factoring in the above developments, we are lowering our FY09 and FY10 net profit forecasts by 7% and 8% to S$315.7m and S$323.9m respectively. We believe more market players will cut their earnings forecasts and therefore expect the current consensus expectations of S$335.3m and S$382.5m (for FY09 and FY10 respectively) to fall closer to our forecasts over the next few weeks Given the recent P/E compression across all sectors, we have reviewed our assumptions for SGX target price. Our new target price of S$3.95 is pegged to 13x FY10 P/E – lower than the 16x P/E which we adopted earlier. This target P/E rating is close to the level recorded in FY05, when ADT fell 14.5% yoy. Our sensitivity analysis shows that market players are assuming an ADT exceeding S$1.62b based on the current share price of SGX – a level which we feel is unachievable over the next few quarters.

Keppel Corporation: Buy (OCBC Research, 20 Nov)
The Keppel group has posted a decent set of results for 3Q08 with revenue growing 24% year-on-year (yoy) to S$3.21b, while PATMI rose at a more placid pace of 10.2% to S$272.9m, with the Offshore & Marine (O&M) segment contributing S$197m, or 72% of the group's PATMI. With net order book at S$13b with visibility to 2012, Keppel's key O&M division would continue to tide the group through these turbulent times. On the counter balance, its property division has performed badly in view of the declining property market. We can possibly expect a positive upside from its Infrastructure division which turned around last year and have remained in the black albeit with a razor thin net margin of 2.4% in the last quarter. As more of its projects become operationally profitable and revenues start flowing into its books, we are expecting this division to provide further uplift to the group. Keppel will be keeping a close lid on expenses while spending capex to better its capabilities for longer term growth and keeping its eyes peeled for attractive assets priced at distressed values. We value Keppel on a Sum-of-The-Parts (SOTP) basis in view of its diverse business exposure. Keppel has a track record of tiding through difficult economic situations. We resume coverage on Keppel with a fair value of S$5.28 and a BUY rating.

Keppel Land: Buy (OCBC Research, 20 Nov)
We are resuming coverage on KepLand with a BUY rating. Macro outlook remains a major uncertainty, with looming concerns over the weakness in regional property markets and the oversupply of office space in Singapore. Risk of land bank write-downs should be lower for this downturn. Weakness in office rental is expected but long-term rental pre-commitments for Marina Bay Financial Centre (MBFC) could shield it from the downturn. To date, MBFC has secured lease commitments for 60% of the net lettable area (NLA), at rates of around S$16 per sq ft and over 80% of the pre-commitments are long-term leases of up to 12 years. On the other hand, we see greater risk associated with the development of Ocean Financial Centre as we believe that it would be tougher to secure lease pre-commitments going forward, especially with declining office rental rates and weak economic outlook. KepLand's balance sheet is now stronger to weather the downturn and with the support of Keppel Corporation, we do not foresee any near term liquidity crunch. We have derived a RNAV of S$4.05 for KepLand and putting a discount of 40% to our RNAV, our fair value for KepLand is pegged at S$2.43. Share price downside looks limited as KepLand is already trading at its trough RNAV discount in 2002/03.

Beauty China Holdings: HOLD (Phillip Securities, 19 Nov)
Based its financial results and the global economic situation, we have revised our revenue growth forecast to 26.51% in FY2008, 22.74% in FY2009 and 5.82% in FY2010. We however believe that the Group will still be able to continue managing their gross profit margins; hence we have maintained our forecasted gross profit margins of 63.89% in FY2008, 64.55% in FY2009 and 65.55% in FY2010. As a result of China Beauty's continuous focus in the advertising and promotion of their Charming Lady brand, we have maintained our forecasts for net profit margins of 24.45% in FY2008, 23.55% in FY2009 and 22.21% in FY2010. In view of the Group's recent half year financial results and the current economic situation, we remain conservative and have further revised our fair value estimate to S$0.42. We have changed our valuation method and pegged 1x to the Group's FY2008 book value per share, translating to 7.69% upside. Despite the management's assurance, we remain concerned about the group's strategy in extending full credit terms to their distributors, which has in turn increased their exposure to credit risk, especially in the current credit climate.

China Milk: Buy (DMG, 17 Nov)
China Milk has reported a 24.2% year-on-year (yoy) increase in its revenue and a net profit rise increase of 8.4% yoy for 2QFY09. This was better than we have expected because of the nation's milk scandal. We had initially expected China Milk's raw milk sales to decline in 2QFY09. Instead, the company raised production and sold 22.4% more tonnes of raw milk during the quarter to 12.5m tonnes. China Milk grows the bulk of its feed and produces its own fertiliser. They have the ability to control quality and ensure that every cow and bull is fed top quality feed. The company produces and grows about 75% of their own feed which has helped reduced operating cost by about 54% to 56%. We believe that the company will see steady growth in all business segments, but we have reduced revenue from RMB745.8m to RMB692.2m. Revenue will grow more conservatively at 23.4% yoy versus our previous 33% postulation. Due to our conservative slant we therefore expect lower net profit of RMB453.9m for FY09 as compared to RMB480.6m for FY08. We have reduced our price target from S$0.975 to S$0.52 based on 4x FY09 P/E.

Man Wah Holdings: Neutral (Phillip Securities, 18 Nov)
The designer & manufacturer of high-end leather furniture, Man Wah has reported a year-on-year (yoy) 40.72% growth in revenue from HKD 684.28 million in 1HFY2008 to HKD962.92 million in 1HFY2009, contributed by growth in all the group's geographical segments. The Group also report net profit growth of 35.94% (yoy) from HKD 86.95 million in 1HFY2008 to HKD 118.20 million in 1HFY2009. Gross profit margin improved by 3.70ppts from 30.41% in 1HFY2008 to 34.11% in 1HFY2009. The Group attributes the improvement in gross profit margins to better product mix and higher economies. However, net profit margin fell 0.44ppts from 12.71% in 1HFY2008 to 12.27% in 1HY2009, due to higher income taxes which resulted from the cessation of tax exemption from some of their PRC subsidiaries. The Group announced an interim dividend of HKD 0.0653 per ordinary share. Despite the growth in 1HFY2009, we remain concerned of the Group's exposures in the North American and European market. In view of the current economic situation and uncertainty, we continue to take a conservative stance and have since further lowered our estimates, by forecasting revenue growth of 16.18% for FY2009 and 10.48% for FY2010. In addition, with easing raw material prices, we have forecasted gross margins of 33.00% and 33.50%, and net margins of 13.41% and 13.88% for FY2009 and FY2010 respectively.

Swiber Holdings: Neutral (DMG, 18 Nov)
Swiber's 3Q08 revenue grew 186.5% year-on-year (yoy) and 4.5% quarter-to-quarter (qoq) to US$130.1m buoyed by increased activities in the offshore construction projects in Malaysia, Brunei, Indonesia and India. However, as a result of higher administrative expenses & finance costs, its PATMI declined 7.4% yoy (-18.1% qoq) to US$16.0m. On a 9M08 basis, Swiber's revenue turned in US$325.5m, representing 91% of our FY08 estimates, while core PATMI, excluding exceptional gains from disposal of assets, was approximately US$44m, accounting for 74% of our FY08 forecast. Gross profit margin was down by 13.8 ppt YoY (-6.1 ppt QoQ) to 21.6% as a result of the increased usage of third party vessels. Swiber's net debt to equity ratio increased from 0.53x as at 31 Dec 07 to 1.05x as at 30 Sept 08 mainly due to the increase in borrowings. The management assured that it has adequate funding for total committed outstanding capex of US$336m. The management also added that Swiber is exploring other strategies such as asset transfer to further lighten the balance sheet. We have left our FY08 estimates unchanged, but lowered our FY09 revenue by 21% on the back of slowing new contract orders. Consequently, our FY09 net profit is reduced by 29% with further considerations from expected higher administrative and finance expenses. In view of Swiber's high gearing, we are of the view that Swiber may not pay dividends for the next two years in a bid to preserve cash. Our target price is reduced to S$0.62 (from S$2.17 previously).

Armstrong Industrial: Buy (DMG, 18 Nov)
Affected by forex losses. 3Q08 revenue was almost flat at S$48.5m while net earnings fell 26.7% to S$2.4m mainly due to a S$2.6m mark-to-market derivative loss that in turn resulted from unfavourable FX movements. Additionally, Armstrong's operating profit was also hit due to the high raw materials costs which have not yet abated while increased admin expenses attributed to the new factories in China and Thailand was also a factor. Turnover and net profit would have stood at S$52.1m and S$3.8m respectively had the Sing dollar stayed stable against the various Asian currencies and the US dollar – this in turn equates to a 6% and 19% gain in top and bottomline in 3Q08. For 9M08, sales and net earnings would actually have been higher by 13% and 41% respectively. We have lowered our earnings forecast in FY08 by 28% to S$14.8m. Given the rapid pace of decline in the global economy, we are also slashing our FY09 earnings estimates by 59% to S$10.8m, as customers are currently seeing signs of cut-backs. We continue to believe that it will be able to dish out 1.6 cents in dividends, giving an attractive yield of 15.2%. At S$0.105, it is trading at 3.6x FY08 and 5.0x FY09 P/E. Based on industry average of 6x P/E, we attain a revised target price of S$0.17 (S$0.33 previously).

Olam: Buy (DMG, 17 Nov)
Olam has reported an impressive set of results for 1QFY09, with net profit rising 61.9% year-on-year (yoy) to S$14.9m and a PBT expansion of 48.5%. The largest growth contribution came from the edible nuts, spices and beans segment (+44% or S$14m yoy). Another strong contributor was the confectionery & beverage ingredients segment (+31% or S$11m yoy). Continued soft commodity prices should help lighten Olam's financing needs. Olam has decided to put on hold further M&A activity until the credit markets stabilize and capital availability improves. Olam has no loan refinancing requirement in FY09, which is a positive – the next repayment in FY10 will amount to US$200m and S$272m. For Olam, 17 out of the 20 products in the portfolio are food raw materials where demand is more recession-proof. The remaining three of cotton, wood products and wool are, however, likely to record demand decline. Factoring this, Olam has maintained its guidance of volume growth of between 16-20% in compounded annual growth (CAGR) for the next three years, and bottom line earnings of between 25-30% annually. For FY09, Olam expects growth to be at the lower end of the guidance range. Given the uncertainties ahead, we are less optimistic, and forecast a weaker 7% FY09 net profit expansion. We maintain our S$1.60 target price – which is derived from DCF valuation. Olam now trades at a FY09 PE of 11.4x, which is low considering its strong long-term sustainable earnings growth.

Sembcorp Marine: Buy (DMG, 17 Nov)
We have valued SCM from another angle and concluded that its intrinsic value could possibly exceed S$2.90. We performed a simple calculation on the net cash flow generated from the repair and conversion projects. Our simple arithmetic calculation shows that if this counter-cyclical business division is to generate S$2b of revenue per year, the net present value (NPV) would be S$2.18, or 88% of our target price (TP). We ran a similar analysis of the rigbuilding division, assuming one semi-submersible and one jack-up to be delivered per year and derived a NPV of S$0.72 per share. We believe our assumptions are not unreasonable, given that the management's mid-term strategy is to deliver two semi-submersibles and two units of jack-ups/floating production units per year We believe the stretched test for SCM's worst case scenario would imply business activity constricted to only repair and conversion projects (assuming no new contracts secured – which we believe to be unrealistic) at an intrinsic fundamental value of S$2.18. However, we believe this is unlikely to be so, as SCM has progressed into an internationally-renowned rig-builder, only second to Keppel Corp. We chose the conservative S$2.49 as target price, which is based on to sum-of-the-parts valuation from (1) P/E of 12x FY09 blended earnings for SCM's rigbuilding, repair and conversion sectors; (2) Implied value of SCM's 30% stake in Cosco Shipyard Group and (3) 4.98% equity interest of Cosco Corp at Cosco's TP of S$0.68

AusGroup Ltd: Hold (OCBC Research, 17 Nov)
AusGroup has chalked up A$130.4m in 1Q09 revenue, up 46% year-on- year (yoy) and 31.5% quarter-on-quarter (qoq). Net profit was up 17.8% yoy and 1.8% qoq at A$5.8m. Gross margin was down to 12.8% from 16.2% a year ago, but significantly better than the 3.3% achieved in the previous quarter. We would like to see a sustained show in performance over the next few quarters as AusGroup focuses on tightening its management systems and processes. A confluence of factors – economic woes, credit difficulties, and a commodity price collapse – have dramatically changed the outlook for the mineral resources industry. With little visibility, we are cutting our FY10 estimate to A$430m from A$494m previously, implying flat yoy growth, and will make further revisions as necessary. Our other concern is margin pressure in a recessionary and highly competitive environment. Our new fair value estimate is 24 S cents or 6x FY09F PER (S$0.60 previously), which also incorporates the much weaker Aussie dollar Downgrade to HOLD.

Genting International Limited: Hold (OCBC Research, 17 Nov)
GIL has reported a dismal set of 3Q08 results. Going forward, the outlook remains pessimistic, as the weakening economic situation in the UK will continue to affect its casino operations. Management maintains that Resorts World@Sentosa (RWS) remains on track for an early 2010 soft opening and reassures that it has secured the required financing. Nevertheless, in wake of the recent developments, we now expect even larger losses of S$76.6m (+144.2%) for FY08 and S$86.4m (+43.2%) FY09. In line with the recent de-rating in the casino sector, we ascribe a lower valuation for RWS and Genting Stanley (GS) acquisition in the UK, resulting a lower fair value of S$0.33 (prev: S$0.63). Maintain HOLD.

Hotel Grand Central: Hold (OCBC Research, 17 Nov)
Hotel Grand Central has turned in a disappointing set of 3Q08 results, dragged down sharply by unrealised foreign exchange losses of S$7.2m versus gains of S$1.4m in 3Q07. Net earnings plunged from S$16.2m in 3Q07 to S$0.9m in 3Q08. Management guided that the outlook for the rest of the year is difficult. With the recent cuts in the economic growth prospects in New Zealand, Australia and Singapore, this will dent its tourism-dependent earnings. The International Monetary Fund (IMF) has forecasted global growth of 2.2 % next year. Singapore tourist arrivals have also been coming off, down from 917,000 in Jul to 739,000 by Sep. In line with the weakness in the market and its closer comparables, we are pegging the stock now at 0.4x book, lowering our fair value estimates from S$0.88 to S$0.48.

Pacific Andes Holdings: Buy (OCBC Research, 17 Nov)
PAH's 2Q pre-tax profits fell 37% yoy and 43% qoq to HK$112.1m. Revenue also took a hit, down 4% yoy and 35% qoq to HK$1525.6m. Gross profits dipped from 21.2% in 3QFY08 to 19.3% in 3QFY09. This weak set of result was partly due to higher oil prices, as bunker increased from 18.5% of sales in 3Q07 to 34.4% in 3Q08 as oil prices spiked up this year. With the current sharp deterioration in world economy outlook, selling prices for both fish and fishmeal are likely to ease in the coming months. We have imputed this into our estimates and lowered FY09 earnings from HK$695m to HK$493m. In line with the recent sharp plunge in valuation, we are also dropping our valuation parameter to 4x (prev: 8x and 80 cents) deriving a fair value estimate of 30 cents. We are maintaining the 1/3 payout estimate, giving net dividend yield of 13% currently. Maintain BUY.

Avi-Tech Electronics: Sell (OCBC Research, 17 Nov)
Avi-Tech's 1Q09 results were generally below expectations. Over the quarter, revenue decreased substantially by 57.7% yoy (-30.6% qoq) to S$9.2m, or 11.9% of our FY09 sales forecast, while its net income fell 52.4% yoy (+18.1% qoq) to S$1.9m, meeting 19.8% of full-year earnings projection. Its Engineering Services segment, which was making strong headway in US, had already faltered as its customers turned cautious in these times of uncertainty. Despite Avi-Tech's efforts in expanding its customer base and improving its operations to achieve greater efficiencies, we fear further slowdown that will be detrimental to its businesses. A recent report by Gartner had also projected that the semiconductor assembly and test services (SATS) market would grow 1.6% in 2008 but fall 4% in 2009. As such, we conservatively pare our FY09-10 forecasts by 32% to 48% and base our fair value on 4x FY09F earnings (6x FY09F previously). As our current fair value of S$0.07 suggests a potential downside of 53%, we downgrade Avi-Tech from HOLD to SELL.

City Developments Limited: Neutral (DMG, 14 Nov)
CDL has carded a 11.0% year-on-year (yoy) dip in 3Q08 PATMI to S$150.8m. On a 9-month basis, PATMI came to S$481m, which was slightly under analysts' expectations. Development plans for South Beach have been deferred. Aside from the expectation of softening construction costs, we surmise it could also be attributable to capital preservation being top of the participating companies' agenda given the ongoing tight credit conditions. Despite delaying the launch of The Arte and The Quayside Collection, their constructions are set to continue due to the low building costs secured and land costs of under S$400 psf per plot ratio. As such, we believe CDL could launch them at attractive prices when sentiments improve. The bulk of CDL's projects under development would only be completed in 2010 and 2011, which should allow buyers to have a reasonable amount of time to secure bank loans especially with interest rates expected to remain soft. From our view, CDL's share price in the near-term would be weighed down by an ongoing global slowdown within the hospitality sector, as well as weak sentiments in the domestic property sphere. However, its portfolio of more mass-mid market residential landbank and current/future projects suggests that it is in a better position to ride on any remaining interest from genuine owner-occupiers, and any potential spillover from the still-buoyant activity within the HDB segment. For the next two years, we estimate that CDL should be able to book in approximately S$400 to $500m worth of PBT from previously sold units. Further, with a cash position of S$813.3m and net gearing of 0.47x, its balance sheet remains healthy. Nonetheless, we have assumed price declines of 3% to 8% for the remaining 2008 and 10% to 20% for 2009, with a slight 1% to 5% improvement in 2010. We have also accounted for a higher cap rates (+25 to 50 bps) for its investment properties, as well as pegging the target prices of its two listed entities to current market prices. As such, earnings estimates for FY08F and FY09F are trimmed by 9.4% to 22.1% to S$640.5m and S$600.2m respectively. We have trimmed our fair value for CDL to S$5.53 (previously S$11.25).

Straits Asia Resources: Buy (OCBC Research 14 Nov)
3Q08 results were within expectations. Revenue accelerated 232% year-on-year (yoy) to US$168.9m, and net profit surged 707% to US$28.4m, driven by higher volumes and average selling prices (ASP). A second interim dividend of 1.55 US cents has been approved, bringing its YTD dividend to 4.65 US cents (yield: 8.7%). SAR has made good progress since its last update, locking in higher prices for its FY09 thermal coal contracts despite the recent decline in oil prices. We are of the view that thermal coal prices may have peaked, but are assured that SAR will have no problem breaking even given its low cost of production. SAR has successfully refinanced its bridge loan, relieving concerns over its funding requirements. It has also called off its acquisition of coal interests in Brunei and Madagascar, taking pressure off its gearing. Our thermal coal price assumptions for FY08 and FY09 remain intact as prices have largely been locked in. However, in light of the weak global economic outlook weighing on energy demand, we are lowering our thermal coal price assumptions for 2010 and beyond. As a result, our fair value estimate has been trimmed to S$1.25 (from S$2.25).

Man Wah Holdings: Hold (OCBC Research 14 Nov)
The designer & manufacturer of high-end leather furniture, Man Wah's 2Q09 results were within expectations, thanks to one-off gains from derivative financial instruments. Revenue grew 40.7% yoy to HK$488m, while net profit improved 13.3% to HK$55.6m. Stripping away one-off gains, earnings could have missed our expectations by 18%. An interim dividend of 2.66 HK cents has been declared, translating to an approximate interim yield of 3.3%. The company continued to post robust revenue growth in 2Q09 as all its geographical segments reported improved sales. Its China division recorded the greatest acceleration with a 55.5% yoy gain as the group expanded its distribution network of Cheers specialty stores from 213 in March to 243 by Sep 08. Moving forward, management will shift its strategy away from aggressive store expansions towards improving organic growth from existing stores. This may help to alleviate some cost pressure. Man Wah's operating expenses, finance costs and taxes were higher than expected, leading to a 2.8ppt decline in net profit margin. We are cautious about its future outlook as demand has been tapering off along with sluggish property markets and weak consumer sentiment around the world. We have trimmed our FY09 and FY10 estimates by 5%, bringing our fair value estimate a notch lower to S$0.17.

Fraser Commercial Trust: Hold (Phillip Securities, 14 Nov)
Fraser Commercial Trust's (FCT) new management has decided to ditch divestment plans for its Australian assets. Previous asset enhancement projects at Keypoint and China Square Central are also put on hold. It has also dropped plans for a hotel development at China Square Central in view of rising construction cost and lower tourist arrivals. It will instead focus on recapitalizing the balance sheet and active asset management to retain tenants and maximizes lease renewals. FCT is trading at approximately 80% discount to its net assets value (NAV). Although cheap on a relative basis, we are of the view that sentiments may not pick up in the short term. Our concerns stem its high gearing ratio, high borrowing cost probable dilution from equity fund raising, and worsening rental outlook and asset value. We are downgrading our call to Hold with a fair value of $0.21.

Cambridge Industrial Trust: Buy (Phillip Securities, 14 Nov)
CIT reported 3QFY08 results with gross revenue of S$18.3 million (+35.8% yoy), net property income of S$16.2 million (+40.4%) and distributable income of S$11.8 million (+35.5% ). DPU however dropped from 1.70 cents to 1.49 cents (-12.4%). CIT has S$337 million of debt (91%) that is due in Feb 2009. We are expecting borrowing terms to be a lot more critical and borrowing cost to escalate. We raise our interest cost assumption to an effective rate of 4.78%. The main reason for the fall in DPU in this quarter is because management fee was paid out entirely in cash. Although there isn't a fixed policy on the payout method, this was in contrast to the approximately 63% of fees paid out of new issuance in units in the previous two quarters. On the flip side, management reasoned that new units are dilutive and even more so at depressed price level where a greater number of units have to be issued. We do not foresee near term acquisition activities given the tight credit environment. Our gross revenue assumptions remain intact for now, bolstered by built-in rent escalation. We reduce our DPU estimations by 5.2% and 17.6% for FY08F and FY09F respectively mainly due to higher borrowing expenses. Currently CIT trade at close to 65% discount to NAV, which we believe is a reflection of market's perception to the inherent refinancing risk. Our DCF derived fair value is $0.48 ($0.92 previously). Maintain BUY on valuation basis. Risk to our projections would be falling occupancy level.

MacarthurCook Industrial REIT: Buy (Phillip Securities, 14 Nov)
Latest 2QFY09 results were within expectations without much surprise. MacarthurCook Industrial REIT (MIREIT) reported gross rental revenue of S$12.4m (68.8% yoy, 0% QoQ), distributable income of S$6.9m (44.2% yoY, +5.6% QoQ) and DPU of 2.35 cents (26.3% YoY, 0% QoQ). Since 1QFY09, MIREIT has paid out approximately 90.16% of the distributable income and had maintained the same quantum of 2.35 cents for both 1QFY09 and 2QFY09. The REIT Manager has indicated that it will pay out all retained amounts for the full year and therefore we do not expect much variant of the DPU amount for the second half of the year. MIREIT has 91% of its debt due in April 2009. Negotiations are underway and our general view is refinancing will take place with a much higher margin. The remaining of its debt relate to the Japanese debt that is due in Dec 2009. MIREIT will also face significant financing requirement in Dec 2009. We have increased our borrowing cost assumptions and reduced our DPU projections from FY10F onwards. We adjusted our DCF parameters to factor in higher risk premium and our DCF derived fair value is lowered to S$0.60 from S$1.18 previously. Maintain Buy with a long-term view.

ComfortDelgro: Buy (DMG, 13 Nov)
ComfortDelgro recorded 3Q08 net profit of S$48.3m, down 18.1% year-on-year (yoy), despite a 5.2% increase in turnover. Its 9M08 net profit of S$155.3m represents 78% of our raised 2008 forecast. Singapore bus turnover expanded 8.7% to S$156m, due to a 6.1% rise in ridership to 2.375 million rides/day. But high diesel prices led to operating profit (inclusive of advertisement and rental income) falling 32% to S$5.9m. ComfortDelgro's UK Metroline recorded a 13% YoY turnover contraction due to the weaker sterling pound while its Australia operations saw turnover growing 11.7% to S$54.4 m and a 3.5% rise in operating profit to S$8.8m. The income however was partly offset by the weaker Australian dollar. High WTI crude oil price in 3Q08 contributed to the weakness in CD earnings. However, WTI prices has since fallen from Aug 08 monthly average of US$116.70/barrel to 1H Nov 08 average of US$61.70. This is positive for earnings going ahead. We raise our 2008 net profit forecast by 4% to reflect the recent declines in WTI crude oil price. Our 2009 net profit forecast remains unchanged. Our S$1.63 target price is derived from sum-of-the-parts valuation. ComfortDelgro also offers an attractive 2009 dividend yield of 7%. We believe further falls in WTI prices will be the catalyst for investors to relook at investing in the stock.

SingTel: Buy (Phillip Securities, 13 Nov)
SingTel has reported a 2Q FY08 operating revenue of S$3,891m (+5.3% yoy) and net profit of S$868m (-12.1% yoy). Revenue increased due to the growth of the Singapore and Australian postpaid mobile market. However, net profit was lower because of the introduction of iPhone 3G, the depreciation of the regional currencies and weaker earnings from the regional mobile associates. Excluding the depreciation of the Australian dollar and the regional currencies, net profit would have declined by a smaller amount of 5%. Due to the lower-than-expected profit, we have reduced the target price to S$3.86. We anticipate that the regional mobile associates will continue to face competition in their respective regional markets. Moreover, the strengthening of the Singapore dollar against most currencies will result in lower profits for Optus and the regional mobile associates. Nevertheless, SingTel remains a Buy because its business continues to grow in Singapore and Australia with revenue contributions from its regional mobile associates.

SingTel: Buy (OCBC Research, 13 Nov)
SingTel reported a muted set of 2Q08 results as expected; with revenue up 5.3% yoy and 3% quarter-on-quarter (qoq) at S$3890.9m, net profit down 12.1% yoy and 1.2% qoq to S$868m. However, if we exclude exceptional items (including a forex translation gains), underlying net profit was 12.3% yoy and 7.4% qoq lower at S$801m, versus the S$810.5m expected by a Reuters poll. Going forward, SingTel expects operating revenue and operational EBITDA for its Singapore and Australia businesses to grow but expects the consolidated revenue and operational EBITDA of the group to be negatively impacted by the Aussie dollar depreciation. On the other hand, SingTel has slashed the guidance for associates from low double-digit growth to lower overall yoy pre-tax contributions, citing slower economic growth in the countries as well as working into the lower guidance from key associates like Telkomsel as well as losses from Warid. To reflect the new guidance, as well as the still uncertain outlook, we have pared our FY09/FY10 forecasts by 7-10%. And in view of the recent tumble in the global stock market, our sum-of-the-parts (SOTP) fair value also falls from S$3.85 to S$3.09, which still offers an upside potential of 31.7%.

Tiong Woon: Buy Neutral (DMG, 13 Nov)
Turnover rose 54% yoy hitting S$45.4m. This is attributable to an increase in revenue from its heavy lift & haulage as well as fabrication & engineering segments. PATMI rose 240% to S$11m from S$3.2m a year ago. Gross profit margin, also rose to 43% from 36.6% due to the higher revenues and margins enjoyed from its heavy lift & haulage projects which saw PBT increased significantly from S$6.9m to S$12.4m. This is an increase of S$5.5m or 80% year-on-year (yoy). PBT from its marine transportation segment for the 1Q09 increased by 149% yoy due mainly to a gain of S$1.6m from the disposal of its smaller tug and barges. As there were no crane sales, the trading segment recorded lower PBT of S$0.168m versus S$0.514m a year earlier. Management confirmed that the second slipway’s construction is currently on track for completion in Dec 08. Although Tiong Woon has a high exposure to the slowing oil and gas and petrochemical sectors, its niche position as one of the few specialised contractors supporting these industries has helped it secure sizable projects such as the “Shell Houdini” project. These major projects would only be completed in early 2011, giving some visibility to its earnings. With the stock trading at a 53% discount to its book value of S$0.44 per share, we maintain our buy rating and fair value of S$0.28, based on 3x prospective P/E.

HUPsteel: Neutral (DMG, 13 Nov)
HUPsteel has posted an impressive 1Q09 financial performance considering the tough operating environment from July – Sept 08. Revenue was up 56% for the quarter, rising from S$71.7m to S$111.7m, on the back of overall higher selling prices of its steel products and stronger demand from all its customers segments. Gross profit also grew 94% during the period to S$33.8m. Gross margins for 1Q09 came in at 25.4%, 2.5 percentage points higher than 1Q08 of 22.9%, also due to better prices attained for sales of its steel products. Net gearing has improved to a tame 0.14x so any sudden squeezes from credit issues with banks should be well guarded by its operating cash flow. HUPsteel has done reasonably well for the quarter despite a deteriorating business environment (falling steel prices and demand). This boils down to its diversified customer base, firm demand from local government-linked construction projects, and its strategy of engaging in more spot sales since 3Q08, which has yielded higher selling prices and strategically drawn down its inventory. Hence it has not been badly caught out by the sharp downturn in steel prices since Aug 08. In light of the poor operating environment not just for the steel industry, but also for demand drivers such as the oil & gas and marine sectors, we see continued slowing sales and tightening margins from at least another two more quarters. We reckon that gross margins for the Group should normalise to the 18% mark or lower, depending on the severity of the industry's slowdown. At S$0.19, it is trading at 3.0x FY09 and 2.8x FY10 P/E, with a dividend yield of 16.9%. We are lowering our target price from S$0.35 to S$0.255, based on 4x FY09 P/E, which is the stock's trough valuation in the past five years, to appropriately reflect market uncertainties going forward. Thus, we maintain our NEUTRAL call for the stock on the back of the increasingly challenging operating environment.

CapitaLand: Buy (DMG, 13 Nov)
CapitaLand recently posted a 25.6% YoY slide in 3Q08 PATMI to S$419.4m, boosted by gains of S$317.4m from asset divestments. While we recognise CapitaLand's proven track record of seeking out new residential geographies, we note that a majority of its current projects and landbank (80% of total residential GFA) are situated in Singapore and China. As such, it is not immune from current negative sentiments from these two regions. Although we take heart from recent country and sector-specific policies, we reckon that sentiments would remain soured as long as the global macroeconomic climate does not improve. For CapitaLand, this implies further dampeners on core earnings. In view of the anticipated residential slowdown, we have delayed our sale & launch schedules, as well as assumed price declines of 13 – 28% and 13 – 21% from 2H08 through 2H09 for Singapore and China respectively, with a slight recovery beginning 1H10. While we acknowledge that their contributions would not be as significant as its residential business units, we believe that their recurring and stable nature would help to mitigate the uncertainty and present weakness of the cyclical and lumpy-earnings residential sector. Despite the credit squeeze, recent successful asset divestments suggest that CapitaLand is still able to tap on its private funds and other third parties. Further, with a low net gearing of 0.51x and a cash coffer of S$4.2b, CapitaLand is well-poised to seize any upcoming business opportunities in the different regions which it is operating in. At current levels, CapitaLand is trading at 23% discount to its end-3Q08 NAV of S$3.60. Historically during the past few crises, CapitaLand has been trading at 40 – 60% discount to its NAV. Taking the view that CapitaLand is now of a different stead compared to then, we have thus pegged our RNAV base-case value of S$5.05 to the lower end of that range at 40% discount, implying end-FY09 fair value of S$3.05.

Tat Hong Holdings Ltd: Buy (OCBC Research, 13 Nov)
Tat Hong's 2Q09 earnings fell short of expectations with net profit retreating 3.4% yoy to S$22.1m despite a 14.7% gain in revenue to S$183.7m. The disappointing net profit was due to a gross profit margin decline coupled with high operating expenses following the incorporation of its newly acquired subsidiaries. Nevertheless, Tat Hong's revenue growth was within expectations, backed by broad-based improvements across all its business segments. An interim dividend of 3.5 S cents has been declared, translating to an interim yield of 6%. Tat Hong is positioning itself to ride out the turbulence by increasing its reliance on its rental business in order to up the slack from lower equipment sales. In the light of a challenging economy, we have trimmed our FY09 and FY10 earnings estimates by 16% and 46%, and ease our valuation parameter to 6x (from 8x), bringing our fair value estimate to S$0.91.

Cacola Furniture International Ltd: Buy (OCBC Research, 13 Nov)
Cacola missed our expectations with 3Q08 earnings falling 10% yoy to RMB30.9m. This was despite a 10.9% gain in revenue to RMB158.5m. The shortfall arose from gross margin compression as the company lowered its average selling prices (ASP) due to intense price competition. Cacola hardly made progress on its retail expansion front in 3Q08 as it dealt with more store closures than new store openings. Its 2nd mega store in Chongqing has also faced further delays. China's sluggish property market suggests that the group's sales may remain depressed in the near future. We have slashed our FY08 and FY09 earnings estimates by 12% and 40% on lower sales and gross profit margin assumptions, bringing our fair value estimate to S$0.19 (from S$0.26). Nevertheless, Cacola is debt-free, trades below its cash value of S$0.14, and is valued at a mere 0.3x NTA. As such, from a valuation perspective, we maintain our Buy rating.

Golden Agri-Resources Ltd: Buy (OCBC Research, 13 Nov)
Golden Agri-Resources (GAR) posted a 55.7% yoy rise in 3Q08 revenue to US$830.8m, aided by higher production of CPO (crude palm oil) by 6% due to higher FFB (fresh fruit bunch) production and extraction rate. Net profit was up 56.1% at US$224.3m, but underlying net profit (excluding bio-asset revaluation gains) fell 16.1% to US$70.1m, reflecting pricier fertiliser costs and also higher export taxes. For 9M08, revenue was up 97% at US$2394.9m, which exceeds our FY08 estimate, while underlying net profit rose 80% to US$344.5m, or around 87.5% of our full-year forecast. Outlook for the near to medium term remains muted, crimped by the deteriorating economic conditions around the globe. As such, management is adopting a more prudent stance. It plans to pare back its planting programme for 2009 to focus on lowering costs through efficiency exercises and also preserve cash to support its operations and complete existing projects. In view of the catatonic state of the market, we further ease our valuation from 8x FY08 PER to 6x FY09 PER, resulting in a revised fair value S$0.30

Sino-Environment: Buy (OCBC Research, 13 Nov)
Sino-Environment Technology Group’s 3Q08 results saw its revenue up 51.5% yoy (12.9% qoq) at RMB215.3m, or about 7% ahead of our estimate. But as expected, its earnings plunged into the red with a net loss of RMB46.7m, after booking a marked-to-market (MTM) loss of RMB100.2m for its equity swap deal with Morgan Stanley. Nevertheless, if we exclude the non-cash item and RMB2.7m one-off convertible bond-related expenses, underlying net profit was actually up 24.9% yoy (down 2.4% qoq) at RMB56.2m, or about 5.6% shy of our estimate. Going forward, the group expects higher sales from all its business segments, as well as an added boost from its new Denitrogenation business. And as the latest stimulus package from the government will see quite substantial spending to tackle environmental issues, we believe that SINE is in a good position to benefit from this. As such, we raise our FY09 estimates by 13-19%, which also raises our fair value from S$0.78 to S$0.97.

Li Heng: Buy (DMG, 14 Nov)
Li Heng clocked RMB1.02b worth of revenue for 3Q08, up 53.7% versus 3Q07 of RMB666.7m. The stronger revenue was achieved despite lower average selling prices (ASPs) across all product segments, as it was more than compensated by higher production capacity due to its capacity expansion. As a result of weaker ASPs, gross margin was down from 34.2% in 3Q07 to 31% in 3Q08. In our recent company update report, we highlighted that the textile industry would be severely hit due to slowing Chinese exports and a relatively stronger RMB. This would impact Li Heng directly in terms of its ability to continue to secure future sales and also put further pressure on its ASPs and gross margins. Hence, especially in the next two quarters, we expect to see margins come under even more pressure albeit at a slowing rate of decline. This will inadvertently result in quarterly financial performances taking further dips in light of the current crisis. Management has been prudent enough in our view, to acknowledge the slowdown in its operating environment, and has hence recognised the point that it can afford putting off its target of expanding nylon yarn capacity by 3Q09. This possible move will allow them to cut back on capex (reduced from RMB600m to RMB 200m for FY09), increase working capital, and improve overall cash flow. Li Heng has done quite well in terms of meeting the investment community's expectations so far in terms of its financial performance. However, 4Q08 and beyond is proving to be an uphill battle for management due to the worldwide economic slowdown. Hence, we are cautiously optimistic of the Group’s ability to deliver on our already reduced FY09 estimates. We will wait till the Group announces its 4Q08 to see if further adjustments to our FY09 forecasts are necessary. For now, we maintain our BUY call with a 12-month price target of S$0.685. The stock currently trades at 2.5x FY08 P/E and 2.2x FY09 P/E, giving an attractive yield of 11.4%.

Li Heng Chemical Fibre: Buy (OCBC Research, 13 Nov)
Li Heng 3Q08 results saw its revenue up 53.7% yoy at RMB1024.8m, driven mainly by an increase in sales volume of 67.7% over the same quarter last year, but this was partially offset by an 8.4% fall in overall average selling prices (ASP) due to a change in product mix towards the thicker nylon yarns (winter demand) and a sharp fall in raw material prices which depressed the general market prices. While the fall in ASPs was well-flagged by management, margins were affected and resulted in a slower 19.2% rise in net profit to RMB258.7m. Meanwhile, 9M08 revenue rose 42.0% to RMB2996.8m, while net profit rose 19.2% to RMB823.2m, meeting 84.4% and 85.6% of our FY08 revenue and earnings estimates respectively. Li Heng also declared a special S$0.015/share dividend, bringing the total to S$0.03 so far. We will be meeting with management later for an update. For now, we maintain our Buy rating and S$0.78 fair value.

CitySpring Infrastructure Trust: Hold (OCBC Research, 13 Nov)
CitySpring Infrastructure Trust (CitySpring) has posted a net loss of S$36.7m in 2Q09, largely due to non-cash items. Cash earnings came in at S$1.1m, or 90.2% lower than the trust had projected in its January unitholders circular. Cash earnings were primarily hit by timing lags and one-offs, including a S$7.8m one-time upfront fee for a recently secured S$370m loan. The trust will maintain its 1.75 cents quarterly payout by utilizing retained cash. CitySpring estimates its accumulated cash surplus as at 30 Sept is about 3.7x the current quarterly distribution – a nice cushion against any further one-offs or lags. The investment case for CitySpring is unchanged – its strong sponsor (Temasek) and its basket of defensive assets. Our concerns are also unchanged – we think an equity cash call is inevitable, and also necessary for CitySpring to continue on its acquisition-led growth path. It would also be highly dilutive at current price levels. We retain our Hold rating with new fair value of S$0.57. We have also adjusted our earnings estimates to reflect a weaker Aussie dollar.

Jurong Technologies: Hold (OCBC Research, 13 Nov)
JTL has delivered a dismal set of 3Q08 results with revenue down 45% y0y (+5.2% qoq) at S$132.0m, and net profit down 94.7% yoy (-82.6% qoq) at S$0.7m. While the decline in sales was expected, the group's profitability was hit by a huge S$3m forex loss due to a sudden surge in US dollar against the Brazilian real. Following the soft results, we are cutting our FY08-09 projections by 14.4% to 39.9%. While demand for JTL's services still remains strong, we are increasingly concerned of its ability to fund its working capital and expansion plans. As such, we reduce our fair value to S$0.19. Downgrade to Hold.

Valuetronics Holdings: Buy (OCBC Research, 12 Nov)
Valuetronics posted a strong set of 2Q09 results as expected. Revenue grew 25.3% year-on-year (yoy) to HK$317.8m, but net profit declined 23.8% to HK$22.2m, due to a one-off charge of HK$10m for the estimated loss of asset due to flash flood in June 2008. Despite the good showing, management noted that the operating landscape is likely to remain very challenging with higher input costs and rising inflation in China. VHL revealed that its largest customer had recently revised down its order forecasts for 2H09 amid the current market weakness (although some other customers are also speeding up their production migrations to China in order to maintain their cost competitiveness). We have revised our FY09 forecasts to incorporate the one-off charge, but are maintaining our full-year revenue projection in light of a potential slowdown in 2H09. In addition, we are paring our FY10F estimates by 6.3-9.6% to reflect a likelihood of prolonged weakness in global economy. Applying a lower valuation metric of 4x PER to its FY09F earnings (6x FY09F previously), our fair value eases from S$0.26 to S$0.17. Even then, we continue to like VHL for its strong financial position (zero debt, strong cash hoard of HK$83m), sound operating fundamentals, and an attractive FY09F dividend yield of 18.8%.

Biosensors International Group: Buy (OCBC Research, 12 Nov)
Biosensors reported 2Q09 topline growth of 95% to US$18m and expectedly continued in its net loss position of US$17.7m. The loss was heavy this quarter in view of the US$8.4m in impairment charges for closing down its two plants which will translate to cost savings of up to US$7-10m/yr which will be ploughed back into R&D and marketing. Biosensors' gross margins have and will continue to improve due to sales increase in high margin DES products; better optimisation in balancing direct sales force vs. distributors and greater efficiencies from its operations. The group's desire to focus on growing topline vs. profitability will help to gain market presence and position it for acquisition. We have overhauled our financials with better clarity on projections in China, cost estimates and product sales acceleration. We are maintaining our medtech discounted model but fair value is now S$0.66 (prev. S$1.03) in view of lower bottomline forecasts. Biosensors trades cheaply at 8.8x next year's PER.

Bright World Precision Machinery: Buy (OCBC Research, 11 Nov)
Bright World has posted a set of 3Q08 results that were below our expectations. The group encountered slower sales in both its conventional and high performance stamping machines, resulting in a decline in 3Q08 revenue by 2.3% yoy (-22.4% qoq) to RMB$163.2m. It was also affected by increase in cost of its key raw material, iron, which more than offset any upward revision of average selling prices (ASPs) of its stamping machines. In addition, BWPM incurred higher administrative expenses (+32.1%) due to higher headcount and commencement of operations in its two subsidiaries. Management acknowledges that the current economic turmoil is likely to slow down the overall manufacturing industry, and in turn soften demand for its stamping products. We have trimmed our FY08-09 forecasts by 9% to 28% to reflect the current market weakness and a potential deceleration in its manufacturing activity. In today's increasingly volatile market and limited earnings visibility, we are also adopting a NTA-based fair value, as opposed to a DCF-based estimate earlier. At 1x FY09F NTA, the fair value stands at S$0.41, representing a 39% upside.

Food Empire Holdings: Buy (OCBC Research, 11 Nov)
FEH reported steady growth in 3Q08. Revenue grew 41.4% YoY to US$61.6m while gross profit improved 47.5% to US$30.5m. Net profit, however, rose by a smaller 17.0% to US$6.3m as the group incurred high operating expenses for the launch of its new product packaging. FEH's robust revenue growth was backed by broad-based improvements across all its markets. Russia led the pack with a 54.4% gain, Eastern Europe and Central Asia reported a 23.7% growth, while other markets turned in a 31.5% increase in sales. We note, however, that the Russian ruble has depreciated sharply against the USD recently, and the forward market suggests further weakening. This could hurt FEH's future earnings as it derives >60% of sales from Russia. Management has adopted a cautious tone and expects 4Q08 to be challenging in light of the weak global economic outlook. Nonetheless, we are leaving our FY08 estimates intact as the group's 9M08 results have met 81% and 77% of our revenue and earnings forecasts, respectively. Our FY09 earnings estimate, however, has been trimmed to reflect the effect of a weakening ruble. Combined with a lower valuation parameter of 8x (from 10x), we derive a fair value estimate of S$0.48 (from S$0.56).

China Sunsine Chemical Holdings: Buy (Phillip Securities, 10 Nov)
China Sunsine is a producer of rubber chemicals and the 2nd largest producer of rubber accelerators in the world used in the process of "curing rubber" for use in the manufacturing of rubber products. The Group's main products are rubber accelerators which are used in the tyre manufacturing process. Serving all top 10 tyre manufacturers in the world. China Sunsine has a customer base, which include the likes of Goodyear, Bridgestone, Michellin and Pirelli. The Group also serves 9 of the top 10 PRC tyre manufacturers. This strong customer base allows the Group to cross-sell other rubber chemicals to existing customers or to serve them in new geographical markets. It recently completed building a new integrated workshop in its 2nd facility which would increase annual capacity of rubber chemicals from 39,000 tonnes per annum to 60,000 tonnes per annum. We expect a meaningful maiden contribution for its new segment of insoluble sulphur and anti-oxidants in FY2009. China Sunsine is currently also in the enviable position of having a strong net cash balance. Other than a cash balance of Rmb180.8 million, the Group also has Rmb14.3 million in available for sale financial investments. Our target price of S$0.27 implies an estimated 5.4X FY2009 P/E, means an upside of 35%. Despite the current difficult equity market conditions, we believe the book value, which includes a strong cash position should provide support at this level.

ASL Marine: Buy (DMG, 10 Nov)
ASL Marine has delivered a stellar set of 1QFY09 results with improved performance from all three core divisions. Its revenue rose 27% year-on-year (yoy) (+3% QoQ) to S$118.6m (or 25% of our FY09 estimates). Growth was seen across all three core divisions: shipbuilding (+23%), shiprepair (+79%), shipchartering (+8%). While revenue contributions from shipbuilding and shipchartering are expected as more progressive payments are being recognized and increased ASL's fleet size, the surprise came from the surge in shiprepair's topline buoyed by higher value shiprepair jobs undertaken. Other operating income did exceptionally well at S$11.9m. The jump in other operating income was largely attributed to gains of S$3.6m from the sale of 7 vessels (vs. S$1.0m for the sale of 4 vessels in 1QFY08) as part of ASL's fleet renewal program and S$6.6m from the disposal of over 10 vessels held-for-sale. We are keeping our earnings forecast for now and maintaining our P/E parameter of 4.5x to FY09 recurring EPS. Our target price remains at S$0.96. We continue to like ASL for its prudent and quality management, strong balance sheet and clear business guidance.

Venture Corp: Buy (DMG, 10 Nov)
With several of the major contract manufacturers reporting lower profitability for their latest quarterly results and guiding for anything but a positive outlook due to the global economic slowdown, we believe that Venture may not be spared from this trend either. On a bright note, Venture remains operationally positive as it generated free cash flows of S$67.9m while net gearing was lowered further to 0.4%. The group has implemented a wage freeze for its top management as part of their cost cutting measures. However, the company also believes that after having gone through several recessions in the past, it has noted that there is actually greater impetus for original equipment manufacturers (OEMs) to outsource in a worsening macroeconomic environment. Additionally, more customers are also looking for total value-chain management with end-to-end solutions and Venture is of the opinion that it is well-positioned to take advantage of these opportunities. While the prospects for Venture may have taken a step back in recent times, we do believe that the present selldown in its share price appears over-extended. In light of the current stock market conditions, we are changing our valuation methodology to a 30% discount to Venture's 3-yr P/E average of 13.6x which translates to 9.5x P/E. This implies a target price of S$7.40 (from S$12.50 previously) which equates to an expected capital return of 28.2% and a prospective dividend yield of 8.7%. With the potential 36.9% upside, we maintain our BUY recommendation.

Venture Corp: Buy (OCBC Research, 10 Nov)
Venture Corp reported its 3Q08 results last Friday, with revenue +3.2% yoy (-0.7% qoq) at S$965.6m, in line with our forecast. But net profit tumbled 47.4% yoy and 38.9% qoq to S$40.1m, or about 11.4% below our estimate, hit by larger-than-expected marked-to-market (MTM) CDO losses of S$29.8m. Excluding forex and the MTM losses, pre-tax profit was just 8.8% yoy and 3.4% qoq lower. 9M08 revenue fell 1.1% to S$2909.5m, meeting 74.5% of our full year forecast, while net profit fell 28.2% to S$225.7m, or about 61.1% of FY08 estimate. Management maintains that it has not seen any sharp pullback in customer orders in 4Q08. Nevertheless, it concedes that the economic outlook remains very uncertain and it is prepared should the worst come to pass. We are reducing our fair value from S$11.21 to S$7.36 to reflect the more uncertain economic picture. But given the sharp 52% tumble since our last downgrade, and the fact that Venture is trading below its FY09 NTA, we rate it a BUY.

Gallant Venture: Hold (OCBC Research, 10 Nov)
Gallant reported a dismal set of 3Q08 results accompanied with worrying updates about its future development plans. Revenue grew 2.1% yoy to S$56.8m but PATMI fell 31.6% to S$0.2m. Key variances from our projections arose from higher taxes and operating expenses. Of greater concern is the deferment of Gallant's development plans. Original plans to build a power plant and airport in Bintan have been postponed indefinitely due to lack of funding in light of the ongoing credit crisis. Gallant's land sales have also come to a standstill since July 08, and we believe that the weak economy may crimp property investment. We have slashed our FY08 earnings estimates and switch our valuation methodology to 0.5x NTA (vs. 20% discount to RNAV previously), bringing our fair value estimate to S$0.26. Downgrade to HOLD.

Koda Ltd: Hold (OCBC Research, 10 Nov)
Koda's 1Q09 results were below expectations. Revenue slipped 32.5% year-on-year (y-o-y) to US$11.5m while net profit plunged 77.9% to US$0.4m. Sequentially, the group recorded an 11.8% quarter-on-quarter (qoq) growth in sales, enabling it to return to profitability after momentarily suffering a US$0.5m loss in 4Q08. Gross profit margin declined by 2 percentage points (ppt) y-o-y to 25.5% while net profit margin dipped 7.3ppt y-o-y to 3.6%. This was due to reduced operating efficiency arising from lower utilization, coupled with reductions of 5% to 7% in average selling prices. The outlook for Koda remains uncertain as weak property markets crimp demand for furniture. We have trimmed our FY09 and FY10 revenue and net profit estimates by 12% – 35% to factor in the group's weaker-than-expected 1Q09 performance. Nevertheless, the stock has already been punished and is trading at a mere 0.5x FY09F NAV. We retain our HOLD rating and S$0.185 fair value estimate as we peg Koda to 0.6x FY09F NTA.

Jardine Cycle & Carriage: Buy (DMG Research, 7 Nov)
JC&C's subsidiary, PT Astra International achieved net profit of IDR7.4 trillion for the first 9 months of FY2008, buoyed by the relatively strong overall economic conditions in Indonesia. Astra's revenue grew by 45% year-on-year (yoy). All business units recorded improved performance during the period. The Indonesian wholesale market for motorcars jumped by 47% yoy. Astra saw its sales of motorcars increase by 44% yoy to 236,000 units during the 9-month period. In 3Q08, Astra launched four new models of motorcars. Astra has a 51% market share for motorcars. The Indonesian wholesale market for motorcycles also grew strongly, by 42% yoy for 9M08. Astra's motorcycle sales jumped by 51% to over 2.2m units, which led to a market share of 47%. With the robust growth in the automotive market, its financial services business also recorded improved performance. Higher palm oil prices (41% higher) achieved and increased palm oil production to 735,000 tonnes (15% more) during the period helped boost the contribution from its agribusiness. The heavy equipment business recorded sales growth of 46% to over 3,800 units, while its mining business extracted 12% more coal, achieving 44m tones of coal during 9M08. With the Astra's good performance in the first nine months of the year, we expect JC&C to record a strong growth for 9M08. We remain positive on JC&C for its diversified businesses. Maintain BUY for a price target of S$12.28.

Rotary Engineering: Buy (OCBC Research, 7 Nov)
Rotary 3Q08 topline decline by 15% yoy to S$118m while bottomline fell in tandem by 22% to S$9.7m. This was primarily due to a thinner project flow in its order book as compared to the latter half of 2007. Rotary managed to maintain its gross and EBIT margins through these nine months, signalling good cost controls despite vacillating raw material prices. Rotary updated that it is still in pursuit of the Jubail and Yanbu refinery projects that are valued at about S$1b each but expects tender closures to be delayed to Feb/Mar09 with award in May/Jun 09. Rotary is also open to sub-contractor roles due to the escalating value of such jobs. Investors should be mindful that Rotary is in a strong net cash position of S$94m with an operational facility in its targeted growth driver geography fully paid for. We maintain our topline estimates but tweak our cost structure to better reflect the current situation moving forward – this lowers our FY08/09 PATMI by 3-6%. Rotary has risen 30% since our last report. Maintain BUY with fair value of $0.34 (prev: S$0.35) pegged at 5x FY09 PER. We have not factored in Jubail/Yanbu wins.

Soilbuild Group Holdings Ltd: Buy (OCBC Research, 7 Nov)
Soilbuild reported a strong set of results that was within expectation. 3Q08 revenue soared 159.2% yoy to S$68.4m with the progressive recognition of revenue from sold development projects and income from investment properties. For 3Q08, PATMI jumped 235.7% to S$15.3m. Reduction in borrowings and a larger equity base helped to lower Soilbuild's net gearing ratio to 2.3x in 3Q08. We estimate that Soilbuild's net gearing could come down 2.0x and 1.7x at the end of FY08 and FY09 respectively. Signs of weakness are starting to show on the industrial property sector. We are now forecasting an annual decline of 5% in rental rates for its industrial properties in FY09 and FY10 and also raising our RNAV discount to 40% in light of the weak market conditions. Our fair value of Soilbuild has been lowered from S$1.17 to S$0.93. Maintain BUY

StarHub: Buy (DMG, 6 Nov)
Earnings down but within expectations with 3Q earnings down 2.1% year-on-year (y-o-y) to S$79.5m on the back of a 2.3% rise in revenue to S$524.6m. The business segments that saw growth include Pay TV (+15%), mobile post-paid (+4%) as well as fixed data services (+16%). Free cash flow rose 11.3% YoY to S$125.6m, a good sign as it determines the capability of the telco to pay out dividends. We are maintaining our earnings estimates of S$292.7m in FY08 (-11.4% YoY) and S$347.4m in FY09 (+18.7% YoY). At S$2.20, StarHub offers an attractive yield of 8.2% for both FY08 and FY09. Based on the discounted cash flow methodology, our target price has been reduced from S$3.09 to S$2.68 due to rising equity risk premium.

StarHub Ltd: Buy (OCBC Research, 6 Nov)
StarHub posted 3Q08 revenue of S$524.6m, up 2.2% year-on-year (y-o-y) but down 1.3% quarter-on-quarter (q-o-q); this was about 2.3% and 2.7% short of our estimate and the consensus number, respectively. Although net profit fell 2.3% y-o-y to S$79.4m, it was up 23.7% q-o-q and was about 6% ahead of our forecast, albeit still 3.5% shy of consensus. Revenue for the first 3 quarters rose 7.9% to S$1,591 m, meeting 74.3% of our full-year estimate, while net profit fell 3.6% to S$223.7m, or about 74.2% of our FY08 forecast. Management remains confident that it can maintain its 7% growth guidance for this year. But outlook for 2009 is more uncertain and we have pared our FY09 numbers slightly to adopt a more conservative stance. While this drops our fair value to S$2.81, we keep our Buy rating due to its attractive dividend yield (7.9% expected for 2009) and its fairly defensive business.

UOL Group Ltd: Buy (OCBC Research, 6 Nov)
UOL reported a good set of results. 3Q08 revenue grew by 60.6% YoY to S$267.9m and was driven by its property development arm. 3Q08 PATMI increased by 14% YoY to S$73.5m. Excluding the one-off negative goodwill in 3Q07, 3Q08 PATMI would have jumped by about 42%. Its balance sheet remains robust. UOL's net debt/equity ratio edged slightly higher in 3Q08 to 0.34x but it is still among the lowest geared Singapore developers. The cautious forward guidance given by UOL in light of the weak economic outlook and tight credit market was within expectation. Our RNAV has now been lowered to S$3.68 after the decline in value of UOL's listed investments. We are also raising our RNAV discount from 30% to 40% in view of the weak market conditions and our fair value of UOL has now been lowered from S$3.83 to S$2.88.

ST Engineering: Buy (DMG, 5 Nov)
STE's 3Q08 revenue rose 11.8% to S$1,382.4m as it recorded higher turnover from all sectors except its Marine division while net profit inched up 2.7% to S$128.9m. The Aerospace segment continued to be the mainstay of STE as it contributed 36.3% and 47.8% to top and bottomline respectively for 3Q08. Pre-tax margin was lower at 10.4% as STE was dragged down by its Aerospace and Electronics sectors which had recorded lower margins. While the Land Systems division continued to depict a 5% PBT margin, a better showing from the Marine segment that was attributed to a favourable sales mix had failed to improve the overall picture. STE's cash balance decreased from S$1.2b to S$935.8m in 3Q08 y-o-y due mainly to higher capex and the payment of dividends. STE's current cash hoard is still higher than its total borrowings of S$886m. Notwithstanding the currently weak global economic environment, STE's order book increased from S$9.29b in 2Q08 to S$9.54b in 3Q08, where S$1.25b is expected to be delivered in 4Q08. Management also stressed that despite several airliners presently operating under bearish conditions and a potential further weakening of the US$, it remains confident of riding through this rough patch given its capabilities. Despite its drop in operating profit, We have maintained our earnings estimates given that the third quarter results are largely within our expectations. We forecast earnings to grow 2.1% to S$514.2m in FY08 and 10.4% to S$567.7m in FY09. STE fell 14% since our previous note in Aug 08, nothing impressive but a lot better than the market's 35% slump. At S$2.44, it offers an attractive expected yield of 7% for this year, and 7.7% for the next Given the rising equity risk premium, we have revised our target price from S$3.41 to S$2.83.

ST Engineering: Hold (OCBC Research, 5 Nov)
STE's 3Q08 results were in line with expectations. Revenue rose 11.8% year-on-year (y-o-y) to S$1.38b while PATMI rose 2.7% to S$129m, boosted primarily by one-off tax write-back from its US assets. Forex, lower margins and higher depreciation showed in this quarter's slow performance. STE's aerospace division dragged the group with falls in margins mainly due to prototyping costs and weaker USD. On the bright side, STE managed to win contracts to sustain its order book at S$9.54b and its diversified geographical footprint, different customer types and business segment helped to buffer earnings. We are keeping our previous estimates as it is in line with management's guidance for a lower FY08, but reducing our valuation multiple from 17x to 14x (near lows experienced in 2002) as the premium for its aero division loses its shine. We maintain our HOLD rating while our fair value estimate is revised to S$2.54 (prev. S$2.95). Major FY09 accretive contracts or acquisitions will incentive us to revisit our forecasts.

SembCorp Marine Ltd: Buy (OCBC Research, 5 Nov)
Sembcorp Marine reported an expectedly strong set of results. While topline was marginally 2.3% lower at S$1.14b, PATMI rose a robust 73% to S$140.9m (highest recorded quarter). The lower topline was due to an absence of major down payments except for 1 jackup rig. SM's margins continue to surprise on the upside with a operating margin at 9.7% for the first nine months (vs 7.7% in 2007) as it achieved better product sales mix of rig building and ship repair. It has secured S$5.5b of contracts year-to-date, matching its FY07 contract wins. This translates to a net order book of S$9.9b, 47% of which are for lucrative semi-subs. This solid base load will keep its shipyards busy with progression completion till 2012. For now, our BUY rating and fair value of S$3.86 remains intact.

Qian Hu: Buy (Phillip Securities, 5 Nov)
QH registered its third successive quarterly rises for FY08, with a 4.1% rise in revenue for 3QFY08. Gross profit increased 3.4% while net profit rose 20.9% for the quarter. Contribution from ornamental fish sales was stable and accounted for approximately 50% of total revenue. QH's aim is to achieve an equal contribution from both the ornamental fish and accessories business segments. Accessories production is expected to pick up in 4Q08. Plastics sales managed to register a y-o-y growth of 18.5%. We can see QH gross profit margin hovering around the 35% level and this actually depends on the sales of the product mix. Ornamental fish has a relatively higher margin than both accessories and plastics. Sales in the Europe region continued its third quarter of growth while Others and Singapore regions recovered from a negative growth in 2Q08. However Other Asian countries exhibited a decline. This was due to the delay in OEM manufacturing of the Guangzhou plant, which has been deferred to October. Thus we’d expect positive growth from this segment in the next quarter. We believe QH would be able to continue on its growth path, however the broad economic factors may be a drag on its growth rate. We tweak our estimates and project a 3-year CAGR of 3.3% to factor in slower growth due to macro factors. The next phase of growth would be the catch-up of accessories sales to ornamental fish sales. The accessories market is potentially much bigger than the ornamental fish market given that management shared previously that every $1 spent on fish, an equivalent of $5 is spent on accessories. Fair value: S$0.15

HL Finance: Buy (DMG, 4 Nov)
HLF reported 3Q08 net profit of S$30.9m, down 16.2%. This is stronger than our expectations, as net interest income came in above our forecasts. Net interest income rose a marginal 1.4% y-o-y to S$51.9m. HLF is one of the distributors of the Lehman Minibond series of products. On 22 Oct 08, HLF announced a proposal to purchase Lehman Minibond notes from its most vulnerable customers. HLF said this proposal is not expected to have a material adverse effect on the current year results. We remain positive on HLF earnings resilience going ahead. HLF was early in curtailing its loan book, and we rate this very positively. We believe this will help it to minimize the damage to asset quality as the Singapore economy slows over the next few quarters. We raise our 2008 net profit forecast by 6.2% to S$113.9m to factor in the continued stability in net interest income going ahead into 4Q08. With an NTA of S$3.13/share, HLF is trading at a P/NTA of 0.7x, which is low relative to its historical trend. We maintain our price target of S$2.65, which is pegged to 0.8x 2009 NTA. Assuming a 49% payout ratio, 2008 dividend yield is fairly decent at 6%.

Hyflux Water Trust: Buy (DBS Research, 3 Nov)
Hyflux Water Trust has agreed to purchase 5 water/wastewater treatment plants from sponsor Hyflux, for a total consideration of S$88m. The acquisition is expected to be financed by an outstanding revolving loan facility of US$66m. The 5 plants have a combined capacity of treating 160,000 cu m of water/day and represent a 36% increase over current portfolio capacity of 445,000 cu m/day. The purchase price of S$88m represents a P/BV of roughly 1.4x, as against IPO valuation of 1.3x P/BV. The premium is justifiable given that all the plants will be fully functional at the time of acquisition, compared to the IPO portfolio where only 7 of the 13 plants were operational. HWT will also ink agreements with sponsor Hyflux to eliminate interest rate risk and risk of lower-than-expected utilisation rates, in order to ensure positive DPU accretion. Relevance: Following our downgrade last month, share price has plunged 32% – underperforming the broad market index, which fell 17% over the same period – and is now trading at 14% FY09 yield. Based on the higher valuation on expanded asset base and a target dividend yield of about 10% for this asset class, we revise our target price upwards to S$0.61. We expect the market to react favourably to HWT's positive acquisition intent on favourable terms and the relatively secure yield accretive growth story and upgrade the counter to a Buy.

China XLX: Hold (DBS Research, 3 Nov)
China XLX's 3Q results were largely in line with expectation. Revenue grew 57% yoy and 23% qoq to RMB628.5m, thanks to the surge in average selling prices (ASP) of compound fertilizers by almost 100% year-on-year (y-o-y) and 50% (quarter-on –quarter) q-o-q. Net profit rose at a slower pace of 21% y-o-y and 6% q-o-q to RMB96.6m as the profitability of urea dropped. The gross margin for urea fell by more than half sequentially to only 12% in 3Q. The increase in coal cost of RMB120/ton q-o-q ate into its margin given the ASP of urea is capped at the price ceiling of RMB1725/ton. Notwithstanding the weak performance of urea segment, the overall gross margin only declined by 2.2ppt q-o-q, attributable to 13ppt margin expansion in compound fertilizer. We are leaving our estimate unchanged given 4Q is traditionally a slow quarter. In addition, we expect prices of urea and compound fertliser to soften and margins to moderate this quarter. We trim our FY09 forecast by 10% to impute thinner margin for methanol segment which ASP is expected to decline from RMB3000/ton to less than RMB2500/ton. China XLX's balance sheet remains healthy. The collection days are short at about 10 days as most the transactions are on cash terms. However, cash flow in these 2 years would be tied up for the construction of its 3rd plant, which required total capex of RMB930m. The group is also gearing up to around 25% to fund the expansion. The Chinese government's policy changes to price ceiling and export tax next year are still unclear at the moment. These post greater risk to our earnings estimates. We rate the stock of hold pending improved visibility on this front. We have trimmed out target price to S$0.33, based on 5x revised FY09 earnings. (vs 6x FY09 previously), maintaing a 30% discount to its global peers average PE.

Rickmers Maritime: Hold (OCBC Research, 3 Nov)
RMT posted US$26.5m in 3Q revenue, up 97% year-on-year (y-o-y) and 12% quarter-on-quarter (q-o-q) thanks to new vessel acquisitions. The trust will distribute 2.25 US cents for the quarter. The looming prospect of a global recession and an immense order book are pointing to tougher days ahead for the containership industry. Falling asset values pose a more immediate threat to RMT because of the loan-to-market value covenant in its loan agreements. RMT expects 11 new vessels costing US$1.2b over 4Q08 to 2010. RMT has credit facilities in place for the first seven ships. RMT can defer the planned equity issue but it cannot avoid it forever – even with all else equal, at current price levels, the threat of dilution trumps the lure of value. We like RMT for its blue chip charterers and its partial cash retention policy but find the above issues difficult to downplay. Downgrade RMT to HOLD with S$0.40 fair value.

UOB: Hold (OCBC Research, 3 Nov)
Recent turmoil has hurt UOB's 3Q earnings which fell 21.1% quarter-on-quarter (q-o-q) to S$475m. Net Interest Margin fell q-o-q from 2.23% in 2Q08 to 2.21% in 3Q08, but this was up from 1.93% in 3Q07. With the weak economic prospects ahead, the tight money market, imminent earnings cuts for most corporates and the possibility of more impairment charges in the coming quarters, we have revised down our FY08 earnings estimate from S$2,257m to S$2,010m and our FY09 earnings from S$2,432m to S$2,065m. In addition, peers' and market valuations have also come off and with the near-term risk averse sentiment, we are cutting our fair value estimate from S$20.60 to S$13.30, pegging it now at 1.2x book. We retain our HOLD rating.

UOL Group Ltd: Buy (OCBC Research, 3 Nov)
UOL announced that it had entered into a share sale agreement with Hotel Plaza, a listed subsidiary of UOL, for the sale of its Pan Pacific operations for a total consideration of S$21.3m based on its NAV at the end of 3Q08. The move is to consolidate all its hotel management activities under Hotel Plaza, which is the hotel arm of UOL. As this is effectively a transfer of asset to a subsidiary and Pan Pacific operations do not contribute significantly to UOL's revenue and profit, we do not expect the transaction to have a significant impact on UOL. UOL will be announcing its 3Q08 results this Wednesday and we are maintaining our BUY recommendation and fair value of S$3.83 for now.

CapitaLand: Hold (OCBC Research, 3 Nov)
Revenue for 3Q08 fell by 33.3% y-o-y and and 27.2% q-o-q to S$597.2 due to the completion of development projects, slower property sales and weak contribution from AustraLand. PATMI for 3Q08 declined by 25.6% y-o-y to S$419.4m and excluding the one-off items, we estimate that PATMI will be lower at about S$100m. Going forward, we believe that it would be harder for CapLand to monetize its assets in light of the tight credit market and global deleveraging. Although the current downturn could present opportunities, we take a cautious stance towards an acquisition strategy in the current market. RNAV has been lowered to S$4.63 following the recent sharp devaluation of CapLand's listed investments. We are also raising our RNAV discount from 30% to 40% for its development and investment properties. As such, our fair value of CapLand has been reduced from S$3.71 to S$2.62 and we are maintaining our HOLD recommendation for CapLand.

CapitaLand: Buy (DMG, 3 Nov)
CapLand posted a 25.6% y-o-y drop (-18.6% q-o-q) in 3Q08 PATMI S$419.4m, which accounts for 38.2% to 38.6% of our FY08 estimates and the Street’s. Stripping away divestment gains, namely from the sale of Capital Tower Beijing, Raffles City portfolio and 1 George Street, 3Q08 PATMI would have been S$102.0m. 3Q08 Topline was down 33.3% YoY to S$597.2m, on the back of lower sales from development projects as fewer projects were launched for sale in China. On the bright side, this was mitigated by new malls in Malaysia and, as well as better performance from REITs and investment properties. As of now, CapLand's balance sheet remains strong, as net gearing is low at 0.51, coupled a cash position of S$4.2b. Given the current weakness within the global property arena, including the regions where CapLand operates in, we are re-looking at our RNAV assumptions and schedule, thus reviewing our current RNAV-backed fair value of S$6.60 and Buy rating.

Chartered Semiconductor: Hold (OCBC Research, 3 Nov)
Chartered Semiconductor announced its 3Q08 results last Friday, with revenue up 30.7% y-o-y to US$463.7m, while its earnings (after preference shares accretion) sank into the red with US$26.9m loss. Since mid August 2008, Chartered had started to see declining orders and requests from customers to reschedule their deliveries. Of late, the weakness had intensified as some customers again revised their outlook forecasts. In response to contracting demand in the foundry industry and difficult macroeconomic environment, we are reducing our FY08-09 sales forecasts by 4.6-10.4%. Despite Chartered's plans to lower its breakeven utilization level by 4Q09, execution risks to optimizing its product mix and ramping up its Fab7 remain an issue for the group. Maintain HOLD, with S$0.31 fair value.

Chartered Semiconductor: Hold (DBS Research, 3 Nov)
Chartered reported a net loss of US$26.9m for 3Q08, at the higher end of its mid-quarter guidance but revenues of US$463.7m fell short of expectations. Profitability continued to disappoint as gross margins dipped further to 14.1%, as against 15.3% a quarter ago and 19.0% a year back. The dip in profitability came primarily as a result of lower average selling prices (ASPs), and higher input costs per wafer. 3Q08 utilization slipped to 85% from 88% in 2Q08 while ASPs y-o-y declined from US$888 to US$878. Operating cash flows remained healthy at US$429m. The foundry industry is expected to be in the doldrums till demand improves across end-user segments like handsets and consumer electronics. The SEMI Book-to-Bill ratio stood at 0.76 in September, and has remained below 1 for more than 18 months now, which does not augur well for chip demand. Based on the outlook, we now expect a net loss of US$39m in FY08 and US$100m in FY09. A semiconductor recovery before end-FY09 is unlikely, and we expect a return to profitability for Chartered only in FY10 at best. We reduce our target price to S$0.38 but upgrade our recommendation to a Hold, as we believe downside risk is extremely limited at current price and there is upside potential from rumoured M&A possibilities.

Suntec REIT: Buy (DMG, 3 Nov)
SRT achieved a 34.6% year-on-year (y-o-y) rise in 4Q08 DPU to 2.85¢, making up 31% of our FY08 estimates. On a full year basis, SRT's FY08 DPU of 10.44¢ exceeded the Street’s and our expectations by 12.3% to 14.1%. Given the ongoing refinancing concerns over S-REITs, management is committed to securing new financing for its S$125m and S$700m of debts due in Apr–May 09 and Dec 09 respectively. We remain confident of SRT's ability to secure new financing, given its strong sponsor in Cheung Kong (Holdings) Ltd and track record in successful capital raising, as shown by the recent S$400m club loan. However, we are less optimistic on the eventual funding cost. Park Mall's redevelopment plans have been put on hold for a period of 1-2 years, and despite cap rates inching up and prospective purchases looking cheaper, we reckon the 12,023 sf of strata-titled office space in Suntec Tower 1 bought in Oct 08 should mark the end of any further near-medium term acquisitions due to the tight credit conditions and need to preserve capital. Despite a considerable quantum of expiring leases up for renewal in the next couple of years, we are turning cautious and sceptical of any positive rental reversions due to the macroeconomic slowdown and landlords shifting their emphasis to tenant retention. In view of the above, we are assuming portfolio-wide occupancy levels of 95%. Further, for SRT's office assets, we are predicting negative rental reversions of 5% for FY09, 10% for FY10 and 5% for FY11. As for its retail assets, we are pegging rental reversion rates (previously 5 – 10%) to a bear-case forecasted GDP growth rate of -1% and 2% respectively for FY09 and FY10 respectively. Our revised estimates reflect a 21% to 24.4% fall in DPU for FY09F and FY10F to 8.73¢ and 8.56¢ respectively, implying yields of 12.3 – 12.6%. At current levels, we believe the stock has factored in a majority of the negativities, offering investors an opportunity to buy into a REIT with quality assets. Maintain Buy at S$0.79.

SMRT: Neutral (DMG, 3 Nov)
SMRT reported 2QFY09 net profit of S$42.6m, up 7.7% y-o-y and in line with expectations.
MRT revenue rose 13.7% to S$122.8m, and accounted for a 54% revenue share. MRT average daily ridership was up 13% y-o-y to 1.44m rides. Higher electricity costs however, led to a slower 10.5% y-o-y increase in MRT operating profit, though this still accounted for a sizeable 70.5% share of total operating profit. Bus average daily ridership grew 5.8% to 809,000 rides. However, diesel costs rose 54.1% to S$15.2m, and this contributed to bus operations recorded an operating loss of S$0.9m, versus the S$0.8m gain in 2QFY08. Commercial space rental revenue surged 44.7% YoY to S$14.2m. Though this accounts for only 6.3% revenue share, its share of operating profit is a sharply higher 20.3%. Total lettable space has risen 11.7% YoY to 26,592 sqm. We raised our FY09 net profit forecast by 7.1% to S$154.8m, due to expectations of higher revenue for 2HFY09. Our FY10 net profit forecast is also raised marginally by 2.6%. We are assuming an average WTI oil price of US$70/barrel, for calendar year 2009 which is lower than CY08's US$100. However, SMRT's 6-mth electricity contract till Mar 09 is at a higher rate (30% higher than the previous 6-mth contract), and therefore the benefits of lower electricity cost will only flow through from FY10 onwards. We have also factored in increased costs with the commencement of the Circle Line revenue service in mid-2009. SMRT declared an interim dividend of 1.75S¢/share. We are forecasting FY09 dividends of 8.7S¢, based on a 85% payout ratio (versus 78% in FY08). This gives a dividend yield of 5.6%. As the recent market collapse has led to yields of many equities rising sharply, this 5.6% now appears less attractive. As a consequence, we are cutting our price target to S$1.65, from the previous S$2.03. Maintain Neutral.

SMRT: Outperform (CIMB, 3 Nov)
SMRT’s 2QFY09 net profit of S$42.6m (+7.7% yoy) was within market consensus (S$157m) and our estimate (S$167m). 1HFY09 net profit of S$82.9m constitutes 49.6% of our full-year estimate. 2Q revenue growth of 15.1% yoy to S$227m was ahead of our forecast, mainly driven by higher train and bus ridership, and rental income. Interim dividend declared was S$0.0175. Operating expenses rose 16.9% yoy to S$186m on higher energy costs (+31.1% yoy) and other expenses (+38.6% yoy). Within energy, diesel costs rose 54.1% yoy to S$15.2m, while electricity costs rose 12.9% yoy to S$14.1m. Notably, diesel costs were lower than in 1QFY09 on falling global fuel prices. Revenue from train and bus operations increased on strong ridership growth. Operating profit margins improved for all segments, although bus operations were hit by higher diesel costs while taxi operations bore the brunt of diesel subsidies, and higher repair and maintenance costs. Operating losses for bus and taxi operations were S$1m and S$0.5m respectively. LRT operations posted a maiden operating profit of S$0.1m and improved contributions from the Middle East in the Palm Jumeriah operations boosted engineering service revenue. Rental growth was boosted by increased net lettable space (+11.7% yoy) to 26,592 sq m with an average 99.4% occupancy. We expect revenue to improve further with increased service frequencies to support higher train and bus ridership as more people switch to public transport, while also supported by non-fare segments in rentals and engineering services. There has also been a welcome reprieve from declining global energy prices. The recent market sell-off has made SMRT attractive again, supported by a dividend yield of 5.7%. Target price: S$2.08 (previously S$2.09).

Cosco Corporation: Sell (DMG, 3 Nov)
Cosco has revealed that there was an outstanding sum of US$12.4m owed by Russian customers for repair works of three fish processing vessels. Cosco Shipyard is seeking payment for the outstanding sum in accordance with the terms of the contract entered into the owner of the vessels. We believe this incident affirms, yet again, our concerns on Cosco's customers' profile, funding abilities and the possibility of payment default in the face of the current credit situation. As this event is not expected to have a material impact on Cosco's FY08/09 NTA and EPS, we are maintaining our earnings forecast and target price of S$0.680 based on 1.0x FY09 P/B. Maintain Sell.