DBS Equity Research: Wired Daily 1 Oct 2014

kiasutrader

Publish date: Wed, 01 Oct 2014, 12:25 PM

Plantation Companies - More uncertainties in a weak market; we recommend restraint in adding positions

According to Jakarta Post newspaper, the Indonesian parliament yesterday passed the Plantation Bill into law that set stricter rules on foreign ownership in the plantation sector. According to the article, the law does not set foreign ownership limit, but this would be stipulated in a subsequent government regulation (PP) issued to interpret the law. The new law also regulates the scope of plantation areas and land concessions. There are now more uncertainties in a weak market - we recommend restraint in adding positions.

City Developmentshas stepped up its overseas expansion with a maiden acquisition of a residential site in Japan. The group has tied up with a US-based investment firm to acquire a prime freehold land site in Tokyo for 30.5 billion yen S$355.5m. This acquisition is in line with CDL's strategy to accelerate overseas expansion to supplement its existing operations, said CDL executive chairman Kwek Leng Beng.

Major shareholder China Investment Corp (CIC) has cut its stake in Noble Groupto about 10% from 14%, according to a Bloomberg report, the 300m shares were sold at S$1.32 each. CIC remains Noble's largest external shareholder. It was not known who the buyer was. CIC had bought the stake in Noble in 2009 from Noble's founder and chairman Richard Elman to increase its exposure to natural resources, at a price of S$2.1137.

Rotary Engineeringproposed to acquire 10% equity stake in an independent bulk storage terminal for petroleum products in Indonesia that will serve as a distribution terminal to the rest of the country for US$1.15m and a loan of US$18.2m to support the operations. This Investment is in line with the Group's longer term objective of making strategic investments that will provide recurring income. It also allows the Group to tap on its strong track record in the oil and gas industry and form new strategic partnerships to gain greater foothold in the Indonesian market.

Japfaannounced that its subsidiary, PT Japfa Comfeed Indonesia has entered into a JV to acquire a 17.5% stake in PT Nusa Prima Logistik (NPL), which has signed an MOU for the right to own, operate and use a warehouse in an Indonesian dry bulk port. This joint venture will contribute to the Group's logistics management of its imported raw materials. The initial capital injection by PT Japfa is IDR 218,750 million (about US$18,000) and the total capital required from PT Japfa for the warehouse project (which will be injected over the next 2 years) is not expected to exceed US$7.5m.

Giken Sakata announced that PT Cepu Sakti Energy, a subsidiary of the Group, has secured a 10-year extension for both the Trembul Agreement and Gabus Agreement. The extensions will allow PT CSE to operate in its Trembul oil field and Gabus oil field until 2 November 2020 and 14 December 2021 respectively. Both agreements can be further extended for another 5 years. With the extensions, the Group now has higher visibility on its drilling schedule for these two oil fields and its portfolio as a whole. Going forward, focus remains on increasing production while assessing further oil field opportunities as they arise.

Hiap Hoe plans to sell 39 shop units, most of which are strata-titled units in Parklane Shopping Mall, in line with its plan to divest non-core assets even as it capitalises on healthy investor demand for retail space.

KLW Holdings announced the appointment of Prince Abdul Qawi of Brunei as the Non-Executive Chairman of the Group. Prince Qawi is the second largest substantial shareholder of the Group since the subscription of KLW's placement shares in June 2014. KLW also announced the acquisition of a property located at 301 Flinders Lane, Melbourne, Victoria, Australia for A$23.6m. This is a prime freehold property within Melbourne CBD and is a stone's throw away from Collins Street financial district. The Property is currently zoned "Capital City Zone 1" and can potentially be developed into high density residential, commercial, retail and/or hotel uses.

China Environmental Resources Group has terminated the proposed acquisition of entire issued share capital of Clear Wisdom. The proposed acquisition would have enabled the Group to diversify and further expand its business portfolio into the PRC commercial property sector.

Bank lending in Singapore returned to growth in August, thanks to a rebound in business loans. Over the month, total domestic banking unit (DBU) loans rose by S$7.1 billion to S$604.6 billion. The 1.2% increase marked the first growth in loans since May - borrowings had dipped ever so slightly by 0.1% in July, after staying flat in June. On a year-on-year basis, credit growth accelerated in August after slowing for eight consecutive months, increasing 11.8%, compared to 10.8% in July. The increase in total borrowings was powered by a 1.6% rise in loans to businesses, which staged a turnaround in August after contracting 0.3% in both June and July. Consumer loans grew by 0.5% month on month in August, from July's 0.3%. Compared to the same month a year ago, August registered a 5.8% increase in consumer loans - slower than the 6% seen in June, and the 17th consecutive month of slower expansion.

US stocks slipped, dragged down by energy and materials shares as economic data disappointed. US consumer confidence fell in September for the first time in five months and home prices in July rose less than expected from a year earlier.

Source: DBS

CityDev (C09)Japfa (UD2)Hiap Hoe (5JK)HS Optimus (504)China Env Res (RS1)

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