By Carey Wong
Mon, 5 Jul 2010, 08:55:44 SGT

Market Pulse: Singapore Property, Genting and Wilmar (05 Jul 2010)

FOCUS

Singapore Property: 2Q10 flash estimates released

Summary: Last week, the URA and HDB released the flash estimates of price indexes for 2Q10. The URA Property Price Index gained 5.2% QoQ in 2Q10 and has surpassed its previous high in 2Q08. In the HDB resale market, the pace of price increase picked up again in 2Q10, after a temporary slow down in 1Q10. HDB’s intention to cool the HDB resale market is clearly evident in its recent actions that aim to increase the supply of new HDB flats and provide more affordable options to new home owners. With rising concerns over the strength of US economic recovery, signs of a slowdown in China and the ongoing euro-zone debt crisis, buying sentiment could be dented in the near future. Nevertheless, fundamentals of the residential property market remain sound. We have a NEUTRAL rating on the property sector, with a preference towards the residential segment. (Foo Sze Ming)


Genting Singapore: Selling off UK operations

Summary: Genting Singapore (GS) has entered into a conditional sale and purchase agreement to divest its entire UK casino operations for £340m (or S$688.8m). If the proposed divestment is completed, GS will receive net proceeds of ~S$688.8m and will book an excess over book value of around S$103.6m. However, it will also recognize a non-cash exchange translation loss of ~S$338.8m. But we are not overly concerned as we view the sale as an exceptional item; we also agree with management’s intention to focus its energy on RWS and also opportunities in the region, as gaming here is still likely to experience good growth prospects. Assuming the deal is completed, we expect it to reduce our FY10 sales estimate by 24% but increase our net profit estimate by 13% as margins would improve ex-UK operations. As we also believe that GS is likely to spend less in capex without its UK operations, our DCF-based fair value rises from S$1.29 to S$1.34. Maintain BUY. (Carey Wong)


Wilmar: Acquires Sugar and Renewable Energy Business

Summary: Wilmar International Limited (WIL) has entered into an agreement to acquire CSR Limited’s sugar and renewable energy business, Sucrogen Limited, for an enterprise value of A$1,750m (US$1,472m) excluding minority interest, comprising A$1,347m (US$1,133m) in equity, and A$403m (US$339m) of net debt. WIL expects the deal to take place around 30 Sep, subject to Australia’s Foreign Investment Review Board and New Zealand’s Overseas Investment Office approvals; although the effective date of acquisition is 01 Apr 2010. WIL says it will fund the purchase using internal resources and bank borrowings. Management says the move will back its move into the sugar business; this as Sucrogen is the largest producer of raw sugar in Australia and through its subsidiary OSL the second largest exporter of raw sugar globally. We are generally positive on the move; nonetheless, we will be speaking to management to get more details, especially on valuations. Until then, we place our S$7.15 fair value and BUY rating UNDER REVIEW. (Carey Wong)


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


NEWS HEADLINES

- According to the SGX, trading in ETFs rose 38% YoY in June.

- China Fishery Group has decided not to proceed with its plans for a proposed secondary listing on the Oslo stock exchange.

- Sembcorp Industries noted that the Cascal board has changed its recommendation to neutral and withdrew its previous recommendation for stockholders to reject Sembcorp’s tender offer.

- Full Apex (Holdings) has secured US$42m in bank loans to refinance existing debt and for general purposes.

- A company linked to the Blackstone Group is investing about US$45m into China Animal Healthcare.

- Sound Global said it still intends to list on the Stock Exchange of Hong Kong.

- Key management from Rowsley will be assuming other roles at UPP Holdings, the former’s associate company.

- JEL Corporation has obtained approvals from its lenders for the extension of a loan.