By Carmen Lee
Thu, 22 Jul 2010, 08:50:26 SGT

Market Pulse: Golden-Agri, CCT, KepCorp, Wilmar and CMT (22 Jul 2010)

FOCUS

Golden Agri: Committed towards sustainability

Summary: Golden Agri-Resources (GAR) Ltd’s subsidiary PT SMART recently announced that it has implemented an “enhanced” Standard Operating Procedures (SOPs) as part of its revitalized strategy and strong commitment towards sustainability, conserving bio-diversity and land with high carbon stock. And to further verify recent reports and allegations by Greenpeace, SMART engaged two of the world’s leading certification bodies (accredited by RSPO), and adds that the full report will be released on 29 Jul during lunch break. On the operations side, we note that crude palm oil (CPO) prices have been slightly softer in 2Q10, averaging around US$743/ton versus US$777/ton in 1Q10; but we are still expecting to see a QoQ increase in CPO output in 2Q10 and this should help to negate slightly weaker CPO prices. With its results just around the corner, we hold off revising our estimates for both FY10 and FY11 for now. We believe that the worst is likely over for GAR, coupled with a modestly positive medium-term outlook, we maintain our BUY rating and fair value estimate of S$0.72. (Carey Wong)

CapitaCommercial Trust: 1H DPU of 3.9 S cents; CCT more positive on office sector

Summary: CapitaCommercial Trust (CCT)’s 2Q10 gross revenue of S$100.2m edged up 0.2% YoY but slipped 1.6% QoQ. The QoQ declines may have been driven by the sale of Robinson Point, which was completed on 19 Apr. Tax claims on capital equipment and lower interest expenses driven by reduced leverage (32.3% versus 41.9% a year ago) were major drivers of the 15.9% YoY increase in distributable income to S$55.7m. CCT 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.” Negative rent reversions still remain a key risk, in our view. CCT said it was looking for “well-located Grade A” office assets in Singapore. With a change in analyst coverage, we will be reviewing our assumptions and earnings estimates. As such, our previous HOLD rating and S$1.26 fair value for CCT is UNDER REVIEW. CCT will trade ex-distribution on 28 Jul. (Meenal Kumar)

Keppel Corporation: Secures contracts worth S$170m

Summary: Keppel Offshore and Marine has secured two contracts worth S$170m from repeat customers for the conversion of a floating production storage and offloading (FPSO) vessel and repair of a semi-submersible drilling rig. The first contract is a conversion of a VLCC for Single Buoy Moorings Inc and work is expected to start in 3Q10 till 1Q12. The second contract is by Keppel FELS Brasil for Queiroz Galvão Óleo e Gás (QGOG) and work will be completed in Oct 2010. With these wins, the group has secured about S$1.7b contracts YTD, representing 45% of our FY10 contract win estimate. Keppel Corp will announce its 2Q10 results this evening. We maintain our BUY rating and S$11.22 fair value estimate on the stock. (Low Pei Han)

Wilmar: Acquires Oleochemical Outfit in Malaysia

Summary: Wilmar International Limited (WIL) announced that its 100%-owned subsidiary PGEO Group Sdn. Bhd. has entered into a sale and purchase agreement to acquire 91.38% of Natural Oleochemicals Sdn Bhd (“Natoleo”) from KL-listed Kulim (Malaysia) Berhad (“Kulim”) for MYR450m (US$136.4m). WIL expects the transaction to complete before 21 Oct 2010 and this is subject to certain conditions including Malaysian regulatory approvals. WIL adds that it will fund the acquisition using internal resources and bank borrowings. According to WIL, the move will allow it to consolidate its leading position in the global fatty acids market and entrench WIL as Asia’s dominant oleochemical company with a market share of some 35% of the fatty acid production capacity in Asia. With Natoleo, WIL can add Malaysia to its existing network of oleochemical production bases. Again, we are positive on the move and believe that it will reinforce the view that it is back to “business as usual” after the unfortunate tax allegation incident in Indonesia. Maintain BUY with S$7.15 fair value. (Carey Wong)

CapitaMall Trust: 2Q DPU of 2.29 S cents

Summary: CapitaMall Trust (CMT) announced 2Q10 results this morning. Gross revenue of S$142.5m edged up 2.8% YoY and 2.4% QoQ. The manager attributed the YoY increase to higher rental rates achieved from new and renewed leases and staggered rental from most of the malls. With higher interest and transaction costs incurred, finance costs increased significantly (+19.4% YoY, +32.6% QoQ). Distributable income of S$73m was up 7.5% YoY and 2.7% QoQ. Recall that the manager had retained some S$9.5m of taxable income in the previous quarter; including that amount, distributable income actually fell 9.4% QoQ. CMT also re-valued its portfolio, with asset values declining S$92.7m (-1.34%) versus 31 Dec. This was primarily due to a 17.8% fall in the valuation of The Atrium @ Orchard from S$714m six months ago to S$587m as at 30 Jun. CMT has declared a distribution per unit of 2.29 S cents for 2Q10, translating to an annualized DPU yield of 4.6%. The manager said that gross revenue locked-in for 2010 is close to 93.0% of FY09 total gross revenue, and that CCT was “well-positioned to capitalize on the expected growth in retail consumption in Singapore arising from positive economic conditions and the expected growth in the tourism industry.” An analyst briefing will be held later today. With a change in analyst coverage, our previous BUY rating and S$1.95 fair value for CMT is UNDER REVIEW. (Meenal Kumar)

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

NEWS HEADLINES

- NOL has ordered 10 new 8,400 TEU container ships to be delivered in 2013 and 2014.

- The SGX is considering whether to scrap the lunchtime break on its securities market.

- Kreuz Holdings has launched an IPO of 80m new shares on Catalist, representing 15.8% of the group’s enlarged share capital.

- China Fibretech expects to report “significantly lower revenue and net profit before tax” in 2Q10 compared with 2Q09.

- HLN Technologies expects to report a profit in 1H10 after suffering a S$2.36m net loss in 1H09.

- A unit of Renewable Energy Asia has signed a MOU to acquire a unit of Jiangsu Maritime Engineering Services Co.

- A rebound in associate contributions helped lift Keppel T&T’s net profit by 37.9% to S$13.8m in 2Q10.

- Pacific Shipping Trust has pared its DPU by 20% YoY to 0.793 US cents in 2Q10 as it retained more cash to acquire new vessels.