DBSV S'pore Wired Daily 29 October 2013

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DBSV S'pore Wired Daily 29 October 2013

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Publish date: Tue, 29 Oct 2013, 10:04 AM

Today's Focus

ARA - Growth trajectory accelerated with new strategic partner. Maintain BUY, TP raised to S$2.08

Hi-P - No growth for 3Q13, 2H13<1H13. Downgrade to FULLY VALUED, TP cut to S$0.47

ARA Asset Management (ARA) and Straits Trading Company (STC) have announced a strategic collaboration

to jointly invest in property. The transaction details: (1) STC will acquire a 20.1% stake in ARA, from vendor share

sales by Cheung Kong and John Lim, (2) ARA will manage STC's entire real estate portfolio (ex hospitality) and (3) STC and John Lim will set up a new S$950m coinvestment vehicle (Straits Real Estate) to provide seed

capital for new fund products to be managed by ARA. With a much-needed strong war chest to accelerate its

growth trajectory, we see exciting times ahead for ARA. We have raised ARA's TP to S$2.08 (Prev S$ 1.89).

Maintain BUY.

Hi-P has cut earnings guidance due to lower orders from customers. 3Q is affected by inventory provisions; we

believe margins were lower than expected. We had earlier warned of downside risks for Hi-P, in view of weak

demand and rising stockpiles of Blackberry and Apple smartphones. However, the decline turned out to be more

severe than we had expected. FY13F/14F EPS cut by 37%/25%. Downgrade to FULLY VALUED, TP revised

down to S$0.47 (Prev S$0.65).

3Q13 results for Raffles Medical within expectations. Hospital revenue growth a tad slower, but attributed to

one-off events. The group is in a strong cash position to fund expansion plans internally. Maintain HOLD and TP of S$3.15.

Petra Foods' deal to sell its cocoa ingredients business to Barry Callebaut for US$950m - subject to adjustments at completion - appears to have hit a more sour note as Petra is now being asked by the buyer to assume a closing price reduction to the tune of US$98.3m, on top of the US$74m that was already cut earlier. Should Petra be compelled to accept the closing price reduction, it would mean a chunky 20% slice off the original offer price when the deal was struck in December last year. This could also mean that Petra's last announced initial net proceeds of US$164m from the last agreed price of US$860m and the net estimated gain on divestment of US$64m could be whittled down to just US$66m in net proceeds and a significant estimated net loss on divestment of about US$34.3m.

ST Engineering'saerospace arm, ST Aerospace and Jetstar Asia has signed a three-year line maintenance contract. The agreement covers a full suite of line maintenance support for Jetstar Asia's existing and future fleet of Airbus A320 aircraft. King Wan Corp has secured five new mechanical and electrical (M&E) contracts in Singapore worth a total of S$26m during the period from August to October 2013. With these new contracts, the Group's order book to date stands at S$168.9m, with M&E contracts which will keep the group busy to 2016.

BH Global Corpexpects to report a net loss for 3Q13, mainly due to foreign exchange losses arising from the significant depreciation in value of Indonesian Rupiah against Singapore Dollar.

US markets finished mixed ahead of the mid-wk FOMC meeting even as consensus expects the FED to continue its USD85bil/mth bond purchases, cutting back on stimulus only around March 2014. The US 10-year bond yield stay generally flat around the 2.51% level in recent sessions. In after hours, shares of Apple Inc fell 2.2% after it forecasts lower-than-expected gross margins going forward despite reporting better-than-expected quarterly results.

Source: DBSV

Delfi (P34)ST Engineering (S63)

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