OCBC Report 25 Oct 13

KEY IDEA Suntec REIT: Poised for strong harvest Suntec REIT posted 3Q13 DPU of 2.289 S cents, up 1.8% QoQ (-2.6% YoY). This brings the 9M13 DPU to 6.766 S cents (-5.6%), meeting 73.4% of both consensus and our FY13F DPU. As at 30 Sep, both the office and retail portfolio occupancy rates were maintained at high levels of 99.8% and 98.3%, respectively. We understand that ~160,000 sqft of leases was signed in 3Q, leaving only a balance of 1.7% of office NLA due for renewal in 2013. As such, its portfolio performance is expected to stay relatively steady, despite potential weakness in 4Q13/1Q14 as Suntec REIT prepares for Phase 3 AEI. Management also updated that pre-commitment at Phase 2 retail space has improved from 70.1% in 2Q to 83.7%. While there are a few anchor tenants (which may command lower rents), Suntec REIT reiterated that ROI of 10.1% remains on track. In 4Q, we can reasonably expect revaluation gains of the portfolio assets, which may improve Suntec REIT’s gearing and P/B ratios (currently at 37.2% and 0.84x respectively). Maintain BUYwith higher fair value of S$1.85 (S$1.80 previously) as we roll our valuation to FY14. (Kevin Tan) MORE REPORTS Tiger Airways: Growing pains to sustain We were disappointed by Tigerair’s (TR) 2QFY14 results, which showed a larger operating loss (S$12.8m vs. S$11.5m in 2Q13) due to higher operating costs. Performance by its associate airlines during the quarter was also weak with overall losses at almost S$24m (S$26.6m in 1Q14; S$3.8m in 2Q13), and that lead to an erosion of gains from the disposal of 60% interest in Tigerair Australia. Although there were some seasonality factors at play, the lack of demand traction and competitive fare pressures force us to temper our earlier optimism over TR’s performance for FY14/15. Lowering our FY14/15 net profit projections considerably to account for the growing pains of its associate airlines and the likelihood of depressed passenger yields for Tigerair Singapore in the near-term, we downgrade TR to HOLDwith a reduced fair value estimate of S$0.55 (S$0.79 previously). (Lim Siyi) Triyards Holdings: Proposes maiden dividend Triyards Holdings (Triyards) reported a 6.5% YoY drop in revenue to US$76.7m and a 32.2% decrease in net profit to US$10.3m in 4QFY13, bringing FY13 revenue and net profit to US$275.1m and US$31.4m, respectively. Though results were good, the market is likely to focus on new orders. It has been about ten months since the group secured its last SEU order, and the lack of new contracts so far has been a key factor that has weighed on the share price, in our view. The group’s net order book of US$217m will provide work for FY14, but more work has to be secured to keep its yards busy beyond that. Rolling forward our valuation to blended FY14/15F earnings with a lower P/E of 7x (prev 8x) due to the lack of orders so far, our fair value estimate dips from S$1.07 to S$0.88. Maintain BUY. Meanwhile, the group has proposed a final dividend of S$0.02/share, translating to a 3.1% dividend yield. (Low Pei Han) Ascott Residence Trust: 3Q13 results ahead ART has announced 3Q13 results that were ahead of ours and the street’s expectations. Revenue climbed 11% YoY to S$86.1m, chiefly due to additional revenue of S$14.1m from the properties acquired in second half last year and on 28 June 2013. The increase was partially offset by the decrease in revenue of S$4.7m from the divestment of Somerset Grand Cairnhill in September 2012 and lower contribution of S$0.7m from the existing properties, mainly properties in Philippines and Japan. The group achieved a REVPAU of S$133 in 3Q 2013, a decrease of 10% as compared to 3Q 2012. The decrease in REVPAU was mainly due to divestment of Somerset Grand Cairnhill Singapore and weaker performance from Philippines and Japan. Gross profit climbed 10% YoY to S$44.8m. Unitholder’s distribution increased 17% YoY to S$30.0m. DPU rose 6% YoY to 2.37 S cents, bringing 9M13 DPU to 7.07 S cents, versus full year estimates by us and the street of 8.9 S cents and 9.0 S cents respectively. We maintain our BUYrating on ART but place out FV of S$1.37 under review. (Sarah Ong)

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NEWS HEADLINES - US stocks climbed on Thu, as equities picked up steam along with large-cap companies on signs of an improving global economy. - The total debt servicing ratio framework appears to have made a bigger dent on purchases of private homes by those with HDB addresses than by those with private addresses, according to consulting group DTZ. - Mapletree Commercial Trust's DPU rose to 1.801 S cents in 2QFY14, up 16.5% from a year earlier, thanks to positive contributions from its properties. - Far East Hospitality Management will launch three Singapore hotels over the next three months. - Stamford Tyres has appointed a dealer for Sumo Firenza tyres in the United Arab Emirates to expand its presence in the Middle East.