STI - Support around 3150, worst case 3100
ASEAN Travel & Hospitality – Our SGX listed picks:
Tiger Airways and CDL Hospitality Trust
STI’s 29pt decline yesterday to 3152 was within our
expectations. We had pointed out back in September
19th that the index’s rally was due for a stall heading into
the uncertainty that follows the need to raise the US debt
ceiling in October and a likely uninspiring 3Q results
season that provides little impetus to power the index
higher.
We had pegged ranged bound trade from 3150-3250 and
the index is currently at the lower band level. We see
limited downside, tweaking support levels to 3145 that is
around current level and should this level not hold, 3100.
While levels are slightly changed, it’s part parcel of a
choppy trend and we see bargain hunting opportunities
on just modest downside. Our economist says virtually all
of the goods & services cut back amount would represent
spending delayed, not denied. In addition, the lost wages
of government workers would also be repaid,
retroactively, if the 1995 shutdown is anything to go by.
ASEAN aviation has expanded at a rapid pace since 2000,
along with economic growth and the introduction of Low
Cost Carriers (LCCs) into the region. With the middle class
population set to increase from 79m to 196m by 2020,
and factoring in the aggressive expansion plans by LCCs
as well as progress of the ASEAN Open Skies talks, we
project ASEAN short haul air traffic (intra-ASEAN and
ASEAN - China/South Asia) to double by 2020 from 2012.
LCCs will continue to grow rapidly, backed by a huge
order book (>1,000 narrow-body aircraft on order). We
like Tiger Airways (BUY, TP S$0.74) for its strong position
in Singapore, and its increasing exposure to Indonesia and
the Philippines.
ASEAN hotels have and will continue to benefit from the
increased numbers of travellers into and within this
region. Our top pick for SGX-listed hotel play is CDL
Hospitality Trust.
US Indices Last Close Pts Chg % Chg
Dow Jones 15,133.1 (58.6) (0.4)
S&P 1,693.9 (1.1) (0.1)
NASDAQ 3,815.0 (3.0) (0.1)
Regional Indices
ST Index 3,152.6 (28.9) (0.9)
ST Small Cap 569.7 (1.2) (0.2)
Hang Seng 22,984.5 124.6 0.5
HSCEI 10,333.6 17.5 0.2
HSCCI 4,402.3 22.1 0.5
KLCI 1,770.4 1.3 0.1
SET 1,409.0 0.8 0.1
JCI 4,387.6 41.7 1.0
PCOMP 6,362.3 164.4 2.7
KOSPI 1,999.5 0.6 0.0
TWSE 8,216.5 29.5 0.4
Nikkei 14,170.5 (314.2) (2.2)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013
100-Day MA
Index
STI
Total Market cap (US$bn) 589
Total Daily Vol (m shrs) 3,622
12m ST Index High 3,454
12m ST Index Low 2,946
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price ($)
2 Oct
Target Price
($)
ST Engineering Buy 4.180 4.80
ComfortDelgro Buy 1.935 2.19
OCBC Bank Buy 10.220 12.40
Singapore Airlines Buy 10.190 11.40
Frasers Centrepoint Trust Buy 1.835 2.07
Stock Picks – Small /Mid Cap
Rec’n Price ($)
2 Oct
Target Price
($)
Ezion Holdings Buy 2.230 3.10
Goodpack Buy 1.695 2.00
CSE Global Buy 0.880 1.07
Mapletree Commercial Trust Buy 1.240 1.35
CDL Hospitality Trust Buy 1.620 1.80
Source: Bloomberg Finance L.P., DBS Vickers
Singapore
Wired Daily
Page 2
Related industries such as airports, maintenance, repair and
overhaul (MRO) and ground handling companies should also
benefit. We believe investors should BUY ST Engineering (TP
S$4.80) over SIA Engineering (HOLD, TP S$5.10) among the
MRO players that will benefit from strong ASEAN travel
demand. SATS is a HOLD (TP S$3.29) as it is mainly
dependent on Full Service Carrier business.
Cordlife Group has proposed a private placement of 26.8m
shares that is expected to raise gross proceeds of $33.5m.
Cordlife intends to offer 17.8m shares at $1.25 each via
placement agent while the remaining 9.038m shares will be
taken up by Caerus Capital and four other investors via
subscription agreements. The issue price of $1.25 represents
a discount of 4.8% to the last volume-weighted average
price. Of the net proceeds, $23.5m will fund its expansion
plans abroad, including investments, joint ventures,
acquisitions or strategic alliances, while the rest will be used
for general working capital purposes.
Artivision Technologies expects to raise net proceeds of
$4.27m from its proposed placement of 35.7m new shares at
12.222 Singapore cents each. This price is a discount of 10%
from the last volume-weighted average price. Artivision
intends to use up to $3.5m of the net proceeds to settle
unpaid construction costs for the Thai factory of Colibri
Assembly Thailand Co (CAT). The rest of the proceeds will be
used for working capital requirements.
RH Petrogas is proposing to place up to 116m new shares at
a placement price of S$0.63 for each share. The Placement
Price represents a discount of approximately 9.47% to the
last weighted average price. The estimated net proceeds will
be approximately S$70.2m, and will be mainly used to fund
the operating expenditure and capital expenditure in relation
to exploration, development or production activities.
Vallianz Holdings, an integrated offshore marine solutions
provider in the offshore oil and gas industry, has entered into
a subscription agreement with Rawabi, a leading Saudi
Arabian oil and gas service company, and an option
agreement with Swiber. Under the subscription agreement,
Rawabi will subscribe for redeemable convertible capital
securities issued by Vallianz for a principal amount of
US$35.2m. Under the option agreement, Swiber will be
issued an aggregate of 500,000,000 non-transferable share
options, which could raise gross proceeds of S$27.5m,
assuming that all options are exercised. Recently in October
2013, Vallianz’s order book was boosted to US$334.0m.
Singapore's purchasing managers' index (PMI) pointed to a
further slowdown in new export orders, echoing the lessthan-
stellar manufacturing data from the region earlier this
week. September’s reading of 50.5 is unchanged from
August's reading, but fell short of the market's consensus
forecast for a reading of 51.2. The stagnation of Singapore's
overall PMI stood in contrast to signs of improvement across
Asia. Most of the region's economies reported PMIs above
the 50-point threshold which suggests expansion, except for
South Korea and India, whose PMIs inched closer to the 50-
point line but still pointed to contraction. Singapore's new
exports also showed a slower pace of growth, whereas key
Asian exporters such as China and Taiwan's new exports
picked up steam, while Korea's shrank at a slower pace.
In a sign of Singapore's growing attractiveness as a listing
venue for early-stage mineral, oil and gas firms, Australian
upstream oil and gas company Linc Energy revealed plans to
move its listing from Australia to Singapore. It also intends to
offer shares to new investors together with the listing on the
Singapore Exchange (SGX) mainboard. Linc produces oil in
the US, and owns undeveloped coal and shale resources in
Australia. It also possesses unique underground coal
gasification (UCG) technology.
US stocks fell as the government shutdown entered a second
day but managed to par losses after Obama summoned
Congress leaders for the first high level talks on reopening
the US government and raising the debt ceiling. According to
Bloomberg median estimates of economists, a partial
shutdown lasting a week will probably cut 0.1% pt from
economic growth with costs accelerating if it continues.
Meanwhile, the ADP employment change for September
came in weaker-than-expected (actual 166k, consensus
180k).
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