By Carmen Lee
Wed, 21 Apr 2010, 08:36:02 SGT

Market Pulse: Noble Group, KepLand, CMT and FSL Trust (21 Apr 2010)

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Noble Group Ltd: Positioned for growth regardless of Macarthur deal

Summary: Having visited Noble Group’s (Noble) coal operations in Australia and soybean operations in Argentina, we remain positive on the group’s growth strategy. Noble is poised to leverage on rising coal markets via its stakes in Gloucester Coal and Donaldson Coal. Management is especially upbeat on coking coal, a product it believes to be structurally short owing to strong steel demand in China and India. The group recently expanded its soybean capabilities with a new oilseed processing complex in Argentina. It aims to double the size and triple the margins of its soybean operations by expanding in the processing market. Noble has multiple growth engines which will drive medium term earnings growth and we do not expect the recent fallout of the Macarthur deal to have significant impact on its prospects. We maintain our BUY rating and keep our S$3.75 fair value estimate intact. (Lee Wen Ching)

Keppel Land Ltd: Strong earnings driven by Singapore projects

Summary: Keppel Land’s (KepLand) 1Q10 results came in within our expectations. Key earnings driver came from the progressive revenue recognition from its residential projects, lower administrative expenses and associates. These resulted in a 75.3% YoY increase in 1Q10 PATMI to S$64.7m. Property sales in China slowed down visibly in 1Q10 due to the slowdown in launches. KepLand is going ahead with its plans to launch more units in 2Q10. The majority of these units are in second-tier cities, where demand from urbanization should be able to replace the reduction in demand for investment purposes. Pre-leasing of office spaces at Marina Bay Financial Centre and Ocean Financial Centre continued to pick up momentum in 1Q10. We keep our estimates unchanged but our fair value edges up marginally to S$4.18. Investors should not over-focus on the negativities in KepLand’s overseas operations as its Singapore assets still account for the bulk of our RNAV estimate (~82%). We maintain our BUY rating on KepLand. (Foo Sze Ming)

CapitaMall Trust: Encouraging signs of growth

Summary: CapitaMall Trust reported its 1Q10 results this morning which came in within our expectations. Gross revenue increased 3.4% YoY to S$139.1m, underpinned by higher new and renewal leases, and higher contribution from Sembawang Shopping Centre, where asset enhancement was completed only in late December 2008. Net property income increased 5.7% YoY to S$97.7m. Even though DPU of 2.23 S-cents for 1Q10 fell short of the 2.32 S-cents that we have projected, this is due to the retention of S$9.5m of taxable income this quarter. CMT remains committed to a 100% payout of its distributable income for FY10. We are seeing encouraging signs of growth from CMT’s operating statistics. Its malls turned in positive rent reversion of +6.2% in 1Q10, sharply higher than the +2.3% achieved in FY09. More trade categories are seeing increase in their gross turnover in 1Q10. While portfolio occupancy rate fell to 99.4% at the end of 1Q10, this was attributable to the termination of a mini-anchor tenant at Plaza Singapura and CMT has already received offers from several interested parties. We will be reviewing our estimates and rating after an analyst briefing this morning. (Foo Sze Ming)

FSL Trust: 1Q DPU of 1.50 US cents; asset values edge up versus October

Summary: FSL Trust (FSLT) announced 1Q10 results last night. The trust posted US$24.4m in revenue, slipping 1.6% YoY and 0.2% QoQ. Net cash generated from operations of US$16.3m fell 3.8% YoY but gained 1.1% QoQ. DPU fell 38.8% YoY to 1.5 US cents because of a lower payout policy and a larger unit base post-placement. It was flat QoQ. The manager said it was making progress in finalizing an acquisition, likely to utilize net proceeds from the Sep 2009 placement. In a Mar 2010 charter-free revaluation of its portfolio, FSLT recorded a 5.5% gain in asset values versus Oct 2009. The current value-to-loan (VTL) coverage of 129% is higher versus 120% in Oct 09 because of both the uptick in asset values and also ongoing loan repayments. It is comfortably above the current reduced 100% VTL requirement but below the 145% threshold required after end-2Q FY11. FSLT is guiding for a 2Q10 DPU of 1.5 US cents, equivalent to an annualized yield of about 12.9%. An analyst call is scheduled for later this morning. We maintain our HOLD rating, but place our S$0.53 fair value under review. (Meenal Kumar)

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

NEWS HEADLINES

- Public transport users will be able to make commuting transfers without feeling the pinch when transfer penalties are removed from 3 Jul 2010, which will decrease bus and train fare revenues.

- Osim reported net profit of S$8m in 1Q10 compared to S$3.2m in 1Q09.

- Ryobi Kiso Holdings reported a 0.3% YoY fall in net profit to S$7.87m in 3Q10.

- A unit of Hiap Seng Engineering has won a US$12m contract to supply gas compressor packages and related services.

- Tianjin Zhong Xin Pharmaceutical Group has proposed a 10-for-10 bonus issue of up to 369.65m new shares.

- A unit of Parkway Holdings has entered into a MOU with a Korean clinical research unit to jointly provide clinical research services in the Asia-Pacific region.

- Stamford Land Corporation has completed its Dynons Plaza office development in Perth, Australia.