Morning Matters

Figure of the Day

Source: google.com

Sakari sees sequential improvement. See

'Scoop of the Day'.

Market Indices

Value Chg % Chg

Dow Jones 13,073.0 -2.65 -0.02

S&P 500 1,385.3 -0.67 -0.05

Nasdaq 2,945.8 -12.25 -0.41

FTSE 100

5,693.6 -+66.42 +1.18

Nikkei 8,635.4 +68.80 +0.80

Hang Seng 19,585.4 +310.44 +1.61

Shanghai 2,109.9 -18.85 -0.89

KOSPI 1,843.8 +14.63 +0.80

STI 3,032.8 +34.31 +1.14

KLCI 1,632.4 +7.41 +0.46

Key Indicators

Value Chg %

Oil Price*

(US$/bbl)

89.78 -0.35 -0.39

Gold Price**

(US$/oz)

1621.97 -0.93 -0.06

US$/S$ 1.2462 -0.00 -0.10

* WTI Crude Future

** Gold Spot

While You Were Sleeping

US markets: Negative

Dow futures: +3 (as at 8am Singapore Time)

US Wrap: Following the biggest two day rally of the year, US stocks pulled

back, while European equities rose for a third day and Spanish bonds rose

on speculation policy makers will take action to ease the region’s debt crisis.

Corn rose to a record high as an American drought persisted. ECB

President Draghi met with US Treasury Secretary Geithner in Frankfurt after

leaders in Berlin, Paris and Rome backed him by saying they will do

whatever is needed to protect the 17 nation euro. The Dow slipped 2.65pts

(-0.02%), the S&P500 lost 0.67pts (-0.05%) while the Nasdaq fell 12.25pts

(-0.41%).

The Day Ahead…

Scoop of the Day: Sakari Resources' 2Q12 PATMI was down 39% YoY

to US$24m (+66% QoQ) on the back of 0.2% YoY decline in top-line to

US$238m (+26% QoQ), further dragged by a 8% YoY increase in cost of

sales to US$183m and a 60% YoY increase in tax (though this includes

one-off US$4.2m for prior years’ taxes) to US$23m. Other gains of

US$8.3m in 2Q12 helped offset the decline. Management will hold a results

conference call on 31 Jul 12, during which revisions on guidance could be

made. We maintain our BUY rating and target price of S$2.00 based on

15.5x FY12 P/E. An interim dividend of US2¢/sh has been declared.

(Joshua Low)

WHAT’S INSIDE?

On The Platter

Sakari Resources: Output improves sequentially (BUY, S$1.27, TP: S$2.00)

- Flash note

OSIM International: More special dividends in the offing? (BUY, S$1.20,

TP: S$1.75)

SMRT: Insurance compensation boosted earnings (NEUTRAL, S$1.62, TP:

S$1.60)

Cambridge Industrial Trust: Another attractive quarter (BUY, S$0.590, TP:

S$0.660)

Singapore Airlines: No Yield Recovery in Sight (NEUTRAL, S$10.82. TP:

S$11.17)

Tiger Airways: Tiger Singapore back from the red (BUY, S$0.69, TP:

S$0.75)

On the Platter

Sakari Resources: Output improves sequentially (BUY, S$1.27, TPS$2.00) - Flash note

Joshua Low (+65 6232 3884, [email protected])

2Q12 PATMI above our expectations. 2Q12 PATMI was down 39% YoY to US$24m (+66%

QoQ) on the back of 0.2% YoY decline in top-line to US$238m (+26% QoQ), further dragged by a

8% YoY increase in cost of sales to US$183m and a 60% YoY increase in tax (though this

includes one-off US$4.2m for prior years’ taxes) to US$23m. Other gains of US$8.3m in 2Q12

helped offset the decline. Management will hold a results conference call on 31 Jul 12, during

which revisions on guidance could be made. We maintain our BUY rating and target price of

S$2.00 based on 15.5x FY12 P/E. An interim dividend of US2¢/sh has been declared.

Sebuku 1H12 production accounted for 48% of our full year. Sebuku’s production was strong

in 2Q12, with production up 138% YoY to 672Kt (+30% QoQ). Cash costs were down 23% YoY to

US$42.7/tonne (+1% QoQ). With 1H12 production accounting for 48% of our FY12 forecast of

2.5m tonnes, we see strong possibility of Sebuku beating our production forecasts.

Jembayan cash costs declined 15% QoQ. Jembayan’s production was down 12% YoY to

2,069Kt (+43% QoQ). 1H12 production now accounts for 39% of our FY12 estimate. We continue

to expect Jembayan to experience sequential ramp up in volumes. What was notable was that

Jembayan’s cash costs were down 15% QoQ to US$57.6/tonne (-5.2% YoY).

OSIM International: More special dividends in the offing? (BUY, S$1.20, TP: S$1.75)

OSIM reported a 20% YoY growth in 2Q12 earnings of S$22.5m, which are within expectations.

We were pleasantly surprised with a special 1 S¢ dividend in addition to an interim 1 S¢, which

brings total payout in 1H12 to 3 S¢. Given the Group’s highly cash generative business and cash

hoard of S$196m (net: S$54m), we believe management will continue to reward shareholders with

special dividends down the road. After adjusting for higher dividends and lower taxes, our FY12-

14F earnings have been raised by 8%. The Company has been aggressively buying back its

shares, purchasing 82.5m shares, out of which 50m has been cancelled. We believe this

continued buying will provide limited downside risk to stock price. We remain bullish on the stock

and raise our TP by 8% to S$1.75, still pegged at 15x FY12F earnings. OSIM remains our top pick

in the Singapore consumer space.

Raising earnings on lower taxes in 2H12. 1H12 earnings grew 15% YoY to S$44.7m, in-line

with expectations, accounting for 56% of our FY12F. Sales have so far been broad based across

all markets with North Asia accounting for the bulk of it at 57%. 1H12 net margins grew by 1.2ppt

to 14.7%, against our estimate of 13.4% for FY12F largely due to a lower tax rate. We now

assume lower FY12-14F tax rates of 23% (compared to FY11’s 29%, owing to a one-off S$3.5m

tax provision).

Expect more special dividends. Apart from reducing our tax assumptions, we have also raised

our dividend assumptions to include a special 1 S¢ annually in FY13-14F. At last closing, the stock

offers investors a 3.5% dividend yield.

SMRT: Insurance compensation boosted earnings (NEUTRAL, S$1.62, TP:S$1.60)

Core earnings were below our expectations. SMRT’s 1QFY13 core PATMI (this excludes S$8m

insurance compensation for a rail asset, S$2m penalty by the LTA and COI related fees of

S$1.5m) came in below our expectations and was down 8% YoY to S$32m (-11% QoQ) while topline

rose 9% YoY to S$275m (flat QoQ). Including the exceptionals, 1QFY13 PATMI was up 5%

YoY to S$36.5m (+162% QoQ). Cost components came in higher than expected and we therefore

lower our FY13 and FY14 PATMI by 13% and 15% respectively due to higher (1) staff and related

costs, (2) depreciation, and (3) repair and maintenance costs. Maintain NEUTRAL with lower TP of

S$1.60 (from S$1.73 previously) based on DCF implying a FY13 P/E of 18x.

Raising our cost estimates. We raise our FY13/14 staff and related costs due to increase in

headcount (mainly due to Train operations for maintenance and increased train runs, and service

leaders for Bus operations) as well as salary increases. Management expects headcount to

increase by 10% (from total group headcount of 7,064) in FY13. Our depreciation cost rose due to

increases in our capex assumptions which is expected to be S$500m for FY13.

CCL ridership flattish sequentially, Bus ops remains in the red. The average weekday

ridership for CCL was ~350k in 1QFY13, close to previous quarter’s average. Though this is still

below the estimated breakeven of ~450k/day for CCL, management expects ridership for CCL to

continue to grow. SMRT’s total MRT ridership growth remains strong, rising by 8.6% YoY in

1QFY13. Bus operating losses widened to S$5.2m (+44% YoY, +39% QoQ) due to higher staff

costs and depreciation.

Valuations appear fair, await better entry point. SMRT does not appear cheap trading at 18x

FY13 (FYE Mar) P/E versus ComfortDelGro’s 13.6x FY12 P/E. We think SMRT’s share price may

see limited upside with concerns on the cost pressures it faces.

Cambridge Industrial Trust: Another attractive quarter (BUY, S$0.590, TP: S$0.660

2Q12 results in-line with expectations. Cambridge Industrial Trust (CIT) just released its 2Q12

results posting gross revenue and net property income of S$21.5m (+10.4% YoY) and S$18.4m

(+8.8% YoY) respectively. The increase in revenue is mainly attributed to additional contributions

from the acquisitions at 16 Tai Seng Street, 25 Pioneer Crescent and 3C Toh Guan Road East.

DPU for the quarter came in at 1.180S¢ (+13.9% YoY), equivalent to 24.4% of our FY12 DPU

estimate. Going forward, we expect CIT’s DPU to continue to remain strong from 1) additional

contributions from its acquisitions, 2) resilient industrial rental rates coupled with average security

deposits of 12.9 months; 3) the completion of the BTS project at Tuas View Circuit in August 2012

and 4) future AEIs in the pipeline. On the back of falling risk free rate to historic low together with

the improvement in the quality of assets of CIT, we maintain our BUY call on CIT with a revised

DDM based (COE: 9.8%, terminal growth: 1.0%) TP of S$0.660. With CIT currently trading at

7.2% spread vs the pre-crisis historical mean of 4.6%, our TP represents a spread of 6.3% posting

a potential upside of 11.8%

Multiple acquisitions and AEIs a positive for DPU. Since the beginning of the year, CIT has

completed three acquisitions (namely: 16 Tai Seng Street, 25 Pioneer Crescent and 3C Toh Guan

Road East) and proposed a future acquisition at 30 Teban Gardens Crescent. Together with the

completion of the BTS project at Tuas View Circuit by August 2012, we expect CIT’s DPU to grow

by c.0.5S¢ (+12%) in FY12.

Pro-active management with room for slight positive reversion. CIT’s management continues

to be pro-active in engaging tenants early on negotiations of lease renewals in a bid to reduce

lease concentration. Average lease expiry profile for FY13/14 continues to decline to 46.3% from

>50.0% last year. Currently, CIT’s portfolio occupancy is at 99.1%, together with a high average

security deposit of 12.9 months, and a WALE of 3.1 years, we believe CIT’s portfolio will continue

to remain defensive amid a volatile global economy.

Acceptable gearing amid multiple acquisitions. Management has been undertaking a portfolio

reconstitution exercise since beginning of 2010, divesting nonperforming assets and redeploying

capital into yield accretive acquisitions. Amid multiple acquisitions, gearing has been pared down

from 42.6% in Dec 2009 to 35.8% in Jun 2012. With an internal target gearing 40%, CIT will still

has some room for further acquisitions. Together with an attractive yield of 8% and a strong

pipeline of acquisitions, we maintain our BUY rating with a revised TP of S$0.660.

Singapore Airlines: No Yield Recovery in Sight (NEUTRAL, S$10.82, TP: S$11.17

We downgrade SIA from BUY to NEUTRAL, with a lower FV of SGD11.17, premised on 1x

FY13 BV. The adoption of a load active strategy through more promotions may add

pressure on overall yields in the near term. Being a premium carrier, raising yields to precrisis

levels to maximize profit would be tough when the outlook improves. This prompts

us to trim our yields forecast, which accordingly cuts our earnings estimates by

39%/26%/27% respectively for FY13/FY14/FY15. SIA’s earnings outlook will be better but

such a potential may not be as exciting as we had earlier anticipated.

Challenging times. At last week’s analyst briefing, Management highlighted that it has adopted a

load active strategy by having more promotions, which may further pressure overall yields in the

near term. Given the recent launch of Scoot potentially giving rise to some cannibalization,

competition from Middle East carriers and the proliferation of low cost carriers, it would be tough

for a premium carrier like SIA to increase yields to pre- crisis levels even when the outlook turns

positive. While current the strategy of improving loads at the expense of yield seemed to have

buoyed earnings in 1QFY13 after consecutive quarters of declines, we do not think investors may

be too excited as the airline’s pace of profits has been weaker than they had anticipated. The drop

in yields was felt in the premium and economy segments, notably on flights to/from Europe and

America. Asia was not also spared, although the impact on yields was not as bad.

No change in capacity guidance. The recent changes in SIA’s winter schedule will not in any

way change management’s 3% capacity growth guidance. In an announcement last week’,

management said it had reduced the flight frequency on its European routes (except London) and

at the same time increased the frequency on its flights to London, Perth and Mumbai. In the

meantime, flights to San Francisco via Hong Kong and also to Tokyo will be served by the airline’s

A380s instead of B777-300s.

Trimming yield outlook and profits. We trim our passenger yield forecast, for which we now

expect a 1% drop in Rev/RPK to 11.70 cents (1QFY13: 11.4 cents, down by 3.4% y-o-y) from 2%

growth earlier. Similarly, in view of the still-sluggish cargo outlook, we are also trimming our cargo

yields forecast assumption from a 5% growth to minus 2%. With an unchanged assumption of a jet

fuel price average of USD130/barrel, our earnings estimates for FY13/FY14/FY15 are lower by

39%/26%/27% respectively.

Downgrade to NEUTRAL. Though there will be y-o-y improvement in SIA’s earnings, the potential

upside will not be as exciting as we anticipated earlier. We downgrade SIA from BUY to

NEUTRAL, with a lower FV of SGD11.17, premised on 1x on its lower FY13 book value, with ROE

of only a meager 3%. Downgrade to NEUTRAL.

Singapore Airlines: No Yield Recovery in Sight (NEUTRAL, S$10.82, TP: S$11.17)

We downgrade SIA from BUY to NEUTRAL, with a lower FV of SGD11.17, premised on 1x

FY13 BV. The adoption of a load active strategy through more promotions may add

pressure on overall yields in the near term. Being a premium carrier, raising yields to precrisis

levels to maximize profit would be tough when the outlook improves. This prompts

us to trim our yields forecast, which accordingly cuts our earnings estimates by

39%/26%/27% respectively for FY13/FY14/FY15. SIA’s earnings outlook will be better but

such a potential may not be as exciting as we had earlier anticipated.

Challenging times. At last week’s analyst briefing, Management highlighted that it has adopted a

load active strategy by having more promotions, which may further pressure overall yields in the

near term. Given the recent launch of Scoot potentially giving rise to some cannibalization,

competition from Middle East carriers and the proliferation of low cost carriers, it would be tough

for a premium carrier like SIA to increase yields to pre- crisis levels even when the outlook turns

positive. While current the strategy of improving loads at the expense of yield seemed to have

buoyed earnings in 1QFY13 after consecutive quarters of declines, we do not think investors may

be too excited as the airline’s pace of profits has been weaker than they had anticipated. The drop

in yields was felt in the premium and economy segments, notably on flights to/from Europe and

America. Asia was not also spared, although the impact on yields was not as bad.

No change in capacity guidance. The recent changes in SIA’s winter schedule will not in any

way change management’s 3% capacity growth guidance. In an announcement last week’,

management said it had reduced the flight frequency on its European routes (except London) and

at the same time increased the frequency on its flights to London, Perth and Mumbai. In the

meantime, flights to San Francisco via Hong Kong and also to Tokyo will be served by the airline’s

A380s instead of B777-300s.

Trimming yield outlook and profits. We trim our passenger yield forecast, for which we now

expect a 1% drop in Rev/RPK to 11.70 cents (1QFY13: 11.4 cents, down by 3.4% y-o-y) from 2%

growth earlier. Similarly, in view of the still-sluggish cargo outlook, we are also trimming our cargo

yields forecast assumption from a 5% growth to minus 2%. With an unchanged assumption of a jet

fuel price average of USD130/barrel, our earnings estimates for FY13/FY14/FY15 are lower by

39%/26%/27% respectively.

Downgrade to NEUTRAL. Though there will be y-o-y improvement in SIA’s earnings, the potential

upside will not be as exciting as we anticipated earlier. We downgrade SIA from BUY to

NEUTRAL, with a lower FV of SGD11.17, premised on 1x on its lower FY13 book value, with ROE

of only a meager 3%. Downgrade to NEUTRAL.

31 July 2012

See important disclosures at the end of this publication

9

DMG Research

Company Insider No. of Shares

Share Price

(S$)

% Stake before

transaction

% Stake after

transaction

Popular WORLD HOLDINGS 540,000 na 56.780 56.840

Ho Bee Share Buy-Back 400,000 1.220 na 0.441

Company Insider No. of Shares

Share Price

(S$)

% Stake before

transaction

% Stake after

transaction

Sale

M Development VALUE CAPITAL ASSET MANAGEMENT 18,101,000 na 9.540 6.980

# Exercise of Rights issue / Share Options / Convertibles / Warrants / Share Issuance.

## Married deal.

Purchase

INSIDER TRADES HIGHLIGHT FOR 30 Jul 12

US Data US Data US Data US Data US Data

MBA Mortgage Applications (Jul 27) Initial Jobless Claims (Jul 28)

Continuing Claims (Jul 21)

SG Data SG Data SG Data SG Data SG Data

SG Results SG Results SG Results SG Results SG Results

Cambdrige Industrial Trust Ltd CapitaLand Ltd Parkway Life Real Estate Investment Trust SembCorp Industries Ltd

Tuan Sing Holdings Ltd Cosco Corp Singapore Ltd OCBC Corp Ltd DBS Group Holdings Ltd

Singapore Post Great Eastern Holdings Ltd SembCorp Marine Ltd United Industrial Corp Ltd

China Aviation Oil Singapore Ltd Singapore Land Ltd

Hi-P International Ltd

Roxy-Pacific Holdings Ltd

Global Premium Hotels Ltd

Fragrance Group Ltd

Cityspring Infrastructure Trust

Second Chance Properties Ltd

6-Aug 7-Aug 8-Aug 9-Aug 10-Aug

US Data US Data US Data US Data US Data

MBA Mortgage Applications (Aug 3) Initial Jobless Claims (Aug 4)

Continuing Claims (Jul 28)

SG Data SG Data SG Data SG Data SG Data

Automobile COE Open Bid Cat A (Aug 8)

Automobile COE Open Bid Cat B (Aug 8)

Automobile COE Open Bid Cat E (Aug 8)

SG Results SG Results SG Results SG Results SG Results

Maxi-Cash Financial Services HTL International Holdings Ltd Hiap Hoe Ltd Vicom Ltd

QAF Ltd United Overseas Bank Ltd Neptune Orient Lines Ltd Fraser & Neave Ltd

Venture Corp Ltd Genting Singapore Plc

Starhub Ltd Super Group Ltd/Singapore

Parkson Retail Asia Ltd Superbowl Holdings Ltd

Golden Agri-Resources Ltd

UOL Group Ltd

13-Aug 14-Aug 15-Aug 16-Aug 17-Aug

US Data US Data US Data US Data US Data

MBA Mortgage Applications (Aug 10) Initial Jobless Claims (Aug 11)

Continuing Claims (Aug 4)

SG Data SG Data SG Data SG Data SG Data

Retail Sales Ex Auto (YoY) Jun

Retail Sales (YoY) Jun

Retail Sales (MoM) sa Jun

SG Results SG Results SG Results SG Results SG Results

Armstrong Industral Corp Ltd Wilmar International Ltd ASL Marine Holdings Ltd Chosen Holdings Ltd

Global Logistic Properties Ltd

Singapore Technologies Engrg Ltd

Ho Bee Investment Ltd

Indofood Agri-Resourfes Ltd

City Developments Ltd

DIARY OF EVENTS

TIGER AIRWAYS BUY

Price S$0.69

Previous S$0.75

Target
S$0.75

Airline

Tiger Airways is a low cost airline operating

out of Singapore and Australia.

Stock Profile/Statistics

Bloomberg Ticker TGR SP

STI 3,033

Issued Share Capital (m) 820

Market Capitalisation (S$m) 566

52 week H | L Price (S$) 1.19 0.60

Average Volume (‘000) 1,418

YTD Returns (%) 8.7

Net gearing (x) 1.7

Altman Z-Score 0.4

ROCE/WACC 1.1

Beta (x) 1.1

Book Value/share (S$) 30.0

Major Shareholders (%)

Temasek Holdings 27.2

Singapore Airlines 21.8

Tembusu Capital 5.2

Share Performance (%)

Month Absolute Rela tive

1m (0.7) (6.1)

3m (2.8) (3.7)

6m (0.7) (5.1)

12m (37.1) (32.2)

6-month share performance

0.60

0.65

0.70

0.75

0.80

0.85

Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12

Tiger Singapore back from the red

Tiger reported 1Q13 net loss of S$14m, down from $21m in the previous

corresponding period. Results are within expectations. Revenue grew by a

marginal 1.4% YoY on the back of higher yields (+7.8%) which were offset by a

decline in capacity (-4.5%) and load factors (-2.2ppt). As expected, Tiger

Australia continued to register losses of S$21m, down from S$23m a year ago.

Meanwhile, Tiger Singapore has recovered from the red, posting an operating

profit of S$4m after three consecutive quarters of losses, as demand catches up

with capacity. Going forward, we expect Tiger Australia’s losses to narrow as it

has started its second base at Sydney which should allow it to gradually ramp up

services to pre-grounding levels. We are maintaining our BUY call and TP of

S$0.75, pegged to 2.5x FY13F P/B.

Tiger Singapore back to profitability. 1Q13 saw Tiger Singapore recovering to

post an operating profit of S$4m as demand catches up with capacity which grew

by 14.3% in the quarter. Average load factor was an impressive 85%. While

Singapore will not be accepting any new aircraft deliveries this year, it will

continue to expand capacity via frequency increases and addition of new routes.

Losses at Tiger Australia narrow. Tiger Australia posted an operating loss of

S$21m, down from S$23m a year ago. With the launch of its second base at

Sydney in July, we expect subsequent quarter losses to continue to narrow as

fleet utilisation improves. Management plans to gradually ramp up services to

pre-grounding levels by October 2012.

Positive progress with other cubs. Associate airline, Mandala is launching its

fourth route, Jakarta-Bangkok in Aug2012 and currently operates three A320s.

Tiger is in the midst of finalising its agreement to acquire a 40% in SEAir which is

targeted to be completed by Aug2012. SEAir currently operates a fleet of three

A320s and two A319s. and will be expanding its network to include Manila to

seven domestic cities from 31 July 2012.

FYE Mar (S$m) FY11 FY12 FY13F FY14F FY15F

Turnover 622.2 618.2 794.3 952.9 1,133.5

PATMI 39.9 (104.3) 0.9 30.6 69.6

% chg YoY 41.5 nm nm nm 75.3

Consensus PATMI - - 23.1 45.8 -

EPS (S¢) 7.0 (14.9) 0.1 3.7 8.5

DPS (S¢) - - - - -

Div Yield (%) - - - - -

ROE (%) 20.5 Na 0.4 10.9 19.9

ROA (%) 4.0 Na 0.1 2.4 4.8

P/E (x) 9.9 Na Na 18.5 8.1

P/B (x) 1.9 2.3 2.3 2.0 1.6

Source: Company data and OSK | DMG estimates

SINGAPORE EQUITY

Investment Research

DMG & Partners Research 1Q13 Results Review

TIGER AIRWAYS BUY

Price S$0.69

Previous S$0.75

Target
S$0.75

Airline

Tiger Airways is a low cost airline operating

out of Singapore and Australia.

Stock Profile/Statistics

Bloomberg Ticker TGR SP

STI 3,033

Issued Share Capital (m) 820

Market Capitalisation (S$m) 566

52 week H | L Price (S$) 1.19 0.60

Average Volume (‘000) 1,418

YTD Returns (%) 8.7

Net gearing (x) 1.7

Altman Z-Score 0.4

ROCE/WACC 1.1

Beta (x) 1.1

Book Value/share (S$) 30.0

Major Shareholders (%)

Temasek Holdings 27.2

Singapore Airlines 21.8

Tembusu Capital 5.2

Share Performance (%)

Month Absolute Rela tive

1m (0.7) (6.1)

3m (2.8) (3.7)

6m (0.7) (5.1)

12m (37.1) (32.2)

6-month share performance

0.60

0.65

0.70

0.75

0.80

0.85

Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12

Tiger Singapore back from the red

Tiger reported 1Q13 net loss of S$14m, down from $21m in the previous

corresponding period. Results are within expectations. Revenue grew by a

marginal 1.4% YoY on the back of higher yields (+7.8%) which were offset by a

decline in capacity (-4.5%) and load factors (-2.2ppt). As expected, Tiger

Australia continued to register losses of S$21m, down from S$23m a year ago.

Meanwhile, Tiger Singapore has recovered from the red, posting an operating

profit of S$4m after three consecutive quarters of losses, as demand catches up

with capacity. Going forward, we expect Tiger Australia’s losses to narrow as it

has started its second base at Sydney which should allow it to gradually ramp up

services to pre-grounding levels. We are maintaining our BUY call and TP of

S$0.75, pegged to 2.5x FY13F P/B.

Tiger Singapore back to profitability. 1Q13 saw Tiger Singapore recovering to

post an operating profit of S$4m as demand catches up with capacity which grew

by 14.3% in the quarter. Average load factor was an impressive 85%. While

Singapore will not be accepting any new aircraft deliveries this year, it will

continue to expand capacity via frequency increases and addition of new routes.

Losses at Tiger Australia narrow. Tiger Australia posted an operating loss of

S$21m, down from S$23m a year ago. With the launch of its second base at

Sydney in July, we expect subsequent quarter losses to continue to narrow as

fleet utilisation improves. Management plans to gradually ramp up services to

pre-grounding levels by October 2012.

Positive progress with other cubs. Associate airline, Mandala is launching its

fourth route, Jakarta-Bangkok in Aug2012 and currently operates three A320s.

Tiger is in the midst of finalising its agreement to acquire a 40% in SEAir which is

targeted to be completed by Aug2012. SEAir currently operates a fleet of three

A320s and two A319s. and will be expanding its network to include Manila to

seven domestic cities from 31 July 2012.

FYE Mar (S$m) FY11 FY12 FY13F FY14F FY15F

Turnover 622.2 618.2 794.3 952.9 1,133.5

PATMI 39.9 (104.3) 0.9 30.6 69.6

% chg YoY 41.5 nm nm nm 75.3

Consensus PATMI - - 23.1 45.8 -

EPS (S¢) 7.0 (14.9) 0.1 3.7 8.5

DPS (S¢) - - - - -

Div Yield (%) - - - - -

ROE (%) 20.5 Na 0.4 10.9 19.9

ROA (%) 4.0 Na 0.1 2.4 4.8

P/E (x) 9.9 Na Na 18.5 8.1

P/B (x) 1.9 2.3 2.3 2.0 1.6

Source: Company data and OSK | DMG estimates

SINGAPORE EQUITY

Investment Research

DMG & Partners Research 1Q13 Results Review

TIGER AIRWAYS BUY

Price S$0.69

Terence Wong, CFA

+65 6232 3896

[email protected]

Previous S$0.75

Target
S$0.75

Airline

Tiger Airways is a low cost airline operating

out of Singapore and Australia.

Stock Profile/Statistics

Bloomberg Ticker TGR SP

STI 3,033

Issued Share Capital (m) 820

Market Capitalisation (S$m) 566

52 week H | L Price (S$) 1.19 0.60

Average Volume (‘000) 1,418

YTD Returns (%) 8.7

Net gearing (x) 1.7

Altman Z-Score 0.4

ROCE/WACC 1.1

Beta (x) 1.1

Book Value/share (S$) 30.0

Major Shareholders (%)

Temasek Holdings 27.2

Singapore Airlines 21.8

Tembusu Capital 5.2

Share Performance (%)

Month Absolute Rela tive

1m (0.7) (6.1)

3m (2.8) (3.7)

6m (0.7) (5.1)

12m (37.1) (32.2)

6-month share performance

0.60

0.65

0.70

0.75

0.80

0.85

Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12

Tiger Singapore back from the red

Tiger reported 1Q13 net loss of S$14m, down from $21m in the previous

corresponding period. Results are within expectations. Revenue grew by a

marginal 1.4% YoY on the back of higher yields (+7.8%) which were offset by a

decline in capacity (-4.5%) and load factors (-2.2ppt). As expected, Tiger

Australia continued to register losses of S$21m, down from S$23m a year ago.

Meanwhile, Tiger Singapore has recovered from the red, posting an operating

profit of S$4m after three consecutive quarters of losses, as demand catches up

with capacity. Going forward, we expect Tiger Australia’s losses to narrow as it

has started its second base at Sydney which should allow it to gradually ramp up

services to pre-grounding levels. We are maintaining our BUY call and TP of

S$0.75, pegged to 2.5x FY13F P/B.

Tiger Singapore back to profitability. 1Q13 saw Tiger Singapore recovering to

post an operating profit of S$4m as demand catches up with capacity which grew

by 14.3% in the quarter. Average load factor was an impressive 85%. While

Singapore will not be accepting any new aircraft deliveries this year, it will

continue to expand capacity via frequency increases and addition of new routes.

Losses at Tiger Australia narrow. Tiger Australia posted an operating loss of

S$21m, down from S$23m a year ago. With the launch of its second base at

Sydney in July, we expect subsequent quarter losses to continue to narrow as

fleet utilisation improves. Management plans to gradually ramp up services to

pre-grounding levels by October 2012.

Positive progress with other cubs. Associate airline, Mandala is launching its

fourth route, Jakarta-Bangkok in Aug2012 and currently operates three A320s.

Tiger is in the midst of finalising its agreement to acquire a 40% in SEAir which is

targeted to be completed by Aug2012. SEAir currently operates a fleet of three

A320s and two A319s. and will be expanding its network to include Manila to

seven domestic cities from 31 July 2012.

FYE Mar (S$m) FY11 FY12 FY13F FY14F FY15F

Turnover 622.2 618.2 794.3 952.9 1,133.5

PATMI 39.9 (104.3) 0.9 30.6 69.6

% chg YoY 41.5 nm nm nm 75.3

Consensus PATMI - - 23.1 45.8 -

EPS (S¢) 7.0 (14.9) 0.1 3.7 8.5

DPS (S¢) - - - - -

Div Yield (%) - - - - -

ROE (%) 20.5 Na 0.4 10.9 19.9

ROA (%) 4.0 Na 0.1 2.4 4.8

P/E (x) 9.9 Na Na 18.5 8.1

P/B (x) 1.9 2.3 2.3 2.0 1.6

Source: Company data and OSK | DMG estimates

Today’s Focus

 Small Mid Caps - Lock in gains; buy on pullback stocks

with visible and stronger earnings drivers/catalysts -

Bumitama, Tiger Airways and Silverlake

 Indofood Agri Resources – Expect 2Q12 earnings to

ease; accumulate on weakness

US stocks started the current week lower ahead of the slew of

economic data releases ahead and as investors await the

outcome of the FED and ECB monetary policy meeting.

Expectations have built up on the August 2nd ECB policy

meeting after ECB President Mario Draghi said last week the

ECB will do whatever it takes to preserve the Euro. If the ECB

disappoints, financial markets could react.

The STI rose above the 3025 immediate resistance yesterday

but we remind that the index will have to face the even more

important resistance around 3100. In other words, STI is

looking more tired as it attempts to claw higher and

technically, we still look for a pullback to the short-term

support at 2930.

Small mid caps (SMCs) are susceptible to profit taking after

recent market strength. Exit stocks with earnings risks as Q2

reflects weak near term demand and cautious outlook. Stay

out of tech stocks given volatile and uncertain outlook. Lock in

gains of stocks which have rallied close to their fundamental

target prices. In the absence of further re-rating catalysts, we

recommend taking profits on Wheelock, Raffles Med and

Super Group. Not surprisingly, REITs are among the

outperformers in this market. However, in view of limited

upside to target prices and lack of strong re-rating catalysts,

we would also lock in gains on CDL Hospitality Trusts, Cache

and Ascendas India Trust. Take advantage of eventual pullback

to collect stocks with strong and visible catalysts. Our bottomup

picks are Bumitama, Tiger Airways and Silverlake.

Our analyst expects Indofood Agri Resources’ 2Q12 earnings

to sequentially ease 7% to 16% due to weaker CPO prices. TP

revised to S$1.60 from S$1.65; as he expects Indonesia’s palm

oil refining spreads to gradually taper off after FY14F – on

increased competition from new refining capacities entering

the market then. He expects IndoAgri’s profits to improve in

2H12. This would be backed by higher CPO prices, a seasonal

uptick in CPO output; robust refining margins and a seasonal

ramp up in sugar production volumes. BUY rating reiterated,

accumulate on weakness.

US Indices Last Close Pts Chg % Chg

Dow Jones  13,073.0 (2.6) (0.0)

S&P  1,385.3 (0.7) (0.0)

NASDAQ  2,945.8 (12.3) (0.4)

Regional Indices

ST Index  3,032.8 34.3 1.1

ST Small Cap  457.0 3.2 0.7

Hang Seng  19,585.4 310.4 1.6

HSCEI  9,523.4 124.6 1.3

HSCCI  3,816.0 26.5 0.7

KLCI  1,632.4 7.4 0.5

SET  1,193.3 15.3 1.3

JCI  4,099.1 14.9 0.4

PCOMP  5,277.9 58.3 1.1

KOSPI  1,843.8 14.6 0.8

TWSE  7,158.9 34.4 0.5

Nikkei  8,635.4 68.8 0.8

STI Index Performance

Singapore

1,000

2,000

3,000

4,000

2006 2007 2008 2009 2010 2011 2012

100-Day MA

Index

STI

Total Market cap (US$bn) 545

Total Daily Vol (m shrs) 1,548

12m ST Index High 3,215

12m ST Index Low 2,529

Source: Bloomberg

Stock Picks – Large Cap

Rec’n Price ($)

30/7

Target Price

($)

SembCorp Industries Buy 5.330 6.00

SembCorp Marine Buy 4.900 5.85

SingTel Take profit 3.550 3.29

City Development Take profit 11.730 10.85

UOB Take profit 19.900 19.50

Stock Picks – Small Cap

Rec’n Price ($)

30/7

Target Price

($)

STX OSV Holdings Buy 1.545 2.00

Ezion Holdings Buy 0.935 1.35

Bumitama Agri Buy 1.085 1.35

Nam Cheong Buy 0.178 0.24

Source: Bloomberg, DBS Vickers

Singapore

Wired Daily

Page 2

2Q12 net earnings for Sakari Resources were below

expectations, dragged down by one-off tax charges. ASPs

held up in 2Q, despite sliding coal prices. While volumes

from Jembayan mine should ramp up significantly in

2H12, the key to earnings will still be coal prices.

Benchmark Newcastle coal prices have been in the

US$80-85/ton range in recent weeks, and upward

momentum is lacking, given abundant supplies and

macro uncertainties. This could cap share price

performance in the near term, despite seemingly

attractive valuations. We will provide more details after

briefing today.

Underlying 1Q13 net profits of S$36.6m for Singapore

Post were above estimates; 1.25Scts DPS in line.

Operating costs are still rising faster than revenues.

Business transformation is underway but earnings

turnaround could take a while. Maintain HOLD for 6%

yield; TP S$1.04.

Luye Pharma Group has been suspended as its public

float fell below 10% after its majority shareholder raised

its stake to 92.63% as a result of married trades made

last Friday. Luye Pharmaceutical Investment had acquired

about 75m shares at $1.30 apiece in married trades. This

took its stake from 77.41% previously to 92.63%,

triggering the suspension.

Dapai International is expected to record a net loss for

2Q12 and half year (1H12) ended 30 June 2012, due to

the substantial downward pricing adjustments for its

products in order to remain competitive.

GOME Electrical Appliances is expected to record a net

loss for the six months ended 30 June 2012, primarily due

to a drop in the Group’s sales revenue and loss

attributable to the e-commerce business.

Trek 2000 also issued profit guidance. The group is

expected to report a loss for 2Q12 and the six months

ended 30th June, 2012 due mainly to a one-time writeoff

of ASIC chips due to a design flaw. The group has

taken action and rectified the design flaw.

Courage Marine expects to record a greater net loss for

1H12 as compared to the three months ended 31 March

2012. The expected loss was mainly attributable to (i) the

cumulative losses on disposal of vessels arising from the

disposal of 4 of the Group’s older vessels and (ii) the

continuing challenging operating environment for cargo

shipment, necessitating provisions for impairment losses

of the group’s remaining vessels.

Share Buy-Back

Company D.O.T . Buy /Sell No.of shares S$/shr

Ho Bee Investment Limited 30-Jul-12 Share Buy-Back 400,000 1.2200

Ho Bee Investment Limited 27-Jul-12 Share Buy-Back 300,000 1.2167

Ho Bee Investment Limited 26-Jul-12 Share Buy-Back 394,000 1.2150

AEM Holdings Ltd 25-Jul-12 Share Buy-Back 2,500,000 0.0850

HG Metal Manufacturing Ltd 25-Jul-12 Share Buy-Back 20,000 0.0820

Ho Bee Investment Limited 25-Jul-12 Share Buy-Back 426,000 1.2138

Ho Bee Investment Limited 24-Jul-12 Share Buy-Back 563,000 1.2094

San Teh Limited 24-Jul-12 Share Buy -Back 242,000 0.2900

CNA Group Ltd 23-Jul-12 Share Buy-Back 25,000 0.1076

HG Metal Manufacturing Ltd 23-Jul-12 Share Buy-Back 1,071,000 0.0829

Ho Bee Investment Limited 23-Jul-12 Share Buy-Back 450,000 1.2094

KSH Holdings Limited 20-Jul-12 Share Buy-Back 488,000 0.2450

Viking Offshore and Marine 20-J ul-12 Share Buy-Back 40,000 0.1080

Hyflux Ltd 19-Jul-12 Share Buy-Back 240,000 1.4104

Pan-United Corporation Ltd 19-Jul-12 Share Buy-Back 105,000 0.5831

Wee Hur Holdings Ltd 19-Jul-12 Share Buy-Back 260,000 0.2800

Hyflux Ltd 18-Jul-12 Share Buy-Back 661,000 1.4137

Pan-United Corporation Ltd 18-Jul-12 Share Buy-Back 164,000 0.5792

Overseas-Chinese Banking Corp 17-J ul-12 Share Buy-Back 200,000 9.2700

Wee Hur Holdings Ltd 17-Jul-12 Share Buy-Back 625,000 0.2800

SGX Masnet

Buy /Sell

/ Conv

No of

Shares

('000)

Price Per

Share $

%Issued

Cap Before

Change

%Issued

Cap A f ter

Change

C&G Env Protect 26-Jul-12 C&G Hldgs (HK) Ltd Buy 18000 na 76.02 77.87

C&G Env Protect 26-Jul-12 Lam Chik Tsan * Buy 18000 na 76.02 77.87

C&G Env Protect 26-Jul-12 Lin Yan * Buy 18000 0.12 76.02 77.87

C&G Env Protect 25-Jul-12 C&G Hldgs (HK) Ltd Buy 19300 na 74.04 76.02

C&G Env Protect 25-Jul-12 Lam Chik Tsan * Buy 19300 na 74.04 76.02

C&G Env Protect 25-Jul-12 Lin Yan * Buy 19300 na 74.04 76.02

Popular Hldgs 24-Jul-12 Chou Cheng Ngok * Buy 900 0.22 56.67 56.78

Popular Hldgs 24-Jul-12 World Hldgs Buy 900 na 56.67 56.78

C&G Env Protect 23-Jul-12 C&G Hldgs (HK) Ltd Buy 19246 na 72.06 74.04

C&G Env Protect 23-Jul-12 Lam Chik Tsan * Buy 19246 na 72.06 74.04

C&G Env Protect 23-Jul-12 Lin Yan * Buy 19246 0.11 72.06 74.04

M Dev 23-Jul-12 Value Capital Asset Mgt Sell 37791 na 14.88 9.54

Oxley Hldgs 23-J ul-12 Tee Wee Sien Buy 254 na 12.52 12.54

SingTel 23-J ul-12 Chua Sock Koong * Buy 788 3.44 0.05 0.06

Ecowise Hldgs 20-J ul-12 Chu Sai Keaw * Sell 12034 na 7.58 6.28

Ecowise Hldgs 20-J ul-12 Lee Moi Sung * Sell 12034 na 7.58 6.28

Ecowise Hldgs 20-J ul-12 Sun Organization Sdn Bhd Sell 12034 na 7.58 6.28

Oxley Hldgs 20-J ul-12 Tee Wee Sien Buy 200 na 12.51 12.52

Oxley Hldgs 20-J ul-12 Ching Chiat Kwong Buy 952 0.4 14 14.06

HG Metal 20-Jul-12 Tan Kim Seng Buy 300 na 0.3 0.57

Pteris Global 20-J ul-12 Amy Lim * Buy 260 na 11.66 11.71

Pteris Global 20-J ul-12 Winmark Investments Buy 260 na 11.66 11.71

Pteris Global 20-J ul-12 Tan Tien Hin Winston * Buy 260 0.12 11.66 11.71

Hanwell Hldgs 20-J ul-12 John Chen Sell 835 0.28 15.02 0

SingTel 20-J ul-12 Chua Sock Koong * Buy 1571 3.46 0.07 0.08

San Teh 20-Jul-12 Poh Choo Bin Buy 162 na 6.69 6.73

HG Metal 20-Jul-12 Tan Kim Seng Buy 300 na 0.3 0.33

Oxley Hldgs 19-J ul-12 Ching Chiat Kwong Buy 371 0.4 13.97 14

Samko Timber 19-J ul-12 Sampoerna Forestry Buy 219 na 39.78 39.79

*Deemed Interest

Source: Business Times; SA: Share Allotment; ST: Share Transfer, B/R: Bonus/Rights Issue; OE: Option Exercise; PL: Placement Shares

BUKIT SEMBAWANG ESTATES LTD DIV IDEND SGD 0.14 ONE-TIER TAX 31-Jul-12 15-Aug-12

BUKIT SEMBAWANG ESTATES LTD DIV IDEND SGD 0.04 ONE-TIER TAX 31-Jul-12 15-Aug-12

COUGAR LOGISTICS CORPN LTD DIVIDEND SGD 0.025 ONE-TIER TAX 31-Jul-12 23-Aug-12

FRASERS CENTREPOINT TRUST DIV IDEND 010412 - 300612 SGD 0.026 LESS TAX 31-Jul-12 29-Aug-12

JAPAN FOODS HOLDING LTD. DIVIDEND SGD 0.007 ONE-TIER TAX 31-Jul-12 15-Aug-12

SATS LTD. DIVIDEND SGD 0.15 ONE-TIER TAX 31-Jul-12 15-Aug-12

SATS LTD. DIVIDEND SGD 0.06 ONE-TIER TAX 31-Jul-12 15-Aug-12

SINGAPORE SHIPPING CORP LTD DIV IDEND SGD 0.01 ONE-TIER TAX 31-Jul-12 23-Aug-12

STAMFORD LAND CORPORATION LTD DIVIDEND SGD 0.02 ONE-TIER TAX 31-Jul-12 23-Aug-12

STAMFORD LAND CORPORATION LTD DIVIDEND SGD 0.02 ONE-TIER TAX 31-Jul-12 23-Aug-12

AEM HOLDINGS LTD DIVIDEND SGD 0.0035 ONE-TIER TAX 01-Aug-12 17-Aug-12

BAN LEONG TECHNOLOGIES LIMITED DIVIDEND SGD 0.01 ONE-TIER TAX 01-Aug-12 16-Aug-12

BROTHERS (HOLDINGS) LIMITED DIVIDEND SGD 0.004 ONE-TIER TAX 01-Aug-12 23-Aug-12

FORTUNE REAL ESTATE INV TRUST DIVIDEND 010112 - 300612 HKD 0.1582 TAX EXEMPT 01-Aug-12 29-Aug-12

JASON MARINE GROUP LIMITED DIVIDEND SGD 0.002 ONE-TIER TAX 01-Aug-12 21-Aug-12

KSH HOLDINGS LIMITED BONUS OFFER OF 1 FOR 10 01-Aug-12

KSH HOLDINGS LIMITED DIVIDEND SGD 0.005 ONE-TIER TAX 01-Aug-12 23-Aug-12

MTQ CORPORATION LIMITED DIV IDEND SCRIPDIVSCHEME SGD 0.02 ONE-TIER TAX 01-Aug-12 19-Sep-12

BOUSTEAD SINGAPORE LIMITED DIVIDEND SGD 0.03 ONE-TIER TAX 02-Aug-12 21-Aug-12

TAT HONG HOLDINGS LTD DIVIDEND SGD 0.015 ONE-TIER TAX 02-Aug-12 22-Aug-12

TOTAL ACCESS COMM PUB CO LTD DIV IDEND THB 2.27 LESS TAX 02-Aug-12 22-Aug-12

GLOBAL YELLOW PAGES LIMITED DIV IDEND SGD 0.002 ONE-TIER TAX 03-Aug-12 28-Aug-12

KING WAN CORPORATION LIMITED DIVIDEND SGD 0.01 ONE-TIER TAX 03-Aug-12 17-Aug-12

METRO HOLDINGS LIMITED DIVIDEND SGD 0.02 ONE-TIER TAX 03-Aug-12 17-Aug-12

METRO HOLDINGS LIMITED DIVIDEND SGD 0.04 ONE-TIER TAX 03-Aug-12 17-Aug-12

PAN HONG PROPERTY GROUP LTD DIV IDEND SGD 0.01 03-Aug-12 30-Aug-12

UNITED ENVIROTECH LTD DIVIDEND SGD 0.003 ONE-TIER TAX 03-Aug-12 17-Aug-12

SINGTEL DIVIDEND SGD 0.09 ONE-TIER TAX 06-Aug-12 24-Aug-12

WILLAS-ARRAY ELEC (HLDGS) LTD DIVIDEND HKD 0.06088 06-Aug-12 21-Aug-12

WILLAS-ARRAY ELEC (HLDGS) LTD DIVIDEND HKD 0.01826 06-Aug-12 21-Aug-12

ZAGRO ASIA LIMITED OFFER OFFER OF 32 FOR 100 @ SGD 0.15 06-Aug-12

HIAP SENG ENGINEERING LTD DIV IDEND SGD 0.005 ONE-TIER TAX 07-Aug-12 28-Aug-12

POWERMATIC DATA SYSTEMS LTD DIV IDEND SGD 0.01 ONE-TIER TAX 07-Aug-12 27-Aug-12

GP BATTERIES INT LTD DIVIDEND SGD 0.015 ONE-TIER TAX 08-Aug-12 28-Aug-12

FISCHER TECH LTD DIVIDEND SGD 0.006 ONE-TIER TAX 13-Aug-12 30-Aug-12

RAFFLES MEDICAL GROUP LTD DIVIDEND SGD 0.01 ONE-TIER TAX 13-Aug-12 31-Aug-12

TRANSIT-MIXED CONCRETE LTD DIV IDEND SGD 0.01 ONE-TIER TAX 17-Aug-12 07-Sep-12

CSC HOLDINGS LTD DIV IDEND SGD 0.0009 ONE-TIER TAX 23-Aug-12 07-Sep-12

NY01100F 160901 INTEREST 3.75% 23-Aug-12 03-Sep-12

NY03100A 180901 INTEREST 0.04 23-Aug-12 03-Sep-12

NY05100N 200901 INTEREST 0.0325 23-Aug-12 03-Sep-12

NY07100X 220901 INTEREST 0.03125 23-Aug-12 03-Sep-12

NY09100H 240901 INTEREST 0.03 23-Aug-12 03-Sep-12

NZ07100S 270301 INTEREST 0.035 23-Aug-12 03-Sep-12

NZ10100F 300901 INTEREST 0.02875 23-Aug-12 03-Sep-12

CAPITARETAIL CHINA TRUST DIVIDEND 010112 - 300612 SGD 0.0482 5-Sep-12 26-Sep-12

POPULAR HOLDINGS LIMITED DIV IDEND SGD 0.008 ONE-TIER TAX 7-Sep-12 26-Sep-12

NOVO GROUP LTD. DIVIDEND SGD 0.01 ONE-TIER TAX 10-Sep-12 04-Oct-12

FRAGRANCE GROUP LIMITED BONUS OFFER OF 1 FOR 1 14-Sep-12

N507101E 121001 INTEREST 0.025 20-Sep-12 01-Oct-12

N507101E 121001 ENTITL. REDEMPTION 100% 20-Sep-12 01-Oct-12

N508100V 130401 INTEREST 0.01625 20-Sep-12 01-Oct-12

N509100N 141001 INTEREST 0.01375 20-Sep-12 01-Oct-12

N511100W 160401 INTEREST 0.01125 20-Sep-12 01-Oct-12

N710100Z 170401 INTEREST 0.02375 20-Sep-12 01-Oct-12

NA12100N 420401 INTEREST 0.0275 20-Sep-12 01-Oct-12

K1 VENTURES LIMITED DIVIDEND SGD 0.005 ONE-TIER TAX 31-Oct-12 14-Nov-12

NX09100W 190601 INTEREST 0.025 22-Nov-12 03-Dec-12

NX11100X 210601 INTEREST 0.0225 22-Nov-12 3-Dec-12

Source: SGX