By Carmen Lee
Wed, 23 Jun 2010, 08:27:05 SGT

Market Pulse: Midas & LMIR (23 Jun 2010)

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Midas Holdings: Well-anchored amid global macroeconomic volatility

Summary: Midas Holdings (Midas) has clinched two contracts over the last month, reaffirming its robust earnings outlook amid global macroeconomic uncertainty. The group’s most recent contract win pertains to a RMB59m contract to supply aluminium alloy extrusion profiles and fabricated parts for an inter-city high-speed train project in China, and this follows shortly after its 32.5%-owned JV Nanjing SR Puzhen Rail Transport Co (NPRT) secured a RMB1.14b contract to supply train sets for a Shanghai Metro project. The group remains poised for further contract wins, which we believe will serve as catalysts for the stock. On a separate note, we do not expect the RMB’s appreciation to have a significant impact on Midas as the group is naturally hedged with the bulk of its revenue and costs denominated in RMB. It may, however, get a boost from translation gains should the RMB appreciate against the SGD, its reporting currency. We continue to like Midas for its robust earnings outlook and maintain our BUY rating on the stock. Our fair value estimate remains at S$1.58. (Lee Wen Ching)

LMIR Trust: Macro signals continue to show strength

Summary: Indonesia’s Deputy Finance Minister said this week that the economy is likely to have grown by 5.9% YoY in 2Q10. In our view, strong domestic consumption could lift the fortunes of both retailers and retail landlords like LMIR Trust (LMIR). We spoke to the manager this week and understand that leasing efforts are going well, and occupancy trends are positive. The manager noted at 1Q10 results that the REIT’s “portfolio has a very defensive position with very low upcoming expiries and already high occupancy levels”, which may cap near-term earnings upside from the improving retail environment. Nevertheless, LMIR still has scope for accretion from new acquisitions, thanks to its low leverage of 10.2% debt-to-assets (the lowest in the S-REIT sector). Our fair value estimate of S$0.55, at a 20% discount to SOTP value, remains unchanged. With a 23.7% estimated total return, maintain BUY. (Meenal Kumar)

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

NEWS HEADLINES

- The UK finance minister unveiled a harsh emergency budget, with measures including 1) a tightening of spending; 2) higher taxes; and 3) a bank levy that is expected to raise £2b annually.

- CB Richard Ellis said investment sales of property this year have already reached S$11.26b, higher than the S$10.62b tallied over the whole of 2009.

- CDL Hospitality Trusts is raising some S$150m in gross proceeds via a private placement aimed at strengthening its balance sheet.

- Mercator Lines said it has secured a four-year Contract of Affreightment with a state owned Sri Lankan company.

- A BT source says there is no provision to allow Khazanah Nasional to buy out Parkway Holding in their 60-40 Pantai joint venture.

- STX Pan Ocean has ordered new Kamsarmax bulkers from a Chinese shipyard for about US$138m.

- Forex strategists are bullish about the Singapore dollar and other Asian currencies following Beijing’s move towards limited revaluation.

- Singapore and Malaysia have agreed to finalize a land swap proposal in three months’ time.

- Germany’s Lanxess has announced some key supplier contracts for its S$681m plant that includes Tuas Power and Sembcorp Industries.