OCBC Report 18 Mar 14

MARKET PULSE: SingTel, Midas, CapLand, Suntec REIT

19 Mar 2014

KEY IDEA SingTel – Secures 2014 World Cup on exclusive basis SingTel has recently won the 2014 FIFA World Cup Brazil broadcast rights on an exclusive basis, meaning it will have to cross carry the content of the month-long tournament with rival StarHub. The standalone pricing for the World Cup 2014 will be S$105 (before GST) for both mio TV and StarHub customers. But SingTel will offer the World Cup for free to customers who either sign up or recontract with mio TV for mio Stadium+ or Gold Pack packages (with a two-year lock-in period). We understand that StarHub customers with existing BPL contracts are also eligible for the free offer if they extend their contracts. In any case, we do not expect the event to have much of an impact on SingTel’s FY14 performance. For now, we continue to maintain our BUY rating on the stock with an unchanged fair value of S$3.74. (Carey Wong) MORE REPORTS Midas Holdings: Secures metro contracts worth CNY71.9m Midas Holdings (Midas) announced last evening that it has secured two metro contracts in China from CNR Changchun Railway Vehicles totalling CNY71.9m. The first contract is valued at CNY47.2m and involves the supply of aluminium alloy extrusion profiles for 38 train sets (or 228 train cars) for the Shenzhen Metro Lines 2 and 5 projects, with delivery scheduled between 2014 and 2015. The second contract is worth CNY24.7m and entails the supply of aluminium alloy extrusion profiles for 24 train sets (or 144 train cars) for the Wuhan Metro Line 4 project, with delivery slated in 2014. This is Midas’ first announced contract win of the year, and we believe the group is still in a strong position to clinch high-speed railway contracts from China CNR worth an estimated CNY325-380m in the coming weeks. We retain our forecasts as we have assumed such contract wins in our model. Reiterate BUY and S$0.66 fair value estimate on Midas, pegged to 1.3x FY14F P/B. (Wong Teck Ching Andy) CapitaLand Limited: Divests remaining stake in Australand CapitaLand announced this morning that it has placed out its remaining 39.1% stake in Australand at an average price of A$3.75 per share, which represents a 3.6% discount from its last traded price and a 5.3% premium from last reported NTA. The sale will raise total proceeds of S$970.1m and result in a net gain of S$35.7m. The group noted that it conducted a partial sale in Nov-13 to improve trading liquidity, which subsequently provided an opportunity for the group to sell its remaining AustraLand stake at a more favorable valuation closer in line with that of peers. We have a favorable view on this action and believe that the market will likely take this positively as well, given the possibility of a special dividend from the sale proceeds later this year. Strategically, this divestment will further simplify the group’s structure and enable management to recycle capital into key markets - Singapore and China. The sale is estimated to further boost the group’s cash holdings to approximately S$6.9b and reduce gearing to about 29%. Maintain BUY on CAPL with an unchanged fair value estimate of S$3.50. (Eli Lee) Suntec REIT: Launch of private placement Suntec REIT announced this morning that it will be issuing 218.1m new units at S$1.605 apiece following the close of the private placement. The issue price is nearer to the upper range of S$1.575-S$1.615 per unit proposed during the launch of the placement yesterday, and represents a discount of 4.7% to the VWAP. We expect the unit base to increase by 10.5% following the issue of new units (expected 27 Mar). ~S$341.4m in net proceeds is expected to be raised, after deducting the expenses relating to the equity fund raising. Management intends to use the proceeds to repay its existing debt, which is likely to reduce its debt burden and aggregate leverage from 39.1% as at 31 Dec 2013 to 35.0%. In connection with the placement, Suntec REIT also intends to make an advanced distribution of ~2.096 S cents/unit for the period from 1 Jan to 26 Mar 2014 (being the day prior to the issue of new units). We are maintaining our BUY rating on Suntec REIT but now place our fair value of S$1.90 under review. (Kevin Tan)