Towards Financial Freedom
DBSV S'pore Wired Daily 10 December 2013
Midas - Earnings poised for a strong rebound into FY14F and FY15F; maintain BUY, TP raised to S$0.64.
We expect firm earnings rebound for Midas in FY14F as highspeed railway (HSR) contracts roll in. Midas won its first HSR contract (Rmb168m) in over two years in October, as China resumed its HSR development programme, with more likely to come. We believe the Group could win a substantial order arising from the recent second rolling stock tender for 314 train sets, or about 2,500 train carriages. Over the next two years, we believe a further 700 over train sets could be tendered for, resulting in further wins for Midas in the HSR segment. At the same time, we expect (PRC) metro orders to continue flowing in, and overseas orders, which have grown substantially in 2013, to continue to be robust as Midas looks to maintain a more diversified earnings base. Maintain BUY, with our 12-month TP raised to S$0.64 (Prev S$0.60), based on 1.2x FY14F P/BV. We believe current valuations are attractive for a stock whose earnings are poised for a strong rebound into FY14F and FY15F.
Standard & Poor's Ratings Services (S&P) has cut Thai Beverage's credit rating to below investment grade to reflect the weaker combined profile of its corporate group. S&P downgraded ThaiBev's long-term corporate rating by a notch to BB+ from BBB-, two weeks after placing the company on CreditWatch negative. In response to the negative watch, ThaiBev has said it will no longer pay to be rated by S&P.
Moody's expects stable outlook for S-Reits in 2014, with Moody's 13 rated S-Reits expected to grow by 4%, fuelled by a larger asset base and rent increases on existing properties. Overall occupancy and rental rates are expected to remain stable, but the warehousing segment - where Mapletree Logistics Trust and Cache Logistics have the largest exposure - will have potential weakness from a spike in the supply of new warehouse space, said the rating agency. That being said, however, it is estimated that about 40% of this space has been pre-committed by end-users, so this may mitigate the impact of the enlarged supply.
Office landlords are expected to have greater pricing power next year, on the back of a limited supply of new office space in the core central business district (CBD) - where CapitaCommercial Trustand Keppel Reit derive the bulk of their income - and nothing in the pipeline for 2015. On the retail front - where CapitaMall Trust and Frasers Centrepoint Trust have the greatest exposure - there is a glut of space in the suburban areas. But occupancy and rental rates are expected to remain stable because the supply is spread across the island, and because suburban malls are resilient through economic cycles as providers of non-discretionary items to homes in nearby estates. In the business and science park space, where Ascendas Reit has the largest exposure, the strong take-up of upcoming space will keep occupancy and rental rates broadly stable next year, said Moody's.
Raffles Education is in a deal to sell the land use rights and property in China's Hebei province to through a 70:30 jointventure firm and a put option agreement. Raffles Education has an irrevocable put option to sell its 70% share in the JV to its partner at an exercise price of RMB700m. Based on this price, the excess of the net proceeds of the put option over the land and property's book value is about $27.4m. The company intends to utilise the proceeds for reinvestment in the core education businesses of the group.
Lum Chang has entered into an agreement to acquire the freehold property located at 52 to 57 Price's Square, London for £26m plus tax of about £5.2m. The property extends to about 30,099 sq ft within six inter-communicating buildings and is currently operating as a hotel. The executive condominium (EC) scheme has been tweaked to bring the terms for ECs closer to that for public housing and to support a stable and sustainable EC market. The Ministry of National Development said that there will be three changes. The first change involves the Mortgage Servicing Ratio (MSR) for EC housing loans from financial institutions for units bought directly from developers. The MSR, imposed by the Monetary Authority of Singapore (MAS), will be capped at 30% of gross monthly income and will apply to purchases where the option-to-purchase is granted today and hereafter. Previously, the MSR did not apply to ECs. The second change is that second-timer applicants who buy EC units directly from developers must now pay a resale levy, just like second-timer applicants who buy Build-To-Order (BTO) flats. The third and final change is the reduction in the cancellation fee for EC buyers from 20% of the purchase price to 5%, in line with the practice for BTO flats.
The employment outlook in Singapore is tipped to stay favourable in the first three months of next year, says the
Manpower employment group. 19% said they expect to recruit staff; 3% said they would trim staff. This yields a net employment outlook of 16%. Another 67% said they will be in a holding pattern in staffing levels.
China's annual consumer inflation unexpectedly slowed in November, easing market fears of any imminent policy
tightening as authorities meet this week to outline their policy and reform priorities for 2014. Annual consumer inflation unexpectedly slowed to 3% in November from an eightmonth high of 3.2%. The market had expected the inflation rate to hold steady at October's level. From a month earlier, consumer prices fell 0.1%, the first fall in six months and a touch weaker than market expectations that they would be flat.
China's producer prices fell 1.4% y-o-y in November - the 21st consecutive month of decline - against a fall of 1.5% in the previous month. On a monthly basis, producer prices were unchanged. A strong jump in exports and a run of surveys of factory and service sector activity indicate that the world's second-largest economy has regained some momentum since arresting a protracted slowdown in the middle of the year.
Source: DBSV
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