SINGAPORE DAYBOOK :Court quashes Thomson View sale

[SINGAPORE] A proposed $590 million collective sale of Thomson View Condominium is scuppered after the High Court found that its marketing agent's offer of more than $548,000 in incentive payments to four owners to get a requisite 80 per cent majority amounted to bad faith.
Justice Andrew Ang, in a 30-page decision released yesterday, found that HSR International Realtors "egregiously breached its duty to avoid any possible conflict of interest", and also "breached its duty of transparency" by failing to disclose the incentive payments to the Collective Sales Committee (CSC) and other owners.
As such, the four owners should not be counted in the requisite 80 per cent majority for the sale to go through, he ruled. Discounting these owners, the 80 per cent consent threshold would not be reached; the plaintiffs were therefore not even in a position to apply for court approval of the sale, he said.
Yesterday's ruling came two weeks after the Court of Appeal upheld a decision by Justice Belinda Ang to disallow a $33 million en bloc sale of Harbour View Gardens because she found its marketing agent's offer of a $200,000 inducement to a couple to join the sale is "commercially unacceptable", and that its CSC had failed to act in good faith. (Source: The Business Times)

MARKET SCOOP

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(Source: The Business Times)

UOB KAY HIAN says...

KEPPEL REIT | BUY | TP: S$1.46

Valuations are now more compelling as Keppel REIT (KREIT) offers a yield of 6.6%, 40bp over the average 6.2% yield for office S-REITs
With physical office transactions at 3-3.5% cap rates, office REITs offer better value for investors to gain exposure to economic growth and improvements in office rentals
Its recent private placement (completed on 6 August) of 95m new units at S$1.26 per unit raised gross S$120m (S$118m after fees)
The proceeds were used to fund the S$192m acquisition of 8 Exhibition Street in Melbourne, Australia, and remove the near-term equity overhang following the
recent acquisition
Mirvac and KREIT recently announced that 8 Chifley Square in Sydney is 70% pre-committed ahead of its completion in Oct 13
This is 14ppt up from Apr 13's (56% pre-committed) and reflects positive leasing sentiment for high-quality office space despite slowing economic growth due to a moderation in commodity prices
The new tenant, data analytics firm Quantium, joins other tenants including law firm Corrs Chambers Westgarth and insurance leader QBE Insurance Group, at 8 Chifley. Occupancies and pre-commitments for the other Australia properties (275 George Street,
77 King Street and Old Treasury Building) in KREIT's portfolio are all above 97%
About 90% of KREIT's portfolio by valuation is centred in Singapore, despite recent
acquisitions in Australia
Among office REITs, KREIT has the highest quality office portfolio with over 92% of its Singapore portfolio located in the Raffles Place and Marina Bay precincts
Following the latest distribution-in-specie of 8 KREIT units for every 100 Keppel Corp shares, we estimate Keppel Corp has pared down its stake to a mere 0.1% (~3.7m shares)
Keppel Land remains a substantial shareholder, with a 46% stake in KREIT
Although there could still be some near-term weakness when Keppel Corp's shareholders receive their KREIT units on 13 September, the previous distribution-in-specie on 8 May marked a 6.8% one-week rally in the share price as new unit holders did not divest of their KREIT units
We view any near-term weakness as a good opportunity to accumulate KREIT
We expect Grade-A office rentals to rise 8% yoy in 2014 after bottoming in 2013
Office rentals in 2Q13 remained unchanged qoq at S$9.55psf pm, slowing from the average 3.4% quarterly decline in 2012
We expect office demand to rebound to 2.1m sf p.a. in 2013-17, while demolitions could remove over 60% of upcoming supply over the next two years
As MBFC Tower 3 achieves close to 80% occupancy, and following the positive leasing momentum for OFC, we believe MBFC Tower 3 will be leased by end-13
Any acquisition could be supported through asset divestments, potentially strata-office units in Prudential Tower, as demand for strata-office space remains buoyant
Space at Prudential Tower is valued at S$2,200psf, while strata units at Suntec City are transacting at S$2,750psf
Key risks remain the relatively high gearing of 44% post equity fund raising and the acquisition of 8 Exhibition Street, although further equity fund raising will likely be paired with acquisitions
We upgrade the stock to a BUY (from HOLD) with an unchanged target price of S$1.46, based on dividend discount model (required rate of return: 7.1%, terminal growth: 2.2%)

OCBC Securities says ...

OLAM INTERNATIONAL | HOLD | TP: S$1.45
Muddy Waters (MW) has just issued a new report on Olam International Limited (Olam), titling its "Not Changing the Old Ways" following the release of its FY13 results
The report again raised issues over transparency and corporate governance, as well as remaining skeptical if Olam will operate differently in the future; this given that there have been no changes to Olam's board since MW's initial report
In particular, the viability of the Gabon fertilizer project was called into question, where MW believed that Tata Chemical (TCL) is highly unlikely to participate in the project
We note that during the results briefing, Olam stated that its relationship with TCL is "still strong" but added that they are "still discussing and have not reached closing conditions"
MW now recommends that Olam "fall on the sword" and terminate the project, despite spending significant money on dredging
In any case, our current forecasts do not include any contributions from Gabon as we have always held the conservative view and would only include the project if it has achieved financial close
Recall that the Gabon project was first raised in Apr 2011 where Olam announced
that TCL will invest US$290m to acquire a 25.1% stake
While we expect the new MW report to weigh slightly on sentiment, we are maintaining our forecasts for now, given that we have already pared our FY14F core net profit figure by 16% recently
Maintain HOLD with an unchanged S$1.45 fair value (based on 10x FY14F EPS) for now

CIMB Securities says...

OCBC | UNDERPERFORM | TP: S$10.09

Our GGM-based target price of S$10.09 (based on 1.27x CY13 P/BV) remains unchanged
Maintain Underperform, with the de-rating catalysts of rising interest rates, poor investment appetite from private banking clients and eventually, rising credit costs
OCBC remains our least preferred Singaporean bank
In Aug, 10-year SGS yields rose by ~30bp and 10-year US treasury yields rose by 20bp
Talk of tapering has intensified
The US Fed is widely expected to scale back QE by 4Q13
When interest rates rise, OCBC's insurance earnings will be dragged down as non-par gains subside
OCBC's 2012 ROE beat peers because GEH's accounting earnings were buoyed by the rising bond market
The reverse is now true
We expect OCBC's ROE to lag peers now, making it difficult to justify current valuations
If OCBC's non-interest income engines were more diversified, then there would be some support from transactional fee income
Our findings show that it has lagged peers in trade fees, loan fees and investment-related fee growth
The only fee streams that OCBC excels at are wealth management (WM) and insurance
The recent guidance that private banking flows have been slower than normal does not foster confidence that WM will cushion the lower insurance contribution
The worst credit quality problems of Singaporean banks typically do not emanate from their Singaporean loan books
In 1998, it was Indonesian loans
In 2008, it was OECD loans and investment securities (CDO, bank debt)
OCBC was top in 2009's asset quality class because it did not have these credits
However, as OCBC currently has the highest exposure to problematic Indonesia and India, it is likely that its NPL will deteriorate to the same level as its peers'
Coming from especially low levels, increasing credit costs will pose a potential headwind to earnings