Asia Pacific Equity Research | Singapore

MARKET

PULSE
Key Idea
Chg -23.5 -2.6 -4.8 -3.9 0.2 213.3 587.4 % Chg -0.7 -1.4 -0.6 -0.5 0.0 8.9 48.3

Morning Call 1 Aug 2013

Key Singapore Indices Close 3221.9 179.4 832.2 750.7 544.6 2597.8 1803.5

STI Catalist Finance Property Electronics Vol(m) Val(S$m)

World Indices Close 15499.5 3626.4 1685.7 6621.1 1772.6 21883.7 13668.3 1423.1 1914.0 8107.9 Chg -21.1 9.9 -0.2 50.1 -22.5 -70.3 -201.5 -12.3 -3.0 -55.6 % Chg -0.1 0.3 0.0 0.8 -1.3 -0.3 -1.5 -0.9 -0.2 -0.7

Dow Jones Nasdaq S&P500 FTSE KLCI Hang Seng Nikkei SET KOSPI TWSE

Fortune REIT: MOU for Kingswood Ginza property FRT has entered into a non-binding MOU in connection with the acquisition of 100% of the issued share capital of a target company by FRT and assignment of the shareholder loans to FRT. The target company owns Kingswood Ginza Property, which comprises the entire Kingswood Ginza Mall as well as other retail, kindergarten, parking lots and ancillary spaces. The indicative purchase consideration is HK$5,849m. 142,962,000 new units, representing an increase of 8.4% of the total number of units currently in issue (excluding the new units), have been placed out at HK$6.82 each. The net proceeds of ~HK$947m will be used to partially fund the proposed acquisition. The remainder will be funded through new facilities. In our model, we assume that the acquisition will be completed by midSeptember. While the acquisition is likely to be accretive, we note the continued increase in bond rates since late June, and hence lift our risk-free rate to 2.3% from 2.0%. Incorporating a higher expected market return of 13.5% as well (13.0% previously), we lower our FV to HK$6.95 from HK$7.51. On valuation grounds, we downgrade FRT to a HOLD.

Market Statistics (SG) STI No. No. No. 52-week range of gainers of losers of unchanged 2,932 3,465 182 375 154

More reports: Singapore Post: Expecting another steady quarter Yoma Strategic Holdings: Key catalyst ahead - the Landmark Project - Far East Hospitality Trust: Rendezvous acquisition Issue price for new stapled securities - DBS Group: 2Q in line; ended Danamon bid News Headlines US stocks on Wed ended little changed after the Fed offered few clues on potential changes to its monetary policy. SGX-listed companies will have to hold their general meetings in Singapore beginning 1 Jan 2014 and conduct poll voting in two years' time. SGX has launched long dated order types for securities, allowing investors to retain buy or sell orders for a maximum of 30 days. StarHub has launched a high-speed Ethernet network for financial traders which it says is four times faster than the existing one.
Sources: MasNet, Bloomberg, Business Times, Straits Times and other media

Economic Statistics S$/US$ Yen/US$ 3-mth S$ SIBOR 3-mth US$ SIBOR Crude futures (US$) 1.3 97.8 0.4 0.3 105.1 0.0 0.0 0.0 0.0 0.1

Research Team (65) 6531 9800 e-mail: info@ocbc-research.com

Please refer to important disclosures at the back of this document.

MCI (P) 006/06/2013

OCBC Investment Research Market Pulse 1 Aug 2013

Fortune REIT: MOU for Kingswood Ginza property Portfolio valuation to grow by 26% Placement; units increase by 8.4% Higher discount rate, downgrade to HOLD Kingswood Ginza in close proximity to mainland FRT has entered into a non-binding MOU regarding the acquisition of the entire issued share capital of the target company by FRT and the assignment of the shareholder loans to FRT. The target company owns Kingswood Ginza Property, which comprises the entire Kingswood Ginza Mall as well as other retail, kindergarten, parking lots and ancillary spaces. Kingswood Ginza Mall is the largest shopping center in HKs Yuen Long district and is in close proximity to the mainland. The indicative purchase consideration is HK$5,849m. With 1H13 net property income at HK$110.4m, implied annualized NPI yield is 3.78%. NPI yield of the existing portfolio is ~3.94% (based on annualized 1H13 NPI). If the occupancy of Kingswood Ginza Property can be raised from the current 95.5%, we believe its NPI yield could be brought closer to 4%. Increase portfolio valuation by 26% The acquisition could increase FRTs portfolio valuation by ~26%. 142,962,000 new units, representing an increase of 8.4% over the number of prior units, have each been placed out at HK$6.82, which is at a discount of 4.4% to the volume weighted average price for trades done on the SGX-ST and the SEHK for 29 July. The net proceeds of ~HK$947m is intended to partially fund the acquisition. The remainder funding will come from new facilities which will bear a blended interest margin of 1.48% per annum over HIBOR. The borrowings will become payable in 3.5 to 5 years. Downgrade to HOLD In our model, we assume that the acquisition will be completed by mid-September. While the acquisition is likely to be accretive in the longer term, we note the continued increase in bond rates since late June, and hence lift our risk-free rate to 2.3% from 2.0%. Incorporating a higher expected market return of 13.5% as well (13.0% previously), we lower our FV to HK$6.95 from HK$7.51. On valuation grounds, we downgrade FRT to a HOLD. (Sarah Ong) . . . . .

Singapore Post: Expecting another steady quarter Expecting steady results More acquisitions along the way Improved positioning Monitoring expenses in upcoming results Singapore Post (SingPost) will be announcing its 1QFY14 results after market close on 2 Aug 2013. We expect net profit to be around S$35m, which would represent about 24% of our full year estimate. Expenses are likely to remain elevated due to inflationary cost increases, additional headcount from new subsidiaries, growth in volume-related expenses and other administrative costs. The group is also pressing on in its investments to enhance service quality and productivity. In particular, SingPost will invest more than S$100m in infrastructure (e.g. better sorting machines), services and enhancements over the next few years. Revenue growth to be partly driven by acquisitions in the short term The group has been focused on growing its non-mail businesses with the help of acquisitions. For instance, General Storage was acquired in Feb this year to grow SingPosts self-storage business in the region. A 62.5% stake in Famous Holdings was also acquired early this year, with the aim that its freight-forwarding capabilities will complement SingPosts e-commerce capabilities in the region. We expect the group to continue to grow inorganically as it will be the fastest way to diversify from the mail business. Improved positioning, but awaiting further growth With Quantium Solutions full integrated by now, SingPost has improved its positioning in the regional e-fulfilment business. The increasing popularity of regional e-commerce websites should drive inbound and outbound volumes in Asia, providing further growth opportunities. We look forward to SingPosts transformation which remains underway. As the group increases its exposure to fastergrowing businesses such as the logistics and e-commerce segments, we increase our terminal growth assumption from 1.5% to 2.0%, thus bumping up our fair value estimate from S$1.23 to S$1.32. Maintain HOLD. (Low Pei Han) . . . . .

OCBC Investment Research Market Pulse 1 Aug 2013

Yoma Strategic Holdings: Key catalyst ahead - the Landmark Project Higher staff costs and slow construction Selling LDRs in Star City Zone B Awaiting Landmark acquisition 1QFY14 PATMI down 81% YoY due to higher staff costs and slow construction Yoma reported 1QFY14 PATMI of S$0.4m, which decreased 80.6% YoY mostly due to higher staff costs as the group continues to build up its management team in anticipation of future activity. We judge 1QFY14 PATMI to be below view forming only 3.7% of our full year forecast due to a slower than anticipated pace of recognition at Star City and higher staff costs. We therefore tweak our estimates down by 29% to S$7.9m and expect recognition at development projects to be mostly backloaded in the fiscal year. 1QFY14 topline came in at S$15.2m, up 11.6% YoY due to increased contributions from recognition of residential sales. Agreement with third party to develop and sell Zone B of Star City We highlight that the pace of sales in Zone A of Star City has slowed to only 22 units over the quarter as Building 3 (260 out of 264 units sold) and Building 4 (260 out of 264 units sold) are by now almost completely sold. We understand that Building 5 is expected to be retained for rental purposes. For Zone B of Star City, Yoma has entered into an agreement with a third party investor for the sale of LDRs for five buildings (1043 units) and would receive incentive fees if certain sales targets to end buyers are met. Over 1QFY14, Yoma has already sold the LDR for the equivalent of one building for S$5.93m. We expect the LDRs for two more Zone B buildings to be sold over the next two quarters. Awaiting the Landmark Project acquisition We continue to await more color regarding the development of the Landmark Project in Yangon and believe that the completion of the acquisition, on which the subsequent rights issue is conditional, would likely be a key catalyst for the share price ahead. We understand that this project is currently a key item of focus for management. Maintain HOLD with an unchanged fair value estimate of S$0.87 (20% premium to RNAV). (Eli Lee) . . . . .

Far East Hospitality Trust: Rendezvous acquisition Issue price for new stapled securities Far East Hospitality Trust (FEHT) has announced the issue price of new FEHT stapled securities to be issued to the The Straits Trading Company (as partial consideration for the proposed acquisition of Rendezvous Grand Hotel and Rendezvous Gallery), the Far East Organization (FEO) group of companies (pursuant to the equity placement to the FEO group), and the REIT manager (as payment for 80.0% of acquisition fee payable in relation to the acquisition). The issue price is at S$0.9302 per stapled security, based on the volume weighted price for FEHT trades done on the SGX for the period of 10 business days commencing from the day on which the existing stapled securities trade exdistribution i.e. the period from 18 July 2013 to 31 July 2013. The trading of the 148,304,059 in aggregate of new stapled securities is expected to commence today, 1 Aug, at 2pm. Pending the 2Q13 results which will be released next week, we maintain our FV of S$1.01 and HOLD rating on FEHT. (Sarah Ong) . . . . .

DBS Group: 2Q in line; ended Danamon bid DBS Group Holdings posted 2Q net earnings of S$887m this morning, up 10% YoY and 7% QoQ. This is in line with consensus estimate of S$883m. Net Interest Margin (NIM) eased off from 1.72% in 2Q12 and 1.64% in 1Q13 to 1.62% in 2Q13. Loans grew a decent 5% from last quarter to S$234.8b by Jun 2013. In terms of fee income, the top performers were Investment Banking, up 82% in 1H to S$111m, followed by Wealth Management (+44% to S$214m) and Stockbroking (+29% to S$119m). An unchanged interim dividend of 28 cents has been declared. Stock will trade ex-dividend on 15 Aug and dividend will be paid on or about 7 Oct 2013. Meanwhile, DBS has also announced last evening that the long delayed acquisition of PT Bank Danamon Indonesia has lapsed. However, while this is a slight disappointment for its Indonesian strategy, it is not totally unexpected as this proposed acquisition has been long delayed with no

OCBC Investment Research Market Pulse 1 Aug 2013

clear outcome. We do not expect the market to have included any possible contribution from this proposed deal and as such do not expect this to impact earnings forecasts for the next two years. Meantime, do note that our pre-results rating was a BUY with fair value estimate of S$18.28. We will provide more details after the media and analysts briefings later in the day. (Carmen Lee) . . . . .

OCBC Investment Research Market Pulse 1 Aug 2013

Calendar of key events

Mon 29-Jul-13
XP Power S113 OKP Hldgs 2Q13

Tue 30-Jul-13
SMRT/Mapletree GCCT 1Q14 Tuan Sing/HPHT 2Q13 OSIM 2Q13 Kulicke & Soffa 3Q13 United Overseas Insurance 2Q13

Wed 31-Jul-13
Great Eastern 2Q13 (am) BH Global 2Q13 Elec & Eltek 2Q13 Artvision Tech 1Q14 (est) CapitaRetail China Trust 2Q13 (est) SG Jun Bank Loans & Advances

Thu 01-Aug-13
SembCorp Marine 2Q13 DBS/UOB 2Q13 Cosco/Lippo Malls 2Q13 China Aviation 2Q13 Parkwaylife REIT 2Q13 Roxy 2Q13 Dairy Farm/HK Land 1H13 Mandarin Oriental 1H13

Fri 02-Aug-13
OCBC/Global Prem Hotels 2Q13 Golden Agri/Hi-P 2Q13 Spore Post/UEL 1Q14 Fragrance/Pharmesis/S Land 2Q13 China Av Oil/UIC 2Q13 Jardine Math/Jardine Stra 1H13

05-Aug-13
Forterra 2Q13 Hiap Hoe 2Q13 ARA Asset 2Q13 Baker Tech 1H13

06-Aug-13
SCI 2Q13 Wilmar/Maxi-Cash 2Q13 StarHub 2Q13 City Dev 2Q13 Genting/Hyflux 2Q13 Riverstone 1H13 DMX Tech/Sembcorp Ind 2Q13 STATS ChipPac 2Q13

07-Aug-13
NOL/Challenger 2Q13 IFS/China Merchants Hldgs 2Q13 Far East Hospitality Trust 2Q13 Ezion/YZJ/Vicom 2Q13 Noble/Perennial/UOL 2Q13 Biosensors 1QFY14 Ascendas H-Trust 1Q14

08-Aug-13

09-Aug-13

12-Aug-13
Superbowl/Ho Bee 2Q13 Mewah/Del Monte 2Q13 F&N 3Q13 Hotel Royal 2Q13 Super Group 2Q13

13-Aug-13
Venture/Aspial 2Q13 HTL 2Q13 Amara 2Q13 APTT (am) 2Q13 Cityspring 1Q14 CSE Global 2Q13 SBS Transit/WorldPreci 2Q13 WBL Corp 3Q13

14-Aug-13
Comfort Delgro 2Q13 Global Logistics 1Q13 Armstrong 2Q13 GLP 1Q14 Indofood Agri 2Q13

15-Aug-13
ICP FY13 (est) Ley Choon Group 2Q13 (est) Courts Asia 1Q14 (est) Cordlife FY13 (est)

16-Aug-13
Grand Bks Yatch FY13 (est) Chosen FY13 (est)

19-Aug-13
Capital Drilling S113

20-Aug-13

21-Aug-13
Miclyn Express FY13 (est) Wing Tai FY 13 (est) FJ Benjamin FY13 (est) Union Steel FY13 (est)

22-Aug-13
Ellipsiz FY13 (est) Gems TV Holdings FY13 (est)

23-Aug-13
Jaya FY13 (est) Singapura Finance FY13 (est) Raffles Education FY13 (est) PEC FY13 (est)

26-Aug-13

27-Aug-13
GPR GY13 (est) Noel Gifts FY13 (est) Spindex FY13 (est) Goodpack FY13 (est) Viz Branz FY13 (est)

28-Aug-13
Equation FY13 (est) HupSteel FY13 (est) Memstar FY13 (est) Magnum FY13 (est) Sim Lian FY13 (est) Sin Heng Heavy FY13 (est)

29-Aug-13
Cape Plc S113 Olam FY13 Metax Engrg FY13 (est) Koda FY13 (est) Metech FY13 (est)

30-Aug-13
Greater China Precision S113 (est) CW S113 (est)

Notes:

All US Tech results dates have been adjusted to Singapore dates. US Initial jobless claims are released every Friday. MBA mortgage applications are released every Wednesday.

OCBC Investment Research Market Pulse 1 Aug 2013

SHAREHOLDING DECLARATION:

For shareholding disclosure on individual companies, please refer to the latest reports of these companies.

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RATINGS AND RECOMMENDATIONS:

- OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented. - OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIRs BUY rating indicates a total return in excess of 10% based on the current price; a HOLD rating indicates total returns within +10% and -5%; a SELL rating indicates total returns less than -5%.

Co.Reg.no.: 198301152E

Carmen Lee Head of Research For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd