DBSV S'pore Wired Daily 11 July 2013

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Publish date: Fri, 12 Jul 2013, 10:12 AM

Today's Focus

Plantation Companies - In a weak CPO price environment, prefer Bumitama, First Resources and Wilmar.

US stocks ended mixed but futures are higher after FED Chairman Ben Bernanke reassured that interest rates will stay low for a long time even as the FED minutes showed members debating whether to halt bond this year. 10-year treasury yields fell 2.576% while the USD weakened. Against the SGD, the USD weakened to 1.265 from 1.28 last week. STI is expected to rebound, testing the 3220 (38.2% upward retracement) level and while an overshoot to 3246 is even possible. These levels remain below the 13.9x (average) 12-mth forward PE of 3266.

Malaysia's Jun13 palm oil stockpile dropped 9% m-o-m to 1.647m MT -c.11% below forecast - as same month output came in 10% below expectations. Flat Jun13 palm oil exports were partly compensated by higher domestic consumption. Given YTD numbers and Ramadan slowdown, we cut Jul13 output forecasts by 3% to 1.656m MT. Jul13 stockpile may further drop to 1.593m MT. Productivity may deteriorate if low prices persist. In a weak CPO price environment, we recommend stocks with young age profile, decent volume growth, trading at a discount to peers, have relatively low unit cost of production, and strong balance sheet. For SGX listed stocks, we believe Bumitama Agri, First Resources and Wilmar fit these criteria.

Asian Telecom Sector update: Among mature markets, Hong Kong is likely to benefit more than Singapore from 4G networks. For the emerging markets, China and Thailand are monetizing 3G better than Indonesia. Our top picks in Singapore are StarHub and M1. As roaming revenue bottom out in 2013, average revenue per user (ARPU) is set to rise in 2014F due to the impact of data re-pricing. M1 and StarHub are expected to benefit more from potentially higher excess data charges. StarHub to benefit from rising popularity of Android phones while M1. StarHub & M1 had net debt to EBITDA of 0.5x & 0.6x respectively at the end of 1Q13 versus 1.0x for SingTel. StarHub is likely to raise annual DPS (from 20 Scts currently) after spectrum auction in Aug 2013. For SingTel, weaker regional currencies (AUD, INR, IDR) and huge investments into Myanmar and Digital Life business are the key risks.

OUE Hospitality Trust (OUE H-Trust) - the real estate investment trust of OUE that is heading for a listing - is looking to raise as much as $613.6m from its initial public offering of stapled securities at between 88 and 90 cents each. The amount comprises $391.1m from an offering of 434.6m stapled securities and $222.5m from a separate subscription for 247.2m stapled units from cornerstone investors. Based on the 88-90 cent price range, the distribution yield for the full year 2013 could range from 6.99% to 7.15%. The preliminary prospectus shows that OUE H-Trust is a hospitality stapled group consisting of OUE Hospitality Real Estate Investment Trust (OUE H-Reit) and OUE Hospitality Business Trust (OUE H-BT). OUE, as vendor of the initial portfolio of properties, will receive about 626.8m units as part consideration. These units represent 47.9% of the total number of stapled securities in issue when OUE Hospitality Trust is listed, assuming an over-allotment option is not exercised.

Tiger Airways Singapore posted a 22% y-o-y rise in passenger traffic in June, while capacity was boosted by 21.7%, giving rise to a 0.3 percentage point increase in load factor to 86.5% for the month. Passenger traffic came in at 787 million revenue passenger-kilometres (RPK), while capacity for the month was 910 million available seat-kilometres (ASK). For the 12-month period ended June, Tigerair Singapore saw a 22.6% increase in traffic to 8.4 billion RPK, outpacing the 18% increase in capacity. Passenger load factor was 3.1 percentage points higher at 84%. Meanwhile, Tigerair Australia registered a 60% growth in passenger traffic to 299 million RPK while capacity increased 48% to 339 million ASK. As a result, passenger load factor rose 6.5 percentage points to 88.2%.

Global Logistic Properties has signed an agreement to develop BMW's largest distribution centre in China. Construction starts this year. The agreement, signed with BMW's joint venture with Brilliance Auto, will see a 75,000 square metre built-to-suit facility developed at GLP's Lingang logistics park in Shanghai.

China's exports shrank 3.1% in June to US$174.32 billion from a year earlier, the first decline in more than three and a half years and the biggest since October 2009. Imports were down 0.7% at US$147.19 billion. The country's overall trade for the month fell 2% to US$321.51 billion, taking the trade surplus to US$27.13 billion. In the six months to June, overall trade came to US$1.998 trillion, up 8.6% y-o-y, with the trade surplus hitting US$107.95 billion. Exports rose 10.4% to US$1.05 trillion while imports grew 6.7% at US$944.87 billion. China has set a 10% trade growth target for this year. In 2012, overall trade expanded 6.2% to US$3.87 trillion, missing the official 10% growth target. Weak global demand is clouding China's trade growth prospects.

Global shipments of personal computers slumped 10.9% in the second quarter, the fifth straight quarterly decline in a market that has been devastated by the popularity of tablets, according to research firm Gartner. Marking the longest decline in the PC industry's history, HewlettPackard in the June quarter lost ground to Lenovo, now the world's leading personal computer maker with a market share of 16.7%.

Source: DBSV

Bumitama Agri (P8Z)First Resources (EB5)Wilmar Intl (F34)StarHub (CC3)Singtel (Z74)

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