OCBC Report 20 Sep 13

CapitaLand Limited: New convertible bond issue
Yesterday, CAPL priced its proposed S$750m 2023 convertible bond issue at 1.95% yield to maturity with a conversion price of S$4.212. The group announced that they will use ~95%-100% of the proceeds to refinance its existing indebtedness and has set up an invitation to repurchase for cash existing CBs due in 2016 and 2018. We see this as a positive move that would reduce interest payments and lengthen the group’s average debt expiry. We also look forward to CAPL’s new condominium launch – the 694-unit Sky Vue in Bishan. While we estimate fairly slim profit margins in the low teens due to the pricing, we believe a strong launch would be taken positively by the market, particularly now that the group has a large unsold exposure of over a thousand units in the Bishan locality in Sky Habitat (340 units unsold) and Sky Vue (694 units unsold). Maintain BUY with an unchanged fair value estimate of S$3.77. (Eli Lee)

Telecom Sector: Price plans for new iPhones out
All three telcos have announced their price plans for the new Apple iPhone 5S/5C recently. For the 16GB model of the more powerful 5S, the telcos are offering the phone between S$515 and S$532 on a 2-year contract under their basic plans, versus the Apple Store’s retail price of S$988. This translates to an upfront subsidy of ~S$470 per subscriber. For the 5C, basic plan subscribers would need to fork out between S$318 and S$355 for the entry-level 16GB model on a 2-year contract. This amounts to a subsidy of ~S$515 against the retail price of S$848 found in the Apple Store. However, with Samsung launching its new Galaxy Note 3 around the same time, this may temper the demand for the new iPhone. We have a NEUTRAL rating on the sector. (Carey Wong)


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NEWS HEADLINES

- US stocks on Thu mostly fell, with benchmark indexes retreating from record highs that came with the Federal Reserve’s unexpected decision not to begin cutting stimulus.

- Singapore Airlines tied up with Tata Group, owner of the Jaguar and Land Rover brands, to start an airline in India.

- Asian Trust Investment has become a substantial shareholder in Logistics Holdings, following the acquisition of about 1.06m shares. This raises Asian Trust Investment's stake to 5.60% from 4.97%.

- Albedo has agreed to a S$774.1m reverse takeover with Tan Sri Dato’ Danny Tan’s company to buy land in Iskandar.