DBS Equity Research: Wired Daily 9 Mar 2015

kiasutrader

Publish date: Mon, 09 Mar 2015, 10:57 AM

Dairy Farm - FY14 results in line; valuations compelling. Maintain BUY with higher US$10.42 TP

It's "good news is bad news" as a stronger than expected February job numbers ignited worries that the FED might raise interest rates soon. February's nonfarm payrolls showed a gain of 295k, above consensus expectations for 240k. The unemployment rate fell to 5.5% from 5.7% the previous month. The bond market reacted with the US 10-yr yield rising to 2.25% and that for the 2-yr surging to 0.73% on heightened anticipation of a rate hike. The USD strengthened against major currencies. It now trades at 1.3776 to the SGD.

The benchmark STI should start the session lower on the back of Friday's fall on Wall Street. We maintain our view for firm near-term support at the 3380-3390 technical gap, which is slightly below the 13.4x (-0.25SD) 12-mth forward PE level. SREITs should underperform amid higher FED rate hike concerns while yield names that are in net cash position such as China Merchants and Sheng Siong hold up better.

FY14 results for Dairy Farm in line, driven by Health & Beauty and Home Furnishing. Final DPS of 16.5 UScts within expectations. We believe the high cost structure, which is a drag on South East Asia Food's business segment, is unlikely to diminish in the immediate term. However, we remain positive on the group's other non-Asean food businesses : 1) the Yonghui acquisition will contribute from FY15F/FY16F; 2) IKEA will continue to grow albeit from a relatively low base; and 3) strong performance momentum from Health & Beauty stores especially in North Asia will spill over into FY15F. Current valuations of 22.5x forward PE are compelling, at below regional peer average (24x) and its historical 6-year mean (26x). Maintain BUY with higher US$10.42 TP (Prev US$ 10.39).

HongKong Land's FY14 underlying earnings were in line with our forecast. We expect strong development profits from China in FY15, however, this is likely to be more than offset by lower contributions from Singapore and Hong Kong. Maintain BUY with US$8.13 TP (Prev US$8.05).

Genting Hong Kong will receive US$316.9m of net proceeds from a previously reported plan to sell a 2.7% stake in associate company Norwegian Cruise Line Holdings. The sale will reduce Genting Hong Kong's stake in Norwegian Cruise Line, held through Star NCLC Holdings, to about 22.2% from 24.9%. Genting Hong Kong is currently acquiring luxury cruise line Crystal Cruises for US$550m from Japanese shipping company Nippon Yusen Kaisha.

KS Energy has been awarded a contract for the "KS Java Star" jack-up drilling rig. Work is expected to begin in March 2015. The expected value of the new contract is approximately US$7.2m.

A supply crunch in prime office space drove the average total occupancy cost for Singapore CBD office space up 9.8% from 2013's level to US$93 per sq ft (psf) a year lastyear. This was 49% cheaper than rents in Hong Kong's CBD, where the average total occupancy cost for office space came in at US$184 psf a year last year. Globally, the most expensive offices last year were in London's West End, where the average total occupancy cost was US$264 psf a year.

China's trade surplus hit a record high last month as exports surged on better global growth and imports remained weak, underlining the inherent weakness in domestic demand. Data released showed that China posted a record trade surplus of US$60.6 billion last month. For January and February combined, the surplus totalled US$120.7 billion. In February, China's exports gained more than 48% y-o-y, far above matket's expectations, while imports slid more than 20%.

Source: DBS

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