We expect 2Q13 earnings for Vard to miss expectations due to cost overruns of Brazil projects. This is a dampener on confidence, and our analyst has cut FY13/14F earnings by 11/7%. Downgrade to HOLD; TP lowered to S$1.16 (Prev S$ 1.46).

Plantation counters are still in the last leg of correction. Our analyst recommends investors who are underweight in this sector to start rebuilding positions in the latter part of the year - when palm oil stockpiles peak. He expects CPO prices to weaken between now and end of the year on rising inventories and to rebound by next year, led by global demand recovery. He has cut CY13/CY14/CY15 crude palm oil (CPO) price forecasts by 11%/2%/4%, and expects spot CPO prices to average RM2,350 (US$791) in 3QCY13 and RM2,300 (US$777) in 4QCY13. The upcoming 2Q13 results are expected to lag consensus, as realised CPO ASP is lower than market expectations. Switch to Singapore listed planters (close to -1SD forward PE); accumulate others by year-end. Upgrade to BUY for Bumitama Agri (TP: S$1.23, (Prev S$ 1.12)) and Wilmar (TP: S$3.48, (Prev S$ 3.72)); maintain BUY for First Resources(TP: S$2.18, (Prev S$ 2.14)).  

SembCorp Marinehas secured two turnkey contracts for jack-up rigs from repeat customer Oro Negro worth US$417m in total, scheduled for delivery by Jul 2015 and 3Q 2015. Including the two jack-up rigs ordered in Dec 2012 and two in Mar 2013,  Oro Negro now have six units of Pacific Class 400 jack-up rigs on order with SMM. These new contracts will bring SMM's YTD wins to S$3,212m, making up 64% of our new order assumption of S$5bn. Maintain (HOLD, TP: S$4.70).

F&N's Board announced that it will appoint advisors to study and review alternative strategic options available to the group to unlock shareholder value. This may involve a segregation of the group's property-related business from its non-property related businesses. No decision has yet been made on any strategic option or proposal. We are not surprised by the message, though timing of this announcement seems faster than expected. Separately, the S$4.7bn cash distribution was approved by shareholders and resolution was passed in its EGM held on 28 June 2013. Shareholders will receive S$3.28/share in cash, and based on the preliminary timeline indicated in its shareholders' circular dated 6 June 2013, F&N shares will trade ex-cash distribution on or about 19 July 2013 at 9am, and payment expected on or about 31 July 2013. The SGX-ST has also granted F&N 3 months till 19 July to restore the public float to above 10%, or about 0.32% from the current level (9.7%).  

Sembcorp Industriesannounced that it has commenced construction of its US$200m expansion project for its Fujairah 1 IWPP plant in the UAE. Completion of this project is expected in 1H15. Positive development but no impact to earnings forecast.  Separately, SCI announced it is investing S$6.4m for a 28.8% stake in Biowater, a Norwegian-based water design and engineering firm. In addition to equity investment, SCI has formed a Strategic Partnership Agreement with Biowater. Positive to operations long run but no quantifiable contributions near term.    

Sound Globalannounced that its chairman Mr Wen, also largest shareholder with 56.2% stake, has issued a Letter of Intent to the board to propose a delisting from SGX while maintaining its primary listing of HKSE (00967 HK).  In connection with the possible delisting, Mr Wen has offered cash of not less than S$0.70 per share. Exit offer base price looks fair on current state of operations. The offer base price of S$0.70 is 22.8% higher than last transacted price of S$0.57. However, in PE terms, this translates to 12.2x FY13F PE, still below historical mean of 13.5x PE. Share price could spike on reaction to this news but fundamentally, there is no change to our view on SGL's operations and earnings forecast.

The Monetary Authority of Singapore (MAS) will introduce a Total Debt Servicing Ratio (TDSR) framework for all property loans granted by financial institutions (FIs) to individuals. MAS expects any property loan extended by the financial institutions to not exceed a TDSR threshold of 60%. MAS will also refine rules related to the application of the existing Loan-to-Value (LTV) limits on housing loans.  These refinements seek to ensure the effectiveness of the LTV limits that were put in place to cool investment demand in the housing market.  In particular, they aim to prevent circumvention of the tighter LTV limits on second and subsequent housing loans. 

Based on the latest MAS stats for banks as at end May 2013, housing loan growth continued to soften to 15.2% y-o-y vs 16.0% in Apr 2013 compared to a 12-month peak of 16.1% recorded in Nov 2012. Monthly loan momentum also soften to 0.5% m-o-m vs a peak of 2.0% m-o-m in Nov 2012. As at end 1Q13, UOB had the highest exposure to mortgages at 29% of total loans, OCBC at 27% and DBS at 20%. From our previous conversations with the banks, we gather that housing loan momentum would remain fairly robust due to prior approvals granted but the momentum should taper off.

We understand that housing loan applications have declined by 20-30% since the new stricter LTV rules were introduced earlier this year.  Bank loans grew at a slower pace of 18.8% y-o-y in May to $528.75 bn, after registering year-on-year growth of 20% in April to $522.28 bn at the close of the month. But credit growth picked up month-on-month, following two months of moderation. Over the month of May, loans grew 1.2%, up from 0.9% in April. Business lending grew 22% y-o-y in May, slowing slightly from 23.7% in April. But month-on-month growth picked up to 1.6% in May, from 1% in April. Consumer loans grew a slower 14.5% in May from a year ago, following 15% y-o-y growth in April. Momentum has stabilised, too, as consumer lending grew 0.6% over the month of May, from 0.7% in April. Housing loans growth slowed for a second straight month to rise 15.2% y-o-y in May, down from 16% in April. In month-on-month terms, total housing loans were just 0.5% higher.

Source: DBSV