DBS Equity Research: Wired Daily 9 May 2016

kiasutrader

Publish date: Mon, 09 May 2016, 04:54 PM

STI - c.2700 to 2800/2835 in coming weeks on valuation, FOMC meeting & BREXIT referendrum

OUE Hospitality Trust - Opportune time to BUY during earnings lull

While we were spot on in identifying the short-term turning point at 2965, the decline that followed has turned out deeper-than-expected, falling below the 2800 level and even 2750 at the end of last week. In the near-term, we believe that the correction will end soon. Current STI PE valuation looks to have priced in the 1Q earnings cut while technical indicators have fallen to oversold levels. Further downside in the short-term should be limited at 2685-2715. Investors sentiment through May and June is likely tentative. The 2 major macro events that lay ahead - the mid-June FOMC meeting and the 23 June BREXIT referendum, will cap rebound upside at 2800 or 2835 in the weeks ahead. Thus, we peg a range of c.2700 to 2835 in the weeks.

OUE Hospitality Trust's 1Q16 DPU of 1.1 Scts (-26%) y-o-y was below expectations, drag from recent rights issue and weaker contribution from Mandarin Gallery. The Hotel portfolio is resilient with 1Q16 RevPAR up 1% y-o-y. We reiterate our BUY call with a revised TP of S$0.75 (Prev S$0.85). With expectations of an improvement in earnings in 2H16 due to the acquisition of Crown Plaza Changi Airport Extension and opening of Michael Kors and Victoria Secret stores, we believe now is the opportune time for investors to gain exposure to a portfolio of well located hotels/malls.

Vard Holdings said that it has been notified that Harkand Group has entered into administration - which is a procedure under insolvency laws in some jurisdictions. Harkand has one diving support and construction vessel under construction at Vard, originally contracted in December 2013 for delivery in Q2 2016. The vessel is in an advanced stage of construction. Vard said that if the shipbuilding contract is unlawfully terminated by the customer, it will contractually be entitled to retain the advance payments already received, equivalent to 20% of the original contract price, and to resell the vessel.

Vallianz Holdings has been awarded a time charter contract valued at up to US$63m for the supply of two offshore support vessels to a national oil company in the Middle East (NOC). The Group will supply two Anchor Handling Tug, Supply and Safety Standby (AHTSS) vessels to the NOC for a period of up to 7 years. The first AHTSS vessel is expected to be deployed to the NOC's oil fields in the Arabian Gulf during the third quarter of 2016 while the second vessel is scheduled for deployment in the first quarter of 2017. The new contract lifts the Group's chartering services order book to US$950m, which comprises mainly of long term charters stretching up to 2024.

Pharmesis International plans to acquire an industrial complex and two properties with a total consideration of RMB15.6m to expand its production capacity and nonmanufacturing facility. The proposed acquisitions comprise an industrial complex for production capacity expansion and two units within a multi-storey building for non manufacturing facility expansion, both developments still under construction. The manufacturing plant in Industrial complex expected to be completed by April 2017 and commence operations by second half of 2017.

China's exports and imports fell more than expected in April, underlining weak demand at home and abroad and cooling hopes of a recovery in the world's second largest economy. Exports fell 1.8% from a year earlier, reversing the previous month's brief recovery and supporting the government's concerns that the foreign trade environment will be challenging in 2016. April imports dropped 10.9% from a year earlier, falling for the 18th consecutive month, suggesting that domestic demand remains weak despite a pickup in infrastructure spending and record credit growth in the first quarter.

Source: DBS

Pharmesis Intl (BFK)

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