By Carmen Lee
Tue, 10 Feb 2009, 09:29:04 SGT

Market Pulse: CAPL, CMT, SingTel, Rickmers & Li-Heng (10 Feb 2009)

FOCUS

CapitaLand Ltd: Rights issue to boost war chest

Summary: CapitaLand (CapLand) reported 4Q08 revenue decline of 46.9% YoY to S$703.7m. 4Q08 PATMI plunged 88.4% to S$78m, in line with our expectations. CapLand will also be doing a 1-for-2 rights issue at an issue price of S$1.30 per rights share. This rights issue is a pre-emptive move to enhance its capacity to seize opportunities that arise. At the same time, CapLand will also participate in the rights issue by CapitaMall Trust. Consideration to be paid by CapLand could range from S$365.8m to S$739.2m and its post-rights net gearing would be between 0.3x and 0.33x. Using end-FY08 book value, our FY09 RNAV is now pegged at S$3.85 per share. We are lowering our fair value of CapLand from S$3.27 to S$2.99 (or S$2.42 post-rights. We are also upgrading CapLand from HOLD to BUY as the stock has already fallen 34% since our downgrade on 5 Jan 2009 and the overhang from the Rights issue is now lifted. (Foo Sze Ming)

For more information on the above, visit www.ocbcresearch.com for detailed report.

CapitaMall Trust: Gearing concern removed; Upgrading to BUY

Summary: CapitaMall Trust (CMT) yesterday announced that it will be doing a 9-for-10 rights issue at an issue price of S$0.82 per rights unit. Issue price is at a steep discount of 43.4% to its closing price of S$1.45 prior to the trading halt. We believe that the purpose of the rights issue is for the long term sustainable growth of CMT’s portfolio. Taking into consideration the dilution impact of the rights issue, we are now revising down our FY09 DPU forecast to 9.1 S-cents. There is no change to our RNAV estimate of S$1.94 per share but we are lowering our RNAV discount from 20% to 15% after our gearing concern has been removed. As such, our fair value of CMT has now been raised from S$1.55 to S$1.65 and our ex-rights fair value will fall to S$1.26. As the potential upside is 13.5%, we are upgrading CMT from HOLD to BUY. (Foo Sze Ming)

For more information on the above, visit www.ocbcresearch.com for detailed report.

Singapore Telecom: 3QFY09 results broadly in line

Summary: SingTel reported its 3QFY09 results this morning, which were broadly in line with our forecasts. Overall revenue came in at S$3701.0m, down 3.2% YoY and 4.9% QoQ, versus our estimate of S$3696m, and the results included the consolidation of recently-acquired Singapore Computer Systems (SCS) as a subsidiary (contributed S$173m to topline and S$22m to EBITDA). And as expected, regional associates earnings fell sharply by 33% YoY (-17% QoQ) to S$329.4m, mainly due to forex impact (regional currencies were 9% to 29% weaker against the SGD), as well as weaker operational performance of Telkomsel, Globe and Warid, although Bharti continued to deliver strong operational performance. As a result, net profit fell 16.1% YoY and 7.9% QoQ to S$799.2m, but almost smack on our forecast of S$796.7m. For 9MFY09, overall revenue grew 2.5% to S$11369m, meeting 82.5% of our FY09 forecast, while net profit fell 11.2% to S$2545m, but still around 79.7% of our FY09 estimate.

Going forward, SingTel expects its operating revenues for Singapore (excluding SCS) and Australia to grow at mid single-digit levels; both EBITDAs will also continue to grow, with EBITDA margin for Singapore expected at around 40%; both capex to revenue ratio will rise to mid-teens levels. It also expects its associate earnings to be lower YoY. Last but not least, SingTel expects its consolidated revenue and operational EBITDA to be negatively impacted by the weaker AUD. We will have more after the analyst briefing at 11am. For now, we retain our BUY rating and S$3.09 fair value. (Carey Wong)

Rickmers Maritime: Deadlocked by order book

Summary: Rickmers Maritime (RMT) posted a 11.4% QoQ increase in 4Q08 revenue to US$29.6m - the results met our expectations except for a surprise US$3.5m non-cash provision for vessel impairment. RMT will pay out 2.25 US cents for the quarter, flat QoQ and up 5.1% YoY. The manager said that given current conditions, it would not provide any guidance on FY09 DPU. RMT’s gearing stands at 1.5x debt-to-equity as at 31 December. It is contracted to acquire US$1.1b worth of containerships over the next two years. The trust needs fresh funding to cover both its FY10 acquisitions and its debt repayment schedule. An equity issue in FY09 itself is, in our opinion, necessary to strengthen RMT’s negotiating position with lenders. But the market needs more clarity on financing conditions, the extent of fresh equity required, and the odds of ‘disappearing’ the order book (through an outright vessel sale, a sale-and-leaseback or a sponsor “bail-out”). Maintain HOLD with S$0.40 fair value. (Meenal Kumar)

For more information on the above, visit www.ocbcresearch.com for detailed report.

Li Heng Chemical Fibre: Guides for 4Q08 loss

Summary: Li Heng Chemical Fibre (LHCF) has just guided that it expects to post a loss in the final quarter of 2008. According to management, this loss is due to two reasons – 1) the slowdown in demand for its nylon fibres and 2) unrealized forex losses arising from the translation of its SGD deposits into RMB. As in our earlier report, we were already expecting 4Q08 to be quite a dismal quarter, given the poor sales numbers for the industry in Oct and Nov. As we have mentioned before, the main reason is still the declining ASPs (Average Selling Prices), which we understand have fallen by over 30% YoY. While we had expected LHCF to remain in the black, the forex loss will now push them into the red. In light of the latest development, we are shading down our FY08 net profit by around 7% (translating to 10.5% fall from FY07), but will keep our FY09 numbers for now (as we have already factored in a 32% drop in earnings) until we get a further update from the management during its FY08 results briefing (early March). As LHCF has yet to finalise its expansion (and its capex) plan, we are placing our DCF-based fair value of S$0.44 and BUY rating under review. (Carey Wong)

NEWS HEADLINES

- IE Singapore and Spring Singapore will be launching three major programmes (Export Coverage Scheme, BUILD scheme and Exporter Development Programme) to help facilitate credit, boost demand and build capabilities for the long term.

- The Singapore Tourism Board is putting together a S$90m package to keep tourism ticking in the short term and build capacity for the upturn.

- JTC will temporarily lift the 50% sub-letting cap to help companies cope with the downturn.

- MI-Reit reported a 49% YoY rise in net property income to S$9.39m for 3Q09 and DPU of 2.35 S cents, exceeding the 1.92 S cents DPU in 3Q08.

- SGX has unveiled 28 securities for the first batch of extended settlement contracts that begin trading on Feb 20, 08.

- Raffles Education is investing 2.4b rupiah in a new Raffles International College in Jakarta, Indonesia to offer advanced diplomas.

- Hiap Seng Engineering has won a S$63m project for the provision of mechanical, piping, painting and steel structures works for the Singapore NExtBTL plant project.

- Yongmao Holdings reported a 30.2% YoY fall in revenue to RMB113.6m and a 87.5% drop in net profit to RMB4.1m for 3Q09.