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DBS Group Research . Equity 19 May 2011
Todays Focus
More risks than catalysts cap markets near term performance. STI near term upside at 3350 (14.6x PE); support at 2850 (12x PE).
US Indices Dow Jones S&P NASDAQ Regional Indices ST Index ST Small Cap Hang Seng HSCEI HSCCI KLCI SET JCI PCOMP KOSPI TWSE Nikkei Last Close 12,560.18 1,340.68 2,815.00 3,141.21 540.41 23,011.14 12,870.83 4,217.34 1,541.27 1,075.91 3,840.21 4,303.31 2,135.78 8,944.84 9,662.08 Pts Chg 80.60 11.70 31.79 4.73 2.28 110.06 137.62 32.01 5.00 -9.05 40.98 41.71 -64.95 60.75 699.41 % Chg 0.65 0.88 1.14 0.15 0.42 0.48 1.08 0.76 0.33 -0.83 1.08 0.98 -2.95 0.68 7.80
We maintain our view that equities lack catalysts to trend higher post 1Q results season as stocks enter the typically quiet months from May-July. Earnings growth for STI stocks is low at 4.3% for FY11 before rebounding to 13% in FY12. The recent earnings cut led to a -2% change in STI target. Based on an average PE of 14.6x on blended FY11 and FY12 earnings, the near term upside will be capped at 3350. We expect support at 2850 or -1 standard deviation of 12x in the event investors take risk off the table. Our year-end target of 3500, based on FY12 earnings remains unchanged. Technically, we continue to see resistance at slightly below 3200 that caps near-term upside. The immediate technical resistance is at 3160, no change from yesterday. Yield plays will be in focus. Our preferred yield picks are CDL HT, Cache Logistics, ART, Mapletree Industrial, Parkway Life Reit, Venture Corp, SIA Engineering and M1 which provide yields of >5%. We like Wilmars turnaround; OCBC is our preferred pick among banks while Keppel Corp and SMM could see potential earnings upgrade in coming quarters. Straits Asia Resourcess strong 1Q showing and final award of Sebukus permit underpins strong 3 year CAGR of 37%. The Cabinet reshuffle and retirement of nine ministers point to policy risks affecting property & land transport sectors. The high cost of living, affordability of public housing, transportation woes, influx of foreign immigrants and competition with foreign workers for jobs were the key issues raised during the campaigning period for the election. Singapore's economy expanded slower than previously estimated in the first quarter. 1Q11 revised GDP growth was +8.3% yoy, slightly below a prior estimate of +8.5%. The government now expects the economy to expand 5.0% to 7.0% for 2011, vs the 4.0% to 6.0% estimated earlier. This is more in line with our economist forecast of 7% y-o-y GDP growth. The government has maintained that inflation has peaked and estimates inflation for 2011 at 3.0%-4.0%. Our economists forecast is for CPI to rise 4.2% this year.
STI Index Performance Singapore Total Market cap (US$bn) Total Daily Vol (m shrs) 12m ST Index High 12m ST Index Low 579 1,362 3,314 2,651
Index 4,000
3,000
STI 100-Day MA
2,000
Source: Bloomberg
Stock Picks Large Cap Recn Keppel Corp SIA Engineering Wilmar Spore Airlines Stock Picks Small Cap Recn Ezion Holdings ARA Asset Management Parkway Reit CDL Hospitality Trust Buy Buy Buy Buy Price ($) 18/05 0.71 1.71 1.76 2.10 Target Price 1.09 2.00 1.95 2.30 Buy Buy Buy Buy Price ($) 18/05 11.34 4.38 5.47 14.38 Target Price 13.55 5.00 6.25 17.00
Chip Eng Seng has been awarded a main contract works of $74m at Pasir Ris Drive 1 / Elias Road. No material impact on FY Dec 2011. In property news, two redevelopment sites have been put on the market - Elizabeth Tower and 70 Shenton Way. 70 Shenton Way has already got the approval for redevelopment into a 60:40 commercial-residential project, at a price said to be around $270m. This price works out to $1,583 psf ppr. Separately, the freehold Elizabeth Tower at Mount Elizabeth off Orchard Road, is up for collective sale with an asking price of $630m, which works out to $2,496 psf ppr. US indices snapped a 3-day decline after the FED signalled continued low interest rates, Dells earnings beat analysts estimates and commodity producers rebounded. Our chief economist continues to put notice on the recent unhealthy rise in weekly jobless claims. Domestic demand growth is slowing, both on a q-o-q and y-o-y basis due to falling investment growth and a drop in government spending in the past 1-2 quarters. Recent uncertainties such as Japan earthquake, rising oil price and trouble in European debt markets have also further pressured the jobless claims figure upwards.
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Announced Dividends and Capital Issues: 19 May 2011 15 Jun 2011 (by Ex-Date)
Company BONVESTS HOLDINGS LTD EDMI LIMITED UNIDUX ELECTRONICS LIMITED UNIDUX ELECTRONICS LIMITED UNITED FOOD HOLDINGS LIMITED ADV INTEGRATED MFG CORP LTD HEALTHWAY MEDICAL CORP LTD PETROCHINA ADR 10 THAKRAL CORPORATION LTD ARA ASSET MANAGEMENT LIMITED QUALITAS MEDICAL GROUP LIMITED RAFFLES MEDICAL GROUP LTD YANGZIJIANG SHIPBLDG HLDGS LTD SHANGRI-LA ASIA LIMITED UMS HOLDINGS LIMITED EASTGATE TECHNOLOGY W110911 EASTGATE TECHNOLOGY W120514 SILVERLAKE AXIS LTD GREAT EASTERN HLDGS LTD WBL CORPORATION 2.5%CB140610 ASIA PACIFIC BREWERIES LTD CHINA TAISAN TECH GRP HLDGSLTD SP AUSNET SP AUSNET SP AUSNET OSIM INTERNATIONAL LTD FRASER AND NEAVE, LIMITED TECHNICS OIL & GAS LIMITED CONSCIENCEFOOD HOLDING LIMITED OCBC BK 4.2% NCPS OCBC BK 5.1%NCPS 100 OCBC BK S$500M4.5%NCPS 100 NATURAL COOL HOLDINGS LIMITED SAKAE HOLDINGS LTD. CITY DEVELOPMENTS LTD NCCPS LEE METAL GROUP LTD LOW KENG HUAT (SINGAPORE) LTD LOW KENG HUAT (SINGAPORE) LTD RAFFLES EDUCATION CORP LTD AMARA HOLDINGS LTD FRAGRANCE GROUP LIMITED JACKS INTERNATIONAL LIMITED Type DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND RIGHTS DIVIDEND DIVIDEND BONUS DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND ENTITL. ENTITL. DIVIDEND ENTITL. INTEREST DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND DIVIDEND Particulars SGD 0.018 ONE-TIER TAX SGD 0.0075 ONE-TIER TAX SGD 0.0025 ONE-TIER TAX SGD 0.005 ONE-TIER TAX CNY 0.0068 SGD 0.0033 ONE-TIER TAX OFFER OF 1 FOR 8 @ SGD 0.075 USD 2.494619 SGD 0.001 ONE-TIER TAX OFFER OF 1 FOR 10 SGD 0.011 ONE-TIER TAX SCRIPDIVSCHEME SGD 0.025 ONE-TIER TAX SGD 0.045 ONE-TIER TAX HKD 0.1 SGD 0.01 ONE-TIER TAX WARRANTS ADJ WARRANTS ADJ SGD 0.0025 ONE-TIER TAX CASH DIST SGD 0.77 101210 - 090611 2.5% SGD 0.22 ONE-TIER TAX SCRIPDIVSCHEME CNY 0.0227 ONE-TIER TAX FULLYFRANK, DRP AUD 0.01333 INT INCOME, DRP AUD 0.02279 LESS TAX RET CAPITAL,DRP AUD 0.00388 SGD 0.01 ONE-TIER TAX SGD 0.06 ONE-TIER TAX SGD 0.03 ONE-TIER TAX SGD 0.0068 ONE-TIER TAX 201210 - 190611 4.2% ONE-TIER TAX 201210 - 190611 5.1% ONE-TIER TAX 201210 - 190611 4.5% ONE-TIER TAX SGD 0.02 ONE-TIER TAX SGD 0.01 ONE-TIER TAX 311210 - 290611 3.9% ONE-TIER TAX SGD 0.002 ONE-TIER TAX SGD 0.03 ONE-TIER TAX SGD 0.01 ONE-TIER TAX SGD 0.0045 ONE-TIER TAX SGD 0.005 ONE-TIER TAX SGD 0.0025 ONE-TIER TAX SGD 0.003 ONE-TIER TAX Ex Date 19-May-11 19-May-11 19-May-11 19-May-11 19-May-11 20-May-11 20-May-11 20-May-11 20-May-11 23-May-11 23-May-11 23-May-11 23-May-11 24-May-11 24-May-11 25-May-11 25-May-11 26-May-11 27-May-11 27-May-11 30-May-11 30-May-11 30-May-11 30-May-11 30-May-11 31-May-11 1-Jun-11 1-Jun-11 2-Jun-11 2-Jun-11 2-Jun-11 2-Jun-11 3-Jun-11 3-Jun-11 7-Jun-11 7-Jun-11 7-Jun-11 7-Jun-11 8-Jun-11 13-Jun-11 13-Jun-11 15-Jun-11 Rec. Date 23-May-11 23-May-11 23-May-11 23-May-11 23-May-11 24-May-11 24-May-11 24-May-11 24-May-11 25-May-11 25-May-11 25-May-11 25-May-11 26-May-11 26-May-11 27-May-11 27-May-11 30-May-11 31-May-11 31-May-11 1-Jun-11 1-Jun-11 1-Jun-11 1-Jun-11 1-Jun-11 2-Jun-11 3-Jun-11 3-Jun-11 6-Jun-11 6-Jun-11 6-Jun-11 6-Jun-11 7-Jun-11 7-Jun-11 9-Jun-11 9-Jun-11 9-Jun-11 9-Jun-11 10-Jun-11 15-Jun-11 15-Jun-11 17-Jun-11 Paid/ Payable 10-Jun-11 3-Jun-11 8-Jun-11 8-Jun-11 10-Jun-11 6-Jun-11
20-Jun-11 13-Jun-11 10-Jun-11 20-Jun-11 15-Jul-11 29-Jun-11 29-Jun-11 29-Jun-11 16-Jun-11 22-Jun-11 15-Jun-11 22-Jun-11 20-Jun-11 20-Jun-11 20-Jun-11 22-Jun-11 21-Jun-11 30-Jun-11 24-Jun-11 23-Jun-11 23-Jun-11 23-Jun-11 27-Jun-11 28-Jun-11 30-Jun-11
Source: SGX
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Deemed Interest
Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest
Deemed Interest
Deemed Interest
Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest Deemed Interest
Deemed Interest
Source: Business Times; SA: Share Allotment; ST: Share Transfer, B/R: Bonus/Rights Issue; OE: Option Exercise; PL: Placement Shares
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Thu 6
Fri
Cosco Corporation Q1 2011 Hotel Royal Q1 2011 UOB Q1 2011 Sin Heng Heavy Q3 2011 Hengxin Q1 2011
ARA Asset Mgmt Q1 2011 Treasury China Trust Q1 2011 United Overseas Insurance Q1 2011 Berger Intl FY 2011 China Energy Q1 2011 Food Empire Holdings Q1 2011 Great Eastern Hldgs Q1 2011 Hi-P Int'l Q1 2011 Riverstone Holdings Q1 2011 Roxy-Pacific Q1 2011 Sing Holdings Q1 2011 Starhub Q1 2011 Electronics Sector Index Purchasing Managers Index
Foreign Reserves
9
ASL Marine Q3 2011 Beng Kuang Q1 2011 Cerebos Pacific Q2 2011 CWT Q1 2011 Etika Q2 2011
10
Hiap Hoe Q1 2011 Q & M Dental Q1 2011 SIA Engineering FY 2011
11
China Fishery Q2 2011 Banyan Tree Q1 2011 China Yuchai Q1 2011 City Debelopments Q1 2011 Hai Leck Holdings Q3 2011
12
Best World Q1 2011 CSE Global Q1 2011 Francken Group Q1 2011 Genting Singapore Q1 2011 Hong Leong Asia Q1 2011
13
Adampak Q1 2011 Armstrong Q1 2011 Asiatravel Q2 2011 Bonvest Q1 2011 Breadtalk Q1 2011 ComfortDelgro Q1 2011 Ezion 1Q 2011 First Resources Q1 2011 Frasers & Neave Q2 2011 Golden Agri Q1 2011 GuocolLeisure Q3 2011 Hong Fok Q1 2011 Hotel Prop Q1 2011 Interra Resources Q1 2011 Kruez Q1 2011 NOL Q1 2011 Pan Pacific Q1 2011 Retail Sales (MoM) sa Retail Sales (YoY) Retail Sales Ex Auto Straco Q1 2011 Swiber 1Q11 UOL Group Q1 2011 WBL Q2 2011 Wilmar Q1 2011
FJ Benjamin Holdings Q3 2011 Gems TV Q3 2011 Hup Seng Q1 2011 K1 Ventures Q3 2011 OKP Holdings Q1 2011 OUE Q1 2011 Second Chance Q3 2011 Sembcorp Marine Q1 2011
Haw Par Q1 2011 Mewah Q1 2011 Noble Group Q1 2011 Otto Marine Q1 2011 Pacific Andes Q2 2011 Sembcrop Industries Q1 2011 STE Q1 2011 Superbowl Holdings Q1 2011 Vicom Q1 2011
IFS Capital Q1 2011 InnoTek Q1 2011 Jaya 3Q 2011 Kian Ann Q3 2011 Mercator FY 2011 Mun Siong Q1 2011 OCBC Q1 2011 Olam Intl Q3 2011 Petra Foods Q1 2011 Saizen Reit Q3 2011
16
SATS Q4 2011
17
18
19
AIMS AMP Capital FY 2011 Tiger Airways FY 2011
20
Electronic Exports (YoY) Non-oil Domestic Exports (YoY) Non-oil Domestic Exp SA (MoM)
Automobile COE Open Bid Cat A Automobile COE Open Bid Cat B Automobile COE Open Bid Cat E
23
Vergy Ltd Q2 2011
24
Avago Technologies Q2 2011
25
26
Biosensors International Q4 2011
27
Biosensors Q4 2011 (rel 28 May)
30
31
Bank Loans & Advances (YoY) Credit Card Bad Debts Credit Card Billings M1 Money Supply (YoY) M2 Money Supply (YoY)
Source: Bloomberg
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DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
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ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 19 May 2011, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (interest includes direct or indirect ownership of securities, directorships and trustee positions). COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1 DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in companies mentioned as of 16 May 2011. 2 3 DBS Bank Ltd has been appointed as the designated market maker of structured warrant(s) for Keppel Corp, WIlmar, Sembcorp Marine, OCBC issued by DBS Bank Ltd. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered broker-dealer, beneficially own a total of 1% or more of any class of common equity securities of CDL HT, Cache as of 19 May 2011. Compensation for investment banking services: i. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA received compensation, within the past 12 months, and within the next 3 months may receive or intend to seek compensation for investment banking services from Keppel Corp, SIA, ARA Asset, CDL HT, Cache, Ascott Residence, Mapletree Industrial. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.
ii.
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