Goodpack - Growth on track; maintain BUY with higher TP of S$2.00

STI's decline beneath June's low of 3065 yesterday signaled a resumption of the downtrend that points to 2880 on the technical charts, which coincides with 12.3x (-1SD) 2860 blended FY13F/14F PE. In coming sessions though, a technical rebound off the 3000 level towards 3100 is expected. Transport and airline stocks could underperform while O&M names hold up better as oil price rallied. Brent crude added c.5% to USD105pbl.

FY13 results for Goodpackslightly above. The key variants were the US$1.4m disposal gain of PPE and US$0.9m forex gain in 4Q13. Goodpack is on track to achieve volume growth of 250k boxes in FY14, underpinned by the firm ramp up of new SR markets in Singapore and Russia. It is also gaining traction in the autoparts market. Maintain BUY with higher TP of S$2.00.

The finalisation of autopart contracts serve as an imminent catalyst. 2Q13 results for IHH Healthcare within expectations. EBITDA margins improved with positive contribution from new hospitals. Novena hospital turned in RM2m EBITDA profit, on track for positive contribution in FY13. Maintain HOLD, TP adjusted to S$1.50 (Prev S$ 1.55), accounting for recent currency effects. While we believe the long term prospects for healthcare remains positive and IHH commands a premium due to its scarcity and geographical spread, the stock is already trading at 43x/36x on FY13F/14F earnings.

Update on Singapore property - office and retail segment. For the office segment, we see the nascent signs of strength in the office leasing market as a temporary mismatch between demand and supply. Net positive take up of 0.2msf in 1H13 coupled with c0.16msf of older office space taken out of circulation squeezed occupancy a tad higher to 91.2% and lifted rents by 0.2% in 1H. Going forward, with 83% of 2013's new supply being completed in 2H, tenant relocations and re-leasing activities and frictional vacancies would mean a lacklustre outlook. We expect office rents to end the year relatively unchanged at 0% to -5% (vs - 5% to -8% previously) and occupancy to hover around the 89-90% mark. Our strategy would be to prefer landlords with exposure to the CBD or the Central areas given that a large part of the fringe office and business parks space has been absorbed.

On the one hand, demand for retail space is robust but costs are rising. We expect retail rents to trickle up by 2% this year; high pre-commitment rates in 2H13 should stabilise rents, while the large incoming supply, to the tune of c10% of total inventory till 2017, largely in the fringe areas, may cap near term upside.

Whilst we have a neutral weighting on both sectors, we have a preference for retail over office as retail landlords can typically conduct AEIs to boost growth. In terms of stock picks, we adopt a stock picking strategy to identify value. We are buyers of UOL given its resilient diversified business model and strong management track record. The stock is currently trading at a 24% discount to our TP of $8.34, premised on a 15% discount to RNAV. Amongst the REIT space, we like Suntec REIT as it would benefit from its extensive AEI. The Reit offers FY13 yield of 6% and total return of 24%.

AusGroup reported a 93.6% plunge in fourth-quarter net profit to A$525,000, from A$8.25m a year ago. Reduction in revenue from its integrated services division resulted in group turnover for the three months ended June falling 21.5% to A$137.6m. Additionally, gross profit margin fell 3.3 percentage points to 10.5%, dragging gross profit down 40.1% to A$14.4m. Full-year profit fell 58.4% to A$9.7m, with turnover decreasing 7.8% to A$582.7m. Revenue growth from the major projects and fabrication divisions were offset by a reduction in revenue from the integrated services division. The group was also impacted by decreased activity in the resource sector as major resource companies scaled back capital expenditure following volatility in commodity prices, as well as customer delays in awarding contracts in the oil and gas sector. Gross margin for the year slipped to 10.9% from 12.4%. AusGroup has a current order book of A$200m.

Sembcorpannounces the expansion of its water business in China's Liaoning province with two new wastewater treatment projects in industrial parks in Panjin city. Its wholly-owned subsidiary Sembcorp China will sign agreements for new wastewater treatment projects in Panjin City's Panjin Fine Chemical Industrial Park and Panjin Liaodong Bay New District. The first of the agreements will be a joint venture agreement to build, own and operate a new RMB117.3m industrial wastewater treatment plant to serve industrial customers in Panjin Fine Chemical Industrial Park (PFCIP). The second agreement to be signed will be a non-binding agreement with the Panjin Liaodong Bay New District Administrative Committee, which supplements an exclusive concession granted to Sembcorp for the provision of wastewater treatment to companies located in a 60.3-square kilometre industrial park in the west of the Panjin Liaodong Bay New District.

Mirach Energy has unexpectedly uncovered a new untapped oil zone at the Kampung Minyak Oil Field (KM) as it drilled deeper at the KM-607 infill well. This zone is below the old production oil layer. With the strong results shown in the newly uncovered oil zone, the company intends to apply to Pertamina EP to drill new wells deeper than 1000 metres to confirm the other potential pay zones that it has identified in KM.

China Aviation Oilhas signed a product storage agreement with Horizon Singapore Terminals to lease storage facilities at Jurong Island, for three years as from 1 September 2013. Under the terms of the agreement, CAO agreed to lease five storage tanks with a combined storage capacity of about 174,000 cubic metres. The leased storage tanks will be used for fuel oil and fuel oil blend components.

KSH Holdings has been awarded a S$98.9m construction contract for the construction of NEWest, a mixed-use development located at West Coast Drive in District 5. Construction for NEWest is expected to commence in September 2013, with completion expected within 30 months. Year-to-date, KSH has won construction projects amounting to S$301.1m in Singapore and RMB157.0m in Beijing, PRC. KSH's existing construction order book, which stands at approximately S$478m, is expected to contribute to the Group's financial results up till FY2016.

Tighter housing loan limits and restrictions on permanent residents have been imposed for the purchase of HDB resale flats, which could drive up demand for the rental and private residential markets in the next three years. The latest series of measures - which include a three-year wait before newly-minted PRs can buy a resale flat - may rejuvenate the private residential sector, which is expecting an onslaught of supply up to 2016. Other measures include reducing the maximum tenure for public housing loans to 25 years from 30. Flat buyers who take HDB loans can now use only up to 30% of their gross monthly income to repay their loans, down from 35%.

Passenger traffic at Changi Airport rose 4% y-o-y in July. The total number of passengers that passed through the airport in the first seven months of this year hit 30.8m - 4.9% higher than last year. Strong demand for air travel to and from south-east Asia, north-east Asia, the southwest Pacific and the Middle East contributed to the growth in passenger traffic for the month. Among the top 10 destination cities for flights out of Changi were Bali-Denpasar, Sydney, Taipei and Tokyo. All recorded double-digit growth in passenger movements. Air traffic movements for the month grew by 6.9% y-o-y while cargo passed through Changi last month was a slight improvement of 1.1% from the previous year.

US stocks fell as tension grew over a possible military action against Syria after Secretary of State said America will hold the Syrian government accountable for using chemical weapons. It is not clear whether the US would seek a mandate from the UN for potential responses. Russia had blocked previous UN action against Syria while Iran warns that a military strike will destabilize the region.

Airlines fell as oil price rose. Stocks sold off even as data showed consumer confidence unexpectedly increased in August. According to US and UK officials, any army response will be narrowly focused on Syria's chemical capabilities. The flight to safety saw 10-year treasury yields dipped to 2.7%.

Investors are also watching the political wrangling over the approaching limit on federal spending. The U.S. government is expected to exhaust its ability to borrow funds by mid-October when it will hit the statutory debt limit, this according to an estimate from the Treasury Department.

Source: DBSV