DBS Equity Research: Wired Daily 24 Nov 2015

kiasutrader

Publish date: Tue, 24 Nov 2015, 01:47 PM

CapitaLand - Positive on key developments in East China. Maintain BUY and TP of S$3.73

Our analyst is positive on CapitaLand's key developments in East China after his recent visit to various key developments undertaken by CapitaLand in Shanghai, Hangzhou and Suzhou. With a combined development cost of c.RMB 25bn (CapitaLand's effective stake of c.RMB 11.5bn), we believe that the execution and positioning of the various projects - Raffles City Hangzhou, Raffles City Changning, and Lu One in Shanghai, Suzhou City Mall remain on track and will be key drivers to higher ROE on completion from 2017 onwards. Management strategy is to deepen their focus in key Tier 1 and 2 cities in China through M&As and urban renewal projects to gain access to prime land. Maintain BUY and TP of S$3.73.

The Land Transport Authority announced that the results of the second bus package (Loyang Bus Package). Go-Ahead has been awarded the contract. Go-Ahead is a bus and rail operator from the UK. With the award, it will manage the new Loyang Bus Depot and the 25 bus services will operate from Changi Airport and Changi Village Terminals, as well as Pasir Ris and Punggol Bus Interchanges. The bus services will be placed in contracting regime of two tranches starting from 3Q 2016. The estimated total fee for the 5-year contract is S$497.7m. There were a total of 10 bids submitted with their respective technical proposal, but only 8 tenders were selected for the price evaluation. As compared to the first bus package (Bulim Bus Package) which was won by Tower Transit, this current tender went to the lowest price bidder.

SIA Engineeringannounced that it has signed an agreement with Rolls-Royce Overseas Holdings (RROH) and Hong Kong Aircraft Engineering Company (HAECO) to divest its 10% stake in Hong Kong Aero Engine Services (HAESL) to RROH and HAECO in equal proportion. At the same time, HAESL has signed an agreement with Rolls-Royce Singapore (RRS) to divest its 20% stake in Singapore Aero Engine Services Private Limited (SAESL) to RRS. The divestments are expected to result in a net gain of approximately S$186.8m for SIA Engineering for FY Mar 16.

Noble Group may have its credit rating cut to junk by Standard & Poor's on concerns about the company's liquidity. The ratings company said that it is placing its BBB- rating on Noble, the lowest measure for investment-grade debt, on review with "negative implications." S&P said it aims to resolve the CreditWatch listing within three months.

Singapore has logged its 12th straight month of negative inflation, marking a stretch of sub-zero readings that has lasted longer than that during the global financial crisis. The last period of negative headline inflation lasted from July to December 2009. October's headline inflation eased to -0.8% from September's -0.6%. October's core inflation, which excludes the costs of accommodation and private road transport, moderated to 0.3%. lower than the previous month's 0.6%. This mostly reflected the impact of lower electricity tariffs and prices of retail items. The largest component of core inflation, food inflation, remained unchanged at 1.8%. For the full year, the government expects core inflation at 0.5% and headline inflation at -0.5%. Next year, it expects core inflation to come in at 0.5 to 1.5%, and overall inflation at between -0.5 and 0.5%.

Source: DBS

SIA Engineering (S59)

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