§        Weak USD to maintain interest in O&M stocks – Keppel Corp, SembCorp Marine, STX OSV, Ezion, Nam Cheong, ASL Marine & Kreuz

§        Pan-United Corp top pick as potential beneficiary of Thomson MRT line construction

Singapore Traders Spectrum

Wired Weekly

Page 2

Singapore GDP outlook slashed

The global economy is seen heading into choppy waters that

will have significant impact on the growth prospects for the

Singapore economy, which is externally driven. Thus, our

Singapore economist has lowered 2012 GDP growth

forecast to 2.5% (previous 3%) and that for 2013 to 3.7%

(previous 4.3%). This is the second forecast cut in a month,

the first being a 0.5% 2012 GDP forecast reduction to 3%

from 3.5%. The downside risk to headline GDP growth will

most likely continue even after this latest reduction as the

country battles against the rising global uncertainties and

fading external demand.

Already, the latest numbers are telling – July NODX fell

3.6% MoM sa in July while the overall industrial production

index dipped 9.1% MoM sa, led by a 28.5% plunge in

pharmaceutical output. Ex-biomedical production has been

declining for 2 consecutive months, at an average pace of

3.8% MoM sa in June and July. Meanwhile, Singapore’s PMI

has been dipping towards contraction territory (<50) while

the services sector contracted 0.6% QoQ saar in 2Q12,

down from a 2.9% expansion in 1Q12.

Similar weakness is observed across Asia. Japan’s July

industrial production fell 1.2% m-o-m (consensus 1.7%

increase) while that for South Korea declined 1.6% m-o-m

(consensus 0.9% decline). China’s August PMI fell into

contraction territory at 49.2 (consensus 50) from 50.1 the

previous month. The weak manufacturing data keeps

stimulus hopes alive.

Chart 1: SG Broad based manufacturing slowdown Chart 2: SG Global PMIs slipping

Source: Irvin Seah, Singapore Economist, DBS Research

Stimulus hopes kept alive at Jackson Hole

FED chairman Ben Bernanke did not offer anything new but

kept stimulus hopes alive at the Jackson Hole summit after

he stated that he would not rule out more stimuli to combat

the stagnation in the labour market, which he called a

“grave concern.” The US unemployment rate remains at

8.3% even after the past 2 rounds of quantitative easing

that totalled USD2.3tril.

The current data heavy week will plot 1 more data point for

the FED chairman. The week begins with August ISM

manufacturing, which consensus sees a shift out of mild

contraction to a borderline 50. The ADP employment

change comes before Friday’s official payrolls figures.

Consensus expects the ADP number to decline to 140k from

163k the previous month. August non-farm payrolls figure is

also seen declining to 125k from 163k while the

unemployment rate should stay at 8.3%.

Singapore Traders Spectrum

Wired Weekly

Page 3

Table 1: US economic data releases this week

Date Time Event

Survey Prior

09/04/2012 ISM Manufacturing Aug 50 49.8

09/04/2012 Construction Spending MoM Jul 0.50% 0.40%

09/05/2012 Total Vehicle Sales Aug 14.10M 14.05M

09/05/2012 Domestic Vehicle Sales Aug 11.00M 11.00M

09/06/2012 Challenger Job Cuts YoY Aug -- -44.50%

09/06/2012 ADP Employment Change Aug 140K 163K

09/06/2012 Initial Jobless Claims 01-Sep -- 372K

09/06/2012 ISM Non-Manf. Composite Aug 52.5 52.6

09/07/2012 Change in Nonfarm Payrolls Aug 125K 163K

09/07/2012 Change in Private Payrolls Aug 128K 172K

09/07/2012 Unemployment Rate Aug 8.30% 8.30%

Source: Bloomberg

Several events flashpoints fill the month of September. First

is the ECB policy meeting on September 6. This is followed

by the German constitutional court ruling on the legality of

the ESM on September 12. The ECB may announce details

of its own bond-buying program on the 6th or wait till the

crucial September 12 ESM ruling before unveiling plans to

buy Euro government bonds. The outcome of the FOMC

meeting on September 13 immediately follows Germany’s

constitutional court ruling. Ironically, Ben Bernanke’s

comments at Jackson Hole has reduced the positive surprise

in the lead-up to the September 13 FOMC meeting. Across

the Atlantic, the outcome of the troika’s (IMF, ECB and EC)

assessment of Greece’s reform efforts is expected to be

ready by end September. This will be ahead of the EU

finance ministers meeting come October 8 that will decide

whether to give Greece the next aid tranche that amounts

to €31bil.

With these events lined in coming weeks and equity markets

already rebounded from their early June lows, the trend is

likely to be choppy in September. For the STI, we peg a

range from 2930 to 3100.

O&M and commodity stocks indirect beneficiaries of US

stimulus hope

The USD weakened against major currencies after FED

chairman Ben Bernanke made the case for further monetary

stimulus at the Jackson Hole summit. The USD-SGD cross

rate dropped 0.42% to 1.2476 on Friday while the Dollar

Index fell 0.59% to 81.2. Hopes of QE3 had led the Dollar

Index’s 3.5% decline since late July.

With stimulus hopes alive, the USD should stay pressured

and this should benefit USD denominated commodities.

Gold price, for example, started to climb from USD1600 an

ounce in mid-August to USD1684 an ounce. On Friday, it

gained 1.9% in reaction to Ben Bernanke’s comments.

Oil price also rose in reaction to Ben Bernanke’s Jackson

Hole speech. Brent futures gained 1.7% to USD114.57pbl.

Technically, it can still strengthen to slightly below

USD122pbl before correcting.

Chart 3: Gold price rising since August Chart 4: Brent crude

Source: DBS Research

Straits Times Index Technical Outlook

Our view of a pullback off the 3100 level continued to pan out last week. The 30pt decline last Thursday created a ‘gap down’ and a decisive decline below the 15-day EMA. This

Chart 5: Straits Times Index (Daily)

places immediate resistance at 3040. After the nearly 400pt rally since early June, September should turn out choppy as

the STI backs off the 3100 level. The 2 short-term support levels are at 3000 and 2930. Post pullback, look for a re-test of 3100 while an upside break should send it towards 3200.

Source: DBS Research

Singapore Traders Spectrum

Wired Weekly

Page 6

Top large and small / mid cap picks for the coming week

TOP LARGE CAP PICKS

Company Recom Price

Ta rge t

Price

Upside Catalys t

Keppel Corp Buy 11.19 13.20 18% 1) Key beneficiary to ride the tightening rig market, with its solid

execution track record and market leading position in jackups and

semisubmersibles.

2) Valuation undemanding at ~12x PE with a dividend y ield of ~4%.

SembCorp Marine Buy 5.00 5.85 17% 1) Expect earnings to pick up over FY12 as orderbook recognition picks

up pace.

2) Purest O&M plays and a prime beneficiary of the upcycle in semisubs,

with potential catalysts from Petrobras contracts.

Noble Group Buy 1.200 1.30 8% 1) Underv alued relative to peers – superior EPS growth but lowest PE.

2) Bombed out stock - share price down >50% from peak in J an 11.

City Development Fully V alued 11.52 11.42 -1% Near or exceeded target price after recent rise

TOP SMALL / MID CAP PICKS

Company Recom Price

Ta rge t

Price

Upside Catalys t

STX OSV Holdings Buy 1.520 2.00 32% 1) Front line beneficiary of recovery in subsea market.

2) Recent price weakness triggers buy opportunity.

Ezion Holdings Buy 1.055 1.42 35% 1) solid earnings growth profile (FY11-13 earnings CAGR of 50%), high

earnings visibility, good execution track record and undemanding

valuation.

2) Eased >20% from YTD high.

Bumitama Agri Buy 1.080 1.30 20% 1) In a strong growth phase, offering FY11-14F earnings CAGR of

29%.

2) Plantable reserves of c.63k ha to support expansion to FY15F.

3) Well positioned against refining overcapacity in Indonesia and CPO

price weakness.

Nam Cheong Buy 0.198 0.24 20% 1) Strong earnings growth and attractive valuations.

2) Buoyant demand outlook; poised to ride uptrend in OSV market.

3) Catalysts from new order wins.

Tiger Airways Buy 0.730 0.92 26% 1) Demand finally caught up with capacity expansion in Singapore.

2) Tiger Australia ramping up services to pre-grounding scale.

3) Jet fuel price currently about 12% lower than peak in early 2012.

Source: DBSV Research

Singapore Traders Spectrum

Wired Weekly

Page 7

Major research reports released last week

Source: DBSV Research

Company / Sector Recommendation Target Price ($) Key Points

Ascendas Hospitality

Trust

BUY (Initiating Coverage) S$ 0.95 1) High beta proxy to growing corporate and leisure demand

2) Independent platform to tap international and domestic market share

3) Projected to achieve better-than-industry growth underpinned by major

refurbishment exercise

4) Initiate with BUY call, TP 0.95

IHH Healthcare BUY S$ 1.38 (RM 3.44) 1) 2Q net profit surged due to medical suite sales, Acibadem consolidation

and valuation gains on investment properties

2) 1H12 core profits forms 49% of FY12F (ex. medical suites)

3) Promising start for Novena hospital, expect positive EBITDA by 2H13

4) Maintain Buy, TP: S$1.38 (RM3.44)

Olam International HOLD S$ 1.80 (Prev S$ 2.00) 1) 4QFY12 core profit of S$48.2m (-45% y-o-y, -40% q-o-q) was significantly

below our expectations

2) Weak Industrial Raw Materials and jump in overheads hit FY12 profits

3) FY13F-15F earnings cut by 9-14% as we impute higher overheads and lower

Food Staple margins

4) Maintain HOLD, TP lowered to S$1.80 from S$2.00

F&N HOLD S$ 8.99 1) Proposed distribution of S$4bn of sale proceeds via cancelling 1-for-3 shares

at S$8.50/share

2) Proforma EPS to improve 9.8% while net D/E to decrease to 12% (as of

June12)

3) Certainty and commitment to shareholders on use of funds, confidence in

cashflow and gearing

4) Maintain Hold and S$8.99 TP

Amtek HOLD (Downgrade from

BUY)

S$ 0.66 (Prev S$ 0.82) 1) Core profit fell short on weaker sales and margins

2) FY13F contingent upon new programmes and stable margins

3) Downgrade to HOLD on limited price upside, TP cut to S$0.66. Expect 7%

yield to support downside

Goodpack BUY S$ 2.00 1) 4QFY12 net profit of US$11.2m (-3% q-o-q, -5% y-o-y), was in line with

expectations

2) Lift in synthetic rubber market share to 40% led to 12% rise in revenues

but this was offset by higher costs

3) Delay in recovery of rubber demand results in FY13-15F earnings revised by -

9% to +2%

4) Maintain BUY, TP of S$2.00

Sakari Resources ACCEPT THE OFFER

@S$1.90

S$ 1.90 (Prev S$ 1.40) 1) PTT offers to buy remaining stake in Sakari @S$1.90 per share

2) Offer price looks attractive at valuations of US$12 per reserve ton and 16x

FY12 PE, considering the lack of other near term catalysts for the stock

3) But longer term investors with bullish coal price outlook could still look to

hold on

Midas Holdings BUY S$ 0.49 1) Potential for more orders from overseas rail, non-rail segments and highspeed

railway projects

2) Stronger earnings from NPRT, on Rmb8bn order book and upcoming Nanjing

Youth Olympics

3) FY12/13 EPS forecasts cut by 41%/12% respectively but stock already

bombed out at 0.7x P/B

4) Maintain BUY, TP S$0.49, based on 1x FY12 P/B.

Singapore Traders Spectrum

Wired Weekly

Page 7

Major research reports released last week

Source: DBSV Research

Company / Sector Recommendation Target Price ($) Key Points

Ascendas Hospitality

Trust

BUY (Initiating Coverage) S$ 0.95 1) High beta proxy to growing corporate and leisure demand

2) Independent platform to tap international and domestic market share

3) Projected to achieve better-than-industry growth underpinned by major

refurbishment exercise

4) Initiate with BUY call, TP 0.95

IHH Healthcare BUY S$ 1.38 (RM 3.44) 1) 2Q net profit surged due to medical suite sales, Acibadem consolidation

and valuation gains on investment properties

2) 1H12 core profits forms 49% of FY12F (ex. medical suites)

3) Promising start for Novena hospital, expect positive EBITDA by 2H13

4) Maintain Buy, TP: S$1.38 (RM3.44)

Olam International HOLD S$ 1.80 (Prev S$ 2.00) 1) 4QFY12 core profit of S$48.2m (-45% y-o-y, -40% q-o-q) was significantly

below our expectations

2) Weak Industrial Raw Materials and jump in overheads hit FY12 profits

3) FY13F-15F earnings cut by 9-14% as we impute higher overheads and lower

Food Staple margins

4) Maintain HOLD, TP lowered to S$1.80 from S$2.00

F&N HOLD S$ 8.99 1) Proposed distribution of S$4bn of sale proceeds via cancelling 1-for-3 shares

at S$8.50/share

2) Proforma EPS to improve 9.8% while net D/E to decrease to 12% (as of

June12)

3) Certainty and commitment to shareholders on use of funds, confidence in

cashflow and gearing

4) Maintain Hold and S$8.99 TP

Amtek HOLD (Downgrade from

BUY)

S$ 0.66 (Prev S$ 0.82) 1) Core profit fell short on weaker sales and margins

2) FY13F contingent upon new programmes and stable margins

3) Downgrade to HOLD on limited price upside, TP cut to S$0.66. Expect 7%

yield to support downside

Goodpack BUY S$ 2.00 1) 4QFY12 net profit of US$11.2m (-3% q-o-q, -5% y-o-y), was in line with

expectations

2) Lift in synthetic rubber market share to 40% led to 12% rise in revenues

but this was offset by higher costs

3) Delay in recovery of rubber demand results in FY13-15F earnings revised by -

9% to +2%

4) Maintain BUY, TP of S$2.00

Sakari Resources ACCEPT THE OFFER

@S$1.90

S$ 1.90 (Prev S$ 1.40) 1) PTT offers to buy remaining stake in Sakari @S$1.90 per share

2) Offer price looks attractive at valuations of US$12 per reserve ton and 16x

FY12 PE, considering the lack of other near term catalysts for the stock

3) But longer term investors with bullish coal price outlook could still look to

hold on

Midas Holdings BUY S$ 0.49 1) Potential for more orders from overseas rail, non-rail segments and highspeed

railway projects

2) Stronger earnings from NPRT, on Rmb8bn order book and upcoming Nanjing

Youth Olympics

3) FY12/13 EPS forecasts cut by 41%/12% respectively but stock already

bombed out at 0.7x P/B

4) Maintain BUY, TP S$0.49, based on 1x FY12 P/B.