OCBC Report 13 Mar 14

KEY IDEA Venture Corp: A golden goose for dividends Venture Corp (VMS) managed to deliver continued sequential improvement in its quarterly results for FY13. We believe this reflects the recovery momentum of the global economy and consequently VMS’s operations, although FY13 revenue and PATMI still came in 2.4% and 6.1% lower than FY12, respectively. Given VMS’s strong balance sheet and our free cashflows/share forecast, we believe its FY13 S$0.50 DPS remains a sustainable baseline scenario. Looking ahead, although we continue to expect FY14 to be a recovery year for VMS, we conservatively trim our revenue forecast by 3.7% as there are still pockets of uncertainty in the global economy. Coupled with a higher effective tax rate assumption, our FY14 PATMI projection is lowered by 6.0%. Maintain BUY on VMS, albeit with a reduced fair value estimate of S$7.98 (previously S$8.50), pegged to 15x FY14F EPS. (Wong Teck Ching Andy)     MORE REPORTS Vard Holdings: More orders secured Vard Holdings Limited (VARD) continued its order wins momentum, announcing that it has secured contracts with an undisclosed customer for the construction of two offshore support vessels worth close to NOK600m in total. The vessels are scheduled for delivery in 3Q15 and 4Q15 from one of its yards in Norway. This follows up from its recent announcement on 11 Mar that it had entered into a Letter of Intent (LOI) with Solstad Offshore for the design and construction of a large Offshore Subsea Construction Vessel (OSCV), which is VARD’s largest single vessel order in its history. We estimate that VARD has already clinched ~NOK4.45b of orders YTD. For now, we have a HOLDrating and S$0.84 fair value estimate on VARD. (Wong Teck Ching Andy) First REIT: Proposed acquisition in West Java, Indonesia First REIT (FREIT) announced that it has entered into a conditional sale and purchase agreement for the acquisition of Siloam Hospitals Purwakarta (SHPW), which is located in West Java, Indonesia. The purchase consideration is S$31.0m, which represents a discount of 17.3% to the average of two independent valuations obtained. SHPW is currently undergoing major refurbishment works, which is expected to be fully completed in Sep 2014. The initial NPI yield of this acquisition works out to be 10.8%, which is slightly higher than that of its recent Indonesian acquisitions (~10%). FREIT will finance this acquisition mainly with debt (S$26.5m), with the remaining S$4.5m to be funded by the issuance of new units. Based on a pro forma basis, this acquisition would have increased FREIT’s FY13 DPU marginally from 7.52 S cents to 7.54 S cents (assuming an illustrative issuance price of S$1.0431/unit). We maintain our BUY rating on FREIT but our S$1.19 fair value estimate is under review. (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks finished little changed on Wed after erasing early losses that followed a selloff in Asian and European equities. - A new wave of iconic integrated mixed-development projects coming up, with total development value of over $15b, are set to enhance Singapore's luxury residential landscape. - TT International was finally ready to unveil details of its flagship retail store Big Box at Jurong East. - STATS ChipPAC yesterday unveiled a new manufacturing process which it hopes will reduce costs by 15% to 30% for some of its customers. - SGX has raised the red flag on recent trading activities in the shares of two companies, namely Giken Sakata and Ziwo Holdings. - Metax Engineering Corporation's subsidiaries have been awarded a total of about S$33m worth of palm oil bio-refining and bio-energy engineering projects in Malaysia and Thailand.