DJ MARKET TALK: Singapore's STI Set To Rise; 3050-3100 Range Likely

0054 GMT [Dow Jones] Singapore's STI is likely to rise, tracking offshore cues after a non-voting Fed official called for more stimulus, but caution may persist. "Wild statements like this do nothing for markets apart from create elevated levels based on false hope," says Andrew Taylor, markets strategist at GFT Markets. He expects a positive open after Tuesday's rises, "but the rest of the day will see recent highs hold and pressure to test support levels the most likely path." He notes, "A sustained upward move in this current economic environment is a big ask even if the central banks unleashed the QE dogs." The STI ended Tuesday down 0.1% at 3067.74; it's likely to hug a 3050-3100 range. UOB's (U11.SG) 2Q12 net profit rose 12.1% on-year to S$713 million, topping expectations. Kindest Place bid S$55/share for F&N's (F99.SG) direct 7.3% APB (A46.SG) stake, countering Heineken's (HEIA.AE) S$50/share bid for F&N's entire APB holding. SembMarine (S51.SG) landed US$4.03 billion contracts from Sete Brasil. Yangzijiang's (BS6.SG) net profit slipped 9.0% on-year to CNY878.2 million
 
 

DJ MARKET TALK: FN Set To Rise Kindest Place Bids For Part Of APB

0043 GMT [Dow Jones] Fraser Neave (F99.SG) appears set to rise as a bidding war for its APB (A46.SG) erupts, with Thailand's Kindest Place making an unsolicited S$1.03 billion, or S$55/share offer to buy its direct 7.3% APB stake, topping Heineken's (HEIA.AE) S$50/share offer for F&N's entire APB holding. "It's a surprise," says Goh Han Peng, an analyst at DMG & Partners. "I think their intention is they probably want to provoke Heineken into offering a higher price." But he notes, "their offer is for a partial stake. Heineken's offer is more compelling. F&N, when they consider this offer, will take this into account." He expects Heineken may wait for F&N's response before acting. He adds, the Thailand group may block the Heineken deal via F&N's shareholder meeting. F&N ended Tuesday up 0.7% at S$8.28 its S$8.55 more-than-20-year high may offer the first cap. APB ended down S$0.01 at S$48.84; ThaiBev (Y92.SG) ended down 1.5%, or a half-cent, at S$0.33.
 
 

*DJ Sembcorp Marine: Secures US$4.0B in Drillship Contracts From Sete Brasil

 
 

Singapore

Wired Daily

Page 2

of Thai Bev. We see this as a shrewd move, likely to force

Heineken’s hand to raise its S$50/share offer. We expect

knee-jerk positive reaction on share price. Hold call on

F&N maintained but raised TP to S$8.99 (Prev S$ 8.68),

based on 15% discount to RNAV of S$10.58, after

imputing S$55/ APB share.

Tiger Airways reported that the Managing Director of its

Tiger Singapore subsidiary, Stewart Adams will be leaving

at the end of the year to pursue personal interests. The

search for a new MD has been initiated, but Stewart will

be staying on until the end of the year to ensure a

smooth transition and handover to his successor. Overall,

we believe the impact is neutral to slightly negative, as

there will be transition in top management at the holding

level as well, with Group CEO Chin Yau Seng handing

over the reign to Koay Peng Yen within a month or so.

No change to our BUY call and S$0.92 TP.

FJ Benjamin has secured an exclusive 10-year deal with

Padini Group to distribute VNC women’s shoes and

accessories in Indonesia. Under the agreement, FJ

Benjamin and its associate PT Glang Agung Persada will

open 25 new stores within the next 5 years across

Indonesia. There is no significant impact on FJB’s

financials given that associate income contributes ~5% of

pretax profit for 9m12. FJB is due to announce FY12

results on 21 Aug 2012 and our analyst is expecting 14%

y-o-y earnings growth for FY12 to S$14.7m. No change

to HOLD call and TP of S$0.36 for now.

In a surprise twist, Oei Hong Leong is back in the race for

a controlling stake in Intraco that may also lead to a

general offer for the trading company. The approximately

29.89% stake in Intraco, which is being held by Hanwell

Holdings, has been scheduled to be sold to the family

that runs crane operator Tat Hong Holdings. Hanwell said

it has received an $18.6m offer for that stake in Intraco

from Mr Oei. That translates to a price of 63 cents per

share, and trumps the price that the Tat Hong family -

through their investment vehicle TH Investment - offered

of 62 cents by one cent, or 1.6%. Mr Oei bought a 21%

stake in Intraco in early June but sold it soon after.

Aspial Corp is proposing a bonus issue of up to 744.3m

new shares on the basis of 1 bonus share for every 2

existing shares held.

Sitra Holdings is expected to show a loss for 1H12. This is

primarily due to lower sales and gross margins across all

key markets and exchange loss.

In property news, the state tender for a 99-year-leasehold

private residential plot at Bright Hill Drive yesterday beat

expectations, fetching a top bid of $719.9 psf ppr, or

$291.5m. The top bid, which was submitted by a joint

venture company between Singapore Land and UOL

Group, was 18.1% more than the second bid and higher

than market expectations of $550-$620 psf ppr.

Share Buy-Back

Company D.O.T. Buy /Sell No.of shares S$/shr Cumulat iv e %

purchase

Overseas-Chinese Banking Corp 07-Aug-12 Share Buy-Back 100,000 9.5100 0.26

Overseas-Chinese Banking Corp 03-Aug-12 Share Buy-Back 100,000 9.4000 0.26

Second Chance Properties Ltd 03-Aug-12 Share Buy-Back 3,512,000 0.3770 0.84

Overseas-Chinese Banking Corp 02-Aug-12 Share Buy-Back 200,000 9.5100 0.26

Ho Bee Investment Limited 30-Jul-12 Share Buy-Back 400,000 1.2200 0.44

Ho Bee Investment Limited 27-Jul-12 Share Buy-Back 300,000 1.2167 0.38

Ho Bee Investment Limited 26-Jul-12 Share Buy-Back 394,000 1.2150 0.34

AEM Holdings Ltd 25-Jul-12 Share Buy-Back 2,500,000 0.0850 1.66

HG Metal Manufacturing Ltd 25-Jul-12 Share Buy-Back 20,000 0.0820 0.86

Ho Bee Investment Limited 25-Jul-12 Share Buy-Back 426,000 1.2138 0.29

Ho Bee Investment Limited 24-Jul-12 Share Buy-Back 563,000 1.2094 0.23

San Teh Limited 24-Jul-12 Share Buy-Back 242,000 0.2900 1.16

SGX Masnet

Singapore

Wired Daily

Page 3

Substantial Shareholders’ Transactions: 26 July – 2 Aug 2012

*Deemed Interest

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

Stock Transacted Date Substantial Shareholder/ Director

Buy/Sell/

Conv

No of

Shares

('000)

Price Per

Share $

%Issued Cap

Before

Change

%Issued Cap

After Change

Grand Banls Yachts 02-Aug-12 Shinetown Ltd Sell 447 na 7.53 7.07

M Dev 01-Aug-12 Value Capital Asset Mgt Sell 16958 na 6.98 4.58

Stats Chippac 01-Aug-12 Marathom Asset Mgt LLP Sell 1549 na 6.08 5.99

Popular Hldgs 31-Jul-12 Chou Cheng Ngok * Buy 100 0.23 56.92 56.93

Popular Hldgs 31-Jul-12 World Holdings Buy 100 na 56.92 56.93

Popular Hldgs 30-Jul-12 Chou Cheng Ngok * Buy 500 0.23 56.86 56.92

Popular Hldgs 30-Jul-12 World Holdings Buy 500 na 56.86 56.92

Petra Foods 30-Jul-12 Aberdeen Asset Mgt PLC & Subsidiaries * Buy 2369 na 5.86 6.25

Petra Foods 30-Jul-12 Aberdeen Asset Mgt Asia * Buy 2369 na 5.86 6.25

ComfortDelgro 30-Jul-12 The PNC Financial Ser. Grp * Buy 71 1.64 4.99 5

ComfortDelgro 30-Jul-12 Blackrock Inc * Buy 71 1.64 4.99 5

Popular Hldgs 27-Jul-12 Chou Cheng Ngok * Buy 141 0.22 56.84 56.86

Popular Hldgs 27-Jul-12 World Hldgs Buy 141 na 56.84 56.86

San Teh 27-Jul-12 Poh Choo Bin Buy 100 na 6.74 6.76

M Dev 27-Jul-12 Value Capital Asset Mgt Sell 18101 na 9.54 6.98

Addvalue Technologies 26-Jul-12 Merida Resources Incorp Sell 500 na 5.01 4.96

Keppel Corporation 26-Jul-12 Blackrock Inc * Buy 602 10.95 4.98 5.02

Popular Hldgs 26-Jul-12 World Hldgs Buy 540 na 56.78 56.84

Keppel Corporation 26-Jul-12 PNC Financial Servces Grp Buy 602 10.95 4.98 5.02

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

Singapore

Wired Daily

Page 4

Announced Dividends and Capital Issues: 8 Aug 2012 – 22 Nov 2012 (by Ex-Date)

Company Ty pe Part iculars Ex Date

Paid/

Pay able

ERATAT LIFESTYLE LIMITED DIV IDEND CNY 0.025 ONE-TIER TAX 08-Aug-12 24-Aug-12

FABCHEM CHINA LIMITED DIVIDEND SGD 0.01 ONE-TIER TAX 08-Aug-12 28-Aug-12

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

OVERSEA-CHINESE BANKING CORP DIVIDEND SGD 0.16 ONE-TIER TAX 08-Aug-12 27-Aug-12

PARKWAYLIF E REIT DIVIDEND 010412 - 300612 SGD 0.019 LESS TAX 08-Aug-12 06-Sep-12

PARKWAYLIFE REIT DIVIDEND 010412 - 300612 SGD 0.0043 08-Aug-12 06-Sep-12

PARKWAYLIFE REIT DIVIDEND 010412 - 300612 SGD 0.0015 TAX EXEMPT 08-Aug-12 06-Sep-12

JARDINE CYCLE & CARRIAGE LTD DIV IDEND USD 0.18 ONE-TIER TAX 10-Aug-12 24-Sep-12

F ISCHER TECH LTD DIV IDEND SGD 0.006 ONE-TIER TAX 13-Aug-12 30-Aug-12

METAL COMPONENT ENGG LTD RIGHTS 1RS1W FOR 1SH OFFER OF 1 FOR 1 @ SGD 0.01 13-Aug-12

RAF F LES MEDICAL GROUP LTD DIV IDEND SGD 0.01 ONE-TIER TAX 13-Aug-12 31-Aug-12

SINGAPORE POST LIMITED DIV IDEND SGD 0.0125 ONE-TIER TAX 14-Aug-12 31-Aug-12

SOUP RESTAURANT GROUP LIMITED DIV IDEND SGD 0.0035 ONE-TIER TAX 14-Aug-12 31-Aug-12

DAIRY FARM INT'L HOLDINGS LTD DIVIDEND USD 0.065 15-Aug-12 10-Oct-12

HONGKONG LAND HOLDINGS LIMITED DIVIDEND USD 0.06 15-Aug-12 10-Oct-12

HSBC ADR 10 DIVIDEND USD 0.45 15-Aug-12 04-Oct-12

JARDINE MATHESON HLDGS LTD DIVIDEND SCRIP OPTION USD 0.35 15-Aug-12 10-Oct-12

JARDINE STRATEGIC HLDGS LTD DIVIDEND SCRIP OPTION USD 0.07 15-Aug-12 10-Oct-12

MANDARIN ORIENTAL INTL LTD DIVIDEND USD 0.02 15-Aug-12 10-Oct-12

SWING MEDIA TECHNOLOGY GRP LTD DIV IDEND SCRIPDIVSCHEME SGD 0.002 15-Aug-12 05-Oct-12

ELEC & ELTEK INT CO LTD DIV IDEND USD 0.09 ONE-TIER TAX 17-Aug-12 06-Sep-12

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

GREAT EASTERN HLDGS LTD DIV IDEND SGD 0.1 ONE-TIER TAX 21-Aug-12 05-Sep-12

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

NY01100F 160901 INTEREST 0.0375 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

CAPITAMALLS ASIA LIMITED DIV IDEND SGD 0.01625 ONE-TIER TAX 29-Aug-12 13-Sep-12

OSIM INTERNATIONAL LTD DIV IDEND SGD 0.01 ONE-TIER TAX 29-Aug-12 12-Sep-12

OSIM INTERNATIONAL LTD DIV IDEND SGD 0.01 ONE-TIER TAX 29-Aug-12 12-Sep-12

SAKARI RESOURCES LIMITED DIV IDEND USD 0.02 TAX EXEMPT 30-Aug-12 13-Sep-12

CAPITARETAIL CHINA TRUST DIVIDEND 010112 - 300612 SGD 0.0482 05-Sep-12 26-Sep-12

POPULAR HOLDINGS LIMITED DIV IDEND SGD 0.008 ONE-TIER TAX 07-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

TOTAL ADR 10 DIVIDEND APPROXIMATE USD 0.587795 19-Sep-12 18-Oct-12

GP INDUSTRIES LIMITED DIV IDEND SGD 0.015 ONE-TIER TAX 20-Sep-12 04-Oct-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

SINGAPORE EXCHANGE LIMITED DIV IDEND SGD 0.15 TAX EXEMPT 26-Sep-12 12-Oct-12

LIAN BENG GROUP LTD DIVIDEND SGD 0.01 ONE-TIER TAX 03-Oct-12 19-Oct-12

LIAN BENG GROUP LTD DIVIDEND SGD 0.01 ONE-TIER TAX 03-Oct-12 19-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 03-Dec-12

Source: SGX

SGD Prev. 2011A Prev. 2012E Prev. 2013E Prev. 2014E

Rev. (MM) -- 246.4 -- 253.1 -- 261.0 -- 267.6

Net Profit -- 131.7 -- 125.6 -- 127.6 -- 127.9

Chg (% YoY) -- -- -- (4.6)% -- 1.7% -- 0.2%

EV/Rev 11.7x 11.4x 11.1x 10.8x

Dividend -- 8.00c -- 8.00c -- 8.20c -- 8.60c

Div. Yield 6.15% 6.15% 6.31% 6.62%

EPS

FY Mar -- 0.08 -- 0.08 -- 0.08 -- 0.08

FY P/E 16.3x 16.3x 16.3x 16.3x

Dividend: 2011 consists of 5 quarters

Price Performance

AUG-11 DEC-11 APR-12 AUG-12

1.4

1.3

1.2

1.1

1

COMPANY NOTE

Initiating Coverage

SGP | Financials | REITs 7 August 2012

Mapletree Industrial Trust (MINT SP)

Initiating at Underperform: Too Expensive

EQUITY RESEARCH ASIA

UNDERPERFORM

Price target SGD1.00

Price SGD1.30

Financial Summary

Book Value (MM): SGD1,654.5

Book Value/Share: SGD1.06

Net Debt (MM): SGD859.1

Return on Avg. Equity: 8.0%

Net Debt/Capital: 37.0%

Long-Term Debt (MM): SGD981.2

LTD/Cap: 59.0%

Dividend Yield: 6.8%

Cash & ST Invest. (MM): SGD122.2

Market Data

52 Week Range: SGD1.34 - SGD1.04

Total Entprs. Value (MM): SGD2,891.3

Market Cap. (MM): SGD2,032.2

Shares Out. (MM): 1,563.2

Float (MM): 1,130.6

Avg. Daily Vol.: 2,764,864

Germaine Tai *

Equity Analyst

+65 6551 3964 [email protected]

* Jefferies Singapore Limited

MICA (P) 016/07/2012

Key Takeaway

We view Mapletree Industrial Trust less favorably barring any changes to its

portfolio. Whilst its portfolio has exposure to different sub-segments of the

industrial space, its earnings are driven by flatted factories. Consequently, the

lease expiry is short. We initiate coverage with an Underperform rating and

$1.00 price target.

High exposure to flatted factories, which contribute 58% of its total rental income.

We view this particular segment of the industrial space to be the most volatile and directly

impacted by short-medium business decisions.

Short lease expiry profile due to the dominance of the flatted factories in the portfolio,

the lease expiry of the trust is biased towards the short end, averaging only slightly above

two years.

Inorganic growth is necessary to achieve a more diversified portfolio. Without further

asset acquisition, the trust will find it difficult to extend its lease expiry profile to achieve

greater stability.

Under-rented portfolio provides cushion against any market weakness. As the

portfolio was inherited from JTC, which were charging below market rents, with the rental

caps lifted, the trust is now able to improve performance of the assets.

Expensive valuations. Given a weakening economic outlook, we view the rental reviews

in the upcoming 12 months with caution. Whilst we do impute growth into reviews given

that the current rents are below market, we believe that the weak economic environment

will dampen the trust's ability to raise rents significantly.

Valuation/Risks

Our three-stage DDM values Mapletree Industrial REIT at $1.00 per share. The key risks to

our valuations are sudden recovery in the global economic environment which drives up

rental rates at reviews. With 30% of its rental income up for renewal in the next 12 months,

Mapletree Industrial Trust is leveraged to both an upswing or further deterioration of the

economy.

Jefferies does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Jefferies may have a

conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment

decision. Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on pages 18 to 22

of this report.

Long Term Financial Model Drivers

Medium Term dividend

growth

2.50%

Terminal Growth 2.00%

Acquisition Contribution 0%

Operating Margin Stabilization 69%

Other Considerations

 MINT is highly exposed to flatted factories

segment which is dominated by smallmedium

sized firms. These firms usually

signs shorter leases which in turn exposes

the trust to greater volatility.

Source: Bloomberg, Jefferies estimates

Mapletree Industrial REIT was listed in 2010 and is a Singapore focused Industrial REIT with

assets in the various sub-segments such as flatted factories, business parks, stack-ups and

light industrial buildings and warehouses. Its portfolio is valued atS$2.7billion as of March

2012.

 Economic recovery faster than expected

leading to strong demand for space.

 More Build to Suit demand driving asset

growth.

Catalysts

Target Investment Thesis

 Conservative assumptions of rents

renewals rates , maintain 10% below

market rents

 Organic revenue growth of 3% with slight

contraction in margins of 0.50%

 No acquisitions assumed in the projections

 2012/13 DPU of $0.082, -2% YOY. Target

dividend yield 6.10%,

 Price Target of $1.00

Upside Scenario

 Strong rental renewals rates due to strong

rebound in economic activities, benefiting

small medium sized enterprises.

 Organic revenue growth of 10% which

offsets increases in cost.

 More acquisitions away from flatted

factories.

 2012/13 DPU of $0.092,

 Target dividend yield of 5.90%, Price

Target of $1.26

Downside Scenario

 Deepening economic weakness leading to

increase in vacancy to 30%, weak rental

renewal rates.

 Organic rental revenue growth of -5%

 Medium term growth 1%

 2012/13:$0.0756,

 Price Target: $0.93, target dividend yield

of 6.30%

Long Term Analysis

Dividend Yield

Scenarios

Price NAV

Dividend Yield

Ticker Rec. DivYield

AREIT Buy 6.33%

MINT U/P 6.81%

MLT Buy 6.71%

MCT 5.50%

KREIT Hold 6.60%

Source: Bloomberg, Jefferies estimates

Recommendation / Price Target

Ticker Rec. PT

AREIT Buy $2.52

MINT U/P $1.00

MLT Buy $1.15

MCT $1.16

KREIT Hold $0.95

WFT Hold $20

Company Description

THE LONG VIEW

Peer Group

[Mapletree Industrial Trust]

Underperform $1.00 Price Target

Hold Hold

page 2 of 22 Germaine Tai, Equity Analyst, +65 6551 3964, [email protected]

Please see important disclosure information on pages 18 - 22 of this report.

MINT SP

Initiating Coverage

7 August 2012

Executive Summary

Listed in 3Q2010, Mapletree Industrial REIT Initial portfolio contained 70 properties, of

which 53 were in flatted factories. Mapletree Industrial REIT (‘MI-REIT’) is closely

compared to Ascendas REIT (‘A-REIT’) due to the similarity in asset exposure; both REITs

have assets in the various sub-segments within the industrial space. However, the asset

composition of MI-REIT is swung in favour of flatted factories, which forms a large part of

its total NLA and rental income. These flatted factories tend to have shorter lease terms as

their main source of demand is from small-medium sized local enterprise. Whereas, A-REIT

is largely exposed to the business and science parks which are higher in the value chain.

Given the weak economic backdrop and the greater volatility in its lease expiry profile we

initiate coverage with an UNDERPERFORM rating and price target of $1.00 per share.

High exposure to Flatted Factories

Flatted factories contribute 58% of its total rental income. We view this particular segment

of industrial space to be the most volatile and directly impacted by short-medium term

business decisions. This segment is mainly occupied by small-medium sized enterprises,

where occupancy costs forms a significant part to the overall business costs, hence the

inertia to move is not as high as big corporations.

In this segment, the room to enjoy premium rents by adding value to the properties is

limited as tenants in the flatted factories have very basic demands and do not require

fancy fit-outs.

Short lease expiry profile

Due to the dominance of the flatted factories in the portfolio, the lease expiry of the Trust

is biased towards the short end, with an average only slightly above 2 years. Over the next

3 years, (2012- 2015) close to 30% of its rental income is up for lease expiry.

Inorganic growth remains the key driver

We view the current portfolio size to be below critical mass, which prevents the Trust

from managing its lease expiry and also earnings concentration. Hence, it must continue

to pursue an acquisition strategy in order to achieve a more diversified pool of assets.

Expensive fee structure

We focus on the fees that trusts in Singapore pay to managers and within the industrial

space, Mapletree Industrial Trust has the most expensive fee structure. It pays a

performance fee equivalent to 3.6% of net property income each year.

Valuation

We deem the current valuation to be rich. The stock is trading at an implied yield of

6.81%, on par with its NAV. Given the current weak economic environment and the high

percentage of its rental income due for renewal over the next 12 months, we view the

risks as being skewed towards the downside.

Risks

Further deterioration in the economic situation will hurt the renewal prospects of the

Trust which will translate into weaker distribution. Expensive asset acquisition that results

in dilution continues to overhang on the whole SREIT sector as the low interest rate

environment makes financing via debt cheap and an all-time high share price makes

equity issuance attractive.

page 3 of 22 Germaine Tai, Equity Analyst, +65 6551 3964, [email protected]

Please see important disclosure information on pages 18 - 22 of this report.

MINT SP

Initiating Coverage

7 August 2012

Year to 31 Dec

(S$m) 2009 2010 2011 2Q11 2Q12

Net Turnover 34.6 44.2 53.1 13.6 15.2

Gross Profit 29.7 39.1 46.8 12.0 13.2

EBITDA 21.0 28.9 34.1 9.1 7.7

EBIT 19.3 26.8 30.8 8.5 6.6

PATMI 13.5 19.9 22.6 6.4 3.6

EPS (cts) 2.46 3.61 4.11 0.61 0.34

P/E (x) 9.8 6.6 5.8 9.84 17.65

P/B (x) 0.5 0.3 0.2 - 0.8

Dividend Yield (%) - - - - -

PATMI Margin (%) 39.1 44.9 42.6 47.0 23.7

Net Gearing (%) 55.1 31.0 20.3 - 123.5

Interest cover (x) 6.1 8.9 10.7 11.03 3.76

ROE (%) 5.8 5.2 4.1 - -

Source: GPH, Bloomberg, UOB Kay Hian.

Background

Valuation

• Global Premium Hotels (GPH) is currently trading at a 20%

discount to its NAV/share of 30.7 cents and 6.0x 2011 PE.

As it intends to pay out at least 80% of its net profit as

dividends, management guided that the yield including the

0.2 cents payout this quarter could be as high as 6-7%.

• GPH’s profitability is largely dependent on the Singapore

tourism sector, ie higher hotel room bookings. According to

STB, visitor arrivals in 2012 are expected to increase to

13.5-14.5m in 2012 (2011: 13.2m) on the back of new

attractions including Gardens by the Bay, River Safari, and

Marine Life Park.

Financial highlights

• GPH reported 1H12 net profit of S$10.0m (-7.1% yoy) as

higher financing costs offset higher revenue and gross profit.

Revenue rose 19.6% yoy to S$30.1m as the group started

operations in Parc Sovereign, Fragrance Hotel-Elegance and

Fragrance Hotel-Riverside. Parc Sovereign and Fragrance

Hotel-Riverside contributed S$1.8m and S$2.4m to the

increase in revenue respectively.

• Average occupancy rate surged 10.5ppt to 90.7% in 1H12

with revenue per available room (RevPAR) increasing 9.9%

yoy to S$92.3 on higher demand for the group’s hotels.

However, average room rate fell marginally by 2.8% to

S$101.8 as the group received less walk-in customers than

on-line bookings and corporate partners. In general, walkins

are charged 10-20% higher than advanced bookings.

• Finance cost jumped 64.5% yoy to S$2.4m as the group

drew down S$343.5m in term loans to partially repay

Fragrance Group for the hotel properties during the

restructuring exercise. Interest rates are expected to stay at

about 2-3% p.a.

• To expand its hotel chain, GPH intends to develop a hotel by

acquiring Fragrance Heritage Pte Ltd (FHPL) for S$25.1m

with a further estimated development cost of S$30.0m.

FHPL owns a site at 165/167 Tyrwhitt Road and a new midtier

hotel, if approved, will boost GPH’s existing hotel

portfolio by another 250-270 rooms, or 14.4-15.5%. GPH

also plans to spend S$3m to renovate Fragrance Hotel-Ruby

in 3Q12 which will be closed till completion by 4Q12.

Peer Comparison

Company Cur Price

Market

Cap (m)

2011

PE (X)

2011

PB (X)

AMARA HLDGS LTD SGD 0.365 211 7.3 0.9

BANYAN TREE HOLD SGD 0.560 426 119.1 0.8

FRAGRANCE GROUP SGD 0.510 1714 26.8 2.2

GUTHRIE GTS LTD SGD 0.585 631 2.9 0.6

HOTEL GRAND CENT SGD 0.780 444 13.0 0.6

HOTEL PROPERTIES SGD 2.310 1169 13.9 0.8

HOTEL ROYAL LTD SGD 2.480 208 36.0 0.6

MANDARIN ORIENTL USD 1.400 1401 25.2 1.5

FAR EAST ORCHARD SGD 2.240 845 5.9 0.7

ROXY-PACIFIC SGD 0.460 439 8.5 2.0

UNITED INDL CORP SGD 2.560 3528 22.5 0.8

Average 22.9 1.1

GLOBAL PREMIUM SGD 0.240 252 5.8 0.2

Source: Bloomberg, UOB Kay Hian

Global Premium Hotels operates one of Singapore’s largest

chains of hotels with 23 hotels - 22 under the Fragrance

brand and one under the Parc Sovereign brand. The group

has 1,738 economy-tier and mid-tier rooms in Singapore.

This message was edited by stand up n wake up on 08-Aug-2012 @ 11:02 AM