Wednesday, March 19, 2014

DBS Report 20 Mar 14

Today’s Focus
􀂃 OSIM - Buy for 3-pronged growth, target price raised to
S$3.08.
STI’s rebound thus far this week has been capped at the 3100
level. Sentiment is likely to stay muted today after the FED
said QE3 could end by this fall and benchmark interest rates
could rise 6 months later from that. US 10-year treasury yields
rebounded while the USD strengthened against major
currencies. Last week’s low point for the STI was at 3060. We
do not rule out the index heading to 3050 followed by 3020
that is still within the 3000-3050 support range we
highlighted earlier, should the 3060 level fail to hold.
We find OSIM’s current business model to be robust and
capable of supporting growth into the future. OSIM’s threepronged
growth model comprises: i) Massage chairs driving
growth through new products; ii) TWG supplementing
growth with rapid store network expansion; and iii) GNC
providing resilient earnings and cashflows to the Group.
These factors, complemented by the scaling up of OSIM’s
presence in China, is more than capable of supporting
sustainable earnings growth going forward. OSIM’s soon-tobe
launched new version of the uAngel chair is set to build on
preceding model’s success while TWG’s rapid expansion is
expected to positively impact earnings growth. We expect
minimal EPS dilution of 1%/6% for FY14F/FY15F from
convertible bonds (CB) conversion. Maintain BUY, target price
raised to S$3.08 (Prev S$ 2.64) as we raise our PE multiple to
18x on stronger business model.
Goodpack announced that it has been approached by parties
for a possible transaction, which may or may not trigger a
general offer. Discussions are still on-going. The Company
has appointed Rippledot Capital Advisers Pte Ltd as its
financial advisor. Company decided to make public about the
development in view of the outperfomance of share price
lately. The last time company received such offer was back in
2008/2009 though eventually the deal was called off as both
parties could not come to an agreement on the offer price.
US Indices Last Close Pts Chg % Chg
Dow Jones 􀀙 16,222.2 (114.0) (0.7)
S&P 􀀙 1,860.8 (11.5) (0.6)
NASDAQ 􀀙 4,307.6 (25.7) (0.6)
Regional Indices
ST Index 􀀙 3,080.8 (13.1) (0.4)
ST Small Cap 􀀙 536.2 (2.6) (0.5)
Hang Seng 􀀙 21,568.7 (14.8) (0.1)
HSCEI 􀀘 9,360.7 18.4 0.2
HSCCI 􀀘 4,005.3 12.3 0.3
KLCI 􀀙 1,817.4 (3.3) (0.2)
SET 􀀙 1,364.3 (8.8) (0.6)
JCI 􀀘 4,821.5 15.8 0.3
PCOMP 􀀙 6,462.5 (4.1) (0.1)
KOSPI 􀀙 1,937.7 (2.5) (0.1)
TWSE 􀀙 8,689.5 (42.5) (0.5)
Nikkei 􀀘 14,462.5 51.3 0.4
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 576
Total Daily Vol (m shrs) 2,506
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
19 Mar
Target Price
(S$)
ComfortDelgro Buy 1.925 2.19
Global Logistic Properties Buy 2.64 3.31
Keppel Corp Buy 10.52 12.60
Yangzijiang Buy 1.065 1.45
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
19 Mar
Target Price
($)
Ezion Holdings Buy 2.13 3.26
Goodpack Buy 2.23 2.25
China Merchants Buy 0.965 1.32
Pacific Radiance Ltd Buy 0.995 1.20
Nam Cheong Buy 0.315 0.43
Source: Bloomberg Finance L.P., DBS Bank
Singapore
Wired Daily
Page 2
Stahill Global REIT announced that it has divested one
Japanese retail asset, Holon L Property, for JPY1.03bn
(S$12.8m), a 6% premium to the Dec-13 independent
valuation of JPY 0.97bn. This translates to an exit yield of
4.03% (or 4.27% over valuation). This property represents
11.5% of SGREIT's Japanese portfolio, or 0.4% of the
REIT's total asset value. The proceeds from this transaction
will be used to fully pay down its JPY1.5bn bond due
2016. Total JPY loans post divestment will be c.7.5bn, and
SGREIT's gearing will fall marginally to 28.7% from 30%.
CapitaLand has sold its remaining 39.1% stake in
Australand Property Group, reaping an expected net gain
of about $35.7m. CapitaLand sold its remaining 226.2m
shares through a secondary placement yesterday at an
average price of A$3.75 each, 3.6% below Australand's
Tuesday closing price but 5.3% above its last reported net
tangible asset. CapitaLand said it will receive about
$970.1m from the sale, which it will deploy towards its key
markets of Singapore and China, and for general working
purposes, including the repayment of debt.
Global Logistic Properties has signed a lease agreement of
approximately 53,000 sqm (570,000 sq ft) with a leading
FMCG company at GLP Park Hefei Hi-Tech in Hefei, Anhui
Province, Midwestern China. With this agreement, GLP
Park Hefei Hi-Tech is 100% leased.
Otto Marine has secured charter contracts for its Multiple
Purposes offshore Supply Vessel (MPSV), Go Explorer, for a
total of US$21m. Go Explorer will initially be deployed to
work in Vietnam follow by Australia working on a major
offshore construction project based on the various
contractual arrangements.
HG Metal Manufacturing announced that Mr Goh Kian
Sin, the Managing Director and Chief Executive Officer of
the Company, has entered into agreement for the sale of
284.05m shares to purchasers including, Mr Yap Xi Ming,
the Chairman of the Company.
Forecasters polled by Singapore's central bank expect the
economy to expand by 3.8% in 2014 - a less optimistic
outlook compared to 3.9% growth three months ago. The
slip was due to softer growth expectations for all sectors
within the economy, except for the manufacturing sector.
Our economist is expecting 4% GDP growth for 2014.
Premium and Grade A office rents in Raffles Place and New
Downtown continue to climb in the first quarter, according
to Colliers International. The quarter also saw office
vacancies shrinking and firms taking a proactive approach
to review expansion and relocation options to lock in rents
before they rise further. Colliers International said that the
average monthly gross rent for Premium Grade offices in
the Raffles Place/New Downtown area rose 3.6% quarter
on quarter to $10.67 psf in the first quarter of this year,
hot on the heels of a 3.8% hike in the fourth quarter of
last year. The property consultancy group forecasts a fullyear
2014 increase of up to 15%. As for Grade A space in
the same Raffles Place/New Downtown micro-market, the
average monthly rent rose 5% quarter on quarter to $9.73
psf in Q1 - a much bigger increase than the 1.4% increase
in Q4 2013. Suburban Grade A rents rose 5.7% to $4.85
psf in Q1, after inching up 0.4% in Q4.
U.S. stocks fell after Federal Reserve Chair Janet Yellen said
the central bank’s stimulus program could end this fall and
benchmark interest rates could rise 6 months later. As
expected, the FED trimmed its monthly bond purchases by
US$10bil to US$55bil. The central bank said it will look at a
wide range of data in determining when to raise its rate,
dropping a pledge tying borrowing costs to a 6.5 percent
unemployment rate.
But investors’ attention turned to the following FED
statement that said officials predicted their target interest
rate would be 1% at the end of 2015 and 2.25% a year
later, as they upgraded projections for gains in the labour
market. The rates are higher than previously forecasted.
Financial markets reacted with the US 10-year treasury
yields rebounding to 2.7725%. The USD strengthened
against major currencies with the USD Index rising to 80
from 79.4. Equities sold off with Walt Disney Co., General
Electric Co. and Boeing Co. losing at least 1.4% each to
lead the Dow lower.

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