Wednesday, September 18, 2013

DBSVickers Report 19 Sep 13

Expect STI to rise in reaction to the FED decision.
SREITs and emerging markets exposure names should
outperform.
�� Centurion - Initiate coverage with a BUY call and
target price of S$ 0.77
The FED refrained from reducing the USD85bil/mth QE
program, saying it needs more evidence of lasting
improvement in the economy and warning an increase in
interest rates threatens to expansion. Interest rates will
remain near zero ‘at least as long as’ unemployment is
higher than 6.5% and outlook for inflation is no higher
than 2.5%. FED officials also reduced their forecasts for
economic growth this year and next. 2013 US GDP is now
lowered to 2-2.3% from 2.3-2.6% this year.
Our economist notes that the ‘taper postponement’ this
month does not mean that one is automatically scheduled
for October. Employment growth has been very weak.
We estimate that less than half the people who lost their
jobs back in 2008/09 have them back again, 5 years after
the fact. Inflation – the biggest risk to the QE program – is
nowhere to be seen. Core PCE prices are running at
1.2% YoY, half the Fed’s target. Private sector GDP
growth is slowing, not accelerating. And long-term
interest rates have risen by 100 basis points and appear to
be having a negative impact on housing. That’s a pretty
solid package of information that told the Fed to sit tight.
As yesterday’s Statement says, “asset purchases are not
on a preset course” – they will remain contingent on the
data. The data are key. And they’re not looking like
October at the moment.
Expect the STI to rise in a positive reaction to the FED
decision. SREITs and emerging markets exposure names
should outperform in the near term. Our SREITs picks are
Suntec REIT, MCT, AREIT and CDL HT. Recovery names
with US recovery exposure should lag. While a positive
reaction for the STI is seen, we note that the recent rise
has lifted it closer to 13.9x (ave) 12-mth forward PE at
3250, which is seen as a near-term cap. This line rises to
3330 by year-end based on current forecast. Post FOMC
outcome, attention will switch to more data watch, the
October debt ceiling debate and the upcoming 3Q results
season. Thus, further gains for the STI in the near-term
should be capped at/slightly below 3250.
US Indices Last Close Pts Chg % Chg
Dow Jones �� 15,676.9 147.2 0.9
S&P �� 1,725.5 20.8 1.2
NASDAQ �� 3,783.6 37.9 1.0
Regional Indices
ST Index �� 3,193.9 12.9 0.4
ST Small Cap �� 573.5 9.8 1.7
Hang Seng �� 23,117.5 (63.1) (0.3)
HSCEI �� 10,588.0 (62.6) (0.6)
HSCCI �� 4,453.3 (29.Cool (0.7)
KLCI �� 1,771.4 (3.5) (0.2)
SET �� 1,439.1 (4.6) (0.3)
JCI �� 4,463.3 (54.4) (1.2)
PCOMP �� 6,334.0 (10.2) (0.2)
KOSPI �� 2,005.6 (7.Cool (0.4)
TWSE �� 8,209.2 (40.6) (0.5)
Nikkei �� 14,505.4 193.7 1.4
STI Index Performance
Singapore
Total Market cap (US$bn) 592
Total Daily Vol (m shrs) 5,688
12m ST Index High 3,454
12m ST Index Low 2,946
Source: Bloomberg Finance L.P
Stock Picks – Large Cap
Rec’n Price ($)
18 Sep
Target Price
($)
ST Engineering Buy 4.230 4.80
ComfortDelgro Buy 1.925 2.19
OCBC Bank Buy 10.340 12.40
Spore Airlines Buy 10.420 11.40
Suntec REIT Buy 1.635 1.78
Stock Picks – Small /Mid Cap
Rec’n Price ($)
18 Sep
Target Price
($)
Ezion Holdings Buy 2.310 3.20
Goodpack Buy 1.690 2.00
CSE Global Buy 0.905 1.07
Mapletree Commercial Trust Buy 1.160 1.35
CDL Hospitality Trust Buy 1.580 1.80
Source: Bloomberg Finance L.P, DBS Vickers
Singapore
Wired Daily
Page 2
We initiate coverage on Centurion with a BUY call and target
price of S$ 0.77. Centurion is a premier player in the foreign
worker dormitory business, garnering c.11% market share
with 18,000 beds in three dormitories in Singapore. The
Group has also expanded into Malaysia since 2011,
operating 11,000 beds as the first and only purpose-built
dormitory operator in the country. It is a key beneficiary of
demand/supply imbalance, and the enforcement to raise
living standards of workers. Key growth drivers are
continued rent increases (we assumed 5% p.a.), higher
occupancy and 50% expansion in beds in Singapore from
2013 to 2015 and 120% in Malaysia by 2015.
Keppel Corp has secured two Floating Production Storage
and Offloading (FPSO) conversion contracts from repeat
customers worth a combined value of S$190m. These
contracts are from SBM Offshore and M3nergy Offshore.
The latest win brings Keppel's YTD new orders to S$4.5bn,
forming 75% of our full year assumption of S$6bn. Maintain
BUY and TP of S$12.90 on Keppel.
Nam Cheong has entered into an agreement to acquire 49%
equity stake in PT Bahtera Niaga Indonesia for US$1.5m. The
purpose and objectives of the acquisition is the owning,
operating and chartering of marine vessels for
transportation, exploration and production activities in the oil
and gas industry and to manage the maintenance of marine
vessel and provision of offshore marine service and all other
related businesses and activities.
BBR secures S$105.8m worth of new contracts in Singapore
and Malaysia. These include a contract for the construction
and maintenance of Phases 14 and 15 of the mixed-use
development at The Springside at Jalan Ulu
Seletar/Sembawang Road, Singapore and a number of
specialised engineering contracts in Singapore and Malaysia.
OUE Hospitality Trust has been granted right of first refusal
to acquire the entire stake in Meritus Mandarin Haikou, a
hotel situated in Haikou, China for S$58.7m and 80% stake
in Meritus Shantou China for S$49.3m but it has declined
the offer. The managers are of the view that such acquisition
would not be accretive to the distribution per unit at the
proposed purchase consideration levels.
China Environmental Resources is expected to record a
decrease in losses for FY Jun 2013 as compared to last year,
mainly attributed to the decrease in loss on changes in fair
value of biological assets.
Flight bookings into Singapore for the 2013 Formula One
(F1) Grand Prix, already up 12.6% from last year, according
to a forecast from travel technology firm Amadeus and
market research company Forward Data, point to a bumper
year. There could be a last-minute surge in bookings based
on last year’s data, since the report took into account
bookings only until Sept 1, 2013. Some 30% of the final
tally for 2012 started to flood in only in the three weeks
leading up to the race.

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