Stock Picks

China Kunda Technology: Buy (Phillip Securities, 30 Oct)
Kunda manufactures and sells plastic injection moulds for the automobile industry -- In-Mould-Decoration (IMD) products and other plastic injection related products. The Company's products are manufactured in Shenzhen, China. China has taken over the US to be the world's top auto market. September sales of automobiles surged by 78% with passenger cars climbing 84%, as reported by the China Association of Automobile Manufacturers ("CAAM"). With such growth in the domestic automobile industry we believe Kunda is well positioned to benefit from this given its acquisition of Shenzhen Precision and SXD as well as its initial contract with BYD, a domestic brand automaker. We initiate our coverage of the stock with a Buy call at a fair value estimate of S$0.39. China Kunda has shown its resilience even during tough times. It was listed in October last year when the global financial crisis toppled many companies. The Company's focus on the automobile sector as well as IMD products looks like the way to go. The Chinese government, through its stimulus package and tax cuts for the automobile industry this year, has boosted its growth and domestic demand to the extent China has taken over USA as the world's top auto sales market. We believe Kunda is in a strong position to leverage from this growth given its strong technological focus, strategic acquisitions of Shenzhen Precision and SXD, good relationships with their customers, many of whom are large international brands, and the strong demand for high precision moulds. From the last traded price of S$0.255, our target price gives a potential upside of 52.9%.

Starhill Global REIT: Buy (UOB Kay Hian, 29 Oct)
Distributable income of S$18.5m for 3Q09 was in line with our expectations, largely due to improvements in net property income from the Wisma Atria (WA) (+19.6%) and Ngee Ann City (NAC) (+6%). The increase in revenue (WA +2.7% yoy, Japan portfolio +11.0% yoy) were offset by property tax rebates passed on to tenants, resulting in gross revenue coming in flat at S$32.6m. Property expenses declined 27.5% yoy due to property tax rebates and lower advertising, promotion and operating expenses. DPU grew 6.7% to 0.95 cents after adjusting for the recent rights issue. Shopper traffic at WA increased 80% yoy following the opening of the basement linkway and the opening of ION Orchard. Retail sales turnover at WA was also higher yoy, compared to the declines in the first six months of the year. At WA and NAC, retail and office occupancy stood at about 99% and 89% respectively, allowing for positive rental reversions. Retail net lettable area (NLA) in Wisma is expected to increase in October following the removal of escalators, which were installed during the linkway closure. We estimate FY09 DPU at 3.7 cents. Our target price for the stock is S$0.64, based on the dividend discount model (required rate of return: 7.7%, growth: 2.5%).

Wing Tai: Buy (UOB Kay Hian, 29 Oct)
Wing Tai Holdings reported 1QFY10 PATMI of S$46.3m (+42% year-on-year), above our expectations and representing 40% of our full-year forecasts. Group revenue for 1Q10 increased by 106% yoy to S$277.2m mainly due to the higher contributions from the development properties division from the units sold in Belle Vue Residences and the progressive sales recognised from The Riverine by Park in Singapore. The Group's operating profit also jumped 108% yoy to S$85.6m due to profits recognised from the above projects. Net gearing ratio is currently at 0.48x compared to 0.51x at end-FY09. Wing Tai's recent launches Ascentia Sky, Belle Vue Residences and The Floridian have received good response with the Group managing to sell an additional 300 units with total sales proceeds of S$650m. Based on URA data for developer sales in September, Wing Tai has managed to sell more than 87% of the 180 units launched in Ascentia Sky at average selling price (ASP) levels of S$1250psf, 68% of the 176 units launched at Floridian at ASP of S$1,300psf and sold more than 75% of the 138 units launched in Belle Vue Residences at ASP of S$1,800psf. Management remains cautiously optimistic on the outlook of the property market in Singapore and plans to release more residential units for sale at the appropriate time. We expect Wing Tai to benefit from strong residential sales momentum in Singapore. We like Wing Tai for its exposure to the mid- to high-end segment and alternative recurrent income streams from retail and investment properties. Maintain BUY with a target price of S$2.55, pegged at a premium of FY09 RNAV of S$2.34.

Ascott Residence Trust: Buy (UOB Kay Hian, 29 Oct)
ART reported distributable income of S$11.8m (-25% year-on-year, +7% qtr-on-qtr) and DPU of 1.92 cents (-26% yoy, +7% qoq) during 3Q09. The total DPU for 9M09 is 5.5 cents. DPU for 3Q09 was in line with our expectations accounting for 28% of our full-year estimates. Distributable income for 3Q09 fell 25% yoy mainly due to absence of the positive impact on serviced residence business seen in 3Q08 due to Beijing Olympics coupled with a weaker demand for serviced residences in Singapore and China where revenue contributions deteriorated by 26% yoy and 46% yoy respectively. While the overall RevPAU during 3Q09 declined 24% yoy to S$124, it was up 4% qoq on the stablisation in hospitality demand with the improvement in the macroeconomic conditions across the countries in which it operates. The gross profit and DPU increased by 6% qoq and 7% qoq respectively. The Average Length of Stay (ALOS) stood firm at seven months similar to the previous quarter. ART currently has anasset portfolio of 51% in emerging markets and 49% in stable economies.Management targets an Asset mix of 70-30% in the emerging markets and stable economies with key focus market being China and Vietnam. The relatively higher ALOS in Vietnam compared to other countries is particularly appealing. The improvement in the overall occupancy levels to 79% in 3Q09 from low 70's in 2Q09 will enable ART to capitalize on its asset enhancement activities. RevPAU from Japan (+14% yoy) and Philippines (+3% yoy) showed an improvement as a result of asset enhancement activities and high occupancy levels. We have increased our DPU estimates for 2009-11 by 13-16%, factoring in the higher expected occupancy rates and better average daily rentals.
We have revised our RevPAU assumptions for 2009-11 by 10-20% factoring in higher expected occupancy rates and better average daily rentals with the improved market conditions. Maintain BUY with a revised target price of S$1.40.

OCBC: Buy (UOB Kay Hian, 29 Oct)
OCBC reported net profit of S$450m for 3Q09, significantly above our forecast of S$325m and consensus estimate of S$341m. The good results were achieved despite loss of S$213m from Great Eastern's redemption offer for GreatLink Choice policies. Loans contracted by a marginal 0.6% qtr-on-qtr. Loan growth on a sequential basis was positive for Indonesia (+4.7% qoq) but negative for Singapore (-0.6% qoq), Malaysia (-1.0% qoq) and Greater China (-2.8% qoq). Expansion in loans to consumer was driven by housing loans (+2.2% qoq) and professional & private individuals (+1.3% qoq). Loans to business was lacklustre due repayment by corporate customers. Fees & commissions maintained at S$189m with growth in stockbroking (+13.8% qoq) and credit cards (+33.3% qoq) offset by decline for investment banking (-59.1% qoq). Income from insurance businesses was a positive S$29m despite losses from redemption offer for GreatLink Choice policies. This is a good set of results for OCBC, clearly demonstrating that both corporate and retail customers were resilient despite the financial crisis. OCBC's non-performing loan (NPL) ratio for building & construction was only 1.3% at Sep 09. This shows experience and prudence in selection of private residential projects. OCBC's results indicate that asset quality has improved for Singapore banks and NPL cycle has peaked. Many developers have depleted their land bank and OCBC sees opportunities to finance developers in land acquisitions in 2010. Applications for housing loans have also increased 65% qoq in 3Q09 for private residential projects in Singapore. Our target price is unchanged at S$10.10 based on P/B of 1.89x derived from the Gordon Growth Model (ROE: 12%, required return: 8% and constant growth: 4.8%).

OCBC: Buy (Phillip Securities, 29 Oct)
OCBC has reported a set of outstanding results despite the one time loss of S$213mil due to the Greatlink Choice (GLC) redemption offer. Exclusive of one-time items, core net profit rose to S$604mil (+52.5% yoy, +30.0% qoq, 2Q09: S$466mil) due to lower allowances and lower taxes. OCBC had announced that it will acquire ING Asia Private Bank Limited and its affiliated entitles (IAPB) for S$2.05bil. We think that the acquisition is appropriate as OCBC can now extend its private banking presence in this region especially with its current GEH, OCBC and Bank NISP network. OCBC also announced that it would subscribe 45% or 192.4mil of Bank of Ningbo's share placement thus increased its stake from the current 10% to 15.1%. We expect interest income to remain subdued due to the lackluster loans growth with low interest rate environment. Non-interest income should surprise on the upside with the rebound in the insurance segment. We forecast allowances to normalize in the coming quarters as the economy improves. We adjust our target price to S$9.02, peg to 1.54x FY10 NAV and maintain our Buy rating. This also approximates to the 5-year average P/B ratio of 1.57X NAV.

Mercator Lines: Hold (Phillip Securities, 29 Oct)
Mercator Lines HAS reported 2Q10 revenue of US$35m (-37% year-on-year-yoy) and net profit of US$10.2m (-59% yoy). The fall in spot market day rates and the renewal of long term contracts at poorer rates than previous rates caused the drop in revenue. Depreciation expenses rose 48% to US$8.3m as the number of vessels increased from 9 to 11. Net profit declined substantially mainly as a result of lower revenue and higher depreciation expenses.
As Mercator posted worse-than-expected net profit of US$10.2m compared to our forecast of US$11.8m, we cut the fair value from S$0.42 to S$0.36. This is a reduction from 1.0 time to 0.9 time book value for FY2010F. Although Mercator is among the few shipping companies that are profitable despite the downturn in the industry, we are concerned that shipping rates are likely to remain volatile and this may affect Mercator's revenue and profit. Therefore, we downgrade our recommendation from buy to hold.

Oceanus: Buy (DMG, 29 Oct)
Oceanus has announced that it is pursuing the listing of Taiwan depository receipts (TDR) on the Taiwan Exchange representing up to 200m shares, which will comprise 100m new shares and 100m of warrant-converted shares. Its management has indicated that the key motivation for the listing of TDRs is to garner higher valuations given that TWSE trades at a premium to STI. However, the TDRs are not fungible and thus provide no room for arbitrage, unlike American Depository Receipts (ADRs). Oceanus follows in the footsteps of Medtecs and Eastern Asia Technology, which listed TDRs on the Taiwan Stock Exchange in 2007 and 2002 at a premium of 250% and 7% respectively. The 200m new shares represent 11.3% of current issued share capital of 1,765m shares and 10.2% of the enlarged share capital of 1,965m shares. In addition, we expect higher expense in the form of increased finance costs due to the S$73.5m loan from warrant holders. The EPS for FY09F and FY10F are thus revised downwards to 2.86S¢ (-14.6%) and 3.86S¢ (-9.1%) respectively. We are lowering our target price to S$0.50 from S$0.52, based on a 20% discount (previously 30% discount) to the peers’ P/E relative to their respective indices, representing a potential upside of 39%. We think that the EPS dilution and higher finance cost will more than offset the potentially higher valuation arising from TDR listing. At this target price, Oceanus will be trading at 17.5x FY09F and 12.9x FY10F P/E, which is less than the forward P/E of TWSE.

Cambridge Industrial Trust: Buy (DMG, 28 Oct)
CREIT reported 3Q09 DPU of 1.34¢, down 9.8% year-on-year (yoy) and 0.1% sequentially. The decline in DPU was due to the higher refinancing cost that was completed at end-2008. Annualised 9M09 DPU came in at 5.3¢, broadly in-line with ours and consensus estimates. Net property income rose 0.9% yoy underpinned by strong occupancy levels. CREIT will trade ex-3Q09 distribution on 03 November 2009. CREIT has finalised the divestment of several of its non-core properties, which will result in the net sale proceeds exceeding its book value. Management plans to divest up to S$25m of non-performing assets to de-leverage the portfolio. The de-leveraging will, however, bring down its gearing by a mere 0.5ppt to 42.1%. CREIT also intends to implement a Distribution Reinvestment Plan (DRP) as a further means of raising cash which can be used to lower gearing. Management has a long-term target to reduce its gearing ratio to 30-35% over time. We favour CREIT for its bond-like characteristics anchored by: 1) long tenant leases of 4.9 years; 2) high levels of bank-guaranteed security deposits of 16 months; 3) built-in portfolio rental escalation of 2% pa; 4) high occupancy and diversified tenant mix; and 5) 51% of portfolio sublet providing second layer of income support Besides, its existing interest costs are hedged for the next three years, minimising interest rate fluctuation risks. CREIT does not have any debt expiring until Feb 2012. CREIT's dividends are well supported by rental guarantees and step-up rental agreements. Prior to the credit crisis, CREIT traded at 140bp yield premium over A-REIT. That gap now stands at 400bp,suggesting that it is very much a laggard play. At our target price of S$0.64, CREIT offers an attractive FY10 yield of 8.5%, a reasonable peg in our view.

Frasers Centrepoint Trust: Buy (OCBC Research 28 Oct)
Frasers Centrepoint Trust (FCT) posted a 17% qtr-on-qtr (qoq) increase in 4Q revenue to S$24.8m and a 19.6% qoq increase in NPI to S$17.6m. The strong performance was on the back of increased contributions from Northpoint, where asset works came to a close. DPU of 2.04 S cents for the quarter was 3% higher than our 1.98 S cents estimate. FCT booked a revaluation surplus of S$37m this year despite a cap rate expansion. The manager was upbeat and made its intentions to acquire part of its pipeline crystal clear. We increase our fair value estimate to S$1.30 from S$1.22 due to revisions to our fund-raising assumptions. FCT has appreciated 11.6% since our September upgrade but we still see value in the current price. Maintain BUY, with 10.7% total return.

FSL Trust: Buy (OCBC Research 28 Oct)
FSL Trust (FSLT) announced 3Q09 results this morning. The trust posted US$24.6m in revenue, up 4% year-on-year (yoy) but marginally down 0.9% qoq. Net cash generated from operations of US$17.6m rose 11.5% Yoy and 3.1% qoq. DPU, however, fell 50.8% yoy and 38.8% qtr-on-qtr (qoq) to 1.5 US cents. This was primarily because of the lower payout policy as well as the first effects of dilution stemming from the recent placement. Cash retained for the quarter has been used to prepay loans. Note that 1.27 US cents of the DPU amount has already been declared for the pre-placement units in September. All units will enjoy the outstanding 0.23 US cents amount. FSLT intends to use the net proceeds from the placement to fund acquisitions. The manager said it is currently evaluating a number of "attractive acquisition-and-leaseback opportunities". FSLT is guiding for a 4Q09 DPU of 1.5 US cents, equivalent to an annualized yield of roughly 14%. Maintain BUY with S$0.72 fair value.

Mapletree Logistics Trust: Buy (OCBC Research 28 Oct)
MLT recorded a 2.3% qtr-on-qtr (qoq) fall in 3Q09 revenue to S$50.8m and a 3.5% fall in NPI to S$44.1m. The weaker performance was attributed to forex effects, higher vacancies, and the early termination of a lease in Singapore. MLT also booked a S$2.2m provision for a doubtful debt on that same lease. Results were in line, with the quarter's DPU of 1.48 S cents being 4.5% higher than expected. Portfolio occupancy moderated further in 3Q09 to 97.1% from 98.3% three months prior. MLT said it was "cautiously optimistic" and saw opportunities to make accretive acquisitions. Such buys would likely be funded using a combination of debt and equity. We have revised our estimates to reflect actual 9M09 figures. We're estimating 1.42 S cents for 4Q09 DPU. Maintain BUY with S$0.78 fair value on valuations, 11.5% total return.

CapitaMall Trust: Hold (OCBC Research 28 Oct)
CapitaMall Trust reported its 3Q09 results yesterday and they were in line with our expectations. Gross revenue increased to S$129.7m, driven by the acquisition of Atrium and completion of asset enhancement initiatives (AEI) at several malls. Net property income had also increased to S$94.5m. Portfolio occupancy rate remained strong at 99.6% at end-3Q09 and CMT also managed to achieve better rental reversions in 3Q09. DPU of 2.35 cents has been declared for the quarter. Slow recovery in consumer spending is likely to cap any rental increase going forward. Nevertheless, growth could still be sustained by AEI and reconfigurations. CMT has proposed to build a new underground link connecting Raffles City to Esplanade MRT Station, which is expected to start in 4Q09. Opportunities for acquisition are also opening up. We are now raising our fair value of CMT to S$1.69 but maintain our HOLD rating on valuation ground.

Pacific Shipping Trust: Hold (OCBC Research 28 Oct)
PST recorded a 39% year-on-year (yoy) increase in gross revenue to US$15.6m and a 30% yoy increase in distributed income to US$4.8m. The gains were due to contributions from the two CSAV vessels acquired in 2008. On a qoq basis, revenue rose 1.1% and distributed income fell 17.4%. The trust will pay out 0.818 US cents per unit to investors. This is equivalent to 70% of income available for distribution (2Q: 88%) or 43% of cash earnings (2Q: 48%). PST outperformed our estimates for the quarter as we had already priced in rate concessions to charterer CSAV. But these discussions, which began in April, are still ongoing. We maintain our HOLD rating and US$0.27 fair value estimate for now.

Suntec REIT: Buy (DMG, 28 Oct)
Suntec REIT reported 3Q09 results DPU of 2.92¢ (+2.3% year-on-year; -1.9% qtr-on-qtr). Annualised 9M09 DPU (including deferred units) came in at 10.9¢, broadly in-line with ours and consensus estimates. Net property income rose 3.1% YoY on the back of higher rental reversion. Suntec will trade ex-3Q09 distribution on 02 November 2009. Suntec achieved gross office revenue of S$28.7m for 3Q09, 7.9% higher than in 3Q08, driven mainly by higher rents achieved for the Suntec City and Park Mall offices. In 3Q09, committed occupancy for the overall retail portfolio stood at 99.1% (98.4% in 2Q) and 96.4% for office (94.8% in 2Q). For 9M09, Suntec renewed and signed 513,000 sqft of office space. With this, the remaining office leases expiring in FY09 amounts to approximately 14,000 sq ft or 0.5% of the total office NLA. Suntec has seen healthy leasing activity, with eBay/PayPal taking a 28,000 sqft lease in Tower 5 (UBS's former space). COSL Drilling, Interoil Singapore (oil & gas), Asia Green Capital (investment bank), Dan Bunkering (bunker trader) are among the new tenants at Suntec City. Despite the economy being technically out of a recession, it is clearly still a tenants' market and the focus on tenant retention remains paramount for all landlords. Nevertheless, with retail contributing to about 50% of overall income, we expect earnings prospects to remain favourable. We believe the spectre of higher retail footfall at Suntec City is likely to transpire when the Circle Line becomes fully operational in 2011. The opening of Esplanade and Promenade stations will materially enhance Suntec's traffic footfall, a case that is currently seen in ION Orchard mall, given its connectivity with Orchard MRT. At current prices, Suntec offers investors an attractive dividend yield of 8.0% for FY10. Stock traded at 4.6% yield between 2005 and 2007. At our target price of S$1.45, stock still offers attractive yield of 6.5%.

Suntec REIT: Hold (Phillip Securities, 28 Oct)
Suntec reported gross revenue for 3QFY09 of $61.9 million (flat year-o-year; - 3.9% qtr-on-qtr); net property income (NPI) was $47.0 million(+3.1% yoy, -3.6% qoq). Distributable income was $47.7 million(+8.8% y-o-y, flat q-o-q). DPU for the quarter was 2.921 cents (+2.3% yoy, -1.9% qoq). On a year-on-year basis, top-line revenue was little changed, however quarterly performance registered negative growth, indicating the still dismal operating environment. Office portfolio reversionary rent continues on its downward slide. We estimate that It has fallen approximately 45.9% from the peak rental achieved in the 1st half of FY08. Although leases were secured at continually lower rents, occupancy rate of the office portfolio has shown encouraging sign of recovery. Office occupancy rate for 3QFY09 was up 1.6ppt at 96.4%. This could indicate optimism among tenants as they lock in the low rentals now. Similarly, the retail portfolio also showed improvement in occupancy. 3QFY09 occupancy rate improved 0.7ppt to 99.1%. The office portfolio accounts for 46% of total revenue while the retail portfolio contributes 54%. Suntec has total debt of $1.88 billion and gearing of 34.3%. Next refinancing requirement is in 2011 with debt of $532.5 million. We believe Suntec portfolio is showing sign of recovery as leasing activities resumed as indicated by Suntec improving occupancy. We upgrade our portfolio occupancy forecast for FY09F from 97.6% to 99.3%. We raise our gross revenue forecast by 4.3% from $233.1 million to $243.1 million. FY09F DPU correspondingly increased by 5.1% from 10.05 cents to 10.56 cents. We raised our DCF derived fair value from $0.94 to $1.13. Maintain Hold recommendation.

Suntec REIT: Buy (DMG, 27 Oct)
Suntec achieved gross office revenue of S$28.7m for 3Q09, 7.9% higher than in 3Q08, driven mainly by higher rents achieved for the Suntec City and Park Mall offices. In 3Q09, committed occupancy for the overall retail portfolio stood at 99.1% (98.4% in 2Q) and 96.4% for office (94.8% in 2Q). For 9M09, Suntec renewed and signed 513,000 sq ft of office space. With this, the remaining office leases expiring in FY09 amounts to approximately 14,000 sq ft or 0.5% of the total office NLA. Suntec has seen healthy leasing activity, with eBay/PayPal taking a 28,000 sq ft lease in Tower 5 (UBS's former space). COSL Drilling, Interoil Singapore (oil & gas), Asia Green Capital (investment bank), Dan Bunkering (bunker trader) are among the new tenants at Suntec City. Despite the economy being technically out of a recession, it is clearly still a tenants' market and the focus on tenant retention remains paramount for all landlords. Nevertheless, with retail contributing to ~50% of overall income, we expect earnings prospects to remain favourable. We believe the spectre of higher retail footfall at Suntec City is likely to transpire when the Circle Line becomes fully operational in 2011. The opening of Esplanade and Promenade stations will materially enhance Suntec's traffic footfall, a case that is currently seen in ION Orchard mall, given its connectivity with Orchard MRT. At current prices, Suntec offers investors an attractive dividend yield of 8.0% for FY10. Stock traded at 4.6% yield between 2005 and 2007. At our TP of S$1.45, stock still offers attractive yield of 6.5%.

Thomson Medical: Buy (DMG, 27 Oct)
Thomson Medical's FY09 earnings came in within our expectations. Revenue achieved was S$67.4m (+11.8%), on the back of a record number of baby deliveries during the year and contribution from its Thomson Women's Cancer Centre (TWCC). Net profit for FY09 grew by 14.2% year-on-year (yoy) to S$12.8m. Going ahead, we expect its TWCC and network of Thomson Women's Clinics (TWC) to continue driving growth. FY10 will see maiden full-year contribution from TWCC and the opening of another TWC, which would contribute to growth. Tapping on the growing popularity of traditional Chinese medicine (TCM), Thomson Medical has also started offering TCM services to its patients. This would serve to complement its existing O&G services, allowing it to offer East and West treatments to patients. We think that these initiatives would help boost its branding and in turn, contribute to growth. Meanwhile, its hospital project in Binh Duong, Vietnam (Hanh Phuc Hospital), which is likely to commence in 3Q FY10, will also boost earnings growth. Management declared total dividends of 2.8 S¢ per share (including 0.3¢ special and 1¢ interim) for FY09. It is trading at a decent yield of 4.5%. Based on its peer average (ex-Parkway) of 16x, we arrive at a 12-month target price of S$0.78. Maintain BUY.

Noble Group: Buy (OCBC Research, 27 Oct)
Noble has recently strengthened its balance sheet via an equity placement and a separate non-convertible bond issue, raising net proceeds of over US$1.4b. The group's enhanced capitalisation not only equips it with financial flexibility for acquisitions, it also ensures sufficient working capital in the event of a surge in commodities prices. Furthermore, the bond issue effectively extends the group's debt maturity profile. We expect commodities to be key beneficiaries of an economic recovery and highlight Noble as our preferred pick within this sector by virtue of its diverse exposure to hard and soft commodities, coupled with a strong balance sheet and proven execution. We maintain our BUY rating on the stock and raise our fair value estimate to S$3.14 (from S$2.67) based on 17x FY10F PER.

Olam International: Buy (OCBC Research, 27 Oct)
Having raised US$800m via an equity placement and convertible bond issue, Olam is well equipped to execute its inorganic growth plans. The group plans to expand into upstream and midstream supply chain activities in a bid to capture a wider profit pool along the value chain and to boost profit margins. We believe that Olam's next phase of growth will be driven by inorganic growth – a tried and tested method that has generally worked well for the group. The emergence of distressed assets presents Olam with opportunities to acquire at discounted valuations. Olam is well positioned to leverage on the economic recovery by virtue of its global reach and extensive portfolio of agricultural products. We maintain our BUY rating on the stock and raise our fair value estimate to S$3.33 (from S$2.85) as we rollover our valuation to blended FY10/11

Armstrong: Buy (Kim Eng, 26 Oct)
We expect the company to report sales of about $48m (flat year-on-year; +15% qtr-on-qtr) and net profit of $4m. Although flat, the topline performance represents a significant improvement since its worst quarter (1Q09, -30% yoy) and its second sequential quarter of improvement. Net profit is expected to grow 31% qoq but 71% yoy as 3Q08 was depressed by a $2.5m charge for a forex mark-to-market exercise. We believe monthly sales have fully recovered from the slump of the previous four quarters, driven by a recovery in almost all business segments but especially electronics and automotive. Armstrong is likely to show positive yoy growth again by 4Q09. In addition, margins are likely to have continued to improve. EBITDA margin more than doubled qoq in 2Q09 from 6.9% in 1Q to 14.1%. Seagate and WD reported above-expectations results and forecasted strong demand ahead. For the Jan 2010 quarter, Seagate expects revenue of $2.75-2.85b while WD targets $2.25-2.35b vs expectations of $2.75b and $2.2b respectively. We expect strong demand for HDDs from consumers buying more storage as part of the growing social media trend and enterprises upgrading their PCs for the Windows 7 transition. Meanwhile, the China auto market continues to zoom ahead with Sep sales vaulting 78% yoy to 1.33m units, the seventh consecutive month of growth, driven by tax cuts and government stimulus spending. Not only will Armstrong benefit from this rising tide, its own efforts to widen product line and customer base will drive growth. We are raising our full year forecast from $9.1m to $13.1m, mainly on the back of higher margin assumptions. We further raise our price target to $0.39 (from $0.34) as we continue to use 12x FY10 forecast to value the stock.

SIA Engineering: Buy (UOB Kay Hian, 26 Oct)
Passenger throughput at Changi Airport has rebounded to 6% year-on-year (yoy), the first growth for the year. Even prior to that, flight arrivals at Changi had bucked the trend with Jan-Aug 09 growth of 2.5% yoy. We expect higher flight arrivals for the next few quarters, which will benefit SIA Engineering's (SIAEC) line maintenance income. For SIAEC, the quantum of flight arrivals is paramount as it performs line checks on about 86% of all commercial flights in Singapore. This is an effective captive business with low risk. We estimate flight arrivals at Changi will rise by 4.0% in FY10 and a further 5.0% in FY11, once integrated resorts come on stream. This should boost line maintenance revenue by 3.0 % and 6.0% in FY10 and FY11, respectively. In FY09, line maintenance revenue accounted for 35% of operating revenue but 68% of operating profit. Operating margins had also steadily increased from 12% in FY07 to 20.7% in FY10. With greater economies of scale, we expect further improvement in margins in FY10 and FY11. Given the improved operating environment, we now accord the stock a 15.9x PE rating (+1 standard deviation) on two year’s average earnings. This provides a target price of S$3.52. Upgrade to BUY.

Frasers Centrepoint Trust: Buy (DMG, 23 Oct)
FCT has reported a 3.5% year-on-year gain in capital values to S$1.1billion due to the strong increase in its net property income. (NPI) We project NPI from the existing assets to rise by 7% in FY10, bringing about a corresponding increase in capital values, and a fall in gearing. We expect FCT's gearing to hover below 30% in FY10. With its strong balance sheet, FCT has substantial debt headroom to acquire new assets. We expect Northpoint 2 and YewTee Point to be acquired within the next 12 months. We value both assets at ~S$300m, with NPI yields between 5.7-6.1%, above its WACC cost of 5.2%. With the acquisitions, FCT's asset under management (AUM) will grow by 28% to S$1.4b by end-2010. Our valuation assumes the acquisition of these assets by mid-FY10. With a low cost of equity, we expect the above acquisitions to be accretive, strengthening FCT's retail oligopoly status in the northern region of Singapore. With an expanded AUM and equity base, concerns over FCT's poor stock liquidity will be addressed. We expect a further re-rating on the stock as yields could compress closer to its 5% heyday levels seen in 2006-08. We raise our FY10 DPU estimate by 7.6% to 8.26¢, providing an implied yield of 6.6% At our target price of $1.53, FCT trades at 5.4% FY10 yield, a reasonable peg, in our view. Note that FCT traded at 4.6% during heydays of 2006 and 2007, suggesting that the stock has further legs to ride up the economic recovery.

SATS: Neutral (DMG, 23 Oct)
SAT's 2QFY10 earnings grew 26.2% year-on-year (yoy) to S$40.9m, which was in line with our estimates. Contribution from SFI's business helped offset the 10% yoy decline in aviation-related revenue, resulting in a 45.4% yoy growth in Group revenue to S$362.3m during the quarter. On a qtr-on-qtr (qoq) basis, revenue was up 3% as all segments saw improved business; and earnings growth was a mild 1.2%. Due to a $2m provision for staff bonuses during 2Q10, EBITDA margin was 17.9% (vs 1Q10's 18.9%), which would otherwise have been 18.4%. Management declared an interim dividend of 5.0 S¢ per share. We are maintaining our FY10 earnings estimates of S$169.2m. The Aviation segment saw improved business volumes in 2Q vs 1Q, indicating that the segment has probably "bottomed out". The increased flights handled was largely due to more flights from the LCCs. Management maintains that recovery in this segment is likely to remain gradual. SFI's revenue fell 14% YoY, but business volumes remain healthy. The decline was largely due to the weaker £ during the quarter and the cessation of its Irish business in Dec 08. Business volumes at its UK business are expected to remain healthy, especially in the coming winter months, when demand for its soups and desserts are stronger. While it is still working through its plans to expand into Heathrow airport, SATS has managed to increase its supply into the UK aviation segment through its juices and soups. now made available on more airlines. Management will continue to evaluate possible revenue synergies, while realising more cost savings from the acquisition. We arrive at a revised target price of S$2.63. We remain Neutral on the stock.

Ezra Holdings: Buy (OCBC Research, 22 Oct)
Ezra has announced that it will issue US$100m worth of 4% convertible bonds. In a separate note, its construction and production arm, EOC Ltd (EOC), has secured its largest-ever contract to operate a new Floating Production, Storage and Offloading vessel (FPSO) for Vietnam's Chim Sao oil project. The contract is worth up to about US$527m for six years and up to about US$477m for the remaining option of six years. The group has positioned itself well in the recent downturn and we are optimistic of its ability to capitalize on opportunities that are emerging. Meanwhile, the EOC contract announcement is an endorsement of EOC's operating capabilities. We have tweaked our earnings estimates to take into account EOC's increased contribution to Ezra's earnings, but given that the earliest impact will be felt in 4QFY11 (assuming no delays), and the fact that our valuation is based on FY10F earnings, we are keeping our fair value estimate at S$2.27. Maintain Buy.

Keppel Land: Buy (Kim Eng, 22 Oct)
KepLand has announced a very strong 3Q09 PATMI of $78.5m, beating expectations. This is primarily due to better-than-expected associated profits, mainly from projects such as the Marina Bay Residences, Reflections at Keppel Bay and The Botanica in Chengdu. This brings year-to-date PATMI to $173.6m – about 85% of full-year consensus estimates. Building on the sales momentum gathered in 2Q09, KepLand further sold about 900 units in 3Q09 in China, mainly in Chengdu and Wuxi, bringing the total units sold there to-date to 2,350. The sale of units elsewhere is also brisk, particularly in Vietnam and Jakarta. Overall, overseas markets accounted for 31.2% of KepLand's 3Q09 PATMI. Capitalising on renewed interest in mid-end properties, KepLand has launched and sold more than 80% of the 56-unit Madison Residences, achieving a median price of $1686 psf, exceeding our ASP assumption of $1500 psf. 7 units of the Promont (total 15 units) have also been sold at a median price of $1857 psf. We have correspondingly lowered our ASP assumption for the Promont to $1900 psf from $2000 psf. KepLand named Servcorp as the latest tenant to sign up for 22,000 sq ft of space at MBFC Tower 2, bringing the pre-commitment level of Phase 1 (1.6m sq ft in total) to 67%. In addition, the Group also revealed that 50,000 sq ft of space has been pre-committed at the Ocean Financial Centre. While we think it’s still too early to be optimistic about the office sector, these pre-leasing announcements are quite encouraging after over half a year of stalemate. Besides renewed sales activity in Singapore, KepLand could benefit from robust sales in China and Vietnam going into 2010. We have raised our FY09-10 forecasts by 22.6% and 15.5% respectively. Maintain our BUY recommendation at a new target price of $3.28, pegged at a 10%-discount to FY10 RNAV of $3.64.

CapitaCommercial Trust: Hold (Kim Eng, 22 Oct)
Despite the subdued leasing outlook in the office sector, CCT posted a 21%- yoy increase in its distributable income to $52.1m, in-line with expectations, translating to a DPU of 1.85 cents. Year-to-date net property income fared better than expected due to a more resilient Grade A occupancy rate than expected, but it is negated by higher-than-expected borrowing costs. The gap between CCT's passing office rent ($8.49 psf as of 3Q09) and market rents have narrowed rapidly. Based on CBRE's estimates, the average prime Grade A office rent is $8.80 psf. While business sentiments appear to have improved slightly with the economy, we think that the net effect on CCT's portfolio is likely to be flat rental reversion for FY10. CCT's overall portfolio occupancy rate decreased 2.2 ppts to 94% in 3Q09, mainly due to Starhub Centre's occupancy rate falling to 66.4%. However, due to active tenant management, the occupancy rate of CCT's Grade A office space is maintained at a healthy 97.9%. We expect CCT to actively increase the occupancy rates of Starhub Centre and Wilkie Edge over the next few quarters. CCT has little short-term refinancing issues. $235m of debt matures in 2010, which is likely to be repaid in part by the balance of about $140m from the rights issue proceeds. About $1b of debt matures in 2011, but CCT has about $3.0b worth of unsecured assets which could be secured against new loans. We have raised our target price to $0.94, based mainly on a higher terminal growth rate assumption of 1% as the economy moves out of recession. However, we think it is too soon to be optimistic about the office sector, as there is a possibility the pace of economic recovery may not keep up with the oncoming office supply. Maintain Hold.

Armstrong Industrial: Buy (DMG, 22 Oct)
It was recently reported that China experienced a 78% YoY growth for its total automotive sales during Sep 09 and that the country had widened its lead over the US as the world’s top auto market. With total sales in 2009 expected to come in at no less than 12m vehicles which already represents a 28% growth over the 9.38m vehicles in 2008, we believe that this positive macro environment would bode well for Armstrong's Automotive business that accounts for 26% of Group revenue. Armstrong’s major customer Seagate recently released its 1QFY10 results that surpassed analysts' forecasts and more importantly, guided that global demand for HDDs is still increasing and hiked its forecast for overall disk drive demand to be in the range of 153 – 160m units for 4Q09, an improvement from its previous expectations of 135 – 140m for 3Q09. We therefore opine that Armstrong would also benefit from the improved outlook for HDDs, given that this business accounts for 29% of Group revenue. Given these developments, we have thus tweaked our forecasts for both FY09 (+2.5% and +1.8% for sales and net profit respectively) and FY10 (+3.3% and +3.4% for sales and net profit respectively) and we now expect Armstrong's 3Q09 revenue to be S$50.1m (+20.1% QoQ, +3.3% YoY) while net profit is estimated at S$3.8m (+22.6% QoQ, +58.3% YoY). Our BUY recommendation stays while target price is now revised to S$0.30 (from S$0.295 previously) based on 10x FY10 P/E, which is the average the stock traded at during recovery periods.

Adampak: Buy (DMG, 22 Oct)
Recent developments in the hard disk drive (HDD) industry continue to be positive whether be it from a bottom-up or top-down perspective. HDD major Seagate (Adampak's largest customer) recently released its 1QFY10 results and 2QFY10 guidance that both topped Wall Street's estimates, while YoY growth of global PC shipments in 3Q09 at 2.3% as measured by market research firm IDC also exceeded their own forecasts for around a 3% drop. Also striking an upbeat note, Gartner recently revised its 2009 forecast for worldwide PC sales to decrease 2% year-on-year (yoy) an upward revision from its previous expectations of a 6% decline. Given the improving fortunes of the PC industry, the HDD sector would therefore be accordingly lifted given that most PCs are still using HDDs rather than flash or solid state drives – Adampak would thus be positively impacted. For 3Q09, we also estimate that Adampak would see revenue and net profit come in at no less than US$14.1m (+6.8% qtr-on-qtr) and US$1.57m (+8.3% qoq) respectively. Accordingly, we have raised our forecasts for both FY09 (+2.3% and +3.6% for sales and net profit respectively) and FY10 (+4.1% and +4.3% for sales and net profit respectively). We have also increased our dividend forecast from 0.75 S¢ to 1.0 S¢ for 4Q09 as we believe that Adampak's improved cash hoard would enable it to pay more dividends. Based on a 57% dividend payout ratio for our DDM, our target price is t herefore raised to S$0.295 (from S$0.27 previously). Maintain BUY.

Keppel Land: Sell (Citi Research, 22 Oct)
For 3Q09, Keppel Land reported a net profit of S$78.5m, up 34%, a S$20m rise QoQ. The increase was driven by the hotels, resorts, property services and others division which reported a more than doubling in revenue to S$34.7m and a profit of S$10.2m from a loss of S$6.9m in 2Q09, due to higher project management fees from managing Marina Bay project. First 9-months earnings was S$173m, about 76% of our full-year estimate of S$228m and 86% of consensus' S$200m. The group sold 23 units at The Reflections, seven out of the 15 units at The Promont, 109 out of 118 units at Carribean and over 80% of the 56 units at The Madison. Keppel Land also sold 900 units in China, mostly The Botanica in Chengdu and Wuxi. Keppel Land also secured a new tenant, ServCorp, which pre-committed 22,000 sqft at Tower 2 of MBFC, bringing the pre-commitment rate at MBFC phase 1 to 67%. We have raised FY09E earnings estimates to reflect the better-than-expected sales at Caribbean (completed) and The Madison. FY10E earnings are lowered as earnings for Caribbean were brought forward, and FY11E earnings are adjusted up slightly. We maintain our view that the stock is overvalued at above our RNAV estimates of S$2.50. Even on our best-case valuation, i.e. prime grade A office capital value at S$1500psf and residential prices rise 20%, its RNAV would only be S$2.83. The stock has been hovering at current level since Jul-09 and we see no catalyst for any immediate upside.

Keppel Land: Buy (DMG, 22 Oct)
KepLand's 3Q09 PATMI was in line with our estimates, which was largely driven by robust residential sales. We believe the outlook for residential sector (50% of RNAV) continues to look positive across the geographies which KepLand is exposed to, especially Singapore and China. KepLand notched a 70.0% YoY surge (+35.0% qtr-on-qtr) in 3Q09 PATMI to S$78.5m, mainly driven by robust residential sales in Singapore and China, a net profit of S$10.2m (vs net losses in 3Q08 and 2Q09) from its Hotel/Resorts division and improved operating margins. 9M09 PATMI of S$173.6m is within our expectations (75% of FY09F PATMI), which are at the higher end of consensus estimates.Topline was up 22.6% year-on-year (yoy) to S$227.8m, with all four business segments posting improved performances. Looking ahead, we expect KepLand to continue riding on the rising residential demand in China's lower-tier cities, where 86% of its 3.5m sqm Chinese landbank is exposed to. While its domestic residential footprint has centered on the high-end segment, KepLand's recent participation in the Lorong Chuan GLS site's bidding suggests it is also interested in adding a mass-mid market project. With its high-end landbank still adequately made up of 221-unit Marina Bay Suites and residual sites of Keppel Shipyard, we reckon it will continue to target upcoming GLS sites for mass-mid end exposure. Current net gearing of 0.19x implies ample debt headroom for new acquisitions in addition to cash position of S$1.3b. However, we believe the counter's short-term upside would be capped by the still-weakening office sector, which accounts for 33% of our RNAV. We are leaving our target price of S$2.98 unchanged, pegged at parity to base case end-FY10 RNAV with a potential 10% price upside.

Olam International: Hold (Kin Eng, 21 Oct)
Olam's announced in September the agreement to acquire an almond plantation from Timbercorp Limited for a total consideration of A$128m in cash. This is Olam's 2nd largest acquisition to date and will make it the largest Almond grower in Australia and 3rd largest globally. We believe this deal fits in well with management's upstream initiatives which will help improve overall group margins. The assets were acquired from Timbercorp, which went into voluntary administration in early 2009. We believe the price represents value and is substantially below replacement cost. Management expects it to yield pre-tax profits of A$50m a year during steady-state in 2-3 years, although the transaction is expected to be earnings and value accretive from FY10. With Temasek's recent take up of the additional US$100m upsize option of the convertible bond issue, Olam's war chest has been boosted to more than US$1b. This will be spent on acquisitions over the next three years. With the un-utilised cash used to pay down existing debt of more than $3b, we do not expect major impact on net interest expense. With Olam's acquisitions typically reaching steady-state in 2-3 years, we believe there could be a potential mismatch between equity dilution and earnings contribution from new acquisitions. This could result in some share price overhang at this price. We keep our earnings estimate intact even as we factor in the convertible bonds as we have already factored in acquisition-fuelled growth. While we are optimistic of Olam's long-term outlook, we maintain a hold for now as we await more details of its next phase growth strategy. Our 25X FY10F target price at $2.98 represents a limited 6% upside.

Olam International: Outperform (CIMB, 21 Oct)
We maintain an Outperform on Olam on the back of an upturn in the economic cycle and a sizeable war chest from recent fundraisings. Our FY11-12 EPS estimates have been lifted by 4-14% following higher price and volume assumptions from a stronger than expected economic recovery, and higher margins. Our target price rises to S$3.50, based on 21.5x CY11 P/E, its historical mean since 2005, from S$2.75, based on 22x CY10 P/E, as we upgrade our earnings estimates and roll over our target price to end-CY10. We are positive on the company's expansion into upstream and value-added processing assets as its supply chain integration should reduce overall supplier default risks, and differentiate Olam from the competition, resulting in customer stickiness and higher margins. Having attained scale in its core supply chain management business, management is now trying to increase margins instead of just the topline. By 2015, management aims to lift net margins above 3% from 2% by expanding into selective upstream (plantations) and value-added processing assets with much higher margins than the current SCM business. Ownership of plantations would provide Olam with supply security and reduce its supplier default risks. It is common especially in times of rising commodity prices, for suppliers to default on deliveries as they can sell at higher prices in spot markets. Also, the ability to provide value-added services to customers can help to differentiate the company from competitors, locking in customers for the longer term. We continue to be bullish on commodity-related stocks on the back of the upturn in the economic cycle. Olam's sizeable war chest from recent fund raisings puts it in a prime position to capitalise on smaller competitors' lack of credit, to gain market share and acquire assets cheaply. Upstream and downstream expansion should also improve its supply capability and lock in customers.

Noble group: Outperform (CIMB, 21 Oct)
Newswires have been reporting that Noble is part of a consortium looking to purchase a s 49.998% stake in the Koornfontein coal mine in South Africa for ZAR686m (US$93.7m). The bidding consortium consists of Noble's 60% subsidiary, Africa Commodities Group (AFC), and the Bravura Group. Separately, Noble announced that it plans to issue new 10-year notes (due 2020) in conjunction with a tender offer to buy back half (US$340m principal value) of its outstanding US$680m 6.625% bonds due 2015. The terms of the new notes are not available as pricing is not yet confirmed, but the issuance would be a positive step by the company to take advantage of its recent credit upgrade by Moody's and lock in its long-term funding. Proceeds will be used to buy back US$340m of the 2015 bonds, with the remainder allocated to general corporate purposes, effectively extending the maturity of its US$340m debt by five years.. We expect Noble to benefit directly from rising coal prices due to its significant equity stakes in coal mines (67% of Donaldson, 87% of Gloucester, 30% of Middlemount) and rising coal production. Management intends to produce 16m tonnes by 2013 from 4m tonnes currently. Forward coal prices have risen on continued strong demand from China and India, and a stronger-than-expected global recovery, with FY13-14 prices rising by as much as US$17/tonne since July. We continue to be bullish on commodity-related stocks given the upturn in the global economy. The proposed straight bond issue (as opposed to a convertible bond) is a positive as it will not result in dilution for equity holders. Our target price has been raised from $2.65 to S$3.30.

CapitaCommercial Trust: Sell (DMG, 21 Oct)
CCT has reported a 3Q09 DPU of 1.85¢. Annualised DPU came in at 6.9¢, 10% above our FY09 forecast of 6.3¢ (6% above the Street's 6.5¢ estimates). Net property income was up 15.5% due to cost management measures and positive rental reversion, in particular One George Street which chalked an implied passing rent of about S$12/sqft, above our expectation of S$9/sqft. Overall portfolio occupancy fell to 94%. CCT saw a 2ppt fall in occupancy owing largely to the relocation of Starhub out of Starhub Centre in 3Q09. Vacancy rate as a result for Starhub Centre shot up from 7% to 34%. Management said they are in talks with various tenants to re-let the vacant spaces. On the positive note, core properties like Capital Tower, Raffles City and Six Battery Rd building continued to enjoy almost 100% occupancies. CCT's portfolio rents of S$8.49/sqft are above 3Q09 spot rates of S$7.50/sqft. Our channel checks indicate that some landlords in prime areas are currently negotiating rents at between S$6-7/sqft, 20% lower than 3Q09 figures. Despite the economy being technically out of a recession, it is clearly still a tenants' market and the focus on tenant retention remains paramount for all landlords including CCT. In our view, most office landlords will likely shift their focus on occupancy optimisation at the expense of rental rates, putting further pressure on rents in the coming quarters. We maintain SELL on CCT, with our target price of S$0.96. At current price, CCT offers investors a dividend yield of 6.8% for FY10, compared to its historical yield of 5.7% between 2005 and 2007. We view risk-returns on the counter as unfavourable and recommend investors to sell into strength. Our recommendation is also predicated on the subdued earnings visibility within the office space. Key risks to our rating and TP include a faster-than-expected recovery in the office sector.

Goodpack: Buy (DMG, 21 Oct)
What started as a humble idea 20 years back has since taken a life of its own, transforming Goodpack to become the owner of the world’s largest fleet of Intermediate Bulk Containers (IBCs), which are used for packing and transporting bulk and liquid cargoes. It has set its sights to extend on its lead by growing its fleet from 1.9m boxes currently to 2.5m by 2011, which seems like the right time to do so, considering that we are at the cusp of a global trade recovery. Given the superiority of its IBCs in terms of cost and environmental friendliness (carry 20-30% more than wooden crate, contamination free and reuseable), Goodpack is likely to remain as one of the top choices for the shipments of rubber and liquid. Goodpack currently operates in three business segments across 68 countries – natural rubber (~50% global market share), synthetic rubber (~15%) and juices and edible oil (~6%). We expect the global shipment volume of these products to bounce back in FY10 as the world recovers from the worst economic crisis in 80 years. Expansion into six new segments and four new countries. Goodpack intends to diversify its revenue stream by venturing into six new business segments which include automotive parts and ink. The global sales of automotive parts are expected to reach US$501b by 2013 (4-yr CAGR: +0.4%) while those of ink are expected to reach US$4.8b by 2014 (4-yr CAGR: +1.8%). While the industry growth may not be the most exciting, we believe there is scope for market share gains. Goodpack also plans to extend its global footprint to Middle East, Russia, South Africa and Taiwan.
Attractively valued. At S$1.12, Goodpack is trading at 12.0x FY10 and 10.6x FY11 P/E, which is lower than its 5-year historical average P/E of 18.9x. We value the company at S$1.44. Note that the potential upside from Goodpack’s imminent foray into six new business segments has not been accounted for.

Indofood Agri Resources: Buy (UOB Kay Hian, 20 Oct)
IFAR's CPO production increased slightly by 3% year-on-year (yoy) in 1H09. We expect strong CPO production in 3Q09, which is likely to continue into 4Q09. The management has guided a 10% yoy production growth in 2009, which is close to our expectation of 11% yoy for 2009. We project strong CPO production of 15% yoy for 2010, coming from yield recovery in 1H10. In 2008, IFAR produced a total of 714,000 tonnes of CPO. Strong CPO production growth is supported by young age profile with an average age of 12 years old, which is the prime production age. Sugar planting is also on track with planted area of about 6,011ha as of Jun 09. Currently, the entire sugar cane production is sold to third party millers. Sugar mill will start to operate once the planting reaches total planted areas of 18,000 ha by 2011. IFAR's cooking oil division is likely to report better results in 2H09 due to sales volume pick-up and higher average selling price (ASP). Sales of cooking oil declined slightly in 1H09 (-5% yoy) but are expected to pick up in 2H09, which is usually higher on seasonality factor. The decline in 1H09 was mainly due to the switch from high-end branded cooking oil to mid- and mid-low brand while IFAR only focuses on high-end branded cooking oil. Cooking oil and fats division accounted about 13% of total EBITDA but contributed 62% of total external sales in 1H09. Maintain BUY on IFAR with a target price of S$2.00, based on 12.0x 2010 PE for a mid-cap and an integrated plantation company. We expect IFAR's core net profit to decline slightly by 2% yoy to Rp1,210b in 2009 due to lower CPO ASP as well as the cooking oil and fats division. For 2010, we expect core net profit to post strong growth of 32% yoy to Rp1,592b, supported by strong CPO price as well as sturdy production growth.

SingTel: Buy (OCBC Research, 20 Oct)
SingTel managed to clinch the 2010-2012 broadcast rights for the English Premier League from the incumbent StarHub this after just one round of bidding, which suggests that SingTel may have paid handsomely for these rights. In addition, SingTel has scored another coup over StarHub by securing the exclusive broadcast rights to a suite of sports networks and services from ESPN STAR Sports (ESS) from mid-2010 – this will add more sports content to SingTel's fledging mioTV line up. Overall, we believe that the developments in the pay-TV space are positive for SingTel – especially as it works towards "stickiness" ahead of the New Broadband Network (NBN) launch. This is also in line with SingTel's vision to transform itself from a traditional telco into a leading multi-media solutions provider. With its 2QFY10 results just around the corner, we hold off revising our estimates. However, we continue to favour SingTel's defensive earnings and potential to expand regionally. Maintain BUY with S$3.51 fair value

Ascendas REIT: Neutral (DMG, 20 Oct)
Reflecting the stabilisation in global demand, A-REIT's portfolio occupancy declined marginally to 96.8% from 97.1% in 2Q09. For its multi-tenanted properties, occupancy moderated to 93.3% from 94%. According to management, A-REIT has about 12,098 sqm of its 2m sqm of NLA (0.4% of gross monthly rental income) which could run the risk of default. Default risk from this tenant is almost negligible considering that A-REIT has about 12-month security deposits from the tenant. As of Sep 2009, outstanding accounts receivable past due for more than two months is about S$0.4m or 0.1% of gross revenue. Following its S$296m equity fund raising exercise, A-REIT has a sturdier balance sheet with a gearing of about 30%. At the current gearing level, we believe there is little need for management to further recapitalise its balance sheet, easing concerns that our forecast dividend yield would be diluted. A-REIT has indicated that about S$120m of its recent proceeds could be used partly or wholly fund potential acquisition and/or built-to-suit development opportunities. At current prices, A-REIT offers investors a stable dividend yield of 6.8% for FY10 and FY11 – with dividends well supported by the long-term leases on single-tenanted buildings which accounts for 50% of revenue. Between 2005 and 2007, A-REIT traded at 6% forward yield. We recommend buy on dips as stock has rallied 80% since Mar 09. Recommend entry at S$1.85.

Ascendas REIT: Buy (Citi Research, 20 Oct)
A-REIT reported DPU of 3.48cents for 2QFY10. Inclusive of the 1QFY10 DPU of 3.62cents, 1HFY10 DPU amounts to 7.1cents, ahead of both ours and consensus estimates of 12.8 cents. Despite revenue rising just 5.1% year-on-year (yoy) Compared to 4QFY09, occupancy fell from 95.3% to 94% in 1QFY10, while its portfolio occupancy fell from 97.8% to 97.1%. However, its Business & Science Park and High-tech properties are still experiencing positive rental reversion, albeit at a slower pace. We expect NPI for 2HFY10 to be stronger with completion of Plaza 8 Changi Business Park which should help offset potential decline in occupancy rate in its multi-tenanted buildings. However, DPU is likely to be weaker due to the effect of its recent placement. We raise our estimates by 3.5% to 3.6% following the better-than-expected results. We have also raised our target price to S$2.23. We reiterate our Buy on A-REIT on the back of the strong set of results. It remains our most preferred REIT given its valuation and its steady stream of income.

Ascendas REIT: Buy (UBS Research, 19 Oct)
Revenue and net property income were flat qtr-on-qtr (qoq) but rose 5.1% and 11.7% year-on-year (yoy) due to lower property tax and utility costs. Signing rents fell 2-8% and occupancy rate fell to 96.8%, both well within UBS expectations. Management is working to refinance the S$300m term loan due in Mar 2010, potentially for an unsecured 7-yr loan at c4.3%, broadly in line with our expectations. In Q309, manufacturing output, non-oil exports (NODX) and the Purchasing Managers’ Index (PMI) all showed signs of recovery. If the economy recovers well in 2010, industrial rents may not fall as steeply as our forecast of 10% decline for 2010. AREIT management does not expect any writedowns for FY09/10. We observe that strata-subdivided industrial transaction volume has recovered and prices seemed to have risen in Q309 to S$275psf from S$211psf in Q209. Our top picks remain Capitaland, CDREIT, CCT and AREIT. AREIT is weathering the recession well and is the only SREIT with the capacity to develop assets and the potential to acquire assets without raising additional equity. We expect AREIT to acquire/develop assets of around S$300m in the next 12 months.AREIT provides an attractive 6.3% FY10 yield, compared with CMT's 5.7%. Maintain Buy with price target of S$2.25.

M1: Outperform (Credit Suisse, 19 Oct)
M1 reported 3Q results on 16 October evening. The operating results were largely in line with expectations with its year-to-date EBITDA of S$316 mn representing 73% of our full-year forecast. Promotional activities have helped increase the number of post paid subscribers by 7,000 and prepaid base by 41,000 in 3Q. However, post-paid monthly average revenue per user (ARPU) has declined marginally to S$59.9 and prepaid monthly ARPU fell 5% sequentially to S$14.7 in 3Q. The capex guidance for 2009 has been raised to S$120 mn (from S$100 mn), as the company has been able to accelerate its fibre backhaul rollout. When completed, this is expected to result in substantial savings in leased circuit costs. Dividend guidance is unchanged at 80% of net profit. We continue to believe that M1 looks extremely attractive on comparative multiples versus its Singapore telco peers. Also, the stock remains one of the highest dividend yield names in Singapore.

SPH: Outperform (Credit Suisse, 19 Oct)
SPH's management confirmed that the company would continue to selectively look at acquiring residential development sites of around S$200-300 mn. At the same time, SPH is considering investing further in retail investment properties. Management also reiterated that the company does not plan to divest Paragon. While we would prefer to see SPH focus on its core media business, attractive media opportunities (especially in Singapore) admittedly remains highly limited to the company. Management expects the company's ad revenue to continue moving in tandem with the economy. Specifically, display ads have performed relatively well, but management sees more room for improvements in classified job ads. We maintain our view that SPH is a key beneficiary of a pick-up in private consumption in Singapore. Our sum-of-the-parts-based target price of S$4.41 represents 13% potential upside from the current levels.

GuocoLand: Overweight (JP Morgan, 19 Oct)
We upgrade GuocoLand to Overweight with a 12-month price target of S$2.55/share, as we see more upside risk from hereon. We believe that the market has more than priced in the group's high gearing and ongoing legal issues with regards to Beijing DZM project, trading at 20% discount to our ex-DZM RNAV of S$2.55/share and 10% discount to book of S$2.32/share. Resolution on any of the above issues would be a positive catalyst for the stock, in our view. GuocoLand announced 1QFY10 results, net profit of S$12.4million including S$7.5million forex gain and S$2.4million mark-to-market loss on derivative financial instruments. Core net profit came in slightly below our expectation, as most of the Singapore projects sold have yet to be recognized. The group generated S$117.7million operating cash in 1Q10, continued the positive trend thanks to the pick up in property markets in both China and Singapore. Gearing as of 30 Sep decreased from 112% to 108%. Our current RNAV estimates do not include valuation of Beijing DZM project estimated at S$1billion. A successful resolution to the project either through legal proceedings or a sale of the project at an appropriate price would potentially add S$1.20/share to our valuation.

MobileOne (M1): Hold (Phillip Securities, 19 Oct)
For 3Q09, M1 reported operating revenue of S$188.4m (-4.2% year-n-year)and net profit of S$34.2m (-0.7% yoy). Mobile telecommunications services and international call services posted decline in revenue to S$140.8m (-5.6% yoy) and S$31.8m (-1.6% yoy) respectively. Mobile telecommunications revenue fell due to the competitive tariff and bundling discounts. For international call services, it was because of the decrease in roaming traffic. Meanwhile, fixed network services reported revenue of S$0.6m. Moreover, handset sales increased slightly to S$15.3m (+0.4% yoy) because of higher sales volume. Operating expenses was also lower at S$146.1m (-4.4% yoy).Because of lower revenue, the net profit margin was lesser at 18.2% in 3Q09 compared to 19.5% in 2Q09. However, the net profit margin of 18.2% in 3Q09 was higher than 17.5% in 3Q08 as a result of lower operating expenses. The number of post-paid customers rose by 0.8% from 886,000 in 2Q09 to 893,000 in 3Q09. However, its post-paid market share fell from 26.5% in 2Q09 to 26.0% in 3Q09. Furthermore, the number of prepaid customers rose by 5.2% from 783,000 in 2Q09 to 824,000 in 3Q09. This caused its pre-paid market share to improve from 24.5% in 2Q09 to 25.0% in 3Q09. We feel that M1 should continue to work on improving its post-paid market share against bigger rivals SingTel and StarHub through innovative products, advertising and promotion programs as well as attractive discounts. M1 anticipates net profit to be comparable to 2008. It will offer iPhone by the end of the year and we expect this to help M1 achieve a larger increase in the number of post-paid customers. We have a hold recommendation as M1 is likely to achieve limited growth in the local telecommunications market. Using the free cash flow to firm model, we derive a fair value of S$1.78. The dividend yield for the stock is 7.2%.

MobileOne (M1): Buy (OCBC Research, 19 Oct)
M1 saw its 3Q09 revenue fall 4.2% year-on-year (yoy) and 1.1% qtr-on-qtr (qoq) to S$188.4, as the telco continued to feel the impact of the economic slowdown; and due to increased pricing pressure, EBITDA slipped 0.6% yoy and 4.0% qoq to S$75.2m, while net profit eased 0.6% yoy (down 7.8% qoq) to S$34.2m. For 9M09, revenue fell 6.7% to S$565.3m, meeting around 72.6% of our FY09 estimate, while EBITDA slipped 3.1% to S$230.4m and net profit eased 0.3% to S$113.1m, meeting 79.5% and 78.6% of our full-year estimates, respectively. Going forward, M1 expects the operating environment to remain "challenging" as it has yet to see a firm or sustainable recovery in consumer spending. Nevertheless, it will continue to push for disciplined cost management and improvement in efficiency; this should keep its service EBITDA between 44% and 46%. While M1 has revised its 2009 capex back to the original S$120m (also expects to revert to 10% of revenue after 2010), it has maintained its 80% payout ratio. We continue to like M1's defensive business and also see it as one of the biggest beneficiaries of the NBN initiative. Maintain BUY with S$2.12 fair value.

Ying Li International : Buy (DMG, 19 Oct)
Ying Li is the first and only SGX-listed pure play commercial property developer in the city of Chongqing. Since its establishment in 1993, Ying Li has successfully developed seven landmark commercial buildings (measuring ~ 500,000 sqm in GFA) within the prime districts of Chongqing. Given its enviable track record and sizeable landbank of ~ 950,000 sqm in GFA, we believe Ying Li is well-poised to capitalise on Chongqing's growing economic growth prospects. We view most positively Ying Li's proven track record in undertaking urban renewal projects, which should allow it to clinch a majority of the seven properties (measuring 1m sqm) up for grabs within the city's newly-earmarked international financial center at Wuyi Road. Current landbank of 950,000 sqm in GFA will enable Ying Li to benefit from the city's rising economic growth, urbanisation and disposable incomes, as well as further boost its recurrent income stream. At 0.06x (post recent S$30.0m share placement), Ying Li's net gearing is one of the lowest amongst S-Chip property developers. Having built on its first mover advantage and attained a proven track record here, we think Ying Li is well-positioned to capitalize on the government's continued city-redevelopment initiatives. Ying Li has outperformed the STI and its peers over the past quarter. While current P/B of 5.2x implies rich valuations, we believe its NAV remain significantly undervalued, given that several properties under development are valued at cost. Based on our estimates, Ying Li should trade at 0.7x RNAV. Maintain Buy with target price at $1.20

Biosensors: Buy (Nomura,16 Oct)
Drug-eluting stent (DES) company Biosensors is at an earnings inflexion point, coming out of its start-up phase and now generating sustainable profitability. We see a promising earnings outlook driven by market-share gains in Europe and Asia, accelerating royalties from partner Terumo, and significant contribution (31% of FY11F pre-tax) from its 50%-owned China JV. We see catalysts in continued momentum in its forthcoming 2Q10 results, new approvals to market its flagship product BioMatrix in France and China, and the potential value-unlocking of its 50% stake in China DES supplier, JWMS. The US$4.5bn DES industry is one of the most profitable segments in the medical technology space, with market share changes driven by innovation. Start-ups like Biosensors with leading-edge technology are subject to takeovers by incumbents. With its next-generation biodegradable polymer DES BioMatrix, we believe that Biosensors is poised to gain market share outside of the US and Japan, driving a 40% revenue CAGR over our forecast period. With a sustainable net margin of 28% going into FY12F, partly attributable to its JV, we expect a profit CAGR of around 100% over FY10-12F, which should drive P/E down to 9x in FY12F. We value Biosensors at S$1.06/share, based on a sum-of-the-parts valuation comprising the company's DES assets, base business, royalties from Terumo and 50% stake in JWMS. JWMS has a 20-30% share in China's fast-growing DES market, currently worth US$400mn, with sustainable double-digit volume growth.Biosensors' current market cap. Our price target of S$1.06 implies a FY12F P/E of 16x. Biosensors is also a potential M&A target in the medtech space given its next-generation stent technology and valuable DES franchise in China.
We value a take-out scenario at S$1.17-1.24/share. The group recently secured refinancing for its maturing convertible debt, and its net cash position should help to drive growth.

Indofood Agri Resources: BUY (UOB Kay Hian, 16 Oct)
Production has pick up strongly in 2H09. To pick up strongly in 3Q09 and continue into 4Q09. Management is guided for a 10% production growth for 2009 which is closed to our expectation of 11% for 2009 Strong production growth is supported by young age profile with an average age of 12 years old, i.e. the prime production age. We are expecting a stronger 3Q09 for IFAR boosted by higher volume and average selling prices (ASP) for its upstream operation.Speeding up new planting in 2H09. More new planting in 2H09 of about 7,900 hectares to meet its full year new planting target of 10,000 hectares for 2009. IFAR is looking new planting of about 20,000 hectare in 2010. Sugar planting also coming on track with about 6,011 ha planted as of Jun 09. Sugar mill will be started up once the planting reaches total planted areas of 18,000 by 2011. This would be the capex spending from IFAR for next two years, i.e. sugar planting and building of sugar mill. Expected better results in 2H09 for cooking oil division due to pick up on volume and ASP increase in Jul 09 after the slightly decline of cooking oil sales in 1H09, which usually higher on seasonality factor. However, margarine sales for 2H09 likely to be flattish vs. 9% yoy growth for 1H09. Management is expecting margarine sales to increase by 5% for 2009. Maintain BUY on IFAR with target price of S$2.00 based on 12x 2010F PE for mid-cap and integrated plantation players.

Singapore Exchange: Hold (OCBC Research, 16 Oct)
SGX kicked off FY10 with a good set of 1Q results. Net earnings came in at S$94.1m, up 11% YoY or 3% QoQ. The star was Securities Market with a 41% YoY increase in revenue to S$104.6m. Management is positive on the outlook, citing stronger liquidity, better economic growth and the possibility of larger companies IPOs ahead as market conditions improve. The group has declared a 1Q dividend of 3.75 cents (1QFY09: 3.5 cents). Buoyed by the strong 1Q, we have raised FY10 earnings from S$333m to S$379m. With the higher 1Q dividend payout, we are also increasing our DPS estimate for this year from 26 S cents to 27 S cents, giving a decent yield of 3.1%. We are retaining our HOLD rating and fair value estimate of S$8.35.

Midas Holdings Ltd: Buy (OCBC Research, 16 Oct)
Midas Holdings (Midas) has won a RMB152m contract to supply 400 train cars, or 35 train sets, to CNR Changchun Railway Vehicles Co Ltd. Delivery is scheduled from 2010 to 2012. As such, earnings will be positively impacted from next year onwards. We are leaving our estimates unchanged as our projections allow for such contract wins. Midas is a key beneficiary of China's large infrastructure spending and is poised for more contract wins. We believe that sustained positive new flow will serve as a catalyst for the stock. Maintain BUY and S$1.05 fair value estimate.

Singapore Exchange: Sell (DMG, 15 Oct)
SGX has recorded a 1QFY10 net profit of S$94.1m, up 11% year-on-year (yoy), in line with our S$92m forecast. Operating revenue rose 10% yoy to S$173.4m. Securities market revenue rose 41% yoy to S$104.6m. Securities market trading value (excluding derivative warrants) rose 33% yoy to S$111b, with average daily turnover (ADT) rising 37% to S$1.73b. Net derivatives clearing revenue plunged 27% to S$33.7m. Futures and options clearing revenue fell 26.4% primarily due to a 58% collapse in the number of CNX Nifty Index contracts traded. Futures and options clearing revenue accounted for 95% share of 1QFY10 net derivatives clearing revenue. Structured warrants trading volume also plunged an equally severe 47% to 8.5b units. SGX declared an interim base dividend of 3.75S¢/share on tax exempt one-tier basis. We are forecasting FY10 DPS of 29.7S¢ (based on 90% payout ratio). The resultant yield of 3.4% is not exciting, given SGX's earnings volatility. Our sensitivity analysis shows that SGX target price will be S$8.80 if FY11 ADT hits S$2.00b (25% higher than our expectations), or S$10.00 if FY11 ADT hits S$2.40b (50% higher than our expectations). Investors who assume such levels of ADT can consider trading SGX, but we are not optimistic that these levels would be achieved. Though 1QFY10 ADT was S$1.77b (inclusive of derivative warrants), we are assuming a lower FY10 ADT of S$1.59b. Our FY11 ADT assumption is S$1.60b, from which we apply a 22x FY11 EPS to derive our target price of S$7.60 – this takes into consideration SGX 2-yr average P/E of 21x. Maintain SELL.

OCBC: Buy (Phillip Securities, 15 Oct)
OCBC announced that it will acquire ING Asia Private Bank Limited and its affiliated entitles (IAPB) for S$2.05 billion in cash. This amounts to 1.6 times NAV and 17 times normalized earnings in 2008. The move will also triple its current AUM to US$23 bil with an additional 150 relationship managers. We think that the acquisition is appropriate as private banking in this region is especially lucrative with the rising number of High Net Worth clients in Singapore, Hong Kong, China and Indonesia. OCBC can also leverage on its current GEH, OCBC and Bank NISP network to expand on its private banking services with the expertise of IAPB. Although we view the impact to CAR is substantial but with the Bank's total Tier 1 CAR at 13.9% post acquisition, it is still higher than the regulatory minimal of 6% and Total CAR of 10%. The transaction is expected to be earnings accretive from 2010. n In view of the improvement in the economy outlook and as we roll over our valuation to peg to 1.54x FY10 NAV, we are upgrading our target price to S$8.80 with a BUY rating.

OCBC: Neutral (DMG, 15 Oct)
OCBC will acquire ING Asia Private Bank (IAPB) for US$1,463m (S$2,048m) in cash. The acquisition amount includes IAPB’s estimated surplus capital of US$550m. With this acquisition, OCBC will more than triple its private banking assets under management to US$23b. We view the acquisition as a positive, as it allows OCBC to expand further into the private banking business. OCBC is paying 1.6x P/NAV, and 17x normalized 2008 earnings for IAPB. Following the acquisition, OCBC pro-forma Tier 1 CAR ratio (based on Jun 09 numbers) is expected to be reduced by 1.5 ppt to 13.9%, which is still well above the 6% regulatory minimum. OCBC sees the acquisition as earnings accretive in 2010, and increasing from 2011 onwards. The acquisition price is also fair, in our view. However, given that OCBC now trades at a P/B that is close to historical norms, we maintain our Neutral call.

Goodpack Ltd: Buy (OCBC Research, 15 Oct)
Goodpack's 1QFY10 revenue has declined by 3.9% year-on-year (yoy) to US$25.9m, while net profit eased 3.2% yoy to US$7.2m. However, on a sequential basis, revenue and net profit actually grew by 9.2% qtr-on-qtr (qoq) and 77.9% qoq respectively on demand recovery and enhanced operational efficiency. The quarterly revenue represented 24.1% of our FY10 revenue forecast (in line with our forecast of US$25.6m). Net profit, on the other hand, made up 23% of our full-year earnings projection (slightly higher than our estimate of US$6.9m). Going forward, Goodpack anticipates the business environment to remain challenging, but is expecting to achieve greater economies of scale from its growing IBC fleet and footprint in the world market. We think that Goodpack's recent proposal to undertake a renounceable non-underwritten rights issue of warrants together with its strong operating cash flows, should give the group enough flexibility and strength to fund its working capital and reduce its reliance on debt. It will put the group in good stead to capture the market recovery and expand into new avenues of growth. As we incorporate the quarterly results into our forecasts, our DCF-based fair value also inches ahead from S$1.25 to S$1.26. We continue to like Goodpack for its strong earnings margin (27.9% in 1QFY10), market leadership and constant drive for operational efficiency. Retain Buy.

Nera Telecommunications: Neutral (DMG, 15 Oct)
NeraTel's 3Q09 revenue of S$33.0m (-4.1% year-on-year, -32.9% qtr-on-qtr) and net profit at S$1.5m (-18.3% yoy, -54% qoq) were below our expectations as we were forecasting for top and bottomline to come in at S$42m and S$2.5m respectively. Gross margin pressures experienced in both the Telecom and Infocomm business segments were worse than we had anticipated and below management's overall target of the 20 – 24% band due to intense competition, while sales from the Infocomm division had also dropped by 22.6% yoy for the same reason. While the Telecom business is expected to grow as driven by the demand in data traffic and multi-media services from the various mobile operators while the Infocomm segment would be positively boosted by the growth in broadband and Internet, we are concerned that further margin pressures may be forthcoming as competition within the industry remains keen. Nevertheless, we believe that NeraTel's strong balance sheet of net cash per share at S$0.05 (equating to 15% of current share price) and prospective dividend yield of 9.0% remain as positives. Given the worse-than-expected set of 3Q09 numbers coupled with potential further margin pressures, we have decreased our estimates for FY09 (-8.3% and -11.3% for sales and net profit respectively) and FY10 (-1.6% and -9.7% for sales and net profit respectively). NeraTel's valuations are also in line with the industry average of 11.8x P/E in 2009. We therefore downgrade the stock to NEUTRAL and reduce our target price to S$0.335 (from S$0.405 previously).

Yangzijiang: Buy (DBS Research, 14 Oct)
Yangzijiang is expected to report a stellar 3Q09 results similar to 2Q09 on the back of favorable steel prices and on track delivery when release on 3 Nov. Steel prices have hovered at low levels of RMB3000–4000/ton year-to-date and are not expected to pick up significantly in the near term, We project 3Q09 to record net profit of RMB550-600m on revenue of c. RMB2.4billion. With this, 9M09 bottomline could make up 80%-85% of consensus forecasts, which will likely call for a series of earnings upgrades by the streets. We continue to favor Yangzijiang for its solid execution and consistent earnings delivery. The shipbuilding track records of SGX-listed shipyards have generally been patchy, ranging from estimated losses to positive 23% gross margin. Yangzijiang has stood above its peers by achieving consistent and better 19-23% gross profit margin and 78% net profit CAGR in the 2004-08 periods; through its superior raw materials and forex hedging strategies and better order book quality. Our target price is raised to S$1.36 following the earning revisions, still pegged to 11x FY10 EPS. This is in line with the average PE of regional peers.

Ezion Holdings: Buy (Kim Eng, 14 Oct)
Ezion has announced that it has formed a joint-venture company with Allwonder Enterprises, to own and operate vessels to support the first phase development of the Gorgon gas fields. The joint venture, known as OMSA Ningaui has an issued and paid up capital of US$420,274 and is owned equally between Ezion and Allwonder. We understand that Allwonder is a subsidiary of the Skilled Group, which in turn one of the three joint venture partners of the Offshore Marine Service Alliance (OMSA), through which Ezion had secured the A$350m-contract to support the Gorgon project. The OMSA Ningaui JV has been set up to own and operate one logistics vessel, which will cost around US$5m. We view this development as positive, in that it indicates that the OMSA contract for Gorgon is starting in earnest. Ezion is also in the process of procuring a second vessel for Gorgon, which is expected to cost around US$20m. Furthermore, despite tight credit markets, Ezion is sill able to secure vessel financing, while its net gearing currently stands at 0.3x. Our forecasts projects earnings CAGR of 109% p.a. over the next three years, driven by both the Gorgon project as well as the addition of four liftboats to its fleet. The first liftboat is still on track to be delivered by mid-November, with meaningful contribution only expected in FY10 onwards. We maintain our Buy recommendation to our target price of S$0.99 per share.

M1: Buy (Macquarie Research, 14 Oct)
We have raised our FY09–11 EPS estimates by 7–9%. FY09 estimates were revised up on higher margins reflecting our expectation that the company’s cost control efforts will continue for the rest of the year. Our FY10–11 EPS revisions are driven primarily by higher revenue assumptions, which are tied to the improving economy and partly the launch of the iPhone. While the iPhone could prove a good retention tool, it is unclear to us whether it would be EBITDA-accretive in the medium term, given the need for higher handset subsidies. We forecast revenue of S$175m (-4% year-on-year), EBITDA of S$77m (+3%) and net profit of S$37m (+10%). Margin expansion (+305bp) is expected on the back of tight control of staff costs (-21%) and handset subsidies. While we expect post-paid revenue to decline 5% yoy, we expect stability on a qtr-on-qtr basis, in line with the improving macro environment. In our revised numbers, we continue to forecast modest earnings decline (-3.7% EPS FY08–11 CAGR). Revenue growth remains challenging (flat FY08–11E CAGR), in our view, and M1 faces an uphill task to sustain into the future its current cost structures, particularly personnel and advertising expenses. However, we think the market has already discounted M1's muted growth prospects in the share price and we continue to see value in the shares. For example, our Gordon growth model (9% cost of equity) suggests the market is pricing in a 2% steady-state growth rate in dividends from our FY10 forecast. Dividends (6–7% yield) continue to be the primary attraction of the stock and we maintain our Outperform rating on MobileOne (M1) with a revised target price of S$2.00 (up from S$1.80).

M1: Hold (Deutsche Bank, 14 Oct)
M1 has announced it will launch the iPhone later this year, which will end SingTel's de-facto exclusive iPhone distribution. We believe M1's iPhone distribution agreement is a reflection of the company's growing resolve to target higher-end subs. But the potential risk is that M1 merely churns its existing subs across to the iPhone and incurs substantial subsidies in the process. Furthermore, it remains unclear if M1's ability to offer the iPhone will have any significant positive impact on average revenue per user (ARPU). But it is likely the requirement to offer heavy subsidies will impact margins going forward – for example, we think it is possible that M1's FY10e margins compress by 1-2% points as a result of the higher marketing costs associated with offering the iPhone. For reference, every 1% point reduction in M1's FY10e EBITDA margin results in a 4% decline in our FY10e net profit estimate. It is further possible that M1 has had to commit to certain handset sales volume in order to reach the agreement. In conclusion, we recognise M1's ongoing efforts to maintain its market positioning. But we are not entirely convinced the iPhone agreement will be near-term positive for M1's earnings or for its shareholders. Maintain Hold with target price at S$1.60.

City Developments: Hold (OCBC Research, 14 Oct)
Recent months have seen a return of buying interests to Sentosa Cove. Last week, SC Global announced that its residential project, Seven Palms Sentosa Cove sold 6 out of the 10 released units at an average selling price of S$3,300 psf. In the sub-sale and resale markets, prices of other condominium projects on Sentosa have also recovered firmly in 2H09. We think that the time is ripe for City Developments (CDL) to launch its Quayside Isle Collection project soon. While we previously assumed a bear-case scenario pricing of S$1,400 psf for the project, we are now raising our selling price estimate to S$1,900 psf. As such, our projected profit contribution from the residential component of the Quayside Isle Collection project has now been raised from S$209.7m to S$386.2m. Our fair value of CDL has now been raised to S$9.83. We maintain our HOLD rating on CDL.

K-REIT Asia: Sell (UOB Kay Hian, 14 Oct)
K-REIT has reported DPU of 2.69 cents for 3Q09, which is in line with expectations. Gross revenue grew 1.9% qtr-on-qtr (qoq) to S$15.7m with broad-based growth from Prudential Tower, Keppel & GE Towers and Bugis Junction Tower. Average gross monthly rent dropped 2.7% qoq to S$7.91psf in Sep 09 due to lower income support from one-third interest in One Raffles Quay (ORQ). Excluding ORQ, average gross monthly rent was relatively unchanged at S$7.14psf. Portfolio occupancy was unchanged at 94.9%. Latest revaluation conducted in Sep 09 resulted in a net fair value loss of S$92.9m, representing a 4.9% decline. According to CB Richard Ellis, prime office rents averaged S$7.50psf pm in 3Q09. The qoq decline of 12.8% was moderate compared with the 18.6% and 18.1% contractions for 1Q09 and 2Q09 respectively. Grade A office rents declined 13.3% qoq to S$8.80psf pm in the quarter. We continue to expect average rents for Grade A offices in Raffles Place to slide further to S$6.00psf by end-10, representing a two-third correction from the last peak of S$17.90psf pm recorded in 3Q08. K-REIT has announced an underwritten renounceable 1-for-1 rights issue at S$0.93/unit. The rights issue will raise S$620m. About 80.8% of the proceeds will be utilised to repay borrowings from Kephinance Investment (wholly-owned subsidiary of Keppel Corporation). We have previously estimated that the rights issue will result in dilution of 25.3% for FY10 DPU. Management intends to pursue acquisitions and has witnessed "an increased number of attractive investment opportunities". It plans to pursue a growth-oriented strategy in Singapore and overseas, thus establishing itself as a pan-Asian REIT. K-REIT could also explore opportunities to acquire office properties from sponsor Keppel Land. Maintain fair price for K-REIT at S$1.13 based on the dividend discount model (required rate of return: 7.98%, growth: 2.5%).

K-REIT Asia: Sell (Citi Research, 14 Oct)
Together with the 1H DPU of 5.02 cents, 1H09 DPU for the first nine months amounted to 7.71 cents, accounting for about 82% of our FY DPU estimate of 9.36 cents. The results were slightly ahead of our expectations. Qtr-on-qtr (qoq) rental revenue was up 2% while NPI flat. Passing rent fell to S$7.91 from S$8.13psf a quarter ago due to lower income support for One Raffles Quay (ORQ) as a result of higher property income arising from lower property expenses incurred by ORQ. Portfolio occupancy improves slightly to 94.9% from 94.4%, driven largely by an improvement in occupancy at Prudential Tower from 87.8% to 89.5%. Keppel Tower and GE Tower recorded a slight dip in occupancy from 93.3% to 92.9%. With passing rentals currently at $7.91psf, we expect negative reversion to hit in 2010, where 20% of the space leased will expire. We expect prime grade A rentals to drop to $5psf. We are particularly concerned about the risk of a sharp fall in contribution from ORQ when its rental support expires in 2012.. We estimate DPU dilution of 29-33% for FY10-11. On our target price of $0.69, our current fair value stands at $0.78 including the 12M forward DPU of 9.1cents. Ex-rights fair value including the 12-month forward DPU would be $0.70, assuming rights start trading only in FY10.

Swing Media: Buy (DMG, 14 Oct)
Manufacturing DVDs may not seem like one of the sexiest business around, given that it is a highly matured industry. But ironically, the intense competition has killed off many of the bit players over the past five years, benefiting the larger ones like Swing Media. It should continue to ride on the rising demand for DVDs, particularly in its key market China. In addition to its core business, Swing Media is also targeting new solar business to spur its growth. Currently looking undervalued at 0.5x FY10 P/B, we believe that it has the capacity to trade up to its historical average of 0.7x P/B. Initiate with BUY recommendation and target price of S$0.105. Swing Media manufactures DVD-Rs, CD-Rs, video cassettes and computer peripherals as well as engages in the trading of chemical dyes and stampers from its plants in Hong Kong and Taiwan. Its primary product is the DVD-R while its main export market is China, which had accounted for 62% of its total revenue in FY09. As China is anticipated to be one of the fastest growing nations and the Asia-Pacific entertainment and media industry is expected to grow at 4.5% CAGR to reach US$413b by 2013, demand for optical storage medium is poised to rise. Furthermore, current forecasts are gunning for global DVD-R shipments to increase by over 1b discs (+11.7%) from 2008 to 2011. Coupled with industry consolidation, Swing Media is thus well-positioned to grow its market share.
Swing Media has also just announced that it will be diversifying into the green energy field with the acquisition of a China-based specialist in the installation of solar energy systems in petrol stations. If this project takes off, we estimate that earnings may rise by 4% in FY10 and 36% in FY11.

Cosco Corp: Hold (AmResearch, 13 Oct)
We visited Cosco recently and came away less upbeat on the company's prospects for an earnings recovery in the near term. Lower expectations for Cosco stems from: (1) Stockpile of steel at high locked-in prices; (2) Inefficiencies in execution; (3) Possibility of further order cancellations and delivery deferrals; and (4) A drop in the Baltic Dry Index (BDI), which dampened earnings expectations for the group's bulk shipping segment. Cosco will remained saddled by high costs for steel plates at over US$1,000/tonne until end 2010, which will be allocated to 30 new dry bulk carriers under construction. This will keep the group's shipbuilding margins under pressure until FY11F. Thus far, Cosco has experienced order cancellations of 13 bulk carriers and postponements for delivery of 39 bulk carriers. Management indicated that there is a possibility that order cancellations and delivery reschedulement would continue to occur given the weak demand for dry bulk carriers. We have reduced our FY09F-FY11F earnings by 19%-25% due to: (1) Reduced EBIT margins for its shipbuilding, repair and marine engineering division – from 10%-12% to 5%-7%; and (2) Decreased EBIT margin by 5 percentage points to 55% for FY09F and 60% for FY10F-FY11F. Following this reduction in our earnings forecasts, Cosco currently trades at a FY10F PE of 17x, 15% below Cosco's three-year forward PE average of 20x. As a China-play proxy, Cosco's valuations represent a premium compared to 13x for Singapore’s oil & gas industry. We have downgraded our call on Cosco from BUY to a HOLD with lower fair value of S$1.17/ share based on a FY10F PE of 17x.

Genting Singapore: Overweight (Morgan Stanley, 13 Oct)
We initiate coverage of GENS at Overweight with a price target of S$1.30, implying 17% upside, and we rate the ASEAN Gaming industry Attractive. GENS commands a lower discount rate for its scarcity premium as the only Singapore-listed gaming stock and for Singapore's duopoly market structure. We assign 50% probability to our S$1.20 base-case fair value and 25% probabilities to our bull and bear cases. We expect GENS to outperform before its Resorts World Sentosa (RWS) mega-casino opens in 1Q10. We are 20%/6% ahead of consensus on 2010/11e EBITDA. Though the jury is still out, we estimate 2010 tourist arrivals of 11.3m (+18% YoY), Singapore gaming revenue of US$3b, and EBITDA of US$1.0b. RWS could capture more than 50% of the market in the first year of operation. Gaming stocks have generally outperformed in the months leading up to the opening of new casinos; and GENS has a first-mover advantage as we expect RWS to open earlier than rival Marina Bay Sands (MBS), in which case RWS could attract residents who are willing to purchase an annual membership for only one casino. RWS's Universal Studios theme park could help drive visitor nights higher and keep the casino humming. At 13.4x 2011e EV/EBITDA and 24x P/E, GENS looks expensive. However, given Singapore's duopoly market structure, benign competitive environment, and lower taxes, we expect GENS to trade at a premium to its Macau peers. We consider our visitation assumptions conservative, and our operating cost estimate exceeds management guidance.

OCBC: Neutral (DMG, 13 Oct)
OCBC has announced it will increase its stake in Bank of Ningbo (BON) via subscription of 192.4m new BON shares at RMB11.63/share. We view this stake increase positively. OCBC would be better able to tap on BON’s local market knowledge for the organic expansion via OCBC Bank China. The investment is in line with OCBC's desire to raise its strategic stake in BON, subject to the single foreign shareholding in Chinese banks of 20%. OCBC will be announcing its 3Q09 results on 28 Oct 09. We forecast OCBC 3Q09 net profit of S$210m, sharply lower than 2Q09's S$466m. Whilst core operating profit is seen to be resilient sequentially, we have factored in S$218m of negative impact from the redemption offer to GreatLink Choice policyholders. We believe 3Q09 provisions will be sharply higher sequentially, due to the GreatLink Choice impact as well as increased provisions to maintain loan loss coverage close to Jun 09’s 97%. As OCBC now trades at a P/B level close to historical norms, we see limited share price upside and maintain our Neutral call with a S$7.30 target price, which is pegged to 1.4x 2010 book.

SPH: Buy (Kim Eng, 13 Oct)
SPH met expectations with its marginal growth in FY09 operating revenue to $1,312m. Operating profit before investment income only dipped marginally to $518.5m, bolstered by property development profit. Net profit beat our estimate by 8% due to reduced staff costs (-13.9% year-on-year) and turnaround in investment income in 2H09. A final dividend of 18 cts was declared (top-end of consensus estimates). Impacted by the recession, Newspaper & Magazine revenue declined 12% yoy to $892.4m. But the worst is behind as the demand for display ad has improved since 4Q09. Classified ad revenue also showed a big improvement in 4Q09, falling 21.5% yoy compared to -30.1% in 3Q09. Sky@eleven's profit margin was a healthy 71.7%. To date, 69.5% of revenue has been recognized and the remaining 30.5% will be recognized in 2010. Rental income at Paragon grew 5% yoy to $123.1m due to the addition in commercial space. The high-end retail space achieved 100%-occupancy, while office space was 99%-occupied. The management remains optimistic about the resilience of its rental income in spite of competition. As anticipated, SPH's attempted bid ($188m) for a residential site at Serangoon Ave 3 in September shows it will not stop at Sky@Eleven and Paragon. Land-banking will be a major catalyst for re-rating and we can expect potential condo projects to be similar to Sky@Eleven in scale and market segment (mid-market). Final DPS of 18 cts offers a decent yield of 4.6%. Total DPS for FY09 of 25 cts implied a 96% payout from net profit, in line with the historical track record of between 88 and 100%. Our SOTP target price has been raised to $4.50 to factor in positive growth in core media business from FY10F. Property development is the engine for additional returns after Sky@Eleven’s completion in 2010. Its huge war chest of cash ($1.0b investible fund) provides the competitive edge.

SPH: Outperform (Daiwa Research, 13 Oct)
Singapore Press Holdings’ (SPH) 4Q FY09 results saw its net profit rose by 46.0% year-on-year on flat (+0.1% yoy) revenue. The results were 10.6% above our and the Bloomberg-consensus estimates, largely due to better-than-expected property-revenue recognition and a favourable tax rate during the quarter. Advertising revenue, which generally moves in association with the Singapore economy, showed a deceleration in its 4Q FY09 yoy decline compared to 3Q FY09. SPH reported a 9 cent final dividend and a 9 cent special dividend, for a total FY09 dividend of S$0.25, which was 1 cent below our FY09 forecast and SPH's FY08 total dividend. We have raised our FY10 and FY11 net profit forecasts by 3.5% and 1.0%, respectively, partly due to a reduction in our paper-cost assumptions. We believe 3Q FY09 marked the trough in terms of the yoy change in advertising revenue, and we expect FY10 to be better than FY09. Historically, SPH's advertising revenue has tended to lag the Singapore economy by at least one quarter. We have raised our six-month target price to S$3.68 from S$2.84. In addition, we have changed our valuation methodology from a quantitative to a yield-based model, as the latter allows us to take the company's fundamentals into perspective rather than base our target price on a top-down method. Our target price is based on our FY10 dividend-yield forecast of 6.8%, which is benchmarked against other defensive cash-cow companies in the Straits Times Index. In our view, SPH lacks a clear catalyst for the next six months, apart from the company's quarterly earnings announcements. We believe the next biggest influence on SPH share-price performance should be based on Singapore dollar cross-rate movements (which then affect real interest rates) and the general movement of the STI.

SPH: Hold (OCBC Research, 13 Oct)
Singapore Press Holdings' core printing business continued to buckle under pressure from the weak economy, falling 12% year-on-year (yoy) to S$892.4m. However, the Sky@Eleven condo development and rentals at Paragon helped buffer the group's revenue. Overall, the group posted FY09 results with flat topline of S$1.3b and PATMI down slightly 4% YoY to S$418.4m. Management has indicated that the "business outlook remains uncertain although there are signs of a gradual recovery at the macroeconomic level." Subsequent to the successful launch and current development of Sky@Eleven, management indicated that it has gained confidence in the property development business. It recently put forth a bid for a 1.38-ha plot next to Lorong Chuan MRT station that drew 15 bidders. While this is a business that management is keen to embark on in larger scale, we note that it could introduce increased risks to the group's earnings with fluctuating property cycles. FY10 will see SPH recognising the final phase of its Sky@Eleven project. The profit recognition from this condo project helped prop up the group in the midst of its weak core printing business. Tax free capital gains from this project also aided in a lower tax rate on a group basis. Unless SPH embarks on another accretive property project, we believe that we will see earnings sliding from FY10. SPH will be paying a final dividend of 18 cents (Final: 9 cents, Special: 9 cents) bringing total FY09 DPS to 25 S cents. This beat our final dividend forecast of 14.5 S cents and came in at the top end of the street's forecast. SPH's operating costs assumptions have also been realigned with the faster than expected fall in material costs and staffing. Finally, our assumptions for its core printing business have taken a turn for the better in view of the improving economy. Our SOTP is now S$3.56 (prev. S$3.31). However, we prefer to maintain our Hold rating as we watch how the cyclical property development business pans out for SPH.

SPH: Buy (Deutsche Bank, 12 Oct)
SPH's S$1,301m FY09 revenues were flat year-on-year (yoy) and came in slightly ahead of DB estimates (S$1,267m), largely due to faster than expected Sky@eleven revenue recognition (S$452m booked to-date). FY09 circulation revenues grew 4% yoy whilst Paragon rental income rose 5% yoy on continued robust occupancy. Although ad revenues well 17% yoy to S$648m, the rate of decline was within our expectations and management highlighted a recovery of advertising orders. FY09 EBITDA +1% yoy to S$586m as lower staff costs offset other opex increases and drove a slight FY09 margin improvement to 45%. Following Sky@eleven, management indicated SPH is seeking further opportunities to participate in property development projects. Although no project is being planned for now (the company was unsuccessful in a recent bid for a condominium land parcel), SPH highlighted it will target "quality" residential development projects in Singapore with a similar profile to Sky@eleven. We maintain our SPH estimates and TP and reiterate our Buy recommendation. Target price for SPH is S$4.30.

SPH: Neutral (DMG, 12 Oct)
While SPH had turned in a set of better-than-expected results, we believe that contributions from the property front may decline in FY10 and FY11. Its FY09 revenue though flat at S$1,301.4 million and net profit declined by 3.6% to S$421.9m, nonetheless exceeded our expectations (top and bottomline at S$1,293.6m and S$370.4m respectively) and that of the market (top and bottomline at S$1,284.5m and S$384.9m respectively). Reasons for the discrepancy are larger-than-expected fall in newsprint costs to US$612 per tonne in 4QFY09 and the absence of the S$26.7m impairment charge that was previously seen in FY08. On a quarterly basis, SPH's 4QFY09 revenue was S$346.9m (-12.7% year-on-year, +6.1% qtr-on-qtr) while net profit was S$135.2m (+46.2% yoy, +6.7% qoq). Revenue from ads are forecasted to pick up as the economy recovers while newsprint costs are expected to be lower on a yoy basis, thus resulting in higher margins. Nevertheless, as we believe that the bulk of the revenue recognition has already been accounted for the Sky@eleven project during FY08 and FY09, we are expecting lower overall Group revenue in FY10. At S$3.88, SPH is trading at 14.9x FY10 P/E, which is in line with its 6-yr historical average. Moreover, the Sky@eleven project is also slated to cease earnings contributions in FY11 after it has been completed, thus lowering profitability and dividends for the Group. On the bright side, we have raised our valuations for SPH's core media business to 14x forward P/E from 12x given its improving outlook – our target price is thus accordingly raised to S$3.86 based on our SOTP valuations. Downgrade to Neutral given the impending downside.

SIA Engineering: Buy (DBS Vickers, 12 Oct)
Both SIA's Aug'09 operating numbers as well as IATA's latest press release indicate that the global aviation industry seems to have bottomed out sometime in May this year and things have started to look up – albeit mildly – in July-August, driven by the economic recovery. The targeted opening of the integrated resorts (IRs) here in 1Q-2010 should bring more cheer to airlines flying into Singapore, as visitor numbers are expected to shoot up by 20% over the next two years. As parent SIA looks to add capacity and benefit from this slow but sure upturn, SIE would stand to gain earlier – as it performs checks and modifications on fleet being put back into service. No change to estimates for FY10 and FY11. Line Maintenance could surprise on the upside as airport statistics show a healthy 2.5% year-0n-year (yoy) growth in flight movements at Changi despite the industry downturn. While declines in base maintenance are expected, hangar utilisation should be sustained by non-traditional works like cabin retrofit/ redesign and other new contracts that are similar to the contract with OEM partner Panasonic Avionics. Compared to valuations implied in Cathay's recent stake sale in HAECO – 18x FY09 and 13.5x FY10 earnings (Yr end-Dec) – SIE appears distinctly cheaper, trading at 13.5x FY10 and 12x FY11 earnings. In addition, it promises a relatively secure 5.4% dividend yield. The stock has underperformed the STI by about 13% since our downgrade in July; and we feel that current levels represent a good entry point. Hence, we upgrade the stock to BUY at an unchanged target price of S$3.00.

Singapore Technologies Engineering: Buy (Citi Research, 12 Oct)
We expect flat STE's EPS growth in 2010E, after a lackluster 1H09, but view that upside surprise to estimates exists, underpinned by margin recovery in the Maintenance, Repair & Overhaul (MRO) sector, which was depressed in 1H09. Market share gains (engine repair & landing gears), and continuing momentum in Electronics/Land Systems, should help drive top line growth. In addition, the strong likelihood of military contract wins could provide further positive stock catalysts, in our view. Prospects of a mid-size orderbook win have increased after SAF expressed interest in procuring 135 Terrex infantry vehicles. Terrex represents ST Eng's continued military innovation after successful launches such as Bronco and Bionix. With each Terrex likely to cost between US$1.5-3m, this could add S$300-600m to ST Eng's current estimated S$10b orderbook. A rebound, albeit from a low base, in both cargo and passenger load factor should benefit ST Eng. Fedex has raised its profit guidance which is a positive factor since ST Eng accounts for about 70% of Fedex MRO work, while Indication by Japan Airlines expanding its cargo fleet would benefit ST Eng should B-757 aircraft conversion be required. Recent contract win with Primeria Air helps enlarge landing gears work scope in Europe.

Midas Holdings: Buy (Kim Eng, 12 Oct)
After some delays, the China Ministry of Railways has awarded the 2nd round of high-speed train contracts, with the CSR Group announcing on September 28 that it and its joint venture with Bombardier has won contracts for 4,160 train cars worth a total of RMB72.4b. We expect suppliers such as Midas to start vying for these contracts. Midas's JV company, Nanjing SR Puzhen Rail Transport was recently awarded a RMB1.76b, 288 train cars contract for the Hangzhou Metro Line 1 project. With earnings only recognised upon delivery, this contract to be delivered between May 2011 and August 2013 implies associate contribution of about $3.5m per year for FY12 and FY13. Proposed secondary listing in Hong Kong, another platform for equity fund-raising – We believe this will be done via issuing new shares to be listed there, with an expected timeline of 9-12 months. This will widen the investor base, for example funds which only has mandate to invest in the HK market. This will also possibly facilitate equity fund-raising for the next round of investments in production expansion to match demand. Our revenue model assumes Midas will win about 50-60% market share of the 2nd round of orders, which will be worth an estimated $175m. Depending on the time line of delivery, orders above that could mean earnings upside. We expect Midas to be in a good position to achieve strong orders, which should flow down in about 3 months. We maintain our Buy call with target price at $1.15.

F J Benjamin: Buy (DMG, 12 Oct)
What a difference a few months make. Back at the start of this year, FJB was struggling, as consumer sentiment sunk to multi-year lows. But with an improving economy and more stable job conditions, the tide has turned. Moreover, with the opening of the Integrated Resorts (IR) in early 2010, the expected influx of well-heeled visitors is likely to contribute to growing retail sales in Singapore. FJB is primed to be one of the most direct beneficiaries of this rising trend among its listed peers. Its Raoul label is a mid-premium line that targets trendy executives. We believe it would continue to boost FJB's growth and help sustain margins as (1) it is a proprietary brand, and 2) it caters to a niche market and does not conflict with the other fashion labels that FJB brings in. FJB has established a showroom in NYC to sell its Raoul apparel and accessories to department and specialty stores in the US, such as Macy's. This provides an opportunity for FJB to penetrate the US fashion market. It is also planning to extend its Raoul franchise into other countries in the region, following a successful stint in Indonesia. We have upgraded the stock to BUY, with a price target of S$0.46.

Ascott REIT: Buy (Kim Eng, 9 Oct)
Located in gateway cities of Asia, ART's assets are poised to benefit from the Asian economic recovery, which will drive REVPAU growth in its key markets such as Singapore, China, Vietnam and Philippines. According to the management, revenue per available room (REVPAU) appears to have bottomed and results in 2H09 are likely to beat our previous forecasts. The ADB has just raised its economic growth forecast for Asia. Demand for travel is picking up, with tourist arrivals in Singapore showing the smallest year-on-year (yoy) decline in August; The IATA had reported a strong improvement in the passenger demand of Asia Pacific carriers; Major hotel chains in Asia are anticipating growth and still expanding in 2009 despite the downturn. Finally, the opening of Singapore's IRs is expected to draw a throng of expatriates, boosting REVPAU. Besides organic growth, ART could also begin to tap on its sponsor's sizeable pipeline of assets in Asia for acquisitions. Based on indicative cap rates for serviced residences, Vietnam shows up as an attractive target market (9-10%). The sponsor, Ascott Group (100% owned by Capitaland) has some 1182 units of serviced residences in Vietnam, which could potentially be injected into ART. ART is also keen to invest in India, possibility through an asset injection from its sponsor. Our stress test shows that a further 10% decline in ART's portfolio asset value will lift gearing from 40.7% to 45.2%. Although ART is comfortable with a gearing of around 45%, we believe this level is unsustainable given the higher prospects for acquisitions. Being committed to protecting shareholders' value, ART has indicated that an equity-raising will only be done when there are confirmed acquisition plans. We forecast REVPAU growth of 5-20% across the key markets. Our DPU forecast for FY09-10F have been raised by 2-13%. Applying a normalized cost of equity (8.8%) and terminal growth rate of 2%, our DDM-derived target price has been raised to $1.23 (prev. $0.77). We upgrade ART to Buy.

Pan Hong Property Group: Buy (DMG, 9 Oct)
The month of Sep 09 saw Pan Hong Property Group (PANH) sell another 30 units of its flagship landed project in Huzhou – Hua Cui Ting Yuan (HCT), despite the recent tightening of bank lending activities. Looking ahead, we believe the underlying demand for mass and mid housing projects in China remains strong, where majority of PANH's landbank (2.7m sm in GFA) is exposed to. Current net cash position allows PANH to take on another RMB 360m for additional acquisitions to expand an already-robust landbank. Recent placement of 23.8m shares to BOCOM International group has also certified its status as one of the higher quality S-Chips. Since our last report on 24 Jul 09, PANH has surged 42%. We are now removing our 20% discount on its RNAV to take into account its net cash position, as well as an improved operating environment for developers within the more resilient Chinese lower-tier cities. Our new target price of S$0.65 takes into account the new Huzhou acquisition, as well as updated prices for HCT.

SC Global Developments: Buy (DMG, 9 Oct)
Reiterate BUY with S$2.30 target price. SC Global Developments' (SCGD) sale of Seven Palms Sentosa Cove at benchmark prices has re-affirmed our confidence in management's track record. It also reflects a recovering high-end residential segment, which should favor pure play luxury (87% of RNAV) residential developers like SCGD. Following the recent correction, SCGD is now trading at 49% discount to our FY10 base case RNAV of S$2.88. We expect this discount to narrow further upon increased offshore buying and IRs’ opening. Our target price of $2.30 is pegged at a 20% discount to RNAV.

Tiong Woon: Buy (DMG, 9 Oct)
TWC has announced that it will issue up to 34m new ordinary shares at an issue price of S$0.83 per share. This implies a net consideration of S$27.3m. TWC intends to use about 50% (or S$13.7m) of net proceeds for acquiring heavy lifting equipment and the rest for working capital purposes. The new shares represent 10.1% of TWC's current issued share capital of 337,576,410 shares and 9.2% of the enlarged issued share capital of 371,576,410 shares. We have adjusted our financials accordingly and our FY10F and FY11F EPS were tweaked down by 7.6% and 8.7% respectively. Post placement, FY10F net gearing is still expected to remain stable at about 0.3x. In parts of Asia, oil and gas activities are going on and the Middle East is seeing energy intensive projects across the region. Long-term prospects in the Middle East remain bright. With more than 60 cranes in the region currently, TWC hopes to progressively build up the fleet size of heavy lift equipment, over the next two to three years, to meet the growing demands of the Middle East market. We are maintaining our BUY call on TWC, while raising our target price to S$1.02 (previously S$0.95). This is based on 7x FY10F EPS (in line with peers, previously 6x).

Straits Asia Resources: Hold (OCBC Research, 9 Oct)
Straits Asia Resources Ltd's (SAR) new loading facilities at Jembayan mine have been damaged by persistent rain. As a result, no further loading will be possible from this facility for some time. The damage casts a shadow over SAR's expansion plans and is expected to hurt production volumes. Nevertheless, its original facilities continue to run normally and will support the group's operations. In addition, the group will seek alternatives to mitigate the impact of damages. We have cut our FY09 and FY10 earnings forecast by 18% and 15% respectively on lower production volumes, and lower our fair value estimate to S$2.20 from S$2.38. SAR will provide further updates as they assess the impact of damages. We downgrade the stock to Hold.

Suntec REIT: Hold (OCBC Research, 9 Oct)
ARA Asset Management has acquired 100% of Suntec City Management Pte Ltd from Suntec City Development Pte Ltd (SCD) for S$1.45m. SCM is the current managing agent of the Management Corporation Strata Title plan responsible for the management and maintenance of the common property of the Suntec City integrated complex. The transaction is expected to be completed in or around December 2009. Concurrently, Suntec REIT (Suntec) will terminate its property management agreement with SCD, which manages the Suntec City properties at present. The REIT will appoint a wholly-owned ARA subsidiary instead. SCD, of which Li Ka-shing is an indirect shareholder, was also behind the initial sale of Suntec City at IPO and the recent sale of Suntec City Convention Centre. This latest move jives with the recent convention centre transaction as SCD reduces its direct exposure to the Suntec City development and the REIT manager extends its strategic influence over the development. Maintain HOLD on Suntec REIT with S$1.00 fair value.

Tat Hong: Buy (OCBC Research, 7 Oct)
Tat Hong has weathered several challenging quarters as equipment sales plunged along with the global economic crisis, leading us to project earnings contraction for FY10. On a positive note, management believes that the worst is over. 3Q10 earnings are expected to rebound as banks loosen their credit lines and customers regain confidence. Tat Hong has been steadily increasing its focus on rental income, which now accounts for 68.5% of gross profit, in order to stabilise its earnings stream. This strategy will ensure the group's profitability through ups and downs of economic cycles, and will capitalise on customers' growing preference for equipment rental rather than outright capital investments. Tat Hong's shares have fallen by 20% over the last two months and we see value emerging at current levels. Valuations are undemanding at 10.3x FY10F PER and 1.2x FY10F NTA, coupled with a relatively decent 3.9% dividend yield. On top of that, recent purchases by directors signal confidence in the company's prospects. We upgrade Tat Hong to Buy and raise our fair value estimate to S$1.15 (from S$1.13) as we rollover our valuations to a blended FY10/11F NTA (previously FY10F) but on the same 1.3x peg. With slower earnings momentum, we continue to favour NTA valuations to better capture Tat Hong's value. Our earnings projections have been lowered slightly to reflect more conservative revenue and margin assumptions.

CNA Group: Buy (DMG, 7 Oct)
Given that it is a pioneer in the 'connected real estate' (CRE) space, CNA is in a good position to ride on the growth of intelligent buildings. Khoo Teck Puat Hospital is one such example. Gross margins are richer for such projects, coming in at about twice that of mechanical and electrical (M&E) projects. Prior to this, the group won its first CRE technology contract in China, the Singapore Hangzhou Science and Technology Park. These projects indicate that intelligent buildings are gaining popularity both in Singapore and overseas. CNA has a 49.9% stake in China-based Standard Water (SWL), which in turn has a 50% stake in Crystal Water (CWL). Standard Chartered's SCI Asia owns the other half. Given that SWL has grown rapidly over the years, the time may be ripe for a listing. If it were to list in Singapore and assuming it trades to the industry average of 12x, we estimate CNA's stake in SWL to be worth about S$80m. Part of these funds may possibly go towards rewarding shareholders. We have ascribed a target P/E of 8.2x FY10 earnings (55% for its water business valued at 10x and the remaining 45% for its core MEP business at 6x – both in line with peers), which is a discount to its historical average of 12.6x. This works out to a target price of S$0.52. Initiate with a BUY.

ASL Marine: Buy (Kim Eng, 6 Oct)
While its current shipbuilding orderbook is progressing well, ASL's management sees difficult conditions ahead and is now focusing primarily on ship repair. Demand for tanker repair jobs remains relatively good, while bulk carriers and container vessels are weak, which is in line with the broader shipping market outlook. Going forward, management will concentrate on mid-size ships, which still constitute the bulk of vessels in the market. While ship repair margins have been relatively healthy at over 30% ASL says it now has to work harder in order to secure customers. We therefore believe that erosion in revenues and margins is inevitable. We are factoring in average gross margins of 28% from FY11 onwards, versus 31% previously, and have consequently reduced our forecasts by 11% and 16% for FY11 and 12 respectively. ASL has also not secured any new shipbuilding orders since October 2008, but is working on its existing orderbook of around $523m. ASL does not expect to receive new orders until the credit crunch eases. We have already factored in a 60% decline in the segment's revenue from FY12. As for chartering, margins have remained steady so far, but could see further pricing pressure. ASL has already chartered out seven of the twelve vessels that will come online during the financial year. Despite difficult conditions facing shipyards, we maintain our positive outlook on ASL itself while holding a neutral view on the broader sector. ASL still trades at a significant discount to other yards, with a 2-year forward PER of 7.6 versus the industry average of 10.8x. Its price to book stands at 1.0x versus comparables at 1.6x. We maintain our BUY call with a target price of $1.62, which in line with its peer PBV average.

CapitaLand: Buy (UOB Kay Hian, 6 Oct)
CapitaLand unveiled its plans to list its integrated shopping mall business under the CapitaMalls Asia Group (CMA) comprising 86 retail properties cross 48 cities in five countries in Asia with a total property value of approximately S$20.3b. It aims to provide a transparent valuation benchmark for its retail operations and an investment vehicle for investors seeking opportunities to tap on the growth potential of Asia's rising consumer demand, affluence and spending power over the next few decades. CapitaLand is considering an offer of around 30% stake in CMA and intends to retain majority control post listing for the foreseeable future. The retail real estate fund and REIT management business will be transferred to CMA. Projects with retail components that contribute to 65% or more in terms of total GFA, asset value or rental income of an asset will be undertaken by CMA. CMA would inherit CapitaLand's REIT management strategy of injecting yield-accretive mature assets into the REIT. Both CMT and CRCT will continue to retain the existing rights of first refusal. CMA would have a significant debt capacity of around S$1.6b to S$2.6b based on 0.3-0.5x gearing for its expansion. The proposed move will further help to strengthen CapitaLand's books by injecting cash and reducing debts. Considering a 30% offer of its shareholding interest in CMA at an offer price based on the book value as at 1H09, and using one-third of net proceeds to repay debts and the rest in fixed deposits, CapitaLand's cash position will increase to S$5.2b from the current S$4.2b and its gearing ratio will drop to 0.3x from 0.47x. This additional cash proceeds from the listing presents CapitaLand with an enormous opportunity to tap on to the growing retail real estate in Asia and allows it to strengthen its core business segments. We have not yet incorporated the potential gains from the listing of CMA as the details are still being finalised. We view the transaction positively. Maintain BUY and our target price of S$4.90, pegged at a 20% premium to our 2009 RNAV of S$4.08/share.

CapitaLand: Buy (Kim Eng, 6 Oct)
Target price: $4.60 (upgraded from $4.57)
CapitaLand announced that it plans to restructure and separately list its retail business under a new entity, known as CapitaMalls Asia (CMA). CMA will also take over the retail real estate fund and REIT management businesses. CapitaLand is looking to float between 20-30% of its shareholdings, thereby maintaining its majority stake while providing sufficient liquidity to CMA. CapitaLand reiterates that the retail real estate business is still very much a core business, but a separate listing will give CMA direct access to the capital markets, possibly accelerating the growth of this business. CMA will then manage 86 retail properties with a total value of $20.3b, including stakes in CMT, CRCT, as well as a 15%-stake in the unlisted Raffles City China Fund. Total retail space under management would be 66.5m sq ft. The NAV of CMA is currently $5.3b and its net gearing is nearly zero, giving it a debt headroom of between $1.6-2.6b to grow, assuming a net gearing of 0.3-0.5x. Assuming that CapitaLand lists 30% of CMA at its NAV, it could receive net proceeds of about $1.57b, strengthening CapitaLand’s financial position by bringing its net gearing down to 0.3x. CapitaLand’s management will consider paying out a portion of the proceeds in the form of a special cash dividend, but the amount would depend on the actual valuation and other capital requirements after CMA's listing. We think that the proposed listing of CMA is a win-win outcome for both CapitaLand shareholders as well as the retail business in the long-run. We have adjusted our target price to $4.60, pegged to a 15%-premium and the market prices of the listed associates.

CapitaLand: Buy (DMG, 6 Oct)
CapitaLand has proposed to list CapitaLand Retail Limited, its retail business unit. The proposed SGX-listed entity is named CapitaMalls Asia (CMA), which will have a portfolio of 86 retail properties (66.5m sf spanning 5 Asian countries and 48 cities) valued at S$20.3b. Further, CapitaLand's retail real estate fund and REIT management business will be transferred to CMA to establish an integrated retail-focused business model. We view most positively CMA's direct access to the capital markets and lowly-geared capital structure. Given its present net gearing of 0.02x, CMA could potentially take on another S$1.6b – 2.6b before hitting 0.3x – 0.5x. This sizeable debt capacity should facilitate the execution of an accelerated growth strategy through external acquisitions and organic asset enhancements in Asia, especially emerging economies China and India. Their rising economic growth, urbanisation, affluence and consumer spending power should drive demand for retail space per capita. As such, we believe this is the most opportune time for CapitaLand to leverage on its unrivalled track record of retail mall management, scale up and cement itself as a Pan-Asian retail behemoth. On top of new acquisitions, CMA's current 27 malls under development suggests plenty of capital appreciation. We reckon their value would be fully realised through its well-honed capital recycling model, with the monetisation proceeds (from sale to CMT, CRCT or third parties) channeled to other business units. Therefore, we think CMA's value preposition to investors will be a growth-centric retail developer, as opposed to the consistent dividend payouts offered by CMT and CRCT. CapitaLand may consider declaring a special dividend to its shareholders, dependent on its gain from CMA's IPO, cash position and net gearing and growth strategies and capital needs of other business units. Maintain Buy at S$4.43.

CapitaLand: Buy (OCBC Research, 6 Oct)
CapitaLand (CapLand) announced that it has obtained a letter of eligibility-to-list to list its wholly-owned subsidiary – CapitaLand Retail Ltd on the Main Board of SGX-ST and CapitaLand Retail Ltd will be renamed as CapitaMalls Asia Ltd (CMA). Base on assumptions, CapLand could receive net proceeds of ~S$1.6bn from the IPO, which is approximately 37 S-cents per CapLand share. The proceeds may be paid out as a special dividend to CapLand’s shareholders. If the IPO performs well as we expected, CapLand could recognize a gain from the IPO. In addition, the possibility of a special dividend could also lead to outperformance in CapLand’s share price. We maintain our RNAV estimate of S$3.72 for now, but peg our valuation of development projects and investment properties at a 20% premium, in view of the positive development. As such, our fair value of CapLand has now been raised to from S$3.72 to S$4.15. We are now upgrading CapLand from HOLD to BUY.

Mobile One: Buy (Kim Eng, 5 Oct)
M1 is pushing ahead of the other telcos in terms of mobile broadband network speeds. It recently announced that part of its HSPA+ network has been upgraded to be capable of downlink speeds of up to 28Mbps, faster than SingTel's 14.4Mbps and StarHub's 21Mbps, with the rest to be upgraded progressively. The 28Mbps upgrade is still within M1's capex budget of $100m this year. In the next 1-2 years, we believe M1 is working toward implementing LTE (Long Term Evolution or 4G), which currently has a theoretical maximum download speed of 326Mbps. Of course, this does not mean users will be able to surf at 326Mbps, just that the network will share 326Mbps per cell with many users, ensuring a guaranteed minimum speed and a higher but generally consistent average speed within the cell. Without media offerings, M1 needs to be rely on technology to sustain Average Revenue Per User (ARPUs). However, HSPA offers cost savings and more bang for the buck as well. It can move its more expensive circuit-switched voice traffic to the cheaper packet domain without the user being the wiser. In long distance calls, interconnect fees can also be cut. As such, we expect M1's margins to gradually improve as the rollout progresses. In being so determined to stay ahead of the pack in the mobile broadband speed curve, we reckon some form of broadcast content strategy is also in M1's future plans, though most likely on a mobile rather than fixed platform to keep costs low. However, this will depend on available devices as downstream hardware tends to lag behind upstream hardware. Eg dongles tend to overheat as mobile broadband speeds rise. With the recent market correction, M1's share price has retreated to an attractive $1.73, valuing it at just 10.5x current year forecast and 7.6% dividend yield. With StarHub's loss of BPL rights and lack of immediate catalysts for SingTel, M1 is our top pick among the three telco stocks. We maintain our Buy call and $2.01 target price.

ASL Marine: Buy (OCBC Research, 5 Oct)
ASL's management has reiterated that the group will be focusing on repair activities amidst an environment with fewer newbuild orders. However, ASL still has a newbuild order book of about S$523m as at Jun 09 in which about 56% will be recognized in FY10. Its shipchartering segment provided 39% of the group's FY09 gross profit and should continue to provide earnings support as the existing fleet is expanded, but we think price pressure on charter rates is likely to cap contributions from this segment. An expanded Batam yard (adding two new drydocks and lengthening its 150,000 dwt drydock) by Mar 2010 will be able to cater to an increased number and a wider range of vessels. We think it pays to be diversified in an uncertain environment, not just in terms of business segments, but also customer profile. We therefore appreciate ASL's shipbuilding, repair and chartering businesses, and the fact that the group caters to customers from various sectors, including the offshore support industry, marine infrastructure, land reclamation, and transport of materials. Revenue sources from various geographical regions are also relatively diversified. We maintain our BUY rating on ASL and keep our fair value estimate of S$1.18.

Singtel: Buy (UOB Kay Hian, 2 Oct)
SingTel has won the bid for the rights to broadcast Barclays Premier League (BPL) matches for three years commencing Aug 10. These include rights for mio TV, as well as Internet and mobile phone services. It has also secured exclusive broadcast rights to a suite of sports networks and services from ESPN STAR Sports (ESS) for its mio TV customers starting from mid-10. Meanwhile, Bharti Airtel has announced today that it will disengage from its discussions with South Africa’s MTN Group Limited (MTN) with the end of the exclusivity period on 30 Sep 09. The Pay TV segment has a penetration rate of about 55%, with Starhub accounting for 84%. Presently, the segment accounts for less than 4% of SingTel's revenue stream from Singapore. The exclusive broadcast rights to the BPL would help SingTel grow its pay TV business and break StarHub's monopoly in the cable TV segment. While SingTel has not disclosed the details of the bid, we believe the bid price is significantly higher than the S$250m that Starhub bid to acquire the content rights back in 2007. Although the high price paid could intensify SingTel's losses in its pay TV segment in the first two years of operation, the enhanced appeal of its bundling strategy with the Pay TV add-on and cross-selling opportunities would mitigate the impact. The acquisition is in line with the Group's growth strategy and should be accretive over the longer term. The Bharti and MTN merger talks came to an end after the South African government, which has to approve the deal, expressed its inability to accept the deal structure in its current form. The termination of the deal is likely to have a slightly positive impact on SingTel as the risks of potential dilution of SingTel's 30% stake in Bharti and possible overpayment by Bharti are removed. We have revised our FY10-12 earnings by 8-11%, mainly adjusting for higher currency forecasts and higher associate contributions. We have raised our target price by 13.3% to S$3.70 based on a revised sum-of-the-parts valuation.

K-REIT: Fully Valued (DBS Research, 2 Oct)
K-REIT has proposed to raise $620m through a 1-for-1 rights issue priced at $0.93, a 21.2% discount to the last closing price of $1.18. The issue is fully underwritten by sponsors Keppel Corp, Keppel Land and BNP. An EGM will be held to seek shareholders approval. Proceeds from the issue will be used to repay debt, including the bridging loan for the Prudential Tower strata space purchase (80.8%) and to fund new acquisitions. At the same time, K-REIT has written down the value of its properties by 6.3% to $1970.2m as at Sep 09. Post rights, Kreit's gearing will fall from 33% to 9.1%, translating to a debt headroom of $438.3-647.8m, assuming target gearing of 30-40%, for new acquisitions. On a post rights basis, adjusting for interest savings, DPU will be diluted by 36% to 6cts in FY09 while FY10 DPU will be adjusted to 6.5cts, after imputing $115m of new acquisitions at 5% return. We are surprised by the timing of this exercise. While we note that all of K-REIT's debt is maturing around the same period, they are not due till 2011, 18-20 months away. Post the issue, FY09-10 DPU yield is diluted to 5.7-6.1% based on the TERP of $1.06, on the lower end of the 6-8% yield range of comparable peers. Lack of catalyst, with office rents expected to continue on a downtrend, albeit at a slower pace, would continue to limit share price upside performance. Downgrade to Fully Valued with a DCF-based TP of $1.01 (rights-adjusted $0.95).

K-REIT: Sell (UOB Kay Hian, 2 Oct)
K-REIT Asia has announced an underwritten renounceable 1-for-1 rights issue at S$0.93/unit representing a 21.2% discount to its last closing price of S$1.18 and 11.8% discount to the theoretical ex-rights price of S$1.06. The rights issue will raise S$620m and 80.8% of the proceeds will be utilized to repay borrowings from Kephinance Investment (a wholly-owned subsidiary of Keppel Corporation), including a bridging loan taken to fund the acquisition of six floors at Prudential Tower. The balance will mainly be utilised to fund potential acquisitions and asset enhancement initiatives. The management has evaluated plans to enhance Keppel Towers and GE Tower to increase rental income. The rights issue will better position K-REIT to take on opportunities for acquisitions. The management has witnessed "an increased number of attractive investment opportunities". It plans to pursue a growth-oriented strategy in Singapore and overseas, thus establishing itself as a pan-Asian REIT. K-REIT could also explore opportunities to acquire office properties from sponsor Keppel Land. K-REIT has provided an updated valuation of existing investment properties. Its portfolio was valued at S$1,970.2m as at 29 Sep 09, a 6.3% decline compared to the last valuation as at 31 Dec 08. Gearing has increased from 27.6% to 33% due to the fall in valuation, but it will be reduced to 9.1% after the completion of the rights issue. The headroom for additional debt to fund acquisitions is S$438.3m to S$647.8m, if K-REIT increases its gearing to 30% or 40%.In our opinion, it is expensive to replace debt with equity. Finding yield accretive acquisitions in the office space will also take some time. Our 2010 DPU forecast is reduced by 25.3% from 7.9 cents to 5.9 cents due to dilution from the rights issue. Our new fair price for K-REIT is S$1.13 (previous:S$1.32).

China Milk: Buy (DMG, 2 Oct)
We have factored in a 20% decline in FY10 average selling price (ASP) for bull semen and cow embryos while raw milk ASP is expected to drop by a softer 5%. Hence FY10 operating profit could fall 23% to RMB377m. But bull semen and cow embryo ASP is forecasted to increase by 10% in FY11, as the industry recovers. Raw milk prices may have some marginal increase as well. The convertible bonds will mature 5 Jan 12. However, it is possible for early redemption from 5 Jan 10 onwards. This is likely to happen as China Milk's share price is way below the conversion price of S$2. The company has RMB1.6b in cash which exceeds the expected repayment of RMB1.2b. We raise target price to S$0.64 from previous S$0.52 based on 5.0x FY11 P/E, which is a 60% discount to the FTSE ST China Index FY09 P/E of 12.6x. This 60% discount takes into account some downside risk should milk prices fall further than expected.

Frasers Centrepoint Trust: Buy (DMG, 2 Oct)
Since July, FCT has been one of the best S-REIT performers with yields compressing by 100bps. We believe the major reason is that FCT is one of the most defensive plays among other REITs. Apart from its low stock beta (0.7x), FCT's well-positioned portfolio of suburban retail assets offers a high degree of stability in terms of occupancies and cash flows. Its anchors are primarily dominated by non-discretionary retailers with an eclectic mix concentrated towards F&B and mass-market merchandising. We expect Northpoint 2 and Yew Tee Point to be acquired within the next 12 months. We value both assets at about S$300m, with NPI yields averaging between 5.7-6.1%, above its WACC cost of 5.2%. With the acquisitions, FCT's AUM will grow by 28% to S$1.4b by end-2010. FCT has a robust balance sheet with no debt due for refinancing until Jul 2011. With a current equity cost of 6.2%, we believe acquisitions will likely be funded using both debt and equity. We understand that secured debt has an interest cost of ~3.8%. We estimate a 50:50 equity/debt combination will improve DPU yield by 40-60bp, whilst lifting gearing to only 32.4%. he acquisition of these malls is expected to be accretive and will strengthen FCT's retail oligopoly status in the northern region of Singapore. With an expanded AUM and equity base, concerns over FCT's poor stock liquidity will be addressed. We expect a further re-rating on the stock as yields could compress closer to its 5% heyday levels seen in 2006-08. We are raising our target price to S$1.53 from S$1.17.

Sembawang Marine: Underperfom (Credit Suisse, 2 Oct)
Diamond Offshore has announced the acquisition of Petrorig II for US$490m, which may cover SMM.s outstanding dues. While the sale of the rig is a clear positive, Diamond's ability to acquire the two Petrorigs at about cost also suggests the absence of bidding pressure with the auctions closing 20-30% below previous newbuild prices. SMM has to repeat this performance to recover its dues from Petrorig III (yard portion cost of US$525m), LOG rig also known as Petrorig IV (outstanding project cost of US$544m) and CJ70 jack-up rig (US$263 m outstanding towards suppliers). We maintain that the best-case scenario for SMM is the recovery of its dues although it is exposed to downside risk on asset pricing. In view of SMM.s peak earnings and potential downside risk on its contracts with Larsen Group companies, we believe its valuations are optimistic at the very least and are already pricing in new orders activity from Brazil. We maintain our target price (S$2.5) and UNDERPERFORM rating The average price of newbuild semi-sub ordered in 2008 was US$593m, which has been lowered by the US$385m contract from Queiroz Galvao. The average cost of a Friede and Goldman design semi-sub ordered with SMM in that year was US$658m. Although there may be some differences in design and capability of the vessels, Diamond Offshore has effectively acquired Petrorig 1 and Petrorig 3 at 20-30% discount to the average contract values awarded in 2008. Higher newbuild contract value for the remaining Larsen group contracts on SMM.s books. Petrorig 3, Petrorig 4 and CJ70 still presents a risk to SMM, in our opinion.

China Hongxing: Hold (Kim Eng, 2 Oct)
CHHS's intention to buy back shares in 3Q09 did not materialise. With the share purchase mandate approved, we believe it is a matter of time that the company executes share buy-back, possibly at lower share price levels. Subjected to the maximum limit of 10% of the issued ordinary share capital, the group could buy back up to 280m shares. While same-store-sales plunged double-digit in the past 2 quarters, the group has observed slight improvement in same-store-sales and inventory levels in 3Q. However, the path to recovery remains uncertain as rising competition continues to add pressure to its growth and margins. The group is seating on a huge pile of net cash of RMB2.67bn as at June 2009. Assuming a dividend payout of 20% that is in line with past trends and the share buy-back program to be activated, we estimate that only a mere RMB 350m could be returned back to share holders. The bulk of its cash is likely to be utilised for store expansion and M&A, which may come along with higher risks. Peak Sport, the Chinese sportswear maker, slumped 17% on its first day of trading in Hong Kong yesterday. A similar fate had befallen sportswear makers such as Multisports and Xingguan International which saw their share prices slumped 20-40% since listing on KLSE earlier this year. The lacklustre share price performance of the sector justifies the lack of earnings catalysts amid stiffening competition. As the stock approaches our target price of 23 cents, we are downgrading it to HOLD. We continue to peg the stock to 8x FY10 PER, a 40% discount to its HK peers that is in line with its smaller store network and weaker earnings. With its peers actively expanding and global players like Adidas and Nike cutting prices in China, rising competition will be a major hindrance to earnings recovery. We prefer lower entry levels at 18 cents.

Singapore Airport Terminal Services: Buy (DBS Research, 2 Oct)
We forecast 16% compounded annual earnings (2009-2012F) for SATS, driven by contribution from SFI and an improvement in airport services. We see exciting opportunities for the Group to capitalize upon, such as a turnaround in air travel and expected increase in tourists arrivals arising from the IR and MICE events, opportunities in food solutions arising from the merged entity with SFI, and inorganic growth with its strong balance sheet. We see improvements in airfreight and passenger travel. In fact, passenger traffic through Changi Airport in Aug'09 registered a 1.2% year-on-year (yoy) growth, a positive figure since Nov'08. Airfreight tonnage also registered a smaller decline at 13.6%, vis-à-vis the 20% slump we saw in early '09. IATA expects a 5% growth in cargo in 2010. We are expecting tourist arrivals to surge by c.20% in 2010 to 10.9m, arising from the IR and MICE. This should bode well for SATS, which provides both airport services and food solutions. Being an airport services provider with the largest network in Asia, we see immense exciting opportunities ahead. We believe share price should re-rate to commensurate with its potential and size. Target price of S$3.00 based on PE (at 13x, a discount to peers) and DCF. Share price should be supported by a reasonable dividend yield of 5.5% in FY10F assumed at 74% payout (DPS 12cents) of our forecast.

Goodpack Ltd: Buy (OCBC Research, 2 Oct)
Goodpack has proposed to undertake a renounceable non-underwritten rights issue of warrants at an issue price of S$0.22 per warrant, on the basis of one warrant for every five existing ordinary shares. Each warrant carries the right to subscribe for one new ordinary share in the group at an exercise price of S$0.68. The net proceeds from the subscription of warrants will be used for working capital purposes. We view the cash call positively, as it is likely to give Goodpack the financial flexibility and strength to capture the market recovery and expand into the new avenues of growth. We also see it as an effective way to pare down its debt-equity ratio with minimal dilution in shareholding. While the proposed warrants issue is likely to go through and that the warrants are already in-the-money, we have not factored in an enlarged share capital and a dilution in earnings from the exercise of the warrants. Nonetheless, the expected proceeds from the subscription of warrants has raised our DCF-based fair value slightly from S$1.20 to S$1.25. At 21.4% upside potential from its last price, we reiterate our Buy rating for Goodpack

SingTel: Buy (Phillip Securities, 2 Oct)
Singtel has won the bid for the rights to BPL matches for a period of three years beginning August 2010. SingTel had beaten StarHub for the rights and the amount of the bid was not Disclosed. We expect the revenue contribution from mioTV to increase significantly from FY2010. This is because we anticipate a large number of BPL fans to switch from StarHub's cable TV to SingTel's mioTV in 2010. In fact, we are projecting mioTV revenue of S$89m, S$295m and S$335m for FY2010F, FY2011F and FY2012F respectively. As SingTel will not charge more than the existing payment by StarHub customers for BPL matches and it paid a higher bid for the rights, we anticipate that it is likely to suffer a loss from offering BPL matches. However, we expect SingTel to benefit by gaining new customers from the offer of bundled mobile, Pay TV and broadband services to customers. Moreover, SingTel's 30.4% owned associate, Bharti, announced that the merger between Bharti and MTN was not accepted by the South African government. This meant that SingTel's interest in Bharti would not be diluted. Although SingTel paid a high price for the rights to BPL matches, it is likely to gain from strengthening its position as the number one telecommunications provider in Singapore. Furthermore, we expect SingTel and its regional mobile associates to benefit from the recovery in the global economy and report higher revenue and profit. Therefore, we maintain our buy recommendation and target price at S$3.80.

StarHub: Hold (Phillip Securities, 2 Oct)
Starhub has lost the bid to SingTel for the rights to BPL matches for a period of three years beginning August 2010. It mentioned that it did not bid a much higher price as they were concerned that the regulators would intervene if it raised the prices of cable TV to cover the higher cost of BPL rights. We expect StarHub to suffer a significant drop in cable TV revenue from FY2010F as a large number of customers switch to SingTel's mioTV to watch BPL matches. The cable TV revenue is anticipated to decline from S$408m in FY2009F to S$281m in FY2010F and S$154m in FY2011F. Maintain Hold recommendation and target price reduced from S$2.14 to S$2.05. Due to lower revenue and profit, our fair value using the discounted cash flow (DCF) model is reduced from S$2.14 to S$2.05. We believe that the loss of the BPL rights will weaken its position in the cable TV market. As upside to the fair value is limited from the current stock price, we maintain our hold recommendation on StarHub.

StarHub: Hold (DBS Research, 1 Oct)
We believe that SingTel's EPL bid price was so attractive that Premier League decided to award the EPL rights in the first round itself rather than proceeding to the second round. As far as potential impact on StarHub is concerned, about 50% of StarHub pay TV subscribers watch sports (not exclusively sports though), and we expect 20%-30% of sports subscribers to migrate to SingTel's mio TV and others to subscribe to both SingTel and StarHub as they may not want to miss other popular channels on StarHub, which are locked in for 5-10 years. (eg BBC, CNN, Discovery, AXN, HBO, Malay, Indian & Chinese channels). We also see potential loss of some subscribers across broadband and mobile to SingTel's bundled offerings. We have assumed subscriber decline of 10%/8%, 10%/8% and 3%/2% across pay TV, broadband and postpaid mobile segments respectively over FY10F/11F. We also lowered cable TV ARPU by 20%/10% for FY10F/11F. We expect earnings decline to reverse in FY12F. Given that StarHub's free cash flow exceeds earnings, we forecast DPS to be at least 16 Scents for FY10F and beyond, translating to 98% payout ratio. StarHub has already committed to 18 cents dps for FY09F. Our revised target price is S$2.00 pegged at 12x FY11F (prev 13x FY10F) at 20% discount to the historical average of 15x and we downgrade the stock to HOLD. Based on 12x FY11F PER, our fair value would be S$2.14 under the best case and S$1.90 under the worst-case scenario. Our best-case FY10F/11F earnings are 4%/7% higher while worst-case FY10F/11F earnings are 4%/5% lower than our base case earnings.

Parkway Holdings: Buy (Kim Eng, 1 Oct)
Parkway is the leading private healthcare provider in Asia. It is embarking on an exciting growth trajectory through: a) the rapid expansion of its hospital operations in Asia; b) and the establishment of its brand name through management contracts in new markets. At 13x PER, Parkway still trades close to valuation at crisis-level and is in the early cycle of another coming peak. Parkway's ability to sell the Novena medical suites coming 1Q10 will drive up sentiments greatly. Revenue intensity is the key driver Parkway is almost the "de facto" standard for highly complex procedures. As such, they attract the highest-yielding patients. With the upcoming state-of-the-art Novena hospital to complement its niche in high-value procedures, we are excited about the Group's long-term growth strategy. At prospective PER of 24x (excluding exceptional items), we are currently at the entry level of strategic investor, TPG Capital that was convinced to enter at a premium valuation in 2005. It opted not to take profit despite seeing its returns double in 2007. We view Parkway as a long-term defensive play, with its organic growth initiatives returning profits over the long term. Sale of medical suites poses as potentially strong catalysts One-third of the medical suites at Novena hospital will be launched for sale in 1Q10. The management sees strong interest in the medical suites expressed by senior medical specialists, reflecting the pent-up demand for such facilities. Proceeds from the sale could reduce the company's gross gearing to 0.4x from 0.8x by 2011 and will greatly improve sentiments. Using sum-of-the-parts (SOTP), we value at Parkway at $3.24.

Hiap Seng Engineering: Buy (DBS Research, 1 Oct)
A reputable service provider in oil & gas industry, is involved in construction of storage tanks, and structural and piping works; engineering, procurement and construction (EPC) for pressure vessels and process equipment for FPSO topsides; and repair and maintenance works for refineries and petrochemical plants. Its huge share price discount to peers is unwarranted. Hiap Seng's share price is now trading at 8x forward PE, which implies a 40% discount to its local peers' 14x forward PE, and 60% discount to its global peers' 18x forward PE. We believe that this is unwarranted, given Hiap Seng's improved project execution, and sustainable high dividend payouts. We believe that Hiap Seng's positive free cash flow of 5-9 Scents per share in FY10-11 can support management's intention to pay high dividends to shareholders. We expect Hiap Seng to pay 4.0-4.5 cents dividend per share per annum in FY10-FY11, We expect Hiap Seng's S$178m order book and steady repair and maintenance revenue to support our projection of 49% net profit CAGR in FY10-11. Hiap Seng’s gross profit margins are also expected to hold up at 20-21% in FY10-11. We initiate coverage on Hiap Seng with a BUY rating. Our target price for Hiap Seng is S$0.90; using 12x blended FY10/11 PE for its stable repair and maintenance business, and 9x for its construction and EPC businesses.Hence, our target price reflects an implied 9.7x P/E, and has 30% upside potential. We have a BUY rating on Hiap Seng.