DBSV S'pore Wired Daily 18 July 2013

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Publish date: Thu, 18 Jul 2013, 10:04 AM

Today's Focus

Keppel Land - 2Q13 dragged by lower associate income; maintain BUY with lower TP of S$4.66

As expected, 2Q13 net profit for Keppel Land was flat y-o-y, dragged by lower associate income. Looking ahead, there will be more new offerings in Singapore and China in 2H13, with balance sheet having room for more investments. Maintain BUY, TP S$4.66 (Prev S$ 4.68).

2Q13 results for CapitaCommercial Trustin line. The expiry of yield protection income for One George Street is expected to negatively impact 2H13 earnings. However, management has indicated a willingness to utilise a portion of their retained distributable income from Quill Capita Trust in order to stabilise the DPU going forward. CCT has also announced new AEI works at Capital Tower. Maintain HOLD, TP revised lower to S$1.62 (Prev S$ 1.72).

Cosco has secured a contract worth over US$200m from repeat Mexican customer - COTEMAR, to build one Harsh Environment Semi Submersible Accommodation Vessel. This is an exercise of one of the two options granted to COTEMAR together with the contract for similar vessel in May 2012. The vessel is scheduled for delivery in 24 months. The latest contract takes Cosco YTD wins to US$944m, forming 47% of our order win assumption of US$2bn. Upstream reported in early June that Cosco is signing contracts for two drillships worth US$650-700m each with X-Drill. If this materialise, Cosco will beat consensus' order win assumption this year. While the recent slew of order flow is encouraging, we remain concerned over Cosco's project execution particularly for the new vessel types. Positive order win momentum will likely be overshadowed by poor earnings visibility, in our view. Hence, we maintain our FULLY VALUED call and TP: S$0.75. Cosco's 1H13 results will be due on 1st Aug.

mDR's unit MDR Myanmar has been appointed the aftermarket service (AMS) provider for Nokia in Myanmar, shortly after its partner Golden Myanmar Sea Company (GMS) became Nokia's distributor. mDR set up MDR Myanmar in January to grow its presence in the new market and is working with GMS and Nokia to expand its distribution channels and provide retail planning and support in the Myanmar market.

Air travel markets appeared to slow down in May, with the number of passengers travelling in premium cabins on international routes growing by 2% y-o-y, compared to a growth of 3.8% in April, according to International Air Transport Association (Iata). Meanwhile, the number of passengers travelling in Economy Class was up 3.9% in May, although this was slightly slower than the 4-5% growth - seasonally adjusted for the Easter holidays - chalked up in April. Total international passenger numbers rose 3.7% y-o-y in May, while international RPKs (revenue passenger kilometres) increased 5.7%. Mediumand long-haul routes, which are growing at a quicker clip this year, are fuelling the total growth in international air travel.

China announced a nationwide crackdown on the sale of illegal and said it would tighten industry regulation. The crackdown comes 2 days after Chinese police accused GlaxoSmithKline of bribing officials and doctors to boost sales and raise the price of its medicines in the country. The State Food and Drug Administration said the 6-month campaign would target illegal online drug sales and the sale of fake traditional Chinese medicine.

China's economic slowdown is likely to weigh on Southeast Asian economies but is unlikely to result in a steep downturn in the region's growth, this according to the president of the Asian Development Bank. China's challenges are more about achieving sustainable, balanced growth driven by personal consumption. The country's current economic growth was too reliant on capital expenditure, so the key is whether overall growth would be supported more by strength in personal consumption, said the ADB president. The challenge is whether China can make a smooth transition in the medium- to long-term.

FED chairman Ben Bernanke reiterated the FED's stance that the pace of QE tapering depends on economic conditions. The FED still expects to start QE tapering later this year but left open the option of changing that plan in either direction if the economic outlook shifted. While sticking closely to the time line that was outlined last month in which the Fed is anticipated to halt bond buying by mid-2014 when the unemployment rate is seen dipping to around 7%, Ben Bernanke went out of his way to stress that nothing is cast in stone. The pace of asset purchases will be reduced "somewhat more quickly" if economic conditions are to improve faster than expected. On the other hand, the current US$85bil monthly pace "could be maintained for longer" if the labour market outlook weakened or if inflation did not look like it is rising back towards the 2% goal.

US markets rose following Ben Bernanke's reiteration regarding QE tapering. On the data front, housing starts unexpectedly fell in June to the lowest level in almost a year (actual 836k, consensus 960k). In after hours trade, IBM reported better than expected earnings and raised FY forecast while eBay and Intel fell as revenue fell short of expectations.

Source: DBSV

COSCO SHP SG (F83)

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