Macquarie is pleased to list the following new warrants this morning:

Under the transactions, The Ascott will pay $359mn to buy Somerset Grand Cairnhill from Ascott Residence Trust and will sell Ascott Raffles Place ($220mn) and Ascott Guangzhou ($63.3mn) to the latter. The Ascott will redevelop Somerset Grand Cairnhill into a mixed-use development comprising 40% hotel and 60% residential.

In a report dated 9 July 2012, Macquarie Equities Research (MER) analysed the impact of the transactions:

Sale and leaseback of new Somerset serviced residence. The Ascott will sell the planned 371-unit serviced apartment to Ascott Residence Trust for $405mn on completion in 2017. It will also lease back the property for a minimum period of five years (renewable for another five years upon mutual agreement of the parties) at a fixed rental of $13.2mn per annum plus 85% of the net operating income (NOI) of the asset.

Likewise, the Ascott Raffles Place transaction will be on a similar master lease structure of S$7.2m per annum fixed and 85% of NOI. The Ascott Guangzhou transaction will be on a pre-existing management agreement.

Overall cost of Somerset redevelopment at $0.86bn. This includes $160mn to $180mn in land premiums for a fresh 99-year lease and change of use. Stripping out the $405m that The Ascott will receive from Ascott Residence Trust, the balance of $453m works out to be $2,242 per sq ft of net leasable area, assuming 80% efficiency on the residential component of the redevelopment. Current selling prices of condo projects in the vicinity are in the region of S$2,700 per sq ft, which suggests a pre-tax margin of 17.0%.

Gains of S$94.1m in 2012. The transaction requires an EGM for Ascott Residence Trust unit-holders scheduled on 27 July 2012, with a transaction completion date at end-September 2012. CapitaLand will recognise a net gain of $94.1m, comprising $51.4mn from the sale of two Ascott properties and $42.7mn as share of gains from the Somerset sale by Ascott Residence Trust.

Stock looking attractive to MER. While the transactions will have no change to earnings estimates, the surplus from the residential component could add 2.41 cents to MER’s current residual net asset value (RNAV) of $4.72. MER maintains its outperform rating on CapitaLand and its 12-month target price $3.77.

MER believes that the transaction will enable CapitaLand to get access to a prime condo site at a reasonable price, funded partly by the monetisation of the two Ascott properties to its REIT associate. MER views the stock attractive at its current 37% discount to their RNAV, with a potential upside of 27%. MER believes that its 2Q12 results in early August and progress of residential sales in Singapore/China could be a stock price catalyst.

* Excerpt from MER report dated 9th July.

Singapore Market Wrap

STI outperforms the region

Singapore was the best performer amongst major asian indices, closing at 2989.31, up 0.83% day-on-day (dod). The Shanghai Composite Index also did well, adding 0.51% dod. Investors' sentiments in Shanghai were lifted after Premier Wen Jiabao's comments signalled that officials may boost spending to stimulate economic growth in China. Nonetheless, investors' worries over a global economic slowdown is likely to remain an overhang.

The STI's good performance was given an extra boost by the announcement that the country's returns from reserves added about S$7bil to its budget. Going forward, the government plans to spend more on infrastructure given Singapore's aging population.

Call STI 2950MBeCW120831 (QE8W) exercise level 2,950.*
Put STI 2850MBePW120831 (QE9W) exercise level 2,850.*

Singtel launches cloud service in Hong Kong
Singtel announced yesterday that it is launching the award-winning cloud computing service, PowerON Compute in Hong Kong. PowerON Compute gives businesses the flexibility of quickly scaling up or down their usage of computing resources, since users are only paying a monthly subscription fee instead of paying extra for servers and computing resources.

Mr Bill Chang, Singtel's managing director said, "The launch of PowerON Compute in Hong Kong is a key strategy in entrenching SingTel's position as the leading cloud service provider which delivers seamless and true enterprise-grade cloud services in the Asia Pacific region."

Singtel closed at $3.43, up 1.8% dod.

Call warrant SingTelMBeCW130301 (PB6W) exercise price $3.30.*

SGX to trade Chinese yuan securities
SGX announced recently that it is prepared to list, quote, trade, clear and settle securities denominated in Chinese Renminbi (RMB). With the globalization of the Chinese economy, this initiative will give issuers and investors a chance to participate in the biggest emerging market. SGX's CEO Magnus Bocker said that "the listing and trading of RMB securities on SGX will also extend Singapore's position as an offshore RMB centre". Currently, SGX is the world's first exchange to offer the clearing of OTC FX forwards for RMB.

SGX closed at $6.55, up 1.08% dod.

Call warrant SGX MB eCW120904 (P9HW) exercise price $6.50.*
Put warrant SGX MB ePW121203 (Q0BW) exercise price $ 6.00.*

Overnight Market Wrap

To QE or not

Last night the Fed released minutes of the recent FOMC and many were interested to see if the Fed were to announce on another round ofquantitative easing (QE). However, the minutes gave no clear indication and the S&P closed 1341.45, flat for the trading session.

Minutes for June's meeting not only included the benefits of further QE, it also addressed the risk further easing might pose. If there were excessive bond purchases, the Treasury Markets may be disrupted. That being said, the committee agreed that it was prepared to take further action as appropriate to promote a stronger economic recovery. Also included in the minutes was that interest rates are likely to stay near zero at least through late 2014.

Back in Europe, Spain announced fiscal policies by cutting jobless benefits and public wages. Going forward, pensions may be cut and sales tax may be increased. These measures are put in place so that they would be able to shore up its budget by 65bil Euros. European markets took this piece of news well and Euro STOXX added 0.2% while in Spain, IBEX 35 Index added 1.2%.

Overnight Market

Indices	Last	Change
STI	2989.31	0.8%
HSI	19419.87	0.1%
DJIA	12604.53	-0.4%
S&P 500	1341.45	-0.0%
Nasdaq	2887.98	-0.5%
China A50	7678.01	0.5%

Corporate News

Corporate Announcements

Results announcements:
Thu 19 Jul: Keppel Corp 2Q12
Wed 25 Jul: Biosensors 1Q13, SIA 1Q13
Fri 27 Jul: SGX 4Q12
Thu 2 Aug: SembCorp Marine 2Q12
Tue 7 Aug: UOB 2Q12

Ex-dividend dates:
Mon 6 Aug: SingTel ($0.09 final)