DBS Equity Research: Wired Daily 16 Mar 2015

kiasutrader

Publish date: Mon, 16 Mar 2015, 05:49 PM

STI - We expect the STI to hold above 3330

CapitaCommercial Trust - CapitaGreen 69% committed as of Dec-14; maintain HOLD, TP S$1.81

While neighbouring ASEAN equities are vulnerable to further declines due to expensive PE valuation and weak regional currencies, we maintain our view for the STI to stay resilient even though it has fallen below our stated 3380-3390 support level. We believe that the Singapore equity market is trading near its valuation trough. We expect the STI to hold above 3330.

Furthermore, we do not rule out a rebound in the SGD against the USD in 2Q. From a mid- to long-term perspective, the multi-month rally of the USD/SGD currency cross has pushed passed a major 23.6% upward retracement level at 1.35. The next key level is the 38.2% retracement at 1.45. But we note intermediate resistance around 1.40. An intermediate pullback off c.1.40 towards the 1.35 support is possible before the USD/SGD strengthens further to 1.45.

Our analysts visited CapitaGreen, which received TOP in December 2014. Formerly Market Street Carpark, the asset was redeveloped into a 40-storey Grade A office tower with NLA of 700k sqft and average floor plate of 20-25k sqft. CapitaCommercial Trustcurrently owns 40% of the asset, and has a call option to acquire the remaining 60% within 3 years of its completion As of December 2014, CapitaGreen has achieved commitment levels of 69%. We understand that most tenants have opted for long term leases; 91% of leases expire after 2019, offering long term income visibility. The Manager has guided that contribution to DPU from CapitaGreen is likely to commence only in 2016. Maintain HOLD and TP S$1.81.

Vard Holdings terminated two shipbuilding contracts for platform supply vessel, or PSV, linked to insolvent customers. It has received a 10% instalment for one of the vessels. The group does not expect to repay the prepayment received, and expects to be able to sell the vessels at a price that will cover the expected construction cost less the prepayment received.

Unemployment in Singapore stayed low in 2014 despite the fact that more workers were laid off in the fourth quarter amid ongoing business restructuring. The unemployment rate in 2014 was 2% overall, and 2.9% for Singaporeans. This is largely the same as the previous year's figures, which were 1.9% and 2.9% respectively.

Retail sales dipped 5% to S$3.7 bn, compared to the S$3.9 bn posted in January 2014. The sales of motor vehicles, and telecommunications apparatus and computers, were the only two sectors with significant increases at 33.2% and 25.9% from January 2014's figures respectively.

Excluding motor vehicles, retail sales decreased 8.7%. Sales in most other categories, such as department stores, supermarkets, apparel and footwear and recreational goods, all fell by between 7% and 42.1% y-o-y. On a month-to-month basis, overall retail sales climbed 4.8% in January 2015 after seasonal adjustment, on the back of brisk sales of motor vehicles, which increased 22.8% month-on-month.

Source: DBS

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