OCBC Report 28 Apr 14

CapitaLand Limited: Focused on marketing SG home inventory
CapitaLand (CAPL) reported 1Q14 PATMI of S$182.8m, down 1.7% YoY mostly due to the absence of a one-time S$58.7m divestment gain in 1Q13. 1Q14 PATMI now constitutes 20.8% of our full year forecast and we judge 1Q performance to be mostly in line with expectations. An anemic 34 residential units were sold in Singapore over 1Q14, down significantly YoY from the 544 units sold in 1Q13, due to continued headwinds in the domestic housing segment and a lack of new launches over the quarter. We expect the run-rate to pick up ahead, however, as the group pushes to sell remaining inventory by adjusting prices at slower projects. Management reports that newly operational assets, Raffles City Chengdu and Raffles City Ningbo, are gaining good traction. The retail components for both assets are already 98% and 92% committed, respectively, with tenant sales and shopper traffic showing firm double-digits YoY growth. Maintain BUY with an unchanged FV estimate of S$3.79. (Eli Lee)

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Sheng Siong Group: Plans ahead
During Sheng Siong Group’s (SSG) 1Q14 results briefing, management shared updates on growth strategies and business operations. Measures to grow bottom line are: 1) renovation of three stores in FY14, and 2) actively increasing the proportion of goods sold from direct sourcing (currently 55%), which will translate into improved GP margins that are sustainable. In SSG’s usual fashion of prudence, management updated it is in talks for new stores, but would not hesitate to walk away if the price is deemed too high. Finally, the pilot phase in e-commerce has expanded to other areas with a larger base of customers. We think that if this is executed well it will make up for the challenges in opening new stores. Maintain BUY with fair value estimate of S$0.68. (Yap Kim Leng)

CapitaRetail China Trust: Boost from Grand Canyon
CapitaRetail China Trust (CRCT) reported 1Q14 DPU of 2.40 S cents, up 3.9% YoY.
The improved performance was due to contributions from newly-acquired Grand Canyon and higher rentals from existing malls. We note that the asset enhancement works for CapitaMall Minzhongleyuan is near completion, and that ~90.0% of the mall’s total NLA has been secured or in advanced negotiations for leasing commitments. With the mall’s scheduled reopening in 2Q14, we expect it to provide additional rental uplift to CRCT’s earnings. CRCT is currently the top performer in the S-REITs sector, clocking a 13.2% gain YTD. At its present level, we believe that CRCT is justly valued, with limited upside over the near term. As such, we downgrade CRCT to HOLD from Buy. Our fair value is revised marginally from S$1.54 to S$1.55. (Kevin Tan)

CDL Hospitality Trusts: Encouraging 1Q14 results
CDL Hospitality Trusts (CDLHT) reported a 2.2% YoY growth in 1Q14 DPU to 2.75 S cents, ahead of our expectations. Over the quarter, CDLHT witnessed RevPAR growth for both its Maldives and Singapore assets. However, we note that the operating environment in Singapore remains competitive amid a restrained corporate travel budget and larger supply of new hotel rooms, as evidenced by a slight 0.5% decline in average daily rate. For the first 23 days of Apr, we understand that RevPAR for its Singapore hotels eased 1.2%. The Australia hotels, which saw reduced contribution in 1Q as a result of a weaker AUD and lower full-year variable income, may also continue to be impacted by the slower Australia economy and lower activity in the mining sector. However, as we factor in the better-than-expected results, our fair value is now raised to S$1.80 from S$1.65. Maintain HOLD. (Kevin Tan)
Raffles Medical Group: 1Q14 results within our expectations

Summary: Raffles Medical Group (RMG) reported its 1Q14 results this morning, with both revenue and PATMI increasing by 8.0% YoY to S$87.6m and S$14.6m, such that topline and bottomline formed 23.0% and 21.4% of our FY14 forecasts, respectively. This is within our expectations as 1Q is seasonally RMG’s weakest quarter. On a segmental basis, revenue for RMG’s Healthcare Services and Hospital Services segments grew 14.3% and 4.8% YoY, respectively. This was driven by higher patient loads, increased volume of healthcare insurance services and the addition of more specialist consultants. Pending an analyst briefing later, our BUY rating and S$3.68 fair value estimate is under review. (Wong Teck Ching Andy)


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NEWS HEADLINES

- US stocks slumped Fri, hit by renewed tensions between Russia and Ukraine as well as a batch of disappointing results.

- Singapore's 1Q14 GDP estimates look set to be upgraded, after the manufacturing sector grew by a surprising 12.1% in Mar from a year ago.

- The labour market in Singapore will remain tight until 2020 - and become even tighter for a full decade after that, labour chief Lim Swee Say said.

- Australian food company Goodman Fielder said it had received a takeover offer proposal from Wilmar International Limited and First Pacific Company Limited, but said the offer undervalued the company.