DBS Equity Research: Wired Daily 27 Jan 2015

kiasutrader

Publish date: Tue, 27 Jan 2015, 03:38 PM

Plantation Companies - CY15F-17F CPO prices cut 9-13% on lower forecast of soybean oil and crude oil prices, stronger USD

Palm oil's 4% price recovery (US$/MT) since mid Dec14 reflected the steep 22% drop in Malaysian Dec14 output - given the worst floods in Peninsular Malaysia since 2006. However, we do not expect the recent price gains to continue given (1) seasonal supply recovery, (2) record South American soybean harvests, (3) drop in crude oil prices and (4) prospective shift in Indian demand to soybean oil. We cut FY15/16/17 CPO price forecasts (i.e. US$/MT, FOB Pasir Gudang) by 9%/13%/11%, respectively. However, after accounting for the weaker Ringgit, these translate to upward adjustments of 4%/2%/6% in Ringgit terms.

We adjusted FY14F earnings by -28% to +6%; while FY15F earnings were revised by -26% to +14%, reflecting revisions in average selling price (ASP) and forex (FX) rates. Lower prices should trim refining margins this year (despite absence of discretionary biodiesel demand); while some planters with USD debts exposure are due to incur FX losses. Our fair value estimates were adjusted by -21% to +11%. An anticipated price rebound next year should position young planters ahead of established ones, thanks to their volume-growth leverage. For SGX-listed planters, our top pick is Bumitama Agri.

Ascendas India Trust's3Q15 DPU of 1.16 Scts (+6% y-o-y) in line. Near term, a-iTrust is expected to benefit from the appreciation of the INR vs. SGD (45.7 spot vs 48.1 at end-Dec14). We tweak our FY15-16F DPU higher by 2-3%. Going forward, with continued positive rental reversions and contribution from Aviator, we expect a-iTrust to deliver a healthy 9% CAGR in DPU over FY14-16. As we roll forward our valuation to FY16 and impute the trust's new development activities, we raise our TP to S$0.95 from S$0.87. Maintain BUY.

CapitaLand's wholly-owned serviced residence business unit, The Ascott Limited (Ascott), has secured contracts to manage three more properties with over 300 apartment units in Beijing and Hong Kong. The new properties will further reinforce Ascott's leadership position as the largest international serviced residence owner-operator in China, with over 12,900 apartment units in 72 properties across 23 cities.

Hock Lian Seng Holdings has been awarded a contract from Land Transport Authority for the Design and Construction of Stabling at Gali Batu Depot. The contract sum is approximately $137.4m. The project will commence in January 2015 and is expected to complete by November 2019.

JES International Holdings proposed to place 183m new shares at S$0.036 per share. The placement price represents a discount of approximately 0.28% to the last weighted average price. The funds raised will be partly used for repayment of loans.

Dragon Group proposed to place 27.8m new shares at the issue price of S$0.09 per share. The issue price represents a premium of 19.2% over the last volume weighted average price. Gross proceeds of approximately S$2.5m will be used as working capital and/or to fund the acquisition of businesses by the Company.

Sincap Group proposed to place up to 351m new shares at an issue price of S$0.10 for each Placement Share, amounting to an aggregate consideration of up to S$35.1m. The Placement Price represents a premium of approximately 0.9% to the last volume weighted average price. The proceeds will be used to fund acquisitions and for general working capital of the Group.

According to a PwC survey, the global exchange traded fund (ETF) market is expected to almost double to about US$5 trillion by 2020. Asia is expected to contribute significantly to that growth, although poor distribution and a lack of innovation could be hurdles to the region's uptake of ETFs, the consulting firm said.

Singapore's industrial production fell 1.9% y-o-y last month, with factory output declining across all clusters except precision engineering. The drop was far less than the 3.4% contraction the market had forecasted. Production in the key electronics cluster slipped back into negative territory in December, with a 2.4% fall in output. After adjusting for seasonal factors, industrial production grew 1.8% month on month in December. Excluding biomedical manufacturing, output would have increased 1.5%.

US stocks edged higher as investors brushed off fears that a leftist victory in Greece would bring fresh crisis to the Eurozone. Energy stocks led gains after Abdulla al-Badri, Opec's secretary-general, told Reuters that oil prices may have reached a floor and could move higher very soon. After the closing bell, Microsoft shares lost 3% to US$45.60 while United Technologies fell 2.5% to US$115.80 after their quarterly results.

Source: DBS

Bumitama Agri (P8Z)CapLand India T (CY6U)Hock Lian Seng (J2T)JES Intl (EG0)Dragon (MT1)Sincap (5UN)

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