1. business and industrial

Asia Pacific Equity Research | Singapore
MARKET
PULSE
Key Idea
Key Singapore Indices
STI
Catalist
Finance
Property
Electronics
Vol(m)
Val(S$m)
Close
3167.7
150.5
814.5
724.1
427.0
1467.9
1145.4
Chg
13.5
1.5
3.6
2.3
2.0
-134.3
-204.4
% Chg
0.4
1.0
0.4
0.3
0.5
-8.4
-15.1
Close
16380.4
4258.4
1886.8
6310.3
1788.3
23023.2
14532.5
1528.7
1900.7
8512.9
Chg
263.2
41.0
24.0
114.4
20.5
122.3
-205.9
2.6
-18.2
-120.8
% Chg
1.6
1.0
1.3
1.8
1.2
0.5
-1.4
0.2
-0.9
-1.4
2,953
3,388
321
175
159
World Indices
Dow Jones
Nasdaq
S&P500
FTSE
KLCI
Hang Seng
Nikkei
SET
KOSPI
TWSE
Morning Call
20 Oct 2014
CapitaMall Trust: Resilient quarter
CapitaMall Trust (CMT) reported its 3Q14 results which
were in-line with ours and the street’s expectations. Gross
revenue increased 2.9% YoY to S$164.6m, while DPU grew
at a stronger 6.2% to 2.72 S cents. We expect S$11.2m, or
0.32 S cents/unit of taxable income retained in 1H14 to be
distributed in 4Q14. Despite softness in its shopper traffic
and tenants’ sales psf, we note that the magnitude of
decline has moderated, while portfolio occupancy rate was
stable at 98.5%. Positive rental reversions of 6.3% were
also achieved for 9M14. We retain our forecasts given this
in-line set of results. CMT is trading at 5.7% FY14F and
6.0% FY15F distribution yield, above its 10-year average
blended 12-month forward distribution yield of 5.3%.
Maintain BUY, with an unchanged fair value estimate of
S$2.20. This implies total potential returns of 21%.
More reports:
-
First REIT: Another reliable performance
Tiger Airways: Wings clipped by weak balance sheet
Sembcorp Marine: Secures orders worth S$222m
Singapore Airlines: To take control of Tiger Airways
Market Statistics (SG)
STI
No.
No.
No.
52-week range
of gainers
of losers
of unchanged
Economic Statistics
S$/US$
Yen/US$
3-mth S$ SIBOR
3-mth US$ SIBOR
Crude futures (US$)
1.3
107.2
0.4
0.2
83.4
0.0
0.2
0.0
0.0
0.7
News Headlines
 Weakness in Europe and a stronger dollar are the major
concerns for corporate America going into this earnings
season but that may apply more to outlook than results for
3Q.
 Commodity markets were haunted by demand fears last
week in the face of mounting global economic worries, with
crude oil prices striking 4-year lows and base metals also
suffering heavy falls.
 Buying surged with directors and listed firms posting huge
trading last week based on SGX filings. A total of 28
companies recorded 50 director purchases worth S$11.9m up sharply from the previous week's S$7.06m.
 Manhattan Resources Ltd said that it has exercised its call
option to acquire a 60% stake in investment holding
company Starsmind Capital Pte Ltd (SCPL) for S$40m.
Research Team
(65) 6531 9800
e-mail: [email protected]
 Keppel Land has unveiled its plan to redevelop the existing
International Financial Centre (IFC) Jakarta Tower 1 which
would more than double the net leasable area (NLA) of
premium grade office space.
 In the biggest office leasing deal for a new suburban project
so far this year, CPG Corporation has taken a lease of
83,000 sq ft at Westgate Tower next to Jurong East MRT
Station.

Sources: MasNet, Bloomberg, Business Times, Straits Times and other media
 Xxx xxxx xxx.
 document.
Xxx xxxx
Please refer to important disclosures at the back of this
xxx.
MCI (P) 006/06/2014
OCBC Investment Research
Market Pulse
20 Oct 2014
CapitaMall Trust: Resilient quarter
forward distribution yield of 5.3%. Maintain
BUY, with an unchanged fair value estimate
of S$2.20. This implies total potential returns
of 21%. (Wong Teck Ching Andy)
 3Q14 DPU rose 6.2% YoY
 6.3% rental reversions achieved
YTD
 Ongoing AEIs to drive growth
ahead
.
3Q14 results within expectations
CapitaMall Trust (CMT) reported its 3Q14
results which were in-line with ours and the
street’s expectations. Gross revenue
increased 2.9% YoY to S$164.6m,
underpinned largely by the completion of the
AEIs at Bugis Junction in Oct 2013 and Sep
2014, coupled with higher rentals on new
and renewed leases. DPU grew at a stronger
6.2% YoY to 2.72 S cents (ex-dividend on 24
Oct), partly due to a +0.3 ppt increase in its
NPI margin to 69.3%. For 9M14, revenue
rose 3.7% to S$493.6m, while DPU climbed
5.7% to 7.98 S cents. This constituted
74.9% and 72.6% of our FY14 forecasts,
respectively. The latter is within expectations
as S$11.2m, or 0.32 S cents/unit of taxable
income retained in 1H14 is expected to be
distributed in 4Q14.
.
.
.
.
First REIT: Another reliable performance
 3Q14 DPU +3.1% YoY
 Another record DPU
 Trim forecasts but retain HOLD
3Q14 results in-line with our
expectations
First REIT’s (FREIT) 3Q14 results came in
within our expectations. Revenue,
distributable income and DPU rose 4.6%,
6.1% and 3.1% YoY to S$23.8m, S$14.7m
and 2.02 S cents (ex-dividend on 24 Oct),
respectively. Notably, its DPU achieved
another record high (+1% QoQ), aided by
organic growth in its portfolio and a full
quarter of contribution from Siloam Hospitals
Purwakarta (SHPW), which was acquired in
May this year. For 9M14, revenue,
distributable income and DPU jumped 14.7%,
13.5% and 8.3% to S$69.4m, S$43.3m and
6.01 S cents; and this formed 74.4%, 72.0%
and 72.4% of our FY14 projections,
respectively.
Softness in retail scene; but portfolio
still resilient
CMT recorded a 1.5% and 3.0% YoY decline
in its shopper traffic and tenants’ sales psf in
9M14, respectively, in-line with the softness
in Singapore’s retail sales. Nevertheless, we
note that the magnitude of decline has
moderated (shopper traffic and tenants’ sales
psf were down 2.0% and 3.7% in 1H14,
respectively). Its portfolio occupancy rate
was also stable at 98.5% as at end Sep
2014, versus 98.6% as at end 1H14 and
98.5% as at end Dec 2013. CMT managed to
achieve positive rental reversions of 6.3% for
9M14, despite a slight drag coming from IMM
(-2.8%). We expect the situation to improve
at IMM, as management plans to carry out
Phase 2 of AEIs to incorporate more outlet
stores. Three other malls are also undergoing
AEIs at the moment.
More acquisitions could come in 4Q14
Management believes the victory by Joko
Widodo at the recent Indonesian presidential
elections augurs well for the economy and
the healthcare sector, in particular. Hence,
we expect FREIT to maintain its core focus on
the Indonesian market for future
acquisitions-fuelled growth. Siloam
International Hospitals, a subsidiary of
FREIT’s sponsor Lippo Karawaci, recently won
the Healthcare Services Provider of the Year
title in the Frost & Sullivan Indonesia
Excellence Awards 2014. Its Strategic
Development Director, Dr. Anang Prayudi,
highlighted plans to achieve growth of ~3040% via greenfield projects and M&A
activities. We expect FREIT to be a
beneficiary of this trend, and believe it is
currently in negotiations with Lippo Karawaci
on possible acquisition targets, with 4Q14 a
possible timeline for an agreement to be
reached.
Maintain BUY
In terms of financial position, CMT has
maintained a comfortable gearing ratio of
34.1%, with an average cost of debt of
3.6%. We retain our forecasts given this inline set of results. CMT is trading at 5.7%
FY14F and 6.0% FY15F distribution yield,
above its 10-year average blended 12-month
2
OCBC Investment Research
Market Pulse
20 Oct 2014
Pare estimates slightly; maintain HOLD
We trim our FY14 and FY15 forecasts slightly
by 2.8%, as we input higher tax expenses
and a larger unit base in our model to
account for its distribution reinvestment plan.
Correspondingly, our DDM-derived fair value
estimate declines from S$1.21 to S$1.18.
Despite our lowered DPU forecast, FREIT still
offers a healthy FY14 and FY15 dividend yield
of 6.8% and 7.0%, respectively.
Nevertheless, we are maintaining our HOLD
rating on the stock as valuations appear fair,
in our opinion, with the stock trading at 1.3x
FY14F and FY15F P/B. (Wong Teck Ching
Andy)
.
.
.
.
Proposed rights issue to strengthen
balance sheet
The large provisions charged during the
quarter weakened Tigerair’s balance sheet
tremendously and reduced its book value by
91.9% from S$278.7m as at 31-Mar to
S$22.6m as at 30-Sep. It announced last
week the proposal to undertake an 85-for100 rights issue to raise gross proceeds of up
to ~S$234m at S$0.20 per rights share. SIA
has undertaken to subscribe for its pro rata
entitlement as well as excess rights shares
up to total of S$140m. In addition, SIA
announced that it will convert all of its
perpetual convertible capital securities
(PCCS) holdings into shares prior to the
rights issue, raising its stake in Tigerair from
40% to ~55%. Simply put, if the rights issue
is approved, the minimum gross proceeds
that Tigerair should receive is at least
S$138m.
.
Tiger Airways: Wings clipped by weak
balance sheet
 Large provisions charged to
2QFY15
 Proposed rights issue has SIA’s
support
 Change in valuation; maintain
SELL
Change in FV estimate; maintain SELL
With large provisions and a weak
performance in 2QFY15, we increase our
forecasted FY15F net loss by 145.3% to
S$254.4m. But given the reduction in cash
burden from the sublease of the 12 aircraft,
we narrow our FY16F estimated net loss by
62.7% to S$6.0m. We also have not factored
in the effects of the rights issue as it is only
at the proposal stage. With the tremendous
drop in book value, we change our valuation
methodology to EV/EBITDA instead P/B. We
will review our estimate again when the
rights issue is approved. Hence, at 8x FY16F
EV/EBITDA (regional LCCs average blended
FY15F/16F EV/EBITDA: 8.2x), we lower our
FV estimate to S$0.21 (prev: S$0.35) while
maintaining a SELL rating. We will revisit our
estimate once again when the rights issue is
approved. (Eugene Chua)
Disappointing 2QFY15 results once
again
Tiger Airways Holdings (Tigerair) reported a
10.5% YoY decline in its 2QFY15 revenue to
S$146.7m while its 1HFY15 revenue declined
21.1% to S$315.7m due to exclusion of
Tigerair Australia, meeting 96.2% of our
forecasted 1HFY15 revenue. It also recorded
a 107.7% YoY increase in 2QFY15 core loss
to S$26.6m, mainly due to weaker yields
albeit higher traffic volume, which led to a
126.0% increase in 1HFY15 core loss to
S$44.3m. Tigerair’s 2QFY15 results were
further worsened by large provisions
amounting to S$159.1m. Out of the
S$159.1m, S$99.3m was provided for
onerous aircraft lease contracts while the
remaining provision was for the loss
expected from the planned divestment of
Tigerair Australia. Taking into account these
provisions, Tigerair’s 2QFY15 net loss
amounted to S$182.4m, against its 2QFY14
PATMI of S$23.8m.
.
3
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.
.
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OCBC Investment Research
Market Pulse
20 Oct 2014
Sembcorp Marine: Secures orders worth
S$222m
Sembcorp Marine (SMM) announced that its
subsidiaries Sembmarine SLP and Jurong
Shipyard have secured offshore energy
related contracts valued at a combined
S$222m. Sembmarine SLP has won a
contract from Siemens to design and build
the offshore substation platform for the
Dudgeon Offshore Wind Farm, while Jurong
Shipyard has been contracted by regular
customer MODEC to complete the repair and
life extension, and conversion of a VLCC into
a FPSO vessel as part of the TEN
Development Project. With these contracts,
SMM has secured new contracts worth about
S$3.9b YTD, accounting for close to our full
year new order win estimate. Maintain BUY
with S$4.18 fair value. (Low Pei Han)
.
.
.
.
.
Singapore Airlines: To take control of
Tiger Airways
Singapore Airlines Limited (SIA) last Friday
announced that it had entered into an
irrevocable undertaking with regards to the
rights issue of Tiger Airways Holdings Limited
(Tigerair). SIA currently holds a 40% stake
[~394.6m ordinary shares and 189.4m nonvoting perpetual convertible securities
(PCCS)] in Tigerair. As part of its
undertaking, SIA will be converting all of its
PCCS into 358.7m new Tigerair shares at a
price S$0.565 per share, bringing its stake in
Tigerair up to ~55% before the rights issue,
effectively taking control over Tigerair. As
part of the Whitewash Resolution of PCCS,
SIA is not required to make a general offer
and has no intention to do so. Furthermore,
SIA also undertakes to subscribe in full its
pro rata entitlement (~55%) of the rights
issue as well as any excess rights up to a
total of S$140m. Buying Tigerair’s shares at
a significant premium is probably a strategic
move to gain control to align Tigerair’s
direction with Scoot as well as to participate
in the rights issue with a larger base. As the
Tigerair’s rights issue is still in its proposal
stage, we continue to maintain our HOLD
rating with unchanged fair value estimate of
S$10.05 on SIA. (Eugene Chua)
.
.
.
.
.
4
OCBC Investment Research
Market Pulse
20 Oct 2014
Calendar of key events
20-Oct-14
21-Oct-14
Keppel Land 3Q14
Mapletree Industrial 2Q15
Frasers Commercial Trust
FY14
Mapletree Logistics 2Q15
22-Oct-14
23-Oct-14
24-Oct-14
Cache 3Q14
MGCCT 2Q15
Keppel Corp 3Q14
Aztech 3Q14
United Overseas Insurance
3Q14
Triyards FY14
Cambridge Ind Trust (am)
3Q14
Mapletree Commercial
Trust 2Q15
SGX 1Q15
Frasers Centrepoint Trust
FY14
SG Sep Industrial
Production
SoilbuildBizREIT 3Q14
27-Oct-14
28-Oct-14
Second Chance FY14
SG Sep CPI
29-Oct-14
30-Oct-14
31-Oct-14
CDL Hospitality Trust 3Q14
OCBC 3Q14
DBS 3Q14
OSIM 3Q14
UOB 3Q14
NOL 3QFY14
Forterra Trust 3Q14
SG Sep Bank Loans and
Advances
SG Sep Money Supply
03-Nov-14
04-Nov-14
05-Nov-14
06-Nov-14
07-Nov-14
Cosco 3Q14
GLP 2Q15
Noble 3Q14
SIA 2Q15
Venture Corp 3QFY14
SIAEC 2QFY15
China Aviation Oil 3Q14
Innotek 3Q14
Valuetronics 2Q15
Sembcorp Ind 3Q14
10-Nov-14
17-Nov-14
11-Nov-14
18-Nov-14
12-Nov-14
13-Nov-14
14-Nov-14
SP Ausnet 1H14
SATS 2Q15
SG Sep Retail Sales
HTL Int'l 3Q14
SG 3Q GDP
20-Nov-14
21-Nov-14
19-Nov-14
SG Oct NODX
Notes:
Sourced from Bloomberg
All US Tech results dates have been adjusted to Singapore dates.
US Initial jobless claims are released every Friday.
MBA mortgage applications are released every Wednesday.
5
OCBC Investment Research
Market Pulse
20 Oct 2014
SHAREHOLDING DECLARATION:
For shareholding disclosure on individual companies, please refer to the latest reports of these companies.
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RATINGS AND RECOMMENDATIONS:
- OCBC Investment Research’s (OIR) technical comments and recommendations are short-term and trading
oriented.
- OIR’s fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment
horizon.
- As a guide, OIR’s BUY rating indicates a total return in excess of 10% based on the current price; a HOLD
rating indicates total returns within +10% and -5%; a SELL rating indicates total returns less than -5%.
Co.Reg.no.: 198301152E
Carmen Lee
Head of Research
For OCBC Investment Research Pte Ltd
Published by OCBC Investment Research Pte Ltd
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