DJ MARKET TALK: Singapore's STI May Slip; 3050-3088 Likely 

0057 GMT [Dow Jones] Singapore's STI may slip, tracking negative cues from Wall Street Tuesday and from regional markets already trading. "It was inevitable that traders would slice some profits off," says Justin Harper, market strategist at IG Markets Singapore, in a note, adding that traders also want to reduce risk exposure before the end-August Jackson Hole meeting and the September ECB meeting. "The STI seems to be stuck in a rut, repeatedly bouncing off 3050, but failing to punch above 3080 for very long. If we look at corporate earnings across the region, there's no catalyst there with some of the region's biggest economies (China, Japan, Hong Kong) reporting below-expectation profits." The STI ended Tuesday +0.1% at 3065.77; a 3050-3088 range is likely. ARA Asset (D1R.SG) plans to carve out some of its Chinese property assets in an up to US$640 million IPO by end-October, three people with knowledge of the deal said. Keppel (BN4.SG) firmed up an LOI to build a semi-sub accommodation platform for US$315 million for Floatel. Temasek sold its 1.4% APB (A46.SG) stake to Heineken (HEIA.AE) for S$53/share, two people familiar with the situation said.
 
 
 

DJ MARKET TALK: Keppel May Not React Much To US$315M Job 

0044 GMT [Dow Jones] Keppel Corp. (BN4.SG) may not react too much after saying it signed a US$315 million contract to build a semi-submersible accommodation platform for repeat customer Floatel International as it merely firms up a previously signed letter-of-intent. "It's a slight positive," an analyst says, but notes "it was quite expected," with the LOI signed in March. The stock could get a bit of a fillip from its correlation with oil prices as crude oil futures settled at a three-month high Tuesday amid market optimism struggling eurozone nations will receive regional assistance to strengthen their economies. The stock ended Tuesday down 0.5% at S$11.52. With the stock just a tad off its S$11.58 year-to-date closing high and up nearly 29% year-to-date, near-term upside could be limited. Its 52-week high at S$11.67 may offer a near-term cap, while the 10-day moving average around S$11.44 may offer support.

 
 

DJ MARKET TALK: ARA Asset May Rise; Plans China Ppty IPO - Sources 

0030 GMT [Dow Jones] ARA Asset Management (D1R.SG) may outperform after three people with knowledge of the deal told Dow Jones the property-asset manager plans to carve out some of its Chinese property assets in an up to US$640 million yuan-denominated IPO by end-October. "This is one of the major catalysts for the stock. It has been limboing for some time," an analyst says, noting management has been talking about it for a year. The plan would indicate management sees a window of opportunity in the market climate, the analyst says. The stock ended Tuesday up 1.0% at S$1.495; last week's intraday peak at S$1.52 may offer a cap
 
DJ Wing Tai Holdings Target Raised To S$1.75 From S$1.40 By Maybank-Kim Eng
 

SWITCH TO THE RIGHT REITS

• Switch to office from local retail

• Stay in industrial REITs; top pick is

CACHE

• Hospitality outlook intact; rotate to

Relative total return 1m 3m 12m

Sector (%) 3 12 18

STI-adjusted (%) 0 2 7

Price performance chart

498

548

598

648

698

747

Aug-11 Nov-11 Feb-12 May-12

2100

2340

2580

2820

3060

3300

FST REI FSST I

Sector Index Level Mar ket Index Level

`

Sources: Bloomberg, OIR

Stock coverage ratings

BBRG Ticker Price

Fair

Value

Rating

AREIT SP Equity 2.24 2.27 HOLD

ART SP Equity 1.20 1.34 BUY

CACHE SP Equity 1.10 1.18 BUY

CCT SP Equity 1.39 1.53 BUY

CT SP Equity 1.93 2.04 HOLD

CRCT SP Equity 1.47 1.70 BUY

CDREIT SP Equity 1.93 2.06 HOLD

FIRT SP Equity 0.97 0.96 HOLD

FRT SP Equity 5.32 5.33 HOLD

FCT SP Equity 1.76 1.89 BUY

FCOT SP Equity 1.10 1.23 BUY

LMRT SP Equity 0.43 0.45 BUY

MLT SP Equity 1.02 1.19 BUY

SGREIT SP Equity 0.73 0.79 BUY

SUN SP Equity 1.43 1.45 HOLD

Switch to office REITs from local retail REITs – prefer CCT over

CMT

Due to limited supply coming online and better than expected demand

in 2Q12, office fundamentals are outstripping market expectations.

Meanwhile, office REITs, trading at an attractive average 0.82x PB

and forward yield of 6.4%, reported a healthy set of 2Q12 results inline/

surpassing consensus estimates. Upgrade office REITs to

OVERWEIGHT. On the other hand, while the outlook for the local

retail sector remains stable, we judge that most of the positives are

already priced in at currently rich valuations. Downgrade local retail

REITs to NEUTRAL. Our recommendation here: switch to CCT [BUY,

FV: S$1.53] from CMT [HOLD, FV: S$2.04]. We also like FCOT

[BUY, FV: S$1.23] for its growth potential, strong execution and

attractive forward yield of 7.1%.

Good o’ industrial REITs - in uncertain times, CACHE is king

We believe growth drivers and financial positions of industrial REITs

remain sound. Average current and forward DPU yields of 7.6-7.7%

are still the highest among other REIT subsectors. Maintain

OVERWEIGHT on the subsector. Our top pick here is CACHE [BUY,

FV: S$1.18] for its sturdy portfolio, healthy financial position and

attractive FY12F yield of 7.6%.

Hospitality story intact - rotate to ART from CDLHT

We see overall hotel room demand (6.4% pa) outstripping supply

growth (3.7% pa) over 2012-15 and supporting RevPAR at current

high occupancies of 80%-90%. Maintain OVERWEIGHT on hospitality

REITs. We advocate rotating from CDLHT [HOLD, FV: S$2.06] to

ART [BUY, FV: S$1.34] which looks overly punished for its European

exposure and for its attractive 7.5% forward yield.

Overseas retail REITs can boost returns – CRCT is preferred

Maintain OVERWEIGHT on overseas retail REITs. Our previous top

pick FRT has appreciated significantly YTD, with its acquisition of two

properties and good 1H12 results serving as price catalysts. However,

based on valuations, we are now switching our preference to CRCT

[BUY, FV: S$1.70], which has strong fundamentals and deserves a

premium for being the only pure-play mainland China retail REIT.

Healthcare REITs looks expensive – avoid for now

While prospects of healthcare REITs remain intact, valuations appear

expensive. Based on consensus estimates, healthcare REITs are

trading at 1.27x P/B and forward yields of 6.3% versus SREITs

average of 0.96x P/B and 6.9%. We see limited upside

ahead; downgrade subsector to NEUTRAL.

SINGAPORE REITS |

KEPPEL CORP

S$11.52-KEPC.SI

 Keppel Fels has finalized the contract from

Floatel to build a new generation harsh

environment accommodation semi-sub worth

US$315 mln.

 The Letter of Intent for this was signed in March

this year.

 In the month to date, the group has added a

whopping record US$5365 mln worth of

contracts to its order books.

 Business Times’ top story this morning is about Kep

C and Semb Marine ($5.07, down 4 yesterday) having

a record-busting year (nothing new but worth noting

nonetheless) in 2012 that still has just over a quarter

to go.

 We maintain BUY on both stocks. (Kep Corp is

encountering some technical resistance at current level,

which was first reached this year.)

Daily Review, 22 August 2012 Page 2 of 6

SGX-ST Member, SGX-DT (CNCM)

 There is nothing of significance to CEO Neil

Montefiore’s sale of 420,000 shares at $3.602

average, since it is “for a property transaction here”.

 His new balance is 400,400 shares. Montefiore bought

750,000 shares at $2.19 average, from the market in

May ’10 after his appointment to succeed Terry

Clontz as CEO.

 It is worth noting that Clontz’s selling program (since

he stepped down 2 years ago) has not quite

STARHUB

S$3.64-STAR.SI

“interrupted” StarHub’s steady climb over the past 8

years. (Clontz last sold 300,000 shares on July 2nd ’12

at $3.45 each, leaving a balance of 209,400 shares.)

 Fact however remains, the stock has done well, with

yesterday’s $3.64 close being only 5.2% off its record

high of $3.84 reached 3 weeks ago.

 Based on quarterly dividend rate of 5 cents a share,

yield is 5.5%. We continue to prefer it to Sing Tel.

Daily Review, 22 August 2012 Page 3 of 6

SGX-ST Member, SGX-DT (CNCM)

 LIONGOLD ($1.255, down half): N o m u r a

Holdingsceased to be a substantial shareholder

OTHER NOTEWORTHY SHARE TRANSACTIONS

with the sale of 1,235,000 shares, reducing holding

to 39.71 mln shares or 4.93%.

Daily Review, 22 August 2012 Page 4 of 6

SGX-ST Member, SGX-DT (CNCM)

YIELDS

 The accompanying chart is taken from Barron’s,

showing the surge in funds flowing into the junk bond

market, in the process dramatically pushing yields

down.

 The 16% peak was the result of the melt-down of

financial markets during the Financial Crisis.

 Many gurus have been warning of a bubble developing

in bonds and other high yielding instruments.

Daily Review, 22 August 2012 Page 5 of 6

SGX-ST Member, SGX-DT (CNCM)

 Ahead of Longcheer’s 4Q and full year ended June ’12

results release on 29 Aug ’12, the company warned

that it will be loss making for both 4Q as well as full

year ended June ’12 due to impairment charges for

receivables.

 4Q and full year ended June ’12 loss compares with

loss of Rmb56mln in 4Q June ’11 and loss of

Rmb72mln for full year to June ’11. 3Q to Mar ’12

loss was Rmb15mln while 9 month to Mar ’12 loss

was Rmb19mln.

 In 3Q ended Mar ’12, the company’s trade and other

receivables totalled Rmb408mln, up 21% from a year

LONGCHEER

S$0.099-LONG.SI

ago and accounted for 55% of the company’s

shareholders funds of Rmb743mln.

 And in comparison to the company’s market cap of

S$39.3mln, the receivables account for just over 2x

its market cap.

 In the past year the stock has been stuck in a trading

range of between 6 cents to 16 cents.

 With the company continuing to erode shareholders’

funds, we are maintaining our Sell recommendation, a

call we have had since Jan 2011.