By Carmen Lee
Wed, 2 Jun 2010, 08:32:08 SGT

Market Pulse: KepCorp and Mapletree Logistics (2 Jun 2010)

FOCUS

Keppel Corporation: Progress on various fronts

Summary: Petrobras has received bids from nine shipyard and fabrication groups with regards to its 28-unit rig-building program, including Keppel FELS and Jurong Shipyard. Besides Keppel, only one other contender has a working yard in Brazil – the rest are either building new ones or have entered into agreements with local shipyards. Keppel is also seeing progress on other fronts, with the Sino-Singapore Tianjin Eco-City having signed a RMB4.5b agreement recently to create the first river-front eco-neighbourhood in the Tianjin Eco-city. Keppel has received approvals regarding its K-Green Trust (KGT), including a conditional eligibility-to-list from the SGX. If all goes smoothly, trading of KGT units should commence on 29 June. With event-driven uncertainties, oil price volatility may continue to impact oil and gas related stocks. However, given that we are optimistic of the sector’s longer term outlook and the fact that the group is also supported by its property and infrastructure arms, we believe Keppel remains a quality stock. We keep our fair value estimate of S$11.22 and maintain our BUY rating. (Low Pei Han)

Mapletree Logistics Trust: Another round of acquisitions

Summary: Mapletree Logistics Trust (MLT) intends to acquire three properties in Vietnam, Japan and Singapore for S$83.5m. Two of the assets are being purchased from the sponsor, which has roughly S$300m logistics development projects that are completed or nearing completion. The three properties are being acquired at a weighted NPI yield of 7.9% (existing portfolio: 6.2%). The manager intends to finance all three acquisitions fully by debt in the interim, which would bring the REIT’s leverage up to 40.2% debt-to-assets; this is within MLT’s medium-term target of 45%. The acquisitions were as per prior guidance and are likely, in our view, to be the first of several transactions over the next two years. We continue to price in a further S$200m equity issue in our valuation of the REIT, but reflect the lower unit price in our issue price assumption. We also increase our discount rate assumption by 100 bps to incorporate increased macro-economic and regional risks. This reduces our fair value estimate from S$0.93 previously to S$0.84, or an estimated total return of 11.6%. Maintain BUY. (Meenal Kumar)

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

NEWS HEADLINES

- The Singapore Commodity Exchange has signed an agreement with the Tokyo Commodity Exchange in an initiative to boost trading of commodities.

- Manufacturing in the US expanded in May for the 10th month as factories boosted payrolls to keep up with rising sales.

- New Supersector and Sector indices have been launched to complement the family of FTSE ST Indices.

- A unit of Wee Hur has exercised an option to acquire a property at Upper Paya Lebar Rd for S$15.2m.

- STX Pan Ocean has entered into a shipbuilding contract to construct a semi-submersible heavy lift carrier for at least US$40m.

- Tiger Airways has brought forward the delivery of two new Airbus A320 aircraft.

- A unit of Otto Marine has obtained an injunction order with regards to the cancellation of a shipbuilding contract.