TigerAir

OCBC on 25 Oct 2013

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 HOLD with a reduced fair value estimate of S$0.55 (S$0.79 previously).

Disappointing 2Q14 results
Tigerair’s (TR) 2QFY14 revenue fell 16.7% YoY to S$163.8m due to the exclusion of Tigerair Australia (TRA), which had been deconsolidated as of Jul. Nonetheless, despite the 13.8% YoY increase in revenue by Tigerair Singapore (TRS) to S$151.3m, higher unit costs and service charges resulted in lower passenger yields and a widening of operating losses to S$12.8m from -S$11.5m in 2Q13. Losses from TR’s associate airlines also continued, clocking in at almost S$24m for the quarter (-S$26.6m in 1Q14; -S$3.8m in 2Q13). Only with the one-off gain from TRA’s disposal did TR record a net profit of S$23.8m. 

More time needed to grow the cubs
We admit that our initial optimism for TR’s associate airlines over the past year was premature. TR’s three associate airlines – Tigerair Philippines (TRP), Tigerair Mandala (TRM) and TRA – still face operational challenges (i.e. lack of demand traction, competitive fare pressures and the absorption of additional capacity) that show little signs of abating. For instance, losses for TRP widened in 2Q14 to S$7.7m despite narrowing losses for the previous three quarters (-S$8.3m in 3Q13; -S$7.m in 4Q13; -S$6.0m in 1Q14). While TR will continue to introduce new routes, we expect pick-up rates to be slow and passenger load factors (PLFs) to stay depressed. 

Forecasts reduced; downgrade to HOLD
That said, we lower our FY14/15 net profit projections considerably to account for the growing pains, leaving us with only a smaller overall profit for both years. In the interim, 3QFY14’s seasonal uptick in traffic volume is likely to be negated by capacity expansion (lower PLFs), and fares could remain under pressure due to promotional fares from competitors – even premium carriers – with higher unit costs lowering yields on a YoY basis. Applying a P/B multiple of 1.1x, we lower our fair value estimate to S$0.55 (S$0.79 previously). Downgrade TR to HOLD.

Suntec REIT

OCBC on 24 Oct 2013

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 BUY with higher fair value of S$1.85 (S$1.80 previously) as we roll our valuation to FY14.

Firm recovery as expected
Suntec REIT posted an encouraging set of 3Q13 results last evening. As we have previously expected, NPI saw a strong recovery of 44.0% QoQ (+4.7% YoY) to S$40.3m following the opening of Phase 1 retail space and Suntec Singapore post enhancement works. Distributable income was also lifted up by 10.0% QoQ (-10.4% YoY) to S$47.3m. As a result, a smaller capital distribution of S$4.5m (S$7.8m in 2Q) from CHIJMES sales proceeds was needed to mitigate the dip in distribution payout. This led to a DPU of 2.289 S cents, up 1.8% QoQ (-2.6% YoY). Consequently, 9M13 DPU amounted to 6.766 S cents (-5.6%), meeting 73.4% of both consensus and our FY13F DPU.

Positive portfolio performance
The retail segment contributed 34% of gross revenue, marking a rise from 2Q level of 28%. However, on a YoY basis, retail revenue was still down 30.1% due to Phase 2 asset enhancement initiatives (AEI) at Suntec City Mall. Suntec Singapore was the top performer in 3Q, raking up 125.3% growth to S$16.5m. In addition, the office segment continued to perform, delivering a growth of 4.1% YoY on the back of positive rental reversions. 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. At Suntec City office, average signing rent also improved from S$8.42 psf pm to S$8.55. As at 30 Sep, both the office and retail portfolio occupancy rates were maintained at high levels of 99.8% and 98.3%, respectively. 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.

Maintain BUY
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 BUY with higher fair value of S$1.85 (S$1.80 previously) as we roll our valuation to FY14.

Cache Logistics Trust

OCBC on 24 Oct 2013

Cache Logistics Trust (CACHE) reported 9M13 DPU of 6.507 S cents, up 4.8%. This forms 76.2% and 74.8% of our and consensus FY13 DPU projections, respectively. Based on the last closing price, annualised DPU yield was ~7.3%. As at 30 Sep, the portfolio assets remained fully leased with only 3% of the leases due to expire in 2014. Financial position also remains solid, with aggregate leverage holding steady QoQ at 29.2% and all-in financing costs improving to 3.45% from 3.48% in 2Q. Looking ahead, CACHE reiterated that it will continue pursuing yield-accretive acquisitions as well as organic growth opportunities in both asset enhancement initiatives and built-to-suit projects. Maintain BUY with unchanged fair value of S$1.30 on CACHE.

In-line 3Q13 results
Cache Logistics Trust (CACHE) reported 3Q13 NPI of S$19.6m and distributable income of S$16.5m, up 8.5% and 9.6% YoY respectively. The stronger performance was mainly attributable to additional rental income from upward rental adjustments and acquisitions of investment properties over the year. DPU for the quarter came in at 2.126 S cents, down marginally by 0.8% YoY as a result of enlarged unit base. For 9M13, NPI grew by 12.5% to S$50.9m, while distributable income rose by 15.7% to S$48.9m. 9M13 DPU amounted to 6.507 S cents, up 4.8%. This forms 76.2% and 74.8% of our and consensus FY13 DPU projections, respectively. Based on the last closing price, annualised DPU yield was ~7.3%.

Strong financial standing
As at 30 Sep, the portfolio assets remained fully leased with only 3% of the leases due to expire in 2014. Weighted average lease to expiry stood at 3.4 years, largely stable from 3.6 years seen a quarter ago. Financial position also remains solid, with aggregate leverage holding steady QoQ at 29.2% and all-in financing costs improving to 3.45% from 3.48% in 2Q. We note that management has been prudent on the capital management front, guiding a comfortable gearing level of 30%-40%. No debt refinancing is required until 2015, while 70.0% of its total borrowings are hedged into fixed rates. This would give CACHE considerable certainty over its financing costs, in our view.

Maintain BUY
Looking ahead, CACHE reiterated that it will continue to pursue yield-accretive acquisitions as well as organic growth opportunities in both asset enhancement initiatives and built-to-suit projects. Management pointed out three key markets, namely Singapore, China and Malaysia, for acquisitions. While nothing has materialized so far, this seems to gel well with our view as per our Aug report that CACHE may possibly looking to acquire a warehouse facility in Shanghai, China. Maintain BUY with unchanged fair value of S$1.30 on CACHE.

Frasers Commercial Trust

OCBC on 24 Oct 2013

Frasers Commercial Trust (FCOT) reported 4QFY13 DPU of 2.08 S cents, up 18.9% YoY. This brings the full-year DPU to 7.83 S cents (+17.0%), largely in line with both consensus and our DPU forecasts of 7.9 S cents. The direct management and rejuvenation works at China Square Central has proven to be a great success, as it saw a robust YoY growth in NPI of 26.8% amid higher rental and occupancy rates. Portfolio occupancy has also remained healthy at 97.9%, with positive rental reversions ranging from 4.4% to 23.2% also recorded. Looking ahead, we maintain our view that FCOT will continue to perform as its transformation initiatives over the past year are likely to underpin growth. Maintain BUY with unchanged fair value of S$1.45 on FCOT.

No surprises in 4QFY13
Frasers Commercial Trust (FCOT) released its 4QFY13 results last evening. NPI fell by 17.4% YoY to S$21.9m due mainly to continued weakness in AUD and divestments of KeyPoint and Japan properties. However, the decline in NPI was more than offset by realized gains from currency hedges, lower interest costs and savings in the Series A convertible perpetual preferred unit (CPPU) distribution following the net conversion/redemption of the CPPUs. As a result, distributable income to unitholders jumped 20.9% to S$13.7m. DPU for the quarter came in at 2.08 S cents, up 18.9% YoY. This brings the full-year DPU to 7.83 S cents (+17.0%), largely in line with both consensus and our DPU forecasts of 7.9 S cents.

Robust underlying performance
The direct management and rejuvenation works at China Square Central (CSC) has proven to be a great success, as it saw a robust YoY growth in NPI of 26.8% amid higher rental and occupancy rates. 55 Market Street also delivered 10.8% growth in NPI over the quarter. This helped to cushion the lower translated income from the Australia properties. We note that portfolio occupancy has remained healthy at 97.9%, compared to 98.1% a quarter ago. Positive rental reversions ranging from 4.4% to 23.2% were also recorded for the leases commenced in 4Q, demonstrating the resilience and quality of FCOT’s assets.

Maintain BUY
Looking ahead, we maintain our view that FCOT will continue to perform as its transformation initiatives over the past year are likely to underpin growth. We also understand that the Telok Ayer MRT station, which is just at the doorstep of CSC, is expected to open in Dec 2013. Coupled with the completion of enhancement initiatives around CSC, this is likely to boost its competitive position and growth potential. In addition, management noted that FCOT is receiving a net rent of S$1.80 psf pm at Alexandra Technopark, significantly lower than the underlying passing gross rent of S$3.50. As such, income uplift is expected upon the expiry of the master lease in Aug 2014. We maintain BUY with unchanged fair value of S$1.45 on FCOT.

CapitaMall Trust

OCBC on 24 Oct 2013

CapitaMall Trust’s (CMT) 3Q13 DPU came in at 2.56 S cents, up 5.8% YoY. This is in line with our expectations, as 9M13 DPU has met 75.1% of FY13 distribution forecast. Management noted that its tenants’ sales increased by 2.8% YoY for 9M13, while its shopper traffic grew by 4.0%. Positive rental reversion of 6.3% was also achieved for the 528 leases renewed over the period. CMT updated that it has received strong leasing at Bugis Junction, and over 95% of new retail space has been pre-committed for Phase 1 AEI. In addition, CMT announced a new AEI at Tampines Mall in 3Q, which is expected to start in 1Q14. As CMT looks set to meet our forecasts, we keep our projections intact. Maintain BUY and S$2.35 fair value on CMT.

3Q13 performance within view
CapitaMall Trust (CMT) turned in a firm set of 3Q13 results last evening. NPI grew by 12.9% YoY to S$126.5m, driven chiefly by The Atrium@Orchard following the completion of asset enhancement initiatives (AEI) in Oct 2012. All other malls, we note, also contributed positively during the quarter due to higher secured rentals, except for Bugis Junction which recorded lower contribution as a result of ongoing refurbishment works since Apr. While CMT had to pay a 9.31% premium on its outstanding convertible bonds due in Jul, it benefited from lower finance expenses and released S$8.5m taxable income retained in 1H13. This boosted the distributable income up by 9.7% to S$88.8m, and DPU up by 5.8% to 2.56 S cents. Hence, 9M13 DPU tallied 7.55 S cents, representing a robust growth of 6.3%. This is in line with our expectations, given that the DPU has met 75.1% of FY13 distribution forecast (consensus: 73.3%).

Steady operational metrics
Management noted that its tenants’ sales increased by 2.8% for 9M13, while its shopper traffic grew by 4.0%. Positive rental reversion of 6.3% was also achieved for the 528 leases renewed over the period, roughly consistent with growth of 6.4% attained in 1H. As at 30 Sep, portfolio occupancy stood at 99.5%, slightly higher than 99.1% level seen in 2Q. CMT updated that it has received strong leasing at Bugis Junction, and over 95% of new retail space has been pre-committed for Phase 1 AEI. With the refurbishment works on track for completion in 4Q (Phase 2 to commence in 1Q14), we expect CMT’s portfolio performance to remain sturdy.

New AEI at Tampines Mall
CMT also announced a new AEI at Tampines Mall in 3Q, gelling well with the lease expiry at the mall (23.3% by mall income). Enhancement works are expected to start in 1Q14, and involve increasing its NLA, reconfiguring its retail units and rejuvenating its facade. CMT guided a capex of S$36.0m and an ROI of 8.0% on the project. As CMT looks set to meet our forecasts, we keep our projections intact. Maintain BUY and S$2.35 fair value on CMT.

Yoma Strategic Holdings

OCBC on 24 Oct 2013

Yoma reported that it will operate Volkswagen’s first service center in Yangon, which is expected to begin operations in Oct 13. Yoma’s 70% owned subsidiary, German Car Industries Company will enter into a service partner agreement with Volkswagen Aktiengesellschaft (“VW”) to provide maintenance and repair services. We understand that the automotive market in Myanmar is currently dominated by Japanese vehicles and that VW has no manufacturing facilities or car show room in Myanmar. Therefore, this agreement is expected to have limited financial impact over the near term. That said, we see this deal further strengthening the growth potential of the group’s automotive division which, together with a similar service agreement with Mitsubishi earlier, is one that is steadily growing. The group is expected to report 2QFY14 results in early November and we anticipate a set of stronger numbers QoQ on the back of firmer contributions from sales in Zone B of Star City. Maintain HOLD. Our fair value estimate dips slightly to S$0.84, from S$0.87 earlier, as we update our valuation model to reflect higher risk-free and discount rates.

Service agreement with Volkswagen
Yoma reported that it will operate Volkswagen’s first service center in Yangon, which is expected to begin operations in Oct 2013. Yoma’s 70% owned subsidiary, German Car Industries Company will enter into a service partner agreement with Volkswagen Aktiengesellschaft (“VW”) to provide maintenance and repair services. We understand that the automotive market in Myanmar is currently dominated by Japanese vehicles and that VW has no manufacturing facilities or car show room in Myanmar. Therefore, this agreement is expected to have limited financial impact over the near term. That said, we see this deal further strengthening the growth potential of the group’s automotive division which, together with a similar service agreement with Mitsubishi earlier, is one that is steadily growing. 

Continues to show strong deal-making ability
To recap, Yoma has a similar agreement with Mitsubishi to operate its automotive after-sales service center in Yangon. In addition, the group also recently announced an MOU for Mitsubishi Corp. and Mitsubishi Estate to invest in the Landmark project (excluding the Peninsula Yangon), and that it would enter into a strategic alliance with Mitsubishi Corp. to jointly explore business opportunities in Myanmar. We see these as major positives which points to management’s continued deal-making ability and ambitions to grow as a major conglomerate. In our view, the alliance with the blue-chip Mitsubishi also further cements Yoma’s reputation as a solid name (note that Mitsubishi Estate and CapitaLand are partners in Singapore) and would likely widen its access to capital and business opportunities in Myanmar.

Maintain HOLD 
The group will report 2QFY14 results in early Nov and we anticipate a set of stronger numbers QoQ on the back of firmer contributions from sales in Zone B of Star City. Maintain HOLD. Our fair value estimate dips slightly to S$0.84, from S$0.87 earlier, as we update our valuation model to reflect higher risk-free and discount rates.

Sheng Siong

OCBC on 24 Oct 2013

Sheng Siong Group’s (SSG) 3Q13 results were in-line with our expectations as revenue grew modestly by 4.8% YoY to S$177.8m, gross and operating profit improved to S$41.2m and S$12.6m, respectively, despite higher operating expenses, and 3Q13’s net profit of S$10.6m was the highest for the group since 1Q12. Although the group has yet to add new stores for FY13 thus far, we are encouraged by management’s willingness to consider outright store location purchases, which will open up additional opportunities for the group to expand its presence. For the immediate 4Q13, we are unconcerned by the seasonal weakness, and we expect SSG to actively add stores by early FY14. Maintain BUY on SSG with an unchanged fair value estimate of S$0.78.

3Q13 results in-line with expectations
Sheng Siong Group’s (SSG) 3Q13 results met our expectations. Revenue grew modestly by 4.8% YoY to S$177.8m as full-year contributions from stores opened last year helped to offset lower same-store sales in areas affected by ongoing renovation works and older housing districts. Despite higher operating expenses related to wages and rental, gross and operating profit improved 6.1% and 5.7% YoY, respectively, to S$41.2m and S$12.6m, respectively. In fact, 3Q13’s net profit of S$10.6m was the highest for the group since 1Q12, which had included a one-time gain related to the sale of its Marsiling warehouse. 

Margin stability remains
Notwithstanding the lack of new stores for FY13 thus far, we are encouraged by the group’s ability to improve on its operating margins. Gross profit margin stayed at a healthy 23.2% - similar to 2Q13 (+0.3ppt YoY) – and operating profit improved to 7.1% (+0.1ppt YoY; +0.7ppt QoQ). We are hopeful that these improvements indicate that i) competition amongst the Big 3 supermarkets is manageable and that a tacit agreement not to escalate price competition remains, and ii) economies of scale from its Mandai distribution centre have yet to be exhausted and further margin enhancement should still materialize in the coming quarters. 

Seasonally weaker 4Q not a concern
4Q is traditionally the weakest quarter for SSG – due to subdued demand and the annual inventory stock count – but we do not expect the drop-off to be significant and we expect a similar showing with 4Q12’s in terms of margins. 

Maintain BUY on a quality company
Management’s willingness to consider outright store location purchases is a plus point (especially with their cash-rich balance sheet), and should create additional opportunities for the group. Factoring in new store additions by early FY14, we maintain BUY on SSG with an unchanged fair value estimate of S$0.78.

Nam Cheong

Maybank Kim Eng, Oct 23

WE initiate coverage on Nam Cheong with a "buy" rating and TP of S$0.37, pegged to 9 times PE on average FY13-15F EPS.

We see Nam Cheong benefiting from (1) a recovering Offshore Support Vessel (OSV) market, (2) OSV replacement cycle, (3) Petronas's Oil & Gas capex and (4) its foresight in reading the supply-demand dynamics of the sector.

We expect the company to deliver 16 per cent EPS CAGR over FY13-15F as vessels in its ramped-up newbuild programmes are readily absorbed by the market.

We expect the OSV ordering cycle to turn positive and, in our view, Nam Cheong possesses the right model to capitalise on this cyclical upswing.

By building vessels on a speculative basis, Nam Cheong will have available vessels ahead of shipyards which build only upon receiving orders. This model has also allowed Nam Cheong to charge premium prices and deliver higher-than-peer margins.

As the largest domestic OSV builder in Malaysia, Nam Cheong has established close ties with the country's leading OSV owners, which include Bumi Armada, Perdana Petroleum and Icon Offshore, who are Petronas-licensed operators.

Consequently, Nam Cheong stands to benefit indirectly from Petronas's RM300 billion (S$117.4 billion) capex spending plan over 2011-2015.

Nam Cheong has demonstrated a strong ability to read market demand with a track record of selling all pre-built vessels before delivery.

The 28 vessels to be built for 2014 is a big ramp-up over the 19 vessels for 2013 and it has already sold 57 per cent of the 2014 vessels.

Outstanding orderbook stands at RM1.7 billion. We forecast 2015 programme to be on a similar scale as 2014.

If it can maintain its track record of selling all vessels before they are delivered, we forecast record sales close to RM2.0 billion in FY14F.

At current share price, stock is trading at only 6.1x/6.6 times FY14F/15F PEs, inexpensive considering the robust growth prospects. We also see possibility of higher dividend payout in FY14F translating into a yield of about 5 per cent.

BUY

Oversea-Chinese Banking Corp

UOB KayHian, Oct 23

QE3 tapering expectations would have dampened loan growth and moderated fee income from market-sensitive sources in Q3-13.

However, we view the impact to be temporary as QE3 tapering is likely to be delayed.

We expect net profit to have expanded 15.2 per cent q-o-q to S$688 million for Q3-13 because of normalisation in contribution from Great Eastern. Target price at S$11.84.

BUY

CapitaRetail China Trust

OCBC on 23 Oct 2013

CRCT reported 3Q13 results that were in line with ours and the street’s expectations. Gross revenue climbed 2.2% YoY to S$39.5m. Property expenses rose 7.8% to S$14.5m, chiefly due to higher property management fees and staff related costs. Net property income fell 0.8% to S$25.0m. Total return for the period after tax stayed roughly flat at S$15.2m. 3Q13 distributable income grew 2.1% to S$17.1m. DPU, however, fell 6.6% to 2.26 S cents due to a private placement last Nov. Rental reversion for the multi-tenanted malls, excluding CapitaMall Minzhongleyuan (which is undergoing AEI), is healthy at 10.0%. Tweaking our forecasts, lowering the cost of equity and taking into account the ~6.0m new CRCT units which were allotted and issued in Sep under the Distribution Reinvestment Plan, we increase our FV to S$1.64 from S$1.58 and maintain a BUY rating on CRCT.

Gross revenue up 2% YoY 
CRCT reported 3Q13 results that were in line with ours and the street’s expectations. Gross revenue climbed 2.2% YoY to S$39.5m. Property expenses rose 7.8% to S$14.5m, chiefly due to higher property management fees and staff related costs. Net property income fell 0.8% to S$25.0m. Total return for the period after tax stayed roughly flat at S$15.2m. 3Q13 distributable income grew 2.1% to S$17.1m. DPU, however, fell 6.6% to 2.26 S cents due to a private placement last Nov. Excluding CapitaMall Minzhongleyuan (“MZLY”), which has been closed for asset enhancement since Jul, CRCT’s 3Q13 gross revenue and NPI grew by 5.3% and 1.7% respectively in RMB terms. 

Rental reversion at 10.0%
Tenant sales for the multi-tenanted malls, excluding MZLY, grew 10.1% YoY and 3.7% QoQ. Shopper traffic grew 3.4% YoY and 8.1% QoQ. Rental reversion for the multi-tenanted malls, excluding MZLY, was healthy at 10.0%. CapitaMall Wuhu was the only multi-tenanted mall, excluding MZLY, which registered negative rental reversion. The 1.2% decline was due to new tenants at level one which entered at lower rates. With new fashion tenants, CapitaMall Wangjing has seen its rent boosted, with rental reversion at 15.9%. 

Updates on MZLY and Grand Canyon Mall
For MZLY, over half of the space to be leased has been committed. The rents likely to be achieved are 15.8% higher than the targeted rent (excluding the anchor tenant). Some of the committed tenants include Swatch, Charles & Keith, Starbucks and UA Cinemas (with the only IMAX in the vicinity). An application has been submitted to the Chinese government for the proposed acquisition of Grand Canyon Mall. Approval should be received in 4Q13 and CRCT is on track to complete the acquisition in 1Q14. 

Maintain BUY 
Tweaking our forecasts, lowering the cost of equity and taking into account the ~6.0m new CRCT units which were allotted and issued in Sep under the Distribution Reinvestment Plan, we increase our FV to S$1.64 from S$1.58 and maintain a BUYrating on CRCT.

Frasers Centrepoint Trust

OCBC on 23 Oct 2013

Frasers Centrepoint Trust’s (FCT) FY13 DPU came in at 10.93 S cents (+9.2%), spot on with our DPU projection. We note that overall performance has remained robust, with portfolio occupancy maintained at a high 98.4%, while positive rental reversion of 10.8% was achieved. We also understand ~2% of retail space at YewTee Point is expected to start operations in Oct, which is likely to improve the mall’s occupancy. For Bedok Point, management also updated that it has successfully secured an electronics retailer as its anchor tenant for basement one. This may translate to a more stable performance at the mall. Looking forward, FCT reiterated CWP and Northpoint will continue to perform, as leases at the malls amounting to 75.5% of FCT’s gross rent are due for renewal and positive reversions are still expected. FCT also revealed that the strata title division of One@Changi City is progressing well, and that the asset injection may take place in 2014. We are rolling our valuation to FY14, while keeping our forecasts largely intact. Our fair value is in turn raised to S$2.02 from S$1.96 previously. As upside now looks compelling, we upgrade FCT from Hold to BUY.

Consistent set of 4QFY13 results
Frasers Centrepoint Trust’s (FCT) 4QFY13 NPI fell 5.0% YoY to S$27.3m on higher property expenses. However, distributable income was up 2.7% to S$21.7m as FCT benefited from lower borrowing costs and higher distribution from Hektar REIT. In addition, S$2.9m of cash (0.35 S cents/unit) retained in 1HFY13 was distributed during the quarter. Consequently, DPU jumped 10.0% to 2.98 S cents. For FY13, NPI grew 6.9% to S$111.6m, whereas distributable income rose 9.5% to S$90.1m. Full-year DPU came in at 10.93 S cents (+9.2%), spot on with our DPU projection (consensus: 11.0 S cents). This, we note, marked FCT’s seventh year of consecutive DPU growth since its listing. 

Leasing demand remained robust
Expectedly, Causeway Point (CWP) remained the main revenue generator, raking up 7.4% growth amid improved occupancy and rental rates. During the quarter, however, the mall was subject to higher property taxes (significant portion backdated from 2010 to 2012) and maintenance costs (higher amount budgeted ahead for the year). This brought CWP’s NPI down by 6.7%. Nevertheless, we note that overall performance remained robust, with portfolio occupancy maintained at a high 98.4%, while positive rental reversion of 10.8% was achieved. We also understand ~2% of retail space at YewTee Point is expected to start operations in Oct, which is likely to improve the mall’s occupancy. For Bedok Point, management also updated that it has successfully secured an electronics retailer as its anchor tenant for basement one. This may translate to a more stable performance at the mall.

Upgrade to BUY
Looking forward, FCT reiterated CWP and Northpoint will continue to perform, as leases at the malls amounting to 75.5% of FCT’s gross rent are due for renewal and positive reversions are still expected. FCT also revealed that the strata title division of One@Changi City is progressing well, and that the asset injection may take place in 2014. We are rolling our valuation to FY14, while keeping our forecasts largely intact. Our fair value is in turn raised to S$2.02 from S$1.96 previously. As upside now looks compelling, we upgrade FCT from Hold to BUY.

Hutchison Port Holdings Trust

AmFraser Research, Oct 22

NORMALISED net profit after tax to unitholders down 13 per cent y-o-y. HPHT reported revenue growth of one per cent y-o-y and a decline of 8.4 per cent y-o-y in net profit (NPAT) attributable to unitholders in Q3 2013. On a year-to-date basis, HPHT recorded NPAT of $1.3 billion, which is down 16.6 per cent. After stripping out the one-off performance fee and Asia Container Terminals' acquisition-related costs, we note that the normalised y-o-y decline in NPAT to unitholders would narrow to 13 per cent.

Q3 2013 was a quarter of better fortunes for HPHT's HK terminals than its Yantian ports. Due to a stronger performance in Q3 2013, throughput growth across HPHT's Hong Kong terminals improved from -6 per cent YTD June 2013 to -4 per cent YTD September 2013. Comparatively, Yantian's YTD throughput was largely flattish, owing to lower throughput volumes of empty boxes.

Given that the US has yet to exhibit concrete signs of a turnaround as well as softer-than-expected trade conditions in Q3 2013, we taper our forecasts for Yantian from 4 per cent growth to a flattish full-year performance. On the other hand, we maintain our flat throughput growth expectation for the HK terminals. Accordingly, we lower our earnings per unit (EPU) forecast from 22.3 HK cents to 21.7 HK cents in FY2013. Our FY2013 DPU is also lowered from 41.2 HK cents to 40.3 HK cents.

Overall tax expenses YTD was 7.5 per cent lower y-o-y. This was a result of the utilisation of tax credits at Yantian and lower overall profitability. We highlight that the effective tax rate at Yantian will gradually edge up beyond FY2013 as tax concessions expire in phases. We are currently pencilling in an average tax rate of 17 per cent in FY2014, up from an estimated tax rate of 13 per cent in FY13.

On Sept 25, HPHT successfully refinanced its US$3.6 billion loan and is planning to draw down its borrowings in November 2013. The loan comprises three tranches, specifically a US$1 billion one-year loan, US$1.6 billion three-year loan and a US$1billion five-year loan. All-in interest cost on the borrowings is expected to be 2.25-2.5 per cent. On a separate note, management said it plans to issue a corporate bond to refinance its one-year US$1 billion tranche in FY2014.

This essentially means that a portion of HPHT's borrowings will be converted into fixed-rate, and thus partially hedging its overall interest rate exposure.

Maintain "buy" on FV US$0.86.

BUY

China Environment Ltd

OCBC on 22 Oct 2013

China Environment Ltd (CEL) is a provider of industrial waste gas treatment solutions in China, which is likely to benefit from the Chinese government’s increased focus on cleaning up the environment in China. At the invitation of CEL, we visited their new facility in Bengbu, Anhui Province, China, which houses 12 production buildings. We also visited one of its customers – Shanghai-listed Nanjing Iron & Steel Co (NIS) – to have a look at four dust elimination machines currently deployed in one of its facilities. CEL has built up to 15 such machines for NIS since 2004; but we understand that all these machines are due for upgrades to meet the increasingly higher discharge standards over the next few years. Currently, CEL has an order book of RMB241m as of Sep 2013, up from RMB66.8m as of end-Jun, which it expects to deliver over the next few months. Coupled with some RMB80m raised via a share placement recently, CEL adds that it has sufficient working capacity to take on bigger jobs. We currently do not have a rating on the stock.

Waste gas treatment solutions provider
China Environment Ltd (CEL) is a provider of industrial waste gas treatment solutions in China. Headquartered in Longyan City, Fujian Province, CEL designs, constructs industrial waste gas treatment systems. Its key products include Electrostatic Precipitators (ESP), Electrostatic Lentoid Precipitators (ESLP), bag-houses, and hybrid dust collectors. 

Visit to new facility in Bengbu 
At the invitation of CEL, we visited their new facility in Bengbu, Anhui Province, China, which houses 12 production buildings. We understand that it has started to use about six of them and when the facility swings into optimal capacity, CEL can process up to 350k tonnes of steel (which management believes is equivalent to RMB2b worth of sales) from the current 80k tonnes. And with the completion of the facility, CEL will be able to use it as collateral to secure more bank borrowings (potentially looking at RMB200m) for working capital. 

Pipeline of upgrading projects
We also visited one of its customers – Shanghai-listed Nanjing Iron & Steel Co (NIS) – to have a look at four dust elimination machines currently deployed in one of its facilities. CEL has built up to 15 such machines for NIS since 2004; but we understand that all these machines are due for upgrades to meet the increasingly higher discharge standards over the next few years. CEL notes that this is just from one customer and other customers will also need to upgrade their machines as most, if not all, of them will not be able to meet the higher discharge standards. 

Order book now stands at RMB241m
Currently, CEL has an order book of RMB241m as of Sep 2013, up from RMB66.8m as of end-Jun, which it expects to deliver over the next few months. Coupled with some RMB80m raised via a share placement recently, CEL adds that it has sufficient working capacity to take on bigger jobs. We currently do not have a rating on the stock.

Hutchison Port Holdings Trust

OCBC on 22 Oct 2013

Hutchison Port Holdings Trust (HPHT) reported 3Q13 results that were lower than ours and the street’s expectations. Revenue climbed 1% YoY to HK$3.36b. Total operating expenses increased by 1.3% to HK$2.17b. Profit after tax fell 2.2% to HK$966m. Profit attributable to HPHT unitholders fell 8.4% to HK$539m. We lower our forecasts to -1% and 0% YoY change in 2013 throughput for HPHT’s ports in Kwai Tsing, HK and Yantian, Shenzhen respectively. Our previous forecasts were 0% and 2% growth. Our revenue forecast for FY13 thus falls to HK$12.4b from HK$12.6b. Shipping lines' formation of alliances, e.g. P3, G6 and CKYH, should continue to put pressure on transshipment volumes, especially in HK. We trim our FV for HPHT to US$0.74 from US$0.84 and downgrade HPHT from Buy to HOLD on valuation grounds. HPHT is currently trading at a FY13F dividend yield of 6.8%.

HK volume flat YoY
Hutchison Port Holdings Trust (HPHT) reported 3Q13 results that were lower than ours and the street’s expectations. Revenue climbed 1% YoY to HK$3.36b. Total operating expenses increased by 1.3% to HK$2.17b. Profit before tax fell 1.6% to HK$1.07b and profit after tax fell 2.2% to HK$966m. Profit attributable to HPHT unitholders fell 8.4% to HK$539m. According to management, for 3Q13, volume through the HPHT's HK ports was roughly flat YoY (the prior effect of striking workers has worn off) and the 9M13 volume is down 4%. Volume through Yantain (Shenzhen) was down 3-3.5% QoQ, making 9M13 volume for Yantian flat. All-in-all, the US trade is flat YoY and European volumes remains disappointing, down roughly 5%. Fully-laden export cargo for both US and Europe had registered single-digit growth in 3Q13, but empty boxes were down quite a lot YoY, affecting overall volume. 

Trimming 2013 topline forecast
We lower our forecasts to -1% and 0% YoY change in 2013 throughput for HPHT’s ports in Kwai Tsing, HK (including the increase in TEU from the acquisition of Asia Container Terminals in Mar) and Yantian, Shenzhen respectively. Our previous forecasts were 0% and 2% growth. Our revenue forecast for FY13 thus falls to HK$12.4b from HK$12.6b. Shipping lines' formation of alliances, e.g. P3, G6 and CKYH, should continue to put pressure on transshipment volumes, especially in HK. 

FY13F dividend yield of 6.8% 
Management is guiding FY13 DPU of approximately 40 HK cents, versus a previous range of 40-44 HK cents. With the adjustment of our topline and cost assumptions, we trim our FY13 dividend from 44.2 HK cents to 40.6 HK cents. HPHT is trading at a FY13F dividend yield of 6.8%. For FY14, tax rate should increase significantly because of the expiry of tax holidays for some phases of Yantian, and there will be the full year impact of the 9.8% wage increase for port workers agreed on in early May. 

Downgrade to HOLD
We trim our FV for HPHT to US$0.74 from US$0.84 and downgrade HPHT from Buy to HOLD on valuation grounds.

Midas Holdings

OCBC on 22 Oct 2013

Following last week’s CNY221.8m international train and China metro contract wins, Midas Holdings (Midas) announced last evening that it has secured contracts to supply aluminium alloy extrusion profiles and certain fabricated parts for the manufacture of high-speed trains in China. These contracts are worth CNY167.5m in total, with delivery expected from 2013 to 2014. Total YTD order wins for Midas has now hit ~CNY812.6m (FY12: CNY324.9m). We view Midas’ latest high-speed train contract success as a strong re-rating catalyst for its share price given that its last high-speed contract win came in Feb 2011. We believe this may also set the momentum for further such contract wins to come, given China’s ambition to develop its rail transport sector. Maintain BUY and S$0.65 fair value estimate on Midas, based on 1.3x blended FY13/14F P/B.

Clinches high speed train contracts after a >2.5 years hiatus
Midas Holdings (Midas) announced last evening that it has secured contracts to supply aluminium alloy extrusion profiles and certain fabricated parts for the manufacture of high-speed trains in China. The contracts are worth CNY167.5m in total and are awarded by CNR Changchun Railway Vehicle and CNR Tangshan Railway Vehicle. This comes as a welcome relief for the shareholders of Midas given that the long wait for Midas to win high-speed train contracts in China is finally over. The last time Midas secured a high speed train contract was in Feb 2011 (hiatus due to Minister of Railways corruption scandal and high-speed train crash in Wenzhou in Jul 2011). This positive development is largely within our expectations as we had highlighted in our 11 Sep 2013 report that we expected Midas to clinch high-speed contracts of an estimated CNY153m in value in 4Q13. Delivery of these supplies will take place from 2013 to 2014. 

Recently won international train and China metro contracts too
Last week, Midas also clinched a number of international train and China metro contracts amounting to CNY221.8m (announced on 16 Oct). The former is for two main train projects in Europe and worth EUR17.7m (~CNY145.9m), with delivery expected between 2013 and 2017. The metro contracts from China have an aggregate value of CNY75.9m and were awarded by Midas’ 32.5% owned joint-venture company, Nanjing SR Puzhen Rail Transport (NPRT), for a number of projects such as the Nanjing Metro Line 4 project. Deliveries for the various projects are slated to occur between 2013 and 2016. As a result, Midas’ YTD order wins has now hit ~CNY812.6m (FY12: CNY324.9m).

Re-rating catalyst ignited; maintain BUY
We view Midas’ latest high-speed train contract success as a strong re-rating catalyst for its share price and believe that it may set the momentum for further such contract wins to come, given China’s ambition to develop its rail transport sector. Maintain BUY and S$0.65 fair value estimate on Midas, based on 1.3x blended FY13/14F P/B.

Singapore Exchange

OCBC on 22 Oct 2013

Singapore Exchange (SGX) posted above market expectations 1QFY13 net earnings of S$92.3m last week, up 24.2% YoY. The improvement was across the board from Securities to Depository Services. Securities and Derivatives revenues accounted for 66% of total revenue. An unchanged interim base dividend of 4 cents has been declared. Management is guiding for operating expenses of S$320-330m and capital expenditure of S$35-40m in FY14. We believe that our projections, while on the lower-end of market range, are still on track as 1Q already accounted for 26% of our full year estimate. With global uncertainty still remaining, there are fewer price drivers ahead until we get better clarity from the developed markets. We are retaining our earnings projection, fair value of S$7.43 and HOLD rating.

1QFY14 earnings were above expectations
Singapore Exchange (SGX) posted 1QFY13 net earnings of S$92.3m last week, up 24.2% YoY. Despite a generally weaker equity market, its 1Q performance was above market expectations of S$84.3m. Securities Revenue grew 17% YoY or down 11% QoQ to S$69.0m. Derivatives rose 16% YoY or down 12% QoQ to S$51.7m. Both accounted for 66% of its total revenue. A total of 11 listings took place in the quarter and raised S$2.0b versus 10 listings a year ago (S$3.6b). New bond listings amounted to S$38.8b versus S$52.5b a year ago. An interim base dividend of 4 cents has been declared. Book closure is on 25 Oct and the dividend payable date is 1 Nov 2013.

Across the board improvements
Management attributed the better 1QFY14 Securities Revenue to better average clearing fees. This rose from 2.9bp in 3QFY12 and 3.0bp in 4QFY13 to 3.2bp in 1QFY14. Growth for its Derivatives business was due to growth in key contracts as well as improving average month-end open interest, which was up 80% from a year ago. The latter grew from 1.9m contracts in 1QFY13 to 3.5m contracts in 1QFY14. Its overall performance was also aided by higher Depository Services revenue (+21% YoY) and Issuer Services revenue (+15% YoY). 

Maintaining our forecasts and HOLD rating
Management has guided for operating expenses of S$320-330m for FY14. It expects technology-related capital expenditure to amount to S$35-40m in FY14. As we do not expect the stronger-than-expected 1Q performance to be repeated in 2Q, we believe our projections, while on the lower-end of market range, are still on track as 1Q already accounted for 26% of our full year estimate. With global uncertainty still remaining, there are fewer price drivers ahead until we get better clarity from the developed markets. We are retaining our earnings projection, fair value of S$7.43 and HOLD rating.

CapitaCommercial Trust

OCBC on 21 Oct 2013

Distributable income for 3Q13 increased 1.6% YoY to S$58.8m mostly due to lower interest expenses and the distribution of S$1.7m in tax-exempt income from Quill Capita Trust (QCT), which offset the loss of income support from One George St (OGS). Note that, going forward, CCT can still draw from S$10.9m of retained tax-exempt income from QCT, and also S$0.9m of retained taxable income from RCS Trust to be released in 4Q13. 9M13 distributable income cumulated to S$174.0m, up 2.2% YoY, which made up 75.9% of our FY13 forecast and is judged to be mostly within expectations. 3Q13 DPU is 2.04 S-cents which translates to a 5.7% distribution yield based on the last closing price of S$1.44. We expect CCT to benefit from an improving Grade A office market in FY14 as rental levels reach a turning point in an environment of resilient absorption and limited supply, with only CapitaGreen (~700k sq ft NLA) coming online in FY14 in the Core CBD sub-segment. Maintain BUY with an unchanged fair value estimate of S$1.61. (Eli Lee)

Distributable income up 1.6% YoY
Distributable income for 3Q13 increased 1.6% YoY to S$58.8m mostly due to lower interest expenses and the distribution of S$1.7m in tax-exempt income from Quill Capita Trust (QCT), which offset the loss of income support from One George St (OGS). Note that, going forward, CCT can still draw from S$10.9m of retained tax-exempt income from QCT, and also S$0.9m of retained taxable income from RCS Trust to be released in 4Q13. 9M13 distributable income cumulated to S$174.0m, up 2.2% YoY, which made up 75.9% of our FY13 forecast and is judged to be mostly within expectations. 3Q13 DPU is 2.04 S-cents which translates to a 5.7% distribution yield based on the last closing price of S$1.44.

Overall portfolio occupancy edged up to 97.6%
Over 2Q13, CCT’s overall portfolio occupancy edged up QoQ to 97.6% from 95.8% with ~347k sq ft of space being renewed or signed under new leases. In particular, we note that leasing activity was fairly positive at OGS as the group managed to backfill the bulk of the 9.4% in NLA vacated over 2H13 to maintain the asset’s occupancy level at 94.2%. Committed rents at OGS are in the range of S$8.6-S$10.0 psf pm and we understand management expects OGS occupancy to further improve ahead. Due to continued positive reversions, average committed office portfolio rentals increased QoQ to S$8.03psf from S$7.96psf. AEIs at 6BR and Raffles City remains on track to complete in 4Q13 and 2Q14, respectively, and we expect CCT to begin its S$40m AEI in Capital Tower in 4Q13. CapitaGreen also remains on track to complete by 4Q14.

Maintain BUY with unchanged S$1.61 fair value estimate
We expect CCT to benefit from an improving Grade A office market in FY14 as rental levels reach a turning point in an environment of resilient absorption and limited supply, with only CapitaGreen (~700k sq ft NLA) coming online in FY14 in the Core CBD sub-segment. Maintain BUY with an unchanged fair value estimate of S$1.61.

Keppel Corp

OCBC on 18 Oct 2013

Keppel Corporation (KEP) reported a 8.4% YoY fall in revenue to S$2.95b but saw a 32.1% increase in net profit to S$457.6m in 3Q13, such that 9M13 net profit accounted for 77% of our full year estimates. Stripping out one-off items, we estimate recurring net profit at S$396m, in line with expectations. Operating margin in the O&M segment was strong at 16.5% in 3Q13, much higher than 2Q13’s 14.2%. Order flow YTD has also been healthy, with KEP securing about S$5b new orders so far vs our full year estimate of S$6b. The net order book stood at a record S$13.6b as at end Sep. We continue to see good prospects in the O&M sector with the healthy rig demand, and expect the group to continue with its Near Market, Near Customer strategy. Maintain BUY with S$12.87 fair value estimate. 

 

3Q13 results in line
Keppel Corporation (KEP) reported a 8.4% YoY fall in revenue to S$2.95b but saw a 32.1% increase in net profit to S$457.6m in 3Q13, such that 9M13 net profit accounted for 77% of our full year estimates. Stripping out a S$61m profit on disposal of subsidiaries (gain from divestment of Keppel REIT accounted for slightly less than S$50m), we estimate recurring net profit at S$396m, in line with expectations. Revenue from the O&M division dipped 31% to S$1.54b with the lower volume of work, while turnover from the infrastructure segment rose 29% to S$877m with the co-gen power plant expansion in Singapore. Revenue from the property division rose by S$226m to S$532m, as more homes were sold in China in 3Q13.

Strong O&M operating margin, order flow good
Operating margin in the O&M segment was strong at 16.5% in 3Q13, much higher than 2Q13’s 14.2% and 3Q12’s 12.9%. This was attributed to more deliveries of the KFELS B Class rig, a product that KEP is familiar with repeat executions. The group also saw a few repair projects in the quarter that had higher margins. Order flow YTD has been healthy, with KEP securing about S$5b new orders so far vs our full year estimate of S$6b. The net order book stood at a record S$13.6b as at end Sep, compared to S$13.1b as at end Jun 2013. 

Updates on certain key projects
Construction for the first semi-submersible rig for Sete Brasil is on track; it is expected to leave Singapore early next year and arrive at Brazil around Feb 2014. Revenue recognition for this unit is currently between 20-50%. In infrastructure, the Doha project is close to completion, and management hopes to get it up and running by mid 2014; no provisions were taken in 3Q13. 

Still upbeat on O&M sector
We continue to see good prospects in the O&M sector with the healthy rig demand, and expect the group to continue with its Near Market, Near Customer strategy as seen from its recent inauguration of the Baku Shipyard in Azerbaijan and the MOU with PEMEX to develop a new yard in Mexico. Maintain BUY with S$12.87 fair value estimate.

Mapletree Logistics Trust

OCBC on 21 Oct 2013

Mapletree Logistics Trust (MLT) reported 2QFY14 DPU of 1.82 S cents, representing a 6.4% growth YoY. We deem the results to be in line with our expectations, as 1HFY14 DPU of 3.62 S cents have met 49.9% of our full-year DPU forecasts. While the global economic outlook remains murky, leasing demand at MLT’s logistics facilities has held firm. Going forward, MLT reiterated that it will continue to optimize the portfolio yield through repositioning, enhancement and redevelopment opportunities. We understand that the redevelopment of Mapletree Benoi Logistics is on track for completion in 3QFY14, and that MLT will be embarking on its next redevelopment project at 5B Toh Guan Road in early FY15. We make minor adjustments to our forecasts but lower our fair value marginally to S$1.11 (S$1.15 previously) on higher risk-free rate assumptions. Maintain HOLD.

2QFY14 results within expectations
Mapletree Logistics Trust (MLT) reported a 1.3% YoY drop in 2QFY14 NPI to S$66.6m, as its Japan portfolio saw lower translated income on weaker JPY. Stripping out the forex impact, NPI would have increased by 3.4% due to positive rental reversions and contributions from its past three acquisitions. Total amount distributable to unitholders grew at a faster pace of 7.5% to S$44.5m, as MLT substantially hedged its income streams from Japan, benefitted from lower financing costs, and distributed S$0.6m (0.025 S cents/unit) in divestment gains from 30 Woodlands Loop. For the quarter, DPU came in at 1.82 S cents, representing a 6.4% growth YoY. We deem the results to be in line with our expectations, as 1HFY14 DPU of 3.62 S cents have met 49.9% of our full-year DPU forecasts (consensus: 51.0%).

Firm leasing demand at MLT’s portfolio
While the global economic outlook remains murky, leasing demand at MLT’s logistics facilities has held firm. Starting with 15% of its leases due for expiry in FY14, MLT has managed to renew/replace ~62% of the leases. Portfolio occupancy also improved 50bps QoQ to 98.7%, boosted by higher take-up rates at MLT’s China, Hong Kong and Korea portfolios. More importantly, positive rental reversion of 24% was achieved, higher than the 17% growth seen in previous quarter. This is somewhat more positive than management’s previous guidance for a moderating rate going forward.

Continued focus on yield optimization
MLT reiterated that it will continue to optimize the portfolio yield through repositioning, enhancement and redevelopment opportunities. We understand the redevelopment of Mapletree Benoi Logistics is on track for completion in 3QFY14, while pre-commitment is unchanged at 94%. Following this, MLT will be embarking on its next redevelopment project at 5B Toh Guan Road in early FY15, which will see the site transform from a 3-storey warehouse to a 6-storey modern ramp-up facility (GFA up 2.7x). We make minor adjustments to our forecasts but lower our fair value marginally to S$1.11 (S$1.15 previously) on higher risk-free rate assumptions. Maintain HOLD.

Keppel Land

OCBC on 17 Oct 2013

KPLD’s 3Q13 PATMI increased 70% YoY to S$126.4m mostly due to higher profits from the property development segment and a maiden contribution from Corals at Keppel Bay launched in May 13. 9MFY13 PATMI now cumulates to S$318.5m, forming 70% of our FY13 forecast which we judge to be mostly in line. KPLD sold about 310 residential units in Singapore over 9M13 and we expect the group’s condominium project in Tiong Bahru to be launched next year. In China, KPLD sold a fairly impressive 3,070 units in 9M13 which we note is up three times over the 970 units in 9M12. We understand the group completed 1,800 homes in China over 9M13 and will take an opportunistic stance in launching its new projects in the pipeline. Maintain BUY with an unchanged fair value estimate of S$4.09 (30% RNAV disc.).

3Q13 PATMI up 70%
KPLD’s 3Q13 PATMI increased 70% YoY to S$126.4m mostly due to higher profits from the property development segment and a maiden contribution from Corals at Keppel Bay launched in May 13. 9MFY13 PATMI now cumulates to S$318.5m, forming 70% of our FY13 forecast which we judge to be mostly in line. In terms of the topline, 3Q13 revenue came in at S$417.9m, up 151% with progress recognitions from The Lakefront Residences and The Luxurie in Singapore, Seasons Park in Tianjin Eco-City, Jakarta Garden City in Indonesia, The Springdale in Shanghai, and new revenue contributions from Phase 4 and 5 at 9 Park Avenue in Shanghai.

Residential launch at Tiong Bahru site likely in FY14
The group sold about 310 residential units in Singapore over 9M13, mostly from The Glades at Tanah Merah (89 units out of 726 total units sold, S$1,518 psf ASP), Corals at Keppel Bay (158 units out of 366 total units sold, S$2,170 psf ASP) and the Luxurie which is by now fully sold. Looking ahead, we expect the 500-unit condominium development in Tiong Bahru to be launched in FY14. The site was acquired in April earlier in the year for S$550.3m and we estimate breakeven prices and average selling prices of S$1,750 psf and S$1,950 psf, respectively. In China, KPLD sold a fairly impressive 3,070 units in 9M13 which we note is up three times over the 970 units rate over 9M12. We understand the group completed 1,800 homes in China over 9M13 and will take an opportunistic stance in launching its new projects in the pipeline, i.e. Seasons Residences in Shanghai, Hill Crest Villa in Chengdu and Water Residence in Nantong.

Maintain BUY with S$4.09 FV
We continue to like KPLD for its diversified exposure across property segments and geographical markets, and a strong balance sheet with S$900.4m in cash and 44% net gearing. Maintain BUY with a fair value estimate of S$4.09 (30% discount to RNAV).