By Carmen Lee
Wed, 21 Jul 2010, 08:23:01 SGT

Market Pulse: Ezion, OSIM, KepLand, Midas and CCT (21 Jul 2010)

FOCUS

Ezion Holdings: Second marine supply base in Australia

Summary: Ezion Holdings (Ezion) has entered into a memorandum of agreement for the lease of a plot of land at another strategic location in Northern Australia for a second marine supply base. This closely follows the group’s announcement on 13 Jul 2010 that it is setting up a marine supply base in Northwest Australia. Ezion believes that the second marine base will enhance its ability to better service its existing customers and position itself to secure additional projects near the area. Management has not excluded the possibility of turning to the market to raise funds, though it is likely to use internal resources or bank debt to satisfy capital expenditure needs first. However, given Ezion’s huge ambitions, it will not be surprising if the group taps the equity markets later. This latest project is not expected to have a material impact on the group’s EPS and NTA/share in FY10 and FY11. We maintain our BUY rating on Ezion with S$0.81 fair value estimate. (Low Pei Han)

OSIM International: 2Q10 driven by broad-based growth

Summary: OSIM International Ltd (OSIM) delivered a good set of 2Q10 results last evening. While revenue of S$130.7m came in slightly below our expectation, PATMI of S$12.1m exceeded our projection significantly due to product innovation and better operating efficiency. In the coming months, we note that management expects the group to continue to enjoy higher consumer demand, led by a string of new products in the pipeline. Regarding its expansion plans in China, OSIM also updated it is on track to open to its targeted 50-80 OSIM outlets and 60-100 RichLife outlets for the year. These outlets, together with its product innovation and competitive positioning, are likely to contribute positively to its sales, cash flow and profitability, in our view. We maintain our BUY rating on OSIM, with a higher fair value of S$1.29 (S$1.22 previously) as we incorporate the latest quarterly results into our FY10 forecasts. (Kevin Tan)

Keppel Land Ltd: Overseas projects and associates drive 2Q10

Summary: Keppel Land (KepLand) reported 2Q10 revenue of S$202.8m (-8.9% YoY, +27.7% QoQ); management attributed the YoY decline to the completion of several major Singapore residential projects in 2009. Nonetheless, 2Q10 PATMI rose 20.4% YoY and 8.4% QoQ to S$70.1m, driven by the group’s associate stakes in Marina Bay Suites, Reflections and Caribbean. Office pre-commitments are going strong with Ocean Financial Centre pre-leased at 63% and Marina Bay Financial Centre (MBFC) pre-leased at 80%. KepLand has more launches planned for Singapore, China and Vietnam in 2H10, but said it would “pace” itself carefully. These new launches, as well as further updates on office leasing, may be near-term price drivers for the stock. The sale of its MBFC stake, potentially to K-REIT, could be a medium-term catalyst. KepLand said it was on the look-out for more attractive sites in Singapore; this could also drive valuations depending on pricing. With a change in analyst coverage, we will be reviewing our assumptions and as such, we place our previous BUY rating and S$4.50 fair value (pegged at parity to RNAV) UNDER REVIEW. (Meenal Kumar)

Midas Holdings: Clinches two contracts worth RMB130m

Summary: Midas Holdings (Midas) this morning announced that its aluminium alloy division has secured two contracts worth a total of RMB130m. Both contracts were awarded by its JV company Nanjing SR Puzhen Rail Transport Co (NPRT). The first contract, valued at RMB58m, is for the supply of aluminium alloy extrusion profiles for the Pearl River Delta Inter-City Train Project and Dongguan–Huizhou Inter-City Train Project, and is expected to be delivered from 2010 to 2011; while the second contract, valued at RMB72m, is for the supply of aluminium alloy extrusion profiles for the Hangzhou Metro Line 1 Project and will be delivered from 2010 to 2012. With these contracts, we estimate that Midas’ order book now stands at RMB1.5b with visibility stretching till 2013. We are keeping our estimates intact as our projections allow for such contract wins. Maintain BUY with S$1.27 fair value estimate. (Lee Wen Ching)

CapitaCommercial Trust: 1H DPU of 3.9 S cents

Summary: CapitaCommercial Trust (CCT) announced 2Q10 results this morning. Gross revenue of S$100.2m edged up 0.2% YoY but slipped 1.6% QoQ. Similarly, net property income gained 1.3% YoY but fell 4.3% QoQ to S$74.2m. The QoQ declines may have been driven by the sale of Robinson Point, which was completed on 19 Apr. CCT also re-valued its portfolio, with asset values declining S$25.7m (-0.5%) versus 31 Dec. CCT has declared a distribution per unit of 1.97 S cents for 2Q10. Note that distributions are paid half-yearly and unitholders will receive a total 3.9 S cents for 1H10, translating to an annualized DPU yield of 5.9%. Last week, CCT said it will sell non-Grade A office building StarHub Centre to Frasers Centrepoint Ltd, the property arm of Fraser & Neave [FNN, NOT RATED] for S$380m. Sale proceeds will be used for growth opportunities and/or to reduce debt. The manager said that “given Singapore’s strong economic growth, the prospects for further rental growth for Grade A and prime office space appear positive for the rest of 2010.” An analyst briefing will be held later today. With a change in analyst coverage, our previous HOLD rating and S$1.26 fair value for CCT is UNDER REVIEW. (Meenal Kumar)

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

NEWS HEADLINES

- The Asian Development Bank raised its forecast for aggregate growth across the Asia region to 7.9% from the 7.5% made in April.

- Savills Singapore said that average daily serviced apartment rental rates for the high-end and mid-tier segment here are expected to increase by about 5-10% this year.

- The Singapore Mercantile Exchange (SMX) will introduce euro-US dollar futures contracts when it goes live next month.

- Data on fund flows from research house EPFR Global suggests that risk aversion has subsided but has not fully abated.

- ST Engineering said its ST Aerospace arm will partner Guangdong Airport Management Corporation to set up a commercial aircraft heavy maintenance facility in Guangzhou, China.

- Amara Hotels and Resorts, the hospitality arm of Amara Holdings, yesterday announced a 272-room hotel project in central Bangkok.

- Sun East Group announced that its largest shareholder Lajas Financial was paring its 46.4% stake in Sun East to 4.09%.

- DBS Bank Ltd has set up a wholly foreign-owned entity, DBS Investment & Financial Advisory Co Ltd (DBSIFA), in Beijing.