Today's Focus

Wilmar - Downgrade to HOLD; not immune to weak CPO prices
Keppel Reit - Downgrade to HOLD on valuations


DBSV Research is downgrading Wilmar to HOLD from BUY, TP: S$ 3.65. Wilmar is not immune to the weak CPO prices. Based on sensitivity analysis using the RM2,500 CPO price (ceteris paribus), we estimate there would be c.10% downside to FY13F bottom line and a S$0.05 downside to our TP. Having
run up 18% since our upgrade on 12 Nov12, we do not recommend adding positions at this point. Though 4Q12 core earnings forecast is expected to sequentially improve to US$401m from US$388m, we believe any upside surprise to 4Q12 numbers should no longer be the catalyst for the share price. Technically, Wilmar has support at S$3.65 and S$3.50.

4Q12 results for Keppel Reit in line. Robust occupancy and long leases provide income stability. Downgrade to HOLD on valuations, as share price is now trading close to our revised TP of S$ 1.34 (Prev S$ 1.28). We continue to like Keppel Reit for its stable and resilient cashflow. The next major catalyst for K-REIT would likely come from acquisitions. However, we think an accretive acquisition could be modest as current physical prime office yields are trading at sub 4%.

The Singapore government unveils $2bn package to reverse low birth rate. The initiatives focused on five key areas -making it faster and easier to get housing to support early marriages and births; support for medical costs related to conception and delivery; further defraying child-raising costs; enhancing work-life measures and to signal to fathers to play a bigger role in bringing up their children. Other measures in the
$2bn package, up from the $1.6bn in the 2008 package, included an increase in the Baby Bonus cash gift up to the fourth child, a Medisave account of $3,000 for every Singaporean baby and extension of MediShield to cover congenital and neonatal conditions of babies. Potential beneficiary to these measures is Cordlife Group, which we have already highlighted in our Thematic Report: Population White Paper - Potential beneficiaries, published last week.


Supported by a seasonally strong travel period from October to December, the number of flights handled by
SATS in the third quarter of FY2012-13 grew 7.1% y-o-y and unit services handled rose 8.6%. Passengers handled hit 10.7 million, up 12.2% y-o-y while gross and unit meals increased 7.9% and 6.3% respectively. Cargo throughput, however, fell 4.7% y-o-y due to continued weak demand for air freight. In the first nine months of FY2012-13, all business segments, except cargo, achieved broad-based growth.

Global Logistic Properties announced that it will install solar panels on the rooftops of 22 properties in Japan.
The US$82m investment will generate an internal rate of return (IRR) of approximately 17%, creating a new
revenue stream for GLP.

Construction group KSH Holdings has secured a letter of acceptance worth $142.3m for main contract works for Q Bay Residences, a Tampines condominium. This new contract win brings the group's construction business order book past $460m.

Hong Leong Asia expects to report a loss for FY Dec 12, mainly attributable to the estimated loss on impairment of assets and additional tax liability.

Kian Ho Bearings is expected to report a significant drop in profit for FY Dec 12 due to soft China economy, significant costs in Australia and sustained economic weakness in Europe and US.

Global Yellow Pages is expected to report a loss for 3Q13 and FY Mar 13, attributable to an impairment in its intangible assets.

Source: DBSV