CapitaLand and First Ship (11 May 2010)

By Carey Wong
Tue, 11 May 2010, 08:43:29 SGT

Market Pulse: CapitaLand and First Ship (11 May 2010)

FOCUS

CapitaLand Ltd: New Raffles City integrated development in Shenzhen

Summary: Yesterday, CapitaLand (CapLand) revealed the development plans for the site in Nanshan District, Shenzhen. A Raffles City integrated development (Raffles City Shenzhen) will be developed on the site. In addition to Raffles City Shenzhen, CapLand will also be developing an office tower, residential apartments, SOHO units and retail space for strata sale. The entire project is estimated to have a development estimate of RMB6b (S$1.25b) and will be completed in phases from 2014. Based on our estimates, we project that CapLand’s stake in the development will add an additional S$72.8m (S$0.02 per share) to NAV. With the recent decline in share prices of the listed entities held by CapLand, our RNAV has been lowered by S$0.14 per share. As such, our fair value, which is pegged at parity to RNAV, has been lowered to S$4.97 (previously S$5.09). We maintain our BUY rating on CapLand. (Foo Sze Ming)

FSL Trust: Dragged back into uncertainty

Summary: FSL Trust’s (FSLT) charterer Groda Shipping recently requested FSLT to take re-delivery of two of its product tankers Verona I and Nika I as Groda does not intend to continue to make full charter payments. The two vessels contribute roughly 15% of total revenue. In our view, FSLT may be able to meet its DPU guidance for 2Q10 with cash reserves and the vessel deposits. However, DPU guidance for further quarters will depend on where the two vessels are employed and at what terms. Our key concern is what the re-delivery means for the rest of FSLT’s product tanker portfolio (26% of total revenue including Groda). On a positive note, we understand from the manager that this development does not impact FSLT’s loans. Still, any reduction in revenue could affect FSLT’s plans to raise unsecured debt. We reduce our fair value estimate from S$0.59 to S$0.48 (which assumes a slight negative drag on cash earnings from the two vessels and increases our discount to FCFE value from 20% to 25%). Maintain HOLD. (Meenal Kumar)

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

NEWS HEADLINES

- The EU put up a staggering US$1 trillion aid package yesterday to contain its spreading government debt crisis and keep the euro currency from imploding.

- OUE has proposed to sub-divide each ordinary share of the company into five shares.

- FJ Benjamin reported net profit of S$3m in 3QFY10 compared to net loss of S$1.9m in 3Q09.

- Cerebos Pacific posted a 82% YoY jump in net profit to S$22.7m in 2Q10.

- Thakral Corporation posted net profit of S$2m in 1Q10 compared to S$792k in 1Q09.

- Chip Eng Seng Corp has partnered an Australian developer to purchase a piece of land in Perth for A$20m.

- Tiger Airways saw a 45% YoY rise in passenger numbers to 507k in April.

- Plato Capital has entered into a JV agreement with Tune Hotels.com Ltd to own, develop and/or operate Tune Hotels-branded limited service hotels.

Please refer to the full report for more information and additional disclosures.

Disclaimer for Research Report

This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally.

Privileged/Confidential information may be contained in this message. If you are not the addressee indicated in this message (or responsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions, conclusions and other information in this message that do not relate to the official business of my company shall not be understood as neither given nor endorsed by it.

For and on behalf of OCBC Investment Research Private Limited:

Carmen Lee
Head of Research

Co.Reg.no.:198301152E